Stabilis Solutions, Inc. Annual Report 2019

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FY2019 Annual Report · Stabilis Solutions, Inc.

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HC Slingsby plc
REPORT &
ACCOUNTS

For the year ended 31st December

2019

M. L. Morris
Group Chief Executive

D. S. Slingsby
Interim Executive Chairman and
Operations Director

We Are:
One of the UK market leaders in the distance
selling of industrial and commercial equipment.

We do:
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 new product development to
help keep your business running smoothly.

Our Commitment:
Providing our customers with an extensive
product range, outstanding service and
efficient delivery.

Annual Report & Accounts | 2019

Directors
and Advisors

Directors
D. S. Slingsby
Interim Executive Chairman
and Operations Director

M. L. Morris
Group Chief Executive

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
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Independent Auditors
RSM UK Audit LLP
Central Square
Fifth Floor
29 Wellington Street
Leeds
LS1 4DL

Solicitors
Squire Patton Boggs
(UK) LLP
6 Wellington Place
Leeds
LS1 4AP

Financial Advisors & Brokers
Allenby Capital Limited
5 St. Helens Place
London
EC3A 6AB

Website & E-Mail
Website: www.slingsby.com
E-mail: sales@slingsby.com

Report and Accounts - 2019

Contents

Statement by the Chairman

Strategic Report

Report of the Directors

Corporate Governance

Statement of Directors’
Responsibilities

Independent Auditors’ Report

Consolidated Income Statement

Statement of Consolidated
Comprehensive Income and Expense 19

Statement 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

Annual Report & Accounts | 2019

Statement by the Chairman

Board Composition
Following the Board changes in 2016, I remain as Interim
Executive Chairman and during 2018 Morgan Morris was
appointed Group Chief Executive. The Board continues to
believe that it would benefit from the appointment of new
Non-Executive Directors. Whilst this process should now be
possible following the agreement with regard to the pension
scheme detailed below, it is unable to proceed at present
due to the Coronavirus restrictions.

Results
In the half year statement, I reported an operating profit of
£0.1m on sales of £9.9m. The full year operating profit (before
exceptional items) was £0.45m (2018: £0.52m) on sales of
£19.6m (2018: £19.8m). Group sales declined by around 1%
which together with a reduction in gross margin led to a profit
before taxation and exceptional items of £0.16m (2018: £0.26m)
The reduction in Group sales is attributable to lower sales of
seasonal products (both winter and summer) due to the milder
weather in 2019 compared to 2018.

ESE Direct Limited (“ESE”) contributed £6.4m of sales (2018:
£6.5m) and profit before tax and management charges of
£0.39m (2018: £0.45m). The lack of growth in sales at ESE
led us to re-evaluate the value of goodwill held as an asset
on the balance sheet following the acquisition. Following this
re-evaluation, we decided to impair the value of goodwill from
£1.7m to £0.7m leading to a non-cash exceptional item of £1m.

During 2019, two executive members transferred out of the
Company’s defined benefit pension scheme at values which
led to an overall reduction in the scheme deficit of £3.1m which
is presented in the income statement as an exceptional gain.
In addition, a re-valuation of the Group’s freehold property led
to a reversal of the previous impairment, and a further £0.7m
exceptional gain. After these non-cash items, the Group’s profit
before tax was £2.9m (2018: loss of £0.6m).

Group earnings before interest, tax, depreciation, amortisation
and exceptional items (“EBITDA”) in the year ended 31
December 2019 were £0.9m (2018: £1m). Net debt at 31
December 2019 was £1.1m (2018: £1.1m).

Dividend
Due to the agreement reached with the Trustee of the defined
benefit pension scheme, the Board is unable to recommend
a final dividend for the year (2018: £nil). However, regardless
of this agreement, due to the reduced pre-exceptional profit
performance and the uncertainty caused by the Coronavirus,
the Board would not have recommended a payment be made.

Pension Scheme
Protracted discussions with the Trustee of the defined benefit
pension scheme and the pension authorities, regarding a
long term solution to the scheme deficit, led to an agreement
by which the Company re-commenced contributions paying
£0.125m during the year (2018: nil). The Company has agreed
to pay £0.3m a year in deficit reduction contributions which
will be reviewed in June 2022. The Company will also continue
to contribute £0.16m towards scheme running costs. As
a result of this agreement, the Group agreed not to make
distributions to shareholders prior to 1 June 2021 and to limit
their quantum to £60,000 plus 50% of its net cashflow. More
detail on this agreement is contained in the relevant section of
the Strategic Report.

The agreement removes uncertainty surrounding the Group’s
contributions to the scheme and removes the risk that the
Trustee demand payment of arrears of contributions of £1.6m.
At 31 December 2019, the pension scheme deficit decreased
by £1.8m to £6.6m (2018: £8.4m) largely due to the transfers
out referred to above. This improvement in the pension scheme
position together with the pre-exceptional profit before tax
increased Group net assets to £1.7m (2018: £0.2m).

Recent Trading
Group sales declined in Q1 of 2020 against the same period in
2019 by 4%. The Coronavirus pandemic had an adverse effect
on sales at ESE but this was almost offset by increased sales
of certain of the Group’s products that saw increased demand
due to the Coronavirus. An improvement in the Group’s overall
margin and lower overheads led to operating profit being higher
than in the prior year.

The market remains competitive and we are cautious regarding
the outlook. This is particularly the case due to significant
uncertainty created by the Coronavirus. We are seeing large
falls in demand from customers in certain adversely affected
sectors and order concentration on a limited number of product
lines and from a smaller number of customers. It is unclear as
to the impact that the virus will have on demand going forward.

Finally, I would like to thank our staff across the Group for
their efforts in 2019 and particularly since the outbreak of
Coronavirus. Across the Group, we are proud of our position as
a key supplier to the NHS and related sectors and have worked
hard to ensure that we have remained “open for business”.

D.S.Slingsby
Interim Executive Chairman
15 May 2020

4
4

Annual Report & Accounts | 2019

Annual Report & Accounts | 2019
Annual Report & Accounts | 2019

Annual Report & Accounts | 2019Strategic Report

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 and the confidence
level of businesses. The uncertainty regarding the outcome
of Brexit negotiations could impact on customer confidence
leading to a reduction in sales.

The Government’s response to Coronavirus has abruptly
impacted on demand from certain of the Group’s customer
sectors. Order intake is unpredictable and focussed on a
smaller number of products and customers than normal.
There is considerable uncertainty as to the impact on demand
and the potential for credit related issues should companies
become insolvent.

The Group continues to build upon its strengths in distance
selling and to enhance its e-commerce offering. The acquisition
of the ESE brand in 2015 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 2019, we began investing in a
new website for the Slingsby business and strengthened our
product sourcing team.

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. The main ways in which we do this are through
our experienced personnel, our broad-based product offering
where we ensure we offer a choice of options and price points
and through our web-based knowledge centre. Next day
delivery is offered on a substantial proportion of our lines to
further augment our service levels.

We continue to generate synergies following the acquisition
of ESE with product sourced from Slingsby increasing during
the year.

The Directors believe that the Group’s strong core brand values
of quality, reliability, product range and service excellence
remain as true today as they have done over the past 125
years of trading and this is recognised by the number of repeat
customers. We believe that this stronger focus on value, depth
of product offer and service is what differentiates our business.

Key Performance Indicators and Business Performance

Sales growth

Return on capital employed

Return on sales

Gross profit margin

2019

(1.3%)

2018

3.0%

172.8%

(283.9%)

14.7%

34.5%

(3.2%)

35.1%

Notes:
Return on capital employed is calculated as profit/loss before taxation over the total equity at the year end. This has improved due to the improvement in net assets.

Return on sales is calculated as profit/loss before taxation over revenue. This has improved due to the profit for the year.

A review of the business is included in the Statement by the Chairman on page 1 and forms part of the Strategic Report.

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.

Annual Report & Accounts | 2019Funding 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 and prepares
profit and loss account and cashflow forecasts as appropriate.

Regulatory
The Group remains 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
The Group is committed to continuous improvement in both
Quality and Environmental Management, we remain UKAS (UK
Accreditation Service) accredited to the international standards
ISO 9001:2015 and ISO 14001:2015 respectively.

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 movements in the Group’s profits
before tax, cash flow and balance sheet.

The Group re-commenced deficit reduction contributions
during 2019 paying £0.125m (2018: nil) and the Group
contributed £0.16m towards the running costs of the scheme
which are reflected in overheads. The Group is scheduled
to pay £305,000 in deficit reduction contributions in 2020
rising each year by inflation with a review at 30 June 2022.
The Group will also continue to contribute £0.16m each year
towards the Scheme’s running costs. The Scheme will also
receive 50% of any net cashflow generated by the Group over
£150,000. The Group now has certainty over its short term
contributions to the Scheme and has removed the risk that
the arrears of contributions (£1.58m) can be demanded
by the Trustee.

As a condition of the above arrangement, the Group has
agreed not to make any distribution to shareholders prior to 1
June 2021 and to restrict such distributions to an amount not
greater than £60,000 plus 50% of its net cashflow. The Group
is obliged to consult with the Trustee regarding certain other
matters but is not obliged to change its approach as a result.

Health and Safety and Environmental
Sustainability
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.

In addition to statutory and regulatory compliance, the Group
takes pride in its environmental initiatives which have been
recognised through continued compliance with ISO14001
Environmental Management Standard.

Statement by the Directors in
Performance of their Statutory Duties in
Accordance with S172(1) Companies Act
2006
The board of directors of HC Slingsby PLC consider both
individually and together, that they have acted in the way they
consider in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a
whole (having regard to the stakeholders and matters set out in
S172 of Companies Act 2006).

The Board considers its stakeholders to be its shareholders,
employees, customers, suppliers/creditors and the environment.
The way that the Company considers and discharges its
obligations in respect of S172 Companies Act 2006 in respect
of its stakeholders can be found in the Corporate Governance
section of this annual report (pages 6 – 8) and in respect of the
environment at the relevant section above.

Significant Decision Made
During the year, the directors concluded an agreement with
the Trustee of its defined benefit pension scheme. Details of
the agreement are contained in the relevant section above. In
arriving at this decision, the directors considered the positions
of the defined benefit pension scheme (as a major creditor of
the company), those of scheme members who are employees,
deferred pensioners who are no longer employees and
pensioners, and those of its shareholders (given the curtailment
of future dividends). After due consideration, the directors
considered that the agreement satisfactorily balanced the
interests of both stakeholders by the re-commencement of
affordable repayments to a large creditor whilst still allowing
future returns to shareholders.

By order of the Board

M. L. Morris
Company Secretary
15 May 2020

Annual Report & Accounts | 2019Report of the Directors

Going Concern
The directors have prepared trading and cash flow forecasts for
the Group for the period to 31 December 2021, which include
the pension scheme contributions as agreed. 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 30 April 2021.

The financial statements have therefore been prepared on a
going concern basis which assumes the Group will continue in
operation for the foreseeable future.

However, the coronavirus pandemic could have a short to
medium term impact on the Group’s financial performance
which is not easy to forecast. The impact could be from a
significant fall in demand, from customer credit losses (bad
debts) or from late customer payments. These would restrict
the Group’s ability to generate operating cashflow.

While the directors are taking steps to manage cashflow,
reduce costs and to plan appropriate mitigative commercial
actions to take during this period of instability across the global
economy, sensitivity analysis of the trading and cashflow
forecasts prepared for the period to 31 December 2021
indicate some possible scenarios relating to ongoing reduced
sales activity where the Group may not be able to meet its
liabilities as they fall due. The directors believe that it remains
appropriate to prepare the financial statements on a going
concern basis, however the coronavirus outbreak and the
risks it may pose to the Group give rise to a level of material
uncertainty relating to going concern.

The financial statements do not include any adjustments that
would result from the basis of preparation as a going concern
being inappropriate. Additional information can be found at
note 1.

The Directors are pleased to present their annual report and
audited consolidated financial statements for the year ended
31 December 2019. 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:

D. S Slingsby

M. L. Morris

Dividends
The Directors do not propose a dividend in respect of the 2019
financial year (2018:nil).

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

1 January

2019

115,167

1,000

D. S. Slingsby

M.L. Morris

There have been no other changes in the directors’
shareholdings between 31 December 2019 and 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 (2018: 64,000) ordinary shares.

Annual Report & Accounts | 2019Audit 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 6-8 of
the annual report.

Post Balance Sheet Events
Following the year end, the Group’s activities have been
impacted by the global coronavirus pandemic. We are seeing
falls in demand from customers in certain adversely affected
sectors and order concentration on a limited number of
product lines and from a smaller number of customers. It is
unclear as to the impact that the virus will have on demand
going forward. Whilst the precise impact of the pandemic
is uncertain the Directors have re-forecast profitability and
cashflows for the foreseeable future to take into account
expected outcomes. Details of actions being undertaken
to mitigate the impact of the pandemic are provided in the
Going Concern accounting policy.

By order of the Board

M. L. Morris
Company Secretary
15 May 2020

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 13 May 2020:

Number of
ordinary Shares
of 25p each

Percentage
Holding

M. Chadwick*

K. J. Williams

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)

H. Slingsby

P.S. Allen

S. Whittaker

C. N. Bennett

H C Slingsby plc
Retirement Benefits
Scheme

180,295

67,835

54,866

54,302

53,886

51,167

18.0%

6.8%

5.5%

5.4%

5.1%

48,381

4.8%

47,138

37,440

32,500

31,000

30,061

4.7%

3.7%

3.3%

3.1%

3.0%

*80,995 registered in the name of Goodbody Stockbrokers Nominees Ltd and
99,300 in the name of Rulegale Nominees Limited

Financial Instruments
The Group’s financial instruments comprise cash, banking
facilities, 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 remains in force.

Annual Report & Accounts | 2019Corporate Governance

HC Slingsby PLC is committed to high standards of corporate
governance and follows the requirements of the Corporate
Governance Code (“the Code”) published by the Quoted
Companies Alliance in April 2018, a full version of which is
available at http://www.theqca.com. The Board explains below
the extent of compliance with the Code.

The Board and Committee Meetings
The Board meets on a formal basis regularly and during 2019
there were 7 formal board meetings. 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:

Dominic S. Slingsby
Interim Executive Chairman and Operations Director*

Dominic joined the Group in 1982 and after an initial spell as a
Sales Representative became Marketing Manager in 1985. He
was appointed to the Board in 1990 and became Managing
Director in 1997 before taking the dual role of Interim Executive
Chairman & Operations Director in 2016. He is a member of
both the Audit and Remuneration Committees.

Dominic Slingsby’s service agreement specifies a rolling 12
month notice period.

Morgan L. Morris
Group Chief Executive and Company Secretary

Morgan joined the Board as Interim Finance Director in
February 2015 becoming Group Chief Executive in May 2018.
Previously Morgan was Finance and Commercial Director for
a speciality chemicals manufacturer and prior to that held the
position of Corporate Recovery Director for Ernst & Young, as
well as a range of Pan-European roles for Arthur Andersen.
Morgan holds a Business Finance & Economics degree, is
FCA qualified and is a licensed insolvency practitioner. He is a
member of the Audit and Remuneration Committees.

Morgan Morris’ service agreement specifies a rolling 6 month
notice period.

*Acting Chairman of both Audit and Remuneration Committees

The Board are mindful of the need to keep skills and experience
up to date which is done through a combination of courses,
continuing professional development through professional
bodies, reading and on the job experience.

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.

Both Directors attended all 7 board meetings during the year.

Audit Committee
The audit committee meets as required but at least twice a
year. In addition to reviewing the Annual and Interim Reports
prior to their release, it keeps the scope, cost effectiveness,
independence and objectivity of the external auditors under
review. This includes monitoring the level of non-audit fees.
The external auditors attend its meetings as required.

There were two audit committee meetings during 2019
attended by both Directors.

Remuneration Committee
The committee is responsible for determination of the
remuneration and remuneration policy for the group’s executive
directors and senior executives setting the scale and structure
of such remuneration. Directors’ service agreements and notice
periods are reviewed with due regards to the interests
of shareholders.

There was one meeting of the remuneration committee during
2019 attended by both Directors.

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.

The Board adopted the Quoted Companies Alliance Corporate
Governance Code in April 2018. The extent of compliance with
the ten principles that comprise the Code, together with an
explanation of any areas of non-compliance are set out below:

Annual Report & Accounts | 2019Principle

Establish a strategy
and business model
which promote
long term value for
shareholders

Seek to understand
and meet
shareholder needs
and expectations

Fully compliant

Partially compliant

Take into account
wider stakeholder
and social
responsibilities and
their implications for
long term success

Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation

Maintain the board
as a well-functioning,
balanced team led
by the chair

Extent of current
compliance

Fully compliant

Commentary

Further
disclosure(s)

The relevant information concerning the Group’s model
and strategy can be found in the Strategic Report within
the Annual Report.

Strategic Report
section of the Annual
Report

www.slingsby.com;
Investor Relations,
AGM notices

www.slingsby.com;
Investor Relations,
Corporate
Governance

Principal Risks
section of the
Strategic Report
within the Annual
Report

Board and
Committee
meetings section
of the Corporate
Governance part of
the Annual Report

Key risks and mitigating actions are detailed in the Principal
Risks section of the Strategic Report within the Annual
Report.

The Company’s details are displayed on its website
allowing shareholders to contact the Company if they so
wish. The Company holds an annual general meeting to
which all members are invited and during which, time is set
aside to allow questions from attending members to any
board member. As the Company is small, it does not have
a dedicated investor relations department and so the CEO
is responsible for reviewing all communications received
from members and determining the most appropriate
response.

Directors and employees adopt a broad view during
decision making to take meaningful account of the impact
of the business on all key stakeholder groups. The Board
recognises that the Group’s long term success is reliant
on the efforts of its employees, customers and suppliers
and through maintaining relationships with its regulators.
Feedback from employees, customer groups, suppliers
and others is actively encouraged.

The Group operates a system of internal controls designed
(to the extent considered appropriate) to safeguard Group
assets and protect the business from identified risks,
including risk to reputation.

The Board currently comprises only two Executive
Directors who receive high quality information in a timely
manner to facilitate proper assessment of the matters
requiring a decision or insight. The Board have been
seeking the appointment of one or more Non-Executive
Directors for some time but in the light of the Company’s
very significant pension deficit and the highly publicised
issues facing directors of public companies with a deficit
on its pension fund, it has not been possible to identify
persons prepared to accept such a role.

It is the Board’s intention to appoint at least one Non-
Executive Director at the earliest opportunity.

The Board does not consider Dominic Slingsby to be
independent in view of his family’s large combined interest
in the Company. Although Morgan Morris is an executive
director and therefore cannot be considered by the Board
to be totally independent, Morgan Morris is independent of
Dominic Slingsby and the rest of the Slingsby family.

Annual Report & Accounts | 2019Corporate Governance (continued)

Extent of current
compliance

Fully compliant

Principle

Ensure that between
them the directors
have the necessary
up-to date
experience, skills
and capabilities

Partially compliant

Fully compliant

Non-compliant

Evaluate board
performance
based on clear and
relevant objectives,
seeking continuous
improvement

Promote a corporate
culture that is based
on ethical values and
behaviours

Maintain governance
structures and
processes that
are fit for purpose
and support good
decision-making by
the board

Fully compliant

Communicate
how the company
is governed and
is performing
by maintaining
a dialogue with
shareholders and
other relevant
stakeholders

Further
disclosure(s)

Board and
Committee
meetings section
of the Corporate
Governance part of
the Annual Report

www.slingsby.com;
Investors Relations,
Corporate
Governance

Board and
Committee
meetings section
of the Corporate
Governance part of
the Annual Report

www.slingsby.com;
Investor Relations

Commentary

The Board is satisfied that the current composition provides
the required degree of skills, experience, diversity and
capabilities appropriate to the needs of the business. Steps
are taken to challenge the status quo, and encourage
proper consideration of any dissenting opinion. Board
composition and succession planning are subject to review
taking account of the potential future needs of the business.

The Board has not taken any specific external advice on
a matter, other than in the normal course of business as
an AIM quoted company and other than in respect of the
Company’s defined benefit pension scheme. The Directors
rely on the Company’s advisory team to keep their skills up
to date and through attending market updates and other
seminars provided by the advisory team, the London Stock
Exchange and other intermediaries.

Board evaluation has not been carried out as part of
a formal process during 2019, although the Chairman
has actively encouraged self-evaluation by all Board
members, and feedback on the conduct and content of
board meetings. The Board will consider whether a more
structured approach is required in future.

The Board promotes high ethical and moral standards.
The Board and all employees expect to be judged by, and
accountable for their actions.

The Board currently comprises two Executive Directors.
The Board is currently non-compliant with the QCA Code
as it does not comprise any Non-Executive Directors.
The Company is seeking appropriate candidates to join
the Board, most notably an Independent Chairman and
Independent Non-Executive Director. Whilst a number
of highly suitable candidates have been identified,
appointments have not been made due to the ongoing
uncertainty regarding the pension fund commitments and
its potential impact on personal liability.

The roles of Chairman and Chief Executive are separated.
The Chief Executive is responsible for the operating
performance of the Company and its subsidiaries.

The Board attaches great importance to providing
shareholders with clear and transparent information on the
Group’s activities and strategy. Details of all shareholder
communications are provided on the Company’s website,
including historical annual reports and governance related
material together with notices of all general meetings for
the last five years.

From 2019 the Company will disclose outcomes of all
general meeting votes.

The Company lists contact details on its website and on
all announcements released via RNS, should shareholders
wish to communicate with the Board.

By order of the Board

M. L. Morris
Company Secretary
15 May 2020

Annual Report & Accounts | 2019Statement of Directors’
Responsibilities

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 financial statements are required by law and IFRS adopted
by the EU, to present fairly the financial position of the Group
and the company. 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.

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

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.

M. L. Morris
Company Secretary
15 May 2020

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 ; 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.

Annual Report & Accounts | 2019Independent auditors’ report to the
members of H C Slingsby plc

Opinion
We have audited the financial statements of H C Slingsby
plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 31 December 2019 which comprise the
consolidated income statement, the statement of consolidated
comprehensive income and expense, the statement of
consolidated and company changes in shareholders’ equity,
the consolidated balance sheet, the company balance sheet,
the consolidated cash flow statement, the company cash flow
statement and the notes to the financial statements, including
a summary of significant accounting policies. 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.

In our opinion:
•

the financial statements give a true and fair view of the
state of the group’s and of the parent company’s affairs as
at 31 December 2019 and of the group’s profit 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 company 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.

Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the
group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as
applied to SME listed entities and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going
concern
We draw attention to note 1 in the financial statements,
which indicates that the group may be adversely affected by
the ongoing impact of the Covid-19 (coronavirus) outbreak
and in particular the potential impact of a significant fall in
demand on the group’s cashflow. As stated in note 1, these
events or conditions, along with the other matters as set forth
in note 1, indicate that a material uncertainty exists that may
cast significant doubt on the Company’s ability to continue as
a going concern. Our opinion is not modified in respect of this
matter.

Summary of our audit approach

Key audit
matters

Group
• Impairment of goodwill
• Provision for slow moving inventory

Materiality

Parent Company
• Impairment of investment in subsidiary

Group
• Overall materiality: £83,000
• Performance materiality: £62,000

Parent Company
Overall materiality: £57,000
Performance materiality: £43,000

Scope

Our audit procedures covered 100% of
revenue, 100% of total assets and 100% of
loss before tax.

Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the group
and parent company financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on the overall
audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the group and
parent company financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate
opinion on these matters.

In addition to the matter described in the Material uncertainty
related to going concern section], we have determined the
matters described below to be the key audit matters to be
communicated in our report.

Annual Report & Accounts | 2019Impairment of goodwill

Key audit matter
description

The non-current assets of the ESE Direct cash generating unit (CGU) includes £700,000 of goodwill (after
a current year impairment charge of £1,034,000) and this CGU is subject to annual impairment testing.
Management have disclosed details relating to their impairment test in note 14.
Impairment testing requires management to compare the carrying amount of the CGUs attributable
assets with the higher of fair value less costs to sell and value in use. Where the carrying amount is higher
than fair value or value in use then an impairment charge arises. Impairment testing involves a significant
degree of judgement because management’s determination of value in use is based on a number of
assumptions including an assessment of future trading performance and the selection of an appropriate
discount rate which could have a material impact on the financial statements and gives rise to the risk of
material misstatement.

How the matter was
addressed in the
audit

Management provided us with an impairment test for the ESE Direct CGU. We performed audit work on
this impairment test by:
• Assessing the appropriateness and application of the model used including consideration of the

assumptions made about the discount rate and the expected future trading performance.

• Reviewing historic performance and accuracy of forecasting and considering the sensitivity analysis

performed by management.

We discussed the forecasts, discount rate and sensitivity analysis with management and challenged key
assumptions, requesting evidence where available to support management’s conclusions and considering
the existence of any contradictory evidence which may have indicated that management’s conclusion was
not appropriate.
As a result of these discussions, management issued a revised impairment test which showed an
impairment charge of £1m. We reviewed this model in the light of our previous findings.
Finally, we reviewed the disclosures made in the financial statements to ensure that they were in
accordance with the applicable financial reporting framework.

Provision for slow moving inventory

Key audit matter
description

How the matter was
addressed in the
audit

The group had inventory of £2,134,000 at 31 December 2019 and an associated provision for
obsolescence of £408,000. As disclosed in the accounting policies, inventories are held at the lower
of cost and net realisable value. As disclosed in note 1 and note 17, management estimate the extent
to which provisions are required to cover stock obsolescence. Given the quantum of inventory held at
the balance sheet date, and the estimation inherent within the calculation of the inventory provision, the
adequacy of the recorded provision represents one of the most significant risks of material misstatement.

Our audit work on the inventory provision calculation included:
• Obtaining and reviewing the calculation and considering and challenging the appropriateness of any

judgements and assumptions made therein.

• Testing the mathematical accuracy of the calculation and assessing the accuracy of the source data.
• Identifying potentially obsolete or slow-moving inventory with reference to historic utilisation of inventory

and comparing to the provision recognised.

• Testing a sample of sales to test whether net realisable value is higher than inventory cost.

Impairment of investment in subsidiary (parent company only)

Key audit matter
description

As disclosed in note 15, the company has an investment in ESE Direct Limited of £1,500,000 (after
recording an impairment provision against this balance of £1,100,000). Management is required to
perform impairment testing on this balance where there is an indicator of impairment. In light of the
impairment test performed for the ESE Direct CGU, the risk is that the parent company balance sheet may
not properly reflect any impairment in the cost of investment.

How the matter was
addressed in the
audit

Management provided us with their calculation of the impairment provision of £1,100,000. In order to
assess the adequacy of the provision we tested whether the parent company investment was written
down to the higher of the fair value less costs to sell and value in use of the ESE Direct CGU. The work we
performed is documented in the key audit matter ‘Impairment of goodwill’ above.

Annual Report & Accounts | 2019Independent auditors’ report to the members of H C Slingsby plc (continued)

Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and
extent of our audit procedures. When evaluating whether
the effects of misstatements, both individually and on the

financial statements as a whole, could reasonably influence
the economic decisions of the users, we take into account the
qualitative nature and the size of the misstatements. Based
on our professional judgement, we determined materiality as
follows:

Overall materiality

Group

£83,000

Parent company

£57,000

Basis for determining
overall materiality

9.7% of profit before interest, tax, depreciation,
amortisation and exceptional items

Rationale for
benchmark applied

The adjusted measure has been selected on the
basis that this benchmark is of most relevance to
the users of the financial statements.

Performance materiality

£62,000

£43,000

Basis for determining
performance materiality

75% of overall materiality

Reporting of
misstatements to the
Audit Committee

Misstatements in excess of £4,000 and
misstatements below that threshold that, in our
view, warranted reporting on qualitative grounds.

Misstatements in excess of £3,000 and
misstatements below that threshold that, in our
view, warranted reporting on qualitative grounds.

An overview of the scope of our audit
The group consists of 2 components, both located in the United Kingdom. The coverage achieved by our audit procedures was:

Number of components Revenue

Total assets

Profit before tax

Full scope audit

Total

100%

Other information
The directors are responsible for the other information. The
other information comprises the information included in
the annual report, other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:

•

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

the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.

Matters on which we are required to
report by exception
In the light of the knowledge and understanding of the group
and the parent company and their environment obtained
in the course of the audit, we have not identified material
misstatements in the Strategic Report or the Directors’ Report.

Annual Report & Accounts | 2019
Use of our report
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
Central Square
Fifth Floor
29 Wellington Street
Leeds
LS1 4DL

15 May 2020

We have nothing to report in respect of the following matters in
relation to which 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.

Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error.

In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.

A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.

Annual Report & Accounts | 2019Consolidated Income Statement

For the year ended 31 December 2019

Revenue

Cost of sales

Gross profit

Distribution costs

Administrative expenses (including exceptional credit of £2,726,000 in 2019
(2018 £891,000 loss)

Operating profit before exceptional items

Exceptional items

Operating profit/(loss)

Finance income

Finance costs

Profit before taxation and exceptional items

Exceptional items

Profit/(loss) before taxation

Taxation

Profit /(loss) for the year attributable to owners of the parent

Note

2019

£’000

19,568

(12,825)

6,743

(4,139)

568

446

2,726

3,172

(285)

161

2,726

2,887

(552)

2,335

2018

£’000

19,817

(12,867)

6,950

(4,120)

(3, 201)

520

(891)

(371)

(262)

258

(891)

(633)

(29)

(662)

Basic and diluted profit/(loss) per share

233.5p

(66.2p)

Annual Report & Accounts | 2019Statement of Consolidated
Comprehensive Income and Expense

For the year ended 31 December 2019

Profit/(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

Other comprehensive (expense)/income

Total comprehensive income/(expense) for the year attributable to equity
shareholders

Note

2019

£’000

2,335

(1,069)

182

(887)

1,448

2018

£’000

(662)

604

(103)

501

(161)

Annual Report & Accounts | 2019Statement of Consolidated and
Company Changes in Shareholders’
Equity

For the year ended 31 December 2019

Group

1 January 2018

Loss for the year

Other comprehensive income for the year

Total comprehensive expense for the year

1 January 2019

Profit for the year

Other comprehensive expense for the year

Total comprehensive income for the year

Share capital

£’000

250

Retained
earnings

Total equity

£’000

134

(662)

501

(161)

(27)

2,335

(887)

1,448

384

(662)

501

(161)

223

2,335

(887)

1,448

1,671

31 December 2019

250

1,421

Company

1 January 2018

Loss for the year

Other comprehensive income for the year

Total comprehensive expense for the year

1 January 2019

Profit for the year

Other comprehensive expense for the year

Total comprehensive income for the year

31 December 2019

Share capital

£’000

250

Retained
earnings

Total equity

£’000

(1,561)

501

(1,060)

(991)

2,236

(887)

1,349

358

319

(1,561)

501

(1,060)

(741)

2,236

(887)

1,349

608

Annual Report & Accounts | 2019Consolidated Balance Sheet

As at 31 December 2019

Note

2019

£’000

2018

£’000

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

Lease obligations

Net current assets

Non-current liabilities

Lease obligations

Retirement benefit obligation

Deferred tax liabilities

Net assets

Capital and reserves

Share capital

Retained earnings

Total equity

5,296

610

700

1,115

7,721

2,134

2,401

1,278

5,813

4,578

641

1,734

1,434

8,387

1,947

2,576

1,458

5,995

(4,729)

(5,261)

(8)

(32)

(4,769)

(5,261)

1,044

734

(66)

(6,558)

(470)

1,671

250

1,421

1,671

(8,438)

(460)

223

250

(27)

223

The financial statements were approved by the Board of Directors on 15 May 2020 and were signed on its behalf by:

D. S. Slingsby
Director

H C Slingsby plc
Registered Number: 452716

M. L. Morris
Director

Annual Report & Accounts | 2019

Company Balance Sheet

As at 31 December 2019

Assets

Non-current assets

Property, plant and equipment

Intangible assets

Investments in subsidiaries

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

Net current liabilities

Non-current liabilities

Retirement benefit obligation

Deferred tax liabilities

Net assets

Capital and reserves

Share capital

Retained earnings

Total equity

Note

2019

£’000

2018

£’000

5,127

1,517

1,115

7,844

2,134

2,112

107

4,353

(4,642)

(8)

(4,650)

(297)

(6,558)

(381)

608

250

358

608

4,519

2,564

1,434

8,531

1,947

2,235

391

4,587

(5,067)

(480)

(8,438)

(354)

(741)

250

(991)

(741)

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 profit of £2,236,000 (2018: loss £1,561,000).

The financial statements were approved by the Board of Directors on 15 May 2020 and were signed on its behalf by:

D. S. Slingsby
Director

H C Slingsby plc
Registered Number: 452716

M. L. Morris
Director

Annual Report & Accounts | 2019

Consolidated Cash Flow Statement

For the year ended 31 December 2019

Cash flows from operating activities

Cash generated from operations

Interest payable

UK corporation tax paid

Cash generated from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Proceeds from sales of property, plant and equipment

Purchase of intangible assets

Net cash used in investing activities

Cash flows from financing activities

Capital element of lease payments

Proceeds from / (repayment) of borrowings

(Decrease) / Increase in overdraft

Net cash used in financing activities

Net (decrease)/increase in cash and cash equivalents

Opening cash and cash equivalents

Closing cash and cash equivalents

Note

2019

£’000

404

(36)

(57)

311

(212)

(83)

(275)

(36)

397

(577)

(216)

(180)

1,458

1,278

2018

£’000

893

(45)

(60)

788

(358)

(317)

(37)

(575)

603

(9)

462

996

1,458

Annual Report & Accounts | 2019Company Cash Flow Statement

For the year ended 31 December 2019

Cash flows from operating activities

Cash generated from/(used in) operations

Interest payable

Cash generated from/(used in) operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Proceeds from sales of property, plant and equipment

Purchase of intangible assets

Net cash used in investing activities

Cash flows from financing activities

Capital element of lease payments

Proceeds from / (repayment) of borrowings

(Decrease) / Increase in overdraft

Net cash used in financing activities

Net (decrease)/increase in cash and cash equivalents

Opening cash and cash equivalents

Closing cash and cash equivalents

Note

2019

£’000

174

(36)

138

(179)

(83)

(242)

397

(577)

(180)

(284)

391

107

Note to the Cash Flow Statements

For the year ended 31 December 2019

Group

Company

Cash generated from/(used in) operating activities

Profit / (loss) before tax

Net finance costs

Depreciation and amortisation

Defined benefit pension scheme contributions paid

Property impairment reversal

Settlement gain related to defined benefit pension scheme

Exceptional impairment provision

Profit on sale of property, plant and equipment

Exceptional charge for GMP equalisation

Increase in inventories

Decrease/(increase) in trade and other receivables

(Increase)/Decrease in trade and other payables

Cash generated from/(used in) operating activities

2019

£’000

2,887

285

414

(125)

(691)

(3,069)

1,034

(8)

(186)

189

(326)

404

2018

£’000

(633)

262

463

675

(16)

216

(124)

(214)

264

893

2019

£’000

2,764

280

261

(125)

(691)

(3,069)

1,047

(8)

(186)

136

(235)

174

2018

£’000

594

(45)

549

(358)

(317)

(37)

(575)

603

(9)

223

168

391

2018

£’000

(1,567)

262

330

1,436

(16)

216

(124)

(152)

209

594

Annual Report & Accounts | 2019Notes 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 (IFRIC) 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.

Going concern
The Group has made a profit for the year of £2.3m largely due
to non-cash exceptional items (2018 loss £662,000) and had
net current assets at 31 December 2019 of £1,044,000 (2018
net current assets of £734,000). The result of the company
for the financial year was a profit of £2,236,000 (2018: loss
£1,561,000).

An agreement has been reached with the pension scheme
Trustee, regarding the Company’s short term contributions
to the Scheme which removed the risk that the Trustee could
demand repayment of the arrears of contributions of £1.58m.

The Directors have prepared trading and cash flow forecasts
for the group for the period to 31 December 2021, which
include the pension scheme contributions as agreed. These
forecasts indicate that the Group will be able to operate within
its banking facilities and meet its liabilities as the fall due.

The overdraft element of the Group’s banking facilities expires
on 30 April 2021.

The financial statements have therefore been prepared on a
going concern basis which assumes the group will continue in
operation for the foreseeable future.

However, the coronavirus pandemic could have a short to
medium term impact on the group’s financial performance
which is not easy to forecast. The impact could be from a
significant fall in demand, from customer credit losses (bad
debts) or from late customer payments. These would restrict
the group’s ability to generate operating cashflow.

liabilities as they fall due. The directors believe that it remains
appropriate to prepare the financial statements on a going
concern basis, however the coronavirus outbreak and the
risks it may pose to the group give rise to a level of material
uncertainty relating to going concern.

The financial statements do not include any adjustments that
would result from the basis of preparation as a going concern
being inappropriate.

Initial application of IFRS 16 Leases
During the year, the Group adopted IFRS 16 ‘Leases’ (“IFRS
16”) for the first time. IFRS 16 replaces IAS 17 ‘Leases’
(“IAS 17”). The Group previously classified leases between
‘finance leases’ that transferred substantially all the risks and
rewards incidental to ownership of the asset to the Group, and
‘operating leases’.

The main change on application of IFRS 16 is the accounting
for ‘operating leases’ where rentals payable (as adjusted for
lease incentives) were previously expensed under IAS 17 on a
straight-line basis over the lease term. Under IFRS 16 a right-of-
use asset and a lease liability are recognised for all leases except
‘low-value’ and ‘short’ term leases where lease payments are
recognised on a straight-line basis over the lease term.

The Group has applied IFRS 16 retrospectively to all leases, but
has elected to recognise the cumulative effect against opening
reserves at 1 January 2019. Therefore, the comparative figures
are as previously reported under IAS 17. The Group has
applied this approach subject to the transition provisions set
out below:

•

For all contracts that existed prior to 1 January 2019, the
Group has not applied IFRS 16 to reassess whether each
contract is, or contains, a lease;

• A single discount rate has been applied to portfolios of

leases with similar characteristics;

•

Initial direct costs have been excluded from the
measurement of the right-of-use assets; and

• Hindsight has been applied in determining the lease term

for contracts that contain lease extension or termination
options.

As at 1 January 2019, the Group recognised right-of-use
assets and a lease liability of £128,000 in the statement of
financial position. The right-of-use assets recognised at 1
January 2019 were assessed for impairment. No impairment
losses have been recognised as a result.

The amounts recognised for leases at 1 January 2019, have
been measured as follows:

•

The lease liability is measured at the present value of the
remaining lease payments at 1 January 2019, discounted
at the lessee’s incremental borrowing rate at that date.

The right-of-use asset is measured at the amount of
the lease liability recognised in accordance with the
measurement set out above.

Annual Report & Accounts | 2019Notes to the Accounts (continued)

Impact of new International Financial
Reporting Standards
The following other new standards and amended standards,
none of which have had a material impact on these financial
statements, are mandatory and relevant to the Group for the
first time for the financial period commencing 1 January 2019:

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.

•

IFRIC23: Uncertainty over Income Tax Treatments

• Amendments to IAS 19: Plan amendment, curtailment or

settlement

• Annual Improvements to IFRS Standards 2015-2017 Cycle

Accounting standards in issue but not yet
effective
At the date of authorisation of these financial statements the
following standards and interpretations, which have not been
applied in these financial statements and which are considered
potentially relevant, were in issue but not yet effective (and in
some cases had not yet been adopted by the EU):

• Amendments to References to the Conceptual Framework

in IFRS Standards

• Amendments to IAS 1 and IAS 8: Definition of Material

• Amendments to IAS 1: Presentation of Financial

Statements: Classification of Liabilities as Current or Non-
current

• Amendments to IFRS 3 Business Combinations

The Directors anticipate that the adoption of the amendments
to standards in future periods will have no material impact on
the recognition and measurement of assets, liabilities and the
associated performance of the Group or the Company when
the relevant standards and interpretations come into effect.

Basis of Consolidation
The financial statements of the Group consolidate the financial
statements of H C Slingsby plc and its subsidiaries up to 31
December 2019 using the acquisition method of 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 date on which control is transferred to the
group. 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.

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.

The estimates and judgements made in the process of applying
the Group’s accounting policies that have the most significant
effect on the amount recognised in the financial statements and
the estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are addressed below.

• Actuarial assumptions used in the calculation of the

defined benefit pension scheme liability. Measurement
of the defined benefit pension obligations requires
estimation of future changes in salaries and inflation, as
well as mortality rates, and the selection of a suitable
discount rate. Defined benefit pension obligations at the
reporting date were valued at £6.6m (2018: £8.4m). This
movement was due to the transfers out of the Scheme
during 2019 and the impact of changes in actuarial
assumptions.

• Selection of appropriate rates of amortisation and

depreciation for intangible and tangible non-current
assets. The annual depreciation and amortisation charges
of amortisation and depreciation for intangible and
tangible non-current assets are sensitive to changes in the
estimated useful economic lives of the assets. The useful
economic lives and residual values are reassessed annually.
They are amended when necessary to reflect current
estimates, based on technological advancement, future
investments, economic utilisation and physical condition of
the assets (see notes 13 and 14 for the carrying amount of
intangible and tangible non-current assets).

• Allowances against the valuation of inventories.
Inventories are stated at the lower of cost and net
realisable value. When estimating the net realisable value
of inventories, management considers the nature and
condition of inventory, as well as applying assumptions
around anticipated saleability of finished goods and
future usage of raw materials. The stock provision at the
reporting date amounted to £408,000 (2018: £374,000)
(see note 17 for the net carrying amount of inventories and
details of the provisions made).

•

Impairment of goodwill and intangible assets. The
Directors review whether goodwill is impaired on an annual

Annual Report & Accounts | 2019basis which requires an estimation of the value in use of
the cash generating units to which the goodwill, and any
intangible assets, are allocated. This involves estimation
of future cash flows and choosing a suitable discount rate
(see note 14 for further disclosure). As disclosed in notes 3
and 14, the results for the year ended 31 December 2019
include an impairment of £1m.

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.

•

Impairment of tangible non-current assets. At each
reporting date the directors review the carrying amount
of the Group’s tangible non-current assets to determine
whether there has been any indication that those assets
have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated
in order to determine the extent of any impairment loss.
In 2019, this review resulted in an increase in the carrying
value of the Baildon property and a reversal against an
impairment provision previously recorded, as detailed in
note 13. The revised carrying amount has been derived
from a professional valuation of the property and whilst
any valuation involves a degree of estimation, the directors
consider that the degree of uncertainty is sufficiently
reduced by the use of an appropriately qualified third party
and have concluded that a partial reversal of the previous
impairment recorded in 2017 is appropriate.

• Deferred tax estimation. Recognition of deferred
tax assets and liabilities involves making a series of
assumptions. As far as deferred tax assets are concerned,
their realisation ultimately depends upon taxable profits
being available in the future. Deferred tax assets are
recognised only when it is probable that taxable profits will
be available against which the deferred tax asset can be
utilised and it is probable that the entity will earn sufficient
taxable profit in future periods to benefit from a reduction
in tax payments. This involves the directors making
assumptions within their overall tax-planning activities and
periodically reassessing them in order to reflect changed
circumstances as well as tax regulations. Moreover, the
measurement of a deferred tax asset or liability reflects
the manner in which the entity expects to recover the
asset’s carrying value or settle the liability. At 31 December
2019 the group has recognised deferred tax assets of
£1,150,000 (2018:£1,434,000) and deferred tax liabilities
of £470,000 (2018: £460,000) (see note 16 for disclosure
of the group’s deferred tax assets and liabilities).

•

Lease liabilities. In determining the lease term the Group
assesses whether it is reasonably certain to exercise, or
not to exercise, options to extend or terminate a lease.
This assessment is made at the start of the lease and is re-
assessed if significant events of changes in circumstances
occur that are within the lessee’s control. When the
interest rate implicit in the lease is not readily determinable,
the Group estimates the incremental borrowing rate based
on its external borrowings secured against similar asset,
adjusted for the term of the lease. The Group applied
a rate of 5% to all its leases disclosed in note 21, as it
represents the Group’s expected borrowing rate.

Contracts with customers are typically fixed price based on
agreed amounts and invoiced on dispatch to the customer
in line with the standard terms and conditions of the group.
Typically, the Group’s standard payment terms are 30 days
from date of invoice but certain customers have longer
agreed terms.

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 credit 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 and settlement gains 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
On commencement of a contract which gives the Group
the right to use assets for a period of time in exchange for
consideration, the Group recognises a right-of-use asset and
a lease liability unless the lease qualifies as a ‘short-term’ lease
(term is twelve months or less with no option to purchase the
lease asset) or a ‘low-value’ lease (where the underlying asset is
£4,000 or less when new).

The lease liability is initially measured at the present value of
the lease payments during the lease term discounted using the
interest rate implicit in the lease, or the incremental borrowing
rate if the interest rate implicit in the lease cannot be readily
determined. The lease term is the non-cancellable period of
the lease plus extension periods that the Group is reasonably
certain to exercise and termination periods that the Group is
reasonably certain not to exercise. Lease payments include

Annual Report & Accounts | 2019Notes to the Accounts (continued)

fixed payments, less any lease incentives receivable, variable
lease payments dependant on an index or a rate and any
residual value guarantees.

The lease liability is subsequently increased for a constant
periodic rate of interest on the remaining balance of the lease
liability and reduced for lease payments. Interest on the lease
liability is recognised in profit or loss. Variable lease payments
not included in the measurement of the lease liability as they
are not dependent on an index or rate, are recognised in profit
or loss in the period in which the event or condition that triggers
those payments occurs.

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 functional
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. Monetary 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.

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.

A right-of-use asset is recognised at commencement of the
lease and initially measured at the amount of the lease liability,
plus any incremental costs of obtaining the lease and any
lease payments made at or before the leased asset is available
for use by the Group. The right-of-use asset is subsequently
measured at cost less accumulated depreciation and any
accumulated impairment losses. Right-of-use assets are
depreciated on a straight-line basis over the lease term.

Intangible Assets
Intangible assets are stated at cost less accumulated
amortisation. They are recognised if it is probable 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.

Annual Report & Accounts | 2019
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.

Deferred tax assets and liabilities are offset where there is
a legally enforceable right to offset current tax assets and
liabilities and where the deferred tax balances relate to the
same taxation authority.

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 and age.

Financial assets other than derivatives
The Group classifies its financial assets as subsequently
measured at amortised cost under IFRS 9 if they meets both of
the following criteria:

• Hold to collect business model test. The asset is held
within a business model whose objective is to hold the
financial asset in order to collect contractual cash flows;
and

• Solely payments of principal and interest (SPPI) contractual
cash flow characteristics test. The contractual terms of the
financial asset give rise to cash flows that are SPPI on the
principal amount outstanding on a specified date.

Financial assets include trade receivables, amounts due and
owed to subsidiaries and cash and cash equivalents.

Trade and Other Receivables
Trade and other receivables that do not contain a significant
financing component are initially recognised at fair value
and subsequently held at amortised cost less provision for
impairment.

IFRS 9 introduces an expected credit loss model which
broadens the information that an entity is required to consider
when determining its expectations of impairment. Under
this model, expectations of future events must be taken into
account and this could result in the earlier recognition of
impairments.

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.

Financial liabilities
Financial liabilities are classified as either financial liabilities at
amortised cost or financial liabilities at fair value through profit
or loss. Financial liabilities include trade and other payables,
derivative financial instruments and bank borrowings.

Trade payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.

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
Final 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.

Current tax assets and liabilities are offset where the entity has
a legally enforceable right to offset and intends either to settle
on a net basis, or to realise the asset and settle the liability
simultaneously.

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.

Annual Report & Accounts | 2019Notes to the Accounts (continued)

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 Chief Executive Officer.

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, profits/ (losses), assets and liabilities are wholly attributable to that business
segment. The operations of the group are based in the UK.

3. Exceptional Items

Settlement gain

GMP equalisation

Goodwill impairment provision

Property impairment reversal

2019

£’000

3,069

(1,034)

691

2,726

2018

£’000

(216)

(675)

(891)

The reversal of the property impairment is explained more fully in note 13 and further details relating to the goodwill impairment
provision are included in note 14. The GMP equalisation charge and the settlement gain are explained more fully in note 24.

4. Employee Information

Staff costs

Wages and salaries

Social security costs

Other pension and life assurance costs

Group

2019

£’000

2,625

231

2,937

2018

£’000

2,586

220

2,878

Company

2019

£’000

2,168

181

2,417

2018

£’000

2,087

177

2,325

The average monthly number of persons, including directors, employed during the year was:

Group

Company

2019

Number

2018

Number

2019

Number

2018

Number

107

110

Selling and distribution

Administration

Annual Report & Accounts | 2019

5. Directors’ Remuneration (including pension contributions)

Dominic Slingsby

Morgan Morris

Highest paid Director:

Aggregate emoluments

Defined contribution / defined benefit scheme accrued pension at end of year

2019

£’000

102

105

207

102

2018

£’000

106

176

106

Dominic Slingsby had accrued benefits under a defined benefit scheme from which he transferred out during 2019. The defined
benefit scheme accrued pension at the end of the year was therefore £nil (2018: £89,000). Morgan Morris accrued benefits under a
defined contribution pension scheme amounting to £2,600 (2018: £1,980).

6. Operating profit/(loss)
Operating loss is stated after charging/(crediting):

Goodwill impairment

Property impairment reversal

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/(gains) 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

2019

£’000

1,034

691

(8)

300

114

2018

£’000

675

(16)

227

236

Annual Report & Accounts | 2019

Notes to the Accounts (continued)

7. Finance Income

Bank interest receivable

8. Finance Costs

Interest payable on bank borrowings

Interest payable on lease liabilities

Net retirement benefit obligation finance costs (note 24)

9. Taxation

Current tax

UK corporation tax:

– current year

Deferred tax:

UK deferred tax:

– origination and reversal of timing differences

– adjustments in respect of prior years

Total taxation charge

Factors affecting the tax credit for the year:

2019

£’000

2019

£’000

245

285

2019

£’000

511

552

2018

£’000

2018

£’000

216

262

2018

£’000

(27)

(1)

(28)

The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the weighted average tax rate
applicable to profits of the Group as follows:

Profit/(loss) before taxation

Tax at the UK corporation tax rate of 19%

Expenses not deductible for tax purposes

Effects of changes in tax rates

Adjustments to tax in respect of prior years

– current year

– deferred tax

Tax charge for the year

2019

£’000

2,887

549

(62)

552

2018

£’000

(633)

(120)

149

(1)

The Group profits for this accounting period are taxed at an effective rate of 19%. Deferred tax assets and liabilities are measured at
a rate of 17% as at 31 December 2019.

Annual Report & Accounts | 2019

10. Profit/(loss) Per Share
Basic profit per share is based upon a profit of £2,335,000 (2018: loss of £662,000) and on 1,000,000 (2018: 1,000,000) ordinary

shares in issue during the year.

There is no difference between basic profit per share and diluted loss per share for both years as there are no potentially dilutive
shares in issue.

11. Profit 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 profit of £2,236,000 (2018: loss £1,561,000).

12. Dividends

Interim dividend paid for the financial year of 0.0p (2018: 0.0p)

Final dividend paid for the financial year of 0.0p (2018: 0.0p)

13. Property, Plant and Equipment

Group

Cost

1 January 2018

Additions

Disposals

1 January 2019 – as previously reported

Right-of-use assets on transition to IFRS 16

1 January 2019

Additions

Disposals

31 December 2019

Accumulated depreciation

1 January 2018

Charge for the year

Disposals

1 January 2019

Charge for the year

Reversal of previous impairment provision

Disposals

31 December 2019

Net book amount

At 31 December 2019

At 31 December 2018

At 31 December 2017

Short
Leasehold
Property

£’000

119

–

119

–

119

–

Freehold
land and
buildings

£’000

6,671

–

6,671

–

6,671

–

119

6,671

–

2,451

105

–

2,556

106

(691)

–

1,971

4,700

4,115

4,220

Equipment

£’000

2,277

358

(190)

2,445

–

2,445

212

(397)

2,260

2,092

112

(165)

2,039

150

–

(384)

1,805

455

406

185

2019

£’000

Right-of-
use assets

£’000

–

128

–

128

–

2018

£’000

Total

£’000

9,067

358

(190)

9,235

128

9,363

212

(397)

9,178

4,595

227

(165)

4,657

300

(691)

(384)

3,882

5,296

4,578

4,472

Annual Report & Accounts | 2019Notes to the Accounts (continued)

13. Property, Plant and Equipment (continued)

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.

During 2017, the Board instructed a firm of professional surveyors to carry out a valuation of the freehold land and buildings at
Baildon. The resulting valuation of £4.2m was £1.2m below the carrying value. This resulted in an exceptional non-cash impairment
charge of £1.22m in the year ended 31 December 2017. During October 2019, the same firm undertook a further valuation of the
property on behalf of the Company’s bank. This valuation of £4.7m was £0.7m above the adjusted, depreciated, carrying value.
The Board have elected to adjust the carrying value in line with the recent valuation by reversing a portion of the historic impairment,
leading to an exceptional non-cash impairment reversal of £0.7m.

The carrying amount and depreciation of right-of-use assets all relate to property leases.

Company

Cost

1 January 2018

Additions

Disposals

1 January 2019

Additions

Disposals

31 December 2019

Accumulated depreciation

1 January 2018

Charge for the year

Disposals

1 January 2019

Charge for the year

Reversal of previous impairment provision

Disposals

31 December 2019

Net book amount

At 31 December 2019

At 31 December 2018

At 31 December 2017

Depreciation is charged to administrative expenses in the Income Statement.

Freehold
land and
buildings

£’000

6,671

–

6,671

–

6,671

2,451

105

–

2,556

106

(691)

–

1,971

4,700

4,115

4,220

Equipment

Total

£’000

1,986

358

(190)

2,154

179

(322)

2,011

1,815

100

(165)

1,750

143

–

(309)

1,584

427

404

171

£’000

8,657

358

(190)

8,825

179

(322)

8,682

4,266

205

(165)

4,306

249

(691)

(309)

3,555

5,127

4,519

4,391

Annual Report & Accounts | 2019
14. Intangible Assets

Cost

1 January 2018

Additions

1 January 2019

Additions

Disposals

31 December 2019

Accumulated amortisation

1 January 2018

Charge for the year

Goodwill impairment

1 January 2019

Goodwill impairment

Charge for the year

Disposals

31 December 2019

Net book amount

At 31 December 2019

At 31 December 2018

At 31 December 2017

Group

Goodwill

Group

IT Software
and
Trademarks

Brand and
Domain
Names and
Customer
Lists

Company

TOTAL

IT Software

£’000

2,409

1,000

2,409

1,000

675

1,034

1,709

700

1,734

2,409

275

100

375

100

475

525

625

725

899

(6)

976

747

136

883

(6)

891

152

1,899

(6)

1,976

1,022

236

1,258

114

(6)

1,366

610

641

877

860

(6)

937

721

125

846

(6)

852

139

Amortisation is charged to administrative expenses in the Income Statement.

Goodwill monitoring
Goodwill, which relates entirely to the acquisition of ESE Direct Limited in 2015, is monitored by management at the Cash
Generating Unit (“CGU”) level. A CGU is considered to be an individual company. The Group tests CGUs containing goodwill for
impairment on at least an annual basis by comparing the carrying amount of the CGU with it’s value in use. Value in use is estimated
based on future cash flow discounted to present value using a pre-tax discount rate that reflects current market assessments of the
time value of money. An impairment charge arises where the carrying value exceeds the value in use.

During 2018, an impairment charge of £675,000 was recognised as an exceptional non-cash item.

The carrying amount of the ESE Direct Limited CGU has been tested for impairment using a discounted cash flow model based on
the following assumptions:

Extrapolation of expected future cash flows using a terminal growth rate of 2%
Sales decrease of 4% and then no growth over the period based on forecasts and prior year perfomance

- Most recent budgets /forecasts for the next 5 years
-
-
- Capital expenditure of £5,000 per annum based on forecasts
- Gross margins projected based on recent trends
- Discount rate (derived from pre-tax weighted average cost of capital “WACC”) of 15%

Annual Report & Accounts | 2019
Notes to the Accounts (continued)

14. Intangible Assets (continued)

On the above basis, goodwill was impaired by £1m. The Directors performed sensitivity analysis on assumptions concerning sales
growth assuming that sales fell by 5% in 2020 and then did not grow over the period. On this sensitised basis, goodwill is impaired
by £1.2m. The Directors have concluded that it would be prudent to write down, as a non-cash exceptional item, the value of
goodwill by £1m to £0.7m.

15. Investment in Subsidiary
On 27 March 2015 the Company acquired 100% of the issued share capital of ESE Direct Limited. The cost of investment was
£4m. During 2018 an impairment provision of £1.4m was recorded such that the net book value of the investment was £2.6m.
Following the impairment testing detailed at note 14 above, the value of this investment has been further impaired during the year by
a further £1.1m to £1.5m. This investment represents the whole of the amount shown in the Company’s balance sheet.

The Company directly owns 100% of the issued share capital of the following subsidiary undertakings, registered in England and
Wales at 1 Otley Road, Baildon, Shipley BD17 7LW.

Company

ESE Direct Limited

Eastern Storage Limited

ESE Projects Limited

Eastern Storage Equipment Limited

Slingsby Trading Post Limited

Slingsby Manufacturing Limited

Slingsby Metro Equipment Limited

Principal Activity

Distribution of Industrial and Commercial Equipment

Dormant

16. Deferred Tax
The deferred tax balances in these financial statements are attributable to the following:

Deferred tax asset

Retirement benefit obligations

Deferred tax liabilities

Accelerated capital allowances

Losses

Intangible asset

Group

2019

£’000

2018

£’000

Company

2019

£’000

2018

£’000

1,115

1,434

1,115

1,434

(457)

(90)

(470)

(440)

(109)

(460)

(458)

(381)

(443)

(354)

The deferred tax asset relates to the deficit on the company’s defined benefit pension scheme. 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.

Annual Report & Accounts | 201916. Deferred Tax (continued)

Movements in deferred tax assets/(liabilities) are as follows:

Group

1 January 2018

(Charged)/credited to income statement

Credited to other comprehensive income

1 January 2019 – Group and Company

(Charged)/credited to income statement

Credited to other comprehensive income

31 December 2019

Company

1 January 2018

(Charged)/credited to income statement

Credited to other comprehensive income

1 January 2019

(Charged)/credited to income statement

Credited to other comprehensive income

31 December 2019

17. Inventories

Raw materials and work in progress

Finished goods and goods for resale

Pension
liability

Tax losses

Accelerated
capital
allowances

Intangible
assets

£’000

1,464

(103)

1,434

(501)

182

1,115

131

(42)

–

(12)

–

(418)

(22)

(440)

(17)

(457)

(128)

(109)

(90)

Pension
liability

Tax losses

Accelerated
capital
allowances

£’000

1,464

(103)

1,434

(501)

182

1,115

132

(43)

–

(12)

–

(420)

(23)

(443)

(15)

(458)

Group

2019

£’000

221

1,913

2,134

2018

£’000

197

1,750

1,947

Company

2019

£’000

221

1,913

2,134

Total

£’000

1,049

(103)

974

(511)

182

645

Total

£’000

1,176

(103)

1,080

(528)

182

734

2018

£’000

197

1,750

1,947

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 £41,000 (2018: £18,000). The cost of inventories
recognised as an expense and included in the Group’s cost of sales was £13,277,000 (2018: £13,343,000) and £8,674,000
(2018: £8,746,000) for the Company. The provision for obsolete stock at the year-end for the Group and Company is £408,000
(2018: £374,000).

Annual Report & Accounts | 2019Notes to the Accounts (continued)

18. Trade and Other Receivables

Trade receivables

Receivables from subsidiary

Prepayments

Group

Company

2019

£’000

2,008

–

393

2,401

2018

£’000

2,289

–

287

2,576

2019

£’000

1,659

375

2,112

2018

£’000

1,905

260

2,235

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 lifetime expected credit loss provision. The ageing profile is used by management in
reviewing receivables and the group applies the IFRS 9 simplified approach to measuring expected credit losses. The expected
loss rates are based on the group’s historical credit losses experienced and these rates are then adjusted for current and forward
looking information on macroeconomic factors affecting the group’s customers. Movements on the group and company provisions
for impairment of trade receivables are:

At 1 January 2019

Expected credit loss

Unused provision reversed

Receivables written off

At 31 December 2019

Group

2019

£’000

(35)

(18)

2018

£’000

(27)

(11)

Company

2019

£’000

(30)

(16)

2018

£’000

(24)

(9)

Receivables due from subsidiary were not impaired at 31 December 2019 and 31 December 2018 as the expected credit loss is not
considered to be material.

Overdue receivables against which no provision has been made are not considered to be material and 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

2019

£’000

825

835

2018

£’000

1,011

1,040

Company

2019

£’000

689

691

The carrying amounts of the group’s and company’s receivables are denominated in the following currencies:

Pound sterling

Euro

Group

Company

2019

£’000

1,939

2,008

2018

£’000

2,225

2,289

2019

£’000

1,668

1,737

2018

£’000

827

849

2018

£’000

1,911

1,975

Annual Report & Accounts | 2019

19. Trade and Other Payables

Trade payables

Payables to subsidiaries

Corporation tax payable

Other taxation and social security payable

Other payables

Accruals

Debtor financing

Overdraft

Group

2019

£’000

1,643

292

317

1,034

1,389

4,729

2018

£’000

1,905

333

350

637

1,966

5,261

Company

2019

£’000

1,214

608

209

177

1,034

1,389

4,642

2018

£’000

1,426

608

239

180

637

1,966

5,067

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 3.1% and 3.3% above
the prevailing Bank of England Base Rate respectively. The overdraft element of the Group’s banking facilities expires on the 30
April 2021. The debtor finance facility remains unaffected. The Group debtor finance facility is a total of £2m (subject to suitable
debt being available) and the overdraft facility is the sum of £500,000. 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.

20. Derivative Financial Instruments

Forward foreign currency contracts and options

Group and Company

Assets

2019

£’000

2018

£’000

Liabilities

2019

£’000

2018

£’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 2020. They have been valued using year end market data.

21. Borrowings and Financial Commitments
Group and Company borrowings include debtor financing, overdraft and leases. The debtor financing and overdraft amounting to
£2,423,000 (2018: £2,603,000) are repayable within one year. The maturity of the lease obligations is set out below:

Lease obligations

Not later than one year

Later than one year and not later than five years

Carrying value of liability

Group

2019

£’000

2018

£’000

Company

2019

£’000

2018

£’000

The Group leases premises for ESE expiring November 2022 with a break date at 1 December in any year of the term. The total
cash outflow for leases during the year was £36,000.

The Company has a commitment by way of a guarantee issued to HMRC in respect of the deferment of import duty and VAT in the
sum of £40,000.

Annual Report & Accounts | 2019

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 principal financial instruments used by the Group from which financial risk arises are as follows:

Financial assets

Trade receivables (note18)

Receivables from subsidiary (note 18)

Forward foreign currency contracts and options (note 20)

Cash and cash equivalents

Financial liabilities

Debt financing and overdraft (note19)

Payable to subsidiary (note 19)

Trade payables (note 19)

Accruals (note 19)

Other payables (note 19)

Lease obligations (note 21)

Forward foreign currency contracts and options (note 20)

Group

2019

£’000

2018

£’000

Company

2019

£’000

2018

£’000

2,008

2,289

1,659

1,905

1,278

3,286

2019

£’000

2,423

1,643

317

1,458

3,761

2018

£’000

2,603

1,905

350

107

1,844

2019

£’000

2,423

608

1,214

177

391

2,380

2018

£’000

2,603

608

1,426

180

4,502

4,871

4,441

4,828

Foreign Exchange Risk
The Group is exposed to foreign exchange risk from purchasing a portion of its supplies and by making a portion of its sales 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

2019

£’000

2018

£’000

Liabilities

2019

£’000

2018

£’000

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. An analysis of maturity of the group’s debtor finance and overdraft facilities is provided in note 21
above. The interest rates applicable to the group’s debtor finance and overdraft facilities are disclosed in note 19.

Annual Report & Accounts | 2019
Liquidity Risk
In the normal course of business the Group and Company is exposed to liquidity risk. The group’s 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. Further details relating to the nature and maturity of the
group’s borrowing facilities are included in notes 19 and 21 above.

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 and is further described in note 18 above. There are no significant
concentrations of credit risk.

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 2019, the gearing ratio was 44% (2018:513%).

24. Pension Commitments

Group and Company Retirement Benefit
Obligations
At 31 December 2019 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 2020 fiscal
year is £305,000. 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.

The scheme 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 2017 and a
shortfall of £9.8m against the Trustee’s funding objective was
identified. The Company agreed to pay annual contributions
of £540,000 (£540,000 in 2016) to remove the shortfall over
14 years. An amount of £270,000 was paid in 2016 and no
payments were made during 2017 and 2018. Deficit reduction
contributions re-commenced in 2019 and the Company paid
£125,000 during the year.

The weighted average duration of the defined benefit obligation
is 20.6 years.

Investment strategy
Approximately 11% (2018: 10%) of the Scheme’s assets
are held in equity type assets, and 89% (2018: 90%) 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 £20,000 as at
31 December 2019 (2018: 30,061 shares with a fair value of
£25,000).

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

Annual Report & Accounts | 2019Notes to the Accounts (continued)

24. Pension Commitments (continued)

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 89% 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. 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.

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 This has been selected following actuarial

Inflation

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 £1.1m 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 £0.8m in the present value of
the defined benefit obligation.

Mortality rates 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 2019 would be 21.1 (23.0)
years and the future life expectancy from age
65 for a male (female) non-pensioner member
currently aged 45 of 22.4 (24.5) 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 2019
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 2017 and updated to
31 December 2019 by a qualified independent actuary.

Guaranteed minimum pension
On 26 October 2018, the High Court issued a judgement
in a claim involving Lloyds Banking Group’s defined benefit
pension schemes. The judgement concluded that the schemes
should be amended to equalise pension benefits for men and
women in relation to guaranteed minimum pension benefits.
The Company has worked with its independent actuary who
has assessed the increase in liabilities from this judgement to
be £216,000. This cost was recognised in the consolidated
income statement as an exceptional item in 2018.

Settlement gain
During 2019, two executive members transferred out of the
scheme with the agreement of the scheme’s independent
trustee. The level of benefits which the two members agreed
to transfer from the scheme was below the level which they
were entitled to receive, as calculated by the independent
scheme actuary. This resulted in a reduction in scheme
liabilities which was £3.1m greater than the reduction in
assets which were transferred to the two members and
resulted in a settlement gain.

Annual Report & Accounts | 2019
24. Pension Commitments (continued)

Reconciliation of the present value of the defined benefit obligation

Present value of defined benefit obligation at beginning of year

GMP equalisation

Settlement gain (note 3)

Interest cost

Effect of changes in financial assumptions

Settlements paid

Benefits paid

Present value of defined benefit obligation at end of year

Reconciliation of fair value of scheme assets

2019

£’000

2018

£’000

25,321

26,666

(3,069)

720

2,769

(2,965)

(771)

22,005

2019

£’000

216

659

(1,585)

(635)

25,321

2018

£’000

Fair value of scheme assets at start of year

16,883

18,056

Interest income

Return on scheme assets

Contributions by the Company

Settlements paid

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

GMP equalisation (note 3)

Settlement gain

Interest on obligation

Interest income on scheme assets

Total expense

475

1,700

125

(2,965)

(771)

15,447

2019

£’000

22,005

(15,447)

6,558

2019

£’000

(3,069)

720

(475)

(2,824)

443

(981)

(635)

16,883

2018

£’000

25,321

(16,883)

8,438

2018

£’000

216

659

(443)

432

Annual Report & Accounts | 2019Notes to the Accounts (continued)

24. Pension Commitments (continued)

Amounts to be recognised in the income statement

Actuarial loss/(gain)

Actuarial loss/(gain) recognised in (SOCI)

Pension cost

GMP equalisation

Settlement gain

Defined benefit scheme net interest charge

Defined contribution scheme

Scheme assets

Equities

Gilts and bonds

Total scheme assets

Expected rate of return on scheme assets

2019

£’000

1,069

2019

£’000

(3,069)

245

(2,758)

2018

100

2018

£’000

(604)

2018

£’000

216

489

2018

£’000

1,686

15,197

16,883

2.9%

2019

100

2019

£’000

1,946

13,501

15,447

2.1%

At 31 December 2019 the scheme assets were invested in a diversified portfolio that consisted primarily of equity and debt
securities. The fair value of the scheme assets 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

2019

£’000

2018

£’000

Annual Report & Accounts | 2019
24. Pension Commitments (continued)

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:

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

2019

2.10%

2.80%

1.90%

0.00%

3.00%

4.00%

4.20%

86.1

87.4

88.0

89.5

2018

2.90%

3.20%

2.10%

0.00%

3.00%

4.00%

4.20%

86.2

87.6

88.2

89.7

25% of
pension at
age 65 at a
rate of 13.0:1

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)

A scaling factor of 110% has been applied to the notes under the standard tables. An allowance for future improvements has been
made in line with the CMI 2016 Core Regulations assuming a long term annual note of improvement in mortality rates of 1.25% for
men and women.

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 £53,000 (2018: £46,000) 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 £13,000
(2018: £11,000) have been charged to operating profit.

Annual Report & Accounts | 2019Notes to the Accounts (continued)

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

2019

Number

2019

£’000

2018

Number

1,200,000

300

1,200,000

1,000,000

250

1,000,000

2018

£’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.

26. Lease Commitments
At 31 December 2018, the Group had the following outstanding future aggregate minimum lease payments under non-cancellable
operating leases as follows:

Operating leases commitments:

within one year

in more than one year but less than five years

more than 5 years

2019

£’000

2018

£’000

105

Differences between the operating lease commitments disclosed at 31 December 2018 under IAS 17 discounted at the incremental
borrowing rate at 1 January 2019 and lease liabilities recognised at 1 January 2019 are explained below:

Operating leases commitments disclosed at 31 December 2018

Discounted using the lessee's incremental borrowing rate at the date of initial application

Lease liability recognised as at 1 January 2019 (note 21)

£’000

141

(13)

128

27. Related Party Transactions

Key Management
Key management personnel comprise the Group’s Executive Directors. Their remuneration (net of employer’s national insurance
costs) is set out in note 5. The total cost including employer’s national insurance costs in respect of Dominic Slingsby would be
£113,000 and in respect of Morgan Morris £114,000.

There were no other transactions with key management.

Company – Transactions With Subsidiaries
Sales amounting to £668,647 (2018: £663,300) were made by HC Slingsby plc to ESE Direct Limited. HC Slingsby plc levied
management charges upon ESE Direct Limited of £180,000 in 2019 (2018: £180,000).

Purchases amounting to £nil (2018:£330) were made by HC Slingsby plc from ESE Direct Limited.

Amounts due to ESE Direct Limited were £nil (2018:£nil) in respect of trading activities and £608,215 (2018: £608,215) in respect of
an inter-company loan.

Amounts due from ESE Direct Limited were £78,128 (2018:£69,522).

Annual Report & Accounts | 2019

28. Movement in liabilities arising from financing activities

Group

Bank overdraft (note 19)

Debt financing (note 19)

Lease obligations (note 21)

Cash and cash equivalents

Net debt

Company

Bank overdraft (note 19)

Debt financing (note 19)

Cash and cash equivalents

Net debt

At 1
January
2019

Recognised
on adoption
of IFRS16

Cashflow

Foreign
exchange
and other
movements

At 31
December
2019

£’000

(1,966)

(637)

1,458

(1,145)

£’000

(128)

577

(397)

(180)

At 1
January
2019

£’000

(1,966)

(637)

391

(2,212)

(6)

(1,389)

(1,034)

(98)

1,278

(1,243)

Cashflow

At 31
December
2019

£’000

577

(397)

(284)

(104)

(1,389)

(1,034)

107

(2,316)

29. Post balance sheet events
Following the year end, the group’s activities have been impacted by the global coronavirus pandemic. We are seeing large falls
in demand from customers in certain adversely affected sectors and order concentration on a limited number of product lines
and from a smaller number of customers. It is unclear as to the impact that the virus will have on demand going forward. Whilst
the precise impact of the pandemic is uncertain, the directors’ have re-forecast profit and loss and cashflow forecasts for the
foreseeable future to take into account expected outcomes. Details of actions being undertaken to mitigate the impact of the
pandemic are provided in the Going Concern accounting policy and Directors’ Report.

Annual Report & Accounts | 2019Five Year Summary

Group

Income Statement

Turnover

Gross profit

Operating profit/(loss) before exceptional item

Exceptional item

Profit/(loss) before tax

Profit/(loss) for the financial year

2019

£’000

19,568

6,743

446

2,726

2,887

2,335

2018

£’000

19,817

6,950

520

(891)

(633)

(662)

2017

£’000

19,240

6,726

557

(1,221)

(995)

(1,057)

2016

£’000

18,044

6,292

(261)

(102)

(732)

(656)

2015

£’000

17,061

6,249

(10)

(281)

(632)

(438)

Profit/(loss) per share – basic and diluted

233.5p

(66.2p)

(105.7p)

(65.6p)

(43.8p)

Dividend Per Ordinary Share*:

– Interim

– Final

Cash Flow Statement

0.0p

Cash generated from /(used by) operating activities

404

893

334

(84)

171

Balance Sheet

Net current assets/(liabilities)

Net assets

Pension deficit (net of deferred tax asset)

Net (debt)/cash excluding leases

Cash and cash equivalents

1,044

1,671

(5,443)

(1,145)

1,278

734

223

(7,004)

(1,145)

1,458

194

384

(7,146)

(1,579)

996

(607)

403

(7,893)

(1,731)

632

(376)

2,303

(6,587)

(1,493)

192

* 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.

Annual Report & Accounts | 2019Notice of Annual General Meeting

Notice is given that the seventy second Annual General
Meeting of H C Slingsby plc (“the Company”) will be held at
HC Slingsby plc, Otley Road, Baildon, Shipley, West Yorkshire
BD17 7LW on 19 June 2020 at 10am to consider and, if
thought fit, pass the following resolutions. Resolutions 1 to 5
will be proposed as ordinary resolutions and resolutions 6 to 8
as special resolutions.

Ordinary resolutions:
1. To receive the Company’s annual accounts for the

financial year ended 31 December 2019 together with the
Directors’ reports and auditor’s report on those accounts.

2. To re-elect as a Director, Morgan Morris who retires from

the Board in accordance with the Company’s articles of
association.

3. 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.

4. 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 (“Act”)
to exercise all powers of the Company to allot equity
securities (as defined in section 560 of the Act):

(a) up to an aggregate nominal amount of £83,250; and

(b) comprising equity securities up to a nominal amount
of £166,750 (including within such limit any equity
securities issued under paragraph (a) above) in
connection with an offer by way of a rights issue:

(i)

(ii)

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.

Special resolutions:
6 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 (b) 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
(a) of resolution 5 and/or in the case of any transfer
of 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
(a) of this resolution 6) 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.

7. Subject to the passing of resolutions 5 and 6, and in

addition to any authority granted under resolution 6 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

Annual Report & Accounts | 2019

(e)

the Company may make a contract or contracts to
purchase Ordinary Shares under the authority hereby
conferred prior to the expiry of such authority which
will or may be executed wholly or partly after the
expiry of such authority, and may make a purchase of
Ordinary Shares in pursuance of any such contract or
contracts.

Registered Office

HC Slingsby plc
Otley Road
Baildon
Shipley
BD17 7LW

Registered in England and Wales No.00452716

By order of the Board

M.L. Morris
Company Secretary
15 May 2020

Notice of Annual General Meeting (continued)

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)

limited to the allotment of equity securities up to an
aggregate nominal amount of £12,500; and

(b) 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

8. To authorise the Company generally and unconditionally to

make one or more market purchases (within the meaning
of 693(4) of the Act) on the London Stock Exchange
plc (the “London Stock Exchange”) of Ordinary Shares
provided that:

(a)

(b)

(c)

the maximum aggregate number of Ordinary Shares
authorised to be purchased is 100,000 (representing
approximately 10 per cent. of the Company’s issued
share capital);

the minimum price (exclusive of expenses) which may
be paid for such Ordinary Shares is 25 pence per
share;

the maximum price (exclusive of expenses) which
may be paid for an Ordinary Share is not more than
the higher of: (i) 5 per cent. above the average of the
middle market quotations for an Ordinary Share as
derived from the London Stock Exchange Daily Official
List for the five business days immediately preceding
the day on which the Ordinary Share is contracted to
be purchased; and (ii) the price stipulated by Article
3(2) of Delegated Regulation (EU) 2016/1052 of 8
March 2016 relating to the conditions applicable to
buy-back programmes and stabilisation measures;

(d) unless previously revoked or varied, the authority
hereby conferred shall expire 15 months after
the passing of this resolution or, if earlier, at the
conclusion of the next annual general meeting of the
Company after the passing of this resolution; and

Annual Report & Accounts | 2019
Notes to the Notice of Annual
General Meeting

Entitlement to attend and vote
1.

IMPORTANT NOTE REGARDING ATTENDANCE
IN PERSON: In light of the Coronavirus pandemic
Shareholders and their proxies will not be allowed
to attend the meeting in person, as to do so would
be inconsistent with current Government guidelines
relating to COVID-19 (as published as at the date
of this notice), in particular the advice for people
to avoid public gatherings, all non-essential travel
and social contact. Any shareholder seeking to
attend the Annual General Meeting in person will be
refused entry. Accordingly, Shareholders are urged
to exercise their votes by submitting their proxy and
appoint the Chair of the Annual General Meeting as
his or her proxy.

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 close of business on 17 June 2020 (or, if the meeting
is adjourned, as at close of business 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. 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.

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.

A proxy may only be appointed in accordance with the
procedures set out in note 3 below and the notes to the
proxy form.

3. You can vote either:

•

by logging on to www.signalshares.com and following
the instructions;

You may request a hard copy form of proxy directly
from the registrars, Link Asset Services (previously
called Capita), on Tel: 0871 664 0300. Calls cost

12p per minute plus your phone company’s access
charge. Calls outside the United Kingdom will be
charged at the applicable international rate. Lines
are open between 09:00 – 17:30, Monday to Friday
excluding public holidays in England and Wales.

•

in the case of CREST members, by utilising the
CREST electronic proxy appointment service in
accordance with the procedures set out below.

In order for a proxy appointment to be valid a form of
proxy must be completed. In each case the form of proxy
must be received by Link Asset Services at 34 Beckenham
Road, Beckenham, Kent, BR3 4ZF by 10 am on 17 June
2020.

Completion of the form of proxy or appointment or
a proxy through CREST will not prevent a member
from attending and voting in person. However,
in light of the Coronavirus pandemic situation,
Shareholders and their proxies will not be allowed to
attend the meeting.

Any member or his proxy attending the General
Meeting has the right to ask any question at the
Annual General Meeting relating to the business of
the Annual General Meeting. However, in light of the
Coronavirus pandemic Shareholders are urged to
appoint the Chair of the meeting as his or her proxy
as given the Coronavirus situation, Shareholders
and their proxies will not be allowed to attend the
meeting in person.

If you return more than one proxy appointment, either
by paper or electronic communication, the appointment
received last by the Registrar before the latest time for the
receipt of proxies will take precedence. You are advised to
read the terms and conditions of use carefully. Electronic
communication facilities are open to all shareholders and
those who use them will not be disadvantaged.

5. CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the Meeting (and any adjournment of
the Meeting) by using the procedures described in the
CREST Manual (available from www.euroclear.com/site/
public/EUI). CREST Personal Members or other CREST
sponsored members, and those CREST members who
have appointed a service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf.

In order for a proxy appointment or instruction made by
means of CREST to be valid, the appropriate CREST
message (a ‘CREST Proxy Instruction’) must be properly
authenticated in accordance with Euroclear UK &
Ireland Limited’s specifications and must contain the
information required for such instructions, as described

Annual Report & Accounts | 2019

Notes to the Notice of Annual General Meeting (continued)

in the CREST Manual. The message must be transmitted
so as to be received by the issuer’s agent (ID RA10) by
10am on 17 June 2020. For this purpose, the time of
receipt will be taken to mean the time (as determined by
the timestamp applied to the message by the CREST
application host) from which the issuer’s agent is able to
retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time, any change of
instructions to proxies appointed through CREST should
be communicated to the appointee through other means.

7. CREST members and, where applicable, their CREST
sponsors or voting service providers should note that
Euroclear UK & Ireland Limited does not make available
special procedures in CREST for any particular message.
Normal system timings and limitations will, therefore,
apply in relation to the input of CREST Proxy Instructions.
It is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed a voting
service provider(s), to procure that his CREST sponsor
or voting service provider(s) take(s)) such action as shall
be necessary to ensure that a message is transmitted by
means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their
CREST sponsors or voting system providers are referred,
in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and
timings. The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation 35(5)
(a) of the Un-certificated Securities Regulations 2001.

Corporate representatives
8. 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
9.

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
10. As at 13 May 2020 (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 13 May 2020 are 1,000,000.

Explanatory Notes to Resolutions 5, 6, 7
and 8
Resolution 5 – Authority to Allot Shares

Paragraph (a) 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’.

Paragraph (b) 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 connection
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 (a) 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.

Resolution 5 is in accordance with the Investment Association’s
Share Capital Management Guidelines issued in July 2016 (the
“Guidelines”).

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.

Resolutions 6 and 7 – Disapplication of Pre-emption Rights

These resolutions 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.

The purpose of resolution 6 is to give the Directors the authority
to allot equity securities for cash otherwise than to existing
shareholders pro rata to their holdings. Apart from offers or
invitations in proportion to the respective number of shares
held, this authority would be limited to the allotment of equity
securities for cash up to 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. The figure of 5% reflects the
Guidelines. The Board will have due regard to the Guidelines
and the Statement of Principles on Disapplying Pre-emption
Rights published by the Pre-Emption Group (the “Principles”) in
relation to any exercise of this authority.

Resolution 7 also gives the Directors the additional authority, in
certain limited circumstances, to allot equity securities for cash
without first being required to offer such shares to the existing

Annual Report & Accounts | 2019shareholders in proportion to their existing shareholdings. The
disapplication of pre-emption rights in respect of a further
5% of the Company’s issued share capital, in addition to the
authority proposed to be granted pursuant to resolution 6
reflects the Guidelines and the Principles. This authority would
be limited to the allotment of equity securities for cash up to 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 (within
the meaning of the Principles).

The authority and power pursuant to resolutions 6 and 7 will
expire on the latter of 15 months from the date the relevant
resolution is passed or the conclusion of the Company’s
next Annual General Meeting. Resolutions 6 and 7 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.

The Board has no present intention to exercise these
authorities.

Resolution 8 — General authority for the Company to purchase
its own Ordinary Shares

Shareholders will be asked to provide the general authority for
the Company to make market purchases on the London Stock
Exchange of its Ordinary Shares, subject to certain limitations
set out below.

The Board has no immediate plans for the Company to make
purchases of its Ordinary Shares if the proposed new general
authority becomes effective but would like to be able to act
quickly if circumstances arise in which they consider such
purchases by the Company of its Ordinary Shares to be
desirable. Accordingly, it is proposed that the Board be given
a new general authority to purchase the Company’s Ordinary
Shares on the terms contained in resolution 8 in the Notice of
Annual General Meeting.

The proposed new general authority will be limited, by the
terms of resolution 8 in the Notice of Annual General Meeting,
to purchases of up to 100,000 Ordinary Shares, representing
approximately 10 per cent. of the current issued share capital
of the Company. The minimum price per Ordinary Share
payable by the Company (exclusive of expenses) will be
25p. The maximum to be paid on the exercise of such new
general authority (exclusive of expenses) will be an amount
not exceeding the higher of (i) 5 per cent. above the average
of the middle-market quotation for Ordinary Shares as derived
from the London Stock Exchange Daily Official List for the
five business days immediately preceding the date of each
purchase, and (ii) the price stipulated by Article 3(2) of the
Commission Delegated Regulation (EU) 2016/1052 of 8
March 2016 relating to the conditions applicable to buy-back
programmes and stabilisation measures (being the higher of

the price of the last independent trade and the highest current
independent purchase bid on the trading venue where the
purchase is carried out).

The Board will only exercise the new general authority to
purchase Ordinary Shares if it considers that such purchases
of Ordinary Shares can be expected to result in an increase in
earnings per share after such purchases and are in the best
interests of shareholders generally. The Directors would also
consider carefully the extent of the Company’s borrowings and
its general financial position. Any such purchase of Ordinary
Shares will be financed out of profits available for distribution.
The actual cash required to fund any buy-backs of Ordinary
Shares pursuant to the new general authority will be met
from existing cash resources and/or borrowing facilities.
Shareholders should note that any shares purchased by the
Company will be cancelled and not made available for reissue.
The number of shares in issue will accordingly be reduced.

The maximum number of Ordinary Shares and the permitted
price range are stated for the purpose of compliance with
statutory and London Stock Exchange requirements in seeking
the authority. This should not be taken as any representation
of the number of Ordinary Shares (if any) which the Company
might purchase, nor the terms upon which the Company
would intend to make any such purchases, nor does it imply
any opinion on the part of the Directors as to the market or
other value of the Company’s shares. In seeking this general
authority, the Board is not indicating any commitment to buy
back Ordinary Shares. Shareholders should not, therefore,
assume that any purchases will take place.

In addition, the requirements of the London Stock Exchange
prevent the Company from purchasing its own shares during
the period of two months before the announcement of its half-
year or full-year results (or, if shorter, the period from the end of
the Company’s relevant financial period up to and including the
time of the relevant announcement), or at any other time when
the directors are in a possession of unpublished price sensitive
information in relation to the Company’s shares.

The general authority set out in resolution 8 in the Notice of
Annual General Meeting will expire fifteen months’ after the
resolution is passed or, if earlier, on the date of the next annual
general meeting of the Company. However, in order to maintain
the Board’s flexibility of action, it is envisaged that this general
authority may be renewed annually at annual general meetings
of the Company.

Details of Ordinary Shares purchased pursuant to the new
general authority will be notified to the London Stock Exchange
by 7.30 a.m. on the business day following the date of dealing
and to the registrar of companies within 28 days of the date of
purchase. Details will also be included in the Company’s report
and financial statements in respect of the financial year in which
any such purchases take place.

Annual Report & Accounts | 2019Notes

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