The future of Global Tubular Solutions Tricorn Group plc Spring Lane Malvern Link Malvern Worcestershire WR14 1DA Tel: 01684 569956 Fax: 01684 892337 www.tricorn.uk.com Tricorn Group plc Annual Report and Accounts 2010 18109TRICORNGcvr.indd 1-2 18109 13/08/10 Proof 6 18109 13/08/10 Proof 6 13/08/2010 14:31 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com EnErgy transportation aErospacE utilitiEs Tricorn Group plc 2000 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. 1500 1000 Strategy 2000 500 To acquire and grow engineering based businesses that are supplying blue chip OEM customers who in turn are focused on attractive end markets. 1500 0 The key elements of this approach are to 2007/08 Drive for operational excellence, ensuring products and services are globally competitive and that class leading quality 2008/09 2006/07 2005/06 2004/05 2009/10 and delivery performance is achieved. 1000 Improve margins by the implementation of lean manufacturing, the resourcing of materials to low cost countries and the 2006/07 2006/07 2006/07 2006/07 2007/08 2007/08 2007/08 2007/08 2008/09 2008/09 2008/09 utilisation of Group resources (shared services and expertise). 2008/09 2009/10 2009/10 2009/10 2009/10 500 Growth. Organically by increasing share within its customers and developing new customers. Inorganically through selective acquisitions where Tricorn’s management expertise can generate sufficient added value. 4.0 2006/07 3.5 3.0 2.5 2.0 1.5 4.0 1.0 3.5 0.5 3.0 0.0 2.5 2.0 1.5 1.0 0.5 0.0 2007/08 2007/08 2007/08 2007/08 2007/08 0 2007/08 Historical summary 2004/05 2008/09 2009/10 2005/06 2006/07 2007/08 2008/09 2009/10 Dec 2001 Listed on AIM June 2006 Acquired RMDG Aerospace Limited June 2007 Acquired Maxpower Automotive Limited Dec 2008 Announced record half year results, but signal slow down anticipated June 2010 Remained profitable, reduced net debt and saw improvements in demand 25000 25000 REVENUE 20000 20000 25000 25000 20000 15000 15000 20000 15000 10000 10000 15000 0 0 10000 0 ’ £ 10000 5000 5000 0 0 5000 5000 0 0 2004/05 2004/05 2005/06 2005/06 2006/07 2006/07 2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 OpERATING pROfIT 2000 2000 Energy Transportation Aerospace Utilities 0 0 0 ’ £ 2000 2000 1500 1500 1000 1000 500 500 0 0 1500 1500 1000 1000 500 500 0 0 2004/05 Group 2004/05 2005/06 2005/06 2006/07 2006/07 2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2006/07 2007/08 2008/09 2004/05 2009/10 2005/06 2006/07 2007/08 2008/09 2009/10 2004/05 2005/06 NET DEbT 2008/09 2008/09 2008/09 2008/09 1000 500 1000 1000 1000 500 500 0 0 2009/10 2009/10 2009/10 2009/10 -500 -500 500 0 0 0 -1000 0 0 ’ £ -1500 -500 -1000 -500 -1500 -1000 -2000 -1500 -2500 -2000 -2000 -2500 -3000 -1000 -1500 -2000 -2500 -3000 2004/05 2004/05 2005/06 2005/06 2006/07 2006/07 2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 -3000 -2500 2008/09 2004/05 -3000 2004/05 2009/10 2005/06 2005/06 2006/07 2007/08 2006/07 2008/09 2009/10 2007/08 ADjUSTED EARNINGS pER ShARE Group 2004/05 2005/06 2005/06 2006/07 2006/07 2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 e c n e P 0.0 2004/05 2005/06 2009/10 2006/07 2007/08 2008/09 2009/10 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2004/05 Group 4.0 3.5 4.0 3.0 3.5 2.5 3.0 2.0 2.5 1.5 2.0 1.0 1.5 0.5 1.0 0.0 2008/09 0.5 0.0 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 18109TRICORNGcvr.indd 3-4 18109 13/08/10 Proof 6 18109 13/08/10 Proof 6 13/08/2010 14:31 Tricorn Group plc Contents 02 Chairman’s and Chief Executive’s Statement 04 Board of Directors 05 Report of the Directors 08 Corporate Governance 11 Report of the Independent Auditors 12 Group Statement of Comprehensive Income 13 Group Statement of Changes in Equity 14 Group Statement of Financial Position 15 Group Statement of Cash Flows 16 Notes to the Financial Statements 43 Company Statutory Financial Statements (prepared under UK GAAP) Summary Highlights Sales revenue Operating profit* Profit before tax* Cash and equivalents Net debt . 2010 £’000 15,031 425 288 1,296 841 2009 £’000 22,245 1,430 1,234 713 2,064 Second half operating profit* up 40% on first half at £0.248m Cash and cash equivalents up 82% to £1.296m Net debt reduced by 59% to £0.841m Improving market conditions in Energy and Transportation sectors * Before intangible asset amortisation, 2009 restructuring charges and interest rate swap valuation. ENERGy TRANSPORTATION REVENUE By SECTOR Fabricated tubular assemblies for diesel engines and radiator sets used in power generation, mining, oil and gas Nylon, rigid and hybrid pipe assemblies for engines, brake systems, fuel sender sub systems used in both on and off highway applications ENERGy - £4,849k TRANSPORTATION - £4,671k AEROSPACE - £5,014k UTILITIES - £497k AEROSPACE UTILITIES OPERATING PROFIT By SECTOR (Pre-intangible amortisation) Rigid pipe assemblies for civil and military aerospace applications Patented jointing solution for multi layer and single layer pipe used in the water and gas markets ENERGy - £96k TRANSPORTATION - £52k AEROSPACE - £128k UTILITIES - £53k UNALLOCATED - £96k 01 18109TRICORNG.indd 1 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com ChAIRmAN’S AND ChIEF ExECUTIVE’S STATEmENT Nick Paul and mike Welburn “Our actions ensured that all business segments remained profitable for the year.” Performance in year ended 31 March 2010 The Group responded decisively to the adverse market conditions experienced People We are extremely appreciative of the continued hard work, enthusiasm and all business segments remained profitable despite the 32% year-on-year and dedication of all our employees who have responded positively to reduction in sales revenue. We remained focused throughout the period on ensuring our capacity was aligned to demand, reducing overhead costs and on the challenges we have faced over the last year. We continue to invest in developing their capabilities further and are delighted to be launching our strengthening the balance sheet. Encouraging progress was made in all of “Energise Programme” this year. Through a significant commitment to training these areas. we will see all employees attain a National Vocational Qualification in Business Improvement Techniques over the next 12 months. In the early part of the year direct head count was flexed partly through reducing working hours enabling us to retain experienced operators whilst still maintaining margins. In the second half this retention of key skills within the FINANCIAL REVIEW business meant we were able to respond swiftly as demand levels improved. Full The 2009/10 financial year proved to be particularly challenging. however, by time working hours were resumed at all Group sites by the year end. focusing and delivering on the key objectives highlighted at the start of the year the Group reported a profit, and strengthened its balance sheet significantly by Overheads remained tightly controlled with administration costs 27% lower reducing net working capital, improving cash and reducing net debt. than the previous year. Operating profit (before intangible asset amortisation and interest rate swap valuation) in the second half was up 40% on the first half reflecting the improved operational gearing from streamlining the business. Income statement Turnover for the year was £15.031m (2009: £22.245m). Gross profit margins, at over 32%, held up well compared to the last financial year, reflecting the We made excellent progress in strengthening the Group’s balance sheet with objective of aligning capacity with the lower demand levels. cash and cash equivalents up 82% to £1.296m (2009: £0.713m) and net debt reduced by 59% to £0.841m (2009: £2.064m). The management’s focus throughout the year on cost reduction also enabled the Group to reduce combined distribution and administrative costs by 27% to £4.413m. Resultant operating profit was £0.425m before amortisation of intangibles. Net finance costs were £0.129m for the year, down 56% on the previous financial year. Reduced net debt, lower interest rates, and a credit of £8k (2009: £0.100m charge) on the interest rate swap fair value adjustment contributed to the reduction. The resultant unadjusted profit before tax was £0.178m (2009: £0.777m). Basic EPS was 0.45p (2009: 1.77p) and, after adjusting for one-off costs EPS stood at 0.79p (2009: 3.16p). Cash flow Net cash from operating activities increased by 22% to £1.413m. This was driven by improved working capital management and lower interest payments. 02 18109TRICORNG.indd 2 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc Full year capital expenditure at £0.135m represented 34% of depreciation and was well within our commitment to keep expenditure below 50% of depreciation for the year. Cash management remained a priority throughout the Group. Cash and equivalents increased by 82% to £1.296m, and gross borrowings reduced by 23% to £2.137m. Balance sheet Net working capital decreased by 22% to £3.586m. The reduction was driven predominantly by £0.710m of lower inventory holdings, which as announced last year, was one of the key drivers to strengthen the balance sheet. The Group’s net debt position at the year end was £0.841m, down 59% from the prior year end position. Gearing, measured as total debt to equity was 18%, compared to 44% in 2009. In November 2009 the Group successfully renewed its invoice discounting facility. The term loan continues to be repaid, and has a final payment date of July 2012. The Group continues to operate comfortably within its banking covenants. In march 2010 the Group purchased 875,000 of its ordinary shares pursuant to the authority granted at last year’s AGm, at an aggregate cost of £49k. These shares are held in Treasury. OPERATIONAL REVIEW The Group operates four main business segments which are focused on the energy, transportation, aerospace and utilities sectors. These all have strong underlying growth potential, albeit with some cyclicality. Improving demand within the energy and transportation sectors towards the end of the second half was encouraging and has more than offset the weakness within the aerospace business. Our actions ensured that all business segments remained profitable for the year. 37% on the first half. The planned improvements to the shop floor layout to accommodate new business wins has now been completed and good progress has also been made on identifying additional growth opportunities. Aerospace RmDG Aerospace supplies rigid pipe assemblies used in a variety of applications within the aerospace sector. There has been some softening within the segment as we anticipated with year-on-year revenues down 16%. however, demand now appears to be stabilising and with a strengthened local management team in place, we are well positioned to deal with these lower levels of demand. Utilities Redman Fittings holds worldwide patents on a unique method of joining polyethylene pipes. Its customers include major OEms which are supplied with a branded version of the product which is then incorporated within their “barrier” pipe systems. These multi layer pipe systems are being used within the water industry in brown field site developments providing advantages in performance and overall cost. The Redman system is increasingly being specified due to its ease of use and effectiveness. The business continues to deliver double digit segmental profit margins despite the lower sales revenues and should contribute significantly to the Group’s earnings when the housing market recovers. Energy Our malvern Tubular Components business specialises in fabricated and manipulated tubular assemblies for large diesel engines and radiator sets used within the energy sector, principally power generation, mining and oil and gas applications. Our earlier view that the second half would see improved demand was confirmed with sales revenues up some 26% on the first half. We have made some selective investment in our product finishing capabilities within the plant and this has enabled additional business to be secured. Outlook Whilst there is clearly still a level of economic uncertainty we have been encouraged by the growth in sales revenue in the second half and by additional business opportunities identified. We remain well positioned to respond to any further changes in demand. Alongside our drive for organic growth the Group will consider potential acquisition opportunities where Tricorn’s management expertise can generate the necessary added value. Transportation maxpower Automotive is focused on nylon, rigid and hybrid tubular products for engines, braking systems and fuel sender sub-systems used within the transportation sector. market conditions deteriorated earlier within this segment Nick Paul CBE Chairman compared to the other businesses in the Group. however, demand had started 9 June 2010 to improve in the second quarter and this continued with second half sales up Mike Welburn Chief Executive 9 June 2010 03 18109TRICORNG.indd 3 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com BOARD OF DIRECTORS Executive Directors Non-executive Directors 1. 2. 3. 4. 5. 1. Mike Welburn (Born 1962) chief Executive officer 2. Phil Lee (Born 1970) group Finance Director 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. Joined Tricorn in January 2009 and appointed to the Board in February 2009. he had previously been at Rolls-Royce plc for nine 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. 3. Noel (“Nick”) Silverthorne (Born 1947) 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.. 4. Nick Paul CBE (Born 1945) non-executive chairman 5. Roger Allsop (Born 1943) non-executive Director 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. In the past he has been Chairman of the Regional Development Agency, Advantage West midlands, midlands Expressway Limited, West midlands CBI and non-executive Director of John Laing homes plc and Sig plc. 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 Aim quoted, 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 04 18109TRICORNG.indd 4 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc REPORT OF ThE DIRECTORS The Directors present their annual report together with the audited financial statements for Tricorn Group plc (”Group”) for the year ended 31 march 2010. Principal activity The Group is the parent company of a number of specialist engineering subsidiaries 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 and Chief Executive’s statement. There was a profit for the year after taxation amounting to £149k (2009: £585k). 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 collar 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 bank 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 partially 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 statement of comprehensive income. 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 considered significant. 18109TRICORNG.indd 5 18109 13/08/10 Proof 6 13/08/2010 14:32 05 Tricorn Group plc Annual Report and Accounts 2010 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 N Silverthorne Share capital Details of the Company’s 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 14 may 2010, were as follows: R Allsop hargreave hale Limited J Grimmond J Rubins Rock Nominees Limited (account 501198) Ordinary shares of 10p each Number 11,220,000 6,809,405 2,336,956 1,500,000 1,370,150 Percentage of capital % 34.90 21.18 7.27 4.67 4.26 Health and safety 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 62 days of average supplies (2009: 67 days). The Company trade payables are 62 days (2009: 41 days). 06 18109TRICORNG.indd 6 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 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; and – 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 adequate 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 auditors are 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 auditors are 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. Auditors Grant Thornton UK LLP offer themselves for reappointment as auditors in accordance with section 489 of the Companies Act 2006. On behalf of the Board Mike Welburn Director 9 June 2010 18109TRICORNG.indd 7 18109 13/08/10 Proof 6 13/08/2010 14:32 07 Tricorn Group plc Annual Report and Accounts 2010 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 approves 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 which is 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 the financial statements 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 reasonable balance between 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. 08 18109TRICORNG.indd 8 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 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. The key assumptions in these forecasts have been sensitised and no issues arise which lead to any concern regarding the operations or financing of the Group. 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 which are commensurate with similar positions 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 CBE 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 six months’ written notice given by either party to the other at any time. N C Paul CBE and R Allsop have letters of appointment with the Group which are terminable upon six months’ written notice being given by either party. 18109TRICORNG.indd 9 18109 13/08/10 Proof 6 13/08/2010 14:32 09 Tricorn Group plc Annual Report and Accounts 2010 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 2010 the following options were held by the Directors: 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 At beginning of period Number 200,000 306,339 375,000 750,000 200,000 150,000 193,661 500,000 Lapsed during the year Number (200,000) – – – – – – – Granted during the year Number Exercised during the year Number – – – – – – – – – – – – – – – – At end of year Number – 306,339 375,000 750,000 200,000 150,000 193,661 500,000 Exercise price £ 0.30 0.1775 0.40 0.10 0.10 0.20 0.1775 0.10 Unapproved share options N C Paul’s option was exercisable between 1 January 2002 and 31 December 2009 and during the year has lapsed. 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. All of the unapproved share options have vested. EMI options m I Welburn has three separate EmI share options. The first option granted on 1 November 2004 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. All options have vested. 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. All options have vested. P Lee was granted an EmI option over 500,000 shares at 10p on 31 march 2009. The first 250,000 are exercisable after three months continuous employment. The second 250,000 are exercisable after a further 12 months’ continuous employment. This option is in force for ten 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 2010 was 7.5p (31 march 2009: 6.5p) and the range during the year was 6.0p to 10.5p (2009: 6.5p to 35.5p). 10 18109TRICORNG.indd 10 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc REPORT OF ThE INDEPENDENT AUDITORS TO ThE mEmBERS OF TRICORN GROUP plc We have audited the Group financial statements of Tricorn Group plc for the year ended 31 march 2010 which comprise the Group statement of comprehensive income, the Group statement of changes in equity, the Group statement of financial position, the Group statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ 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 As explained more fully in the Directors’ Responsibilities statement set out on page 7, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKNP. Opinion on financial statements In our opinion the Group financial statements: l give a true and fair view of the state of the Group’s affairs as at 31 march 2010 and of its profit for the year then ended; l have been properly prepared in accordance with IFRS as adopted by the European Union; and l have been prepared in accordance with the requirements of the Companies Act 2006. 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 IFRSs as issued by the International Accounting Standards Board (IASB). In our opinion the Group financial statements comply with IFRSs as issued by the IASB. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Report of the Directors for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: l certain disclosures of Directors’ remuneration specified by law are not made; or l we have not received all the information and explanations we require for our audit. Other matter We have reported separately on the parent company financial statements of Tricorn Group plc for the year ended 31 march 2010. Mark Taylor Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Birmingham 9 June 2010 18109TRICORNG.indd 11 18109 13/08/10 Proof 6 13/08/2010 14:32 11 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com GROUP STATEmENT OF COmPREhENSIVE INCOmE for the year ended 31 march 2010 REvENUE Cost of sales GROSS PROFIT Distribution costs Administration costs OPERATING PROFIT BEFORE INTANGIBLE AMORTISATION AND RESTRUCTURING COSTS Intangible amortisation Restructuring costs OPERATING PROFIT Finance income Finance costs PROFIT BEFORE TAx Income tax expense PROFIT FOR THE yEAR AND TOTAL COMPREHENSIvE INCOME ATTRIBUTABLE TO: Equity holders of the parent company 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. Notes 3 3 12 4 3/4 8 8 3 9 2010 £’000 15,031 (10,193) 4,838 (676) (3,737) 2009 £’000 22,245 (14,750) 7,495 (947) (5,118) 425 1,430 (118) – 307 3 (132) 178 (118) (239) 1,073 20 (316) 777 (29) (192) 149 149 10 10 0.45p 0.45p 585 585 1.77p 1.71p 12 18109TRICORNG.indd 12 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc GROUP STATEmENT OF ChANGES IN EQUITy for the year ended 31 march 2010 Share-based Investment Share capital £’000 3,302 – – Share premium £’000 1,448 – – Merger reserve £’000 1,388 – – 3,302 1,448 1,388 – – – – – – – – – payment reserve £’000 193 – – 193 – – – in own shares £’000 – – – – (49) – – Profit and loss account £’000 (2,238) 585 585 (1,653) – 149 149 Total £’000 4,093 585 585 4,678 (49) 149 149 BALANCE AT 1 APRIL 2008 Profit for the year Total comprehensive income BALANCE AT 31 MARCH 2009 Transactions with owners Profit for the year Total comprehensive income BALANCE AT 31 MARCH 2010 3,302 1,448 1,388 193 (49) (1,504) 4,778 The accompanying notes form an integral part of these financial statements. 18109TRICORNG.indd 13 18109 13/08/10 Proof 6 13/08/2010 14:32 13 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com GROUP STATEmENT OF FINANCIAL POSITION at 31 march 2010 Notes 11 12 13 15 16 17 19 24 20 20 18 25 2010 £’000 591 793 1,126 2,510 3,107 3,839 1,296 8,242 2009 £’000 591 911 1,382 2,884 3,817 3,661 713 8,191 10,752 11,075 (3,360) (104) (1,734) (88) (5,286) (403) (285) (688) (5,974) 4,778 3,302 1,448 1,388 193 (49) (1,504) 4,778 (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 ASSETS NON-CURRENT Goodwill 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 profit or loss Borrowings Corporation tax NON-CURRENT Borrowings Deferred tax TOTAL LIABILITIES NET ASSETS EqUITy Share capital Share premium account merger reserve Share-based payment reserve Investment in own shares Profit and loss account TOTAL EqUITy The financial statements were approved by the Board of Directors on 9 June 2010. Mike Welburn Director The accompanying notes form an integral part of these financial statements. 14 18109TRICORNG.indd 14 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc GROUP STATEmENT OF CASh FLOWS for the year ended 31 march 2010 CASH FLOWS FROM OPERATING ACTIvITIES Profit after taxation Adjustment for: Depreciation Net finance costs in statement of comprehensive income Amortisation charge Taxation expense recognised in statement of comprehensive income (Increase)/decrease in trade and other receivables Increase/(decrease) in trade payables and other payables Decrease/(increase) in inventories Cash generated from operations Interest paid Income taxes paid NET CASH FROM OPERATING ACTIvITIES CASH FLOWS FROM INvESTING ACTIvITIES Purchase of own shares Acquisition of subsidiaries Purchase 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 Repayment of bank borrowings Payment of finance lease liabilities NET CASH USED IN 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. 2010 £’000 149 392 129 118 29 (170) 463 710 1,820 (140) (267) 1,413 (49) – (135) 3 (181) – (232) (300) (117) (649) 583 713 1,296 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 15 18109TRICORNG.indd 15 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS for the year ended 31 march 2010 1 GENERAL INFORMATION Tricorn Group plc and subsidiaries’ (the “Group”) principal activities comprise high precision tube manipulation, systems engineering and specialist fittings. 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. 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 9 June 2010. 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. Changes in accounting policies The Group has adopted IAS 1 Presentation of Financial Statements (revised 2007) which has led to the inclusion of a new primary statement, the consolidated statement of comprehensive income. The adoption of this accounting standard has had no further effect on the current or previous year’s Group financial statements. IAS 1 Presentation of Financial Statements (Revised 2007) requires presentation of a comparative statement of financial position as at the beginning of the first comparative period, in some circumstances. management considers that it is not necessary this year because the 2009 statement of financial position is the same as that previously published. The Group has adopted IFRS 2 – Share-based payments (amended) during the year and the adoption of this accounting standard has had no effect on the current or previous year’s Group financial statements. The Group has adopted IFRS 8 – Segmental Reporting, in the year. The adoption of IFRS 8 has changed the segments that are disclosed in the financial statements. In the previous annual financial statements, segments were identified by reference to dominant source and nature of the Group’s risks and returns. Under IFRS 8 the accounting policy for identifying segments is now based on the internal management reporting information that is regularly reviewed by the chief operating decision maker. Following the adoption of IFRS 8 which required retrospective application, the comparative segment information for the same period in the prior year is restated to conform with the new requirements. 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. The key assumptions in these forecasts have been sensitised and no issues arise which lead to any concern regarding the operations or financing of the Group. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements. 16 18109TRICORNG.indd 16 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 2 ACCOUNTING POLICIES continued 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 reporting date. All estimates are based on the best information available to management. 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 IFRS 9 Financial Instruments (effective 1 January 2013) IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011) IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009) l Amendment to IAS 39 Financial Instruments: Recognition and measurement – Eligible hedged Items (effective 1 July 2009) l Amendment to IAS 39 Reclassification of Financial Assets: Effective Date and Transition (effective 1 July 2009) l Amendment to IAS 39 and IFRIC 9 – Embedded Derivatives (effective 30 June 2009) l Group Cash-settled Share-based Payment Transactions – Amendment to IFRS 2 (effective 1 January 2010) l l l l l Improvements to IFRSs 2009 (various effective dates, earliest of which is 1 July 2009, but mostly 2010) IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009) IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1 July 2009) IFRIC 18 Transfers of Assets from Customers (effective prospectively for transfers on or after 1 July 2009) IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010) l Prepayments of a minimum Funding Requirement – Amendments to IFRIC 14 (effective 1 January 2011) l Amendment to IFRS 1 Additional Exemptions for First-time Adopters (effective 1 January 2010) l Amendment to IAS 32 Classification of Rights Issues (effective 1 February 2010) 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. 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 performance of impairment reviews to assess the carrying value of goodwill (see note 11); l valuation of interest rate collar (see note 24); l estimates of inventory recoverability. management review ageing of inventory, movement levels throughout the year and forecast future usage levels to set an adequate inventory provision to cover obsolete inventory lines; and l preparation and review of forecasts to support the going concern basis of preparing the financial statements (see above). There are no major areas for judgements within the financial statements which are not covered by the accounting policies detailed below. 18109TRICORNG.indd 17 18109 13/08/10 Proof 6 13/08/2010 14:32 17 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 2 ACCOUNTING POLICIES continued 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. 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 statement of financial position at their revalued amounts, which are also used as the basis for subsequent measurement in accordance with the accounting policies of the Group. 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. 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, being 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 is 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 statement of comprehensive income. 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. 18 18109TRICORNG.indd 18 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 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 through profit or loss and is not subsequently reversed. Impairment The Group’s goodwill, intangible assets and property, 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 asset’s or cash-generating unit’s 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. If the impairment is subsequently reversed, the carrying amount, except in the case of goodwill, is increased to the revised estimate of its recoverable amount, but limited to the carrying value that would have been determined had no impairment been recognised in prior years. Impairment losses in respect of goodwill are not subsequently reversed. 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 reporting date. Exchange differences are dealt with through profit or loss. 18109TRICORNG.indd 19 18109 13/08/10 Proof 6 13/08/2010 14:32 19 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 2 ACCOUNTING POLICIES continued Property, plant and equipment Property, plant and equipment 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 property, plant and equipment 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 and is then disclosed and accounted for as a finance lease 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 reporting 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 reporting date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income. 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 other comprehensive income. 20 18109TRICORNG.indd 20 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 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 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. 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. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. When the Company purchases its own shares, the consideration is deductible from equity attributable to the Company’s equity holders until the shares are either cancelled or reissued. When this happens, any consideration received is included in equity attributable to equity holders. Treasury shares are held at cost. 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 statement of comprehensive income. 18109TRICORNG.indd 21 18109 13/08/10 Proof 6 13/08/2010 14:32 21 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 2 ACCOUNTING POLICIES continued 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 the remuneration of its employees. 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 statement of comprehensive income. Financial liabilities are initially recognised at fair value and subsequently measured at amortised costs using the effective interest rate. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires. 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 statement of comprehensive income 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 reporting date. Derivative contracts All derivatives are recognised at fair value through profit or loss. The value of the derivative is reassessed at fair value at each reporting date. The only material derivative contract in existence during the period relates to an interest collar on the Group’s bank borrowings. The Group, from time to time, enters into forward currency collar 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 2010 or 2009. 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. 22 18109TRICORNG.indd 22 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 3 SEGMENTAL REPORTING The Group operates four main business segments: l Energy: manipulated tubular assemblies for use in power generation, oil and gas and marine sectors. l Transportation: ferrous, non-ferrous and nylon material tubular assemblies for use in off-highway, medical, and other such applications. l Aerospace: specialised rigid pipe assemblies for use in the aerospace sector. l Utilities: the pipefittings sector produces innovative jointing systems for polyethylene pipes, typically within the utility industry. The financial information detailed below is frequently reviewed by the chief operating decision maker. year ended 31 March 2010 £’000 £’000 £’000 £’000 £’000 Energy Transportation Aerospace Utilities Unallocated Revenue – from external customers – from other segments Segment revenues Operating profit pre-intangible amortisation Intangibles amortisation Operating profit Net finance costs Profit before tax Segmental assets Other segment information: Capital expenditure Depreciation 4,849 – 4,849 96 – 96 (46) 50 4,671 – 4,671 52 – 52 (16) 36 5,014 – 5,014 128 – 128 (22) 106 497 – 497 53 – 53 (2) 51 – – – 96 (118) (22) (43) (65) 3,304 1,988 3,040 243 2,177 10,752 66 151 45 165 24 58 – 17 – 1 135 392 Total £’000 15,031 – 15,031 425 (118) 307 (129) 178 18109TRICORNG.indd 23 18109 13/08/10 Proof 6 13/08/2010 14:32 23 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 3 SEGMENTAL REPORTING continued year ended 31 march 2009 Revenue – from external customers – from other segments Segment revenues Operating profit pre-intangible amortisation and restructuring costs Restructuring costs Intangibles amortisation Operating profit/(loss) Net finance costs Profit before tax Segmental assets Other segment information: Capital expenditure Depreciation Energy Transportation Aerospace Utilities Unallocated £’000 £’000 £’000 £’000 £’000 8,428 – 8,428 702 (57) – 645 (90) 555 6,645 – 6,645 138 (143) – (5) (26) (31) 5,995 – 5,995 48 (39) – 9 (56) (47) 3,742 1,884 3,213 178 157 67 149 80 55 1,177 – 1,177 259 – – 259 (6) 253 145 17 17 Total £’000 22,245 – 22,245 1,430 (239) (118) 1,073 (296) 777 – – – 283 – (118) 165 (118) 47 2,041 11,075 5 1 347 379 The Group’s revenue from external customers and its geographic allocation of total assets may be summarised as follows: year ended 31 March 2010 year ended 31 march 2009 Revenue £’000 10,925 3,217 889 15,031 Assets £’000 10,752 – – 10,752 Revenue £’000 17,702 2,758 1,785 22,245 Assets £’000 11,075 – – 11,075 United Kingdom Europe Rest of World 24 18109TRICORNG.indd 24 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs 4 PROFIT BEFORE TAxATION The profit on ordinary activities before taxation is stated after charging: Auditors’ remuneration: Audit of parent and Group consolidation Audit of Group subsidiaries Non-audit services: Corporate taxation Operating lease charges: Land and buildings Plant and equipment motor vehicles Restructuring costs Depreciation and amortisation: Intangible assets Property, plant and equipment – owned Property, plant and equipment – leased Profit on sale of plant and equipment Tricorn Group plc 2010 £’000 2009 £’000 12 25 11 394 34 71 – 118 315 77 – 12 25 11 385 41 77 239 118 312 67 – The restructuring costs were redundancy costs incurred to reduce the Group’s costs in line with forecast sales orders. 5 DIRECTORS’ EMOLUMENTS 2010 Benefits N C Paul CBE J Rubins R Allsop m I Welburn* P Lee* N Silverthorne* Basic £’000 Bonus in kind Pension £’000 £’000 £’000 Total £’000 Basic £’000 Bonus £’000 25 – 10 118 90 53 296 – – – – – – – – – – 17 15 6 38 – – – 8 6 4 18 25 – 10 143 111 63 352 30 15 15 119 17 56 252 – – – – – – – 2009 Benefits in kind £’000 – – – 17 3 6 26 Pension £’000 Total £’000 – – – 8 1 4 13 30 15 15 144 21 66 291 P Lee was appointed as a Director on 25 February 2009 and his emoluments disclosed above for 2009 start from that date. J Rubins resigned as a Director on 31 march 2009. * The executive Directors are classified as the key management personnel of the Group as defined in IAS 24 Related Party Disclosures. 18109TRICORNG.indd 25 18109 13/08/10 Proof 6 13/08/2010 14:32 25 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 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 7 SHARE-BASED EMPLOyEE REMUNERATION There are two share-based remuneration schemes in operation: l Approved Enterprise management Incentive (EmI) scheme. l Unapproved share options. At 31 march 2009 Granted in year Exercised in year No. of shares No. of shares No. of shares Lapsed At 31 March 2010 No. of shares No. of shares in year Enterprise Management Incentive (EMI) scheme April 2002 – April 2012 210,000 June 2005 – August 2013 December 2004 – July 2012 November 2004 – June 2012 July 2006 – November 2015 march 2009 – march 2019 100,000 200,000 750,000 193,661 500,000 December 2009 – December 2019 – 1,953,661 – – – – – – 100,000 100,000 – – – – – – – – – (75,000) – – – – – 210,000 25,000 200,000 750,000 193,661 500,000 100,000 (75,000) 1,978,661 2010 Number 2009 Number 196 42 238 2010 £’000 4,541 407 158 5,106 256 61 317 2009 £’000 5,643 452 141 6,236 Life remaining on options at Exercise 31 march price Pence 20 10 10 10 17.75 10 10 2010 months 24 41 28 28 58 108 117 The weighted average exercise price of the EmI Scheme at 31 march 2010 was 11.25p (2009: 11.8p). 1,728,661 of options were available for exercise at 31 march 2010 (2009: 1,453,661). 26 18109TRICORNG.indd 26 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs 7 SHARE-BASED EMPLOyEE REMUNERATION continued At 31 march 2009 Granted in year Exercised in year No. of shares No. of shares No. of shares Lapsed At 31 March 2010 No. of shares No. of shares in year Unapproved share options January 2002 – December 2009 November 2006 – June 2013 November 2007 – Nov 2014 300,000 306,339 375,000 981,339 – – – – Total share options 2,935,000 100,000 – – – – – (300,000) – – – 306,339 375,000 (300,000) 681,339 (375,000) 2,660,000 Tricorn Group plc Life remaining on options at Exercise 31 march price Pence 30 17.75 40 2010 months – 39 56 The weighted average exercise price of the unapproved share options at 31 march 2010 was 30p (2009: 30p). All options were available for exercise at 31 march 2010 (2009: All options). The charge for the share options granted in the current year to 31 march 2010 is highly immaterial; therefore, no charge has been recorded in the Group statement of comprehensive income. In total £Nil of employee remuneration expense has been included in the Group statement of comprehensive income for 31 march 2010 (31 march 2009: £Nil) 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 collar (note 24) Effective interest charge on borrowings Interest on hire purchase agreements and finance leases Finance expense 2010 £’000 3 3 32 (8) 90 18 132 2009 £’000 20 20 100 100 92 24 316 27 18109TRICORNG.indd 27 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 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 years Deferred taxation (note 18) Tax on profit on ordinary activities 2010 £’000 43 20 63 (34) 29 The tax assessed is different to the standard rate of corporation tax in the UK of 28% (2009: 28%). 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% (2009: 28%) Effect of: Expenses not deductible for tax purposes Capital allowances in excess of depreciation Unutilised tax losses Other temporary differences Effects of other tax rates Adjustments in respect of prior years 2010 £’000 178 50 43 42 (35) (46) (11) 20 63 At 31 march 2010 the Group had tax losses of £207,000 (2009: £331,000) to offset against future profits within the United Kingdom. 2009 £’000 292 (55) 237 (45) 192 2009 £’000 777 218 77 14 (16) (1) – (55) 237 28 18109TRICORNG.indd 28 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 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 2010 Weighted average number Earnings Profit of shares per share £’000 Number ’000 149 – 149 32,979 – 32,979 Pence 0.45p – 0.45p 31 march 2009 Weighted average number Profit of shares £’000 Number ’000 585 – 585 33,020 1,198 34,218 Earnings per share Pence 1.77p – 1.71p 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 Interest rate collar gain Adjusted earnings per share Dilutive shares Diluted adjusted earnings per share 31 March 2010 Weighted average number Earnings Profit of shares per share £’000 Number ’000 149 118 (8) 259 – 259 32,979 – – 32,979 – 32,979 Pence 0.45p – – 0.79p – 0.79p 29 18109TRICORNG.indd 29 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 10 EARNINGS PER SHARE continued Basic earnings per share Amortisation Restructuring costs Interest rate collar loss Adjusted earnings per share Dilutive shares Diluted adjusted earnings per share 11 GOODWILL Cost At 31 March 2009 and 31 March 2010 Impairment At 1 April 2008, 31 march 2009 and 31 march 2010 Net book value At 1 April 2008 At 31 march 2009 At 31 March 2010 Goodwill above relates to the following cash-generating units: Redman Fittings Limited RmDG Aerospace Limited maxpower Automotive Limited 31 march 2009 Weighted average number Profit of shares £’000 Number ’000 585 118 239 100 1,042 – 1,042 33,020 – – – 33,020 1,198 34,218 Date of acquisition June 1999 June 2006 June 2007 Earnings per share Pence 1.77p – – – 3.16p – 3.05p Total £’000 591 – 591 591 591 Original cost £’000 60 140 391 591 30 18109TRICORNG.indd 30 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 11 GOODWILL continued Goodwill arising on consolidation, represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. The Group tests annually for impairment, or more frequently if there are indicators that goodwill might be impaired. The recoverable amounts of the cash generating units (CGUs) are determined from value in use calculations, covering a detailed five year forecast and applying a discount rate of 5.4%. management’s key assumptions are based on their past experience and future expectations of the market over the longer term. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected changes to selling prices and direct costs during the year. 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 on the assumptions underlying the value in use calculation would have an impact on the carrying value of goodwill. After applying sensitivity analysis in respect of the results and future cash flows, in particular for presumed growth rates and discount rates, management believe that no impairment was required. management is not aware of any other changes that would necessitate change to its key estimates. 12 INTANGIBLE ASSETS Cost At 1 April 2008 At 1 April 2009 and 31 march 2010 Amortisation At 1 April 2008 Charge for the year At 1 April 2009 Charge for the year At 31 march 2010 Net book value At 1 April 2008 At 31 march 2009 At 31 March 2010 Brand Customer names £’000 contracts £’000 830 830 (66) (56) (122) (56) (178) 764 708 652 312 312 (47) (62) (109) (62) (171) 265 203 141 Total £’000 1,142 1,142 (113) (118) (231) (118) (349) 1,029 911 793 All intangible asset amortisation is included in the Group statement of comprehensive income under amortisation of intangibles as detailed on the face of the Group statement of comprehensive income. 18109TRICORNG.indd 31 18109 13/08/10 Proof 6 13/08/2010 14:32 31 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 13 PROPERTy, PLANT AND EqUIPMENT Cost At 1 April 2008 Additions At 31 march 2009 Additions At 31 march 2010 Depreciation At 1 April 2008 Charge for the year At 31 march 2009 Charge for the year At 31 march 2010 Net book value At 1 April 2008 At 31 march 2009 At 31 March 2010 Plant and equipment £’000 Motor vehicles £’000 4,139 347 4,486 136 4,622 2,726 378 3,104 392 3,496 1,413 1,382 1,126 43 – 43 – 43 42 1 43 – 43 1 – – Total £’000 4,182 347 4,529 136 4,665 2,768 379 3,147 392 3,539 1,414 1,382 1,126 The net book value of fixed assets includes £421,000 (2009: £492,000) in respect of assets held under finance leases and hire purchase contracts. 32 18109TRICORNG.indd 32 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 14 PRINCIPAL SUBSIDIARIES At 31 march 2010 the principal subsidiaries of the Group were as follows: % of nominal Name of subsidiary undertaking Country of Description of value of Principal incorporation shares held shares held business activity mTC holdings Limited United Kingdom Ordinary 100 Intermediate holding company malvern Tubular Components Limited* United Kingdom Ordinary 100 manufacturer of tubular components Redman Fittings Limited United Kingdom Ordinary 100 Sales and marketing company for specialist pipe fittings RmDG Aerospace Limited United Kingdom Ordinary 100 manufacturer of aerospace fittings maxpower Automotive Limited United Kingdom Ordinary 100 manufacturer of highway and automotive tubular and pipe components Robert morton DG Limited* United Kingdom Ordinary 100 Dormant ISSquared Limited United Kingdom Ordinary 100 Dormant Searchwell Limited United Kingdom Ordinary 100 Dormant Integrated Statistical Solutions Limited United Kingdom Ordinary 100 Dormant * held by a subsidiary undertaking. 15 INvENTORIES Raw materials Work in progress Finished goods 2010 £’000 1,529 934 644 3,107 2009 £’000 2,173 1,182 462 3,817 In the year to 31 march 2010, a total of £6,782,000 of inventory (2009: £9,746,000) was included in the statement of comprehensive income as an expense. 18109TRICORNG.indd 33 18109 13/08/10 Proof 6 13/08/2010 14:32 33 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 16 TRADE AND OTHER RECEIvABLES Trade receivables Impairment of trade receivables Other receivables Prepayments and accrued income Total 2010 £’000 3,633 (5) 3,628 20 191 3,839 2009 £’000 3,475 (5) 3,470 9 182 3,661 At 31 march 2010, some of the unimpaired trade receivables are past their due date but all are considered recoverable. The age of financial assets past due but not impaired, is as follows: Not more than one month Not more than two months Not more than three months 2010 £’000 980 381 137 1,498 2009 £’000 1,123 499 91 1,713 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 2010 £’000 1,296 2009 £’000 713 Cash and cash equivalents consist of cash on hand and balances with banks only. At the year end £518,000 (2009: £219,000) of cash on hand and balances with banks were held by the subsidiary undertakings, however this balance is available for use by the Group. 34 18109TRICORNG.indd 34 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 18 DEFERRED TAxATION The deferred tax included in the statement of financial position 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 Group statement of comprehensive income movement arising during the year Balance carried forward As at 31 march 2010 the Group has unprovided deferred tax assets as follows: Trading losses This deferred tax asset is not recognised due to uncertainty over its recoverability. – – 4 – 4 2010 £’000 41 (37) 4 19 TRADE AND OTHER PAyABLES Trade and other payables Other taxation and social security Accruals 2010 £’000 2009 £’000 2010 £’000 (228) (61) – – (289) – – 4 37 41 Assets Liabilities 2009 £’000 54 (13) 41 2010 £’000 (360) 71 (289) 2009 £’000 (273) (87) – – (360) 2009 £’000 (418) 58 (360) Unprovided 2010 £’000 (58) Unprovided 2009 £’000 (93) 2010 £’000 2,175 513 672 3,360 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 statement of financial position represents the fair value of the liabilities. 18109TRICORNG.indd 35 18109 13/08/10 Proof 6 13/08/2010 14:32 35 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 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 2010 £’000 292 1,388 54 1,734 386 17 403 2010 £’000 373 1,388 365 116 – 2,242 2009 £’000 292 1,620 117 2,029 677 71 748 2009 £’000 382 1,620 373 365 116 2,856 36 18109TRICORNG.indd 36 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 20 BORROWINGS continued Bank loan The Group obtained £1,400,000 bank borrowing in 2007, repayable over five years. Interest is charged at 2.25% over bank base rate. The borrowings are recorded in the statement of financial position with interest charged at an effective rate over the life of the borrowings. The bank borrowings are secured against the assets of the Group. There is no significant difference between the carrying value and the fair value of the bank loan. Invoice discounting facility The invoice discounting facility is secured against the trade receivables to which it relates. Interest is paid at 2.15% 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 2010 Payments Discounting 31 march 2009 Payments Discounting Within 1 year Within Within 1-2 years 2-5 years Total 60 (6) 54 129 (12) 117 18 (1) 17 66 (6) 60 – – – 12 (1) 11 78 (7) 71 207 (19) 188 The hire purchase agreements and finance lease liabilities are secured against the assets to which they relate. 18109TRICORNG.indd 37 18109 13/08/10 Proof 6 13/08/2010 14:32 37 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 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. 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. 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 bank loan at 2.25% over base rate l l invoice discounting at 2.15% 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 £1,000 (2009: £7,000), equity and reserves would reduce/increase by the same amount, and the charge would be £130,000/£128,000 (2009: £303,000/£289,000). 38 18109TRICORNG.indd 38 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 22 FINANCIAL INSTRUMENTS continued Foreign currency risk The Group transacts certain purchases and sales in foreign currencies. At 31 march 2010 there were no (2009: two) foreign currency forward contracts in force. Foreign exchange differences on retranslation of foreign currency assets and liabilities are taken to the statement of comprehensive income of the Group. If the US Dollar and Euro were to fall/rise by 10% on the closing rate and average annual rate at 31 march 2009 then Group profits would rise/fall by £36,000 at 31 march 2010 (2009: £87,000) 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 partially 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 £116,000 at 31 march 2010 (2009: £168,000) and equity and reserves would increase/reduce by the same amount. Financial assets and liabilities The IAS 39 categories of financial assets included in the statement of financial position 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 statement of financial position in the following headings: Current assets Trade and other receivables Cash and cash equivalents 2010 £’000 191 4,944 5,135 3,839 1,296 5,135 2009 £’000 182 4,192 4,374 3,661 713 4,374 39 18109TRICORNG.indd 39 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 22 FINANCIAL INSTRUMENTS continued The IAS 39 categories of financial liabilities included in the statement of financial position and the headings in which they are included are as follows: Non financial liability Financial liabilities at fair value through the profit and loss account Financial liabilities measured at amortised cost Total liabilities The financial liabilities are included in the statement of financial position in the following headings: Current liabilities Trade and other payables Financial liabilities at fair value through the profit and loss account Borrowings Non-current liabilities Borrowings 2010 £’000 513 104 4,984 5,601 3,360 104 1,734 403 5,601 2009 £’000 362 112 5,312 5,786 2,897 112 2,029 748 5,786 Fair value hierarchy The following table presents financial assets and liabilities measured at fair value in the statement of financial position in accordance with the fair value hierarchy prescribed by IFRS 7 Financial Instruments Disclosures. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels: Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities; Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement. The financial liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows: Interest rate collars Level 1 Level 2 Level 3 2010 £’000 – 2010 £’000 104 2010 £’000 – Total 2010 £’000 104 40 18109TRICORNG.indd 40 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 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. 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. 24 DERIvATIvES In February 2008, the Group entered into an interest rate collar 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 2010 and is £104,000 liability (2009: £112,000 liability). The derivative is classified as fair value through the profit or loss and is recorded in the profit or loss under finance costs (note 8). The fair value of the interest rate collar has been determined based on the discounted difference between the interest payable during the life of the collar discounted and the interest that would be payable at variable rates if the collar 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 10 pence each Allotted and issued (including shares held in treasury) 33,020,000 (2009: 33,020,000) ordinary shares of 10 pence each All 10 pence ordinary shares carry the same voting rights and rights to discretionary dividends. 2010 £’000 2009 £’000 10,000 10,000 3,302 3,302 On 11 march 2010 the Group purchased 875,000 of its own ordinary shares in the open market into treasury at a price of 5.5 pence per ordinary share. This is shown as a separate line in equity in the Group statement of financial position. 18109TRICORNG.indd 41 18109 13/08/10 Proof 6 13/08/2010 14:32 41 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 26 CONTINGENT LIABILITIES There were no contingent liabilities at 31 march 2010 or 31 march 2009. 27 CAPITAL COMMITMENTS There were no capital commitments at 31 march 2010 or 31 march 2009. 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 2010 Land and buildings £’000 391 1,512 646 2,549 2009 Land and buildings £’000 391 1,555 860 2,806 2010 2009 Other £’000 99 106 – 205 Other £’000 59 70 – 129 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 statement. 42 18109TRICORNG.indd 42 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc Tricorn Group plc Company Statutory Financial Statements Under UK GAAP For the year ended 31 march 2010 Company number 1999619 Contents 44 Company Statement of Directors’ Responsibilities 45 Report of the Independent Auditors 46 Company Balance Sheet 47 Notes to the Financial Statements 54 Company Information 43 18109TRICORNG.indd 43 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 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. 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; and – 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 adequate 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 2006. 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 auditors are 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 auditors are 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. 44 18109TRICORNG.indd 44 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc REPORT OF ThE INDEPENDENT AUDITORS TO ThE mEmBERS OF TRICORN GROUP plc for the year ended 31 march 2010 We have audited the parent company financial statements of Tricorn Group plc for the year ended 31 march 2010 which comprise the parent company balance sheet and notes 1 to 16. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ 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 As explained more fully in the Directors’ Responsibilities statement set out on page 7, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKNP. Opinion on financial statements In our opinion the parent company financial statements: l give a true and fair view of the state of the Company’s affairs as at 31 march 2010; l have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and l have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the parent company financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: l adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or l l the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of Directors’ remuneration specified by law are not made; or l we have not received all the information and explanations we require for our audit. Other matter We have reported separately on the Group financial statements of Tricorn Group plc for the year ended 31 march 2010. Mark Taylor Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Birmingham 9 June 2010 18109TRICORNG.indd 45 18109 13/08/10 Proof 6 13/08/2010 14:32 45 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com COmPANy BALANCE ShEET at 31 march 2010 FIxED ASSETS Tangible 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 ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES CREDITORS: amounts falling due after more than one year NET ASSETS CAPITAL AND RESERvES Called up share capital Share premium account Share-based payment reserve merger reserve Investment in own shares Profit and loss account SHAREHOLDERS’ FUNDS The financial statements were approved by the Board of Directors on 9 June 2010 . Mike Welburn Director The accompanying accounting policies and notes form an integral part of these financial statements. Notes 7 8 9 10 11 12 12 12 12 12 2010 £’000 3 6,196 6,199 1,535 778 2,313 2009 £’000 4 6,196 6,200 1,857 494 2,351 (1,070) (2,750) 1,243 7,442 (386) 7,056 3,302 1,448 193 1,592 (49) 570 7,056 (399) 5,801 (677) 5,124 3,302 1,448 193 1,592 – (1,411) 5,124 46 18109TRICORNG.indd 46 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc NOTES TO ThE FINANCIAL STATEmENTS for the year ended 31 march 2010 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 612 of the Companies Act 2006 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 the remuneration of employees of the Company and its subsidiaries. Options are issued by the parent to the employees of the Company and its subsidiaries. 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. Equity Share capital is determined using the nominal value of shares that have been issued. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. When the Company purchases its own shares, the consideration is deductible from equity attributable to the Company’s equity holders until the shares are either cancelled or reissued. When this happens, any consideration received is included in equity attributable to equity holders. Treasury shares are held at cost. 47 18109TRICORNG.indd 47 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 2 ACCOUNTING POLICIES continued 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. 3 PROFIT FOR THE FINANCIAL yEAR The Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The Company's profit for the year was £1,981,000 (2009: £207,000). Auditors’ remuneration incurred by the Company during the year for audit services totalled £11,000 (2009: £11,000), and for tax compliance services totalled £2,000 (2009: £2,000). 4 DIRECTORS AND EMPLOyEES REMUNERATION Staff costs during the year were as follows: Wages and salaries Social security costs Other pension costs 2010 £’000 480 48 26 554 2009 £’000 633 68 27 728 The average number of persons (including Directors) employed by the Company during the year was 9 (2009: 13). 5 DIRECTORS’ EMOLUMENTS 2010 Benefits in kind Bonus Pension £’000 £’000 £’000 Total £’000 Basic £’000 Bonus £’000 – – – – – – – – – – 17 15 6 38 – – – 8 6 4 18 25 – 10 143 111 63 352 30 15 15 119 17 56 252 – – – – – – – 2009 Benefits in kind £’000 – – – 17 3 6 26 Basic £’000 25 – 10 118 90 53 296 Pension £’000 Total £’000 – – – 8 1 4 13 30 15 15 144 21 66 291 N C Paul CBE J Rubins R Allsop m I Welburn* P Lee* N Silverthorne* P Lee was appointed as a Director on 25 February 2009 and his emoluments disclosed above for 2009 start from that date. J Rubins resigned as a Director on 31 march 2009. 48 18109TRICORNG.indd 48 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 6 SHARE-BASED EMPLOyEE REMUNERATION There are two share-based remuneration schemes in operation: l Approved Enterprise management Incentive (EmI) scheme; and l Unapproved share options. At 31 march 2009 Granted in year Exercised in year No. of shares No. of shares No. of shares Lapsed At 31 March 2010 No. of shares No. of shares in year Enterprise Management Incentive (EMI) scheme April 2002 – April 2012 June 2005 – August 2013 December 2004 – July 2012 November 2004 – June 2012 July 2006 – November 2015 march 2009 – march 2019 210,000 100,000 200,000 750,000 193,661 500,000 – – – – – December 2009 – December 2019 – 100,000 1,953,661 100,000 – – – – – – – – – (75,000) – – – – – 210,000 25,000 200,000 750,000 193,661 500,000 100,000 (75,000) 1,978,661 Life remaining on options at Exercise 31 march price Pence 2010 months 20 10 10 10 17.75 10 10 24 41 28 28 58 108 117 The weighted average exercise price of the EmI Scheme at 31 march 2009 was 11.25p (2009: 11.8p). 1,728,661 of options were available for exercise at 31 march 2010 (2009: 1,453,661). Unapproved share options January 2002 – December 2009 November 2006 – June 2013 November 2007 – Nov 2014 300,000 306,339 375,000 981,339 – – – – Total share options 2,935,000 100,000 – – – – – (300,000) – – – 306,339 375,000 (300,000) 681,339 (375,000) 2,660,000 30 17.75 40 – 39 56 The weighted average exercise price of the unapproved share options at 31 march 2010 was 30p (2009: 30p). All were available for exercise at 31 march 2010 (2009: all options). The charge for the share options granted in the current year to 31 march 2010 is highly immaterial; therefore, no charge has been recorded in the profit and loss account. In total £Nil of employee remuneration expense has been included in the Company profit and loss account for 31 march 2010 (31 march 2009: £Nil) which gave rise to the share-based payment reserve. 18109TRICORNG.indd 49 18109 13/08/10 Proof 6 13/08/2010 14:32 49 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 7 FIxED ASSET INvESTMENTS Cost At 1 April 2009 and 31 march 2010 Impairment At 1 April 2009 and 31 march 2010 Net book value At 31 March 2010 At 31 march 2009 Total £’000 7,478 (1,282) 6,196 6,196 At 31 march 2010 the Company holds 100% of the ordinary share capital of the following subsidiaries: % of nominal Name of subsidiary undertaking Country of Description of value of Principal incorporation shares held shares held business activity mTC holdings Limited United Kingdom Ordinary 100 Intermediate holding company malvern Tubular Components Limited* United Kingdom Ordinary 100 manufacturer of tubular components Redman Fittings Limited United Kingdom Ordinary 100 Sales and marketing company for specialist pipe fittings RmDG Aerospace Limited United Kingdom Ordinary 100 manufacturer of aerospace fittings maxpower Automotive Limited United Kingdom Ordinary 100 manufacturer of highway and automotive tubular and pipe components Robert morton DG Limited* United Kingdom Ordinary 100 Dormant ISSquared Limited United Kingdom Ordinary 100 Dormant Searchwell Limited United Kingdom Ordinary 100 Dormant Integrated Statistical Solutions Limited United Kingdom Ordinary 100 Dormant * held by a subsidiary undertaking. 50 18109TRICORNG.indd 50 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs 8 DEBTORS Amounts owed by subsidiary undertakings Other debtors Prepayments and accrued income Deferred tax 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 Tricorn Group plc 2010 £’000 1,504 4 27 – 1,535 2010 £’000 292 2 41 629 17 13 76 2009 £’000 1,780 5 35 37 1,857 2009 £’000 292 2 57 2,241 6 59 93 1,070 2,750 2010 £’000 386 2010 £’000 292 292 94 678 2009 £’000 677 2009 £’000 292 292 385 969 The bank loan is secured against the assets of the Company and its subsidiaries. Interest is paid at base rate plus 2.25% and is repayable over five years. 18109TRICORNG.indd 51 18109 13/08/10 Proof 6 13/08/2010 14:32 51 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com NOTES TO ThE FINANCIAL STATEmENTS continued 11 SHARE CAPITAL Authorised 100,000,000 ordinary shares of 10 pence each Allotted and issued (including shares held in treasury) 33,020,000 (2009: 33,020,000) ordinary shares of 10 pence each All 10 pence ordinary shares carry the same voting rights and rights to discretionary dividends. 2010 £’000 2009 £’000 10,000 10,000 3,302 3,302 On 11 march 2010 the Group purchased 875,000 of its own ordinary shares in the open market into treasury at a price of 5.5 pence per ordinary share. This is shown as a separate line in Equity. 12 RESERvES At 1 April 2009 Retained profit for the year Purchase of own shares At 31 March 2010 Share-based Share payment premium £’000 1,448 – – 1,448 reserve £’000 193 – – 193 Merger reserve £’000 1,592 – – 1,592 13 RECONCILIATION OF MOvEMENT IN SHAREHOLDERS’ FUNDS Profit for the financial year Purchase of own shares Net increase to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds Investment in own Profit and shares loss account £’000 – – (49) (49) 2010 £’000 1,981 (49) 1,932 5,124 7,056 £’000 (1,411) 1,981 – 570 2009 £'000 207 – 207 4,917 5,124 52 18109TRICORNG.indd 52 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc 14 CONTINGENT LIABILITIES The Company has given an unlimited guarantee against the bank borrowings of its subsidiaries. At 31 march 2010 the balances amounted to Nil (2009: Nil). There were no further contingent liabilities at 31 march 2010 or 31 march 2009. 15 CAPITAL COMMITMENTS There were no capital commitments at 31 march 2010 or at 31 march 2009. 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. 18109TRICORNG.indd 53 18109 13/08/10 Proof 6 13/08/2010 14:32 53 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com COmPANy INFORmATION 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 (Technical Director) Phillip Lee (Finance Director) Roger Allsop (non-executive Director) Secretary: michael Greensmith Nominated adviser and broker: Arbuthnot Securities Limited Bankers: Bank of Scotland plc 125 Colmore Row Birmingham B3 3SF 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 Arbuthnot house 20 Ropemaker Street London EC2y 9AR Registrars: Neville Registrars Limited Neville house 18 Laurel Lane halesowen West midlands B63 3DA 54 18109TRICORNG.indd 54 18109 13/08/10 Proof 6 13/08/2010 14:32 EnErgy transportation aErospacE utilitiEs Tricorn Group plc ShAREhOLDER NOTES 18109TRICORNG.indd 55 18109 13/08/10 Proof 6 13/08/2010 14:32 55 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com ShAREhOLDER NOTES 56 18109TRICORNG.indd 56 18109 13/08/10 Proof 6 13/08/2010 14:32 Tricorn Group plc Annual Report and Accounts 2010 www.tricorn.uk.com EnErgy transportation aErospacE utilitiEs Tricorn Group plc 2000 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. 1500 1000 Strategy 2000 500 To acquire and grow engineering based businesses that are supplying blue chip OEM customers who in turn are focused on attractive end markets. 1500 0 The key elements of this approach are to 2007/08 Drive for operational excellence, ensuring products and services are globally competitive and that class leading quality 2006/07 2008/09 2004/05 2005/06 2009/10 and delivery performance is achieved. 1000 Improve margins by the implementation of lean manufacturing, the resourcing of materials to low cost countries and the 2006/07 2006/07 2006/07 2006/07 2007/08 2007/08 2007/08 2007/08 2008/09 2008/09 2008/09 utilisation of Group resources (shared services and expertise). 2008/09 2009/10 2009/10 2009/10 2009/10 500 Growth. Organically by increasing share within its customers and developing new customers. Inorganically through selective acquisitions where Tricorn’s management expertise can generate sufficient added value. 4.0 2006/07 3.5 3.0 2.5 2.0 1.5 4.0 1.0 3.5 0.5 3.0 0.0 2.5 2.0 1.5 1.0 0.5 0.0 2007/08 2007/08 2007/08 2007/08 2007/08 0 2007/08 Historical summary 2004/05 2008/09 2009/10 2005/06 2006/07 2007/08 2008/09 2009/10 Dec 2001 Listed on AIM June 2006 Acquired RMDG Aerospace Limited June 2007 Acquired Maxpower Automotive Limited Dec 2008 Announced record half year results, but signal slow down anticipated June 2010 Remained profitable, reduced net debt and saw improvements in demand 25000 25000 REVENUE 20000 20000 25000 25000 20000 15000 15000 20000 15000 10000 10000 15000 0 0 10000 0 ’ £ 10000 5000 5000 0 0 5000 5000 0 0 2004/05 2004/05 2005/06 2005/06 2006/07 2006/07 2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 OpERATING pROfIT 2000 2000 Energy Transportation Aerospace Utilities 0 0 0 ’ £ 2000 2000 1500 1500 1000 1000 500 500 0 0 1500 1500 1000 1000 500 500 0 0 2004/05 Group 2004/05 2005/06 2005/06 2006/07 2006/07 2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2006/07 2007/08 2008/09 2004/05 2009/10 2005/06 2006/07 2007/08 2008/09 2009/10 2004/05 2005/06 NET DEbT 2008/09 2008/09 2008/09 2008/09 1000 500 1000 1000 1000 500 500 0 0 2009/10 2009/10 2009/10 2009/10 -500 -500 500 0 0 0 -1000 0 0 ’ £ -1500 -500 -1000 -500 -1500 -1000 -2000 -1500 -2500 -2000 -2000 -2500 -3000 -1000 -1500 -2000 -2500 -3000 2004/05 2004/05 2005/06 2005/06 2006/07 2006/07 2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 -3000 -2500 2008/09 2004/05 -3000 2004/05 2009/10 2005/06 2005/06 2006/07 2007/08 2006/07 2008/09 2009/10 2007/08 ADjUSTED EARNINGS pER ShARE Group 2004/05 2005/06 2005/06 2006/07 2006/07 2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 e c n e P 0.0 2004/05 2005/06 2009/10 2006/07 2007/08 2008/09 2009/10 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2004/05 Group 4.0 3.5 4.0 3.0 3.5 2.5 3.0 2.0 2.5 1.5 2.0 1.0 1.5 0.5 1.0 0.0 2008/09 0.5 0.0 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 18109TRICORNGcvr.indd 3-4 18109 13/08/10 Proof 6 18109 13/08/10 Proof 6 13/08/2010 14:31 The future of Global Tubular Solutions Tricorn Group plc Spring Lane Malvern Link Malvern Worcestershire WR14 1DA Tel: 01684 569956 Fax: 01684 892337 www.tricorn.uk.com Tricorn Group plc Annual Report and Accounts 2010 18109TRICORNGcvr.indd 1-2 18109 13/08/10 Proof 6 18109 13/08/10 Proof 6 13/08/2010 14:31