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2023 ReportHC Slingsby plc 01274 535 030 01274 535 035 Sales@Slingsby.com T: F: E: W: www.slingsby.com Report & Accounts HC Slingsby plc report and accounts for the year ended 31st December 2016 Contents Statement by the Chairman Strategic Report Report of the Directors Corporate Governance Statement of Directors’ Responsibilities Independent Auditors’ Report 1 2 4 6 7 8 Consolidated Income Statement 10 Statement of Consolidated Comprehensive Income and Expense Statements of Consolidated and Company changes in shareholders’ equity Consolidated Balance Sheet Company Balance Sheet Consolidated Cash Flow Statement Company Cash Flow Statement Note to the Cash Flow Statements Notes to the Accounts Five Year Summary Notice of Annual General Meeting Notes to the Notice of Annual General Meeting 11 12 13 14 15 16 16 17 36 37 39 Solicitors Squire Patton Boggs (UK) LLP 2 Park Lane Leeds LS3 1ES Financial Advisors & Brokers Allenby Capital Limited 3 St. Helens Place London EC3A 6AB Website & E-Mail Website: www.slingsby.com E-mail: sales@slingsby.com Directors & Advisors Directors D. S. Slingsby – Interim Executive Chairman and Operations Director M. L. Morris – Financial Director Company Secretary M. L. Morris Registered Office Otley Road Baildon, Shipley West Yorkshire BD17 7LW Tel : (01274) 535030 Fax : (01274) 535035 Registered Number 452716 Registrars Capita Registrars plc The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Independent Auditors RSM UK Audit LLP 2 Whitehall Quay Leeds LS1 4HG We are one of the UK market leaders in the distance selling of industrial & commercial equipment. We manufacture and distribute over 35,000 high quality products covering everything you need for the workplace from handling and lifting and premises equipment to retail and office supplies, including many new ideas to help keep your business running smoothly. We are committed to providing our customers with an extensive product range, outstanding service and efficient delivery. Statement by the Chairman Board Changes As reported in my 2016 half year statement, at the Annual General Meeting on 30 June 2016, John Waterhouse was not re-elected by shareholders as a Director of the company. As a result, I was appointed as Interim Executive Chairman and we continue to look to appoint a non-executive chairman. We also continue to search for a new non-executive director which is proving to be more protracted than anticipated due to the ongoing uncertainty regarding the pension fund commitments. Results In that half year statement I reported an operating loss (before exceptional items) of £0.16m on sales of £9.3m. The full year operating loss (before exceptional items) was £0.26m (2015: loss of £10,000) on sales of £18m (2015: £17.1m). Together with exceptional restructuring costs, the full year pre-tax loss was £0.7m (2015: £0.6m). The results for the year ended 31 December 2016 contain the full year benefit of the ESE Direct Limited (“ESE”) acquisition which contributed £6.5m of sales (2015: £4.8m) and £0.2m (2015: £0.1m) operating profit. ESE remains cash generative. Group earnings before interest, depreciation and amortisation (“EBITDA”) in the year ended 31 December 2016 was £0.27m (2015: £0.52m) before exceptional items. Net debt at 31 December 2016 is £1.7m (2015: £1.5m). Dividend In view of the loss in 2016 and the uncertainty around the pension fund commitments, the Board is unable to recommend a final dividend for the year (2015: £nil). Pension Scheme The Company has an obligation to fund its defined benefit pension scheme and contributions to this scheme totalled £270,000 in 2016. This, together with scheme running costs of £160,000, represented a major commitment for the Company to meet. Following the vote to leave the European Union, the pensions scheme deficit has increased as at 31 December 2016 to £9.6m (2015: £8.0m). Mainly as a result of this increase (a net £1.3m after deferred tax movement), as well as the losses incurred during the year, group net assets have declined by £1.9m at 31 December 2016 to £0.4m (2015: £2.3m). In our half year statement I advised that, with agreement of the pension scheme Trustee, we had from 1 July 2016 suspended deficit reduction contributions (whilst still paying the agreed costs of the scheme) until a longer term solution was found. Discussions are ongoing and so whilst during this time the Company is not paying deficit reduction contributions, there is uncertainty as to the quantum and timing of future payments to the scheme. Recent Trading During 2016, we began to refocus our sales and marketing efforts towards customer acquisition. We simplified and improved the presentation of our later 2016 mailings and 2017 catalogue. In addition, we have reduced overheads and achieved synergies with ESE by combining activities across the Group. I am pleased to report that these actions have resulted in sales for the first four months of the current financial year being 7% ahead of the comparable period last year. Whilst some of this sales improvement is due to several large orders received in 2016 but delivered in 2017, order intake in 2017 remains ahead of prior year. Whilst encouraged by this improved trading in the early part of 2017, we remain cautious regarding future trading given the volatility which we have experienced in the recent past. Finally, I would like to thank our staff across the Group for their efforts in 2016 and 2017. Our performance to date in 2017 gives grounds for optimism but we must maintain our focus to build on what has been achieved. D. S. Slingsby Interim Executive Chairman 24 May 2017 Contents Report & Accounts 2016 | HC Slingsby plc 1 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Environmental Sustainability In addition to statutory and regulatory compliance, the group takes pride in its environmental initiatives which have been recognised by winning prestigious awards for carbon reduction. By order of the Board M. L. Morris Company Secretary 24 May 2017 Strategic Report Strategic Report continued Business overview The group’s principal activity comprises the merchanting and distribution of a highly diversified range of industrial and commercial equipment primarily consisting of incidental purchasing supplies. The range spanning some 35,000 products includes the following sectors: handling and lifting, wheels and castors, ladders and steps, storage and shelving, office, safety and security, workwear, cleaning and hygiene, mailroom and packaging, workshop and maintenance, waste and recycling, premises, lockers and cloakroom, signs and labels, and flooring and matting. The sector is highly fragmented consisting of a small number of directly comparable distance selling organisations and an increasingly large number of specialist distributors. Our customer base is similarly diverse and consequently demand is reflective of the current market conditions. The group continues to build upon its strengths in distance selling and to enhance its e-commerce offering. The acquisition of the ESE brand diversified the group into different customer segments with an alternative service proposition and pricing strategy. We believe that deploying e-commerce initiatives with our customers will produce efficiencies as well as growth opportunities. During 2016, we have continued to work with our IT partners to improve our e-commerce offering and to become a true omni-channel business. Our field based sales personnel remain vital in personalising our service offering and in providing bespoke solutions to customers’ needs. Our focus is not only on providing value, choice and quality but moreover to differentiate ourselves by providing excellent knowledge and service in an ever changing regulatory environment. One key way in which we do this is by offering a broad spectrum of specialist publications that have pioneered the provision of knowledge and expertise to the facilities management and occupation health sectors. Next day delivery is offered on a substantial proportion of our lines to further augment our service levels. During 2016 we continued to generate synergies to augment ESE’s contribution to group profitability. ESE now runs the common business IT platform and carries a significant amount of products sourced from Slingsby in its range. Warehousing is carried out at the Slingsby site and certain ecommerce activities are centralised at ESE. Further integration actions will be made during 2017. The directors believe that the group’s strong core brand values of quality, reliability and service excellence remain as true today as they have done over the past 120 years of trading and this is recognised by the number of repeat customers. We believe that this focus on value and service have begun to arrest the decline in sales experienced over recent years. Key Performance Indicators and Business Performance Sales growth Return on capital employed Return on sales Gross profit margin Notes: 2016 5.8% (181.6%) (4.1%) 34.9% 2015 35.5% (27.4%) (3.7%) 36.6% Sales growth includes sales from ESE Direct Limited acquired on 27th March 2015. Comparable sales growth was (4.4% down). Return on capital employed is calculated as loss before taxation over the total equity at the year end. This has declined due to the reduction in net assets caused by increased losses and the increase in the pension scheme deficit. Return on sales is calculated as loss before taxation over revenue. This has declined due to the increased loss. A review of the business is included in the Statement by the Chairman on page 1. Principal risks The directors recognise that there are a number of risks that may affect the performance of the business as below. These risks and uncertainties are subjected to regular review and where appropriate, processes are established to minimise the level of exposure. People The principal asset of the group is the commitment and skill of its people. The retention of these people is therefore key to the success of the business. The group has in place incentive schemes which are related to its results and which allow all employees to participate in the success of the group as a whole. Economic and market cycles and volatility The group’s operating performance is influenced by the economic conditions of the regions in which it operates, principally the UK. The continued uncertain economic environment could result in a general reduction in business activity and a consequent loss of income for the group. Funding and liquidity risk The main risk arising from the group’s financial instruments is liquidity risk and ensuring that the group has sufficient bank facilities available to meet all short term cash requirements for the foreseeable future. The group purchases a significant amount of its products from overseas suppliers in foreign currencies and uses forward foreign currency contracts. The group’s borrowings are on floating rates of interest and so the cost of these facilities would increase should interest rates rise. The Board keeps these risks under regular review. Regulatory We remain fully compliant with all regulatory requirements and constantly monitor changes in laws, regulations and standards relating to employment, safety, environment and quality, to enable us to adapt our policies and procedures accordingly. This ensures we continue to meet customer requirements, minimise business impact and control costs, whilst observing our legal and social responsibilities. Approvals We are committed to continuous improvement in both Quality and Environmental Management. We remain UKAS (UK Accreditation Service) accredited to the international standards ISO 9001:2008 and ISO 14001:2004 respectively. Exceptional Items In 2016 we incurred £102,000 relating to employee termination costs. In 2015, the costs of the acquisition of ESE Direct Limited resulted in an exceptional item of £193,000 and a further exceptional item of £88,000 related to redundancy and compensation costs (total exceptional items £281,000). Pensions The group has an obligation to fund its defined benefit pension scheme and this creates an exposure to interest rates, inflation, investment return and the longevity of the plan members. The group eliminated these risks for future service by the closure of the scheme to future accrual from 31 March 2009; however, the funding of the past service liabilities remains and has the potential to create significant variances in the group’s operating profits, cash flow and balance sheet. Contributions to this scheme totalled £270,000 during 2016 and, together with the substantial costs of running the scheme, represents a significant commitment for the Group to meet. Discussions with the pension Trustee and relevant authorities are ongoing concerning an appropriate longer term solution for the scheme. The quantum and timing of future pension contributions is therefore a significant uncertainty for the company. Health and Safety We meet our statutory and regulatory environmental obligations, through membership of our local Eco-Network and appropriate compliance schemes. The group initiatives in optimising our carbon footprint not only benefit the environment but also reduce our costs. 2 3 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Report of the Directors The directors are pleased to present their annual report and audited consolidated financial statements for the year ended 31 December 2016. Future developments are considered in the Statement by the Chairman on page 1. H C Slingsby plc is a public limited company with securities traded on the AIM market of the London Stock Exchange. It is incorporated and domiciled in the United Kingdom and based in Baildon, West Yorkshire. Directors The directors of the company who were in office during the year and up to the date of signing the financial statements are as follows: J.R. Waterhouse (not re-elected 30 June 2016) D. S. Slingsby L. R. Wright (resigned 19 May 2016) M. L. Morris Dividends The following dividends have been proposed for the 2016 financial year: An interim dividend of nil pence per share (2015: 0p per share) The directors recommend a final dividend of nil pence per share (2015: 0p per share) £’000 - - Directors’ Interests The beneficial interests of the directors and their immediate families in the shares of the company are: Number of ordinary shares of 25p each 31 December 2016 1 January 2016 Going Concern The directors have prepared trading and cash flow forecasts for the group for the period to 31 December 2018, which assume that the pension scheme contributions will recommence at their previous level. These forecasts indicate that the group will be able to operate within its banking facilities and meet its liabilities as they fall due. The overdraft element of the group’s banking facilities expires on 31 July 2017, however, HSBC Bank plc have indicated their support to renew the facility until at least 31 December 2017. The group’s debtor finance facilities remain unaffected. In preparing the trading and cash flow forecasts the directors have assumed that the overdraft will be renewed beyond 31 December 2017. However, if this was not the case the directors are confident that given the level of security offered by the group’s assets, they would be successful in obtaining an alternative source of funding. The financial statements have therefore been prepared on a going concern basis which assumes the group will continue in operation for the foreseeable future. Substantial Interests So far as the directors are aware these were the following substantial interests, other than those included in directors’ interests, in the shares of the company at 24 May 2017: Number of ordinary Shares of 25p each Percentage Holding M. Chadwick* 180,295 18.4% J. Crowther Jones & Mr. T. E. Jones J. H. Ridley C.J. Slingsby S. E. Slingsby and Mr Hugh Padfield M. Miller (registered in the name of Platform Securities Nominees Limited) 54,866 54,302 53,886 51,167 48,381 47,138 37,000 32,500 30,835 5.5% 5.4% 5.4% 5.1% 4.8% 4.7% 3.7% 3.3% 3.1% J. R. Waterhouse D. S. Slingsby L. R. Wright M.L. Morris 1,000 115,167 - 1,000 1,000 115,167 H. Slingsby 2,000 1,000 K. J. Williams S. Whittaker S. A. Williams Report of the Directors continued Financial Instruments The group’s financial instruments comprise cash, forward foreign exchange contracts and various items such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to finance the group’s operations. Financial risk management disclosures are included in note 22 to the financial statements. Indemnification of Directors The company confirms that qualifying third party indemnity insurance cover has been effected in respect of directors’ and officers’ liability to protect “insured persons” in respect of liabilities devolving on them for wrongful acts arising in the normal conduct of the business. This was in place throughout the last financial year and is currently in force. Audit Information So far as each of the directors is aware, there is no relevant information that has not been disclosed to the company’s auditors and each of the directors believes that all steps have been taken that ought to have been taken to make them aware of any relevant audit information and to establish that the company’s auditors have been made aware of that information. Independent Auditors A resolution to reappoint RSM UK Audit LLP as the company’s auditors and authorising the directors to fix their remuneration will be proposed at the Annual General Meeting. Corporate Governance The company’s statement on corporate governance is included in the Corporate Governance report on page 6 of the financial statements. By order of the Board M. L. Morris Company Secretary 24 May 2017 There have been no other changes in the directors’ shareholdings between 31 December 2016 the date of this report. None of the directors had any beneficial interest in any contract of significance to which the company was a party, other than their employment contracts, subsisting during the year. The holding of D.S.Slingsby includes a non-beneficial interest of 64,000 (2015: 64,000) ordinary shares. H C Slingsby plc Retirement 3.0% Benefits Scheme * 80,995 registered in the name of Goodbody Stockbrokers Nominees 30,061 Ltd and 99,300 in the name of Rulegale Nominees Limited 4 5 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Corporate Governance Statement of Directors’ Responsibilities The Board recognises the value and importance of high standards of corporate governance. Accordingly, whilst the UK Corporate Governance Code does not apply to AIM companies, the Board intends to observe the requirements of the Corporate Governance Code for small and mid-size companies (“the Code”) published by the Quoted Companies Alliance to the extent that they consider appropriate in light of the Group’s size and resources. The Board The Board meets formally on a monthly basis and special meetings are convened to discuss matters that require urgent consideration. In view of the size of the group and the close involvement of the directors, informal meetings take place frequently. Accordingly, a register of all meetings has not been kept with which to record attendances. There is a Schedule of Matters specifically reserved for the Board’s decision. There is also an established procedure for all directors to take independent professional advice, if necessary, at the company’s expense. Additionally, all directors have access to the advice and services of the Company Secretary and the company maintains directors’ and officers’ liability insurance. The Board comprises the following: D. S. Slingsby M. L. Morris – – Interim Executive Chairman and Operations Director* Financial Director and Company Secretary * Acting Chairman of both Audit and Remuneration Committees As noted in the Chairman’s statement, the Directors continue their search for a suitable non-executive Director to bring more balance to the composition of the Board. Relations with Shareholders The company is ready, where practicable, to enter into a dialogue with institutional shareholders based on the mutual understanding of objectives. The Board also uses the Annual General Meeting (“AGM”) to communicate with private investors. The directors are available to answer questions raised by shareholders at the AGM. The level of proxies lodged on each AGM resolution and the numbers for, against and withheld for each resolution are declared by the Chairman after the resolution has been dealt with on a show of hands. Internal Controls The Board acknowledges that it is responsible for the group’s system of Internal Control and for reviewing its effectiveness. Reflecting the size of the group, a key control procedure is the close day-to-day supervision of the business by the executive directors, supported by the senior management with responsibility for key operations. The executive directors are involved in the budget setting process, constantly monitoring key performance indicators such as those highlighted in the business review and reviewing the management accounts on a monthly basis, noting and investigating major variances. All significant capital expenditure decisions are approved by the Board as a whole, in line with the Schedule of Matters reserved for the Board. By order of the Board M. L. Morris Company Secretary 24 May 2017 The directors are responsible for preparing the Strategic Report and the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and company financial statements for each financial year. The directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and have elected under company law to prepare the company financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”). The group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position and performance of the group; the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing each of the group and company financial statements, the directors are required to: a. select suitable accounting policies and then apply them consistently; b. make judgements and accounting estimates that are reasonable and prudent; c. state whether they have been prepared in accordance with IFRSs adopted by the EU subject to any material departures disclosed and explained in the company financial statements; and d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and the company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. By order of the Board M. L. Morris Company Secretary 24 May 2017 6 7 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Independent auditors’ report to the members of H C Slingsby plc Independent auditors’ report to the members of H C Slingsby plc continued Opinion on financial statements We have audited the group and parent company financial statements (“the financial statements”) on pages 10 to 35. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements and, based on the work undertaken in the course of our audit, the Strategic report and the Directors’ Report have been prepared in accordance with applicable legal requirements. In our opinion • • • the financial statements give a true and fair view of the state of the group’s and the parent’s affairs as at 31 December 2016 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at http://www.frc.org.uk/auditscopeukprivate Matters on which we are required to report by exception In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Respective responsibilities of directors and auditor As more fully explained in the Directors’ Responsibilities Statement set out on page 7, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Michael Thornton (Senior Statutory Auditor) for and on behalf of RSM UK Audit LLP, Statutory Auditor Chartered Accountants 2 Whitehall Quay Leeds LS1 4HG 24 May 2017 8 9 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Consolidated Income Statement Statement of Consolidated Comprehensive Income and Expense For the year ended 31 December 2016 For the year ended 31 December 2016 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Operating loss before exceptional item Exceptional item Operating loss Finance income Finance costs Loss before taxation Taxation Note 2016 £’000 18,044 (11,752) 6,292 2015 £’000 17,061 (10,812) 6,249 (3,746) (2,909) (3,566) (2,974) (261) (10) (102) (281) (363) (291) - (369) (732) 76 1 (342) (632) 194 3 6 7 8 9 Loss for the year attributable to owners of the parent (656) (438) Basic and diluted loss per share 10 (65.6p) (43.8p) Loss for the year Items that will not be reclassified to profit or loss: Remeasurements of post-employment benefit obligations Movement in deferred tax relating to retirement benefit obligation Items that may be subsequently reclassified to profit or loss: Exchange adjustment Other comprehensive (expense)/income Note 2016 £’000 (656) 24 16 (1,555) 280 2015 £’000 (438) 242 (213) 31 (13) (1,244) 16 Total comprehensive expense for the year attributable to equity shareholders (1,900) (422) 10 11 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Statements of Consolidated and Company Changes in Shareholders’ Equity Consolidated Balance Sheet For the year ended 31 December 2016 As at 31 December 2016 Group 1 January 2015 Loss for the year Other comprehensive income/ (expense) for the year Total comprehensive expense for the year Dividends paid 1 January 2016 Loss for the year Other comprehensive income/ (expense) for the year Total comprehensive expense for the year Dividends paid 31 December 2016 Note 12 12 Share capital £’000 250 – – – – 250 – – – – 250 Retained earnings £’000 Translation reserve £’000 2,531 (438) 29 (409) (60) 2,062 (656) (1,275) (1,931) - 131 4 – (13) (13) – (9) – 31 31 – 22 Total equity £’000 2,785 (438) 16 (422) (60) 2,303 (656) (1,244) (1,900) - 403 The translation reserve comprises foreign exchange differences arising from the translation of the financial statements of foreign operations. Company 1 January 2015 Loss for the year Other comprehensive income for the year Total comprehensive expense for the year Dividends paid 1 January 2016 Loss for the year Other comprehensive expense for the year Total comprehensive expense for the year Dividends paid 31 December 2016 Note 12 12 Share capital £’000 250 – – – – 250 – – – – 250 Retained earnings £’000 2,308 (447) 29 Total equity £’000 2,558 (447) 29 (418) (418) (60) 1,830 (671) (1,275) (1,946) - (116) (60) 2,080 (671) (1,275) (1,946) - 134 Assets Non-current assets Property, plant and equipment Intangible assets Goodwill Deferred tax asset Current assets Inventories Trade and other receivables Derivative financial asset Cash and cash equivalents Liabilities Current liabilities Trade and other payables Derivative financial liability Finance lease obligations Net current liabilities Non-current liabilities Finance lease obligations Retirement benefit obligation Deferred tax liabilities Net assets Capital and reserves Share capital Retained earnings Translation reserve Total equity Note 2016 £’000 2015 £’000 13 14 14 16 17 18 20 19 20 21 21 24 16 25 5,838 1,108 2,409 1,733 6,102 1,279 2,409 1,446 11,088 11,236 1,811 1,778 2,525 2,340 - 632 4,968 11 192 4,321 (5,517) (4,653) (13) (44) (5,574) (606) (37) (9,626) (416) 403 250 131 22 403 - (44) (4,697) (376) (66) (8,033) (458) 2,303 250 2,062 (9) 2,303 The financial statements on pages 10 to 35 were approved by the Board of Directors on 24 May 2017 and were signed on its behalf by: D. S. Slingsby Director M. L. Morris Director H C Slingsby plc Registered Number: 452716 12 13 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Company Balance Sheet As at 31 December 2016 Assets Non-current assets Property, plant and equipment Intangible assets Investments in subsidiaries Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents Derivative financial asset Liabilities Current liabilities Trade and other payables Derivative financial liability Finance lease obligations Net current liabilities Non-current liabilities Finance lease obligations Retirement benefit obligation Deferred tax liabilities Net assets Capital and reserves Share capital Retained earnings Total equity Consolidated Cash Flow Statement For the year ended 31 December 2016 Note 2016 £’000 2015 £’000 Note 2016 £’000 2015 £’000 13 14 15 16 17 18 20 19 20 21 21 24 16 25 5,710 258 4,001 1,733 5,877 352 4,001 1,446 Cash flows from operating activities Cash (used in)/generated from operations Interest payable UK corporation tax received Cash (used in)/generated from operating activities Cash flows from investing activities 11,702 11,676 Interest received 1,810 2,005 256 - 4,071 1,731 1,876 62 11 3,680 (5,534) (4,690) (13) (44) (5,591) (1,520) (37) (9,626) (385) 134 250 (116) 134 - (44) (4,734) (1,054) (66) (8,033) (443) 2,080 250 1,830 2,080 Purchase of property, plant and equipment Payment in respect of ESE acquisition Proceeds from sales of property, plant and equipment Purchase of intangible assets Net cash used in investing activities Cash flows from financing activities Equity dividends paid Capital element of finance lease payments New finance leases Proceeds from borrowings Net cash generated from financing activities Net decrease in cash and cash equivalents Opening cash and cash equivalents Exchange differences Closing cash and cash equivalents Cash and cash equivalents Cash Overdraft 13 14 12 (84) (61) 23 (122) - (98) (30) 51 (40) (117) - (57) 27 50 20 (219) (291) 171 (38) 93 226 1 (198) (3,585) 112 (26) (3,696) (60) (20) 130 1,202 1,252 (2,218) 1,940 31 (13) (479) (291) Group 2016 £’000 632 (1,111) (479) 2015 £’000 192 (483) (291) Company 2016 £’000 256 (1,111) (855) 2015 £’000 62 (483) (421) The financial statements on pages 10 to 35 were approved by the Board of Directors on 24 May 2017 and were signed on its behalf by: D. S. Slingsby Director M. L. Morris Director H C Slingsby plc Registered Number: 452716 14 15 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Company Cash Flow Statement For the year ended 31 December 2016 Cash flows from operating activities Cash (used in) / generated from operations Interest payable UK corporation tax received Cash (used in) / generated from operating activities Cash flows from investing activities Interest received Purchase of property, plant and equipment Payment in respect of ESE acquistion Proceeds from sales of property, plant and equipment Purchase of intangible assets Net cash used in investing activities Cash flows from financing activities Equity dividends paid Capital element of finance leases payments New finance leases Proceeds from borrowings Net cash generated from financing activities Net decrease in cash and cash equivalents Opening cash and cash equivalents Closing cash and cash equivalents Note to the Cash Flow Statements For the year ended 31 December 2016 Cash (used in)/generated from operating activities Loss before tax Net finance costs Depreciation and amortisation Profit on sale of property, plant and equipment Pension deficit contributions (Increase)/decrease in inventories (Increase)/decrease in trade and other receivables Increase in trade and other payables Cash (used in)/generated from operating activities Note 2016 £’000 2015 £’000 (317) (61) 597 (38) 23 137 (355) 696 13 14 12 - (60) (30) 31 (40) (99) - (57) 27 50 20 (434) (421) (855) Group Company 2016 £’000 (732) 369 527 (5) (270) (33) (169) 229 (84) 2015 £’000 (632) 341 530 (99) (500) 232 29 270 171 2016 £’000 (760) 369 331 - (270) (79) (118) 210 (317) 1 (176) (3,971) 112 (26) (4,060) (60) (20) 130 1,202 1,252 (2,112) 1,691 (421) 2015 £’000 (628) 342 382 (99) (500) 220 (37) 917 597 Notes to the Accounts 1. Accounting Policies Basis of Preparation The financial accounts are prepared in Sterling, which is the functional currency of the group. Monetary amounts in these statements are rounded to the nearest £’000. The principal accounting policies adopted in the preparation of these financial statements, which have been applied consistently to all years presented, are set out below. The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), IFRS Interpretations Committee (IFRSIC) interpretations as adopted by the EU and with the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements are prepared under the historical cost convention on a going concern basis, except for derivative financial instruments which are measured at fair value through profit or loss. The group has made a loss for the year of £656,000 (2015 - £438,000) and had net current liabilities at 31 December 2016 of £606,000 (2015 - £376,000). With the agreement of the pension scheme Trustee the company suspended deficit reduction contributions to the defined benefit pension scheme from 1 July 2016 until a longer term solution to the pension deficit can be found. Discussions are ongoing and therefore there is uncertainty as to the quantum and timing of future payments to the scheme. The directors have prepared trading and cash flow forecasts for the group for the period to 31 December 2018, which assume that the pension scheme contributions will recommence at their previous level. These forecasts indicate that the group will be able to operate within its banking facilities and meet its liabilities as they fall due. The overdraft element of the group’s banking facilities expires on 31 July 2017, however, HSBC Bank plc have indicated their support to renew the facility until at least 31 December 2017. The group’s debtor finance facilities remain unaffected. In preparing the trading and cash flow forecasts the directors have assumed that the overdraft will be renewed beyond 31 December 2017. However, if this was not the case the directors are confident that given the level of security offered by the group’s assets, they would be successful in obtaining an alternative source of funding. The financial statements have therefore been prepared on a going concern basis which assumes the group will continue in operation for the foreseeable future. Accounting Developments Impact of new International Financial Reporting Standards The group has not adopted any new or amended IFRSs as of 1 January 2016 that have had a material impact on the amounts reported. A number of new amendments have been issued but are not effective until 1 January 2017 and have not been early adopted. The impact of these new standards and amendments will be assessed in detail prior to adoption, however at this stage the Directors do not anticipate them to have a material impact on the Group. Basis of Consolidation The financial statements of the group consolidate the financial statements of H C Slingsby plc and its subsidiaries undertakings up to 31 December 2016 using acquisition accounting. Subsidiaries are entities over which the group has the power to govern the financial and operating policies. The results of subsidiary undertakings acquired during a financial period are included from the effective date of acquisition. Intra-Group sales, Intra-Group balances and Intra-Group profits are eliminated fully on consolidation, and consistent accounting policies have been adopted across the group. The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values for the assets transferred and the liabilities incurred to the former owners of the acquired. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition related costs are expensed as incurred. Exceptional Items Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount. Accounting Estimates and Judgements The preparation of these financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue during the reporting year. Actual results could materially differ from these estimates. Key sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of asset or liabilities within the next accounting year are: 16 17 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued • Assumptions used in the calculation of the defined benefit pension scheme liability (note 24); • Selection of appropriate rates of amortisation and depreciation for intangible and tangible non-current assets; and • Allowances against the valuation of inventories (note 17). Key judgements applied are in respect of: • Adoption of going concern basis (see Report of the Directors); • Non-impairment of non-current assets based on expected future performance of the business; and • Recognition of deferred tax assets based on the availability of suitable future profit streams. Revenue and Recognition of Income Revenue comprises the fair value of the consideration received or receivable from the sale of goods and services in the ordinary course of the group’s activities. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Group. Revenue is recognised when the goods are dispatched to the customer. Employee Benefits The group operates a defined benefit and a defined contribution pension scheme for its employees. Defined benefit scheme: The pension liability recognised in the balance sheet in respect of the defined benefit scheme is the present value of the defined benefit obligation at the balance sheet date less the fair value of the scheme assets. The defined benefit obligation is calculated tri-annually by independent actuaries using the projected unit method and this valuation is updated at each balance sheet date. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that have terms to maturity approximating to the terms of the related pension liability. Past service costs are recognised immediately in income. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in full in the statement of comprehensive income in the period in which they arise. Defined contribution scheme: contributions payable are charged to the income statement in the accounting year in which they are incurred. The group has no further payment obligations once the contributions have been paid to this scheme. Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the income statement on a straight-line basis over the period of the lease. Other leases are classified as finance leases. Assets and liabilities under finance leases are recognised at amounts equal to their fair value and depreciated at rates consistent with similar assets. Payments made are apportioned between finance charges and the reduction in capital value of the liability. Foreign Currency Items included in the financial statements of each of the group entities are measured using the currency of the primary economic environment which the entity operates (the funtional currency). The consolidated financial statements are presented in GBP which is the group’s presentation currency. Foreign currency transactions are translated using exchange rates prevailing at the date of the transactions, or, where forward currency contracts have been taken out, at contractual rates. Per IAS 21 assets and liabilities are translated at exchange rates ruling at the end of each financial year. Gains and losses on retranslation are recognised in the income statement. Assets and liabilities of subsidiaries in foreign currencies are translated into sterling at the exchange rates ruling at the end of the financial year. Differences on exchange arising from the retranslation of the opening net investment in subsidiary companies and from the translation of the results of those companies at average rates are recognised as a separate component of equity and are reported in the statement of comprehensive income. Property, Plant and Equipment Property, plant and equipment is stated at cost net of accumulated depreciation and any provision for impairment. Cost comprises purchase cost together with any incidental costs of acquisition. Depreciation is provided to write off the cost less the estimated residual value of the property, plant and equipment by equal instalments over their estimated useful economic lives. The asset’s residual values and useful economic lives are reviewed, and adjusted as appropriate, at each balance sheet date. The following rates are applied: Freehold buildings – 2% per annum Short leasehold property – 10% per annum Equipment – 10% – 33% per annum Freehold land is not depreciated. Intangible Assets Intangible assets are stated at cost less accumulated amortisation. They are recognised if it is possible that there will be future economic benefits attributable to the asset, the cost of the asset can be measured reliably, the asset is separately identifiable and there is control over the use of the asset. The assets are amortised over the period which the group expects to benefit from these assets. Provision is made for any impairment in value if applicable. IT software costs are amortised on a straight-line basis at a rate of 33% per annum. Brand and domain names and customer lists are amortised on a straight-line basis at 5% to 33%. Goodwill Goodwill arising on acquisitions comprises the excess of the fair value of the consideration for investments in subsidiary undertakings over the fair value of the net identifiable assets acquired at the date of the acquisition. Goodwill arising on acquisitions is included in intangible assets. Goodwill is not amortised but is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the lowest level within the Group at which the associated level of goodwill is monitored for management purposes and are not larger than the operating segments determined in accordance with IFRS8 “Operating Segments”. Impairment of non-financial assets Assets not subject to amortisation are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets, other than goodwill that suffered an impairment, are reviewed for possible reversal of the impairment at each reporting date. Investments Investments are stated at cost, less provision for impairment where necessary. Deferred Taxation Deferred taxation is recognised, using the full liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the consolidated financial statements. Deferred taxation is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the balance sheet date, and are expected to apply when the related deferred taxation asset is realised or deferred taxation liability is settled. Deferred taxation assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Inventories Inventories which include raw materials and work in progress, finished goods and goods for resale are stated at the lower of cost and net realisable value. Raw materials are valued on a first in-first out basis. The cost of work in progress and finished goods includes an appropriate proportion of production overheads. Net realisable value is based on estimated selling price less additional costs to completion or disposal. Allowance is made for obsolete, defective and slow-moving items based on annual usage. Trade and Other Receivables Trade and other receivables are initially recognised at fair value and subsequently held at amortised cost less provision for impairment. Provisions are made for the difference between the asset’s carrying amount and the present value of estimated future cash flows. Subsequent recoveries of amounts previously written off are credited to the Income Statement. Trade Catalogues Expenditure relating to the production and distribution of the main catalogue and supplementary mailings is written off in the financial statements in the year when the catalogue is produced. Cash and Cash Equivalents Cash and cash equivalents include cash in hand, deposits held on call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Trade Payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. 18 19 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued Derivative Financial Instruments Derivative financial instruments are initially recognised at fair value on the date a contract is entered into and are subsequently re- measured at their fair value at each balance sheet date. The resulting gain or loss is recognised directly in the income statement. The group does not apply hedge accounting in respect of its financial instruments, nor does it trade in any financial instruments. Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends proposed by the board are recognised in the financial statements when they have been approved by shareholders. Interim dividends are recognised when they are paid. Current Taxation The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items that are not taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. The tax expense for the year comprises current and deferred tax that is recognised in the Income Statement, except that it relates to items recognised in other comprehensive income or directly in equity, in which case the tax is also recognised in other comprehensive income or directly in equity respectively. 2. Segmental Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions. The group only has one business segment, which is its principal activity, being the merchanting and distribution of industrial and commercial equipment. All of the group’s revenue, (losses)/profits, assets and liabilities are wholly attributable to that business segment. The operations of the group are based in the UK and the Republic of Ireland. The Republic of Ireland operation makes up less than 10% of the group’s revenue and assets, contributing €154,000 ( 2015: €616,000 ) and €257,000 (2015: €271,000) respectively. 3. Exceptional Items Redundancy and compensation costs Acquisition of ESE 2016 £’000 102 - 102 Costs relating to the acquisition of ESE relate to legal, accounting and advisory services together with bank facility costs. 4. Employee Information Staff costs for the company during year: Wages and salaries Social security costs Other pension costs The average monthly number of persons employed by the company during the year was: 2016 £’000 2,718 238 148 3,104 2015 £’000 88 193 281 2015 £’000 2,771 244 167 3,182 Selling and distribution Administration 20 2016 Number 2015 Number 83 27 110 82 30 112 5. Directors’ Remuneration Aggregate emoluments Company contributions to money purchase pension scheme Highest paid director: Aggregate emoluments Defined benefit scheme accrued pension at end of year 2016 £’000 2015 £’000 196 21 217 115 86 411 19 430 130 86 Two directors have accrued benefits under a deferred benefit scheme (2015: three). One director accrued benefits under a defined contribution pension scheme (2015: one). Payments in respect of compensation for loss of office totalled £82,556 and are not included above. 6. Operating Loss Operating loss is stated after charging/(crediting): Profit on disposal of property, plant and equipment Depreciation on property, plant and equipment Amortisation of intangible assets Operating lease charges – land and buildings – other Foreign exchange losses on operating activities Services provided by the company’s auditors Fees payable to the company’s auditors for the audit of parent company and consolidated financial statements Fees payable to the company’s auditors for other services: Other audit services pursuant to legislation: The audit of Company’s subsidiaries pursuant to legislation Other services pursuant to legislation: Tax services – Compliance Advisory Total fees payable to the company’s auditors 7. Finance Income Bank interest receivable 2016 £’000 (5) 282 245 36 4 (27) 32 6 5 - 43 2015 £’000 (99) 308 222 36 4 13 40 7 10 1 58 2016 £’000 - 2015 £’000 1 21 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued 8. Finance Costs Interest payable on bank borrowings Interest payable on finance lease liabilities Net retirement benefit obligation finance costs (note 24) 9. Taxation Current year UK corporation tax: – current year – adjustments in respect of prior years Deferred tax: UK deferred tax: – origination and reversal of timing differences – adjustments in respect of prior years Total taxation credit Factors affecting the tax credit for the year: The tax on the company’s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the company as follows: Loss before taxation Tax at the UK corporation tax rate of 20% (2015: 20.25%) Expenses not deductible for tax purposes Adjustments to tax in respect of prior years – current year – deferred tax Tax credit for the year 2016 £’000 (732) (146) 15 (27) (49) (76) 2015 £’000 (632) (128) 13 (49) (30) (194) The standard rate of tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly, the company’s losses for this accounting period are taxed at an effective rate of 20%. Deferred tax assets and liabilities are measured at a rate of 18% as at 31 December 2016. Further reductions to the UK Corporation tax rates were substantively enacted as part of the Finance Bill 2015 on 26 October 2015 and the Finance Bill 2016 on 6 September 2016. These reduce the main rate to 19% from 1 April 2017 and 17% from 1 April 2020. 2016 £’000 56 5 308 369 2015 £’000 36 2 304 342 10. Loss Per Share Basic loss per share is based upon a loss of £656,000 (2015: £438,000) and on 1,000,000 (2015: 1,000,000) ordinary shares in issue during the year. There is no difference between basic loss per share and diluted loss per share for both years as there are no potentially dilutive shares in issue. 11. Loss for the Financial Year As permitted by Section 408 of the Companies Act 2006, the company has not published its own income statement. The result of the company for the financial year was a loss of £671,000 (2015: £447,000). 2016 £’000 2015 £’000 12. Dividends – (27) (27) (42) (7) (49) (76) -- (49) (49) (115) (30) (145) (194) Interim dividend paid for the 2015 financial year of 0.0p (2014: 2.0p) Final dividend paid for the 2015 financial year of 0.0p (2014: 4.0p) No dividends are proposed for the 2016 financial year as set out in the Report of the Directors. 2016 £’000 2015 £’000 - - - 20 40 60 13. Property, Plant and Equipment Group Cost 1 January 2015 Additions Acquisition of subsidiary (note 28) Disposals 1 January 2016 Additions Disposals 31 December 2016 Accumulated depreciation 1 January 2015 Acquisition of subsidiary Charge for the year Disposals 1 January 2016 Charge for the year Disposals 31 December 2016 Net book amount At 31 December 2016 At 31 December 2015 At 31 December 2014 Short Leasehold Property £’000 Freehold land and buildings £’000 Equipment £’000 - 5 114 – 119 - – 119 - 23 7 – 30 11 – 41 78 89 - 6,665 - - – 6,665 6 – 6,671 913 - 105 – 1,018 106 – 1,124 5,547 5,647 5,752 2,229 193 313 (330) 2,405 58 (205) 2,258 2,029 131 196 (317) 2,039 165 (159) 2,045 213 366 200 Total £’000 8,894 198 427 (330) 9,189 64 (205) 9,048 2,942 154 308 (317) 3,087 282 (159) 3,210 5,838 6,102 5,952 HC Slingsby PLC Retirement Benefits Scheme holds a charge over the company’s freehold land and buildings. HSBC Bank plc holds charges over all of the assets and undertakings of the Group and a fixed charge over the freehold land and buildings. 22 23 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued 13. Property, Plant and Equipment (continued) 14. Intangible Assets Equipment includes the following amounts where the group is lessee under finance leases: Cost of assets subject to finance leases Accumulated depreciation Group and Company 2016 £’000 144 (45) 99 2015 £’000 144 (20) 124 The group leases various motor vehicles under non-cancellable finance lease agreements. The assets are leased on a term of 3 years. Company Cost 1 January 2015 Additions Disposals 1 January 2016 Additions Disposals 31 December 2016 Accumulated depreciation 1 January 2015 Charge for the year Disposals 1 January 2016 Charge for the year Disposals 31 December 2016 Net book amount At 31 December 2016 At 31 December 2015 At 31 December 2014 Depreciation is charged to administrative expenses in the Income Statement. Freehold land and buildings £’000 Equipment £’000 6,665 - – 6,665 6 – 6,671 913 105 – 1,018 106 – 1,124 5,547 5,647 5,752 2,229 174 (330) 2,073 54 (157) 1,970 2,029 131 (317) 1,843 91 (127) 1,807 163 230 200 Total £’000 8,894 174 (330) 8,738 60 (157) 8,641 2,942 236 (317) 2,861 197 (127) 2,931 5,710 5,877 5,952 Group Goodwill £’000 -- 2,409 2,409 -- 2,409 -- -- -- -- -- -- 2,409 2,409 -- Group Company Brand and Domain Names and Customer Lists IT Software and Trademarks £’000 £’000 TOTAL £’000 IT Software £’000 -- 1,000 1,000 -- 1,000 -- 75 -- 75 100 175 825 925 -- 775 30 805 74 879 302 147 2 451 145 596 283 354 473 775 1,030 1,805 74 1,879 302 222 2 526 245 771 1,108 1,279 473 775 25 800 40 840 302 146 - 448 134 582 258 352 473 Cost 1 January 2015 Additions– Acquisition of subsidiary 1 January 2016 Additions 31 December 2016 Accumulated amortisation 1 January 2015 Charge for the year Acquisition of subsidiary 1 January 2016 Charge for the year 31 December 2016 Net book amount At 31 December 2016 At 31 December 2015 At 31 December 2014 Amortisation is charged to administrative expenses in the Income Statement. On 27 March 2015, the Company purchased 100% of the share capital of ESE Direct Limited. Goodwill of £2.4m arose on the acquisition. In 2016, the acquired business contributed revenue of £6.5m (2015:£4.8m) and profit before tax of £0.2m (2015:£0.1m) before management charges) to the group. Goodwill monitoring Goodwill is monitored by management at the Cash Generating Unit (“CGU”) level. A CGU is considered to be an individual company. The goodwill recognised on the acquisition of ESE Direct Limited has been tested for impairment using the following assumptions: • Budgets for the next 5 years • Extrapolation of expected future cash flows using a terminal growth rate of 2% • Sales growth of between 2 and 6 % • Capital expenditure of between £35,000 and £20,000 per annum • Gross margins projected based on recent trends • Pre-tax discount rate of 15% On the above basis, the directors consider that there are no reasonably possible changes to a key assumption which would give rise to an impairment charge. The Directors performed sensitivity analysis on the basis of sales growth at 50% of assumed levels. At these reduced levels there would be no impairment of goodwill. 24 25 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued 15. Investment in Subsidiary On 27 March 2015 the Company acquired 100% of the issued share capital of ESE Direct Limited. The cost and carrying value of this investment is £4m which the Directors believe is supported by the underlying net assets and their future cash generation. This investment represents the whole of the amount shown in the company’s balance sheet. Slingsby Mail Order Limited, is incorporated in the Republic of Ireland. The results are fully consolidated in the group financial statements. Its principal activity is the merchanting of materials handling and distribution equipment. The company owns 100% of its €1 ordinary share capital. The carrying value of this investment is considered impaired and has been fully provided against. The Company directly owns 100% of the issued share capital of the following subsidiary undertakings, registered in England and Wales except for Slingsby Mail Order Limited which is registered in the Republic of Ireland. Company Business Activity Slingsby Mail Order Limited Distribution of Industrial and Commercial Equipment ESE Direct Limited Eastern Storage Limited ESE Projects Limited Eastern Storage Equipment Limited Slingsby Trading Post Limited Slingsby Manufacturing Limited Slingsby Metro Equipment Limited Distribution of Industrial and Commercial Equipment Dormant Dormant Dormant Dormant Dormant Dormant 16. Deferred Tax The deferred tax balances in these financial statements are attributable to the following: 16. Deferred Tax (continued) Company 1 January 2015 (Charged)/credited to income statement Credited to equity 1 January 2016 Credited to income statement Credited to equity 31 December 2016 17. Inventories Raw materials and work in progress Finished goods and goods for resale Deferred tax asset Pension liability Deferred tax liabilities Short term timing differences Rolled over capital gain Group 2016 £’000 2015 £’000 Company 2016 £’000 2015 £’000 1,733 1,446 1,733 1,446 (249) (167) (416) (291) (167) (458) (218) (167) (385) (276) (167) (443) Pension liability £’000 Short term timing differences £’000 Rolled over capital gain £’000 1,694 (35) (213) 1,446 7 280 1,733 (424) 148 – (276) 58 – (218) (185) 18 – (167) - – (167) Total £’000 1,085 131 (213) 1,003 65 280 1,348 Group Company 2016 £’000 178 1,633 1,811 2015 £’000 215 1,563 1,778 2016 £’000 178 1,632 1,810 2015 £’000 168 1,563 1,731 Group Company 2016 £’000 2,157 – 368 2,525 2015 £’000 2,013 – 327 2,340 2016 £’000 1,638 54 313 2,005 2015 £’000 1,642 13 221 1,876 Inventories are presented net of provisions for write-downs, based on management’s estimate of net realisable value. The amount charged to the income statement in respect of write-downs of inventories was £19,000, (2015: £24,000). The cost of inventories recognised as an expense and included in the group’s cost of sales was £11,580,000 (2015: £10,089,000) and £7,325,000 (2015: £6,802,000) for the company. The provision for obsolete stock at the year end is £403,000 (2015: £387,000). 18. Trade and Other Receivables The deferred tax asset relates to the deficit on the company’s defined benefit pension scheme. The company is making payments into this scheme to reduce the deficit and the corresponding asset will reduce in line with these reductions. As movements in the pension deficit arise from changes in actuarial assumptions as well as from deficit reduction payments (see note 24), it is difficult to forecast the movement in the related deferred tax asset. Trade receivables Receivables from subsidiary Prepayments Movements in deferred tax assets/(liabilities) are as follows: Group 1 January 2015 Acquired on acquisition of ESE (Charged)/credited to income statement Credited to equity 1 January 2016 – Group and Company Credited to income statement Credited to equity 31 December 2016 26 Pension liability £’000 Short term timing differences £’000 Rolled over capital gain £’000 1,694 - (35) (213) 1,446 7 280 1,733 (419) (35) 162 – (291) 42 – (249) (185) - 18 – (167) - – Trade and other receivables are non-interest bearing. There is no material difference between the carrying amount and the fair value of trade and other receivables. Trade receivables are presented net of provision for doubtful trade receivables. Provisions are estimated by management based on past default experience and other factors as considered appropriate. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings or to historical information about counterparty default rates Total £’000 1,091 (35) 145 (213) 988 49 280 (167) 1,317 27 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued 18. Trade and Other Receivables (continued) 19. Trade and Other Payables Movements on the group and company provisions for impairment of trade receivables are: At 1 January 2016 Provision made for impaired receivables Unused provision reversed Receivables written off during the year as uncollectable At 31 December 2016 Group 2016 £’000 18 46 (11) (8) 45 Company 2015 £’000 2016 £’000 2015 £’000 16 19 (10) (7) 18 18 38 (11) (6) 39 16 19 (10) (7) 18 Trade payables Payables to subsidiaries Other taxation and social security payable Other payables Accruals Debt financing and overdraft Group Company 2016 £’000 2,416 - 276 12 450 2,363 5,517 2015 £’000 2,248 - 338 12 370 1,685 4,653 2016 £’000 1,734 930 200 11 296 2,363 5,534 2015 £’000 1,768 822 236 12 167 1,685 4,690 Receivables due from subsidiary were not impaired at 31 December 2016 and 31 December 2015. At 31 December 2016 group trade receivables of £45,000 (2015: £18,000) and company trade receivables of £39,000 (2015: £18,000) were impaired. The amount of provision is the full gross amount due. The receivables are considered to be impaired as they have either been disputed by the respective customers or the customers are in financial difficulty. The ageing of these receivables is as follows: Up to three months over terms Over three months over terms Group 2016 £’000 5 40 45 Company 2015 £’000 2016 £’000 2015 £’000 - 18 18 3 36 39 - 18 18 At 31 December 2016 group trade receivables of £1,023,000 (2015: £866,000) and company trade receivables of £617,000 (2015: £835,000) were past due but not impaired. Overdue receivables against which no provision has been made relate to customers for whom there is no recent history of default or any other indication that settlement will not be forthcoming. The ageing of these receivables is as follows: Up to three months over terms Over three months over terms Group Company 2016 £’000 862 161 1,023 2015 £’000 840 26 866 2016 £’000 572 45 617 2015 £’000 809 26 835 Trade and other payables are non-interest bearing. There is no material difference between the carrying amount and the fair value of trade and other payables. The Group’s debtor finance and overdraft facilities (provided by HSBC Bank plc) carry interest rates of 4.25% and 2.55%-4% above the prevailing Bank of England Base Rate respectively. The overdraft element of the Group’s banking facilities expires on the 31 July 2017 but HSBC Bank plc have indicated their support to extend the facility until at least 31 December 2017. Our debtor finance facilities remain unaffected. The Group debtor finance facility is a total of £3m (subject to suitable debt being available) and the overdraft facility is the sum of £750,000. 20. Derivative Financial Instruments Forward foreign currency contracts and options Group and Company Assets Liabilities 2016 £’000 - 2015 £’000 11 2016 £’000 13 2015 £’000 -- Gains and losses on the carrying value of forward foreign currency contract assets and liabilities are recognised in the income statement. The forward foreign currency contracts existing at the year end mature in 2017. They have been valued using year end market data. 21. Borrowings Finance Leases The future minimum finance lease payments are as follows: Group 2016 £’000 Company 2015 £’000 2016 £’000 2015 £’000 Receivables that are neither past due nor impaired are within credit limits for the respective customer and the directors are not aware of any reasons that indicate the amounts due are disputed or not collectable. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable shown above. The group does not hold any collateral as security. Not later than one year Later than one year and not later than five years Total gross payments Impact of finance charges Carrying value of liability The finance lease liabilities relate to motor vehicles leased on a term of 3 years. 48 41 89 (8) 81 48 73 121 (11) 110 48 41 89 (8) 81 The carrying amounts of the group’s and company’s receivables are denominated in the following currencies: Group Company 2016 £’000 2,504 21 2,525 2015 £’000 2,278 62 2,340 2016 £’000 1,984 21 2,005 2015 £’000 1,876 – 1,876 Pound sterling Euro 28 48 73 121 (11) 110 29 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued 22. Financial Risk Management In the normal course of business the group and company is exposed to certain financial risks, principally foreign exchange risk, interest rate risk, liquidity risk and credit risk. The principle financial instruments used by the group from which financial risk arises are as follows: Financial assets Trade receivables (note18) Forward foreign currency contracts and options (note 20) Cash and cash equivalents Financial liabilities Debt financing and overdraft (note19) Trade payables (note 19) Other payables (note 19) Forward foreign currency contracts and options (note 20) 2016 £’000 2,157 - 632 2,789 2016 £’000 2,363 2,416 12 13 2015 £’000 2,013 11 192 2,216 2015 £’000 1,685 2,248 12 - 4,804 3,945 Foreign Exchange Risk The group is exposed to foreign exchange risk from purchasing a portion of its supplies in foreign currencies. The company enters into forward foreign currency contracts to manage its exposure to currency fluctuations that arise on purchase contracts denominated in foreign currencies. The carrying value of the group’s foreign currency denominated financial assets and monetary liabilities at the reporting date are as follows: Euros Dollars Assets Liabilities 2016 £’000 21 14 2015 £’000 62 19 2016 £’000 78 - 2015 £’000 71 - Interest Rate Risk The group’s and company’s exposure to interest rate risk arises on its debtor finance and overdraft facilities. These are based on floating rates of interest. Accordingly should interest rates increase, the group and company’s interest cost would rise. The group does not use interest rate hedges. Liquidity Risk In the normal course of business the group and company is exposed to liquidity risk. The objective is to ensure that sufficient resources are available to fund short term working capital and longer term strategic requirements. This is achieved through ensuring that the group has sufficient cash and borrowing facilities in place. Credit Risk Credit risk principally arises on cash deposits and trade receivables. The credit risk arising on cash deposits is limited because the counterparties are financial institutions with high credit ratings assigned by international credit rating agencies. The credit risk arising on trade receivables is spread over large numbers of customers. There are no significant concentrations of credit risk. Sensitivity Analysis There is not expected to be a material impact on reported results and the balance sheet relating to the above risks. 23. Capital Risk Management The capital structure of the group consists of cash, equity, debtor finance and overdraft. The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain the capital structure the group may adjust the amount of dividends paid to shareholders. This situation is monitored using budgets and by calculation of a gearing ratio (debtor financing and overdraft less cash/net assets). At 31 December 2016, the gearing ratio was 430% (2015:65%). 24. Pension Commitments Group and Company Retirement Benefit Obligations At 31 December 2016 H C Slingsby plc (“the Company”) operated pension schemes for the benefit of its employees. The schemes are provided through both defined benefit and defined contribution arrangements. This disclosure is concerned only with the defined benefit arrangement, the H C Slingsby plc Retirement Benefits Scheme (“the Scheme”). The liability associated with the Scheme is material to the Company. The Company’s objective is for the Scheme to target 100% funding on a basis that should ensure that benefits can be paid as they fall due. Any shortfall in the assets directly held by the Scheme, relative to its funding target, will be financed over a period that ensures the contributions are reasonably affordable to the Company. The expected contribution to the Scheme over the 2017 fiscal year is subject to the outcome of discussions between the Company and the appropriate authorities. The defined benefit scheme was closed to new entrants in 2006 and to future accrual in 2009. Nature of Scheme The Scheme targets a pension paid throughout life. The amount of pension depends on how long employees are active members of the scheme and their salary when they leave the scheme (a ‘‘final salary’’ plan). The pension receives inflation-linked increases in the years before retirement. Once in payment, pensions either do not increase or increase in line with inflation or a fixed rate. The Scheme was closed to future accrual in 2009. It is governed by a sole corporate Trustee that has control over its operation, funding and investment strategy. The Trustee will consult with the Company on certain matters. Funding the liabilities UK legislation requires the Trustee to carry out valuations at least every three years and to target full funding against a basis that prudently reflects the Scheme’s risk exposure. The most recent valuation was carried out as at 1 January 2014 and a shortfall of £7.5m against the Trustee’s funding objective was identified. The Company agreed to pay annual contributions of £540,000 (£500,000 in 2015) to remove the shortfall over 14 years. An amount of £270,000 was paid in 2016. Deficit reduction contributions are suspended pending discussion between the Company and the relevant authorities. The weighted average duration of the defined benefit obligation is 20.4 years. Investment strategy Approximately 53% of the Scheme’s assets are held in equity type assets, and 47% are held in long term fixed interest and inflation linked securities. Included within the fair value of the Scheme assets are 30,061 of the company’s shares, with a fair value of £22,000 as at 31 December 2016. The Scheme’s liabilities are calculated using a discount rate set with reference to corporate bond yields; if Scheme assets underperform this yield, this will increase the deficit. The Scheme holds a significant proportion of equities, which are expected to outperform corporate bonds in the long term while providing volatility and risk in the short term. As the Scheme matures, the expectation is that the Trustee would reduce the level of investment risk by investing more in assets that better match the liabilities. In essence this would see a gradual sale of equities and the purchase of gilts and corporate bonds. The company is of the view that, due to the long term nature of the Scheme’s liabilities, it is appropriate to continue with a degree of equity investment so as to manage the Scheme’s long term liabilities efficiently. The Trustee has derived its investment strategy, in consultation with the company, so as to reflect the Scheme’s long term liabilities. At the current time approximately 50% of the Scheme’s assets are invested in long term fixed interest and inflation linked securities of a duration that broadly matches the duration of benefit payments. The balance is invested in a diversified portfolio of global equity type assets. Both the Trustee and the company believe that equities offer the best returns over the long term with an acceptable level of risk. The Scheme’s investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. It should be noted that the Trustee has sole responsibility for setting the investment strategy for the Scheme, albeit the company is consulted over any change to investment strategy. The processes used to manage risks within the Scheme have not changed from previous periods. Derivatives are not used to manage risks within the Scheme. 30 31 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued 24. Pension Commitments (continued) 24. Pension Commitments (continued) Other risks Actions taken by the local regulator, or changes to European legislation, could result in stronger local funding standards, which could materially affect the company’s cash flow. There is a risk that changes in the assumptions for discount rate, price inflation or life expectancy could result in an increase in the deficit in the Scheme. Other assumptions used to value the defined benefit obligation are also uncertain, although their effect is less material. Winding up Although currently there are no plans to do so, with the company’s approval, the Trustee could choose to wind up the Scheme in which case the benefits would have to be bought out with an insurance company. The cost of buying-out benefits would be significantly more than the defined benefit obligation calculated in accordance with IAS 19 (revised). The measurement of the company’s net defined benefit liability is particularly sensitive to changes in certain key assumptions, which are: Discount rate Inflation Mortality rates This has been selected following actuarial advice received, taking into account the duration of the liabilities. An increase or decrease in the discount rate of 0.25% would result in a decrease or increase of approximately £1.4m in the present value of the defined benefit obligation. The methodology used to derive the assumption adopted is consistent with discount rate methodology. An increase or decrease in the inflation rate of 0.25% would result in an increase or decrease of approximately £0.1m in the present value of the defined benefit obligation. The mortality assumptions adopted are based on actuarial advice received and reflect the most recent information as appropriate. The assumptions used indicate that the future life expectancy of a male (female) pensioner reaching age 65 in 2016 would be 21.4 (23.5) years and the future life expectancy from age 65 for a male (female) non-pensioner member currently aged 45 of 23.1 (25.4) years. The increase or decrease in the present value of the defined benefit obligation due to a member living one year longer, or one year less, would be approximately £1m. The methods used to carry out the sensitivity analyses presented above for the material assumptions are the same as those the company has used previously. The calculations alter the relevant assumption by the amount specified, whilst assuming that all other variables remained the same. This approach is not necessarily realistic, since some assumptions are related: for example, if the scenario is to show the effect if inflation is higher than expected, it might be reasonable to expect that nominal yields on corporate bonds will increase also. However, it enables the reader to isolate one effect from another. Year ended 31 December 2016 The company’s policy is to recognise actuarial gains and losses immediately in full each year. The company operates a scheme in the UK with a final salary section. A full actuarial valuation was carried out as at 1 January 2014 and updated to 31 December 2016 by a qualified independent actuary. Reconciliation of the present value of the defined benefit obligation Present value of defined benefit obligation at beginning of year Interest cost Effect of changes in financial assumptions Benefits paid Present value of defined benefit obligation at end of year 2016 £’000 21,993 845 4,592 (638) 26,792 2015 £’000 22,397 817 (582) (639) 21,993 32 Reconciliation of fair value of scheme assets Fair value of scheme assets at start of year Interest income Return on scheme assets Contributions by the Company Benefits paid Fair value of scheme assets at end of year Amounts to be recognised in the balance sheet Present value of funded obligation Fair value of scheme assets Net liability in balance sheet Amounts to be recognised in the income statement Interest on obligation Interest income on scheme assets Total expense Total amount recognised in the statement of consolidated income SOCI Actuarial loss/(gain) Actuarial loss/(gain) recognised in SOCI Pension cost Defined benefit scheme net interest charge Defined contribution scheme 2016 £’000 2015 £’000 13,960 13,926 537 3,037 270 (638) 513 (340) 500 (639) 17,166 13,960 2016 £’000 26,792 (17,166) 9,626 2015 £’000 21,993 (13,960) 8,033 2016 £’000 845 (537) 308 2016 £’000 1,555 1,555 2016 £’000 308 148 456 2015 £’000 817 (513) 304 2015 £’000 (242) (242) 2015 £’000 304 167 471 33 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notes to the Accounts continued Notes to the Accounts continued 24. Pension Commitments (continued) Scheme assets Equities Gilts and bonds Total scheme assets Expected rate of return on scheme assets 2016 % 53 47 100 2016 £’000 9,050 8,115 17,165 3.9% 2015 % 50 50 100 2015 £’000 7,045 6,915 13,960 3.7% At 31 December 2016 the scheme assets were invested in a diversified portfolio that consisted primarily of equity and debt securities. The fair value of the scheme as a percentage of total scheme assets and target allocations is set out above. Amount of Company related investments included in fair value of assets Company’s own financial instruments 2016 £’000 22 2015 £’000 64 24. Pension Commitments (continued) Defined Contribution Scheme The company commenced the operation of a defined contribution scheme on 1 October 2006. Contributions payable by the company to the defined contribution scheme of £120,000 (2015: £148,000) have been charged to operating profit. ESE Direct Limited also provided a defined contribution scheme in respect of certain employees. Contributions payable to that scheme of £14,000 (from 1 April 2015 to 31 December 2015 totalled £7,000) and have been charged to operating profit. 25. Share Capital Ordinary shares of 25p Authorised At 1 January and 31 December Allotted, called up and fully paid At 1 January and 31 December 2016 Number 2016 £’000 2015 Number 2015 £’000 1,200,000 300 1,200,000 1,000,000 250 1,000,000 300 250 The company has one class of Ordinary shares which carry no right to fixed income. Each carries a right to vote at general meetings of the company. Principal actuarial assumptions at the Balance Sheet date: The assumptions as at the reporting date are used to determine the present value of the benefit obligation at that date. The key financial assumptions are set out below: 26. Operating Lease Commitments At 31 December 2016, the group had the following outstanding future aggregate minimum lease payments under non-cancellable operating leases as follows: Discount rate Long term rate of return on assets RPI Inflation CPI Inflation Pension increases: Non-Executive pension accrued before 1 January 1992 (0% fixed) Non-Executive pension accrued after 1 January 1992 (RPI max 5%) Executive pension accrued before 1 January 1992 (4% fixed) Executive pension accrued after 1 January 1992 (RPI min 4%, 5% max) Pre and post retirement mortality Retiring today: Males Females Retiring in 20 years: Males Females Cash commutation 2016 2.70% 2.70% 3.30% 2.20% 0.00% 3.10% 4.00% 4.20% 86.4 88.1 88.5 2015 3.90% 3.90% 3.10% 2.10% 0.00% 3.10% 4.00% 4.20% 87.0 89.4 88.8 90.4 25% of pension at age 65 at a rate of 13.0:1 91.3 25% of pension at age 65 at a rate of 12.5:1 Mortality Assumption; Base mortality table – Males – standard table SINMA (appropriate to the members’ years of birth) – Females – standard table SINFA (appropriate to the members’ years of birth) Operating leases commitments: within one year in more than one year but less than five years more than 5 years 2016 £’000 2015 £’000 36 144 33 51 148 72 Operating lease charges recognised in the income statement as shown in note 6 and arise in respect of property leases. 27. Related Party Transactions Key Management Key management personnel comprise the group’s executive directors. Their remuneration is set out in note 5. Included within director’s remuneration is the amount £63,713 (2015:£30,345) to Morris and Daughters Limited for the services of Morgan Morris who is a director and shareholder in that company. At 31 December 2016, £nil (2015:£1,995) was outstanding. There were no other transactions with key management. Company – Transactions With Subsidiaries Sales amounting to £99,000 (2015: £394,000) were made by HC Slingsby plc to Slingsby Mail Order Limited. Amounts due to Slingsby Mail Order Limited at 31 December 2016 were £202,000 (2015: £122,000). Sales amounting to £462,935 (2015:£78,268) were made by HC Slingsby plc to ESE Direct Limited. Purchases amounting to £2,287(2015:£13,654) were made to HC Slingsby plc by ESE Direct Limited. Amounts due to ESE Direct Limited were £nil (2015:£nil) in respect of trading activities and £728,215 (2015: £701,000) in respect of an inter-company loan. A scaling factor of 105% has been applied to the notes under the standard tables. An allowance for future improvements has been made in line with the CMI 2013 Core Regulations assuming a long term annual note of improvement in mortality rates of 1.25% for men and women. Amounts due from ESE Direct Limited were £54,000 (2015:£13,054). 34 35 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Five Year Summary Notice of Annual General Meeting Income Statement Turnover Gross profit Operating (loss)/profit before exceptional item Exceptional item (Loss)/profit before tax (Loss)/profit for the financial year 2016 £’000 18,044 6,292 (261) (102) (732) (656) 2015 £’000 2014 £’000 2013 £’000 2012 £’000 17,061 6,249 (10) (281) (632) (438) 12,587 5,038 92 (193) (453) (299) 13,965 5,502 137 - (249) (95) (9.5p) 14,588 6,155 489 129 102 172 17.2p (Loss)/earnings per share – basic and diluted (65.6p) (43.8p) (29.9p) Dividend Per Ordinary Share*: – Interim – Final Cash Flow Statement 0.0p 0.0p 0.0p 0.0p 2.0p 4.0p 2.0p 10.0p 4.0p 15.0p Cash (used in)/generated by operating activities (84) 171 (169) 166 1,041 Balance Sheet Net current (liabilities)/assets Net assets Cash and cash equivalents (607) 403 632 (376) 2,303 192 3,740 2,785 1,940 4,122 3,688 2,325 4,808 2,949 2,836 * Dividends per ordinary share are stated in respect of the years to which they relate. This is not the same as the years in which they are recognised in the financial statements. Notice is given that the sixty-ninth Annual General Meeting of H C Slingsby plc (“the Company”) will be held at the HC Slingsby plc, Otley Road, Baildon, Shipley, West Yorkshire BD17 7LW on 28 June 2017 at 10am for the following purposes: To consider and, if thought fit, to pass the following resolutions as ordinary resolutions: 1. 2. 3. 4. 5. To receive the Company’s annual accounts for the financial year ended 31 December 2016 together with the Directors’ reports and auditor’s report on those accounts. To re-elect as a Director, Dominic Slingsby who retires from the Board in accordance with the Company’s articles of association. To reappoint RSM UK Audit LLP as auditors of the Company to hold office until the end of the next general meeting at which accounts are laid before the Company. To authorise the Directors of the Company to determine the remuneration of the auditors. In substitution for any equivalent authorities and powers granted to the Directors prior to the passing of this Resolution, to authorise the Directors of the Company pursuant to section 551 of the Companies Act 2006 (the “Act”) to exercise all powers of the Company to allot equity securities (as defined in section 560 of the Act): 5.1 5.2 up to an aggregate nominal amount of £83,250; and comprising equity securities up to a nominal amount of £166,750 (including within such limit any equity securities issued under paragraph 5.1 above) in connection with an offer by way of a rights issue: (a) (b) to holders of ordinary shares of 25 pence each in the capital of the Company (“Ordinary Shares”) in proportion (as nearly as may be practicable) to their existing holdings; and to holders of other equity securities as required by the rights of those securities or as the Directors otherwise consider necessary, and so that the Directors may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with any treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any matter. The authority granted by this Resolution shall (unless previously revoked, varied or extended by the Company in general meeting) expire on the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or, if earlier, on the date falling 15 months from the date of the passing of this Resolution, save that the Company may at any time before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such an offer or agreement as if this authority had not expired. To consider and, if thought fit, to pass the following resolution as a special resolution: 6.1 Subject to the passing of resolution 5, to authorise the Directors to allot equity securities (as defined in section 560 of the Act) of the Company for cash under the authority given by resolution 5 and/or where the allotment is treated as an allotment of equity securities under section 560(2)(b) of the Act, in either case as if section 561(1) of the Act did not apply to such allotment provided that such authority shall be limited: (a) to the allotment of equity securities in connection with an offer of equity securities (but in the case of the authority granted under paragraph 5.2 of resolution 5, by way of a rights issue only): (i) (ii) to the holders of the Ordinary Shares in the capital of the Company in proportion as nearly as practicable to their respective holdings of such shares; to holders of other equity securities as required by the rights of those securities or as the Directors otherwise consider necessary, and so that the Directors may impose any limits or restrictions and make any arrangements as the Directors may otherwise consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, or legal, regulatory or practical problems in, or under the laws of, any territory or any other matter; and (b) in the case of the authority granted under paragraph 5.1 of resolution 5 and/or in the case of any transfer of 36 37 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc Notice of Annual General Meeting continued Notes to the Notice of Annual General Meeting treasury shares which is treated as an allotment of equity securities under section 560(2)(b) of the Act, to the allotment otherwise than pursuant to paragraph 6.1(a) above, of equity securities up to an aggregate nominal value equal to £12,500; provided that such power shall (unless previously renewed, varied or revoked by the Company in general meeting) expire on the conclusion of the next Annual General Meeting of the Company after the passing of this Resolution or, if earlier, on the date falling 15 months from the date of the passing of this Resolution, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. 6.2 Subject to the passing of resolution 5, and in addition to any authority granted under Clause 6.1 of this resolution, to authorise the Directors to allot equity securities (as defined in section 560 of the Act) of the Company for cash under the authority given by resolution 5 and/or where the allotment is treated as an allotment of equity securities under section 560(2)(b) of the Act, in either case as if section 561(1) of the Act did not apply to such allotment provided that such authority shall be: (a) (b) limited to the allotment of equity securities up to an aggregate nominal amount of £12,500; and used only for the purpose of financing (or refinance if the authority is to be used within 6 months after the original transaction) a transaction which the Directors determine to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this notice provided that such power shall (unless previously renewed, varied or revoked by the Company in general meeting) expire on the conclusion of the next Annual General Meeting of the Company after the passing of this Resolution or, if earlier, on the date falling 15 months from the date of the passing of this Resolution, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. The resolutions in Clauses 6.1 and 6.2 revoke and replace all unexercised powers previously granted to the Directors to allot equity securities as if section 561 of the Act did not apply but without prejudice to any allotment of equity securities already made or agreed to be made pursuant to such authorities. Registered in England and Wales No. 00452716 Entitlement to attend and vote 1. The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the register of members of the Company as at 6.00pm on 26 June 2017 (or, if the meeting is adjourned, 6.00pm on the date which is two working days before the date of the adjourned meeting) shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the meeting. Proxies 2. 3. A shareholder is entitled to appoint another person as his or her proxy to exercise all or any of his or her rights to attend and to speak and vote at the meeting. A proxy need not be a shareholder of the Company. 1. 1. A shareholder may appoint more than one proxy in relation to the meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. Failure to specify the number of shares each proxy appointment relates to or specifying a number which when taken together with the numbers of shares set out in the other proxy appointments is in excess of the number of shares held by the shareholder may result in the proxy appointment being invalid. 2. 2. A proxy may only be appointed in accordance with the procedures set out in note 3 below and the notes to the proxy form. The appointment of a proxy will not preclude a shareholder from attending and voting in person at the meeting. A form of proxy is enclosed. When appointing more than one proxy, complete a separate proxy form in relation to each appointment. Additional proxy forms may be obtained by contacting the Company’s registrar or the proxy form may be photocopied. State clearly on each proxy form the number of shares in relation to which the proxy is appointed. To be valid, a proxy form must be received by post or (during normal business hours only) by hand at the offices of the Company’s registrar, Capita Asset Ser vices at PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU no later than 10am on 28 June 2017 (or, if the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting). Corporate representatives 4. A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual shareholder, provided that (where there is more than one representative and the vote is otherwise than on a show of hands) they do not do so in relation to the same shares. Joint holders 5. In the case of joint holders of shares, the vote of the first named in the register of members who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of other joint holders. Total voting rights 6. As at 24 May 2017 (being the latest practicable date prior to publication of this Notice of Annual General Meeting (the “Latest Practicable Date”), the Company’s issued share capital consists of 1,000,000 Ordinary Shares, carrying one vote each. No Ordinary Shares are held by the Company in treasury. Therefore, the total voting rights in the Company as at 24 May 2017 are 1,000,000. Explanatory Notes to Resolutions 5 and 6. Resolution 5 – Authority to Allot Shares Registered office H C Slingsby plc Otley Road Baildon Shipley BD17 7LW 38 By order of the board Paragraph 5.1 of this Resolution would give the Directors the authority to allot Ordinary Shares or grant rights to subscribe for or convert any securities into Ordinary Shares up to an aggregate nominal amount of £83,250 (representing 333,000 Ordinary Shares). This amount represents approximately 33.3% of the issued Ordinary Share Capital of the Company as at the ‘Latest Practicable Date’. ...…….................................. M.L. Morris Company Secretary 24 May 2017 Paragraph 5.2 of this Resolution would give the Board authority to allot Ordinary Shares or grant rights to subscribe for or convert any securities into Ordinary Shares in con- nection with a rights issue, to existing shareholders in proportion (as nearly as may be practicable) to their existing holdings, up to an aggregate nominal amount of £166,750 (representing 667,000 Ordinary Shares), as reduced by the nominal amount of any shares issued under paragraph 5.1 of this resolution. This amount (before any reduction) represents approximately 66.7% of the issued ordinary share capital of the Company as at the Latest Practicable Date. Resolutions 5.1 and 5.2 are in accordance with the Investment Association Guidelines issued in July 2016 The authority and power pursuant to Resolution 5 will expire on the later of 15 months from the date it is passed or the conclusion of the Company’s next Annual General Meeting. The Board will continue to seek to renew these authorities at each Annual General Meeting in accordance with current best practice. The Board has no present intention to exercise these authorities. Resolution 6 – Disapplication of Pre-emption Rights This Resolution would give the Board the authority to allot Ordinary Shares for cash without first offering them to existing shareholders in proportion to their existing shareholdings and is in accordance with The Pre-Emption Group Statement of Principles. This authority would be limited to: (a) an aggregate nominal amount of £12,500 (representing 50,000 Ordinary Shares). This aggregate nominal amount represents 5% of the issued Ordinary Share capital of the Company as at the Latest Practicable Date and could be used for any purpose; and (b) an additional aggregate nominal amount of £12,500 (representing 50,000 Ordinary Shares). This aggregate nominal amount represents 5% of the issued Ordinary Share capital of the Company at the Latest Practicable Date and could only be used for an acquisition or specified capital investment. The authority and power pursuant to Resolution 6 will expire on the latter of 15 months from the date Resolution 6 is passed or the conclusion of the Company’s next Annual General Meeting. The Board has no present intention to exercise these authorities. 39 Report & Accounts 2016 | HC Slingsby plcReport & Accounts 2016 | HC Slingsby plcHC Slingsby plc
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