Tricon Residential
Annual Report 2009

Plain-text annual report

Tricorn Group plc Annual Report and Accounts 2009 Global Tubular Solutions Tricorn Group plc Tricorn Group plc Annual Report and Accounts 2009 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com www.tricorn.uk.com Tricorn Group plc is the holding company for a group of companies that develop and manufacture pipe solutions to a growing and increasingly international customer base. Each of the businesses is focussed on its targeted sectors and committed to world class operational performance within its area of expertise. With a strong emphasis placed on delivering value to their stakeholders the businesses are well positioned for further success. Our Markets Manipulated tubular assemblies in steel, plastic, stainless steel, titanium and plastic/steel hybrids for Power Generation, Oil and Gas, Marine, Civil aircraft, Military aircraft, Off highway, Niche automotive, Medical and Water. Our Focus To continue to drive for world class operational performance within individual businesses by: • Developing local management expertise • Cultivating close customer relationships • Implementation of lean manufacture To deliver value to our customers and shareholders through: • Elimination of waste • Overhead streamlining • Low cost country sourcing of components To ensure long-term growth through: • Selective acquisitions • Operating in sectors with strong underlying growth potential • Maintaining a clear focus on pipe solutions Global Tubular Solutions 01 The Year in Brief • Results significantly impacted by market downturn in second half of the year • The Group has acted decisively to reduce operating costs • Improved cash flow from operating activities • Cash and equivalents increased 80% to £713k • Further reductions in gearing and net debt “After a strong first half, the Group has acted decisively in reducing its operating costs in response to the sharp decline in trading conditions experienced in the later part of the year. With these actions nearing completion and with a strong focus on cash generation, the Group is well positioned to respond to the current challenging conditions and to take advantage of the upturn in demand when it occurs.” Nick Paul CBE Chairman Summary of Results Sales revenue Adjusted operating profit* Adjusted profit before tax* Adjusted earnings per share – basic* Restructuring costs * Before restructuring costs, intangible amortisation, share-based charges and interest rate swap charge. 2009 £’000 22,245 1,430 1,234 3.16p 239 2008 £’000 20,829 1,661 1,414 3.55p – change % 6.8 (13.9) (12.7) (11.0) – Contents 02 Chairman’s and Chief Executive’s Statement 04 The Management Team 05 Report of the Directors 08 Corporate Governance 11 Report of the Independent Auditor 13 Group Income Statement 14 Group Statement of Changes in Equity 15 Group Balance Sheet 16 Group Cash Flow Statement 17 Notes to the Financial Statements Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 02 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Chairman’s and Chief Executive’s Statement Nick Paul and Mike Welburn Performance in year ended 31 March 2009 After a strong performance in the first half of the year, the Group saw a significant deterioration in trading conditions through the later part of the year particularly impacting on its more profitable businesses. Even with decisive action to reduce costs, operating profit (before restructuring costs, intangible amortisation and share-based charges) decreased by 13.9% to £1,430k (2008: £1,661k) and adjusted basic earnings per share dropped 11.0% to 3.16p (2008: 3.55p). Notwithstanding the adverse economic conditions, the Group continues to strengthen its balance sheet and it is pleasing to report net debt reduced by 28% to £2,064k (2008: £2,870k) and interest cover* increased to 9.2 times (2008: 8.1 times). Cash in hand at the year end was £713k. Malvern Tubular Components (MTC) had seen record sales and orders through the first half of the year which more than compensated for the weaker demand experienced at Redman Fittings (Redman). However, as the second half developed, orders at MTC dropped by some 30% and the weak housing market saw the run rate at Redman reduce further. Sales at Redman ended the year down nearly £1.5m impacting upon operating profits by approximately £400k. Maxpower Automotive was acquired in June 2007. By the end of the first half of the current year, the vast majority of planned resourcing of components to low cost countries had been completed and significant gains had been made through improved productivity ensuring that the business was performing in line with expectations. Given that the final quarter saw markets drop by nearly 40% compared to earlier in the year, the business did well to return to underlying profitability by the close of the period. At RMDG Aerospace, demand levels have held up relatively well with output up in the final quarter when compared to earlier in the year. Nonetheless, given the current lower operating margins within this business and some softening in demand anticipated, restructuring of the business took place toward the end of the period. Focus for 2009 The Group highlighted in its interim results statement in December 2008 that it was starting to see some evidence of a slow down and its trading update of February 2009 and pre close statement in April 2009 confirmed that market conditions had deteriorated further. Whilst there is a degree of resilience in some markets, sales for the three months to the end of April 2009 are some 35% lower than the corresponding period last year and the Group is not anticipating any improvement in the near-term. Swift and decisive steps were taken to respond to the challenges that this deterioration in the Group’s end markets presented and the Group’s actions continue to be focussed in three key areas: 1. Capacity alignment The Group has rapidly re-sized the operations to reflect lower activity levels by a combination of headcount reduction, short time working arrangements and extended shutdowns. Order levels are reviewed on a weekly basis and hours adjusted accordingly. This approach has enabled productivity to be maintained and will enable the Group to respond quickly to any increase in demand. 2. Cost reduction In addition to ensuring direct head count is fully aligned to demand, the Group has focussed on significant reductions in overheads. Plans to combine back office functions within the Group, introduce shared services and reduce overheads have been accelerated and are now largely complete. Short time working for staff has also been implemented at Maxpower, MTC and Redman with corresponding reductions in pay. Bonus plans/merit awards have been suspended across the Group and all other spend remains under close scrutiny. The Group enters the current year with indirect headcount reduced by over 20% and overheads reduced by 28%. 3. Cash optimisation The Group is focussed on its balance sheet and has implemented even tighter controls around cash conversion. Significant inventory reduction across the Group is being targeted which, combined with capital expenditure targeted at less than 50% of depreciation, will ensure the retention of a strong balance sheet. Operating cash flow for the three months ended April 2009 was £240k, driven by the working capital reduction programme which is very much on track. People Phil Lee joined the Board as Group Finance Director in February 2009. Phil had previously been at Rolls-Royce for nine years working in a number of roles including Finance Director of Distributed Generation Systems. Jeffrey Rubins who had been a non-executive Director resigned from the Board in March 2009. We would like to thank Jeffrey for his considerable contribution. We would also like to thank all of our people for their continued hard work and enthusiasm. It is their energy, initiative and commitment that ensures Tricorn is able to respond effectively to the demanding environment we face. Outlook The global economic downturn has resulted in extremely challenging conditions across many of the Group’s markets. However the Group has responded swiftly to reduce its cost base and this combined with its focus on further strengthening the balance sheet will ensure the Group is well placed as market conditions improve. * Interest cover = Operating profit before amortisation, depreciation, share-based remuneration and restructuring costs divided by interest cost excluding derivatives charges. “Our focus on further strengthening the balance sheet will ensure that we are well placed as market conditions improve.” 03 FINANCIAL REVIEW Income statement Gearing, measured as long-term debt to equity, reduced to 16.0% from 26.6% in 2007/08. Despite the adverse market conditions, the Group delivered a good set of The Group’s term loan is scheduled for final repayment in 2012, whilst the results with revenue increasing by £1,416k (6.8%) to £22,245k. The 2007/08 invoice discounting facility is due for renewal in November 2009, and the results did not include a full year’s revenue from Maxpower following its Directors do not expect any issues in renewing this facility. Both are subject to acquisition in June 2007. Excluding Maxpower from both years, underlying covenants within which the Group is comfortably performing. turnover increased by £182k. Operating profit was down £159k (12.9%) to £1,073k after taking account with good profit to cash conversion and significant inventory reductions being of restructuring costs, intangible asset amortisation and share-based charges. key to delivery. Continued focus will be placed on generating strong cash flows during 2009/10, Nick Paul CBE Chairman 15 June 2009 Mike Welburn Chief Executive 15 June 2009 During the year, the Group undertook a strategic review of its operations and right sized its businesses in the light of economic conditions, which resulted in one-off restructuring costs of £239k. Net interest charges for the year were £296k, which is £37k higher than the 2007/08 charge. However, included within this figure is £100k (2008: £12k) relating to an interest rate swap fair value adjustment on the Group’s borrowing arrangements. This adjustment is a non-cash, accounting adjustment required under IAS 39 and does not, therefore, reflect the underlying trading performance of the Group. Excluding this adjustment, the Group’s net interest charge reduced by £51k (20.6%) to £196k. The resultant profit before tax finished the year at £777k (2008: £973k). Basic EPS fell to 1.77p (2008: 2.56p); after adjusting for one-off costs EPS stood at 3.16p (2008: 3.55p). Balance sheet Total fixed assets of the Group reduced £150k to £2,884k, largely as a result of the amortisation of intangible assets. The Group continues to invest in capital programmes that deliver improved operational efficiencies, and capital expenditure investment for 2008/09 totalled £347k including those funded by lease finance. Net working capital increased £3k to £4,581k. Overall inventory increased in the year by £270k. However, the Group committed to reducing inventory levels during the second half of 2008/09, and throughout 2009/10, and this year on year increase masks an actual second half reduction of £271k. The net debt position of the Group reduced by £806k in the year from £2,870k to £2,064k. With solid cash generation in the year cash and cash equivalents increased by £316k to £713k, whilst steady progress was made in reducing borrowing on the term loan and invoice discounting facility. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 04 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com The Management Team Board of Directors Executive Directors Non-executive Directors Mike Welburn (Age 46) Chief Executive Officer Joined Tricorn in April 2003, appointed to the Board in March 2004 and as Chief Executive in November 2007. He had previously been with IMI plc for 18 years where he had held a number of senior roles within the Fluid Power Division. This included responsibility for European Operations and Global OEM Strategy. Phil Lee (Age 38) Group Finance Director Joined Tricorn in January 2009 and appointed to the Board in February 2009. He had previously been at Rolls-Royce plc for 9 years working in a number of roles including Finance Director of Distributed Generation Systems (part of the Rolls-Royce Energy business). Prior to Rolls- Royce he had been with National Grid Plc. Noel (“Nick”) Silverthorne (Age 62) Group Technical Director Over 25 years of engineering experience with subsidiary companies MTC and Redman Fittings and had been Managing Director of MTC for over 20 years. He is leading the Group’s development of material sourcing from low cost economies, a key element in the Board’s strategy. Nick Paul CBE (Age 64) Non-executive Chairman Appointed to the Board as non-executive Chairman in October 2001. Member of the Remuneration and Audit Committees, and Chairman of the Nomination Committee. He has a wealth of international business experience and had previously been deputy Chief Executive of IMI plc. He is also Chairman of the Regional Development Agency, Advantage West Midlands, and Chairman of Midlands Expressway Limited. In the past he has been Chairman of the West Midlands CBI and non-executive Director of John Laing Homes plc and Sig plc. Roger Allsop (Age 65) Non-executive Director Purchased MTC in 1984 and Chief Executive of Tricorn up to 2002 after which he became a non-executive Director. Chairman of the Audit and Remuneration Committees and a member of the Nomination Committee. He was previously managing Director of Westwood Dawes plc and is currently a non- executive Director of Netcall plc. Committees Audit Committee Roger Allsop – Chairman Nick Paul Nomination Committee Nick Paul – Chairman Roger Allsop Remuneration Committee Roger Allsop – Chairman Nick Paul Michael Greensmith – Secretary Michael Greensmith – Secretary Michael Greensmith – Secretary Report of the Directors 05 The Directors present their annual report together with the audited financial statements for the Group for the year ended 31 March 2009. Principal activity Tricorn Group plc is the parent company of a group of specialist engineering subsidiaries (“Group”) whose activities incorporate high precision tube manipulation, systems engineering and specialist fittings. Business review A review of the progress of the Group during the year and its prospects for the future are included in the Chairman’s report. There was a profit for the year after taxation amounting to £585k (2008: £799k). The Directors do not recommend the payment of a dividend. Financial risks and management The Group’s principal financial instruments comprise a bank loan, an invoice discounting facility, hire purchase and finance lease contracts, cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial instruments such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, commodity price risk, foreign currency risk, and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. Interest rate risk The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt. The Group’s exposure to interest rate fluctuations on its borrowings is managed by the use of both fixed and floating facilities. The Group finances specific large plant acquisitions via hire purchase or finance lease contracts. An interest rate swap has been entered into to fix the interest rate on the Group’s borrowings. Liquidity risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of deposits, bank loans, overdrafts, invoice discounting and finance lease and hire purchase contracts. Money on deposit is held on treasury reserve, partly to finance working capital and also to help finance future acquisitions. Commodity price risk The Group’s exposure to the price of steel is high, therefore selling prices are monitored regularly to reduce the impact of such risk and opportunities to reduce material costs are explored constantly. The Group has partly responded to this risk by sourcing materials in low cost countries. The Group would also look to recharge any increased cost of commodities to customers. Foreign currency risk Certain purchases and sales are made in foreign currencies. In order to minimise the impact of currency movements the Group utilises short-term forward currency contracts. Foreign exchange differences on retranslation of foreign currency assets and liabilities are taken to the Group income statement. Credit risk The Group trades with only recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit vetting procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 06 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Report of the Directors continued Directors The present membership of the Board is set out below. N C Paul CBE R Allsop M I Welburn P Lee (Appointed 25 February 2009) N Silverthorne J Rubins (Resigned 31 March 2009) Share capital Details of the Tricorn Group plc (“Company”) share capital, are given in note 25 to the financial statements. The Group’s policy for managing capital and financing to support the activities of the Group is detailed in note 23 to the financial statements. Substantial shareholdings The only interests in excess of 3% of the issued share capital of the Company, which have been notified as at 31 May 2009, were as follows: R Allsop Hargreave Hale Limited Standard Life Investment Limited J Rubins Rock Nominees Limited (account 500112) Octopus Investment Limited J Cooper Health and safety Ordinary shares of 10p each Number 11,220,000 6,714,000 2,128,229 1,500,000 1,370,150 1,350,000 1,200,000 Percentage of capital % 33.98 20.33 6.45 4.54 4.15 4.09 3.63 The Group recognises its responsibility to ensure that its employees work in as safe a working environment as possible. Checks are implemented to ensure its clients comply with Health and Safety legislation. Payment to suppliers It is the Group’s policy to agree appropriate terms and conditions for its transactions with suppliers by means ranging from standard terms and conditions to individually negotiated contracts and to pay suppliers according to agreed terms and conditions, provided that the supplier meets those terms and conditions. The Group does not have a standard or code which deals specifically with the payment of suppliers. Group trade payables at the year end amount to 43 days of average supplies (2008: 76 days). The Company trade payables are 41 days (2008: 60 days). 07 Directors’ responsibilities for the Group financial statements The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and International Financial Reporting Standards as adopted by the European Union (IFRSs). Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss 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 estimates that are reasonable and prudent – – state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records, for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as the Directors are aware: – – there is no relevant audit information of which the Group’s auditor is unaware; and the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Auditor Grant Thornton UK LLP offer themselves for reappointment as auditor in accordance with section 489 of the Companies Act 2006. On behalf of the Board M I Welburn Director 15 June 2009 Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 08 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Corporate Governance Directors The Directors support the concept of an effective Board leading and controlling the Group. The Board is responsible for approving the Group’s policy and strategy. It meets on a regular basis and has a schedule of matters specifically reserved to it for decision. Management supply the Board with appropriate and timely information and the Directors are free to seek any further information they consider necessary. All Directors have access to advice from the Company Secretary and independent professional advice at the Company’s expense. The Board consists of three executive Directors, who hold the key operational positions in the Group and two non-executive Directors, who bring a breadth of experience and knowledge. This provides a balance whereby the Board’s decision making cannot be dominated by an individual. The Chairman of the Board is N C Paul and the other non-executive Director is R Allsop. The Board approve the strategic decisions of the Group. The Group’s business is run on a day to day basis by M I Welburn, P Lee and N Silverthorne, with M I Welburn having overall responsibility as the Chief Executive. Relations with shareholders The Group values the views of its shareholders and recognises their interest in the Group’s strategy and performance. The Annual General Meeting will be used to communicate with private investors and they are encouraged to participate. The Directors will be available to answer questions. Separate resolutions will be proposed on each issue so that they can be given proper consideration and there will be a resolution to approve the annual report and accounts. Internal control The Board is responsible for maintaining a strong system of internal control to safeguard shareholders’ investment and the Group’s assets and for reviewing its effectiveness. The system of internal control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. An audit committee has been established comprising the non-executive Directors. Following the resignation of J Rubins as a non-executive Director, this is now chaired by R Allsop. The committee meets at least twice per annum and is responsible for ensuring that the financial performance of the Group is properly monitored and reported on as well as meeting the auditors and reviewing any reports from the auditors regarding accounts and internal control systems. The Board has considered the need for an internal audit function but has decided the size of the Group does not justify it at present. However, it will keep the decision under annual review. Board structure The key features of the Group’s system of governance are as follows: – – – – the Group is headed by an effective Board, which leads and controls the Group; there is a clear division of responsibilities in running the Board and running the Group’s business; the Board includes a balance of executive and non-executive Directors; and the Board receives and reviews on a timely basis financial and operating information appropriate to be able to discharge its duties. 09 Going concern After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Detailed cash flow forecasts have been prepared which highlight that the Group has sufficient cash headroom to support its activities. The forecasts also highlight that the financial covenants included in the bank loan agreement will be fully complied with. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements. Directors’ remuneration The Board recognises that Directors’ remuneration is of legitimate concern to the shareholders and is committed to following current best practice. The Group operates within a competitive environment, performance depends on the individual contributions of the Directors and employees and it believes in rewarding vision and innovation. Policy on executive Directors’ remuneration Detail of individual Directors’ remuneration is set out in note 5 to the financial statements. The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain Directors of the calibre necessary to maintain the Group’s position and to reward them for enhancing shareholder value and return. It aims to provide sufficient levels of remuneration to do this, but to avoid paying more than is necessary and reflects the Directors’ responsibilities. A separate remuneration committee has been established comprising the non-executive Directors and is chaired by R Allsop. Basic annual salary The Remuneration Committee reviews each executive Director’s basic salary annually. In deciding upon appropriate levels of remuneration the Board believes that the Group should offer levels of base pay reflecting individual responsibilities and commensurate with similar jobs in other business sectors. Annual bonus payments, benefits and pension arrangements M I Welburn and P Lee participate in a performance related bonus arrangement through Tricorn Group plc. N Silverthorne shares in a performance related bonus arrangement within Malvern Tubular Components Limited. M I Welburn, P Lee and N Silverthorne benefit from the provision of private medical insurance, the provision of company cars and participate in a contributory pension scheme. R Allsop and N C Paul receive no bonus, pension or benefits in kind. Notice periods M I Welburn and N Silverthorne have service agreements with the Group which are terminable on not less than 12 months written notice given by either party to the other at any time. P Lee has a service agreement with the Group which is terminable on not less than 6 months written notice given by either party to the other at any time. N C Paul and R Allsop have letters of appointment with the Group which are terminable upon 6 months written notice being given by either party. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 10 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Corporate Governance continued Share option incentives The Company has adopted a number of individual unapproved and enterprise management scheme share option agreements to motivate and retain key personnel of the Group. At 31 March 2009 the following options were held by the Directors: At beginning Lapsed Granted Exercised of period during the year during the year during the year At end of year Exercise price Number Number Number Number Number £ 200,000 306,339 375,000 750,000 200,000 150,000 193,661 – – – – – – – – – – – – – – – – 500,000 – – – – – – – – 200,000 306,339 375,000 750,000 200,000 150,000 193,661 500,000 0.30 0.1775 0.40 0.10 0.10 0.20 0.1775 0.10 Unapproved share options N C Paul CBE M I Welburn M I Welburn Enterprise management scheme (EMI) options M I Welburn N Silverthorne N Silverthorne M I Welburn P Lee Unapproved share options N C Paul’s option is exercisable between 1 January 2002 and 31 December 2009. The unapproved share options granted on 30 November 2006, over 306,339 shares for M I Welburn are to be exercisable at 17.75p per share once the mid-market price has been maintained at 30p per share or greater for ten consecutive working days – this has been attained. The unapproved options granted over 375,000 shares for M I Welburn are exercisable at 40p per share between 30 November 2007 and 29 November 2014. EMI options M I Welburn has three separate EMI share options. The first option is over 500,000 ordinary shares which is exercisable at 10p per share after 12 months continuous employment and will remain in force for ten years. The second option over 250,000 shares is to be exercisable at 10p per share once the mid-market price has been maintained at 20p per share or greater for ten consecutive working days. The third option, granted on 27 July 2006 over 193,661 shares is to be exercisable at 17.75p per share once the mid-market price has been maintained at 30p per share or greater for ten consecutive working days. N Silverthorne was granted an EMI option on his appointment as a Director of the Company, effective 1 December 2004. This option is over 200,000 ordinary 10p shares and will remain in force for ten years. He also had 150,000 EMI options prior to his appointment as a Director which are exercisable at 20p per share. None of the options have performance conditions attached to them. P Lee was granted an EMI option over 500,000 shares at 10p on commencement of his employment. The first 250,000 are exercisable after 3 months continuous employment. The second 250,000 are exercisable after a further 12 months continuous employment. This option is in force for 10 years and does not have performance conditions attached to it. The exercise periods for share options were set by the Remuneration Committee in order to incentivise and retain key executives. All share disposals will be limited to one third of the option in any given year without prior Board approval. The market price of the Company’s shares at 31 March 2009 was 6.5p (31 March 2008: 34.0p) and the range during the year was 6.5p to 35.5p (2008: 3.75p to 44.5p). 11 Report of the Independent Auditor to the Members of Tricorn Group plc We have audited the Group financial statements of Tricorn Group plc for the year ended 31 March 2009 which comprise the Group income statement, the Group statement of changes in equity, the Group balance sheet, the Group cash flow statement and notes 1 to 29. These Group financial statements have been prepared under the accounting policies set out therein. We have reported separately on the parent Company financial statements of Tricorn Group plc for the year ended 31 March 2009. This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. 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. Respective responsibilities of Directors and auditors The Directors’ responsibilities for preparing the Annual Report and the Group financial statements in accordance with United Kingdom law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors’ Responsibilities for the Group financial statements. Our responsibility is to audit the Group financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the Group financial statements give a true and fair view and whether the Group financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Report of the Directors is consistent with the financial statements. The information given in the Report of the Directors includes that specific information presented in the Chairman’s and Chief Executive’s Statement that is cross referred from the Business Review section of the Report of the Directors. In addition we report to you if, in our opinion, we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed. We read other information contained in the Annual Report and consider whether it is consistent with the audited Group financial statements. The other information comprises only the Chairman’s and Chief Executive’s Statement, the Report of the Directors and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Group financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the Group financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 12 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Report of the Independent Auditor to the Members of Tricorn Group plc continued We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Group financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Group financial statements. Opinion In our opinion: l the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 31 March 2009 and of its profit for the year then ended; l the Group financial statements have been properly prepared in accordance with the Companies Act 1985; and l the information given in the Report of the Directors is consistent with the financial statements. Separate opinion in relation to IFRSs As explained in Note 2 to the Group financial statements, the Group in addition to complying with its legal obligation to comply with IFRSs as adopted by the European Union, has also complied with the IFRSs as issued by the International Accounting Standards Board. In our opinion the Group financial statements give a true and fair view, in accordance with IFRSs, of the state of the Group’s affairs as at 31 March 2009 and of its profit for the year then ended. Grant Thornton UK LLP Registered Auditor Chartered Accountants Birmingham 15 June 2009 Group Income Statement for the year ended 31 March 2009 REVENUE Cost of sales GROSS PROFIT Distribution costs Administration costs OPERATING PROFIT BEFORE AMORTISATION, SHARE-BASED REMUNERATION AND RESTRUCTURING COSTS Amortisation Share-based payment charge Restructuring costs OPERATING PROFIT Finance income Finance costs PROFIT BEFORE TAX Income tax expense PROFIT FOR THE YEAR ATTRIBUTABLE TO: Equity holders of the parent EARNINGS PER SHARE: Basic earnings per share Diluted earnings per share All of the activities of the Group are classed as continuing. The accompanying notes form an integral part of these financial statements. 13 2009 £’000 22,245 (14,750) 7,495 (947) (5,118) Restated 2008 £’000 20,829 (13,672) 7,157 (912) (4,584) 1,430 1,661 Notes 3 3 12 6 4 (118) – (239) 3/4 1,073 8 8 9 3 10 10 20 (316) 777 (192) 585 585 1.77 1.71 (94) (335) – 1,232 10 (269) 973 (174) 799 799 2.56 2.27 Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 14 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Group Statement of Changes in Equity for the year ended 31 March 2009 BALANCE AT 1 APRIL 2007 Profit for the year Total recognised income and expense for the year Share-based payment charge Share options exercised in year Issue of new shares BALANCE AT 31 MARCH 2008 Profit for the year Total recognised income and expense for the year Share capital £’000 3,102 – – – – 200 3,302 – – Share premium £’000 1,371 – – – – 77 1,448 – – Merger reserve £’000 1,388 – – – – – 1,388 – – Share-based payment reserve £’000 52 – – 335 (194) – 193 – – Profit and loss account £’000 (3,231) 799 799 – 194 – (2,238) 585 585 BALANCE AT 31 MARCH 2009 3,302 1,448 1,388 193 (1,653) The accompanying notes form an integral part of these financial statements. Total £’000 2,682 799 799 335 – 277 4,093 585 585 4,678 15 Notes 11 12 13 15 16 17 19 24 20 20 18 25 2009 £’000 591 911 1,382 2,884 3,817 3,661 713 8,191 2008 £’000 591 1,029 1,414 3,034 3,547 5,728 397 9,672 11,075 12,706 (2,897) (112) (2,029) (292) (5,330) (748) (319) (1,067) (6,397) 4,678 3,302 1,448 1,388 193 (1,653) 4,678 (4,697) (12) (2,180) (273) (7,162) (1,087) (364) (1,451) (8,613) 4,093 3,302 1,448 1,388 193 (2,238) 4,093 Group Balance Sheet at 31 March 2009 ASSETS NON-CURRENT Goodwill Other intangible assets Property, plant and equipment CURRENT Inventories Trade and other receivables Cash and cash equivalents TOTAL ASSETS LIABILITIES CURRENT Trade and other payables Financial liabilities at fair value through the income statement Borrowings Corporation tax NON-CURRENT Borrowings Deferred tax TOTAL LIABILITIES NET ASSETS EQUITY Share capital Share premium account Merger reserve Share-based payment reserve Profit and loss account TOTAL EQUITY The financial statements were approved by the Board of Directors on 15 June 2009. M I Welburn Director The accompanying notes form an integral part of these financial statements. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 16 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Group Cash Flow Statement for the year ended 31 March 2009 CASH FLOWS FROM OPERATING ACTIVITIES Profit after taxation Adjustment for: Depreciation Net finance costs in income statement Profit on sale of plant and equipment Amortisation charge Share-based charge Taxation expense recognised in income statement Decrease/(increase) in trade and other receivables (Decrease)/increase in trade payables and other payables Increase in inventories Cash generated from operations Interest paid Income taxes paid NET CASH FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiaries Cash acquired with subsidiary undertaking Purchase of plant and equipment Proceeds from sale of plant and equipment Interest received NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Issue of ordinary share capital Repayment of short-term borrowings Proceeds from bank borrowing Fees in relation to bank borrowings Repayment of bank borrowings Payment of finance lease liabilities NET CASH (USED IN)/GENERATED BY FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR The accompanying notes form an integral part of these financial statements. 2009 £’000 585 379 296 – 118 – 192 1,889 (1,600) (270) 1,589 (216) (218) 1,155 (195) – (263) – 20 (438) 178 (140) – – (300) (139) (401) 316 397 713 2008 £’000 799 344 259 (2) 94 335 174 (918) 1,064 (685) 1,464 (257) (208) 999 (1,537) 28 (148) 2 10 (1,645) 100 (244) 1,400 (37) (100) (111) 1,008 362 35 397 17 Notes to the Financial Statements for the year ended 31 March 2009 1 GENERAL INFORMATION Tricorn Group plc and subsidiaries’ (the “Group”) principal activities include the development and manufacturing of pipe solutions to a growing and increasingly international customer base. The Group’s customer base includes major blue chip companies with world-wide activities in key market sectors, including Pipefittings, Power Generation, Aerospace, Off Highway, and Niche Automotive. The products supplied to the last four sectors share common means of production and are classified as ‘Tube Manipulation’. Refer to note 3 for further information about the Group’s operating segments. Tricorn Group plc is the Group’s ultimate parent company. It is incorporated and domiciled in the United Kingdom. The address of Tricorn Group plc’s registered office, which is also its principal place of business, is Spring Lane, Malvern, Worcestershire, WR14 1DA. Tricorn Group plc’s shares are listed on the Alternative Investment Market of the London Stock Exchange. These consolidated financial statements have been approved for issue by the Board of Directors on 15 June 2009. Amendments to the financial statements are not permitted after they have been approved. 2 ACCOUNTING POLICIES Basis of preparation These consolidated financial statements have been prepared under the required measurement bases specified under International Financial Reporting Standards (IFRS) and in accordance with applicable IFRS as adopted by the European Union and IFRS as issued by the International Accounting Standards Board. Going concern After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Detailed cash flow forecasts have been prepared which highlight that the Group has sufficient cash headroom to support its activities. The forecasts also highlight that the financial covenants included in the bank loan agreements will be fully complied with. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements. Overall considerations The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarised below. The consolidated financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below. The accounting estimates and assumptions are consistent with the Group’s latest approved budget forecast where applicable. Judgements are based on the information available at each balance sheet date. All estimates are based on the best information available to management. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 18 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 2 ACCOUNTING POLICIES continued Standards and interpretations not yet applied by the Group The following new Standards and Interpretations, which are yet to become mandatory, have not been applied in the Group’s financial statements. l l l l l l l IAS 1 Presentation of Financial Statements (revised 2007) – effective from 1 January 2009 IAS 23 Borrowing Costs (revised 2007) – effective from 1 January 2009 IAS 27 Consolidated and Separate Financial Statements (Revised 2008) – effective from 1 July 2009 IFRS 3 Business Combinations (Revised 2008) – effective from 1 July 2009 IFRS 8 Operating Segments – effective from 1 January 2009 Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation – effective from 1 January 2009 Amendment to IFRS 2 Share-based Payment – Vesting Conditions and Cancellations – effective from 1 January 2009 Based on the Group’s current operations and accounting policies, management does not expect material impacts on the Group’s financial statements when the standards and interpretations become effective except for the presentational and reporting requirements of IAS 1 Presentation of Financial Statements (revised 2007) and IFRS 8 Operating segments, which the Directors are reviewing for disclosure in the 30 September 2009 interim financial statements. Significant accounting estimates and judgements Certain estimates and judgements need to be made by the Directors of the Group which affect the results and position of the Group as reported in the financial statements. Estimates and judgements are required for example as at the reporting date that all liabilities have been settled and certain assets/liabilities are recorded at fair value which requires a number of estimates and assumptions to be made. The major areas for estimation within the financial statements are as follows: l l l l performance of impairment reviews to assess the carrying value of goodwill valuation of interest rate swaps estimates of debtor and inventory recoverability preparation and review of forecasts to support the going concern basis. There are no major areas for judgements within the financial statements which are not covered by the accounting policies detailed. Prior year adjustment The income statement for 31 March 2008 has been restated to reduce cost of sales by £913,000 and increase administration costs by £913,000. This has been done to better reflect the direct costs of production of the Group. There has been no effect on retained profit or the net assets of the Group as at 31 March 2008 due to this adjustment. Consolidation and investments in subsidiaries Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group obtains and exercises control through voting rights. The consolidated financial statements of the Group incorporate the financial statements of the parent Company as well as those entities controlled by the Group by full consolidation. 19 2 ACCOUNTING POLICIES continued Acquired subsidiaries are subject to application of the purchase method. This involves the revaluation at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their revalued amounts, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Goodwill represents the excess of acquisition cost over the fair value of the Group’s share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Intra-group balances and transactions, and any unrealised gains or losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Segment reporting A business segment is a group of assets and operations engaged in providing products and services that are subject to risks and returns that are different from those other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns which are different from those of segments operating in other economic environments. Business combinations completed prior to date of transition to IFRS The Group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations prior to the date of transition to IFRS, 1 April 2006. Accordingly the classification of the combination (acquisition, reverse acquisition or merger) remains unchanged from that used under UK GAAP. Assets and liabilities are recognised at date of transition if they would be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Deferred tax and minority interest are adjusted for the impact of any consequential adjustments after taking advantage of the transitional provisions. Revenue recognition Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied and services provided, excluding VAT and trade discounts. Revenue is recognised upon the performance of services or transfer of risk to the customer. The Group recognises revenue when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee fixed and determinable; and collectability is reasonably assured. Amounts received are recognised immediately as revenue where there are no substantial risks, there are no ongoing performance obligations and amounts received are not refundable. Amounts are deferred over an appropriate period where these conditions are not met. Restructuring costs Restructuring costs which have been incurred in the current year which the Group does not expect to incur in a normal year have been separately disclosed on the face of the income statement. Inventories Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Cost of work in progress and finished goods includes materials, direct labour and an attributable proportion of manufacturing overheads based on normal levels of activity. Provisions are made against inventories where there is evidence that the carrying amount has fallen below recoverable amount. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 20 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 2 ACCOUNTING POLICIES continued Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Impairment The Group’s goodwill, other intangible assets and plant and equipment are subject to impairment testing. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management controls the related cash flows. Goodwill with an indefinite useful life is tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets or cash-generating units carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value in use, based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Intangible assets acquired as part of a business combination In accordance with IFRS 3 Business Combinations, an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date. The fair value of the intangible asset reflects market expectations about the probability that the future economic benefits embodied in the asset will flow to the Group. Where an intangible asset might be separable, but only together with a related tangible or intangible asset, the Group of assets is recognised as a single asset separately from goodwill where the individual fair values of the assets in the Group are not reliably measurable. Where the individual fair value of the complementary assets are reliably measurable, the Group recognises them as a single asset provided the individual assets have similar useful lives. Intangible amortisation Intangible assets are amortised over the following periods: – Brand names – Customer relationships 15 years 5 years Foreign currencies These financial statements are presented in UK Sterling which is the presentational currency of the Group. Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Exchange differences are dealt with through the income statement. 21 2 ACCOUNTING POLICIES continued Plant and equipment Plant and equipment and motor vehicles are carried at acquisition cost less subsequent depreciation and impairment losses. Depreciation is charged on these assets, after adjusting for their residual values, on a straight line basis over the estimated useful economic life of each asset. The useful lives of plant, equipment and motor vehicles can be summarised as follows: Plant and equipment Motor vehicles 3 to 10 years 5 years Leases The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability, irrespective of whether some of these lease payments are payable up-front at the date of inception of the lease. Subsequent accounting for assets held under hire purchase and finance lease agreements, i.e. depreciation methods and useful lives, correspond to those applied to comparable acquired assets. The corresponding hire purchase and finance leasing liability is reduced by lease payments less finance charges, which are expensed to finance costs. Finance charges represent a constant periodic rate of interest on the outstanding balance of the hire purchase and finance lease liability. All other leases are treated as operating leases. Payments on operating lease agreements are recognised as an expense on a straight-line basis. Associated costs, such as maintenance and insurance, are expensed as incurred. The Group does not act as a lessor. Taxation Current income tax assets and/or liabilities comprise those obligations to, or claim from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. However, in accordance with the rules set out in IAS 12, no deferred taxes are recognised in conjunction with the initial recognition of goodwill on acquisitions. This applies also to temporary differences associated with shares in subsidiaries if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to equity. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 22 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 2 ACCOUNTING POLICIES continued Employee benefits Defined contribution pension scheme Pensions to employees are provided through contributions to individual personal pension plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions after payment of the fixed contribution. The contributions recognised in respect of personal pension plans are expensed as they fall due. Liabilities and assets may be recognised if underpayment or prepayment has occurred and are included in current liabilities or current assets as they are normally of a short-term nature. Other employee benefits Short-term employee benefits, including holiday entitlement are included in current pension and other employee obligations at the undiscounted amount that the Group expects to pay as a result of the unused entitlement. Financial assets The Group’s financial assets include cash, cash equivalents and trade and other receivables. All financial assets are recognised when the entity becomes party to the contractual provisions of an instrument. All financial assets are initially recognised at fair value, plus transaction costs, and are subsequently measured at amortised cost using the effective interest rate. Interest and other cash flows resulting from holding financial assets are recognised in profit or loss when received, regardless of how the related carrying amount of financial assets is measured. Trade receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the assets’ carrying amount and the present value of estimated future cash flows. No general provisions are made against trade receivables. Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand and overdrafts as well as short-term highly liquid investments such as bank deposits. Equity Share capital is determined using the nominal value of shares that have been issued. The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. The merger reserve represents the difference between the issue price and the nominal value of shares issued as consideration for the acquisition of a subsidiary undertaking when the Company has taken advantage of merger relief. The profit and loss account includes all current and prior period results as disclosed in the income statement. Share-based employee remuneration All share-based payment arrangements are recognised in the consolidated financial statements. The Group operates equity-settled share-based remuneration plans for remuneration of its employees. 23 2 ACCOUNTING POLICIES continued All employee services received in exchange for the grant of any share-based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value of the share options awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). All share-based remuneration is ultimately recognised as an expense in the income statement with a corresponding credit to the share-based payment reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment is made to the expense recognised in prior periods if fewer share options ultimately are exercised than originally estimated. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium. Financial liabilities The Group’s financial liabilities include trade and other payables, bank borrowings, invoice discounting facilities and finance lease and hire purchase agreements. Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest related charges are recognised as an expense in “finance cost” in the income statement. Financial liabilities are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective rate of interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Derivative contracts All derivatives are recognised at fair value through the income statement. The value of the derivative is reassessed and fair valued at each reporting date. The only material derivative contract in existence during the period relates to an interest swap on the Group’s bank borrowings. The Group, from time to time, enters into forward currency swap agreements which are classified as derivative contracts. However, the value of these contracts throughout the period and at the year end are immaterial and as such they have not been valued at 31 March 2009 or 2008. Research costs Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 24 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 3 SEGMENTAL REPORTING The Group operates two main business segments: l l Tube Manipulation: the activities undertaken by Tube Manipulation comprise the supply of steel, plastic, titanium, and hybrid tube fabrications and fittings for, amongst others areas, diesel engine, generator set, jet engine and niche automotive applications. Pipefittings: the Pipefittings sector produces innovative jointing systems for polyethylene pipes, typically within the utility industry. These activities may be analysed as follows: Year to 31 March 2009 Revenue Operating profit before amortisation and restructuring costs Tube Manipulation Pipefittings £’000 21,068 1,171 £’000 1,177 259 Amortisation Share-based charge Restructuring costs Operating profit Finance charge, net Tax charge Profit for the year Year to 31 March 2008 Revenue Operating profit before amortisation and share-based payment remuneration Amortisation Share-based remuneration Restructuring costs Operating profit Finance charge, net Tax charge Profit for the year 18,164 994 2,665 667 Total £’000 22,245 1,430 (118) – (239) 1,073 (296) (192) 585 20,829 1,661 (94) (335) – 1,232 (259) (174) 799 25 Tube Manipulation Pipefittings £’000 10,890 £’000 145 4,606 53 330 362 118 17 17 – 11,399 858 5,608 703 177 332 94 66 12 – Total £’000 11,035 40 11,075 4,659 1,738 6,397 347 379 118 12,257 449 12,706 6,311 2,302 8,613 243 344 94 3 SEGMENTAL REPORTING continued Further information on the segments are given below: 31 March 2009 Segment assets Unallocated assets Consolidated total assets Segment liabilities Unallocated liabilities Consolidated total liabilities Capital expenditure Depreciation Amortisation 31 March 2008 Segment assets Unallocated assets Consolidated total assets Segment liabilities Unallocated liabilities Consolidated total liabilities Capital expenditure Depreciation Amortisation Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 26 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 3 SEGMENTAL REPORTING continued Segment details by geographic segments are as follows: 31 March 2009 Revenue Assets Liabilities Net assets Capital additions 31 March 2008 Revenue Assets Liabilities Net assets Capital additions 4 PROFIT BEFORE TAXATION The profit on ordinary activities before taxation is stated after charging/(crediting): Auditors’ remuneration: Audit of parent and Group consolidation Audit of Group subsidiaries Non-audit services: Corporate taxation Tax advisory Operating lease charges: Land and buildings Plant and equipment Motor vehicles Restructuring costs Depreciation and amortisation: Intangible assets Plant and equipment – owned Plant and equipment – leased Profit on sale of plant and equipment United Kingdom £’000 17,702 11,075 (6,397) 4,678 347 16,919 12,706 (8,613) 4,093 243 Rest of Europe the World £’000 2,758 £’000 1,785 – – – – – – – – 2,744 1,166 – – – – – – – – Total £’000 22,245 11,075 (6,397) 4,678 347 20,829 12,706 (8,613) 4,093 243 2009 £’000 2008 £’000 12 25 11 – 385 41 77 239 118 312 67 – 14 33 11 3 310 27 66 – 94 292 52 (2) During the year the auditors also received remuneration of £Nil (2008: £52k) in respect of transaction support services. This cost was borne by the parent Company. The restructuring costs are redundancy costs incurred to reduce the Group’s costs in line with forecast sales orders. 27 5 DIRECTORS’ EMOLUMENTS Basic £’000 Bonus £’000 2009 Benefits in kind Pension £’000 £’000 Total £’000 Basic £’000 Bonus £’000 30 15 15 – 119 17 56 252 – – – – – – – – – – – – 17 3 6 26 – – – – 8 1 4 13 30 15 15 – 144 21 66 291 25 12 15 82 111 – 54 299 – – – – 32 – 16 48 2008 Benefits in kind £’000 – – – – 11 – 6 17 Pension £’000 Total £’000 – – – – 8 – 4 12 25 12 15 82 162 – 80 376 N C Paul CBE J Rubins R Allsop S W Cooper M I Welburn* P Lee* N Silverthorne* P Lee was appointed as a Director on 25 February 2009. However, his emoluments disclosed above are from commencement of his employment which is 19 January 2009. * The executive Directors are classified as the key management personnel of the Group as defined in IAS 24 Related Party Disclosures. 6 EMPLOYEE COSTS The average number of persons (including Directors) employed by the Group during the year was: Production Sales, distribution and administration Staff costs during the year were as follows: Wages and salaries Social security costs Other pension costs Share-based payment charge 2009 Number 2008 Number 256 61 317 2009 £’000 5,643 452 141 – 6,236 228 50 278 2008 £’000 5,391 483 164 335 6,373 Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 28 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 7 SHARE-BASED EMPLOYEE REMUNERATION There are two share-based remuneration schemes in operation: l l Approved Enterprise Management Incentive (EMI) scheme. Unapproved share options. At 31 March 2008 Granted in year Exercised in year No. of shares No. of shares No. of shares At Lapsed 31 March 2009 No. of shares No. of shares in year Enterprise Management Incentive (EMI) scheme April 2002 – May 2007 June 2005 – August 2013 December 2004 – July 2012 November 2004 – June 2012 July 2006 – November 2015 March 2009 – March 2019 210,000 100,000 200,000 750,000 193,661 – 1,453,661 – – – – – 500,000 500,000 – – – – – – – – – – – – – – 210,000 100,000 200,000 750,000 193,661 500,000 1,953,661 Life remaining on options at 31 March 2009 Months – 53 40 40 70 120 Exercise price Pence 20 10 10 10 17.75 10 The weighted average exercise price of the EMI Scheme at 31 March 2009 was 11.8 p (2008: 12.5p). 1,453,661 of options were available for exercise at 31 March 2009 (2008: 1,453,661). Unapproved share options January 2002 – December 2009 300,000 November 2006 – June 2013 November 2007 – Nov 2014 306,339 375,000 981,339 – – – – Total share options 2,435,000 500,000 – – – – – – – – – – 300,000 306,339 375,000 981,339 2,935,000 30 17.75 40 9 51 68 The weighted average exercise price of the unapproved share options at 31 March 2009 was 30p (2008: 30p). All options were available for exercise at 31 March 2009 (2008: All options). All Group share options in existence at 31 March 2008 had vested by the year end. The charge for the share options granted in the current year to 31 March 2009 is immaterial; therefore, no charge has been recorded in the Group income statement. In total £Nil of employee remuneration expense has been included in the Group income statement for 31 March 2009 (31 March 2008: £335,000) which gave rise to the share-based payment reserve. 8 FINANCE INCOME AND EXPENSE Bank interest receivable Finance income Invoice discounting interest Fair value charge for interest rate swap (note 24) Effective interest charge on borrowings Interest on hire purchase agreements and finance leases Finance expense 9 TAXATION ON PROFIT ON ORDINARY ACTIVITIES The tax is based on the profit for the year and represents: UK corporation tax Adjustments in respect of prior years Current tax charge for the year Deferred taxation (note 18) Tax on profit on ordinary activities 2009 £’000 20 20 100 100 92 24 316 2009 £’000 292 (55) 237 (45) 192 The tax assessed is different than the standard rate of corporation tax in the UK of 28% (2008: 30%). The differences are explained as follows: Profit on ordinary activities before tax Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 28% (2008: 30%) Effect of: Expenses not deductible for tax purposes Capital allowances in excess of depreciation Unutilised tax losses Other temporary differences Share options exercised Adjustments in respect of prior years 2009 £’000 777 218 77 14 (16) (1) – (55) 237 At 31 March 2009 the Group had tax losses of £331,000 (2008: £331,000) to offset against future profits within the United Kingdom. 29 2008 £’000 10 10 154 12 84 19 269 2008 £’000 256 (32) 224 (50) 174 2008 £’000 973 292 144 8 (58) 1 (131) (32) 224 Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 30 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 10 EARNINGS PER SHARE The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. Basic earnings per share Dilutive shares Diluted earnings per share Basic earnings per share Dilutive shares Diluted earnings per share 31 March 2009 Weighted average number Profit of shares £’000 Number ’000 585 – 585 33,020 1,198 34,218 31 March 2008 Weighted average number of shares Number ’000 31,228 3,977 35,205 Profit £’000 799 – 799 Earnings per share Pence 1.77p – 1.71p Earnings per share Pence 2.56p – 2.27p 31 10 EARNINGS PER SHARE continued The Directors consider that the following adjusted earnings per share calculation is a more appropriate reflection of the Group performance. Basic earnings per share Amortisation Restructuring costs Interest rate swap loss Adjusted earnings per share Dilutive shares Diluted adjusted earnings per share Basic earnings per share Amortisation Interest rate swap loss Share-based remuneration Taxation credit on options exercised Adjusted earnings per share Dilutive shares Diluted adjusted earnings per share 31 March 2009 Weighted average number Profit of shares £’000 Number ’000 585 118 239 100 1,042 – 1,042 Profit £’000 799 94 12 335 (131) 1,109 – 1,109 33,020 – – – 33,020 1,198 34,218 31 March 2008 Weighted average number of shares Number ’000 31,228 – – – – 31,228 3,977 35,205 Earnings per share Pence 1.77p – – – 3.16p – 3.05p Earnings per share Pence 2.56p – – – – 3.55p – 3.15p Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 32 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 11 GOODWILL Cost At 1 April 2008 Acquisition of Maxpower Automotive Limited At 1 April 2008 and 31 March 2009 Impairment At 1 April 2007, 31 March 2008 and 31 March 2009 Net book value At 1 April 2007 At 31 March 2008 At 31 March 2009 Goodwill above relates to the following cash-generating units: Redman Fittings Limited RMDG Aerospace Limited Maxpower Automotive Limited Total £’000 200 391 591 – 200 591 591 Original cost £’000 60 140 391 591 Date of acquisition June 1999 June 2006 June 2007 Goodwill arising on consolidation, representing the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired, is capitalised and is tested annually for impairment. The recoverable amount for the cash-generating units was determined based on a value-in-use calculation, covering a detailed 5 year forecast and applying a discount rate of 6.3%. Apart from the considerations described in determining the value-in-use of the cash-generating unit above, the Group management does not believe that modest changes to the assumptions underlying the value-in-use calculation would have an impact on the carrying value of goodwill. 33 Brand Customer names £’000 contracts £’000 380 450 830 (19) (47) (66) (56) – 312 312 – (47) (47) (62) (122) (109) 361 764 708 – 265 203 Total £’000 380 762 1,142 (19) (94) (113) (118) (231) 361 1,029 911 12 INTANGIBLE ASSETS Cost At 1 April 2007 Acquisition of Maxpower Automotive Limited At 1 April 2008 and 31 March 2009 Amortisation At 1 April 2007 Charge for the year At 1 April 2008 Charge for the year At 31 March 2009 Net book value At 1 April 2007 At 31 March 2008 At 31 March 2009 All intangible asset amortisation is included in the Group income statement under amortisation of intangibles as detailed on the face of the Group income statement. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 34 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 13 PLANT AND EQUIPMENT Cost At 1 April 2007 Additions Acquisitions Disposals At 31 March 2008 Additions At 31 March 2009 Depreciation At 1 April 2007 Charge for the year Disposals At 31 March 2008 Charge for the year At 31 March 2009 Net book value At 1 April 2007 At 31 March 2008 At 31 March 2009 Plant and equipment £’000 Motor vehicles £’000 3,237 243 673 (14) 4,139 347 4,486 2,398 342 (14) 2,726 378 3,104 839 1,413 1,382 40 – 3 – 43 – 43 40 2 – 42 1 43 – 1 – Total £’000 3,277 243 676 (14) 4,182 347 4,529 2,438 344 (14) 2,768 379 3,147 839 1,414 1,382 The net book value of fixed assets includes £492,000 (2008: £479,000) in respect of assets held under finance leases and hire purchase contracts. 35 14 PRINCIPAL SUBSIDIARIES At 31 March 2009 the principal subsidiaries of the Group were as follows: Name of subsidiary undertaking Country of Description of value of Principal incorporation shares held shares held business activity % of nominal MTC Holdings Limited United Kingdom Ordinary Malvern Tubular Components Limited United Kingdom Ordinary Redman Fittings Limited United Kingdom Ordinary RMDG Aerospace Limited United Kingdom Ordinary Maxpower Automotive Limited United Kingdom Ordinary Robert Morton DG Limited United Kingdom Ordinary ISSquared Limited United Kingdom Ordinary Searchwell Limited United Kingdom Ordinary Intergrated Statistical Solutions Limited United Kingdom Ordinary 100 100 100 100 100 100 100 100 100 Intermediate holding company Manufacturer of tubular components Sales and marketing company for specialist pipe fittings Manufacturer of aerospace fittings Manufacturer of highway and automotive tubular and pipe components Dormant Dormant Dormant Dormant 15 INVENTORIES Raw materials Work in progress Finished goods 2009 £’000 2,173 1,182 462 3,817 2008 £’000 1,679 1,346 522 3,547 In the year to 31 March 2009, a total of £9,746,000 of inventory (2008: £9,329,000) was included in the income statement as an expense. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 36 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 16 TRADE AND OTHER RECEIVABLES Trade receivables Other receivables Prepayments and accrued income Total Impairment of trade and other receivables 2009 £’000 3,475 9 182 3,666 (5) 3,661 2008 £’000 5,238 313 231 5,782 (54) 5,728 Included within other receivables is £Nil (2008: £177,750) of unpaid share capital. At 31 March 2009, some of the unimpaired trade receivables are past their due date but all are considered recoverable. The age of financial assets past their due date but not impaired, is as follows: Not more than one month Not more than two months Not more than three months 2009 £’000 1,123 499 91 1,713 2008 £’000 594 116 127 837 Trade and other receivables are usually due within 30-60 days and do not bear any effective interest rate. All trade receivables are subject to credit risk exposure. However, the Group does not identify specific concentrations of credit risk with regard to trade and other receivables as the amounts recognised represent a large number of receivables from various customers. The fair-value of these short-term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value. 17 CASH AND CASH EQUIVALENTS Cash and cash equivalents 2009 £’000 2008 £’000 713 397 Cash and cash equivalents consist of cash on hand and balances with banks only. At the year end £219,000 (2008: £146,000) of cash on hand and balances with banks were held by the subsidiary undertakings; however, this balance is available for use by the Group. 37 2008 £’000 (308) (110) – – (418) 2008 £’000 (173) (35) (230) 20 (418) 18 DEFERRED TAXATION The deferred tax included in the balance sheet arose in the following areas: Assets Liabilities Intangible assets Plant and equipment Trade and other payables Share-based payment charge The movement in the deferred taxation account during the year was: Balance brought forward On acquisition On recognition of intangible assets Group income statement movement arising during the year Balance carried forward As at 31 March 2009 the Group has unprovided deferred tax assets as follows: – – 4 37 41 2009 £’000 54 – – (13) 41 Accelerated capital allowances Other temporary differences Trading losses This deferred tax asset is not recognised due to uncertainty over its recoverability. 2009 £’000 2008 £’000 2009 £’000 (273) (87) – – (360) – – 17 37 54 Assets Liabilities 2008 £’000 24 – – 30 54 2009 £’000 (418) – – 58 (360) Unprovided 2009 £’000 – – – (93) (93) Unprovided 2008 £’000 (21) (2) (23) (129) (152) Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 38 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 19 TRADE AND OTHER PAYABLES Trade and other payables Other taxation and social security Accruals 2009 £’000 1,490 382 1,025 2,897 Due to the short-term duration of trade and other payables the carrying value in the balance sheet represents the fair value of the liabilities. 20 BORROWINGS Current borrowings Bank borrowings Invoice discounting facility Hire purchase agreements and finance lease liabilities (note 21) Non current borrowings Bank borrowings Hire purchase agreements and finance lease liabilities (note 21) The future contractual payments, including interest, for bank borrowings and invoice discounting facility are as follows: In one year or less or on demand Bank loan Invoice discounting facility In more than one year but not more than two years: Bank loan In more than two years but not more than three years: Bank loan In more than three years but not more than four years: Bank loan In more than four years but not more than five years: Bank loan 2009 £’000 292 1,620 117 2,029 677 71 748 2009 £’000 382 1,620 373 365 116 – 2,856 2008 £’000 3,161 779 757 4,697 2008 £’000 292 1,760 128 2,180 971 116 1,087 2008 £’000 383 1,760 361 339 317 101 3,261 39 20 BORROWINGS continued Bank loan The Group obtained a £1,400,000 term loan in 2007, repayable over 5 years. Interest is charged at 2.25% over bank base rate. The borrowings are recorded in the balance sheet with interest charged at an effective rate over the life of the borrowings. The bank borrowings are secured against the assets of the Group. Invoice discounting facility The invoice discounting facility is secured against the trade receivables to which it relates. Interest is paid at 1.6% over bank base rate per annum. 21 HIRE PURCHASE AGREEMENTS AND FINANCE LEASE LIABILITIES The commitments under hire purchase agreements and finance lease liabilities are as follows: 31 March 2009 Payments Discounting 31 March 2008 Payments Discounting Within 1 year Within Within 1-2 years 2-5 years Total 129 (12) 117 149 (21) 128 66 (6) 60 104 (15) 89 12 (1) 11 31 (4) 27 207 (19) 188 284 (40) 244 The hire purchase agreements and finance lease liabilities are secured against the assets to which they relate. 22 FINANCIAL INSTRUMENTS The Group uses financial instruments comprising cash and short-term deposits, a bank loan, invoice discounting and hire purchase agreements and finance leases. The Group has items such as trade receivables and trade payables that arise directly from its operations. Trade and other receivables and trade and other payables The Group manages its trade receivables to ensure that credit risk is minimised by avoiding concentration with any one customer. All trade receivables have set credit terms which are monitored. See note 16 for details of the ageing profile. The Group works to ensure that it receives acceptable trading terms from its suppliers. The invoice discounting facility provides immediate funds on approved trade receivables. Liquidity risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of deposits, bank loans, invoice discounting and finance lease and hire purchase contracts. Money on deposit is held on treasury reserve, partly to finance working capital and also to help finance future acquisitions. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 40 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 22 FINANCIAL INSTRUMENTS continued Interest rate risk The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt. The Group’s exposure to interest rate fluctuations on its borrowings is managed by the use of both fixed and floating facilities. The Group finances specific large plant acquisitions via hire purchase or finance lease contracts. The Group pays interest on: l l l bank loan at 2.25% over base rate invoice discounting at 1.6% over base rate finance leases at 3.0% to 3.5% over base rate The exposure to interest rate risk on its bank loan is reduced by the use of an interest rate cap and collar arrangement (see note 24). If the Group’s interest rates were to rise/fall by 10% then the interest charge within the financial statements would increase/decrease by £7,000 (2008: £49,000), equity and reserves would reduce/increase by the same amount, and the charge would be £303,000/£289,000 (2008: £308,000/£210,000). Foreign currency risk The Group transacts certain purchase and sales in foreign currencies. At 31 March 2009 there were two (2008: Nil) foreign currency forward contracts in force. The value of these open contracts has been assessed as immaterial and as such no derivative asset or liability has been recognised for these contracts. Foreign exchange differences on retranslation of foreign currency assets and liabilities are taken to the income statement of the Group. If the US Dollar were to fall/rise by 10% on the closing rate and average annual rate at 31 March 2008 then Group profits would rise/fall by £87,000k at 31 March 2009 (2008: £115,000) and equity and reserves would increase/reduce by the same amount. Commodity price risk The Group’s exposure to the price of steel is high, therefore selling prices are monitored regularly to reduce the impact of such risk and opportunities to reduce material costs are explored constantly. The Group has partly responded to this risk by sourcing materials in low cost countries. In addition, any increases in the cost of steel would be passed onto customers. If steel prices were to fall/rise by 10% on the closing year end price, and the Group was unable to pass the increase onto customers, then Group profits would rise/fall by £168,000 at 31 March 2009 (2008: £102,000) and equity and reserves would increase/reduce by the same amount. 41 2008 £’000 231 5,894 6,125 5,728 397 6,125 2008 £’000 514 12 7,450 7,976 4,697 12 2,180 1,087 7,976 22 FINANCIAL INSTRUMENTS continued Financial assets and liabilities The IAS 39 categories of financial assets included in the balance sheet and the headings in which they are included are as follows: Non financial asset Loans and other receivables Total assets The financial assets are included in the balance sheet in the following headings Current assets Trade and other receivables Cash and cash equivalents 2009 £’000 182 4,192 4,374 3,661 713 4,374 The IAS 39 categories of financial liabilities included in the balance sheet and the headings in which they are included are as follows: Non financial liability Financial liabilities at fair value through the income statement Financial liabilities measured at amortised cost Total liabilities The financial liabilities are included in the balance sheet in the following headings Current liabilities Trade and other payables Financial liabilities at fair value through the income statement Borrowings Non current liabilities Borrowings 23 CAPITAL MANAGEMENT POLICIES PROCEDURES The Group’s capital management objectives are: l l l to ensure that the Group can continue as a going concern: to ensure the Group has adequate resource to support the strategy of the Group: and to provide a return to the Group’s shareholders. 2009 £’000 362 112 5,312 5,786 2,897 112 2,029 748 5,786 The Group’s capital equals total equity less cash and cash equivalents. The Group’s financing includes total equity plus borrowings. The borrowings have been taken out to provide working capital for the Group. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 42 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 24 DERIVATIVES In February 2008, the Group entered into an interest rate swap agreement with its bankers against its bank loan. Under the agreement, the interest payable by the Group under the loan cannot exceed 6.0% or drop below 4.4% of the bank loan balance. The fair value of this derivative has been assessed as at the 31 March 2009 and is £112,000 liability (2008: £12,000 liability). The derivative is classified as fair value through the income statement and is recorded in the income statement under finance costs (note 8) and within the balance sheet. The fair value of the interest rate swap has been determined based on the discounted difference between the interest payable during the life of the swap discounted and the interest that would be payable at variable rates if the swap did not exist. The variable interest payable is based on a forecast long-term interest rate curve as at the year end. 25 SHARE CAPITAL Authorised 100,000,000 ordinary shares of 10p each Allotted and issued 2009 £’000 2008 £’000 10,000 10,000 33,020,000 (2008: 33,020,000) ordinary shares of 10p each 3,302 3,302 During the year ended 31 March 2008, 2,000,000 10p ordinary shares were issued by the Company at a price of 10p for 1,000,000 ordinary shares and 17.75p for 1,000,000 ordinary shares. At 31 March 2008, 1,000,000 of the shares issued at 17.75p remained unpaid. The shares were fully paid in the year to 31 March 2009. All 10p ordinary shares carry the same voting rights and rights to discretionary dividends. 26 CONTINGENT LIABILITIES There were no contingent liabilities at 31 March 2009 or 31 March 2008. 27 CAPITAL COMMITMENTS There were no capital commitments at 31 March 2009 or 31 March 2008. 28 LEASING COMMITMENTS The Group’s aggregate minimum operating lease payments for the remaining lives of the leases are as follows: In one year or less One to five years Greater than five years 2009 Land and buildings £’000 391 1,555 860 2,806 2008 Land and buildings £’000 391 1,555 1,251 3,197 2009 2008 Other £’000 59 70 129 Other £’000 19 274 – 293 29 TRANSACTIONS WITH RELATED PARTIES There are no transactions with related parties other than key management as disclosed in note 5 of the Group financial statements. 43 Tricorn Group plc Company Statutory Annual Report Under UK GAAP For the year ended 31 March 2009 Company number 1999619 Contents 44 Company Statement of Directors’ Responsibilities 45 Report of the Independent Auditor 46 Company Balance Sheet 47 Notes to the Financial Statements 54 Notice of Annual General Meeting 58 Company Information Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 44 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Company Statement of Directors’ Responsibilities The Directors are responsible for preparing the Company only financial statements (“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 have elected to prepare financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the 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 estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records that 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 1985. 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. In so far as the Directors are aware: – – there is no relevant audit information of which the Company’s auditor is unaware; and the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 45 Report of the Independent Auditor to the Members of Tricorn Group plc We have audited the parent Company financial statements of Tricorn Group plc for the year ended 31 March 2009 which comprise the balance sheet and notes 1 to 16. These parent Company financial statements have been prepared under the accounting policies set out therein. We have reported separately on the Group financial statements of Tricorn Group plc for the year ended 31 March 2009. This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. 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. Respective responsibilities of Directors and auditor The Directors’ responsibilities for preparing the Annual Report and the parent Company financial statements in accordance with United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the parent Company financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the parent Company financial statements give a true and fair view and whether the parent Company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Report of the Directors is consistent with the financial statements. The information given in the Report of the Directors includes that specific information presented in the Chairman’s and Chief Executive’s Statement that is cross referred from the Business Review section of the Report of the Directors. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed. We read other information contained in the Annual Report and consider whether it is consistent with the audited parent Company financial statements. The other information comprises only the Chairman’s and Chief Executive’s Statement, the Report of the Directors and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the parent Company financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the parent Company financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the parent Company financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the parent Company financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the parent Company financial statements. Opinion In our opinion: l the parent Company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Company’s affairs as at 31 March 2009; l l the parent Company financial statements have been properly prepared in accordance with the Companies Act 1985; and the information given in the Report of the Directors is consistent with the financial statements. Grant Thornton UK LLP Registered Auditor Chartered Accountants Birmingham 15 June 2009 Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 46 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Company Balance Sheet at 31 March 2009 Fixed assets Fixed assets Investments Current assets Debtors: amounts due within one year Cash at bank and in hand Creditors: amounts falling due within one year Net current liabilities Total assets less current liabilities Creditors: amounts falling due after more than one year Capital and reserves Called up share capital Share premium account Share-based payment reserve Merger reserve Profit and loss account Shareholders’ funds The financial statements were approved by the Board of Directors on 15 June 2009. M I Welburn Director Note 7 8 9 10 11 12 12 12 12 2009 £’000 4 6,196 6,200 1,857 494 2,351 2008 £’000 – 6,196 6,196 1,953 251 2,204 (2,750) (399) (2,512) (308) 5,801 5,888 (677) 5,124 3,302 1,448 193 1,592 (1,411) 5,124 (971) 4,917 3,302 1,448 193 1,592 (1,618) 4,917 47 Notes to the Financial Statements for the year ended 31 March 2009 1 BASIS OF PREPARATION The separate financial statements of the Company have been prepared under the historical cost convention and in accordance with UK accounting standards. The principal activity of the Company is that of a holding company which has remained unchanged from the previous year. 2 ACCOUNTING POLICIES Investments Investments held by the Company are included at cost less amounts written off. Where the consideration for the acquisition of a subsidiary undertaking includes shares in the Company to which the provisions of Section 131 of the Companies Act 1985 apply, cost represents the nominal value of shares issued together with the fair value of any additional consideration given and costs. Financial instruments Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity. Deferred taxation Deferred tax is recognised on all timing differences where the transactions or events that give the Company an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantially enacted by the balance sheet date. Share-based payments All share-based payment arrangements are recognised in the parent Company’s financial statements. The Company operates equity-settled share-based remuneration plans for remuneration of employees of its subsidiaries. Options are issued by the parent to the employees of its subsidiaries. As such, the charge for the share-based remuneration is recognised in the parent Company profit and loss account. All employee services received in exchange for the grant of any share-based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value of the share options awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to the share-based payment reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment is made to the expense recognised in prior periods if fewer share options ultimately are exercised than originally estimated. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 48 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 3 PROFIT FOR THE FINANCIAL YEAR The Company has taken advantage of section 230 (4) of the Companies Act 1985 and has not included its own profit and loss account in these financial statements. The Company’s profit for the year was £207,000 (2008: £20,000). Auditor’s remuneration incurred by the Company during the year for audit services totalled £11,000 (2008: £19,000), and for tax compliance services totalled £2,000 (2008: £3,000). 4 DIRECTORS’ AND EMPLOYEES’ REMUNERATION Staff costs during the year were as follows: Wages and salaries Social security costs Other pension costs Share-based charge 2009 £’000 633 68 27 – 728 The average number of persons (including Directors) employed by the Company during the year was 13 (2008: 13). 5 DIRECTORS’ EMOLUMENTS Benefits Basic £’000 Bonus in kind Pension £’000 £’000 £’000 30 15 15 – 119 17 56 252 – – – – – – – – – – – – 17 3 6 26 – – – – 8 1 4 13 2009 Total £’000 30 15 15 – 144 21 66 291 Basic £’000 Bonus £’000 Benefits in kind £’000 Pension £’000 25 12 15 82 111 – 54 299 – – – – 32 – 16 48 – – – – 11 – 6 17 – – – – 8 – 4 12 N C Paul CBE J Rubins R Allsop S W Cooper M I Welburn P Lee N Silverthorne 2008 £’000 709 48 21 335 1,113 2008 Total £’000 25 12 15 82 162 – 80 376 49 6 SHARE-BASED EMPLOYEE REMUNERATION There are two share-based remuneration schemes in operation: l l Approved Enterprise Management Incentive (EMI) scheme. Unapproved share options. At 31 March Granted Exercised 2008 No. of shares in year No. of shares in year No. of shares Lapsed in year No. of shares 210,000 100,000 200,000 750,000 193,661 – 1,453,661 – – – – – 500,000 500,000 – – – – – – – – – – – – – – At 31 March 2009 No. of shares 210,000 100,000 200,000 750,000 193,661 500,000 1,953,661 Life remaining on options at 31 March 2009 Months – 53 40 40 70 120 Exercise price Pence 20 10 10 10 17.75 10 Enterprise Management Incentive (EMI) scheme April 2002 – May 2007 June 2005 – August 2013 December 2004 – July 2012 November 2004 – June 2012 July 2006 – November 2015 March 2009 – March 2019 The weighted average exercise price of the EMI Scheme at 31 March 2009 was 11.8p (2008: 12.5p). 1,453,661 of options were available for exercise at 31 March 2009 (2008: 1,453,661). Unapproved share options January 2002 – December 2009 November 2006 – June 2013 November 2007 – November 2014 Total share options 300,000 306,339 375,000 – – – 981,339 2,435,000 – 500,000 – – – – – – – – – – 300,000 306,339 375,000 981,339 2,935,000 30 17.75 40 9 51 68 The weighted average exercise price of the unapproved share options at 31 March 2009 was 30p (2008: 30p). All were available for exercise at 31 March 2009 (2008: All). All Group share options in existence at 31 March 2008 had vested by the year end. The charge for the share options granted in the current year to 31 March 2009 is highly immaterial therefore no charge has been recorded in the Group profit and loss account. In total £Nil of employee remuneration expense has been included in the Company profit and loss account for 31 March 2009 (31 March 2008: £335,000) which gave rise to the share-based payment reserve. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 50 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 7 FIXED ASSET INVESTMENTS Cost At 1 April 2008 and 31 March 2009 Impairment At 1 April 2008 and 31 March 2009 Net book value At 31 March 2009 At 31 March 2008 Total £’000 7,478 (1,282) 6,196 6,196 At 31 March 2009 the Company holds 100% of the ordinary share capital of the following subsidiaries: Name of subsidiary undertaking Country of Description of % of nominal value of Principal incorporation shares held shares held business activity MTC Holdings Limited United Kingdom Ordinary Malvern Tubular Components Limited* United Kingdom Ordinary Redman Fittings Limited United Kingdom Ordinary RMDG Aerospace Limited United Kingdom Ordinary Maxpower Automotive Limited United Kingdom Ordinary Robert Morton DG Limited* United Kingdom Ordinary ISSquared Limited United Kingdom Ordinary Searchwell Limited United Kingdom Ordinary Intergrated Statistical Solutions Limited United Kingdom Ordinary * Held by a subsidiary undertaking. 100 100 100 100 100 100 100 100 100 Intermediate holding company Manufacturer of tubular components Sales and marketing company for specialist pipe fittings Manufacturer of aerospace fittings Manufacturer of highway and automotive tubular and pipe components Dormant Dormant Dormant Dormant 51 2009 £’000 1,780 5 35 37 1,857 2009 £’000 292 2 57 2,241 6 59 93 2,750 2009 £’000 677 677 2009 £’000 292 292 385 969 2008 £’000 1,546 328 42 37 1,953 2008 £’000 292 201 54 1,775 18 – 172 2,512 2008 £’000 971 971 2008 £’000 292 292 679 1,263 8 DEBTORS Amounts owed by subsidiary undertakings Other debtors Prepayments and accrued income Deferred tax Included within other debtors is £Nil (2008: £177,750) of unpaid share capital. 9 CREDITORS: AMOUNTS DUE WITHIN ONE YEAR Bank borrowings Other creditors Trade creditors Amounts due to subsidiary undertakings Other taxes and social security Corporation tax Accruals and deferred income 10 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Bank borrowings Borrowings are repayable as follows: Within one year – bank borrowings After one and within two years – bank borrowings After two and within five years – bank borrowings The bank loan is secured against the assets of the Company and its subsidiaries. Interest is paid at base rate plus 2.25%. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 52 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notes to the Financial Statements continued 11 SHARE CAPITAL Authorised 100,000,000 ordinary shares of 10p each Allotted and issued 2009 £’000 2008 £’000 10,000 10,000 33,020,000 (2008: 33,020,000) ordinary shares of 10p each 3,302 3,302 During the year ended 31 March 2008, 2,000,000 10p ordinary shares were issued by the Company. At the 31 March 2008, 1,000,000 of the shares issued remained unpaid. The shares were fully paid in the year to 31 March 2009. All the 10p ordinary shares carry the same voting rights and rights to discretionary dividends. 12 RESERVES At 1 April 2008 Retained profit for the year Share-based charge Share option exercised in year Issue of share capital At 31 March 2009 13 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS Profit for the financial year Share capital issued Share premium on share capital issued Share-based payment charge Net increase to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds Share premium £’000 1,448 – – – – Merger reserve £’000 1,592 – – – – Share-based payment Profit and reserve loss account £’000 193 – – – – £’000 (1,618) 207 – – – 1,448 1,592 193 (1,411) 2009 £’000 207 – – – 207 4,917 5,124 2008 £’000 20 200 77 335 632 4,285 4,917 53 14 CONTINGENT LIABILITIES The Company has given an unlimited guarantee against the bank borrowings of its subsidiaries. At 31 March 2009 the balances amounted to Nil (2008: Nil). There were no further contingent liabilities at 31 March 2009 or 31 March 2008. 15 CAPITAL COMMITMENTS There were no capital commitments at 31 March 2009 or at 31 March 2008. 16 RELATED PARTIES The Company has taken advantage of the exemption under FRS 8 from disclosure of related party transactions with other Group companies, on the grounds that they are wholly owned subsidiaries. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 54 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the eleventh annual general meeting of Tricorn Group plc (the “Company”) will be held at Malvern Tubular Components Limited, Spring Lane, Malvern, Worcestershire, WR14 1DA on Thursday 17 September 2009 at 10.00 am, the business of which will be: TRICORN GROUP plc ORDINARY BUSINESS 1. 2. 3. 4. 5. To receive and consider the accounts for the financial year ended 31 March 2009, together with the reports of the Directors and auditor. To approve the Directors’ Remuneration Report for the financial year ended 31 March 2009. That Noel Silverthorne (who retires by rotation) be re-elected as a Director of the Company. That Phillip Lee be elected as a Director of the Company. To resolve as an ordinary resolution that Grant Thornton UK LLP be and are hereby reappointed as auditor of the Company to hold office until the conclusion of the next general meeting at which accounts are laid before the Company and to authorise the audit committee of the Company to determine their remuneration. SPECIAL BUSINESS 6. To resolve as an ordinary resolution: “That in substitution for all existing and unexercised authorities and in ratification of all previous allotments, for the purposes of and pursuant to section 80 of the Companies Act 1985 (the ‘Act’), the Directors of the Company be and they are hereby generally and unconditionally authorised and empowered to exercise all the powers of the Company to allot relevant securities (within the meaning of section 80(2) of the Act) up to a nominal amount, when aggregated with the nominal amount of the share capital of the Company in issue, of £4,302,000 to such persons at such times and upon such terms and conditions as they may determine (subject always to the articles of association of the Company) provided that this authority and power shall, unless previously renewed, varied or revoked, expire at the conclusion of the next annual general meeting of the Company or 15 months from the date of the passing of this resolution (whichever is the earlier) and provided further that the Directors of the Company may before the expiry of such period make any offer, agreement or arrangement which would or might require relevant securities to be allotted after the expiry of such period, and the Directors of the Company may then allot relevant securities pursuant to any such offer, agreement or arrangement as if the authority or power hereby conferred had not expired.” 7. To resolve as a special resolution: “That, subject to the passing of the resolution numbered 6 in this notice, in substitution for all existing and unexercised authorities and powers, pursuant to section 95(1) of the Act the Directors of the Company be and they are hereby authorised and empowered to allot equity securities (within the meaning of section 94 of the Act) pursuant to the general authority and power conferred by the resolution numbered 6 in this notice as if section 89(1) of the Act did not apply to any such allotment provided that this authority and power shall, unless previously renewed, varied or revoked, expire at the conclusion of the next annual general meeting of the Company or 15 months from the date of the passing of this resolution (whichever is the earlier), save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry, and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired and further all previous allotments of the Company be and are hereby ratified notwithstanding the provisions of section 89(1) of the Act or the provisions of the articles of association of the Company.” 55 8. To resolve as a special resolution: “That the Company be authorised generally and unconditionally, for the purposes of section 166 of the Act, to make market purchases of its ordinary shares provided that: (a) the maximum number of ordinary shares that may be acquired is 3,302,000 being 10% of the Company’s issued share capital as at 7 August 2009; (b) the minimum price per share that may be paid for any such shares is 0.01 pence; and (c) the maximum price that may be paid for any such shares is not more than the higher of (i) an amount equal to 105% of the average market value for an ordinary share, as derived from the London Stock Exchange Business List, for the five business days prior to the day on which the purchase is made; or (ii) that stipulated by Article 5(1) of the Buy-back and Stabilisation Regulation 2003; and (iii) such authority shall expire at the earlier of the close of the next annual general meeting or 17 December 2010 except that the Company shall be entitled, at any time prior to the expiry of this authority, to make a contract of purchase which would or might be executed wholly or partly after such expiry and to purchase shares in accordance with such contract as if the authority conferred had not expired”. 9. To resolve as a special resolution: “That the articles of association of the Company be amended by inserting the following sentence at the end of article 58: ‘For the avoidance of any doubt any shares purchased by the Company may either be cancelled or held or dealt with as treasury shares pursuant to the provisions of sections 162A to 162F (inclusive) of the Act’.” 10. To resolve as a special resolution: “That the Directors be authorised, in accordance with the articles of association, to call a general meeting of the Company, other than an annual general meeting, on 14 clear days’ notice.” The Directors believe that the proposals set out in Resolutions 1 to 10 are in the best interests of shareholders as a whole and they unanimously recommend that shareholders vote in favour of each of these resolutions as they intend to do in respect of their own holdings. Registered Office: Spring Lane Malvern Link Malvern Worcestershire WR14 1DA Registered Number 1999619 Dated 7 August 2009 By Order of the Board Michael Greensmith Michael Greensmith Secretary Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 56 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Notice of Annual General Meeting continued NOTES: (1) A member of the Company may appoint one or more proxies to attend and, on a poll, to vote instead of the member. A proxy of a member need not also be a member. (2) The instrument appointing a proxy, and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of that power or authority, must be deposited with the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands B63 3DA not less than 48 hours before the time for holding the meeting. A Form of Proxy accompanies this document for use by members. (3) Completion of the Form of Proxy will not preclude a member from attending and voting in person. (4) Any person to whom this Notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to enjoy information rights (a “nominated person”) does not have the right to appoint a Proxy. However, a nominated person may, under an agreement between him and the shareholder by whom he was nominated, have a right to be appointed (or have someone else appointed) as a Proxy. If a nominated person has no such Proxy appointment right or does not wish to exercise it, they may, under any such agreement, have a right to give instructions to the person holding the shares as to the exercise of voting rights. (5) Any corporation which is a member of the Company may authorise a person (who need not be a member of the Company) to act as its representative to attend, speak and vote (on a show of hands or a poll) on its behalf. (6) Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 the Company specifies that only those shareholders registered in the Register of Members of the Company as at 10.00 am on 15 September 2009 (the “Specified Time”) shall be entitled to attend or vote at the annual general meeting in respect of the number of shares registered in their names at that time. Changes to entries on the relevant register of members (the “Register”) for certificated or uncertificated shares of the Company after the Specified Time shall be disregarded in determining the rights of any person to attend or vote at the annual general meeting. Should the annual general meeting be adjourned to a time not more than 48 hours after the Specified Time, that time will also apply for the purpose of determining the entitlement of shareholders to attend and vote (and for the purpose of determining the number of votes they may cast) at the adjourned annual general meeting. Should the annual general meeting be adjourned for a longer period, to be so entitled, shareholders must have been entered on the Register at the time which is 48 hours before the time fixed for the adjourned annual general meeting or, if the Company gives notice of the adjourned annual general meeting, at the time specified in the Notice. (7) There are no Directors’ service contracts of more than one year’s duration. (8) Copies of Contracts of Service and letters of appointment (including indemnities) between any Director and the Company or its subsidiaries are available for inspection at the registered office of the Company during normal business hours and will also be available for inspection at the place of the annual general meeting until the conclusion of the annual general meeting. 57 (9) CREST members who wish to appoint a Proxy or Proxies through the CREST electronic Proxy appointment service may do so for the annual general meeting and any adjournment thereof by using the procedures described in the CREST manual. CREST personal members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a Proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with CRESTCo’s specifications and must contain the information required for such instructions, as described in the CREST manual. All messages relating to the appointment of a Proxy or an instruction to a previously appointed Proxy must be transmitted so as to be received by Neville Registrars Limited (ID: 7RA11) no later than 10.00 am on 15 September 2009. Normal system timings and limitations will apply in relation to the input of CREST Proxy Instructions. It is therefore the responsibility of the CREST member concerned to take such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable their CREST sponsor(s) or voting service provider(s) are referred, in particular, to those sections of the CREST manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. (10) As at the date of this Notice there were 33,020,000 ordinary shares in issue, each with equal voting rights. Holders of ordinary shares are entitled to attend, speak and vote, either in person or by proxy, at general meetings of the Company. For further details relating to voting or participation rights of shareholders, please refer to the Company’s articles of association, copies of which are available on our website at http://www.tricorn.uk.com. Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 58 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Company Information Bankers: Bank of Scotland 55 Temple Row Birmingham B2 5LS Solicitors: Orme & Slade Limited National Westminster Bank Chambers The Homend Ledbury Herefordshire HR8 1AB Auditors: Grant Thornton UK LLP Registered Auditors Chartered Accountants Enterprise House 115 Edmund Street Birmingham B3 2HJ Company registration number: 1999619 Registered office: Spring Lane Malvern Link Malvern Worcestershire WR14 1DA Directors: Nicholas Campbell Paul CBE (Chairman and non-executive Director) Michael Ian Welburn (Chief Executive Officer) Noel Silverthorne (Group Technical Director) Phillip Lee (Group Finance Director) Roger Allsop (Non-executive Director) Secretary: Michael Greensmith Nominated adviser and Nominated broker: Collins Stewart Limited 9th Floor 88 Wood Street London EC2V 7QR Registrars: Neville Registrars Limited Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA Shareholder Notes 59 Tricorn Group plc ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Niche Automotive 60 Tricorn Group plc Annual Report and Accounts 2009 www.tricorn.uk.com Shareholder Notes The Group AIM listed in 2001 Tricorn Group has been significantly reshaped and refocussed over the last 5 years. With a strong management team in place and an increasingly global customer base the Group is well positioned for long-term growth both organically and through acquisition Key Market Sectors The customer base includes major blue chip companies with world-wide activities operating in key market sectors including: ‘ Power Generation ‘ Aerospace ‘ Off Highway ‘ Automotive Our Subsidiaries Malvern Tubular Components Limited RMDG Aerospace Limited Maxpower Automotive Limited Redman Fittings Limited MTC is a specialist manufacturer of manipulated tubular assemblies supplying blue chip companies involved in power generation. This includes diesel engine, generator set and radiator manufacture. Acquired in June 2006 the company supplies specialised rigid pipe assemblies to meet the demanding needs of the aerospace sector. Its products are found in a wide range of aircraft and are recognised for their excellence worldwide. Acquired in June 2007 the business manufactures a wide range of tubular assemblies in ferrous, non ferrous and nylon materials primarily for off highway and niche automotive applications. www.mtc.uk.com www.rmdg.co.uk www.maxaut.co.uk The business develops and supplies major OEM's with bespoke jointing systems for multi-layer polyethylene pipe systems.The innovative jointing system is patented worldwide and continues to attract considerable interest. www.redmanfittings.com Tricorn Group plc Spring Lane Malvern Link Malvern Worcestershire WR14 1DA Tel: 01684 569956 Fax: 01684 892337 www.tricorn.uk.com 

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