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2023 ReportEstablished 1893 Annual Report & Audited Financial Statements For the year ended 31st December 2023 www.slingsby.com M. L. Morris – Group Chief Executive A.J. Kitchingman – Chairman Over 130 years serving and supplying the workplace. We do: Manufacture and distribute over 45,000 high quality products covering everything you need for the workplace from handling and lifting and premises equipment to retail and office supplies, including many new ideas to help keep your business running smoothly. Our Commitment: Providing our customers with an extensive product range, outstanding service and efficient delivery. 22 Annual Report & Audited Financial Statements | 2023 Directors and Advisors Directors A.J. Kitchingman Chairman 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 Group Central Square 29 Wellington Street Leeds LS1 4DL 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 Nominated Advisor & Broker Allenby Capital Limited 5 St. Helens Place London EC3A 6AB Website & E-Mail Website: www.slingsby.com E-mail: sales@slingsby.com Annual Report and Audited Financial Statements - 2023 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 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 4 6 9 11 16 17 22 23 24 25 26 27 28 29 30 54 55 57 Annual Report & Audited Financial Statements | 2023 3 Statement by the Chairman Board Composition I was pleased to be appointed as independent Non-Executive Chairman of the company on 12 September 2023. My appointment has improved the level of independence on the Board, although the Board believes that it would benefit from the appointment of another independent Non-Executive Director and intends to make such an appointment in due course. On 11 March 2024, Dominic Slingsby resigned from the board. Dominic remains as an employee and will leave the Group on 30 June 2024 after over 40 years’ service. On behalf of the Board, I would like to thank Dominic for his commitment and contribution during his tenure. His dedication will be missed by everyone at Slingsby, and we wish him the very best in his retirement. Results In the half year statement, an operating profit of £0.33m on sales of £11.5m was reported. The full year operating profit was £0.63m (2022: £0.63m) on sales of £22.6m (2022: £21.6m). Group sales increased by 5%, helped by the acquisition of certain assets of the Stakrak business. Gross margin improved despite the insolvency of our main logistics partner in June 2023, but higher overheads and interest relating to the defined benefit pension scheme, led to a reduced profit before taxation of £0.36m (2022: £0.49m). Group earnings before interest, tax, depreciation and amortisation (“EBITDA”) in the year ended 31 December 2023 were £1.02m (2022: £1.09m). The Group had net cash (after overdraft balances included in trade and other payables) as at 31 December 2023 of £0.21m (2022: £0.03m). The increase in cash was due to EBITDA offsetting capital expenditure, the costs of the acquisition of certain assets of the Stakrak business and pension scheme deficit reduction payments. Dividend As part of the agreement reached with the Trustee of the defined benefit pension scheme (discussed below), the Board is unable to declare a final dividend for the year ended 31 December 2023 (2022: £nil). Pension Scheme The Company paid £0.40m (2022: £0.35m) in deficit reduction contributions during 2023. The Company also continues to contribute £0.16m (2022: £0.16m) towards the scheme’s running costs. Following the triennial valuation which took place as of 1 January 2023, the Company has agreed with the Trustee of its defined benefit pension scheme to pay a lower level of deficit reduction contributions than under its previous agreement over 2024, 2025 and 2026. This will result in a short term cash saving to the Group of approximately £0.39m, but does not alter the obligation upon the Company to fund the scheme deficit. As part of the agreement, the Company has committed to not making dividend payments in respect of the 2023 and 2024 financial years At 31 December 2023, the pension scheme deficit increased by £0.28m to £5.77m (2022: £5.49m). This deterioration in the pension scheme position outweighed the profit generated in the year, decreasing the Group’s net assets to £4.2m (2022: £4.3m). The worsened pension position was largely due to decreases in the discount rate. Recent Trading and Future Developments Group sales in Q1 of 2024 against the same period in 2023 fell by 5%. This decline in sales and the inclusion of costs associated with the retirement of Dominic Slingsby of £0.2m, led to an unaudited loss before tax in Q1 2024 of £0.14m compared to an unaudited profit before tax of £0.12m in the same period in 2023. The market remains competitive, and the Board is cautious regarding the outlook. There remains uncertainty in the economy due to the risk of a prolonged recession in the UK, inflationary pressures (particularly in overhead costs) and the impact on the supply chain from the situation in the Red Sea. These pressures could result in a fall in demand for the Group’s products. The Group continues to invest in its digital market presence and a new e-commerce platform for the Slingsby business will launch during 2024. The Group also remains on the lookout for appropriate acquisitions. Finally, I would like to thank our staff across the Group for their efforts in 2023. The Group has faced numerous challenges in recent years which were overcome due to the positive attitude and hard work of our employees. A.J. Kitchingman Non-Executive Chairman, 22 April 2024 4 Annual Report & Audited Financial Statements | 2023 Annual Report & Audited Financial Statements | 2023 5 5 Annual Report & Audited Financial Statements | 2023 Strategic 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 45,000 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. Sales grew in 2022 by 8.8%, mainly due to the Group passing on to customers cost price increases and increased by 5% in 2023 due partly to price increases and from the acquisition of certain assets of Stakrak Limited on 1 April 2023. There remains uncertainty in the economy due to the risk of recession in the UK, inflationary pressures and the impact on the supply chain from the situation in the Red Sea. This could further impact on demand and lead to credit related issues should companies become insolvent. The impact of inflation in the Group’s cost of products and certain freight costs could also lead to a fall in demand as these cost increases have resulted in increased selling prices. Although, partly due to selling price increases, gross margin increased from 34.6% to 35.9%, this was offset by inflation in overhead costs. The Group had net assets at 31 December 2023 of £4.22m (2022: £4.32m) and net cash (after overdraft balances included in trade and other payables) of £0.21m (2022: £0.03m). The decline in net assets is mainly due to an increase in the defined benefit pension deficit. The increase in cash was due to EBITDA offsetting capital expenditure, the costs of the acquisition of certain assets of the Stakrak business and pension scheme deficit reduction payments. 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 2023, we continued to invest in improvements in the e-commerce platform for the Slingsby business with a new website planned for launch during 2024, and to strengthen our product sourcing and sales teams. 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 the level of 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 130 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 2023 5.0% 8.4% 1.6% 35.9% 2022 8.8% 11.2% 2.2% 34.6% Notes: Return on capital employed is calculated as profit before taxation over the total equity at the year end. This has declined due to reduction in profit before tax due to the increase in interest charges related to the defined benefit pension scheme and the reduction in total equity due to the increase in pension scheme deficit. Return on sales is calculated as profit before taxation over revenue. This has declined due to the reduction in profit before tax due to the increase in interest charges related to the defined benefit pension scheme. More information can be found as part of the Chairman’s statement. A review of the business is included in the results section of 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 described 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. 6 Annual Report & Audited Financial Statements | 2023 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, credit losses and a consequent loss of income for the Group. The risk of recession in the UK, inflationary pressures and the impact on the supply chain from the situation in the Red Sea creates considerable uncertainty. The Group regularly reviews its trading performance and the short-term outlook such that the Board can take any mitigating actions deemed necessary to address the impact of market cycles and volatility. Funding and liquidity risk The main risk arising from the Group’s financial instruments is liquidity risk and ensuring that the Group has sufficient bank facilities available to meet all short-term cash requirements for the foreseeable future. The Group purchases a significant amount of its products from overseas suppliers in foreign currencies and uses forward foreign currency contracts. The Group’s borrowings are on floating rates of interest and so the cost of these facilities would increase should interest rates continue to rise. The Board keeps these risks under regular review and prepares profit and loss account and cashflow forecasts as appropriate. Regulatory The Group has to comply with all relevant regulatory requirements and the risk is that the Group may not comply with the relevant requirements. The Group remains compliant with all relevant regulatory requirements and monitors 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. The risk is that the Group may fail to comply with the accredited standards. In order to mitigate the risk, management review their compliance with relevant accreditations. Pensions The Group has an obligation to fund its defined benefit pension scheme (the “Scheme”) and this creates an exposure to interest rates, inflation, investment return and the longevity of the plan members. The risk is that the Group will not be able to fulfil its responsibilities to the Scheme. 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 was scheduled to pay £418,000 in deficit reduction contributions in 2024 but in March 2024 the Group agreed a revised schedule of contributions with the Trustee as part of the triennial scheme valuation as of 1 January 2023. The Company will pay £150,000 in 2024, £350,000 in 2025, £400,000 in 2026 and £450,000 in 2027. Contributions will then rise each year thereafter by 3%. The next triennial review as at 1 January 2026 and could result in a change to future contributions following agreement between the Company and the Trustee. The Group will also continue to contribute up to £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. A payment in respect of 2023 of £14,500 is anticipated to be paid during 2024. As a condition of the above arrangement, the Group has committed not to pay any dividends in respect of the 2023 and 2024 financial years and thereafter is restricted as to the quantum of distributions to shareholders to an amount not greater than £60,000 plus 50% of its net cashflow over £150,000. The Group is obliged to consult with the Scheme’s Trustee regarding certain other matters but is not obliged to change its approach as a result. Health and Safety and Environmental Sustainability The Group is subject to relevant regulations on the above and there is a risk the Group may not comply with the relevant requirements. 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 (1)(a) to (f) of Companies Act 2006). These matters are the likely consequences of any decision in the long term, the interests of the Company’s workforce, the desirability of the company maintaining a reputation for high standards of business conduct, the need to foster the Company’s business relationships with suppliers, customers and others, the impact of the Company’s operations on the community and the 7 Annual Report & Audited Financial Statements | 2023 Strategic Report (continued) environment and the need to act fairly, as between members of the Company. 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 below, in the Corporate Governance section of this annual report (pages 11 - 15) and above. The Group culture is focussed upon achieving success in the long term, working in a manner that benefits all our stakeholders. The directors ensure that the Group’s business strategy, governance framework, management information flows and stakeholder engagement processes, reflect the long- term impact of decisions they make. The directors discharge their duties by • • • ensuring that they have the relevant experience and competence to perform such duties and obligations under applicable law and regulation and if appropriate undertaking training having processes to ensure the provision of timely management information to the Board from key areas of the business agenda planning for Board and committee meetings to provide sufficient time for the consideration and discussion of key matters. The Board promotes high standards of business conduct recognising the desirability of maintaining the Group’s reputation. This is communicated to the Group’s employees. The Board and all employees expect to be judged by and be held accountable for their actions. The Group has an internal control framework that identifies risk factors which are regularly monitored and reviewed. The Board considers which course of action best enables delivery of our strategy for the long term, taking into consideration the impact on stakeholders. In doing so, the directors act fairly as between the Group’s members. Stakeholder Engagement Shareholders The major interests in the Company’s shares are set out in the directors’ report. Key metrics for our shareholders are the share price, earnings per share and the level of dividends paid. Through the publication of our half and full year financial reports and announcements we inform shareholders regarding the status of their Company. Further shareholder engagement includes the AGM and discussions with investors when questions are asked. Employees The Board believes that the Group’s success is reliant on the commitment of our employees and the directors’ consider the implications of decisions made on them. We pride ourselves on our friendly and safe working environment. Employee feedback is sought through formal review processes and via the head of each department. Training is provided where necessary. Customers and suppliers The Board recognises that the Group depends on its customers and its supply chain. Customer feedback is sought through the use of a third party operated review service as well as encouraged through other communication channels. We regularly engage with suppliers through visits to their facilities, holding presentations and training meetings between suppliers and Group employees on our sites and via a formal appraisal system. Community and environment The Group recognises its obligation to minimise its impact on the environment and the need to consider its impact on the communities in the areas in which it operates. This is achieved by complying with the IS14001 environmental quality standard and support of certain environmentally and community focussed organisations such as sponsorship of the Yorkshire and Norfolk Wildlife Trusts. More information on how 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 11 – 15) and in respect of the environment at the relevant section above. By order of the Board M. L. Morris Company Secretary 22 April 2024 8 Annual Report & Audited Financial Statements | 2023 Report of the Directors Going Concern The directors have prepared trading and cash flow forecasts for the Group for the period to 31 December 2025, 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 Board’s conclusion in this regard is strengthened by the Group’s net cash position at 31 December 2023 of £0.21m (2022: £0.03m) and availability of financing. The overdraft element of the Group’s banking facilities is undergoing its annual renewal at the level of £0.1m. Whilst the Company’s overdraft at 31 December 2023 was £2.24m, the Group has a mechanism whereby it can consolidate cash holdings to ensure that it stays within the agreed overdraft facility. The Directors consider this to be adequate given the Group’s cash and other financing options particularly the Group’s £2m invoice discounting facility. The financial statements have therefore been prepared on a going concern basis which assumes the Group will continue in operation for the foreseeable future, as a minimum for a period of at least 12 months from the date of approval of the financial statements. However, there remains uncertainty in the economy due to the continuing conflict in the Ukraine, risk of a prolonged recession in the UK, inflationary pressures (across both cost of goods and overheads) and the impact on the supply chain from the situation in the Red Sea. 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. The directors have plans in place to mitigate these impacts should the need arise. The Directors are pleased to present their annual report and audited consolidated financial statements for the year ended 31 December 2023. Future developments are considered in the Statement by the Chairman on page 4 and below. H C Slingsby plc is a public limited company (limited by shares) with its ordinary shares traded on the AIM market of the London Stock Exchange. It is incorporated and domiciled in the United Kingdom with its registered office at Otley Road Baildon, West Yorkshire BD17 7LW. The company is registered in England and Wales with a registered number of 452716. 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 (resigned 11 March 2024) D. S Slingsby (resigned 11 March 2024) M. L. Morris A. J. Kitchingman (appointed 12 September 2023) Dividends The Directors do not propose a dividend in respect of the 2023 financial year (2022: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 31 December 2023 1,000 51,167 105,489 2022 - 51,167 93,561 A.J. Kitchingman D. S. Slingsby M.L. Morris There have been no changes in the directors’ shareholdings between 31 December 2023 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 excludes a non-beneficial interest of 64,000 (2022 64,000) ordinary shares. 9 Annual Report & Audited Financial Statements | 2023 Report of the Directors (continued) 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 19 April 2024: Number of ordinary Shares of 25p each Percentage Holding Audit Information So far as each of the Directors is aware, there is no relevant information that has not been disclosed to the Company’s auditors and each of the directors believes that all steps have been taken that ought to have been taken to make themselves aware of any relevant audit information and to establish that the Company’s auditors have been made aware of that information. 192,295 67,835 64,000 18.3% 6.5% 6.1% 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 11 - 15 of the annual report. Stakeholder Engagement The Group’s statement on stakeholder engagement is included in the Strategic Report. Post Balance Sheet Event On 11 March 2024, Dominic Slingsby stepped down from the Board. Dominic remains an employee of the Group until his retirement on 30 June 2024. As part of the Board change and Dominic’s retirement, in addition to payment in relation to his 12 month notice period, the Company has agreed with Dominic that he shall receive a payment of £60,000 and non-cash benefits (principally in relation to the keeping of a Company car) of a value of £15,500 from the Company under an employment settlement agreement By order of the Board M. L. Morris Company Secretary 22 April 2024 M. Chadwick* K. J. Williams J. S. Slingsby Grandchildrens’ Trust J. Crowther Jones & Mr. T. E. Jones J. H. Ridley C. J. Slingsby H. Padfield H. Slingsby (held by executors) A. R. Morris M. Miller† P. S. Allen S. Whittaker 54,866 5.2% 54,302 53,886 51,167 47,138 41,400 38,000 36,940 32,500 5.2% 5.1% 4.9% 4.5% 3.9% 3.6% 3.5% 3.1% * Registered in the name of Davycrest and Goodbody Nominees † Registered in the name of Platform Securities 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 21 to the accounts. Indemnification of Directors The Company confirms that qualifying third party indemnity insurance cover has been affected 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. 10 Annual Report & Audited Financial Statements | 2023 Corporate Governance HC Slingsby plc is committed to high standards of corporate governance and has adopted the Corporate Governance Code (“the QCA 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 QCA Code. The Board and Committee Meetings The Board meets on a formal basis regularly and during 2023 there were five formal board meetings. All Directors attended all five board meetings held during the year (or in the case of Andrew Kitchingman the two meetings held following his appointment in September 2023). There is a Schedule of Matters specifically reserved for the Board’s decision, which can be seen at www.slingsby.com; Investor Relations. 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. As a Director and Company Secretary, M. L. Morris seeks appropriate external advice should the need arise. The Board comprises the following: Andrew J. Kitchingman – Non-Executive Chairman Andrew Kitchingman joined the HC Slingsby plc board on 12 September 2023 as Non-Executive Chairman. He is Chairman of the Company’s Remuneration and Audit Committees. Andrew is Chairman of Mpac Group plc, a non-executive Director of Andrews Sykes Group plc and Chair of the British Board of Agrément. He is a Fellow of the Institute of Chartered Accountants in England and Wales and formerly worked in corporate finance for a number of firms, including KPMG, Hill Samuel, Albert E Sharp, Brewin Dolphin and WH Ireland. Andrew Kitchingman’s service agreement is for a fixed term of one year with a one month notice period. Dominic S. Slingsby – Operations Director until 11 March 2024 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 (until 12 September 2023) and Operations Director. He was a member of the Remuneration Committee and of the audit committee (until the appointment of Andrew Kitchingman) prior to his leaving the board on 11 March 2024. Dominic Slingsby’s service agreement specifies a rolling 12 month notice period. On 12 March 2024, the Company announced details of Dominic’s retirement, including an employment settlement agreement. Morgan L. Morris – Group Chief Executive, Finance Director 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 six month notice period. 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. All directors are expected to devote such time as is necessary for the proper performance of their duties. Directors are expected to prioritise and attend Board meetings and Committee meetings of which they are members and any additional meetings wherever possible. After taking into consideration the availability and time commitment demanded of individual members, the Chairman was satisfied that the members of the Board were able to devote sufficient time and resource to perform their roles for the Group. As noted in the Chairman’s statement in the 2022 annual report, the Directors have continued their search for suitable independent non-executive Directors to bring more balance to the composition of the Board. In this respect, the Company was pleased to announce the appointment of Andrew Kitchingman to the Board on 12 September 2023 as Non- Executive Chairman. 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 2023 attended by Dominic Slingsby and Morgan Morris. During the year to 31 December 2023, the audit committee met to review the Interim Report, the Annual Report, to consider the suitability and monitor the internal control processes and to review the financial procedures of the Company. The audit committee reviews the findings of the external auditors and reviews accounting policies and material accounting judgements. The independence and effectiveness of the external auditor is reviewed annually, and the audit committee meets at least once per financial year with the auditors to discuss their independence and objectivity, the Annual Report, any audit issues arising, internal control processes, auditor appointment and fee levels and other appropriate matters. 11 Annual Report & Audited Financial Statements | 2023 Corporate Governance (continued) Remuneration Committee The remuneration 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 2023 which was attended by Dominic Slingsby and Morgan Morris. During the year to 31 December 2023, the remuneration committee provided a formal review of the remuneration of the Executive Directors and senior employees and makes recommendations to the Board on individual remuneration packages. This includes the award of non-contractual performance related bonuses and other incentives. Remuneration packages are designed to reward, motivate, retain and recruit individuals. Bonuses are only paid in recognition of performance. Relations with Shareholders The Company is ready, where practicable, to enter into a dialogue with institutional and other 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 Chief Executive Officer, supported by the senior management with responsibility for key operations. The Chief Executive Officer is 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. In line with the Schedule of Matters reserves for the Board, certain matters require approval by the Board as a whole. This includes all significant capital expenditure decisions, corporate and capital structure and communications to shareholders. The Board adopted the Quoted Companies Alliance Corporate Governance Code in 2018. The Board’s views on the extent of compliance with the ten principles that comprise the QCA Code, together with an explanation of any areas of non-compliance are set out below: Principle Establish a strategy and business model which promote long term value for shareholders Seek to understand and meet shareholder needs and expectations Extent of current compliance Compliant Compliant Compliant Take into account wider stakeholder and social responsibilities and their implications for long term success Further disclosure(s) Strategic Report section of the 2023 Annual Report www.slingsby.com; Investor Relations, AGM notices, Relations with Shareholders section above. www.slingsby. com; Investor Relations, Corporate Governance Commentary The relevant information concerning the Group’s business model and strategy can be found in the Strategic Report within the 2023 Annual Report. Key risks and mitigating actions are detailed in the Principal Risks section of the Strategic Report within the 2023 Annual Report. The Company’s contact 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 Chairman and CEO are responsible for shareholder liaison and reviewing all communications received from members and determining the most appropriate response. The Directors believe that these methods of shareholder engagement are sufficient to support the Company’s aims in meeting their needs and expectations. 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. Customer feedback is obtained from a third party operated review system. Employees have reviews with their line manager and are encouraged to provide feedback. Employees are also encouraged to express any concerns to the Board or the Human Resources Manager. All feedback is reviewed by the Board and acted upon accordingly. However, no material changes to the Company’s working processes were required over the year to 31 December 2023, or more recently, as a result of stakeholder feedback received by the Company. 12 Annual Report & Audited Financial Statements | 2023 Extent of current compliance Compliant Principle 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 Partially compliant Compliant Ensure that between them the directors have the necessary up-to date experience, skills and capabilities Commentary 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. As well as tight oversight exercised by the executive directors, and appropriate trained and qualified staff, the Board engages appropriate auditors and consultants to assist in identifying and managing risk. The Board obtains assurance that risk management processes and related control systems in place are effective via a review of the Group’s internal risk register at Board meetings. The Board assess the register for any potential emerging risks and ensures appropriate controls are in place to mitigate against such risks should they arise. The Board currently comprises one Executive Director and an Independent Non-Executive Chairman who receive high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight. The Board’s current composition, given that the Board only has one independent non-executive director, represents a departure from the recommendation in the QCA Code which states that a board should have at least two independent non-executive directors. The Board has been seeking the appointment of Non-Executive Directors for some time, although historically the Company’s very significant pension deficit and the highly publicised issues facing directors of public companies with a deficit on its pension fund, previously deterred candidates from accepting such a role. As stated in the 2023 Annual Report, it was the Board’s intention to appoint at least one independent Non-Executive Director at the earliest opportunity. In this respect, the Company was pleased to announce the appointment of Andrew Kitchingman to the Board on 12 September 2023 as Independent Non-Executive Chairman. The Board intends to appoint an additional independent Non- Executive Director in due course. The Corporate Governance section of the Annual report details the number of meetings of the Board (and any committees) during the 2023 year, together with the attendance record of each director. Also described is the time commitment required from directors over 2023. 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. Further disclosure(s) Principal Risks section of the Strategic Report within the 2023 Annual Report Statement by the Chairman, Board and Committee meetings section of the Corporate Governance report within the 2023 Annual Report Board and Committee meetings section of the Corporate Governance report within the 2023 Annual Report 13 Annual Report & Audited Financial Statements | 2023 Extent of current compliance Partially compliant Principle Evaluate board performance based on clear and relevant objectives, seeking continuous improvement Promote a corporate culture that is based on ethical values and behaviours Compliant Further disclosure(s) None. www.slingsby.com; Investors Relations, Corporate Governance Commentary Given its size and composition and the difficulties in obtaining Directors’ and Officers’ insurance cover in respect of claims relating to its pension scheme, which had deterred previously suitable independent non-executive director candidates, in 2023 and previously Board evaluation has not been carried out as part of a formal process, although self-evaluation by all Board members, and feedback on the conduct and content of board meetings and the audit and remuneration committees was actively encouraged. Succession planning for the Board and other senior management appointments is considered as part of the above evaluation process, although the Directors believe that the Company has planned sufficiently for its succession planning needs in the medium-term. This process is generally unchanged from the recent previous years. Aside from the identified need for the appointment of independent non-executive directors, so as to seek to satisfy the recommendation in the QCA Code that a board should have at least two independent non-executive directors, during the year ended 31 December 2023, the Board’s informal assessment did not find any shortcoming in Board or committee effectiveness and did not lead to any material recommendations for any changes. The Board intends that a more structured performance review system will exist in the future, following the appointment of an independent non-executive Chairman in September 2023. The Board promotes high ethical and moral standards. The Board and all employees expect to be judged by, and accountable for their actions. The employment handbook contains relevant information. It is the Board’s view that the Company’s corporate culture is consistent with its objectives, strategy and business model. A large part of the Company’s activities is centred upon what needs to be an open and respectful dialogue with employees, customers and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board has adopted an employment handbook which provides a framework for ethical decision-making and actions across the Group. The employment handbook reiterates the Group’s commitment to integrity and fair dealing in its business affairs and its duty of care to all employees, contractors and stakeholders. The Board are prepared to take appropriate action against unethical behaviour, violation of company policies or misconduct. The Board are also informed of any material enquiries from employees through site managers and when necessary the Chief Executive Officer is available to employees on a direct enquiry basis. The Company is committed to providing a safe environment for its staff and all other parties for which the Company has a legal or moral responsibility in this area. 14 Annual Report & Audited Financial Statements | 2023 Further disclosure(s) Board and Committee meetings section of the Corporate Governance report within the 2023 Annual Report www.slingsby.com; Investor Relations and Board and Committee meetings section of the Corporate Governance report within the 2023Annual Report Commentary A Corporate Governance statement was included in the Report & Accounts for the year ended 31 December 2023, which includes disclosures in relation to the QCA Code and details of the Company’s governance structures, including information about the Audit Committee and Remuneration Committee. Given the current size and scale of the Company’s current operations and its Board, the Company does not publish the full terms of reference of these committees. The audit committee comprises Morgan Morris and Andrew Kitchingman who is chair. The remuneration committee comprises Morgan Morris and Andrew Kitchingman who is chair. Morgan Morris and Andrew Kitchingman recuse themselves from committee meetings as regards their own remuneration. The Company does not have a nomination committee, as the need for appointments and decisions regarding Director appointments are considered by the Board as a whole. The Board currently comprises one Executive Directors and an independent non-executive chairman. The Board is therefore currently non-compliant with the recommendation in the QCA Code that a board should have at least two independent non- executive directors. The Company is seeking appropriate further non executive director candidates to join the Board, as part of its planned evolution of its governance framework and its committees. The roles of Chairman and Chief Executive are separated. The Chief Executive is responsible for the operating performance of the Company and its subsidiaries, whilst the Chairman is responsible for the running of the Board. Details of the Schedule of Matters specifically reserved for the Board’s decision can be found at www.slingsby.com; Investor Relations. 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 discloses outcomes of all general meeting votes. Where a significant proportion of votes (e.g. 20% of independent votes) have been cast against a resolution at any general meeting, the Board will post this on the Company’s website and will include, on a timely basis, an explanation of what actions it intends to take to understand the reasons behind that vote result, and, where appropriate, any different action it has taken, or will take, as a result of the vote. The Company lists contact details on its website and on all announcements released via RNS, should shareholders wish to communicate with the Board. The Company’s Remuneration Committee does not produce a public report on its work over the year, although details in relation to the Remuneration Committee can be found in the Corporate Governance report within the 2023 Annual Report and below and details of the directors’ remuneration can be found in note 5 of the 2023 Annual Report. The Company’s Audit Committee does not produce a public report on its work over the year, as any key findings are instead considered by the Board. Details of the ‘key audit matters’, as determined by the Company’s auditor, RSM UK Audit LLP, can be found in the Independent Auditors’ Report to the Members of H C Slingsby plc in the 2023 Annual Report. The outcomes of historical AGMs and GMs can be viewed on the company website as well as RNS announcements made by the Company. Extent of current compliance Non-compliant Principle Maintain governance structures and processes that are fit for purpose and support good decision-making by the board Compliant Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders On behalf of the Board Andrew J. Kitchingman Non-Executive Chairman 22 April 2024 15 Annual Report & Audited Financial Statements | 2023 Statement of Directors’ Responsibilities 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 requirements of 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 corporate and financial information included on the H C Slingsby Plc website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. By order of the Board M. L. Morris Company Secretary 22 April 2024 The Directors are responsible for preparing the Strategic Report, 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 have elected under company law and are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with UK adopted international accounting standards and have elected under company law to prepare the company financial statements in accordance with UK adopted international accounting standards and applicable law. The group and company financial statements are required by law and UK adopted international accounting standards to present fairly the financial position of the group and the company and the financial performance of the group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing each of the group and company financial statements, the directors are required to: a. select suitable accounting policies and then apply them consistently; b. make judgements and accounting estimates that are reasonable and prudent; c. state whether they have been prepared in accordance with UK adopted international accounting standards; 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. 16 Annual Report & Audited Financial Statements | 2023 Independent Auditors’ Report to the Members of H C Slingsby plc Summary of our audit approach Key audit matters Group and parent company • Inventory Valuation / Obsolescence Materiality Provision • Retirement Benefit Liability Group • Overall materiality: £84,000 (2022: £80,000) • Performance materiality: £63,000 (2022: £60,000) Parent Company • Overall materiality: £56,000 (2022: £60,000) • Performance materiality: £42,000 (2022: £45,000) Scope Our audit procedures covered 100% of revenue, total assets and of profit 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. 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 2023 which comprise the Consolidated Income Statement, the Statement of Consolidated Comprehensive Income, 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, the Note to the Cash Flow Statements and Notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted International Accounting Standards 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 2023 and of the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards; the parent company financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards 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 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. 17 Annual Report & Audited Financial Statements | 2023 Independent Auditors’ Report to the Members of H C Slingsby plc (continued) Inventory Valuation / Obsolescence Provision Key audit matter description At 31 December 2023, the Group and parent company balance sheet records inventory of £2,643k (2022: £2,683k). This amount is net of an inventory provision of £891k (2022: £773k). Further details on the inventory can be found in Note 16. Given the type of industry which the group operates within, inventory items can be seasonal or change with current trends. We consider a significant risk exists in respect of the inventory provision based on the ability to sell inventory based on the aforementioned factors and have therefore determined that the inventory provision is a key audit matter. Management have historically adopted a mechanical approach to the level of provisioning applied based on the ageing of inventory and its last movements. As described in note 1 to the financial statements, management have calculated an inventory provision considering the condition of inventory, its age, and future saleability. The inventory provisioning process involves significant elements of judgement and estimate, including in respect of: • the % of provision applied to different categories of aged inventory; and, • assumptions surrounding the future saleability of inventory. How the matter was addressed in the audit In respect of the inventory valuation / obsolescence provision we: • Assessed the appropriateness of managements inventory provision calculations, including testing the accuracy of data used and the mathematical accuracy of the provisioning model. • Discussed the basis of the provision with management to understand rationale, key supporting information, and any changes in method relative to prior periods. • Assessed the accuracy of the prior year provision by considering information from the current year to determine if the provision was reasonable. • Undertook sensitivity analysis on the key inputs to the model/workings after obtaining detailed inventory reporting information from management. • Used data analytic tools to assess the sale of inventory in both the year and post year end to assess if inventory has been sold at below cost in the periods assessed. • Reviewed the level of sales of inventory product lines over a three-year period to ascertain the last sale date of inventory and inventory which has not been sold within the assessed period. As a result of our findings, we developed an auditor’s point estimate, considering historical and current experiences seen by the Group, and expected future trends. Our point estimate was not materially different to that of managements estimate which allowed us to assess the accuracy and reasonableness of managements provision. Retirement Benefit Liability Key audit matter description How the matter was addressed in the audit The group and parent company has a retirement benefit liability of £5,772k at 31 December 2023 (2022: £5,493k) which is the largest item on the consolidated and parent balance sheet. As disclosed in the accounting policies, the retirement benefit liability is the present value of the defined benefit obligation less the fair value of the scheme assets. As disclosed in note 1 and note 23, the valuation of this obligation is based on a number of assumptions including the expectation of future changes in inflation, mortality, and discount tables. The amount recognised is based on a valuation undertaken by an actuary, who also provides the information relevant to the disclosures for inclusion in the financial statements, including an estimate of Guaranteed Minimum Pension (GMP) equalisation costs. The retirement benefit liability is highly sensitive to changes in respect of the inputs of the actuarial calculation. Because of the risk that small changes in the inputs could have a material impact on the financial statements, we considered a significant risk to exist and have therefore determined that the inventory provision is a key audit matter. In respect of the retirement benefit liability we: • Obtained and reviewed a copy of the IAS 19 actuarial valuation prepared by management’s actuary and undertook procedures to determine our ability to rely on their work. As part of this work, we utilised an auditor’s expert in the form of an independent actuary to assist us in assessing the assumptions and judgements used by management’s actuary. • Challenged management on the assumptions used by the actuary in preparing the IAS19 valuation and considering whether they were consistent with the instructions given by management. Our challenge included, where possible, comparing the key estimates and judgements to those used in actuarial valuations for other similar businesses. • Obtained evidence in respect of all key elements of the actuarial valuation, including the value of scheme assets, the defined benefit obligation, net interest expenses, benefit payments and employer contributions. • Reviewed the disclosures in the financial statements to assess whether they are consistent with the actuary’s report and the requirements of IAS 19 (the relevant financial reporting framework). 18 Annual Report & Audited Financial Statements | 2023 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 £84,000 (2022: £80,000) Group Parent company £56,000 (2022: £60,000) Basis for determining overall materiality 7.3% of profit before interest, depreciation, amortisation and one-off management restructuring costs. 7.3% of profit before interest, depreciation, amortisation and one-off management restructuring costs. Rationale for benchmark applied The adjusted measure has been selected on the basis that it is of the most relevance to the users of the financial statements and excludes the impact of management restructuring costs. The adjusted measure has been selected on the basis that it is of the most relevance to the users of the financial statements and excludes the impact of management restructuring costs. Performance materiality £63,000 (2022: £60,000) Basis for determining performance materiality 75% of overall materiality £42,000 (2022: £45,000) 75% of overall materiality Reporting of misstatements to the Audit Committee Misstatements in excess of £2,100 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. Misstatements in excess of £1,400 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. A specific performance materiality was applied to accruals balances for the group and parent company which was set at 50% of performance materiality being £31,500 and £21,000 respectively. This was a targeted response in relation to findings we identified in the previous year’s audit. An overview of the scope of our audit The group consists of 2 components, all of which are based in the UK. The coverage achieved by our audit procedures was: Number of components Revenue Total assets Profit before tax Full scope audit Specific audit procedures Total 2 - 2 100% - 100% 100% - 100% 100% - 100% Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included reviewing and evaluating management’s latest forecasts and plans, considering the appropriateness and sensitivity of the key assumptions, and reviewing the key terms of borrowing facilities. These forecasts are prepared in respect of the period to 31 December 2025. At 31 December 2023, the Group had cash and cash equivalent balances of £2,449k (2022: £2,243k) and net cash and cash equivalent balances of £205k (2022: £26k). Factoring in downside scenarios which take account of lower than forecast sales, management’s forecasts indicate a net positive cash position at the end of the forecast period. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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. 19 Annual Report & Audited Financial Statements | 2023 Independent Auditors’ Report to the Members of H C Slingsby plc (continued) 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. 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 set out on page 16, 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. The extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements, to perform audit procedures to help identify instances of non- compliance with other laws and regulations that may have a material effect on the financial statements, and to respond appropriately to identified or suspected non-compliance with laws and regulations identified during the audit. In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit. However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud. In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the audit engagement team: • • • obtained an understanding of the nature of the industry and sector, including the legal and regulatory framework that the group and parent company operate in and how the group and parent company are complying with the legal and regulatory framework; inquired of management, and those charged with governance, about their own identification and assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud; and discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where the financial statements may be susceptible to fraud. 20 Annual Report & Audited Financial Statements | 2023 The most significant laws and regulations were determined as follows: Legislation / Regulation Additional audit procedures performed by the Group audit engagement team included: IFRS/UK-adopted IAS and Companies Act 2006 • Review of the financial statement disclosures and testing to supporting documentation. • Completion of disclosure checklists to identify areas of non-compliance. Tax compliance regulations Inspection of advice received from external tax advisors where available. Inspection of correspondence with local tax authorities where available. • • • Consideration of whether any matter identified during the audit required reporting to an appropriate authority outside the entity. We have identified no indirect laws and regulations which we believe would have a material impact on the financial statements. The areas that we identified as being susceptible to material misstatement due to fraud were: Risk Audit procedures performed by the audit engagement team: Revenue recognition – Cut Off • Documenting and reconfirming our understanding of the processes, systems and controls in place relating to the revenue transaction cycle; • Considering the appropriateness of the revenue recognition accounting policy in the context of our understanding of the business and re-evaluated whether the revenue recognition policy is consistently applied to revenue transactions around the financial year end; and • Performing substantive revenue cut off testing on transactions around the year end to test whether sales have been recorded in the correct period based on the date that the risks and rewards of ownership transfer to the customer. Management override of controls • Testing the appropriateness of journal entries and other adjustments on risk criteria and comparing the identified entries to supporting documentation; • Assessing whether the judgements made in making accounting estimates are indicative of a • potential bias; and Evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. 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. 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. Andrew Allchin FCA (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 22 April 2024 21 Annual Report & Audited Financial Statements | 2023 Consolidated Income Statement For the year ended 31 December 2023 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Operating profit Finance income Finance costs Profit before taxation Taxation Profit for the year attributable to owners of the parent Basic and diluted weighted average earnings per share All profits of the group arise from continuing operations. Note 2 5 6 7 8 9 2023 £’000 22,642 (14,511) 8,131 (5,078) (2,423) 630 12 (285) 357 (124) 233 2022 £’000 21,564 (14,108) 7,456 (4,443) (2,386) 627 - (142) 485 (105) 380 22.2p 36.2p 22 Annual Report & Audited Financial Statements | 2023 Statement of Consolidated Comprehensive Income For the year ended 31 December 2023 Profit 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 (expense)/income for the year attributable to equity shareholders All total comprehensive income of the Group arise from continuing operations. Note 23 15 2023 £’000 233 (408) 102 (306) (73) 2022 £’000 380 2,235 (559) 1,676 2,056 23 Annual Report & Audited Financial Statements | 2023 Statement of Consolidated and Company Changes in Shareholders’ Equity For the year ended 31 December 2023 Group 1 January 2022 Profit for the year Other comprehensive income for the year Total comprehensive income for the year 1 January 2023 Profit for the year Other comprehensive income for the year Total comprehensive income for the year 31 December 2023 Company 1 January 2022 Profit for the year Other comprehensive income for the year Total comprehensive income for the year 1 January 2023 Profit for the year Other comprehensive income for the year Total comprehensive income for the year 31 December 2023 Share capital £’000 262 - - - 262 - - - 262 Share premium £’000 24 - - - 24 - - - 24 Retained earnings Total equity £’000 1,977 380 1,676 2,056 4,033 233 (306) (73) 3,960 £’000 2,263 380 1,676 2,056 4,319 233 (306) (73) 4,246 Share capital Share premium Retained earnings Total equity £’000 £’000 262 - - - 262 - - - 262 24 - - - 24 - - - 24 £’000 544 157 1,676 1,833 2,377 22 (306) (284) 2,093 £’000 830 157 1,676 1,833 2,663 22 (306) (284) 2,379 24 Annual Report & Audited Financial Statements | 2023 Consolidated Balance Sheet As at 31 December 2023 Assets Non-current assets Property, plant and equipment Other intangible assets Goodwill Deferred tax asset Current assets Inventories Trade and other receivables 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 Share Premium Retained earnings Total equity Note 2023 £’000 2022 £’000 12 13 13 15 16 17 18 19 20 20 23 15 24 24 24 5,355 293 700 1,443 7,791 5,418 249 700 1,373 7,740 2,643 2,683 2,961 2,962 2,449 8,053 2,243 7,888 (5,043) (5,007) (2) (21) - (20) (5,066) (5,027) 2,987 2,861 (92) (5,772) (668) 4,246 262 24 3,960 4,246 (113) (5,492) (677) 4,319 262 24 4,033 4,319 The financial statements on pages 22 to 53 were approved by the Board of Directors on 22 April 2024 and were signed on its behalf by: M. L. Morris Director H C Slingsby plc Registered Number: 00452716 25 Annual Report & Audited Financial Statements | 2023 Company Balance Sheet As at 31 December 2023 Assets Non-current assets Property, plant and equipment Intangible assets Investments in subsidiaries Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents Liabilities Current liabilities Trade and other payables Derivative financial liability Net current assets Non-current liabilities Retirement benefit obligation Deferred tax liabilities Net assets Capital and reserves Share capital Share premium Retained earnings Total equity Note 2023 £’000 2022 £’000 12 13 14 15 16 17 18 19 23 15 24 24 24 5,241 168 1,517 1,443 8,369 2,643 2,602 5,278 24 1,517 1,373 8,192 2,683 2,495 180 223 5,425 5,401 (5,000) (2) (5,002) 423 (5,772) (641) 2,379 262 24 2,093 2,379 (4,811) - (4,811) 590 (5,492) (627) 2,663 262 24 2,377 2,663 As permitted by Section 408 of the Companies Act 2006, the company has not published its own income statement. The profit of the Company for the financial year was £22,000 (2022: £157,000). The financial statements on pages 22 to 53 were approved by the Board of Directors on 22 April 2024 and were signed on its behalf by: M. L. Morris Director H C Slingsby plc Registered Number: 00452716 26 Annual Report & Audited Financial Statements | 2023 Consolidated Cash Flow Statement For the year ended 31 December 2023 Cash flows from operating activities Cash generated from/ (used in) operations Interest paid UK corporation tax paid Cash generated from/ (used in) operating activities Cash flows from investing activities Interest received 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 Increase in overdraft Net cash generated from / (used in) financing activities Net increase in cash and cash equivalents Opening cash and cash equivalents Closing cash and cash equivalents Note 12 5 13 20 2023 £’000 656 (1) (114) 541 12 (201) 23 (170) (336) (26) 27 1 206 2,243 2,449 2022 £’000 (27) - (49) (76) - (211) 24 (22) (209) (35) 564 529 244 1,999 2,243 Cash and cash equivalents included above is the gross value and does not included amounts due in relation to the bank overdraft of £2.24m (2022: £2.22m) in the values presented above. 27 Annual Report & Audited Financial Statements | 2023 Company Cash Flow Statement For the year ended 31 December 2023 Cash flows from operating activities Cash generated from/ (used in) from operations Interest paid UK corporation tax paid Cash generated from/ (used in) operating activities Cash flows from investing activities Interest received 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 Increase in overdraft Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents Opening cash and cash equivalents Closing cash and cash equivalents Note 12 5 13 2023 £’000 293 (1) (30) 262 12 (197) 23 (170) (332) 27 27 (43) 223 180 2022 £’000 (255) - - (255) - (209) 24 (22) (207) 564 564 102 121 223 Cash and cash equivalents included above is the gross value and does not included amounts due in relation to the bank overdraft of £2.24m (2022: £2.22m) in the values presented above. 28 Annual Report & Audited Financial Statements | 2023 Note to the Cash Flow Statements For the year ended 31 December 2023 Cash generated from operating activities Profit before tax Net finance costs Depreciation and amortisation Defined benefit pension scheme contributions paid Profit on sale of property, plant and equipment Decrease/(increase) in inventories Decrease/(increase) in trade and other receivables Increase/(decrease) in trade and other payables Cash generated from/ (used in) operating activities Group Company 2023 £’000 357 273 390 (405) (23) 40 1 23 656 2022 £’000 485 142 464 (352) (24) (353) (192) (197) (27) 2023 £’000 76 266 260 (405) (23) 40 (107) 186 293 2022 £’000 222 141 299 (352) (24) (353) (23) (165) (255) 29 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts 1. Accounting Policies Basis of Preparation H C Slingsby plc is a public limited company (limited by shares) with its ordinary shares traded on the AIM market of the London Stock Exchange. It is incorporated and domiciled in the United Kingdom with its registered office at Otley Road Baildon, West Yorkshire BD17 7LW. The company is registered in England and Wales with a registered number of 452716. 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 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 UK adopted international accounting standards. 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 directors have prepared trading and cash flow forecasts for the Group for the period to 31 December 2025, 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 Board’s conclusion in this regard is strengthened by the Group’s net cash position at 31 December 2023 of £0.21m (2022: £0.03m) and availability of financing. The overdraft element of the Group’s banking facilities is undergoing its annual renewal at the level of £0.1m. Whilst the Company’s overdraft at 31 December 2023 was £2.24m, the Group has a mechanism whereby it can consolidate cash holdings to ensure that it stays within the agreed overdraft facility. The Directors consider this to be adequate given the Group’s cash and other financing options particularly the Group’s £2m invoice discounting facility. The financial statements have therefore been prepared on a going concern basis which assumes the Group will continue in operation for the foreseeable future, as a minimum for a period of at least 12 months from the date of approval of the financial statements New accounting standards and interpretations The Group and Company financial statements have been prepared in accordance with UK Adopted International Accounting Standards and IFRS Interpretations Committee (IFRIC) effective as at 31 December 2023. The Group and Company have not chosen to adopt any amendments or revised standards early. Where applicable, the following amendments to accounting standards were adopted by the Group on the effective date during the current year, but have not had any material impact on the amounts reported in these financial statements. The Group has applied these standards in the preparation of the financial statements and has not adopted any new or amended standards early. • Amendments to IFRS 17 – Insurance contracts • Amendments to IFRS 17 – Initial application of IFRS 17 and IFRS 9 – comparative information • Amendments to IAS 1 and IFRS practice statement 2 – Disclosure of accounting policies • Amendments to IAS 8 – Definition of accounting estimates • Amendments to IAS 12 – Deferred tax related assets and liabilities arising from a single transaction • Amendments to IAS 12 – International tax reform – pillar two model rules Standards issued but not yet effective Any new or amended Accounting Standards or interpretations that are not yet mandatory (and in some cases, had not yet been endorsed by the UK Endorsement Board) have not been early adopted by the Group for the year ended 31 December 2023. They are as follows: • Amendments to IAS 1 – Classification of liabilities as current or non-current • Amendments to IAS 1 – Non-current liabilities with covenants • Amendments to IFRS 16 – Lease liability in a sale and leaseback • Amendments to IAS 7 and IFRS 7 – Supplier finance arrangements • Amendments to IAS 21 – Lack of exchangeability • Amendments to IFRS 10 and IAS 28 – Sale or contribution of assets between an investor and its associate or joint venture The directors do not expect that the adoption of these Standards or Interpretations in future periods will have a material impact on the financial statements of the Company or the Group. 30 Annual Report & Audited Financial Statements | 2023 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 2023 using the acquisition method of accounting. Subsidiaries are entities over which the Group has the power to govern the financial and operating policies and is exposed to, or has rights to, variable returns. 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 entity. 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. Estimates and judgements with significant effect on the financial statements: • Impairment of goodwill and intangible assets. The Directors review whether goodwill is impaired on an annual basis 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 13 for further disclosure). As disclosed in note 13, the results for the year ended 31 December 2023 include an impairment charge of £nil (2022: £nil). • 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 £5.8m (2022: £5.5m). This movement was due to the impact of changes in actuarial assumptions. See note 23 for further information. • 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, its age, as well as applying assumptions around anticipated saleability of finished goods and future usage of raw materials. The inventory provision at the reporting date amounted to £891,000 (2022: £773,000) (see note 16 for the net carrying amount of inventories and details of the provisions made). • 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 judgements 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 2023 the group has recognised deferred tax assets of £1,443,000 (2022: £1,373,000) and deferred tax liabilities of £668,000 (2022: £677,000). See note 15 for disclosure of the group’s deferred tax assets and liabilities. 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 from the sale of goods is recognised when the goods are dispatched to the customer which is deemed to be the point at which the customer obtains control of the goods. Revenue relating to contract work is recognised as contract activity progresses and the right to consideration is earned. Contract revenue relates to the design, supply and installation of storage systems/equipment, partitioning and mezzanine floors. Contracts are usually less than six months in length and, therefore, the level of accrued and deferred income (presented in other debtors and other creditors respectively) is immaterial to the financial statements and has not been separately disclosed. The Group sells additional service and maintenance on some of the products it sells. Revenue in relation to this is recognised on the completion of such service being provided. Such tasks are completed in a matter of days, resulting in no accrued or deferred income at the year end. 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. 31 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 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 the income statement. 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 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 the income statement. 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 which is GBP). The consolidated financial statements are presented in GBP which is the Group’s presentational 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. Intangible assets purchased through an acquisition are measured at fair value at inception. This relates to the brand and domain names and customer lists acquired through the purchase of ESE Direct Limited. 32 Annual Report & Audited Financial Statements | 2023 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% per annum. 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. 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 and depreciation 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 substantively enacted, by the balance sheet date, and are expected to apply when the related deferred taxation asset is realised or deferred taxation liability is settled. Deferred taxation assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Inventories Inventories which include raw materials and work in progress, finished goods and goods for resale are stated at the lower of cost and net realisable value. Raw materials are valued on a first in-first out basis. The cost of work in progress and finished goods includes an appropriate proportion of production overheads. Net realisable value is based on estimated selling price less additional costs to completion or disposal. Allowance is made for obsolete, defective and slow-moving items based on annual usage and age. Financial assets other than derivatives The Group classifies its financial assets as subsequently measured at amortised cost under IFRS 9 if they meet 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 from 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. An expected credit loss model broadens the information that the Group 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 excludes amounts in respect of the overdraft. 33 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 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 and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings Borrowings are recognised at fair value and subsequently measured at amortised cost using the effective interest method. Borrowings relate to the overdraft facility which is presented in trade and other payables. Overdraft balances are presented gross from cash balances as the Directors believe this best reflects the financing of the Group’s activities. 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. 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. 34 Annual Report & Audited Financial Statements | 2023 3. Employee Information Staff costs Wages and salaries Social security costs Defined contribution pension scheme and life assurance costs Group 2023 £’000 3,339 305 99 2022 £’000 2,982 297 96 Company 2023 £’000 2,834 259 84 2022 £’000 2,491 248 81 3,743 3,375 3,177 2,820 The average monthly number of persons, including directors, employed during the year was: Group Company 2023 Number 2022 Number 2023 Number 2022 Number Selling and distribution Administration 92 18 110 92 19 111 75 16 91 Items in relation to pension costs reported anywhere other than operating costs are excluded from this disclosure. 4. Directors’ Remuneration (including pension contributions) Dominic Slingsby Morgan Morris Andrew Kitchingman Highest paid Director: Aggregate emoluments Defined contribution accrued pension at end of year 2023 £’000 113 131 10 254 128 3 75 17 92 2022 £’000 112 131 - 243 128 3 Morgan Morris accrued benefits under a defined contribution pension scheme amounting to £3,343 (2022: £3,319). Dominic Slingsby and Andrew Kitchingman accrued no such benefits in 2023 or 2022. During the year ended 31 December 2023, the directors did not receive any other emoluments, compensation or cash or non-cash benefits (2022: £nil). The Company does not have a share option or other long term incentive plan. 35 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 5. Operating Profit Operating profit is stated after charging/(crediting): Profit on disposal of property, plant and equipment Depreciation on property, plant and equipment Amortisation of intangible assets Grant released 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 6. Finance Income Bank interest receivable 7. Finance Costs Interest payable on bank borrowings Interest payable on lease liabilities Net retirement benefit obligation finance costs (note 23) 2023 £’000 (23) 264 126 (30) 17 52 10 - - 62 2023 £’000 12 2023 £’000 - 8 277 285 2022 £’000 (24) 305 159 - (19) 45 10 - - 55 2022 £’000 - 2022 £’000 - 1 141 142 36 Annual Report & Audited Financial Statements | 2023 8. Taxation Current tax UK corporation tax: – current year – prior year adjustment Deferred tax: UK deferred tax: – origination and reversal of temporary differences – adjustments due to change of tax rate Total taxation charge Factors affecting the tax charge for the year: 2023 £’000 2022 £’000 91 11 102 19 3 22 124 96 - 96 6 3 9 105 The tax on the Group’s profit 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 before taxation Tax at the UK corporation tax rate of 23.52% (2022: 19%) (Income) not taxable/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 2023 £’000 357 84 4 3 11 22 124 2022 £’000 485 92 22 3 (7) (5) 105 The Group profits for this accounting period are taxed at an effective rate of 23.52% (2022: 19%). Deferred tax assets and liabilities are measured at a rate of 25% (2022: 25%) as at 31 December 2023. In addition to the amounts charged to the income statement, £102k (2022: £559k charge) has been credited directly to other comprehensive income in relation to actuarial differences on the retirement benefit liability. 9. Earnings Per Share Basic earnings per share is based upon a profit of £233,000 (2022: £380,000) and on 1,050,000 (2022: 1,050,000) weighted average ordinary shares in issue during the year. There is no difference between basic earnings per share and diluted earnings per share for both years as there are no potentially dilutive shares in issue. 10. 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 profit for the year was £22,000 (2022: £157,000) and total comprehensive expense £284,000 (2022: total comprehensive income £1,833,000). 37 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 11. Dividends Interim dividend paid for the financial year of 0.0p (2022: 0.0p) Final dividend paid for the financial year of 0.0p (2022: 0.0p) 12. Property, Plant and Equipment Group Cost 1 January 2022 Additions Lease modifications Disposals 1 January 2023 Additions Disposals 31 December 2023 Accumulated depreciation and impairment 1 January 2022 Charge for the year Lease modifications Disposals 1 January 2023 Charge for the year Disposals 31 December 2023 Net book value At 31 December 2023 At 31 December 2022 At 31 December 2021 Short Leasehold Property £’000 119 – - (81) 38 – (17) 21 93 24 - (81) 36 2 (17) 21 - 2 26 2023 £’000 - - - Equipment Right-of- use assets Freehold land and buildings £’000 6,671 – - – 6,671 – – £’000 2,421 211 - (140) 2,492 201 (78) 6,671 2,615 1,652 106 - – 1,758 105 – 2,119 143 - (140) 2,122 134 (78) 1,863 2,178 4,808 4,913 5,019 437 370 302 £’000 128 – 34 (27) 135 - - 135 98 32 (101) (27) 2 23 - 25 110 133 30 2022 £’000 - - - Total £’000 9,339 211 34 (248) 9,336 201 (95) 9,442 3,962 305 (101) (248) 3,918 264 (95) 4,087 5,355 5,418 5,377 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. The carrying amount and depreciation of right-of-use assets all relate to property leases. Depreciation is charged to administrative expenses in the Income Statement. 38 Annual Report & Audited Financial Statements | 2023 Company Cost 1 January 2022 Additions Disposals 1 January 2023 Additions Disposals 31 December 2023 Accumulated depreciation and impairment 1 January 2022 Charge for the year Disposals 1 January 2023 Charge for the year Disposals 31 December 2023 Net book amount At 31 December 2023 At 31 December 2022 At 31 December 2021 Depreciation is charged to administrative expenses in the Income Statement. Freehold land and buildings £’000 6,671 - – 6,671 – – Equipment Total £’000 2,165 209 (140) 2,234 197 (57) £’000 8,836 209 (140) 8,905 197 (57) 6,671 2,374 9,045 1,652 106 – 1,758 105 – 1,875 134 (140) 1,869 129 (57) 3,527 240 (140) 3,627 234 (57) 1,863 1,941 3,804 4,808 4,913 5,019 433 365 290 5,241 5,278 5,309 39 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 13. Intangible Assets Cost 1 January 2022 Additions Disposals 1 January 2023 Additions Disposals 31 December 2023 Accumulated amortisation 1 January 2022 Charge for the year Disposals 1 January 2023 Charge for the year Disposals 31 December 2023 Net book value At 31 December 2023 At 31 December 2022 At 31 December 2021 Group Goodwill Group IT Software and Trademarks Brand and Domain Names and Customer Lists Company TOTAL IT Software £’000 £’000 £’000 £’000 £’000 2,409 1,000 997 1,997 - - - - 2,409 1,000 - - - - 22 (95) 924 170 - 2,409 1,000 1,094 1,709 - - 1,709 - - 1709 700 700 700 675 100 - 775 100 - 875 125 225 325 936 59 (95) 900 26 - 926 168 24 61 22 (95) 1,924 170 - 2,094 1,611 159 (95) 1,675 126 - 1,801 293 249 386 958 22 (95) 885 170 - 1,055 897 59 (95) 861 26 - 887 168 24 61 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 expected future cash flows 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 followed by a further non-cash impairment during 2019 of £1,034,000 such that goodwill relating to the ESE acquisition is £700,000. The carrying amount of the ESE Direct Limited CGU has been tested for impairment using a discounted cash flow model based on the following set of assumptions which have not changed from those used in the prior year other than where shown below: - Most recent budgets /forecasts for the next 5 years - - Extrapolation of expected future cash flows using a terminal growth rate of 2% Sales increase of 7% and then 2% growth over the period based on forecast performance - Capital expenditure of £106,000 in 2024, £20,000 in 2025 and then £5,000 per annum thereafter per annum based on forecasts. In 2022 capital expenditure was assumed to be £5,000. 40 Annual Report & Audited Financial Statements | 2023 - Gross margins projected based on recent trends - Discount rate (derived from pre-tax weighted average cost of capital “WACC”) of 20% (2022: 15%). The WACC was increased to relfects the increase in interest rates. The Directors performed sensitivity analysis on assumptions concerning sales growth assuming no growth over the period. There were no other changes to the sensitivity analysis other than the movement in sales growth with all those assumptions above being included within the sensitivity analysis. On this sensitised basis, there was sufficient headroom for the Director’s to consider that there was no impairment charge required. 14. 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 followed by a further impairment of £1.1m in 2019 such that the net book value of the investment was £1.52m. 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 Dormant Dormant Dormant Dormant Dormant 15. 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 Short term temporary differences Intangible asset Group 2023 £’000 2022 £’000 Company 2023 £’000 2022 £’000 1,443 1,373 1,443 1,373 (649) 14 (33) (668) (634) 13 (56) (677) (654) 13 - (641) (640) 13 - (627) 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 23), it is difficult to forecast the movement in the related deferred tax asset. The deferred tax asset has been recognised as it will be realised through the settlement of the pension liability. 41 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 15. Deferred Tax (continued) Movements in deferred tax assets/(liabilities) are as follows: Group 1 January 2022 (Charged)/credited to income statement Credited to other comprehensive income 1 January 2023 (Charged)/credited to income statement Credited to other comprehensive income 31 December 2023 Company 1 January 2022 (Charged)/credited to income statement Credited to other comprehensive income 1 January 2023 Charged to income statement Credited to other comprehensive income 31 December 2023 16. Inventories Raw materials and work in progress Finished goods and goods for resale Pension liability Tax losses Accelerated capital allowances Intangible assets £’000 £’000 £’000 £’000 1,985 (53) (559) 1,373 (32) 102 1,443 9 4 – 13 1 – 14 (649) 15 - (634) (15) - (649) (82) 26 - (56) 23 - (33) Pension liability Tax losses Accelerated capital allowances Total £’000 1,263 (8) (559) 696 (23) 102 775 Total £’000 £’000 £’000 £’000 1,985 (53) (559) 1,373 (32) 102 1,443 9 4 – 13 - – 13 (653) 13 - (640) (14) - (654) Group 2023 £’000 272 2,371 2,643 2022 £’000 308 2,375 2,683 Company 2023 £’000 272 2,371 2,643 1,341 (36) (559) 746 (46) 102 802 2022 £’000 308 2,375 2,683 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 £187,000 (2022: £122,000). The cost of inventories recognised as an expense and included in the Group’s cost of sales was £15,440,000 (2022: £15,143,000) and £10,485,000 (2022: £10,057,000) for the Company. The provision for obsolete inventory at the year-end for the Group and Company is £891,000 (2022: £773,000). 42 Annual Report & Audited Financial Statements | 2023 17. Trade and Other Receivables Trade receivables Receivables from subsidiary Prepayments Group Company 2023 £’000 2,565 – 396 2,961 2022 £’000 2,589 – 373 2,962 2023 £’000 2,114 125 363 2,602 2022 £’000 2,022 130 343 2,495 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 allowances. 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 2023 Expected credit loss Unused provision reversed Receivables written off At 31 December 2023 Group 2023 £’000 18 24 (1) (29) 12 2022 £’000 7 24 (4) (9) 18 Company 2023 £’000 18 9 (1) (19) 7 2022 £’000 3 23 (3) (5) 18 Receivables due from subsidiary were not impaired at 31 December 2023 and 31 December 2022 as the subsidiary was profit and cash generative. The carrying amounts of the group’s and company’s receivables are denominated in the following currencies: Pound sterling Euro Group Company 2023 £’000 2,433 132 2,565 2022 £’000 2,454 135 2,589 2023 £’000 2,107 132 2,239 2022 £’000 2,017 135 2,152 43 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 18. Trade and Other Payables Trade payables Payables to subsidiaries Corporation tax payable Other taxation and social security payable Other payables Accruals Overdraft Group 2023 £’000 1,744 - 91 399 6 559 2,244 5,043 2022 £’000 1,850 - 103 398 6 433 2,217 5,007 Company 2023 £’000 1,340 608 8 327 3 470 2,244 5,000 2022 £’000 1,365 608 29 301 3 288 2,217 4,811 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. Group and Company borrowings include overdraft and leases. The overdraft amounting to £2,244,000 (2022: £2,217,000) is repayable within one year. 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. 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. The overdraft element of the Group’s banking facilities expires on the 30 April 2024, is repayable on demand and is in the process of being renewed at a level of £0.1m. The directors consider this to be adequate given the Group’s cash and other available financing. The debtor finance facility remains unaffected. The debtor finance facility is a total of £2m (subject to suitable debt being available) and the overdraft facility (net of group cash) is the sum of £100,000. 19. Derivative Financial Instruments Forward foreign currency contracts and options Group and Company Assets 2023 £’000 - 2022 £’000 - Liabilities 2023 £’000 2 2022 £’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 2024. They have been valued using year end market data. 44 Annual Report & Audited Financial Statements | 2023 20. Leases and financial commitments The maturity of the lease obligations is set out below: Lease obligations Current lease liabilities Non-current lease liabilities At 31 December 2023 Maturity analysis of leases Less than 6 months 6 months to 1 year 1 year to 2 years 2 years to 6 years Group 2023 £’000 21 92 113 Group 2023 £’000 13 13 26 76 128 2022 £’000 20 113 133 2022 £’000 13 13 26 102 154 Company 2023 £’000 - - - Company 2023 £’000 - - - - - 2022 £’000 - - - 2022 £’000 - - - - - The Group agreed a new lease regarding premises for ESE which had expired in November 2022. The new lease commenced on 16 March 2023 and expires on 16 March 2029 with a break clause at 17 March 2026. The company held over the lease from expiry on 30 November 2022, and the lease has been deemed to commence on 1 December 2022 within these financial statements. The total cash outflow for leases during the year was £26,000 (2022 - £35,000). The total lease liability at 31 December 2023 is £113,423 which has been recognised as a right of use asset under note 12. £20,919 is included in creditors due within one year and £92,504 is included in creditors due after more than one year. Depreciation of £22,494 has been charged in relation to the right of use asset within 2023 and recognised as an administrative expense. Interest payable on the lease of £6,077 has been recognised as a finance cost. 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 (2022 - £40,000). 45 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 21. 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 (note 17) Receivables from subsidiary (note 17) Forward foreign currency contracts and options (note 19) Cash and cash equivalents Financial liabilities Debt financing and overdraft (note 18) Payable to subsidiary (note 18) Trade payables (note 18) Accruals (note 18) Other payables (note 18) Lease obligations (note 20) Forward foreign currency contracts and options (note 19) Group 2023 £’000 2022 £’000 Company 2023 £’000 2022 £’000 2,565 2,589 2,114 2,022 - - 2,449 5,014 2023 £’000 2,244 - 1,744 559 6 113 2 - - 2,243 4,832 2022 £’000 2,217 - 1,850 433 6 133 - 125 - 180 2,419 2023 £’000 2,244 608 1,340 470 3 - 2 130 - 223 2,375 2022 £’000 2,217 608 1,365 288 3 - - 4,668 4,639 4,667 4,481 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 Group made a foreign exchange loss of £17,000 in 2023 (2022 - £19,000 gain). The carrying value of the group’s foreign currency denominated financial assets and monetary liabilities at the reporting date are as follows: Euros Dollars Assets Liabilities 2023 £’000 305 3 2022 £’000 207 116 2023 £’000 1 3 2022 £’000 1 - 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 continue to increase, the Group and Company’s interest cost would rise. The Group does not use interest rate hedges. The interest rates applicable to the group’s debtor finance and overdraft facilities are disclosed in note 18. 46 Annual Report & Audited Financial Statements | 2023 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 note 18. 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 17 above. There are no significant concentrations of credit risk. The maximum exposure of the group at the end of the reporting period is the carrying value of financial assets totalling £5,014,000 (2022: £4,832,000). 22. 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 2023, the gearing ratio was 0% (2022:0%). 23. Pension Commitments Group and Company Retirement Benefit Obligations At 31 December 2023 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 2024 fiscal year is £150,000. 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 2023 and a shortfall of £7.2m against the Trustee’s funding objective was identified. Differences between the shortfall in the actuarial valuation and the IAS 19 valuation presented within this report are due to differences within the valuation method. The Company has agreed to pay contributions of £150,000 in 2024, £350,000 in 2025, £400,000 in 2026 and £450,000 in 2027. Thereafter, contributions increase by 3% per annum to remove the shortfall over 20 years. Due to the Group’s cash generation an additional payment of £14,500 is anticipated in respect of 2023 which will be paid during 2024. The weighted average duration of the defined benefit obligation is 16 years. In addition to the assets and liabilities which are stated below, the scheme has insured pensioner policies which have not been included within the valuation in these financial statements. This is because the quantum of these policies is not deemed significant against the overall liability. Investment strategy Approximately 45% (2022: 44%) of the Scheme’s assets are held in equity type assets, and 55% (2022: 56%) are held in long term fixed interest and inflation linked securities. 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 47 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 23. Pension Commitments (continued) level of investment risk by investing more in assets that better match the liabilities. In essence this would see a gradual sale of equities and the purchase of gilts and corporate bonds. The company is of the view that, due to the long term nature of the Scheme’s liabilities, it is appropriate to continue with a degree of equity investment so as to manage the Scheme’s long term liabilities efficiently. The Trustee has derived its investment strategy, in consultation with the company, so as to reflect the Scheme’s long term liabilities. At the current time approximately 55% 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. Other risks Actions taken by the local regulator, or changes to 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 0.5% would result in a decrease or increase of approximately £1.2m 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 £0.3m 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 2023 would be 20.8 (22.8) years and the future life expectancy from age 65 for a male (female) non-pensioner member currently aged 45 of 22.1 (24.3) 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 £0.4m. 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. The Company’s policy is to recognise actuarial gains and losses immediately in full each year. A full actuarial valuation was carried out as at 1 January 2023 by a qualified independent actuary. 48 Annual Report & Audited Financial Statements | 2023 Reconciliation of the present value of the defined benefit obligation Present value of defined benefit obligation at beginning of year Interest cost Effect of changes in financial assumptions Benefits paid Present value of defined benefit obligation at end of year Reconciliation of fair value of scheme assets Fair value of scheme assets at start of year Interest income Return on scheme assets Contributions by the Company Benefits paid Fair value of scheme assets at end of year Amounts to be recognised in the balance sheet Present value of funded obligation Fair value of scheme assets Net liability in balance sheet Amounts to be recognised in the income statement Interest on obligation Interest income on scheme assets Total expense 2023 £’000 14,735 726 322 (727) 15,056 2023 £’000 9,243 449 (86) 405 (727) 9,284 2023 £’000 15,056 (9,284) 5,772 2023 £’000 726 (449) 277 2022 £’000 25,061 445 (10,044) (727) 14,735 2022 £’000 17,123 304 (7,809) 352 (727) 9,243 2022 £’000 14,735 (9,243) 5,492 2022 £’000 445 (304) 141 49 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 23. Pension Commitments (continued) Total amount recognised in the statement of consolidated income (SOCI) Actuarial loss/(gain) Actuarial loss/(gain) recognised in (SOCI) Pension cost Defined benefit scheme net interest charge Defined contribution scheme Scheme assets Equities Gilts and bonds Total scheme assets Expected rate of return on scheme assets 2023 £’000 408 408 2023 £’000 277 81 358 2022 % 44 56 100 2022 £’000 (2,235) (2,235) 2022 £’000 141 78 219 2022 £’000 4,081 5,162 9,243 4.95% 2023 % 45 55 100 2023 £’000 4,232 5,053 9,285 4.75% At 31 December 2023 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. There are no Company related investments included in the fair value of assets included above. 50 Annual Report & Audited Financial Statements | 2023 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 2023 4.75% 4.75% 3.00% 2.55% 0.00% 3.00% 4.00% 4.20% 85.8 87.8 87.1 89.3 2022 4.95% 4.95% 3.10% 2.60% 0.00% 3.10% 4.00% 4.20% 86.4 88.7 87.7 90.2 25% of pension at age 65 at a rate of 15.0:1 25% of pension at age 65 at a rate of 15.0:1 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 120% has been applied to the notes under the standard tables. An allowance for future improvements has been made in line with the CMI 2022 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 £66,000 (2022: £63,000) 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 £15,000 (2022: £15,000) have been charged to operating profit. At 31 December 2023, unpaid pension contributions to the Slingsby scheme were £14,209 (2022: £13,478). The respective amount for the ESE scheme was £2,774 (2022: £2,769). 51 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) 24. Share Capital and Reserves Share Capital Allotted, called up and fully paid Ordinary shares of 25p 2023 Number 2023 £’000 2022 Number 2022 £’000 1,050,000 262 1,050,000 262 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. Reserves The Share Premium reserve represents consideration paid in excess of the nominal value of shares allotted, net of the costs of issue. Retained earnings represents all current and prior period retained profits and other comprehensive income. 25. Related Party Transactions Key Management Key management personnel comprises of the Group’s Executive Directors who served during the year. Their remuneration (net of employer’s national insurance costs) is set out in note 4. The total cost including employer’s national insurance costs in respect of Dominic Slingsby would be £126,000 (2022: £125,000) which includes £0 (2022: £0) of pension contributions and in respect of Morgan Morris £147,000 (2022: £147,000) which includes £3,343 (2022: £3,319) of pension contributions. The Group’s Executive Directors made purchases from the Group during the year. Morgan Morris made purchases of £1,106 (2022: £969) Dominic Slingsby made purchases of £349 (2022: £0). All transactions were made under the Group’s usual terms of sale. Other Related Party Transactions There were no other related party transactions to disclose. The company has taken advantage of the exemption not to disclose transactions with Group companies. 52 Annual Report & Audited Financial Statements | 2023 26. Movement in liabilities arising from financing activities Group Bank overdraft (note 18) Debt financing (note 18) Lease obligations (note 20) Cash and cash equivalents Net (debt)/cash Company Bank overdraft (note 18) Debt financing (note 18) Cash and cash equivalents Net debt At 1 January 2023 £’000 (2,217) - (133) 2,243 (107) At 1 January 2023 £’000 (2,217) - 223 (1,994) Cashflow At 31 December 2023 £’000 £’000 (27) - 20 206 199 (2,244) - (113) 2,449 92 Cashflow At 31 December 2023 £’000 £’000 (27) - (43) (70) (2,244) - 180 (2,064) 27. Post Balance Sheet Event On 11 March 2024, Dominic Slingsby stepped down from the Board. Dominic remains an employee of the Group until his retirement on 30 June 2024. As part of the Board change and Dominic’s retirement, in addition to payment in relation to his 12 month notice period, the Company has agreed with Dominic that he shall receive a payment of £60,000 and non-cash benefits (principally in relation to the keeping of a Company car) of a value of £15,500 from the Company under an employment settlement agreement 53 Annual Report & Audited Financial Statements | 2023 Notes to the Accounts (continued) Five Year Summary Income Statement Turnover Gross profit Operating profit before exceptional item Exceptional item Profit/(loss) before tax Profit/(loss) for the financial year 2023 £’000 22,642 8,131 630 - 357 233 2022 £’000 21,564 7,456 627 - 485 380 2021 £’000 19,824 6,645 410 530 822 567 Earnings per share – basic and diluted 22.2p 36.2p 54.0p Dividend Per Ordinary Share*: – Interim – Final Cash Flow Statement 0.0p 0.0p 0.0p 0.0p 0.0p 0.0p 2020 £’000 21,806 7,612 1.263 - 1,109 946 92.3p 0.0p 0.0p 2019 £’000 19,568 6,743 446 2,726 2,887 2,335 233.5p 0.0p 0.0p Cash (used in)/generated from operating activities 541 (76) 182 1.540 404 Balance Sheet Net current assets Net assets Pension deficit (net of deferred tax asset) Net cash/(debt) excluding leases Cash and cash equivalents 2,987 4,246 (4,329) 205 2,449 2,861 4,319 (4,119) 26 2,243 2,475 2,263 (5,953) 346 1,999 2,142 1,208 (6,622) 275 1,781 1,044 1,671 (5,443) (1,145) 1,278 * 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. 54 Annual Report & Audited Financial Statements | 2023 Notice of Annual General Meeting Notice is given that the seventy sixth 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 2024 at 10am to consider and, if thought fit, pass the resolutions as set out below. as set out below. Resolutions 1 to 6 will be proposed as ordinary resolutions and resolutions 7 to 9 as special resolutions. Ordinary resolutions: 1. To receive the Company’s annual accounts for the financial year ended 31 December 2023 together with the Directors’ reports and auditor’s report on those accounts. 2. To elect as a Director, Andrew Kitchingman in accordance with the Company’s articles of association. 3. To re-elect as a Director, Morgan Morris who retires from the Board in accordance with the Company’s articles of association. 4. To reappoint RSM UK Audit LLP as auditors of the Company to hold office until the end of the next annual general meeting at which accounts are laid before the Company. 5. To authorise the Directors of the Company to determine the remuneration of the auditors. 6. 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 £87,500; and (b) comprising equity securities up to a nominal amount of £175,000 (including within such limit any equity securities issued under paragraph (a) above) in connection with an offer by way of a rights issue, open offer or otherwise: (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: 7. Subject to the passing of 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 6 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 6, by way of a rights and other pre-emptive issues): (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 6 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 7) of equity securities up to an aggregate nominal value equal to £26,250; 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. 55 Annual Report & Audited Financial Statements | 2023 Notice of Annual General Meeting (continued) 8. Subject to the passing of resolutions 6 and 7, and in addition to any authority granted under resolution 7 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 6 and/or where the allotment is treated as an allotment of equity securities under section 560(2)(b) of the Act, in either case as if section 561(1) of the Act did not apply to such allotment provided that such authority shall be: (a) limited to the allotment of equity securities up to an aggregate nominal amount of £26,250; and (b) used only for the purpose of financing (or refinance if the authority is to be used within 12 months after the original transaction) a transaction which the Directors determine to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this notice provided that such power shall (unless previously renewed, varied or revoked by the Company in general meeting) expire on the conclusion of the next Annual General Meeting of the Company after the passing of this resolution or, if earlier, on the date falling 15 months from the date of the passing of this resolution, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. measures (as applicable and as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019/310); (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 (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 9. 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: M.L. Morris Company Secretary 22 April 2024 (a) (b) (c) the maximum aggregate number of Ordinary Shares authorised to be purchased is 105,000 (representing approximately 10 per cent. of the Company’s issued share capital as at 8 May 2024); 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 AIM Appendix of 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 56 Annual Report & Audited Financial Statements | 2023 Notes to the Notice of Annual General Meeting Entitlement to attend and vote 1. The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the register of members of the Company as at close of business on 17 June 2024 (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. 3. You can vote either: • via the Link Investor Centre, a free app for smartphone and tablet provided by Link Group (the company’s registrar). It allows you to securely manage and monitor your shareholdings in real time, take part in online voting, keep your details up to date, access a range of information including payment history and much more. The app is available to download on both the Apple App Store and Google Play, or by scanning the relevant QR code below. Alternatively, you may access the Link Investor Centre via a web browser at: https://investorcentre.linkgroup.co.uk/Login/Login; • • if you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www. proxymity.io. Your proxy must be lodged by 10 am on 17 June 2024 in order to be considered valid or, if the meeting is adjourned, by the time which is 48 hours before the time of the adjourned meeting. Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. An electronic proxy appointment via the Proxymity platform may be revoked completely by sending an authenticated message via the platform instructing the removal of your proxy vote. You may request a hard copy form of proxy directly from the registrars, Link Group, by email at shareholderenquiries@linkgroup.co.uk or on Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. 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 Group at PXS 1, Central Square, 29 Wellington Street, Leeds, LS1 4DL by 10 am on 17 June 2024. Completion of the form of proxy or appointment or a proxy through CREST or Proxymity will not prevent a member from attending and voting in person. Unless otherwise indicated on the form of proxy, CREST, Proxymity or any other electronic voting instruction, the proxy will vote as they think fit or, at their discretion, withhold from voting. 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. 4. 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. 57 Annual Report & Audited Financial Statements | 2023 Notes to the Notice of Annual General Meeting (continued) 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 8 May 2024 (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 1,050,000 Ordinary Shares of 25 pence each, carrying one vote each. No Ordinary Shares are held by the Company in treasury. Therefore, the total voting rights in the Company as at 8 May 2024 are 1,050,000. 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). 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. 6. 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 & International Limited’s specifications and must contain the information required for such instructions, as described 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 2024. 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 & International 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. 58 Annual Report & Audited Financial Statements | 2023 Explanatory Notes to Resolutions 6, 7, 8 and 9 Resolution 6 – 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 £87,500 (representing 350,000 Ordinary Shares). This amount represents approximately 33.3% of the issued Ordinary Share capital of the Company as at the ‘Latest Practicable Date’. Shareholders are reminded of the latest Investment Association Share Capital Management Guidelines published in February 2023 (“IA Guidelines”), which updated the previous guidance to incorporate all fully pre-emptive offers, not just fully pre-emptive rights issues, in respect of the authority to allot a further one third of the issued share capital of the Company. Accordingly, in line with the IA Guidelines, the Board is seeking this authority in order to provide flexibility to the Company. 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 an offer by way of rights issue, open offer or otherwise to existing shareholders in proportion (as nearly as may be practicable) to their existing holdings, up to an aggregate nominal amount of £175,000 (representing 700,000 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. The authority and power pursuant to resolution 6 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 7 and 8 – 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 7 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 £26,250 (representing 105,000 Ordinary Shares). This aggregate nominal amount represents 10% of the issued Ordinary Share capital of the Company as at the Latest Practicable Date and could be used for any purpose. This disapplication authority is in line with institutional shareholder guidance, and in particular, with the Pre-Emption Group’s Statement of Principles (the “Principles”) revised in November 2022. The Principles allow the authority for an issue of shares for cash otherwise than in connection with a pre-emptive offer to be increased so that the non-pre-emptive issue of shares represents: (I) no more than 10% of the Company’s issued share capital, whether or not in connection with an acquisition or specified capital investment; and (II) no more than an additional 10% of the Company’s issued share capital, provided that it is intended to be used only in connection with the financing (or refinancing, if the authority is to be used within 12 months after the original transaction) of an acquisition or specified capital investment which is announced contemporaneously with the allotment or which has taken place in the preceding 12 month period and is disclosed in the announcement of the issue. Resolution 8 gives the Directors the additional authority, as described in (ii) above, to allot equity securities for cash without first being required to offer such shares to the existing shareholders in proportion to their existing shareholdings. The disapplication of pre-emption rights in respect of a further 10% of the Company’s issued share capital, in addition to the authority proposed to be granted pursuant to resolution 7 reflects institutional shareholder guidance and the Principles. This authority would be limited to the allotment of equity securities for cash up to an additional aggregate nominal amount of £26,250 (representing 105,000 Ordinary Shares). This aggregate nominal amount represents 10% 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 7 and 8 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 7 and 8 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 9 — 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 59 Annual Report & Audited Financial Statements | 2023 Notes to the Notice of Annual General Meeting (continued) 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 9 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. 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 9 in the Notice of Annual General Meeting. The proposed new general authority will be limited, by the terms of resolution 9 in the Notice of Annual General Meeting, to purchases of up to 105,000 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) (as applicable and as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019/310). 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. 60 Annual Report & Audited Financial Statements | 2023 Notes 61 Annual Report & Audited Financial Statements | 2023 Notes 62 Annual Report & Audited Financial Statements | 2023 Notes 63 Annual Report & Audited Financial Statements | 2023 HC Slingsby plc 01274 535 030 01274 535 035 sales@slingsby.com T: F: E: W: www.slingsby.com
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