Triad Group Plc Annual Report & Accounts 2016–17 Table of contents Triad Group Plc | Annual report for the year ended 31 March 2017 02 07 10 14 20 24 25 26 27 28 43 44 45 Strategic report Directors’ report Corporate governance report Directors’ remuneration report Independent auditors’ report to the members of Triad Group Plc Statements of comprehensive income and expense Statements of changes in equity Statements of financial position Statements of cash flows Notes to the financial statements Five year record Shareholders’ information and financial calendar Corporate information Strategic report Financial highlights • Revenue for the year ended 31 March 2017: £30.9m (2016: £28.3m) Profit before tax: £1.52m (2016: £0.86m) • • Earnings before interest, tax, depreciation and amortisation (EBITDA): £1.61m (2016: £1.13m) • Profit after tax: £1.53m (2016: £1.21m) • Gross profit as a percentage of revenue: 16.2% (2016: 15.0%) Chairman’s statement Dr John Rigg, Executive Chairman The results for the year ended 31 March 2017 represent the Group’s strongest performance in ten years. We have seen continued improvement across key financial indicators with revenue up by 9.2% to £30.9m (2016: £28.3m), profit before tax up by 76% to £1.52m (2016: £0.86m), and gross profit as a percentage of revenue increasing to 16.2% (2016: 15.0%). Revenue and profit have been driven by careful management of existing key accounts, with significant growth seen across three of our four largest clients. This has been achieved as a result of the professionalism of our staff and outstanding levels of service delivered by our teams. Maintaining long- lasting relationships with our clients is a key contributor to our strengthened position, and the Group has been particularly successful in this regard despite the intense competition faced across the industry. Amongst the year’s highlights has been Triad’s involvement in a national roll-out for digital services helping one of our Central Government clients with their transformation agenda. Elsewhere, we have been underpinning the work of one of the country’s leading foreign aid consultancies, helping them to deliver services more efficiently through the development of a range of digital services. This work has also contributed to the significant improvements within our Office365 practice, an area we expect to expand as uptake increases. In another Central Government client, we have been providing a highly talented team of system engineers responsible for creating an industrial-strength platform from which a range of digital services is being hosted. Triad consultants are also providing key advisory services to a major Government-owned company, helping them to determine and deliver their strategic goals over the next 3–5 years. The Group’s strong performance within the GIS sector continued, expanding not only within existing key accounts but also with some new clients who recognise our position as domain experts. A fundamental characteristic of all of our engagements is the provision of highly talented experts, passionate about delivering positive outcomes for our clients. Our ability to deliver and to get projects ‘over the line’ is regularly cited as a core competence by our clients. One of the most significant challenges of the year was undoubtedly the build up to, and introduction of, new legislation around Off-Payroll Working (related to existing IR35 legislation) with a significant number of our contractors placed with public sector clients. Triad adopted a proactive approach regarding the legislation, working with the entire supply chain, achieving a smooth transition when the legislation was enacted in April 2017. The main industry-wide risk associated with the legislation (for both suppliers and customers) was that of contractors, concerned by the impact of the new legislation, choosing to leave their positions to move to roles in the private sector. Whilst we saw a modest amount of such departures, overall the retention rate was high. Going forwards, we do not expect the legislation to pose any significant challenges (at least until it is inevitably rolled out to the private sector). A further challenge arose during the year when one government programme, to whom we were supplying a significant number of consultants, was halted prematurely, necessitating a lengthy pause in activity. This is an inevitable risk of larger and deeper engagements, the mitigation of which remains a key priorty for the Group. The Group has maintained its presence on key frameworks such as DOS and g-Cloud, whilst enjoying success on joining other frameworks that give access to key target clients. A number of new clients were acquired by the Group during the year, including one of Europe’s largest automotive retailers, a large telecoms infrastructure operator, a significant player in the anti-terror area, and the world’s leading GIS software provider. The Group is steadily increasing its public profile. Triad was a key sponsor at last year’s ContainerSched conference, an event attracting some of the leading software engineers and technology businesses. Triad has also assumed leadership of a number of meet-up groups, including two around the emerging BlockChain technology. Involvement in this type of activity is increasing Triad’s reach significantly, providing access to some of the foremost talent in these fields. 2 | Triad Group Plc Annual Report and Accounts 2017 Strategic report In February the Board announced the appointment of a new broker, Arden Partners plc. We view this as a signifcant step in returning the Group to its former glory. Dividend Organisation overview Triad Group Plc is engaged in the provision of IT resourcing, consultancy and solutions services to the public and private sectors. I am pleased to announce that, for the year ending 31 March 2017, the directors have proposed a dividend of 0.5p per share (2016: NIL). Principal objectives Outlook Going forwards, the intention is to drive new business, in particular to increase our coverage outside the public sector. Our expertise in Agile, continuous delivery and DevOps services, combined with increasing exposure to emerging concepts such as BlockChain, is extremely portable across sectors and provides the opportunity to strengthen the client portfolio. Our sales pipeline remains healthy as we move into the the second quarter of the new financial year and we remain focussed on building a more robust, profitable business. Employees On behalf of the Board I would like to thank all our staff for their efforts during the past year. John Rigg Chairman 9 June 2017 The principal objectives of the Group are to; • Provide clients with industry leading service in our core skills. • Achieve sustainable profitable growth across the business and increase long term shareholder value. The key elements of our strategy to achieve our objectives are; To provide a range of specialist services relevant to our clients’ businesss • Our services include consultancy, change leadership, project delivery, software development, mobility services and business insights. Further capacity and expertise is provided via our resourcing services. • We continue to adopt a “business first, technology second” approach to solving our clients’ problems. A cornerstone of our service offer is our consultancy model, offering advice and guidance to clients in terms of technology investments. To develop long term client relationships across a broad client base • Enduring client relationships fuel profitability. A hallmark of our recent improvements has been the frequency of repeat business, which itself has been a function of outstanding delivery and proactive business development within existing accounts. • Our consistent track record in this regard is our major asset when developing propositions for new clients, along with the use of case studies and references. • We have structured our service offering to enable clients to engage early, thus enabling the building of trust and confidence from the outset To work with partners • Our strategy includes working with carefully chosen partners operating under their client frameworks in addition to the frameworks on which Triad is listed. This will expose more opportunities whilst reducing the cost of sale. Triad Group Plc Annual Report and Accounts 2017 | 3 Strategic report To leverage group capability and efficiency to increase profitability • We continue to develop synergies across the Group’s activities both externally and internally, driving better outcomes for clients whilst improving efficiency and effectiveness. The management team sets objectives to ensure that these synergies are exploited. • We enable our clients to benefit from access to a full range of ICT services, delivered through a single, easy to access, point of sale. • We will continue to strive to provide the highest quality of service through the provision of niche resources using market experts, and the supply of IT services though our team of skilled consultants. • We will strengthen our pipeline of work through the development of fulfilling and productive client relationships. Business model The Group provides services to the public and private sectors in the provision of IT consultancy and solutions services, and IT resourcing (both contract and permanent). Typically, this entails the supply of our own permanent consultants, the supply of carefully chosen associates and contractors, or a combination of these. The Group operates in the United Kingdom from offices in Godalming (registered office) and Milton Keynes. Principal risks and uncertainties The Group’s business involves risks and uncertainties, which the Board systematically manages through its planning and governance processes. The Board carries out a robust assessment of the principal risks facing the Group on an annual basis, examining the Group’s operating environment, scanning for potential risks to the health and wellbeing of the organisation. The Directors factor into the business plan the likelihood and magnitude of risk in determining the achievability of the operational objectives. Where feasible, preventive and mitigating actions are developed for all principal risks. Senior management review the risk register and track the status of these risk factors on an on-going basis, identifying any emerging risks as they appear. The outputs of this management review form part of the Board’s governance process, reviewed at regular Board meetings. 4 | Triad Group Plc Annual Report and Accounts 2017 The principal risks identified are: IT services market The demand for IT services is affected by UK market conditions. The creation of new services, acquisition of new clients and the development of new commercial vehicles is important in protecting the Group from fluctuations in market conditions. Revenue visibility The pipeline of contracted orders for time and materials consultancy work can be relatively short. The Board carefully reviews forecasts to assess the level of risk arising from business that is forecast to be won. Availability of staff The ability to recruit and retain staff, and access to appropriately skilled resources are key to ensuring the ability to win and deliver IT services to our clients. The Group continues to recruit quality individuals, and ensures a resilient network of associate resources is maintained. Competition The Group operates in a highly competitive environment. The markets in which the Group operates are continually monitored to respond effectively to emerging opportunities and threats. There are or may be other risks and uncertainties faced by the Group that the Directors currently deem immaterial, or of which they are unaware, that may have a material adverse impact on the Group. Viability Statement In accordance with the Listing Rules the Directors have assessed the Company’s viability over the next five financial years. This assessment of viability has been made with reference to the Group’s current financial and operational positions, revenue projections, cash flows, availability of required finance, commercial opportunities and threats, and the Group’s experience in managing adverse conditions in the past. The Company was founded in 1988 and has survived successfully since then. The assessment also considered the impact of severe, yet plausible, scenarios based on the principal risks set out above. Sensitivities around revenue growth, gross margins, and availability of funds to meet operational requirements were considered. Based on this assessment the Directors have concluded that there is a reasonable expectation that the Company and Group will continue in operation and meet its liabilities as they fall due over the next five years. Strategic report Given the Group’s business model and commercial and financial exposures the Directors consider that five years is an appropriate period for the assessment. The maximum period of visibility of commercial arrangements with clients is currently two years, however in considering the assessment period assumptions have been made beyond this immediate timeframe. Directors Senior managers Employees Male Female Total 5 2 36 43 – 1 12 13 5 3 48 56 Environment and greenhouse gas reporting The Group is committed to ensuring that the actual and potential environmental impact of its activities is understood and managed effectively. The annual quantity of Greenhouse Gas (GHG) Emissions for the period 1 April 2016 to 31 March 2017 in tonnes of carbon dioxide equivalents (tCO2e) is shown in the table below. Performance assessment, financial review and outlook Financial and non-financial key performance indicators (KPIs) used by the Board to monitor progress are revenue, profit from operations, gross margin, net borrowings and headcount. Financial KPIs are discussed in more detail in the Financial Review below. The outlook for the Group is discussed in the Chairman’s statement on page 2. The KPIs are as follows; 2017 2016 Revenue £30,912,000 £28,317,000 Profit from operations £1,547,000 £980,000 £1,612,000 £1,133,000 Earnings before interest, tax, depreciation and amortisation (EBITDA) Gross margin Average headcount Emission source: Combustion of fuel Electricity and heat purchased for own use 16.2% 53 15.0% Total 52 tCO2e per £1m revenue 2017 tCO2e * 2016 tCO2e * 23 94 117 3.8 23 91 114 4.0 * The calculation of tCO2e for each source has been prepared in accordance with DEFRA guidelines for GHG reporting. Social, community and human rights issues We do not report on social, community and human rights issues as the Group has no significant matters to report that would be required to understand the performance of the Group’s business. Corporate social responsibility Our employees The Group is committed to equal opportunities and operates employment policies which are designed to attract, retain and motivate high quality staff, regardless of gender, age, race, religion or disability. The Group has a policy of supporting staff in long term career development. The Group recognises the importance of having effective communication and consultation with, and of providing leadership to, all its employees. The Group promotes the involvement of its employees in understanding the aims and performance of the business. The following table shows the number of persons, by gender, who at 31 March 2017 were directors, senior managers or employees of the Company. Triad Group Plc Annual Report and Accounts 2017 | 5 Strategic report Financial review Group performance The Group reports the following results for the financial year ended 31 March 2017: Group revenue has increased to £30.9m (2016: £28.3m). The Group reports an increase in profit from operations to £1.55m (2016: £0.98m). Earnings before interest, tax, depreciation and amortisation (EBITDA) is £1.61m (2016: £1.13m). The Group reports a profit after tax of £1.53m (2016: £1.21m). Gross margin has increased to 16.2% (2016: 15.0%). A concerted effort across the business has led to improvements in gross margin, helped by the eradication of lower-margin work and the increase in profitability of new business. Cash and cash equivalents at the year-end have increased to £2,248,000 (2016: £955,000). Overheads Intangible assets There were no development costs capitalised during the year (2016: £nil). Net assets The net asset position of the Group at 31 March 2017 was £3,562,000 (2016: £2,056,000). The increase over the year was due to the profit for the year. Share options 340,000 options were exercised by directors and staff during the year. No new options were granted during the year. An expense of £2,000 (2016: £4,438) has been recognised relating to options granted in September 2014. By order of the Board Administrative expenses for the year have increased to £3.45m (2016: £3.26m). Staff costs have increased to £3.99m (2016: £3.67m). The average headcount for the year has increased slightly to 53 (2016: 52). Nick Burrows Finance Director 9 June 2017 Cash flows Cash and cash equivalents at 31 March 2017 stood at £2,248,000 (2016: £955,000). There was a net cash inflow from operating activities of £1,327,000 (2016: £621,000). The net cash outflow from investing activities was £74,000 (2016: £50,000). Tangible assets Tangible assets were purchased totalling £74,000 (2016: £42,000). 6 | Triad Group Plc Annual Report and Accounts 2017 Directors’ report The Directors present their Annual Report on the activities of the Group, together with the financial statements for the year ended 31 March 2017. The Board confirms that these, taken as a whole, are fair, balanced and understandable, and that they provide the information necessary for shareholders to assess the company’s position and performance, business model and strategy, and that the narrative sections of the report are consistent with the financial statements and accurately reflect the Group’s performance and financial position. The Strategic Report provides information relating to the Group’s activities, its business and strategy and the principal risks and uncertainties faced by the business, including analysis using financial and other KPIs where necessary. These sections, together with the Directors’ Remuneration and Corporate Governance Reports, provide an overview of the Group, including environmental and employee matters and give an indication of future developments in the Group’s business, so providing a balanced assessment of the Group’s position and prospects, in accordance with the latest narrative reporting requirements. The Group’s subsidiary undertakings are disclosed in the notes to the financial statements. Corporate Governance disclosures required with the Directors’ Report have been included within our Corporate Governance Report beginning on page 10. Share capital and substantial shareholdings Share capital As at 31 March 2017, the Company’s issued share capital comprised a single class of shares referred to as ordinary shares. Details of the ordinary share capital can be found in note 19 to these financial statements. Voting rights The Group’s articles provide that on a show of hands at a general meeting of the Company every member who (being an individual) is present in person and entitled to vote shall have one vote and on a poll, every member who is present in person or by proxy shall have one vote for every share held. The notice of the Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be passed at the Annual General Meeting. Transfer of shares There are no restrictions on the transfer of ordinary shares in the Company other than as contained in the Articles: • The Board may, in its absolute discretion, and without giving any reason for its decision, refuse to register any transfer of a share which is not fully paid up (but not so as to prevent dealing in listed shares from taking place) and on which the Company has a lien. The Board may also refuse to register any transfer unless it is in respect of only one class of shares, in favour of no more than four transferees, lodged at the Registered office, or such other place as the Board may decide, for registration, accompanied by a certificate for the shares to be transferred (except where the shares are registered in the name of a market nominee and no certificate has been issued for them) and such other evidence as the Board may reasonably require to prove the title of the intending transferor or his right to transfer the shares. Certain restrictions may from time to time be imposed by laws and regulations, for example: Insider trading laws; and • • Whereby certain employees of the Group require the approval of the Company to deal in the Company’s ordinary shares. Appointment and replacement of directors The Board may appoint Directors. Any Directors so appointed shall retire from office at the next Annual General Meeting of the Company, but shall then be eligible for re-appointment. The current Articles require that at the Annual General Meeting one third of the Directors shall retire from office but shall be eligible for re-appointment. The Directors to retire by rotation at each Annual General Meeting shall include any Director who wishes to retire and not offer himself for re-election and otherwise shall be the Directors who, at the date of the meeting, have been longest in office since their last appointment or re-appointment. A Director may be removed from office by the service of a notice to that effect signed by at least three quarters of all the other Directors. Amendment of the Company’s Articles of Association The Company’s Articles may only be amended by a special resolution passed at a general meeting of shareholders. Triad Group Plc Annual Report and Accounts 2017 | 7 Directors’ report Substantial shareholdings As at 31 March 2017 the Company had been notified under the Disclosure and Transparency Rules (DTR 5) of the following notifiable interests in the Company’s issued share capital. These holdings are likely to have changed since the Company was notified, however, notification of any change is not required until the next notifiable threshold is crossed: % of total voting rights Liontrust Investment Partners LLP T Charlton 4.39% 6.04% As at 8 June 2017 the following notifications have been received since the year end: P Atkinson Dividends % of total voting rights 17.39% The Directors are proposing a final dividend of 0.5p per ordinary share (2016: nil), totalling £77,448 (2016: nil). This dividend has not been accrued in the statements of financial position. Financial instruments The Board reviews and agrees policies for managing financial risk. These policies, together with an analysis of the Group’s exposure to financial risks are summarised in note 3 of these financial statements. Research and development activity Research and development activities are undertaken with the prospect of gaining new technical knowledge and understanding, and developing new software. Directors’ interests in contracts Directors’ interests in contracts are shown in note 22 to the accounts. Directors’ insurance and indemnities The Company maintains directors’ and officers’ liability insurance which gives appropriate cover for any legal action brought against its directors and officers. The Directors also have the benefit of the indemnity provisions contained in the Company’s Articles of Association. These provisions, which are qualifying third-party indemnity provisions as defined by Section 236 of the Companies Act 2006, were in force throughout the year and are currently in force. Disclosure of information to auditors All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company’s auditors for the purposes of their audit and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware. Forward-looking statements The Strategic Report contains forward-looking statements. Due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information, the actual results of operations, financial position and liquidity may differ materially from those expressed or implied by these forward-looking statements. Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Strategic Report, and in note 17 to the financial statements. In addition, note 3 to the financial statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities, and its exposure to credit risk and liquidity risk. As highlighted in note 17 to the financial statements, the Group meets its day to day working capital requirements through an invoice finance facility. The Group’s projections, taking account of reasonable possible changes in trading performance, show that the Group should be able to operate within the level of its current facility. The facility may be terminated by either party with one month's written notice. The Board receives regular cash flow and working capital projections to enable it to monitor its available headroom under this facility. These projections indicate that the Group expects to have sufficient resources to meet its reasonably expected obligations. The bank has not drawn to the attention of the Group any matters to suggest that this facility will not be continued on acceptable terms. 8 | Triad Group Plc Annual Report and Accounts 2017 Directors’ report After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts. Auditors The external audit was last put out to tender in 2006 when the current auditor, BDO LLP, was appointed. The lead audit partner was changed by rotation in 2013, her predecessor having served for a period of 5 years. Following the implementation of EU Audit Reform, Triad is required to conduct a selection process for the appointment of the external auditor every 10 years. Accordingly, the Audit Committee intends to undertake a selection process for the appointment of the external auditor for the financial year ending 31 March 2018 so as to ensure auditor independence and continued quality of judgement. The Board can confirm that there are no contractual obligations that restrict the Company’s choice of external auditor. Environment and greenhouse gas reporting Carbon dioxide emissions data, is contained in the Corporate Social Responsibility section of the Strategic Report. Statement of Directors’ responsibilities The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements and have elected to prepare the Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 Company and of the profit or loss for the Group and Company for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • • state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; prepare a Directors’ Report, Strategic Report and Director’s Remuneration Report which comply with the requirements of the Companies Act 2006. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein. The Directors confirm to the best of their knowledge: • The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group. • The annual report includes a fair review of the development and performance of the business and the financial position of the Group and the Parent Company, together with the description of the principal risks and uncertainties that they face. By order of the Board Nick Burrows Company Secretary 9 June 2017 Triad Group Plc Annual Report and Accounts 2017 | 9 Corporate governance report The Board has considered the principles and provisions of the UK Corporate Governance Code 2014 (“the Code”) applicable for this financial period. The following statement sets out the Group’s application of the principles of the Code and the extent of compliance with the Code’s provisions, made in accordance with the requirements of the Listing Rules. The Board The Directors who held office during the financial year were: Executive Directors John Rigg, Chairman Nick Burrows, Finance Director Adrian Leer, Commercial Director Independent non-executive Directors Alistair Fulton, senior independent non-executive Director Steven Sanderson John Rigg is Chairman. He is a Chartered Accountant. He was a founder of Marcol Group Plc and was its Managing Director from 1983 until 1988. Marcol was floated on the Unlisted Securities Market in 1987. He was Chairman of Vega Group plc from 1989 until 1996, holding the post of Chief Executive for much of this period. Vega floated on the main market in 1992. He was a founder shareholder of Triad and served as the Chairman of the Company from 1988 up to just before its flotation in 1996, when he resigned to develop new business interests overseas. He was appointed as non-executive Chairman in June 1999: in May 2004 he became part-time executive Chairman. Between 4 February 2005 and 5 September 2007 John was acting Group Chief Executive. Alistair Fulton is a non-executive Director. He is a Chartered Engineer and member of the British Computer Society. He was the founding Managing Director of Triad. He continued in this role until February 1997 when he became non-executive Chairman, a position he retained until June 1999, when he took up his present position. Steven Sanderson is a non-executive Director. He is a Chartered Accountant. He was appointed non-executive Director in January 2007. He has extensive experience at executive director level in the IT services and telecommunications sectors. His background includes public flotations, plc directorship, fund raising, acquisition and disposal activities. Nick Burrows is the Finance Director. He is a Chartered Accountant who joined Triad in 2001 as Financial Controller 10 | Triad Group Plc Annual Report and Accounts 2017 of the Consulting & Solutions business. He was appointed Company Secretary in 2008 and executive Finance Director in October 2009. Adrian Leer was appointed to the Board as Commercial Director on 3 March 2015. He initially joined Triad in 2009 in a consultative capacity, providing advice to the business regarding its fledgling geospatial product, Zubed, and helping to secure significant wins with major clients. In 2010, he became General Manager of Zubed Geospatial. In 2012 Adrian became Commercial Director of Triad Consulting & Solutions. The Board exercise full and effective control of the Group and has a formal schedule of matters specifically reserved to it for decision, including responsibility for formulating, reviewing and approving Group strategy, budgets and major items of capital expenditure. Regularly the Board will consider and discuss matters which include, but are not limited to: Financial performance and forecast; Strategy; • • • • City and compliance matters. Human resources; and The Executive Chairman, John Rigg, is responsible for the leadership and efficient operation of the Board. This entails ensuring that Board meetings are held in an open manner, and allow sufficient time for agenda points to be discussed. It also entails the regular appraisal of each director, providing feedback and reviewing any training or development needs. The Board meets regularly with senior management to discuss operational matters. The Non-Executive Directors must satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust. Following presentations by senior management and a disciplined process of review and challenge by the Board, clear decisions on the policy or strategy are adopted. The responsibility for implementing Board decisions is delegated to management on a structured basis and monitored at subsequent meetings. During the period under review, and to date, the Executive Chairman has not held any significant commitments outside the Group Alistair Fulton is the nominated senior independent non- executive Director. Steven Sanderson is a non-executive Director. Both have long standing industry experience and are free from any business or other relationship which could materially interfere with the exercise of thier independent judgement. The Board benefits from their Corporate governance report experience and independence, when they bring their judgement to Board decisions. Alistair Fulton has been a non-executive Director for twenty years. Steven Sanderson has been a non-executive director for ten years. The Board considers that both continue to remain independent for the reasons stated above. The Group has a procedure for Directors to take independent professional advice in connection with the affairs of the Group and the discharge of their duties as Directors. The Board has an Audit Committee, comprised of the Executive Chairman John Rigg, and the independent non- executive Directors, Alistair Fulton and Steven Sanderson. The Committee is chaired by Alistair Fulton. The Board has a Remuneration Committee, comprised of the Executive Chairman John Rigg, and the independent non-executive Directors, Alistair Fulton and Steven Sanderson. The Committee is chaired by Alistair Fulton. The following table shows the attendance of Directors at scheduled meetings of the Board and Audit and Remuneration Committees during the year ended 31 March 2017 and shows that the Board are able to allocate sufficient time to the company to discharge their responsibilities effectively. Board Audit Committee Remuneration Committee Number of meetings held 11 2 4 Number of meetings attended Executive Directors: John Rigg (Chairman) Nick Burrows Adrian Leer Non-executive Directors: Alistair Fulton Steven Sanderson 11 11 11 11 9 2 n/a n/a 2 2 4 n/a n/a 4 4 Audit Committee The members of the Audit Committee are shown above. The Board believe that John Rigg and Steven Sanderson, both Chartered Accountants with broad experience of the IT industry, and Alistair Fulton, who has been a Director of companies in the IT sector for over 30 years, have recent and relevant financial experience, as required by the Code. The Audit Committee is responsible for reviewing the Group’s annual and interim financial statements and other announcements. It is also responsible for reviewing the Group’s internal financial controls and its internal control and risk management systems. It considers the appointment and fees of external auditors, and discusses the audit scope and findings arising from audits. The Committee is also responsible for assessing the Group’s need for an internal audit function. Consideration of significant issues in relation to the financial statements The Audit Committee have considered the following significant issues in relation to the preparation of these financial statements; Revenue recognition: The Committee has considered revenue recognised in consultancy and development projects during, and active at the end of, the financial year to ensure revenue has been recognised correctly. Going concern: The Committee has reviewed budgets and cash flow projections against borrowing facilities available to the Group to ensure the going concern basis of preparation of the results remains appropriate. Meetings with auditors and senior finance team The Audit Committee met with the senior finance team in advance of their meeting with the auditors, prior to commencement of the year end audit to discuss; • Audit scope, strategy and objectives • • Key audit and accounting matters Independence and audit fee Further meetings were held following completion of the audit with the senior finance team and the auditors to assess the effectiveness of the audit and discuss audit findings. Triad Group Plc Annual Report and Accounts 2017 | 11 Corporate governance report Effectiveness of external audit process Internal audit The Committee conducts an annual review of the effectiveness of the annual report process. Inputs into the review include feedback from the finance team, planning and scope of the audit process and identification of risk, the execution of the audit, communication by the auditor with the Committee, how the audit adds value and a review of auditor independence and objectivity. Feedback is provided to the external auditor and management by the Committee, with any actions reviewed by the Committee. Auditor independence and objectivity The Committee has procedures in place to ensure that independence and objectivity is not impaired. These include restrictions on the types of services which the external Auditor can provide, in line with the FRC Ethical Standards on Auditing. The external auditors themselves have safeguards in place to ensure that objectivity and independence is maintained and the Committee regularly reviews independence taking into consideration relevant UK professional and regulatory requirements. The external auditors are required to rotate the audit partner responsible for the Group audit every five years. Non-audit fees The Committee reviews all non-audit work to ensure it is appropriate and the fees justified. In relation to the non- audit services provided by BDO LLP during the year, the Committee reviewed and approved management’s reasons for selecting BDO LLP as the best placed adviser on a case-by-case basis. This decision was typically based on the merit of using BDO’s existing knowledge of the Group. In the future, to comply with new EU audit regulations, the Group will not be engaging Group’s auditors for any non- audit work. Appointment of external auditor BDO LLP was appointed external auditor in 2006 following a tendering process. As explained on page 9, the Audit Committee intends to undertake a selection process for the appointment of the external auditor for the financial year ending 31 March 2018. BDO LLP has confirmed to the Committee that they remain independent and have maintained internal safeguards to ensure that the objectivity of the engagement partner and audit staff is not impaired. The Committee has considered the level of non-audit fees and the nature of non-audit services provided and is satisfied that auditor independence has been maintained. See also the note above in relation to fees for non-audit work. The Audit Committee has considered the need for a separate internal audit function this year but does not consider it appropriate in view of the above controls, and in light of the size of the Group. The Group is certified to ISO 9001: 2008. Internal controls and risk management The Board has applied the internal control and risk management provisions of the Code by establishing a continuous process for identifying, evaluating and managing the significant risks faced by the Group. The Board regularly reviews the process, which has been in place from the start of the year to the date of approval of this report and which is in accordance with FRC guidance on risk management, internal control and related financial and business reporting. The Board is responsible for the Group's system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against misstatement or loss. In compliance with the Code, the Audit Committee regularly reviews the effectiveness of the Group's systems of internal financial control and risk management. The Board’s monitoring covers all controls, including financial, operational and compliance controls and risk management. It is based principally on reviewing reports from management to consider whether significant weaknesses and risks are effectively managed and, if applicable, considering the need for more extensive monitoring. The Board has also performed a specific assessment for the purpose of this annual report. This assessment considers all significant aspects of internal control and risk management arising during the period covered by the report. The key elements of the internal control and risk management systems are described below: • Clearly documented procedures contained in a series of manuals covering Group operations and management, which are subject to internal project audit and external audit as well as regular Board review. • An appropriate budgeting process where the business prepares budgets for the coming year, which are approved by the Board. • Close involvement in the day to day management of the business by the executive Directors. • Regular meetings between the executive Chairman, executive Director and senior managers to discuss and monitor potential risks to the business, and to implement mitigation plans to address them. 12 | Triad Group Plc Annual Report and Accounts 2017 Corporate governance report Remuneration Committee Statement of compliance The Remuneration Committee is responsible for setting remuneration for executive directors and the Chairman in accordance with the remuneration policy below. In addition, the Committee is responsible for recommending and monitoring the level and structure of remuneration for senior management. The Group’s Remuneration Committee is authorised to take appropriate counsel to enable it to discharge its duty to make recommendations to the Board in respect of all aspects of the remuneration package of Directors. The Directors Remuneration Report can be found on page 14. Whistleblowing Staff may contact the senior independent non-executive Director, in confidence, to raise genuine concerns of possible improprieties in financial reporting or other matters. Directors’ training Any new Board members are made fully aware of their duties and responsibilities as Directors of listed companies, and are supported in understanding and applying these by established and more experienced Directors. Further training is available for any Director at the Group’s expense should the Board consider it appropriate in the interests of the Group. Relations with shareholders Substantial time and effort is spent by Board members on meetings with and presentations to existing and prospective investors. The views of shareholders derived from such meetings are disseminated by the Chairman to other Board members. Private shareholders are invited to attend and participate at the Annual General Meeting. The Board considers that it has been compliant with the provisions of the Code for the whole of the period, except as detailed below: A.2.1 B.2.1/2.4 B.6 B.2.3 B.7.1 The roles of chairman and chief executive should not be exercised by the same individual. John Rigg is the Executive Chairman. The Board currently has no plans to recruit a Chief Executive Officer as it considers that the duties are being satisfactorily covered by members of the Executive Board and the Group’s senior management. There should be a nominations committee which should lead the process for board appointments and make recommendations to the board. The Board considers that because of its size, the whole Board should be involved in Board appointments. The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. There is a process of continuous informal evaluation, due to the small size of the Board. Non-executive directors should be appointed for specified terms subject to re-election. Although not appointed for fixed terms, Non- executive Directors are subject to re-election in accordance with the Company’s Articles of Association at the Annual General Meeting. Their contracts are subject to a notice period that does not exceed one month. Non-executive directors who have served longer than nine years should be subject to annual re- election. The Board consider that because of its size, re-election by rotation in accordance with the Company’s Articles of Association at the Annual General Meeting is sufficient. Terms of reference The terms of reference of the Audit and Remuneration Committees are available on request from the Company Secretary. By order of the Board Nick Burrows Company Secretary 9 June 2017 Triad Group Plc Annual Report and Accounts 2017 | 13 Directors’ remuneration report On the following pages we set out the Remuneration Report for the year ended 31 March 2017. The members of the Remuneration Committee are shown in the Corporate Governance Report on page 11. This report has been prepared in accordance with the Companies Act 2006 and is split into two sections as follows; 1. The Directors’ remuneration policy. 2. The Annual report on remuneration. This will be subject to an advisory shareholder vote at this years’ Annual General Meeting. No major decisions or changes were made to Directors’ remuneration during the year. Directors’ remuneration policy The remuneration policy sets out the framework within which the Company remunerates its Directors. The Company’s remuneration policy was put to a shareholder vote at the 2016 Annual General Meeting of the Company and was approved by 100% of shareholders. There is no requirement to vote on the policy in 2017 unless any changes to the policy are proposed, and the Committee does not intend making any changes to the policy at this time. Policy table—executive Directors Element Base salary Benefits in kind Relevance to short and long term strategic objectives Reflects the individual’s skills, responsibilities and experience. Supports the recruitment and retention of Executive Directors. Protects the well-being of directors and provides fair and reasonable market competitive benefits. Operation Maximum payable Performance metrics None, although individual performance is considered when setting salary levels. None. Ordinarily, salary increases will be in line with average increases awarded to other employees in the Company. Benefits are set at a level considered to be appropriate taking into account individual circumstances Reviewed annually taking into consideration individual and companywide performance and the wider employee pay review. Benefits in kind include company cars or allowances, private medical insurance, life cover and permanent health insurance. Benefits are reviewed periodically. Pension Provides competitive post-retirement benefits to support the recruitment and retention of Executive Directors. The Company pays contributions into a personal pension scheme or cash alternative. The Company matches individual contributions up to a maximum of 5%. None. Share option scheme Encourages share ownership amongst employees and aligns their interests with the shareholders. The Company operates an EMI share option scheme. Discretionary awards are made in accordance with the scheme rules. The potential value of options held rises as the Company’s share price increases. Specific performance criteria are specified at the time of awarding the share options to ensure alignment with the interests of shareholders. 14 | Triad Group Plc Annual Report and Accounts 2017 Directors’ remuneration report The award of share options is at the discretion of the Remuneration Committee: there is no scheme providing entitlement to share options, and there is no long-term incentive scheme. The Group does not believe that performance related bonuses are appropriate at the present time. The Executive Directors’ existing interests in shares and share options are expected to align their interests with those of shareholders. Policy table—non-executive Directors Element Fees Relevance to short and long term strategic objectives Competitive fees to attract experienced directors Operation Maximum payable Performance metrics Reviewed annually Not applicable. In general, the level of fee increase for the non- executive directors will be set taking account of any change in responsibility. The remuneration of the non-executive Directors is agreed by the Board. However, no Director is involved in deciding their own remuneration. Approach to recruitment remuneration The Group’s remuneration policy is to provide remuneration packages which secure and retain management of the highest quality. Therefore, when determining the remuneration packages of new executive Directors, the Remuneration Committee will structure a package in accordance with the general policy for executive Directors as shown above. In doing so the Committee will consider a number of factors including: • • • • the salaries and benefits available to executive Directors of comparable companies; the need to ensure executive Directors’ commitment to the continued success of the Group; the experience of each executive Director; and the nature and complexity of the work of each executive Director. Directors’ service contracts and policy The details of the Directors’ contracts are summarised as follows: J C Rigg A M Fulton S M Sanderson N E Burrows A Leer Date of contract Notice period 01/07/1999 19/02/1997 01/01/2007 03/03/2015 03/03/2015 1 month 1 month 1 month 6 months 6 months All contracts are for an indefinite period. No contract has any provision for the payment of compensation upon the termination of that contract. Triad Group Plc Annual Report and Accounts 2017 | 15 Directors’ remuneration report Illustrations of application of remuneration policy As there are currently no performance related or variable elements of executive director remuneration it is not appropriate to prepare illustrations required under the legislation. Policy on payment for loss of office It is the Group’s policy in relation to Directors’ contracts that: • executive Directors should have contracts with an indefinite term providing for a maximum of six months’ notice by either party. • • non-executive Directors should have terms of engagement for an indefinite term providing for one month notice by either party. there is no provision for termination payments to Directors. Consideration of employment conditions elsewhere in group In setting the executive Directors’ remuneration the Committee takes into account the pay and employment conditions applicable across the Group in the reported period. As with employees elsewhere in the Group there were no substantial increases to Directors’ remuneration terms since the prior year. No consultation has been held with employees in respect of executive Directors’ remuneration. Consideration of shareholders views The policy is unchanged from the previous year as endorsed by the unanimous vote in favour of the approval of the Directors’ Remuneration Report at the Annual General Meeting in August 2016. Annual report on remuneration (audited) Directors' remuneration—single total figure of remuneration The remuneration of each of the Directors for the period they served as a Director are set out below: 2017 Director Basic salary & fees Benefits in kind £’000 £’000 Pension £’000 Total £’000 Executive J C Rigg N E Burrows A Leer Non-executive A M Fulton S M Sanderson 25 92 100 40 20 – 13 9 — — – 18 9 — — 25 123 118 40 20 16 | Triad Group Plc Annual Report and Accounts 2017 Directors’ remuneration report Director Basic salary & fees Benefits in kind £’000 £’000 Pension £’000 Total £’000 2016 Executive J C Rigg N E Burrows A Leer (appointed 3 March 2015) Non-executive A M Fulton S M Sanderson 25 91 99 25 20 — 12 8 — — — 18 9 — — 25 121 116 25 20 Benefits in kind include the provision of company car and medical insurance. Pension includes a 5% employer contribution together with contributions made under an employee salary sacrifice scheme. No performance measures or targets were in place for either the year ended 31 March 2017, or any prior financial year, upon which any variable pay elements could become payable during the year. Two Directors are members of a money purchase scheme into which the Group made contributions during the year. Payments to past Directors There were no payments to past Directors during the year. Payment for loss of office There were no payments for loss of office during the year. Directors’ interests in shares The Directors who held office at the end of the financial year had the following beneficial interests in the ordinary shares of the Company. No change has occurred between the year end and the date of this report. A M Fulton J C Rigg S M Sanderson N E Burrows A Leer 1 April 2016 354,100 4,509,400 104,089 7,893 5,379 31 March 2017 354,100 4,509,400 104,089 9,893 5,379 Triad Group Plc Annual Report and Accounts 2017 | 17 Directors’ remuneration report Directors’ share options The interests of executive Directors in share options were as follows:: N E Burrows: granted 07.08.08 granted 23.09.11 granted 18.09.14 A Leer: granted 23.09.11 granted 18.09.14 At beginning of year Granted during year Lapsed during year At end of year Exercise price Exercise period 25,000 100,000 25,000 50,000 100,000 300,000 - - - - - - (20,000) 5,000 - - - - 100,000 25,000 50,000 100,000 (20,000) 280,000 14.0p 13.5p 11.0p 13.5p 11.0p 07.08.11 to 07.08.18 23.09.14 to 23.09.21 18.09.17 to 18.09.24 23.09.14 to 23.09.21 18.09.17 to 18.09.24 155,000 share options were exercisable at the end of the year (2016: 175,000). Share options are exercisable provided that the relevant performance requirement has been satisfied. • that the Group shall have achieved positive earnings per share in any financial year commencing at least one year after the date of grant of the option. This performance requirement is the same as that applying to employee share options granted at the same time. The total share based payment expense recognised in the year in respect of Directors’ share options is £1,585 (2016: £1,585). N E Burrows made a gain of £12,500 (2016: nil) on share options exercised during the year. The market price of the Company’s shares was 68.00p at 31 March 2017 and the range during the year was between 24.75p and 85.50p. 18 | Triad Group Plc Annual Report and Accounts 2017 Directors’ remuneration report Annual report on remuneration (unaudited) Performance graph The following graph shows the Group’s performance, measured by total shareholder return, compared with the performance of the FTSE Fledgling Index (“FTSEFI”) also measured by total shareholder return (“TSR”). The FTSEFI has been selected for this comparison because it is an index of companies with similar current market capitalisation to Triad Group Plc. TRD v FTSE Fledging Index Fledging Triad 250 200 150 100 50 x e d n I Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Chief executive remuneration There have been no changes to the remuneration of the Executive Chairman during the year. Relative importance of spend on pay The total dividends or other cash distributions to shareholders during the year was £nil (2016: £nil). The total employee remuneration (including directors) during the year was £3,613m (2016: £3.308m). Consideration of matters related to directors’ remuneration During the financial year the remuneration committee met three times to consider directors’ remuneration. No external advice was sought in relation to matters discussed at these meetings. Statement of voting at last general meeting At the last annual general meeting the Directors’ Remuneration Report was approved with 99.9% of votes cast in favour of the resolution. There were 4,507,951 votes withheld. There was no vote on the directors’ remuneration policy as the policy was unchaged from that last voted on by shareholders. Alistair Fulton Chairman, Remuneration Committee 9 June 2017 Triad Group Plc Annual Report and Accounts 2017 | 19 Independent auditors’ report to the members of Triad Group Plc Opinion on the financial statements In our opinion: • • • the financial statements give a true and fair view of the state of the Group’s and the Parent Company’s affairs as at 31 March 2017 and of the Group’s and Parent Company’s profit for the year then ended; the Group and the Parent Company financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the Group financial statements, Article 4 of the IAS Regulation. The financial statements of Triad Group Plc for the year ended 31 March 2017 comprise: The Group and Parent Company statement of comprehensive income; • • The Group and Parent Company statements of financial position; • The Group and Parent Company statements of changes in equity; • The Group and Parent Company statements of cash flows; and • The notes to the financial statements. The financial reporting framework that has been applied in the preparation of the Group and Parent Company financial statements is applicable law and IFRSs as adopted by the European Union. Respective responsibilities of directors and auditor As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Our assessment of risks of material misstatement and overview of the scope of our audit A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/ auditscopeukprivate. Our Group audit was scoped by obtaining an understanding of the group and its environment, including the group’s system of internal control, and assessing the risks of material misstatement in the financial statements at the group level. 20 | Triad Group Plc Annual Report and Accounts 2017 Independent auditors’ report to the members of Triad Group Plc We set out below the risk that had the greatest impact on our audit strategy and scope. The Audit Committee’s consideration of these matters is set out on page 11: Risk of material misstatement Our response to the risks identified Revenue recognition Revenue is predominantly recognised on an approved timecard basis and we consider there to be a significant risk over the completeness of revenue at the year end due to missing or late timecards or contractor invoices. There is a presumed risk of fraud in relation to revenue recognition due to the possibility that management may be motivated to achieve certain results. Our procedures included understanding and testing the controls in respect of billing from approved timecards, the controls over invoicing and the resulting posting to the financial statements. We tested a sample of approved timecards along with invoices raised either side of the balance sheet date and compared these to recorded revenue, accrued revenue and costs and deferred revenue. Furthermore we tested contractor purchase invoices around the year end to ensure they and the corresponding revenue invoices have been recorded in the correct period. We reviewed and considered journals posted to revenue during the year. An overview of the scope of our audit The Group financial statements are a consolidation of six companies made up of one trading company (the Parent Company) which provides consultancy and development services and five dormant companies. In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed on each company. The Group operates solely in the United Kingdom. Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the group’s system of internal control, and assessing the risks of material misstatement in the financial statements at the Group level. Based on our assessment we performed an audit of the complete financial information of the Parent Company as the only trading company. In our audit, we tested and examined information, using sampling and other auditing techniques, to the extent we considered necessary to provide a reasonable basis for us to draw conclusions. Our audit evidence was largely obtained through substantive procedures. Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. The materiality for the group financial statements as a whole was set at £300,000. This was determined with reference to a benchmark of revenue (of which it represents one per cent) which we consider to be one of the principal considerations for members of the company in assessing the financial performance of the group. Performance materiality was set at seventy per cent of the above materiality level. Materiality levels are not significantly different from those applied in the previous year. We agreed with the Audit Committee that we would report to the committee all individual audit differences in excess of £6,000. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Triad Group Plc Annual Report and Accounts 2017 | 21 Independent auditors’ report to the members of Triad Group Plc Opinion on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with 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 directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and directors’ report have been prepared in accordance with applicable legal requirements. Statement regarding the directors’ assessment of principal risks, going concern and longer term viability of the company We have nothing material to add or to draw attention to in relation to: • • • • the directors’ confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity; the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated; the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the entity’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; or the directors’ explanation in the annual report as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is: • • • materially inconsistent with the information in the audited financial statements; or apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or is otherwise misleading. In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the Audit Committee which we consider should have been disclosed. In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. 22 | Triad Group Plc Annual Report and Accounts 2017 Independent auditors’ report to the members of Triad Group Plc Under the Companies Act 2006 we are required 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 and the part of the directors’ remuneration report to be audited 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. Under the Listing Rules we are required to review: • • the directors’ statements, set out on pages 4 and 8, in relation to going concern and in relation to longer-term viability; and the part of the corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for review by the auditor in accordance with Listing Rule 9.8.10 R(2). We have nothing to report in respect of these matters. Anna Draper (senior statutory auditor) 9 June 2017 For and on behalf of BDO LLP, statutory auditor London United Kingdom Triad Group Plc Annual Report and Accounts 2017 | 23 Statements of comprehensive income and expense for the year ended 31 March 2017 Group and Company Note Revenue Cost of sales Gross profit Administrative expenses Profit from operations Finance expense Finance income Profit before tax Tax credit Profit for the year and total comprehensive income attributable to equity holders of the parent Basic earnings per share Diluted earnings per share All amounts relate to continuing activities. 5 6 8 10 10 2017 £’000 30,912 (25,912) 5,000 (3,453) 1,547 (31) 5 1,521 13 1,534 10.08p 9.55p 2016 £’000 28,317 (24,081) 4,236 (3,256) 980 (118) 1 863 350 1,213 8.01p 7.72p 24 | Triad Group Plc Annual Report and Accounts 2017 Statements of changes in equity for the year ended 31 March 2017 Group At 1 April 2015 Profit for the year and total comprehensive income Share-based payments At 1 April 2016 Profit for the year and total comprehensive income Ordinary shares issued Share-based payments At 31 March 2017 Company At 1 April 2015 Profit for the year and total comprehensive income Share-based payments At 1 April 2016 Profit for the year and total comprehensive income Ordinary shares issued Share-based payments At 31 March 2017 Share Capital £’000 151 — — 151 – 4 – Share premium account Capital redemption reserve £’000 562 £’000 104 — — 562 – 43 – — — 104 – – – Retained earnings Total £’000 22 1,213 4 1,239 1,534 – 2 £’000 839 1,213 4 2,056 1,534 47 2 155 605 104 2,775 3,639 Share Capital £’000 151 — — 151 — 4 — Share premium account Capital redemption reserve £’000 562 £’000 104 — — 562 — 43 — — — 104 — – — Retained earnings Total £’000 17 1,213 4 1,234 1,534 – 2 £’000 834 1,213 4 2,051 1,534 47 2 155 605 104 2,770 3,634 Share capital represents the amount subscribed for share capital at nominal value. The share premium account represents the amount subscribed for share capital in excess of the nominal value. The capital redemption reserve represents the nominal value of the purchase and cancellation of its own shares by the Company in 2002. Retained earnings represents the cumulative net gains and losses recognised in the statement of comprehensive income and expense. Triad Group Plc Annual Report and Accounts 2017 | 25 Statements of financial position at 31 March 2017 Group Company Note 2017 £’000 2016 £’000 2017 £’000 Non-current assets Intangible assets Property, plant and equipment Deferred tax Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Financial liabilities Short term provisions Non-current liabilities Financial liabilities Long term provisions Total liabilities Net assets Shareholders’ equity Share capital Share premium account Capital redemption reserve Retained earnings Total shareholders’ equity 11 12 8 14 15 16 17 18 17 18 19 8 134 361 503 5,051 2,248 7,299 7,802 13 120 350 483 4,683 955 5,638 6,121 8 134 361 503 5,051 2,248 7,299 7,802 2016 £’000 13 120 350 483 4,683 955 5,638 6,121 (3,702) (3,496) (3,707) (3,501) (11) (405) (4,118) (–) (45) (45) (4,163) 3,639 155 605 104 2,775 3,639 (7) (254) (11) (405) (7) (254) (3,757) (4,123) (3,762) (11) (297) (308) (4,065) 2,056 151 562 104 1,239 2,056 (–) (45) (45) (4,168) 3,634 155 605 104 2,770 3,634 (11) (297) (308) (4,070) 2,051 151 562 104 1,234 2,051 The financial statements on pages 24 to 42 were approved by the Board of Directors and authorised for issue on 9 June 2017 and were signed on its behalf by: Nick Burrows Director Alistair Fulton Director Triad Group Plc is registered in England and Wales with registered number 2285049. 26 | Triad Group Plc Annual Report and Accounts 2017 Statements of cash flows for the year ended 31 March 2017 Group and company Note Cash flows from operating activities Profit for the year before taxation Adjustments for: Depreciation of property, plant and equipment Amortisation/impairment of intangible assets Interest expense Finance income Share-based payment expense Changes in working capital Increase in trade and other receivables Increase in trade and other payables Decrease in provisions Cash generated by operations Interest paid Tax received Net cash flows from operating activities Investing activities Purchase of intangible assets Purchase of property, plant and equipment Net cash used in investing activities Financing activities Proceeds of issue of shares Finance lease principal payments Net cash flows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period 15 2017 £’000 1,521 60 5 4 – 2 (367) 205 (101) 1,329 (4) 2 1,327 – (74) (74) 47 (7) 40 1,293 955 2,248 2016 £’000 863 46 107 10 – 4 (672) 363 (90) 631 (10) – 621 (8) (42) (50) – (6) (6) 565 390 955 Triad Group Plc Annual Report and Accounts 2017 | 27 Notes to the financial statements for the year ended 31 March 2017 1. Principal accounting policies Intangible assets Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations), as adopted by the European Union (EU), issued by the International Accounting Standards Board (IASB) and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS. These financial statements have been prepared on a going concern basis. These financial statements have been prepared on a historical cost basis and are presented in sterling, the functional currency of the Group. Basis of consolidation Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee and the ability of the investor to use its power to affect those variable returns. The consolidated financial statements present the results of the Company and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. Property, plant and equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and any impairment in value. Depreciation is calculated so as to write off the cost of assets, less their estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: Computer hardware Fixtures and fittings Motor vehicles % 25–33 10–33 25–33 Expenditure on internally developed products is capitalised if it can be demonstrated that: • • • • • • it is technically feasible to develop the product so that it will be available for use or sale; adequate resources are available to complete the development; there is an intention to complete the product and use or sell it; it is able to be used or sold; the product will generate future economic benefits, internally and/or externally; and expenditure attributable to the development of the product can be measured reliably. Intangible assets are stated at cost, net of accumulated amortisation and any impairment in value. The cost of internally developed software is the attributable salary costs and directly attributable overheads. Amortisation is calculated so as to write off the cost of assets, less their estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. Amortisation is charged to administration expenses in the statement of comprehensive income and expense. The principal annual rates used for this purpose are: Purchased computer software Internally developed software % 25–33 10–25 Impairment of non-financial assets Non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount the asset is written down accordingly. Impairment is charged to administration expenses in the statements of comprehensive income and expense. Trade and other receivables Trade and other receivables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment. 28 | Triad Group Plc Annual Report and Accounts 2017 Notes to the financial statements for the year ended 31 March 2017 Amounts are charged to an impairment account when there is objective evidence that an impairment loss has occurred. Amounts are written off against the carrying amount of trade receivables when it is certain that the receivable will not be realised. Cash Cash in the balance sheet comprises cash held on demand with banks. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash, as defined above, net of bank borrowings due on demand. 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 initially at fair value, and subsequently measured at amortised cost using the effective interest method. Leases Costs in respect of operating leases are charged to the statement of comprehensive income and expense on a straight line basis over the lease term. Finance lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated so as to produce a constant periodic rate of interest on the remaining balance of the liability. Foreign currencies Assets and liabilities expressed in foreign currencies are translated into sterling at the exchange rate ruling on the balance sheet date. Transactions in foreign currencies are recorded at the exchange rate ruling as at the date of the transaction. All differences on exchange are taken to the statement of comprehensive income and expense in the year in which they arise. Revenue Revenue, which excludes value added tax, represents the invoiced value of goods and services supplied: where a service has been provided, but not yet invoiced, the amount is included in the financial statements as accrued income. Income from consultancy contracts, which are on a time hire basis, is recognised as the services are provided. Income from maintenance and fixed price consultancy and development contracts, is recognised over the life of the contract, using the percentage of completion method, and is deferred to the extent that it has not been earned. Taxation The charge for taxation is based on the profit or loss for the year as adjusted for disallowable items. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Full provision is made for deferred tax on all temporary differences resulting from the difference between the carrying value of an asset or liability and its tax base, and on tax losses carried forward indefinitely. Deferred tax assets are recognised to the extent that it is probable that the deferred tax asset will be recovered in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Pension costs Contributions to defined contribution plans are charged to the statements of comprehensive income and expense as the contributions accrue. Share-based payments Share-based incentive arrangements are provided to employees under the Group’s share option scheme. Share options granted to employees are valued at the date of grant using an appropriate option pricing model and are charged to operating profit over the performance or vesting period of the scheme. The annual charge is modified to take account of shares forfeited by employees who leave during the performance or vesting period and, in the case of non-market related performance conditions, where it becomes unlikely the option will vest. Provisions A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, expected future cash flows are discounted using a current pre-tax rate that reflects the risks specific to the liability. Calculations of these provisions require judgements to be made. The Group has provided for property dilapidation and vacant property as detailed in note 18. New standards and interpretations The Group has adopted with effect from 1 April 2016 certain mandatory new standards, amendments and interpretations. Adoption of these standards, amendments and interpretations did not have any impact on the results, cash flows or financial position of the Group or their presentation. Triad Group Plc Annual Report and Accounts 2017 | 29 Notes to the financial statements for the year ended 31 March 2017 Deferred tax asset A deferred tax asset of £361,000 (2016: £350,000) has been recognised in accordance with the accounting policy on page 29. A deferred tax asset of £732,000 (2016: £1,081,000) has not been recognised due to the assumptions and judgments made by management on the certainty and timing of future profits. 3. Financial risk management The Group uses financial instruments that are necessary to facilitate its ordinary purchase and sale activities, namely cash, bank borrowings in the form of a receivables finance facility and trade payables and receivables: the resultant risks are foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Group does not use financial derivatives in its management of these risks. The Board reviews and agrees policies for managing these risks and they are summarised below. These policies are consistent with last year. 3.1 Financial risk factors Foreign exchange risk There are a small number of routine trading contracts with both suppliers and clients in euros. In all such circumstances the “back to back” contracts with supplier and client will be in the same currency thereby mitigating the Group’s exposure to movements in exchange rates. Payments and receipts are made through a bank account in the currency of the contract therefore balances held in any foreign currency are to facilitate day to day transactions. With a functional currency of sterling there are the following foreign currency net assets: Group and company Note 2017 2016 Currency: Euros Net cash Trade and other receivables Trade and other payables £'000 £'000 15 14 16 37 25 (27) 35 47 20 (24) 43 Any change in currency rates would have no significant effect on results. There are also certain standards, amendments and interpretations which have been issued but which are not yet mandatory (and in some cases had not yet been adopted by the EU). The Group has not applied these standards and interpretations in the preparation of these financial statements. IFRS 15 ‘Revenue from Contracts’ was published in May 2014 and will be effective for the Group from 1 April 2018, replacing IAS 18 ‘Revenue’. The standard specifies how and when to recognise revenue. The impact of future adoption of IFRS 15 is under review. IFRS 16 ‘Leases’ was published in January 2016 and will be effective for the Group from 1 April 2019, replacing IAS 17 ‘Leases’ subject to EU endorsement. The standard requires lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset is of low value. The impact of future adoption of IFRS 16 is under review. The Directors do not anticipate that the adoption of other standards and amendments will have a material impact on the Group’s financial statements in the period of initial application. 2. Critical accounting estimates and judgements Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. 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 discussed below. Surplus property Provision has been made to meet the estimated liabilities of any property surplus to the requirements of the business. All ongoing costs net of estimated future rental income are charged to the provision. The provision is discounted, unless the effect of the time value of money is not material (see note 18). Management exercises judgement in estimating costs, rental incomes and the discount rate used in the calculation of the provision. Were the discount rate to increase or decrease by 1% this would increase or decrease net income and equity by £2,000. Were 50% of the vacant property to be let through to the end of the lease at a rent that was the same as the rent paid, this would increase net income and equity by £120,000. 30 | Triad Group Plc Annual Report and Accounts 2017 Notes to the financial statements for the year ended 31 March 2017 Interest rate risk Liquidity risk The Group’s interest rate risk arises from its borrowings, which are at a rate that fluctuates in relation to movements in bank base rate. This facility, as detailed in note 17, is secured by way of a debenture over all assets. At the year- end borrowing under this facility totalled £nil (2016: £nil). Cash balances are held in short term interest bearing accounts, repayable on demand: these attract interest rates which fluctuate in relation to movements in bank base rate. This maintains liquidity and does not commit the Group to long term deposits at fixed rates of interest. The Group’s liquidity risk arises from its management of working capital. The Group has a facility to borrow an amount up to 90% of approved trade debtors subject to a maximum limit of £2.5m. The facility may be terminated by either party with one month’s written notice. The Board receives regular cash flow and working capital projections to enable it to monitor its available headroom under this facility. At the balance sheet date these projections indicated that the Group expected to have sufficient liquid resources to meet its reasonably expected obligations. Maturity of financial liabilities is set out in notes 16 and 17. A 1% change in interest rates would have changed net income and equity by £1,000 (2016: £4,000). Capital risk management The Group’s capital comprises both borrowings and shareholders’ equity. Its objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to maximise shareholder value. To maintain or adjust the capital structure the Group may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares or alter the level of borrowings. 3.2 Fair value estimation The carrying value of financial assets and liabilities approximate their fair values. 4. Revenue The Group operates solely in the UK. All material revenues are generated in the UK. 53% (2016: 40%) of revenue was generated in the public sector. The largest single customer contributed 27% of Group revenue and was in the public sector. In 2016, the largest single customer contributed 24% of Group revenue and was in the private sector. Credit risk The Group is mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new customers before entering into contracts. Each new customer is assessed, using external ratings and relevant information in the public domain, before any credit limit is granted. In addition, trade receivables balances are monitored on a regular basis to minimise exposure to bad debts. The amount charged to the income statement during the year in respect of bad debts was £69,000 being 0.22% of revenue (2016: £12,000). The Group is also exposed to credit risk from accrued income, being revenue earned but not yet invoiced (note 14). Financial assets that are past due but not impaired are analysed in note 14. Each balance has been reviewed by management to assess its recoverability. The Group also has credit risk from cash deposits with banks (note 15). The Group’s maximum exposure to credit risk is: Trade and other receivables Accrued income Cash and cash equivalents Note 2017 2016 14 14 15 £'000 £'000 4,048 3,489 757 1,036 2,248 955 7,053 5,480 Triad Group Plc Annual Report and Accounts 2017 | 31 Notes to the financial statements for the year ended 31 March 2017 2017 £'000 60 5 – 489 44 69 53 4 2017 £'000 3 1 4 27 31 2016 £'000 46 38 69 479 50 12 50 5 2016 £'000 8 2 10 108 118 5. Profit from operations Profit from operations is stated after charging: Depreciation of owned assets Amortisation of intangible assets Impairment of intangible assets Operating leases for land and buildings Other operating leases Impairment of receivables Auditors' remuneration: Audit of financial statements: Group and company Taxation compliance services 6. Finance expense Bank interest payable Other interest payable Total interest expense Unwinding of discount on provisions Total finance expense 32 | Triad Group Plc Annual Report and Accounts 2017 Notes to the financial statements for the year ended 31 March 2017 7. Employees and directors Group and company Average number of persons (including executive Directors) employed 2017 Number 2016 Number Senior management Fee earners Sales Administration and finance Staff costs for the above persons (including executive Directors) Wages and salaries Social security costs Defined contribution pension costs Equity settled share-based payments Directors Emoluments Money purchase pension contributions 5 27 13 8 53 2017 £'000 3,291 381 320 2 3,994 2017 £'000 299 27 326 Two Directors (2016: two) had retirement benefits accruing under money purchase pension schemes. 8. Tax credit Current tax Current tax on profits for the year Research and development tax credit relating to earlier period Deferred tax Increased in recognised deferred tax asset Total tax credit for the year 2017 £'000 – (2) (11) (13) 4 26 14 8 52 2016 £'000 3,040 358 264 4 3,666 2016 £'000 280 27 307 2016 £'000 – – (350) (350) Triad Group Plc Annual Report and Accounts 2017 | 33 Notes to the financial statements for the year ended 31 March 2017 The differences between the actual tax credit for the year and the standard rate of corporation tax in the UK applied to profits for the year are as follows: Profit before tax Profit before tax multiplied by standard rate of corporation tax in the UK of 20% (2016: 20%) Research and development tax credit relating to earlier period Expenses not deductible for tax purposes Brought forward losses utilised against taxable profits Recognition of previously unrecognised deferred tax on losses Tax credit for the year Deferred tax asset The movement is deferred tax is as follows: At beginning of the year Utilisation against taxable profits Recognition of previously unrecognised deferred tax on losses (Decrease)/increase in relation to timing differences Rate change At end of the year 2017 £'000 1,521 304 (2) 8 – (323) (13) 2017 £'000 350 (312) 342 (15) (4) 361 2016 £'000 863 173 – 24 (197) (350) (350) 2016 £'000 – – 316 34 – 350 Deferred tax assets have been recognised in respect of tax losses where the Directors believe it is probable that the assets will be recovered. A deferred tax asset amounting to £732,000 (2016: £1,081,000) has not been recognised in respect of trading losses, which can be carried forward indefinitely. 9. Dividends Dividend paid on equity shares during the year: nil (2016: nil) Proposed final dividend on equity shares: 0.5p per share (2016: nil), totalling £77,448 (2016: nil). This dividend has not been accrued in the statements of financial position. Subject to shareholder approval at the Annual General Meeting, the Company will pay the proposed dividend on Tuesday 7 September 2017 to all shareholders on the register of members of the Company at the close of business on 11 August 2017 (the "Record Date"). 34 | Triad Group Plc Annual Report and Accounts 2017 Notes to the financial statements for the year ended 31 March 2017 10. Earnings per ordinary share Earnings per share have been calculated on the profit for the year divided by the weighted average number of shares in issue during the period based on the following: Profit for the year Average number of shares in issue Effect of dilutive options Average number of shares in issue plus dilutive options Basic earnings per share Diluted earnings per share 2017 £1,534,000 15,219,826 848,437 16,068,263 10.08p 9.55p 2016 £1,213,000 15,149,579 554,919 15,704,498 8.01p 7.72p 11. Intangible assets Group and Company Cost At 31 March 2015 Additions At 31 March 2016 Additions At 31 March 2017 Accumulated amortisation/impairment At 31 March 2015 Charge for the year Impairment At 31 March 2016 Charge for the year At 31 March 2017 Net book value At 31 March 2017 At 31 March 2016 Purchased software £'000 Internally developed software £'000 264 8 272 – 272 255 4 – 259 5 264 8 13 1,110 – 1,110 – 1,110 1,007 34 69 1,110 – 1,110 – – Total £'000 1,374 8 1,382 – 1,382 1,262 38 69 1,369 5 1,374 8 13 Triad Group Plc Annual Report and Accounts 2017 | 35 Notes to the financial statements for the year ended 31 March 2017 12. Property, plant and equipment Group and company Computer hardware £'000 Fixtures & fittings £'000 Motor vehicles £'000 Total £'000 Cost At 31 March 2015 Additions At 31 March 2016 Additions At 31 March 2017 Accumulated depreciation At 31 March 2015 Charge for the year At 31 March 2016 Charge for the year At 31 March 2017 Net book value At 31 March 2017 At 31 March 2016 302 29 331 39 370 256 21 277 28 305 65 54 706 13 719 35 754 650 15 665 22 687 67 54 42 – 42 – 42 20 10 30 10 40 2 12 1,050 42 1,092 74 1,166 926 46 972 60 1,032 134 120 The net carrying amount of property, plant and equipment includes £2,000 (2016: £12,000) in respect of assets held under finance leases. 13. Investments Company Investments are: (a) Generic Software Consultants Limited (“Generic”), a 100% subsidiary undertaking, in respect of both voting rights and issued shares, which is registered in England and Wales and has an issued share capital of 5,610 US$1 ordinary shares. The investment is stated in the Company’s books at £440 Up to 31 March 2009 Generic acted as an agent for the business, but did not enter into any transactions in its own right: its business was included within the figures reported by the Company. On 1 April 2009 the agency agreement was terminated and all business is now conducted directly by the parent company through its Generic business (b) Triad Special Systems Limited, Generic Online Limited, Zubed Geospatial Limited, Zubed Sales Limited, are all 100% subsidiaries which are registered in England and Wales. They are dormant companies, which have never traded. Each has a share capital of £1. The registered office of Triad Special Systems is Huxley House, Weyside Park, Catteshall Lane, Godalming, Surrey GU7 1XE. The registered office of the other subsidiaries is 37 Sunningdale House, Caldecotte Lake Drive, Caldecotte, Milton Keynes MK7 8LF. 36 | Triad Group Plc Annual Report and Accounts 2017 Notes to the financial statements for the year ended 31 March 2017 14. Trade and other receivables Group and company Trade receivables Less: provision for impairment of trade receivables Trade receivables-net Accrued income Trade and other receivables Prepayments 2017 £'000 4,081 (33) 4,048 757 4,805 246 5,051 2016 £'000 3,507 (18) 3,489 1,036 4,525 158 4,683 The fair value of trade and other receivables approximates closely to their book value. Trade receivables are normally on 30 days payment terms. As at 31 March 2017 trade receivables of £1,011,000 (2016: £603,000) were past due but not impaired. They relate to customers with no default history. The total number of customer ledger balances at 31 March 2017 was 51 (2016: 65). The ageing analysis of these receivables is as follows: Group and company Up to 30 days past due 30 to 60 days past due Over 60 days past due Movements on the provision for impairment of trade receivables is as follows: Group and company At beginning of the year Charged to income statement Credited to income statement Written off during the year At end of the year 2017 £'000 722 136 153 1,011 2017 £'000 18 67 – (52) 33 2016 £'000 518 63 22 603 2016 £'000 28 12 (22) – 18 Triad Group Plc Annual Report and Accounts 2017 | 37 Notes to the financial statements for the year ended 31 March 2017 The carrying amount of the Group’s trade and other receivables are denominated in the following currencies: Group and company Sterling Euros 15. Cash and cash equivalents Group and company Cash available on demand 2017 £'000 4,780 25 4,805 2017 £'000 2,248 The fair value of cash and cash equivalents approximates closely to their book value. The carrying amount of the Group’s cash and cash equivalents is denominated in the following currencies: Group and company Sterling Euros 2017 £'000 2,211 37 2,248 2016 £'000 4,505 20 4,525 2016 £'000 955 2016 £'000 908 47 955 For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash, as detailed above, net of bank borrowings repayable on demand. 16. Trade and other payables Trade payables Accruals Owed to subsidiary Deferred income Other taxation and social security 38 | Triad Group Plc Annual Report and Accounts 2017 Group Company 2017 £’000 2,568 652 – 3,220 82 400 3,702 2016 £’000 1,945 968 – 2,913 109 474 3,496 2017 £’000 2,568 652 5 3,225 82 400 3,707 2016 £’000 1,945 968 5 2,918 109 474 3,501 Notes to the financial statements for the year ended 31 March 2017 The maturity date of trade and other payables is as follows: Up to 3 months 3 to 6 months 6 to 12 months Group Company 2017 £’000 2,698 151 371 3,220 2016 £’000 2,637 156 120 2,913 2017 £’000 2,703 151 371 3,225 The fair value of trade and other payables approximates closely to their book value. The carrying amount of trade and other payables is denominated in the following currencies: Sterling Euros 17. Financial liabilities Group and company Current Finance lease obligations Non-current Finance lease obligations Group Company 2017 £’000 3,198 27 3,225 2017 £’000 3,193 27 3,220 2016 £’000 2,889 24 2,913 2017 £'000 11 – 2016 £’000 2,642 156 120 2,918 2016 £’000 2,894 24 2,918 2016 £'000 7 11 The fair value of bank borrowings approximates closely to their book value. The carrying amount of the Group’s financial liabilities is all denominated in sterling. Bank borrowings are in the form of a receivables finance facility to borrow an amount up to 90% of approved trade debtors subject to a maximum limit of £2.5m. This facility is secured by way of a debenture over all the assets of the Group. Bank borrowings are repayable upon demand. The balance at the year end was nil (2016: nil). The receivables finance facility is included as part of cash and cash equivalents for the purpose of the cash flow statement as it forms an integral part of the Group’s cash management. Triad Group Plc Annual Report and Accounts 2017 | 39 Notes to the financial statements for the year ended 31 March 2017 18. Provisions Group and company At 1 April 2016 Charged to income statement Utilised in year Unwinding of discount: passage of time (note 6) At 31 March 2017 Provision for vacant properties Provision for property dilapidation Other provision £’000 465 – (252) 27 240 £’000 £’000 86 25 (16) – 95 – 115 – – 115 Total £’000 551 140 (268) 27 450 The discount rate applied in the calculation of the provision for vacant properties is 5.95% (2016: 5.84%). The maturity profile of the present value of provisions is as follows: Group and company Current Non-current Provision for vacant properties Provision for property dilapidation Other provision Total £’000 £’000 £’000 £’000 240 – 240 50 45 95 115 – 115 405 45 450 The provision for vacant properties covers the anticipated future costs of rent, rates and other outgoings in respect of unoccupied property, less anticipated future rental income. It has been calculated on the basis of when the property is anticipated to be sub-let. These liabilities have been discounted therefore there is no material difference between the value of the provision recorded in the accounts and the fair value. The maturity profile of the carrying amount of this provision as at 31 March 2017 is as follows: Group and company In one year or less In more than one year, but not more than 2 years 2017 £'000 240 – 240 2016 £'000 238 227 465 The provision for property dilapidation covers the estimated future costs required to meet obligations under property leases to redecorate and repair property. 40 | Triad Group Plc Annual Report and Accounts 2017 Notes to the financial statements for the year ended 31 March 2017 19. Share capital Ordinary shares of 1p each Issued, called up and fully paid: Number Nominal value 2017 2016 15,489,579 £154,896 15,149,579 £151,496 During the year 340,000 1p ordinary shares were issued as a result of the exercise by employees of share options: Number 55,000 285,000 340,000 Option price Increase in share capital Increase in share premium 14.0p 13.5p £550 £2,850 £3,400 £7,150 £35,625 £42,775 20. Share-based payments At 31 March 2017, 878,000 options granted under employee share option schemes remain outstanding: Date option granted 7 August 2008 23 September 2011 18 September 2014 Number 78,000 420,000 380,000 Exercise price Period options exercisable 14.0p 13.5p 11.0p 7 August 2011 to 7 August 2018 23 September 2014 to 23 September 2021 18 September 2017 to 18 September 2024 Under the terms of the scheme, options vest after after a period of three years continued employment and are subject to the following performance condition: In any financial year commencing at least one year after the date of grant, the Company shall have achieved a positive basic earnings per share (subject to adjustment to exclude identified exceptional items), as reported in its audited annual accounts. The options outstanding at 31 March 2017 had a weighted average remaining contractual life of 5.5 years (2016: 6.1 years). Options have been valued using the Black-Scholes option-pricing model. No performance conditions were included in the fair value calculations. There were no options granted during the year (2016: nil). The total expense recognised in the year is £2,000 (2016: £4,000). Triad Group Plc Annual Report and Accounts 2017 | 41 Notes to the financial statements for the year ended 31 March 2017 A reconciliation of option movements over the year to 31 March 2017 is shown below: Outstanding at start of year Exercised Forfeited Lapsed Outstanding at end of year Exercisable at end of year 2017 2016 Number of options 1,268,000 (340,000) (50,000) Number of options Weighted average exercise price Pence 12.8 13.6 12.6 1,476,000 – (32,000) – – (176,000) 878,000 498,000 12.5 13.6 1,268,000 868,000 Weighted average exercise price Pence 17.4 – 15.5 51.5 12.8 13.6 There were 340,000 options exercised during the year. The above figures include options held by Directors which are set out in the Directors’ Remuneration Report on page 18. 21. Commitments The Group and Company had capital commitments totalling £nil at 31 March 2017 (31 March 2016: £nil). The future aggregate minimum lease payments under non-cancellable operating leases are: Not later than 1 year Later than 1 year and no later than 5 years 2017 £'000 518 164 682 2016 £'000 552 685 1,237 22. Related party transactions The Group and Company rents two of its offices under contracts expiring in 2018. The current annual rents of £395,000 were fixed, by independent valuation, at the last rent review in 2008. JC Rigg, a Director, has notified the Board that he has a 50% beneficial interest in these contracts. The balance owed at the year end was £nil (2016: £nil). Key management comprises the Board of Directors and their remuneration is set out in the Directors’ Remuneration Report on page 16. 42 | Triad Group Plc Annual Report and Accounts 2017 Five year record Consolidated income statement Years ended 31 March Revenue Gross profit Profit before tax Tax credit Profit after tax Retained profit for the financial year Basic earnings per share (pence) Balance sheet As at 31 March Non-current assets Current assets Current liabilities Non-current liabilities Net assets Share capital Share premium account Capital redemption reserve Retained earnings Equity shareholders’ funds 2017 £’000 30,912 5,000 1,521 13 1,534 1,534 10.08 2017 £’000 503 7,299 (4,118) (45) 3,639 155 605 104 2,775 3,639 2016 £’000 28,317 4,236 863 350 1,213 1,213 8.01 2016 £’000 483 5,638 2015 £’000 23,482 3,325 352 – 352 352 2.32 2015 £’000 236 4,401 2014 £’000 19,702 2,863 11 – 11 11 2013 £’000 18,880 2,704 28 – 28 28 0.07 0.18 2014 £’000 210 3,544 2013 £’000 233 3,343 (3,757) (3,387) (2,705) (2,513) (308) 2,056 151 562 104 1,239 2,056 (411) 839 151 562 104 22 839 (570) (665) 479 151 562 104 (338) 479 398 151 562 104 (419) 398 Triad Group Plc Annual Report and Accounts 2017 | 43 Shareholders’ information and financial calendar Share register Equiniti maintain the register of members of the Company. If you have any questions about your personal holding of the Company’s shares, please contact: Equiniti PO Box 4630 Aspect House Spencer Road Lancing West Sussex BN99 6QQ Telephone: 0870 6015366 If you change your name or address or if the details on the envelope enclosing the report, including your postcode, are incorrect or incomplete, please notify the registrar in writing. Shareholders’ enquiries If you have an enquiry about the Group’s business, or about something affecting you as a shareholder (other than queries which are dealt with by the registrar) you should contact the Company Secretary, by letter or telephone at the Company’s registered office. Company Secretary and registered office: Nick Burrows Triad Group Plc Weyside Park Catteshall Lane Godalming Surrey GU7 1XE Telephone: 01908 860222 Email: investors@triad.co.uk Website: www.triad.co.uk Financial calendar Annual General Meeting 23 August 2017 Final dividend: payment date 7 September 2017 Final dividend: record date 11 August 2017 Financial year ended 31 March 2018: expected announcement of results Half year Full year November 2017 June 2018 44 | Triad Group Plc Annual Report and Accounts 2017 Corporate information Executive Directors John Rigg, Chairman Nick Burrows Adrian Leer Non-executive Directors Alistair Fulton Steven Sanderson Secretary and registered office Nick Burrows Triad Group Plc Weyside Park Catteshall Lane Godalming Surrey GU7 1XE Telephone: 01908 860222 Email: investors@triad.co.uk Website: www.triad.co.uk Country of incorporation and domicile of parent company United Kingdom Legal form Public limited company Company number 2285049 Registered Auditors BDO LLP 55 Baker Street London W1U 7EU Brokers Arden Partners plc 125 Old Broad Street London EC2N 1AR Solicitors Freeths Davy Avenue Knowlhill Milton Keynes MK5 8HJ Bankers Lloyds Bank plc City Office 11–15 Monument Street London EC3V 9JA Registrars Equiniti Aspect House Spencer Road Lancing West Sussex BN99 6DA Triad Group Plc Annual Report and Accounts 2017 | 45 Godalming office: Weyside Park Catteshall Lane Godalming Surrey GU7 1XE Milton Keynes office: 37 Sunningdale House Caldecotte Lake Business Park Milton Keynes MK7 8LF 01908 278450 triad.co.uk