Tricon Residential
Annual Report 2019

Plain-text annual report

Annual Report & Accounts for the year ended 31 March 2019 Stock code: TCN Welcome to our Annual Report 2019 TRICORN GROUP Tricorn creates value for our stakeholders by focusing on our area of expertise and being the best at what we do. We aim to be recognised as the “best in class” tube solutions provider in terms of service, quality and brand reputation. Global manufacturing footprint Operational excellence Large blue-chip OEM customers Tricorn Capitalise on growth opportunities Leveraging capabilities and know-how Financial disciplines Our Strategic Enablers Establishing a global manufacturing footprint − With manufacturing operations now firmly established in the UK, USA and China, the Group is ideally positioned to support its customers’ facilities in these key areas as they continue to seek to localise supply and technical support. We continue to evaluate opportunities to expand further in response to the growing needs of our customers. The Group’s Growth Priorities Focus on large blue-chip OEM customers We focus on a limited number of highly successful customers where we can build long-term, collaborative relationships. By working closely with them from early design, through product validation and onto full production, we can provide highly cost- effective solutions and at the same time benefit from high levels of recurring revenue over the life of the product. Leveraging the capabilities and know-how across the Group − To harness the Group’s full potential we remain determined to channel and maximise our scale and act wherever possible as one Tricorn. Best practice is shared across the Group and operations are consistently benchmarked. Maintaining financial disciplines − As we execute our strategy to deliver profitable growth, we continue to maintain financial discipline. Businesses are targeted to achieve EBITDA/sales of a minimum of 10% and a cash generation/EBITDA ratio of 1:1. Our strong cash generation allows the Group to make significant investments in our operations and at the same time reduce debt and increase funds. Capitalise on significant growth opportunities By being alert, agile and responsive to growth opportunities we are winning new business and securing significant long-term agreements. We continue to invest in developing our capabilities and expanding our capacity, ensuring that we maintain our competitive advantage and can meet the increasing needs of our customers. Drive for operational excellence We are committed to a relentless focus on how to improve the way our businesses operate. By doing this we will better utilise capacity, enhance our competitiveness, reduce working capital and generate cost savings by operating more efficiently. Our journey is underpinned by the engagement of management and employees at all levels and we remain absolutely confident that embedding Lean across the whole of Tricorn is an essential enabler to deliver and sustain our goals. HIGHLIGHTS 2019 Highlights Operational Highlights • Revenue increased 2.6% to £22.763m • Continued strong growth in profits from • Profit before tax up 31.6% to £1.088m • Improved profitability of the Transportation division the China joint venture • Recommended final dividend of 0.2p per share • US expansion announced post year end Financial Highlights Revenue Underlying EBITDA Underlying profit before tax m 0 8 1 2 2 £ . m 3 6 7 2 2 £ . m 6 1 0 8 1 £ . m 9 1 5 8 1 £ . m 2 7 8 1 £ . m 5 7 5 1 £ . m 1 6 9 0 £ . m 8 3 6 0 £ . m 8 8 0 1 £ . m 0 3 2 0 £ . m 7 2 8 0 £ . ) m 3 7 2 0 £ ( . 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 Gearing Underlying earnings per share Cash generated by operations . % 9 7 %5 6 7 4 . % 5 8 4 . % 0 5 4 . p 2 0 3 . p 5 6 2 . p 2 7 0 . m 2 3 5 1 £ . m 9 8 1 1 £ . m 2 2 2 1 £ . m 4 1 6 0 £ . ) p 9 1 0 . ( 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 Contents Strategic Report Board of Directors Report of the Directors Corporate Governance (including remuneration report) Report of the Independent Auditor 4 10 11 13 19 Group Income Statement Group Statement of Comprehensive Income Group Statement of Changes in Equity Group Statement of Financial Position 25 26 27 28 Group Statement of Cash Flows Notes to the Financial Statements Company Statutory Financial Statements (prepared under UK GAAP) 29 30 54 01 Our BusinessTRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comTHE TRICORN GROUP Tricorn USA Locations 1 Tricorn UK, Malvern UK – Manufacturing and • 65,000 sq ft facility in Franklin, North Registered Office 2 Tricorn UK, West Bromwich, UK – Manufacturing 3 Tricorn USA, Franklin, NC, USA – Manufacturing 12 3 4 5 6 Tricorn UK • Facilities in Malvern, Worcestershire and West Bromwich, West Midlands, providing c127,500 sq ft of manufacturing space • Capability to bend up to 4” diameter and currently fabricating up to 12” diameter • Expansion into more complex fabrication and framework • Nylon forming capability as well as wet spray and powder coat paint facility • Market coverage includes off highway, power generation, oil & gas and marine markets Carolina • Manufacturing tubular assemblies up to 3” diameter for global OEM customers • Investment in new 47,000 sq ft facility at Rabun Gap, Georgia • Rabun Gap houses a fully operational wet spray and powder coat painting line • Addresses the Group’s plans to expand USA product offering into larger diameter assemblies • Main markets include off highway, commercial vehicles, agriculture and power generation Tricorn USA Tricorn USA New Paint Plant at Rabun Gap, Georgia 02 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN12 3 4 4 Tricorn USA, Rabun Gap, Georgia, USA – Manufacturing 5 Minguang-Tricorn Tubular Products, Nanjing, China – Manufacturing 6 Nanjing, China – Purchasing Office Minguang-Tricorn Tubular Products Limited • Located in Nanjing, China and occupying c38,000 sq ft of manufacturing space • Nylon forming capability and tube manipulation to 6” diameter • Separate wet spray and powder coat painting facility • Supplying global OEM customers located in Asia and covering off road and power generation markets Small and Large Diameter Factory - Tricorn China JV 5 6 Small and Large Diameter Factory - Tricorn China JV Small and Large Diameter Factory - Tricorn China JV Distinctive Capabilities West Bromwich Core Capabilities: • • Steel tube bending (including electric bending) Forming of nylon into complex shapes • Brazing/Welding (including robotic welding) • • Light assembly work for significant variety of parts Small presswork Product Applications: • HP Cylinder supply tubes/LP Fuel Lines/Leak off rail/ Oil Gauge tubes and gauges/EGR Tubes/Turbo air supply, feed & drain • Transmission breather/Seat adjustment/Fuel senders Distinctive Capabilities Tricorn Malvern Heavy Duty Tube Manufacture Typically 2” (50.8mm) 12”(300mm) Expanding into welded tube assemblies to support construction and Agricultural industries One piece flow manufacture and Kanban fed activities • 5mm to 300mm Diameter • Bending Electro and Hydraulic • End Forming • Beading • Welding • Leak test • Surface treat • Paint • 5mm to 300mm Diameter • Hydraulic and electro bending • End Forming • Beading • Welding • Leak test • Surface treat • Painting 03 Our BusinessTRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comSTRATEGIC REPORT Chairman’s and Chief Executive’s Statement Performance in the Year Ended 31 March 2019 Revenue for the year at £22.763m was 2.6% higher than the previous year (2018: £22.180m). New business growth in the Transportation division more than offset the reduction in revenue in the Energy division which, as anticipated, saw significantly lower demand from the power generation rental sector. The Company’s joint venture in China continues to perform well. Underlying profit before tax at £1.088m was up 31.6% on the previous year (2018: £0.827m). Post year end, the Group announced that it had extended its capabilities in the USA with the purchase of a custom-built, installed and fully operational, powder coat and wet spray painting line. The paint line is located at Rabun Gap, close to the Group’s existing facility, and will provide up to 100,000 Customer Product Markets square feet of additional manufacturing space. This allows previously sub-contracted painting processes to be brought in-house and also addresses plans to broaden its product offering in the USA. “ We are delighted to report that Group revenues increased by 2.6% in the year while profit before tax improved by 31.6% to £1.088m.” Andrew Moss Chairman Application: Engine Gearbox Lube Coolant Global Markets Truck – Medium and Heavy Duty Coolant Application: Gas Vacuum Braking System Transmission Breathers Fuel suction Global Markets Semi-Con. Medium and Heavy Duty Truck Application: Fluid Transfer – Oil, Air, and Water Global Markets Power Generation Construction Mining On Road Truck Off Road Machines Other Off Road Engines Energy Generation Global Markets Construction Agriculture Mining Application: Hydraulic fluid transfer – Actuator control Global Markets Agriculture Construction Mining Oil and Gas Application: Fluid transfer of oil, fuel, air water and coolant 04 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNTransportation The Transportation division is focused on rigid, nylon and hybrid tubular products for engines, braking systems, transmission lubrication, fuel sender sub-systems and hydraulic actuation in a variety of on and off road applications, including construction, trucks and agriculture. in the first half, however, these were largely overcome by year end. Post year end, as set out above, the Group announced that it had extended its capabilities in the USA with the purchase of a custom-built, installed and fully operational, powder coat and wet spray painting line. External revenue for the year ended 31 March 2019 was £17.052m (2018: £15.901m) and underlying profit before tax increased by 38.8% to £0.569m (2018: £0.410m). Tricorn USA continued to make good progress. Market conditions were favourable and the pipeline of new business opportunities remains encouraging. A tight labour market presented challenges in recruiting and retaining skilled employees especially In the UK, the West Bromwich facility made excellent progress on all fronts. The rigid hydraulic tube business continues to grow and production has commenced successfully on the brake pipe assembly business for the London Electric Vehicle Company. In addition, the operation invested in an in-house tube cutting cell that yielded significant efficiency gains through the latter part of the year. Revenue (£m) £17.052m Up 7.2% (2018: £15.901m) Profit before tax (£m) £0.569m Up 38.8% (2018: £0.410m) tax at £0.472m was also down on the previous year (2018: £0.567m) with efficiency gains helping to offset some of the impact of the lower volume. Energy The Energy division is focused on the design and manufacture of larger tubular assemblies and fabrications for diesel engines and power generator sets. The key markets served through its customers are power generation, mining, marine and oil & gas applications. The Malvern facility made good progress in developing new business opportunities and in improving operational performance. Testing of the proposed new IT system, as utilised in West Bromwich, progressed well and will provide further efficiency gains once deployed. External revenue for the year at £5.711m was lower (2018: £6.279m) with, as anticipated, lower demand from the power generation rental sector. Underlying profit before Revenue (£m) £5.711m Down 9.0% (2018: £6.279m) Profit before tax (£m) £0.472m Down 16.8% (2018: £0.567m) All references to EBITDA, profit before tax and earnings per share are before intangible asset amortisation and share-based payment charges. 05 Our BusinessTRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comSTRATEGIC REPORT Chairman’s and Chief Executive’s Statement continued China Our Chinese joint venture, Minguang-Tricorn Tubular Products, performed well. Market conditions softened slightly in the second half of the year but the strong operational performance saw the Group’s share of profit before tax increase to £0.282m, up 34.9% (2018: £0.209m). Coach Critical Thinking Current Target Provide Positive Reinforcement Next Steps Current State What was What was learned learned Show Respect Any Obstacle Any Obstacle Desired Desired Improvement Improvement Align Support Systems Gemba has been implemented across the Group and is an integral part of our operations Change in Net Funds £’000 Business Review The Group’s five manufacturing facilities serve a global blue-chip OEM customer base, many of whom have major facilities in the UK, USA, and China as well as elsewhere in the world. With manufacturing operations now firmly established in each of these key locations and performing well, the Group is ideally positioned to support its customers’ facilities as they continue to seek to localise supply and technical support. Historically, the Group’s two main business divisions have focused on the transportation and energy sectors. As a result of Tricorn’s geographic expansion, the Board has carried out a review of the Group’s organisational structure and concluded that the current structure was no longer appropriate. As a result, post year end, the Group’s brands have been consolidated into the following geographic divisions: • Tricorn UK: comprising Malvern Tubular Components and Maxpower Automotive; • Tricorn USA: comprising Franklin Tubular Products and the recently announced expansion at Rabun Gap; • The joint venture in China remains as Minguang-Tricorn Tubular Products. 31 March 2018 net debt Underlying operating profit Net movement in working capital Depreciation Finance charges Capital expenditure Sales development costs Other movements 31 March 2019 net debt (2,982) 575 (401) (3,290) 1,015 (246) (723) (278) (250) Cash generated by operations £1,189k All references to EBITDA, profit before tax and earnings per share are before intangible asset amortisation and share-based payment charges. 06 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNFinancial Review The Group built on the good trading performance of the prior year and continued to expand on its manufacturing capability which resulted in solid improvements in both revenue and profitability. The Group has made a point over recent years of making considerable investment where it believes that this will yield significant benefits in the short and medium term. This was again the case in the year, with investments being made in tangible assets and development costs to secure contracts with new and existing customers, which are already beginning to deliver returns. All of the Group’s subsidiary businesses were again profitable in the year. Group EBITDA for the year was £1.872m (2018: £1.575m) and underlying profit before tax was £1.088m (2018: £0.827m). Income Statement Revenue for the year, at £22.763m, increased by 2.6% (2018: £22.180m). While revenue in the Energy division was lower than the prior financial year, this was more than offset by an increase in demand within the Transportation division. In line with Group policy when reporting the results for its joint venture in China, the Group has reported its share of the profit before tax while the revenue figure for the joint venture is not reported in the Group consolidated income statement. Gross margins were up slightly at 38.4% (2018: 38.3%) and distribution costs were largely unchanged at £1.022m (2018: £1.005m). While the Group’s administration costs increased to £6.701m (2018: £6.646m), operational gearing reduced to 29.4% (2018: 29.9%). The Group’s Chinese joint venture, Minguang-Tricorn Tubular Products, showed further growth in profitability over the prior year, with the Group’s share of profit for the year increasing to £0.282m (2018: £0.209m). EBITDA for the year was £1.872m (2018: £1.575m). Finance costs for the year were £0.209m (2018: £0.226m) and the Group delivered an underlying profit before tax for the year of £1.088m (2018: £0.827m). After deducting intangible asset amortisation and share-based payment charges, the profit before tax was £0.950m (2018: £0.606m). Basic earnings per share (“EPS”) was 2.62p (2018: 2.00p) and after adjusting for non-underlying items, the underlying EPS was 3.02p (2018: 2.65p). Given the progress made and our confidence in the future prospects of the Group, the Board is recommending the reinstatement of a final dividend of 0.2p per share (2018: Nil). If approved by the shareholders at the Company’s Annual General Meeting, to be held on 11 September 2019, the dividend will be paid on 18 October 2019 to all shareholders who are on the register on 4 October 2019. Cash Flow The Group’s cash flow from operations in the year was £1.189m (2018: £1.532m) and it achieved a cash generated by operations to EBITDA ratio of 0.64:1 (2018: 0.97:1). This was below the target ratio of 1:1 largely as a result of adverse working capital movements, particularly on creditors. Part of this is a timing issue at the year end on supplier payments, with director incentive payments during the year also having an impact. After interest payments and net tax receipts, cash generated by operating activities was £0.943m (2018: £1.321m). Segmental Revenue £’000 1 0 9 5 1 , 9 7 2 6 , 2 5 0 7 1 , 1 1 7 5 , 8 3 5 2 1 , 8 7 4 5 , 5 9 5 3 1 , 4 2 9 4 , 2016 2017 2018 2019 n Energy n Transportation During the year, the net cash outflow from investing activities was £1.001m (2018: £0.696m). Expenditure on the purchase of plant and machinery was £0.723m (2018: £0.696m). In addition, the Group had expenditure of £0.278m (2018: £Nil) on intangible assets. In a number of instances, the Group makes the decision to invest in order to develop the capabilities and infrastructure required to support a particular customer contract. During the financial year, the Group secured a contract where an existing customer was outsourcing work which it had previously manufactured in-house. This required a level of investment by the Group to transfer and develop the manufacturing processes, equipment, tooling and know-how. This expenditure is reported by the Group as an intangible asset. 07 Our BusinessTRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comSTRATEGIC REPORT Chairman’s and Chief Executive’s Statement continued Outlook We are delighted to report that Group revenues increased by 2.6% in the year while profit before tax improved by 31.6% to £1.088m. Earnings per share increased by 14.0% to 3.02p. These results reflect our focus on growth and our continuing investment in our global operations. Our Transportation division delivered strong revenue growth coupled with improved margins. The increased contribution from our joint venture in China resulted from strong operational performance. We are excited by the recently announced expansion of our capabilities in the USA. This allows us to bring in-house previously sub- contracted painting processes and also addresses our plans to broaden our product offering in this key market. Given the progress made to date and our confidence in the future prospects of the Group, the Board is recommending the reinstatement of a final dividend of 0.2p per share. Principal Risks and Uncertainties The management of the business and the nature of the Group’s strategy are subject to a number of risks. The Directors are of the opinion that a thorough risk management process is adopted which involves the formal review of all the risks identified below. Where possible, processes are in place to monitor and mitigate such risks. The Directors have set out below the principal risks facing the business. Economic Climate The Group is exposed to global markets through both its customer base and the market sectors that it serves. As a result there is constant monitoring of the economic environment by the Board to ensure that the Group responds to economic changes appropriately in order to ensure that the risk of any impact is mitigated. Supply Chain At an operational and strategic level the Group ensures that it develops close relationships with its customers and its suppliers. By doing this, it is in a position to understand the changing nature of sourcing and supply chain strategy quickly and respond accordingly to any risks that this might pose to the Group. World Class Fabrication One Piece Flow Manufacturing Process  Standardised Work Methods  Improved Takt  Kanban Fed Activities  New Tools, Electrics and Extraction  Team Engagement/Ownership  Significant number of systems shipped each year to USA and to China As a result of the Group’s expenditure on investing activities in the year, net debt increased over the prior year to £3.290m (2018: £2.982m), cash and cash equivalents were £0.493m (2018: £0.692m) and gearing was 45.0% (2018: 47.6%). The Group uses short-term borrowings to fund its operating activities, with selected capital additions and larger projects being financed by lease finance arrangements. At the year end, the Group did not have any term debt in place and had no covenants on its borrowings. Balance Sheet Total assets of the Group as at 31 March 2019 were £15.044m, which was £0.685m higher than the prior year, driven mainly by the increase in the value of the Group’s investment in its joint venture in China and increases in tangible and intangible assets, as discussed above. Net working capital for the Group increased in the year to £4.040m (2018: £3.475m). On translation of its overseas assets and liabilities, the Group made an exchange gain of £0.125m (2018: loss of £0.487m). This is a non-cash movement, which is not hedged and is treated as a movement in other comprehensive income. As a result, the translation reserve in shareholders’ funds now shows a £0.014m surplus (2018: £0.111m deficit). People The Board would like to take the opportunity to thank all our employees for their hard work and support throughout the year. Their commitment and dedication ensures that we continue to drive the business forward and deliver quality products to our customers. 08 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNCompetition The Group ensures that it is constantly monitoring its competitive environment in order to respond to competitive pressures as well as taking advantage of any opportunities that are presented to it. Regular reviews of market intelligence ensure that the Group manages its competition risk. Operational A focus on operational improvement ensures that the Group’s products remain reliable and of the highest quality. Recruiting, retaining, developing and motivating staff also continue to be a key priority for the Group. With operational performance being such a high priority for the Group, risks are identified and managed on a regular basis. Environmental The Group reviews the risk that its activities place on the environment through the promotion of green initiatives wherever possible. Global Presence The Group operates through wholly owned subsidiaries in the UK and the US as well as being a partner in a joint venture in China. As a result of international expansion in these jurisdictions, new risks have been presented. Senior management has responded by making frequent visits overseas in order to mitigate and control those risks. The Group assessed the direct impact of exiting the European Union as minimal. However, it continues to monitor the situation and its potential impact on customers and suppliers. Andrew Moss Chairman 31 May 2019 Mike Welburn Chief Executive 31 May 2019 09 Our BusinessTRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comBOARD OF DIRECTORS Tricorn Group plc is the parent company of a group of specialist engineering subsidiaries whose activities incorporate high precision tube manipulation, systems engineering and specialist fittings. Directors The present membership of the Board is set out below. A B Moss R Allsop M I Welburn P Lee D E Leakey Executive Directors Non-executive Directors Mike Welburn Chief Executive Officer Phil Lee Group Finance Director David Leakey Group Sales Director Andrew Moss Non-executive Chairman Roger Allsop Non-executive 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. Purchased MTC in 1984 and Chief Executive of Tricorn up to 2002 after which he became a non- executive Director. Chairman of the Audit, Nominations and Remuneration Committees. He was previously managing director of Westwood Dawes plc and a non- executive director of Netcall plc. Joined Tricorn and appointed to the Board in June 2011. He had previously spent 27 years working at Norgren Ltd, the Motion and Fluid Controls division of IMI plc. He has most recently held the role of Global Sales Director in the Energy Sector, with responsibility for the global business development of the company’s products into the oil & gas markets. David has also held the position of Sales Director in Norgren’s Life Sciences and Automotive Sectors. Appointed as a non- executive Director in November 2014 and Chairman in December 2014. Member of the Audit, Remuneration and Nominations Committees. He has over 30 years’ experience in international engineering groups specialising in aviation, automotive and power electronics products, and advanced composite materials. He spent 13 years with Umeco Plc, five years of which was spent as a main board director, resulting in his appointment as Chief Executive in 2011. Prior to this he was with BTR/Invensys Plc managing a number of international manufacturing businesses. 10 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNREPORT OF THE DIRECTORS for the year ended 31 March 2019 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 24 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 23 May 2019, were as follows: R Allsop Canaccord Genuity Wealth Management W B Nominees FNZ Nominees Limited Cheviot Capital Ordinary shares of 10 pence each Number 11,220,000 6,060,000 1,378,334 1,370,150 1,300,000 Percentage of capital % 33.20 17.93 4.08 4.05 3.85 Business Review, Key Performance Indicators (KPIs) and Principal Risks and Uncertainties A review of the Group’s trading operations, KPIs and principal risks and uncertainties is contained in the Strategic Report on page 4. The key financial salients shown on page 1 are deemed to be the KPIs of the Group. Employment Policies Management places emphasis on training and developing its employees. In addition, management encourages self- development which in turn aids succession planning, supporting the strategic growth of the Group. Employees are kept up-to-date with management policies and their respective duties. Management emphasise the importance of good communication and relations with all employees throughout the Group. It is the policy of the Group that there should be no unfair discrimination in considering applications for employment, including those from disabled persons. Employees are given equal opportunities for career development and promotion. Management takes a proactive approach to the welfare of the Group’s employees and the strong commitment to health and safety is cascaded down to all levels of the business by senior management. Health and Safety The Group recognises its responsibility to ensure that its employees work in as safe a working environment as possible. Checks are also implemented to ensure its clients comply with Health and Safety legislation. Financial Risks and Management The Group’s principal financial instruments comprise an invoice discounting facility, short-term borrowings, 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 policy of the Group 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 currently managed by the use of floating facilities. The Group finances specific large plant acquisitions via hire purchase or finance lease contracts. The interest rate risk on positive cash balances is not considered to be significant. 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 exposure of the Group to the price of steel is high, therefore selling prices are monitored regularly to reduce the impact of such risk and opportunities to reduce material costs are explored constantly. The Group has partly responded to this risk by sourcing materials in low-cost countries. The Group also looks 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 utilise short term forward currency contracts. Such cover is determined by written policies set by the Board. Foreign exchange differences on retranslation of foreign currency assets and liabilities are taken to the Group profit or loss. Credit risk The Group trades with only recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit vetting procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. 11 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur GovernanceREPORT OF THE DIRECTORS for the year ended 31 March 2019 continued Other Non-financial Risks The Group supplies products to a large number of customers and works with a number of key suppliers. Successful management of this process is key to delivering the results of the Group. This is also underpinned by retention and training of our staff to ensure that our knowledge and skills are maintained. Directors’ Responsibilities for the Group and Company Financial Statements The Directors are responsible for preparing the Strategic Report, the Report of the Directors, the Group financial statements and the Company 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 to prepare the Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law including FRS 101 Reduced Disclosure Framework). Under company law the Directors must not approve the Group and Company financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Group and Company for that period. In preparing these Group financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Group and Company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that: • so far as each Director is aware, there is no relevant audit information of which the Group and Company’s auditors are unaware; and • the Directors have taken all steps that they ought to have taken as Directors in order 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 and Company’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. • make judgements and estimates that are reasonable and ON BEHALF OF THE BOARD prudent; • state whether applicable IFRS 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 and Company will continue in business. M I Welburn Director Date: 31 May 2019 12 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNCORPORATE GOVERNANCE for the year ended 31 March 2019 Statement by the Directors on compliance with the provisions of the QCA Corporate Governance Code Chairman’s Corporate Governance Statement The Board of Directors is committed to ensuring that Tricorn adheres to appropriate standards of governance. The AIM Rules for Companies require all AIM quoted companies to have formally identified and adopted Corporate Governance Code by 28 September 2018. After careful consideration, the Board decided that the Quoted Companies Alliance Corporate Governance Code (“QCA Code”) is the most appropriate for the Group. The QCA Code has been developed with significant involvement from key stakeholders in the small companies investment community and is a principles-based approach relevant to smaller but growing businesses. The principles of the QCA Code are detailed below. We have addressed each point identifying the impact on the Group and the arrangements that the Group has in place to comply with the Code. QCA Corporate Governance Code Principle 1 – Establish a strategy and business model which promote long-term value for shareholders Application The board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future. The Tricorn Approach Tricorn Group’s strategy is explained in detail on the inside cover of its Annual Report and Accounts and can also be found on the Group’s website, www.tricorn.uk.com. The Group looks to create value for its stakeholders by focusing on its areas of expertise and being the best at what it does. At the same time the Group aims to be recognised as the “best in class” tube solutions provider. To achieve this, the Group identifies Strategic Enablers and Growth Priorities. They are: • Strategic Enablers: − Establishing a global manufacturing footprint − Leveraging the capabilities and know-how across the Group − Maintaining financial disciplines • Growth Priorities: − Focus on large blue-chip OEM customers − Capitalise on significant growth opportunities − Drive for operational excellence At the same time the Group is aware that it faces risks and challenges to its business and these are detailed and addressed in the Annual Report and Accounts. Principle 2 – Seek to understand and meet shareholder needs and expectations Application Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base. The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions. The Tricorn Approach The Group aims to deliver a balance to shareholders between capital and income growth, taking into account the Group’s growth expectations over the medium term. The Board encourages regular interaction and communication with both private and institutional shareholders and responds to shareholder queries in a timely manner. As well as hosting institutional shareholder visits to the Group’s UK facilities, the Board ensures that it is available to present and discuss its interim and full year results on a one-to-one basis with shareholders. The Group’s AGM, which takes place each September, is seen by the Board as an excellent opportunity to communicate and present to shareholders at one of the Group’s UK manufacturing facilities, where questions can be asked directly of Board members and queries addressed. 13 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur GovernanceCORPORATE GOVERNANCE for the year ended 31 March 2019 continued Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long- term success Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite). Application Long-term success relies upon good relations with a range of different stakeholder groups, both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interests and expectations. Where matters that relate to the company’s impact on society, the communities within which it operates or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long term, then those matters must be integrated into the company’s strategy and business model. Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups. The Tricorn Approach The Group is committed to upholding its responsibilities to its stakeholders, both those internal to the organisation and external. The Group’s Annual Report and Accounts highlight the policies that it has in place in respect of its employees. The Group’s employees are vital to its success and the Board regularly seeks their feedback and conducts surveys on all aspects of employment. Work councils are also held to encourage employee engagement. The Group has a varied supplier and blue-chip customer base and works closely with both stakeholders to ensure that the appropriate feedback mechanisms are in place. The community plays an important part in the success of our businesses and the Group makes sure that, where appropriate, it engages with the wider community on a regular basis. Examples include different parts of the Group holding open days and tours to engage with the community. Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation Application The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer. The Tricorn Approach The Group discusses the risks to its business within its Annual Report and Accounts. Within the report, risks are identified with explanations outlining how the Group addresses them. Furthermore, in the Report of the Directors the Board identifies those financial and non-financial risks that may impact the business and then details the processes and procedures that are in place to mitigate them. The Board considers the risks to the Group at each Board Meeting. Risk registers are maintained within the Group and these are reviewed regularly. Regular review of performance and risk take place between the executive Directors and senior management of the businesses, with more formal reviews taking place at least monthly. These reviews assess risks impacting, or which may impact, trading performance. As a result, each business carries out regular forecasting updates, which allow for ongoing performance monitoring and actions to be taken quickly to mitigate risk. Principle 5 – Maintain the Board as a well functioning, balanced team led by the chair Application The board members have a collective responsibility and legal obligation to promote the interests of the company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board. The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight. The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a board judgement. The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. Directors must commit the time necessary to fulfil their roles. 14 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN The Tricorn Approach The Board of Directors is responsible for leading and controlling the Group. The biographies of the members of the Board are set out in the Annual Report and Accounts. Andrew Moss as Chairman and Mike Welburn as the Chief Executive Officer have responsibility for the day-to-day running of the Group. The Report provides further information on Directors’ responsibilities. The Board is supplied with regular information with regards to the operational and financial performance of the Group. The Board currently comprises of three executive Directors and two non-executive Directors and meets formally at least quarterly, which all Directors are required to attend. Information relating to the meeting is circulated in advance by the Company Secretary and minutes of the meeting are produced as an accurate record. The Board is supported by Audit, Remuneration and Nominations Committees. There are specific matters which are reserved for the Board, which are available on the Group’s website. In addition, the terms of reference for each of the sub-committees can also be found on the Group’s website. Principle 6 – Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities Application The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition. The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board. As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change. The Tricorn Approach The Nominations Committee oversees the process of recruitment, where new appointments to the Board are necessary. Their recommendations are then put to the Board. The search for new appointees is conducted according to the relevant skills and experience that an individual can bring to the role. Appointments are made on merit against specific criteria giving due regard to the benefits of diversity. The biographies of the Board of Directors, which are available both in the Annual Report and Accounts and also on the Group’s website, provide details of the employment history of each of the Directors, but also their relevant experience as it relates to the Group. The training and development needs of Board members are considered on an ongoing basis and are encouraged as a way of ensuring that each Board member has the appropriate experience and skills for the Group. Principle 7 – Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement Application The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors. The board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team. It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable. The Tricorn Approach The Board carries out an evaluation of its performance annually. The KPIs of the Group which are shown in the Annual Report and Accounts are used to assess performance which aligns to shareholders’ expectations. In addition, an annual appraisal of performance is carried out, reviewing internal performance against specific targets and requirements. Each Director is subject to a re-election process at the Group’s AGM, with one Director being put forward for re-election each year. Principle 8 – Promote a corporate culture that is based on ethical values and behaviours Application The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage. The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company. 15 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur GovernanceCORPORATE GOVERNANCE for the year ended 31 March 2019 continued The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company. The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company. The Tricorn Approach The Group’s Corporate Strategy, detailed on the inside cover of its Annual Report and Accounts, sets the overriding framework under which the Group promotes a culture that maximises performance with regards to our employees, customers and suppliers, environment and community. The Directors lead by example and work with senior management to implement the processes and procedures within the Group’s subsidiary businesses. Policies covering whistleblowing and anti-bribery are widely communicated and respected. Furthermore, each of the Group’s businesses has developed specific employment manuals providing employees with up-to-date rules and regulations, health and safety rules, as well as pay grades, progression and appraisal processes. Employees are also encouraged to consider and present opportunities for improvement within their area of work. The Group aims to attract, employ and retain the highest calibre of employees. Each business looks to recruit apprentices, where opportunities present themselves, and each business currently employs apprentices in various disciplines. Communication with employees is seen as critical to the success of each of the Group’s businesses, with regular briefings, newsletters, forums and open days proving successful. The reward strategy of the Group aims to offer competitive pay and benefits. At the same time, employees have the opportunity to train and become competent in further disciplines to enhance their pay. Health and safety is of paramount importance to the Group and each employee is made aware of their obligations to maintain a safe workplace. All employees undergo appropriate training and are regularly assessed to ensure continuing competence. The Group is committed to Lean principles in the manufacturing process. Such principles enable the Group to reduce its manufacturing waste, aim to lower carbon emissions and improve the utilisation of packaging materials to reduce the Group’s impact on the environment. Other measures which the Group employ include the safe disposal of waste through the manufacturing process and reducing energy consumption where possible. The Group focuses on large blue-chip OEM customers and ensures that it works closely with its customers through all aspects of the relationship. The Group is keen to satisfy customer requirements through engineered solutions and high-quality products, which lead to a positive customer relationship. The Group’s suppliers are expected to have in place appropriate health and safety, environmental, labour and human rights standards that the Group itself is expected to adhere to. The Group has detailed terms and conditions which are issued to both customers and suppliers. This details the terms under which the Group is prepared to trade, including payment terms. Where it is important to the relationship, and in the best interests of the Group, specific agreements or long-term contracts with customers and suppliers will be negotiated and entered into. Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board Application The company should maintain governance structures and processes in line with its corporate culture and appropriate to its: • size and complexity; and • capacity, appetite and tolerance for risk. The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company. The Tricorn Approach The Corporate Governance section of the Group’s Annual Report and Accounts covers a number of points around the governance structure of the Group. As previously indicated, the Board is supported by the Audit, Remuneration and Nominations Committees, with terms of reference for each committee available on the Group’s website. 16 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNPrinciple 10 – Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders Application A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company. 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. In particular, appropriate communication and reporting structure should exist between the board and all constituent parts of its shareholder base. This will assist: • the communication of shareholders’ views to the board; and • the shareholders’ understanding of the unique circumstances and constraints faced by the company. It should be clear where these communication practices are described (annual report or website). The Tricorn Approach The Board encourages regular interaction and communication with both private and institutional shareholders and responds to shareholder queries in a timely manner. As well as hosting institutional visits to the Group’s UK facilities, the Board ensures that it is available to present and discuss its interim and full year results on a one-to-one basis with shareholders. The Group’s AGM, which takes place each September, is seen by the Board as an excellent opportunity to communicate and present to shareholders at one of the Group’s UK manufacturing facilities, where questions can be asked directly of Board members and queries addressed. 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 covering at least 12 months from the date that these accounts were approved have been prepared which highlight that the Group has sufficient cash headroom within its bank facilities to support its activities. 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. 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 jobs in other business sectors. Annual Bonus Payments, Benefits and Pension Arrangements M I Welburn, P Lee and D E Leakey participate in a performance-related bonus arrangement through Tricorn Group plc. M I Welburn, P Lee and D E Leakey benefit from the provision of private medical insurance, the provision of company cars or car allowance and are eligible to participate in a contributory pension scheme. R Allsop and A B Moss receive no bonus, pension or benefits in kind. 17 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur GovernanceCORPORATE GOVERNANCE for the year ended 31 March 2019 continued Notice Periods M I Welburn has a service agreement with the Company which is terminable on not less than 12 months’ written notice given by either party to the other at any time. P Lee and D E Leakey have service agreements with the Company which are terminable on not less than six months’ written notice given by either party to the other at any time. A B Moss has a letter of appointment with the Company which is terminable upon one months’ written notice being given by either party. R Allsop has a letter of appointment with the Company which is terminable upon six months’ written notice being given by either party. Share Option Incentives The Company has adopted a number of individual unapproved and Enterprise Management Incentive scheme share option agreements to motivate and retain key personnel of the Group. At 31 March 2019 the following options were held by the Directors: At beginning of period Number Lapsed during the year Number Granted during the year Number Exercised during the year Number At end of year 2019 Number Exercise price £ – – – – – – – – – – – – – – – – – – – – 361,844 1,000,000 500,000 500,000 500,000 921,000 1,263,156 0.10 0.10 0.175 0.10 0.10 0.10 0.10 EMI Options M I Welburn’s EMI share option for 1,263,156 shares was granted on 5 August 2010. This scheme has vested and is in force for ten years with an exercise price of 10p per share. P Lee options over 500,000 shares were issued in the first quarter of the following financial year. In addition, there is a further option over 921,000 shares, granted on 5 August 2010, 736,800 of which have vested at 31 March 2019. These options vest in tranches of 184,200 shares once the share price has achieved the trigger points of 20p, 25p, 30p, 35p and 40p for ten consecutive days. 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 2019 was 19.00p (31 March 2018: 19.00p) and the range during the year was 17.50p to 38.00p (2018: 15.75p to 24.75p). Unapproved share options M I Welburn M I Welburn D E Leakey D E Leakey Enterprise Management Incentive scheme (EMI) options P Lee P Lee M I Welburn 361,844 1,000,000 500,000 500,000 500,000 921,000 1,263,156 Unapproved Share Options M I Welburn’s unapproved share option was granted on 16 September 2010, over 361,844 shares. This scheme has vested and is in force for ten years with an exercise price of 10p per share. The unapproved options over 1,000,000 shares for M I Welburn were granted under the Group’s LTIP and vest in tranches of 200,000 shares once the share price has achieved the trigger points of 20p, 25p, 30p, 35p and 40p for ten consecutive days. D E Leakey has an unapproved option over 500,000 shares at 17.5p granted on 30 June 2015. A further option over 500,000 shares was granted on 4 April 2016 at an option price of 10p. Both options vest immediately and run for ten years. 18 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNINDEPENDENT AUDITORS’ REPORT To the members of Tricorn Group plc Opinion Our opinion on the Group financial statements is unmodified We have audited the financial statements of Tricorn Group plc (the “parent Company”) and its subsidiaries (the “Group”) for the year ended 31 March 2019 which comprise the Group Income Statement, the Group Statement of Comprehensive Income, the Group and Company Statement of Changes in Equity, the Group and Company Statement of Financial Position, the Group Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice). In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 March 2019 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We are independent of the Group and the parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s or the parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at least 12 months from the date when the financial statements are authorised for issue. Overview of our audit approach • We determined materiality for the audit of the Group financial statements as a whole to be £198,000; • The key audit matter was identified as revenue recognition; • We performed full-scope procedures on UK-based operations (Tricorn Group plc, Maxpower Automotive Limited, Malvern Tubular Components Limited) and Franklin Tubular Products Inc. and performed specified audit procedures on its joint venture, Minguang-Tricorn Tubular Products Nanjing Limited. 19 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur Governance INDEPENDENT AUDITORS’ REPORT To the members of Tricorn Group plc continued Key audit matters The graph below depicts the audit risks identified and their relative significance based on the extent of the financial statement impact and the extent of management judgement. High Potential financial statement impact Low Low Revenue recognition Investment impairment Inventory Management override of controls Forex translations Exceptional costs Transition to and implementation of IFRS 15 Implementation of IFRS 9 Trade receivables/payables Extent of management judgement High Key audit matter Significant risk Other risk Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter – Group How the matter was addressed in the audit – Group Risk 1 – Revenue recognition Under International Standard on Auditing (UK) 240 “The auditor’s responsibilities relating to fraud in an audit of financial statements”, there is a presumed risk of fraud in revenue recognition. Revenue is recognised to the extent that economic benefits will flow to the Group and the revenue can be reliably measured. Under ISA (UK) 240 “The auditor’s responsibilities relating to fraud in an audit of financial statements”, there is a presumed risk that revenue may be misstated due to fraud. Revenue is a key driver and performance indicator of the business and is also a significant value in the financial statements. We therefore identified revenue recognition (focusing on occurrence) as one of the most significant assessed risks of material misstatement. Our audit work included, but was not restricted to: • Assessing the Group’s accounting policies for recognition of revenue for compliance with the requirements of IFRS 15 and whether management accounted for revenue in accordance with the new policies, including the accounting and disclosure for the transition to the new IFRS. • Testing, on a sample basis, the operating effectiveness of certain key controls over order authorisation, invoicing and despatch. • Agreeing, on a sample basis, amounts recognised in revenue to source documents including invoices and proof of shipping documents. The Group’s accounting policy on revenue recognition is shown in note 2 and related disclosures are included in note 3. Key observations Based on our audit work, we did not identify evidence of material misstatement in the revenue recognised in the year ended 31 March 2019. We did not identify any key audit matters relating to the audit of the financial statements of the parent Company. 20 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNOur application of materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work. Materiality was determined as follows: Materiality measure Group Parent Financial statements as a whole We determined materiality for the audit of the financial statements as a whole to be £198,000. We determined materiality for the audit of the financial statements as a whole to be £148,500. Our determination of materiality was based on a consideration of a number of benchmarks that we believe to be of importance to the users of the financial statements, most notably the Group’s preliminary earnings before tax and total revenues. These benchmarks are considered particularly important due to the significant level of user focus on these figures in assessing the Group’s performance. Materiality for the current year is higher than the level that we determined for the year ended 31 March 2018 as a result of the increased earnings before tax, increased revenues and using both benchmarks to determine materiality in the current year. Out determination of materiality was based on an initial calculation of 2% of the parent Company’s preliminary total assets, then capped at component materiality for the Group audit. This benchmark was considered to be the most appropriate as it most appropriately reflects the Company’s status as a non-trading holding company. Materiality for the current year is higher than the level that we determined for the year ended 31 March 2018 to reflect the Company’s increased asset base in the current year and increased Group materiality. Performance materiality used to drive the extent of our testing Based on our risk assessment, including the Group’s overall control environment, we determined a performance materiality at 75% of the financial statement materiality. Based on our risk assessment, including the Company’s overall control environment, we determined a performance materiality at 75% of the financial statement materiality. Specific materiality We determined a lower level of materiality for Directors’ remuneration and related party transactions outside of the normal course of business due to their sensitivity in the view of key stakeholders. We determined a lower level of materiality for Directors’ remuneration and related party transactions outside of the normal course of business due to their sensitivity in the view of key stakeholders. Communication of misstatements to the Audit Committee £9,900 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. £7,425 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. 21 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur GovernanceINDEPENDENT AUDITORS’ REPORT To the members of Tricorn Group plc continued An overview of the scope of our audit Our audit approach was a risk-based approach founded on a thorough understanding of the Group’s business, its environment and risk profile. The components of the Group were evaluated by the Group audit team based on a measure of materiality, considering each as a percentage of the Group’s total assets, revenues and profit before taxation, to assess the significance of the component to determine the planned audit response. Other information The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, set out on pages 31 to 54, other than the financial statements and our auditors’ report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. A full-scope audit approach for all components evaluated as significant was determined based on their relative materiality to the Group and our assessment of the audit risk. For significant components requiring a full-scope approach we evaluated the controls over the financial reporting system identified as part of our risk assessment, reviewed the financial statement production process and addressed critical accounting matters. We sought, wherever possible, to rely on the effectiveness of the Group’s internal controls in order to reduce substantive testing. We then undertook substantive testing on significant transactions and material account balances. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. In order to address the described audit risks identified during our planning procedures, we performed a full-scope audit of the financial statements of the UK-based operations (Tricorn Group plc, Maxpower Automotive Limited, Malvern Tubular Components Limited) and the USA operation (Franklin Tubular Products Inc.). The Group engagement team visited the location in the USA to perform relevant audit procedures. The Group also has an investment in a joint venture in China, Minguang-Tricorn Tubular Products Nanjing Limited. The Group audit team performed specified audit procedures over the balances within the joint venture, which is consistent with the prior year approach. The operations that were subject to full-scope audit procedures totalled 100% of consolidated revenues and 68% of consolidated profit before taxation. We have nothing to report in this regard. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Report of the Directors’ for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and the Report of the Directors’ have been prepared in accordance with applicable legal requirements. 22 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNMatters on which we are required to report under the Companies Act 2006 In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of Directors’. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of Directors for the financial statements As explained more fully in the “Directors’ Responsibilities for the Group and Company Financial Statements” set out on page 12, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of Group financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Group financial statements, the Directors are responsible for assessing the Group’s and the parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Rebecca Eagle Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditors, Chartered Accountants Birmingham 31 May 2019 23 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur GovernanceTRICORN GROUP PLC GROUP CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 March 2019 Company number 1999619 Group Income Statement Group Statement of Comprehensive Income Group Statement of Changes in Equity Group Statement of Financial Position Group Statement of Cash Flows Notes to the Financial Statements 25 26 27 28 29 30 24 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNGROUP INCOME STATEMENT For the year ended 31 March 2019 22,763 (14,025) 8,738 (1,022) (6,701) – – – – (6,701) 1,015 282 (209) 1,088 (66) 1,022 Revenue Cost of sales Gross profit Distribution costs Administration costs – General administration costs – Restructuring costs – Intangible asset amortisation – Fair value charge relating to forward exchange contracts – Share-based payment charge Total administration costs Operating profit/(loss) Share of profit from joint venture Finance costs Profit/(loss) before tax Income tax (charge)/credit Profit/(loss) after tax from continuing operations Attributable to: Equity holders of the parent Company Earnings per share: Basic earnings per share Diluted earnings per share Note 3 12 6 3/4 14 8 3/4 9 10 10 2019 £’000 Underlying 2019 £’000 Non-underlying 2019 £’000 Group 2018 £’000 Underlying 2018 £’000 Non-underlying – – – – 22,763 (14,025) 8,738 (1,022) 22,180 (13,685) 8,495 (1,005) – – (102) – (36) (138) (138) – – (138) – (6,701) – (102) – (36) (6,839) 877 282 (209) 950 (66) (6,646) – – – – (6,646) 844 209 (226) 827 70 – – – – – – (175) (6) (40) (221) (221) – – (221) – 2018 £’000 Group 22,180 (13,685) 8,495 (1,005) (6,646) – (175) (6) (40) (6,867) 623 209 (226) 606 70 (138) 884 897 (221) 676 1,022 (138) 884 897 (221) 676 2.62p 2.39p 2.00p 1.86p All of the activities of the Group are classed as continuing unless otherwise stated. The accompanying notes form an integral part of these financial statements. 25 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsGROUP STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 March 2019 Profit for the year Other comprehensive income Items that will subsequently be reclassified to profit or loss Foreign exchange translation differences Total comprehensive income attributable to equity holders of the parent The accompanying notes form an integral part of these financial statements. 2019 £’000 884 125 1,009 2018 £’000 676 (487) 189 26 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNGROUP STATEMENT OF CHANGES IN EQUITY For the year ended 31 March 2019 Balance at 1 April 2017 Share-based payment charge Total transactions with owners Profit and total comprehensive income Balance at 31 March 2018 Share-based payment charge Total transactions with owners Profit and total comprehensive income Balance at 31 March 2019 Share capital £’000 3,379 – – – 3,379 – – – 3,379 Share premium £’000 Merger reserve £’000 Translation reserve £’000 Share-based payment reserve £’000 Profit and loss account £’000 1,692 – – – 1,692 – – – 1,692 1,388 – – – 1,388 – – – 1,388 376 – – (487) (111) – – 125 14 309 40 40 – 349 36 36 – 385 (1,107) – – 676 (431) – – 884 453 Total £’000 6,037 40 40 189 6,266 36 36 1,009 7,311 The accompanying notes form an integral part of these financial statements. 27 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsGROUP STATEMENT OF FINANCIAL POSITION At 31 March 2019 Note 2019 £’000 2018 £’000 11 12 13 14 16 17 18 20 21 21 19 25 391 401 4,668 1,191 6,651 3,040 4,854 493 6 8,393 15,044 (3,854) (3,675) – (70) (7,599) (109) (25) (134) 391 210 4,325 917 5,843 2,867 4,957 692 – 8,516 14,359 (4,349) (3,522) (6) (39) (7,916) (152) (25) (177) (7,733) 7,311 (8,093) 6,266 3,379 1,692 1,388 14 385 453 7,311 3,379 1,692 1,388 (111) 349 (431) 6,266 Assets Non-current Goodwill Intangible assets Property, plant and equipment Investment in joint venture Current Inventories Trade and other receivables Cash and cash equivalents Corporation tax Total assets Liabilities Current Trade and other payables Borrowings Fair value of foreign exchange contracts Corporation tax Non-current Borrowings Deferred tax Total liabilities Net assets Equity attributable to owners of the parent Share capital Share premium account Merger reserve Translation reserve Share-based payment reserve Profit and loss account Total equity The financial statements were approved by the Board of Directors on 31 May 2019. M I Welburn Director Company number: 1999619 The accompanying notes form an integral part of these financial statements. 28 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNGROUP STATEMENT OF CASH FLOWS For the year ended 31 March 2019 Cash flows from operating activities Profit after taxation from continuing operations Adjustment for: – Depreciation – Net finance costs in income statement – Charge relating to foreign exchange derivative contract – Amortisation charge – Share-based payment charge – Share of joint venture operating profit – Taxation charge/(credit) recognised in income statement – Decrease/(increase) in trade and other receivables – (Decrease)/increase in trade payables and other payables – Increase in inventories Cash generated by operations Interest paid Income taxes received Net cash generated by operating activities Cash flows from investing activities Purchase of plant and equipment Additions in intangible assets Net cash used in investing activities Cash flows from financing activities Proceeds/(repayment) of overseas short-term borrowing Repayment of short-term borrowings Payment of finance lease liabilities Net cash used in financing activities Net (decrease)/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. 2019 £’000 2018 £’000 884 676 575 209 – 102 36 (282) 66 229 (542) (88) 1,189 (246) – 943 (723) (278) (1,001) 304 (361) (84) (141) (199) 692 493 522 226 6 175 40 (209) (70) (443) 950 (341) 1,532 (220) 9 1,321 (696) – (696) (439) (60) (76) (575) 50 642 692 29 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 1 General information Tricorn Group plc and subsidiaries’ (the “Group”) principal activities comprise high precision tube manipulation and systems engineering. The Group’s customer base includes major blue-chip companies with worldwide activities in key market sectors, including Power Generation, Oil & Gas, Off Highway, Commercial Vehicles, Agriculture and 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. The consolidated financial statements have been approved for issue by the Board of Directors on 31 May 2019. Amendments to the financial statements are not permitted after they have been approved. 2 Accounting policies Basis of preparation This financial information has 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. The Group distinguishes between underlying and non-underlying items in its Consolidated Income Statement. Non- underlying items are material items which arise from unusual non-recurring or non-trading events. They are disclosed on the face of the Consolidated Income Statement where in the opinion of the Directors such disclosure is necessary in order to fairly present the results for the period. Non-underlying items comprise exceptional costs of Group restructuring, intangible assets amortisation and share-based payment charges. 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 for the period at least 12 months from the date that these accounts were approved, which highlight that the Group has sufficient headroom within its bank facilities to support its activities. 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. 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. The Group presents separately underlying and other items in the income statement in order to provide a more transparent view of underlying performance and trends. The Directors consider that the underlying income statement is a more appropriate reflection of the Group’s performance. Where the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Group shall retrospectively adjust the provisional amounts recognised at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date. The measurement period shall not exceed one year from the acquisition date. 30 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN2 Accounting policies (continued) Adoption of new standards Revenue recognition Revenue arises from the sale of tubular components to customers. To determine whether to recognise revenue, the Group follows a five-step process: 1. Identifying the contract with a customer; 2. Identifying the performance obligations; 3. Determining the transaction price; 4. Allocating the transaction price to the performance obligations; 5. Recognising revenue when/as performance obligation(s) are satisfied. The Group contracts with customers to deliver specific products to the customer. At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods to the customer. This is a fixed sales price, discounts are not offered and amounts are not refundable once received. Control transfers at the point in time the customer takes delivery of the goods, and this is the point at which revenue is recognised. Invoices are due on receipt by the customer. Financial instruments IFRS 9 “Financial Instruments” replaces IAS 39 and makes changes to guidance on the classification and measurement of financial assets and introduces an “expected credit loss” model for the impairment of financial assets. When adopting IFRS 9, the Directors have considered the historical credit losses experienced in relation to trade receivables and concluded that the adoption of IFRS 9 does not have a material impact on the financial statements. There have been no changes to the classifications of financial assets. 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. Standard or Interpretation IFRS 16 IFRS Standards Amendments to IAS 28 Amendments to IFRS 3 Amendments to references Leases Annual improvements to IFRS Standards 2015-2017 cycle Long-term interests in Associates and Joint Ventures Business combinations Amendments to references to the Conceptual Framework in IFRS Standards Effective for reporting periods starting on or after 1 January 2019 1 January 2019 1 January 2019 1 January 2020 1 January 2020 Based on the Group’s current business model and accounting policies, management does not expect a material impact on the Group’s financial statements in relation to other Standards when the Standards and Interpretations become effective. There are other new Standards and Interpretations not listed which are not relevant to the Group. 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 at the reporting date regarding whether certain assets/ liabilities are recorded at fair value which requires a number of estimates and assumptions to be made. 31 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 2 Accounting policies (continued) The major areas for estimation within the financial statements are as follows: • Performance of impairment reviews to assess the carrying value of goodwill (see note 11). • In valuing goodwill and intangible assets, management has made certain assumptions in terms of cash flows attributable to cash-generating units to which goodwill and intangibles have been allocated. As a result, estimates of future cash flows are required, together with an appropriate discount factor for the purpose of determining the present value of the future cash flows. The basis of review of the carrying value of goodwill and intangibles is detailed later in the accounting policies section. • 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. Management also calculate a general stock provision over slow-moving stock based on last usage dates. Stock that has not been used for over two years is provided for in full and stock that has not been used for more than one year, but has been used within the last two years, is provided for at 50%. Factors that could impact estimated demand and selling prices are the timing and success of technological developments, competitor actions, supplier prices and economic trends. The carrying value of gross stock, before the stock provision, at the year end was £3,646,000 (year ended 31 March 2018: £3,456,000). • In July 2016, the Group increased its holding and now holds a 63% share in a joint venture in China, Minguang-Tricorn Tubular Products (Nanjing) Limited. The Group accounts for the joint venture under the equity accounting method rather than full consolidation, on the basis that no one party to the venture has sole authority for decisions reserved for the Board, as detailed in note 14. Consolidation and investments in subsidiaries The Group financial statements consolidate those of the parent Company and all of its subsidiaries as of 31 March 2019. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. 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 acquisition method. This involves the valuation 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 fair value, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Goodwill represents the excess of fair value consideration over the fair value of the Group’s share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Acquisition costs are expensed as incurred. If the fair value of identifiable net assets exceeds the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. Intra-group balances and transactions, and any unrealised gains or losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Investments in joint ventures A joint venture is an arrangement that the Group controls jointly with one or more other investors, and over which the Group has rights to a share of the arrangement’s net assets rather than direct rights to underlying assets and obligations for underlying liabilities. Investments in joint ventures are accounted for using the equity method. Any goodwill or fair value adjustment attributable to the Group’s share in the joint venture is not recognised separately and is included in the amount recognised as investment. The carrying amount of the investment in joint ventures is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group. 32 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN2 Accounting policies (continued) Unrealised gains and losses on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment. The investment in the joint venture is initially recognised at cost. When the investor has previously held an investment in the joint venture, accounted for in line with the above policy, the deemed cost of the investment in the joint venture is the fair value of the original investment at the date that joint control is achieved plus the consideration paid for the additional stake. Any difference between the cost of the investment and the entity’s share of the net fair value of the investee’s identifiable assets and liabilities is included in the carrying amount of the investment and represents either positive or negative goodwill. Business combinations completed prior to date of transition to IFRS The Group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations prior to the date of transition to IFRS, 1 April 2006. Accordingly the classification of the combination (acquisition, reverse acquisition or merger) remains unchanged from that used under UK GAAP. Assets and liabilities are recognised at date of transition if they would be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Deferred tax is adjusted for the impact of any consequential adjustments after taking advantage of the transitional provisions. Revenue recognition The Group’s material revenue stream is in respect of the sale of tubular components. Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied, excluding VAT and trade discounts. Revenue is recognised upon the transfer of risk to the customer. When determining whether to recognise revenue, the Group adopts the five-step process proposed by IFRS 15. The Group contracts with customers to deliver specific parts according to specific delivery schedules, sales prices are fixed, discounts are not offered, amounts are not refundable once received and there are on ongoing performance obligations. Therefore, the Group recognises revenue once delivery has occurred. 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. Goodwill Goodwill arising on consolidation represents the excess of the fair value of consideration transferred 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. 33 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 2 Accounting policies (continued) 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, limited to the carrying value that would have been determined had no impairment been recognised previously. 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. Other intangible assets Product development costs Expenditure on the research phase of projects to develop new customised products for customers is recognised as an expense as incurred. Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet the following recognition requirements: • the development costs can be measured reliably; • the project is technically and commercially feasible; • the Group intends to and has sufficient resources to complete the project; • the Group has the ability to use or sell the product; and • the product will generate probable future economic benefits. Development costs not meeting these criteria for capitalisation are expensed as incurred. Directly attributable costs include employee costs incurred on product development along with an appropriate portion of relevant overheads. Intangible amortisation Intangible assets are amortised over the following periods: Brand names Customer contracts Product development costs 15 years 5 years 3 years Foreign currencies These financial statements are presented in UK Sterling which is the functional currency of the parent and 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. 34 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN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: Buildings Plant and equipment Motor vehicles 40 years 3 to 15 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 claims 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 accounting policies carried forward as well as other income tax credits available 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 income statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to other comprehensive income. 35 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 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 to 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 instruments IFRS 9 Financial Instruments requires the classification of financial instruments into different types for which the accounting requirement is different. The Group has classified its financial instruments as follows: • short-term fixed deposits, principally comprising funds held with banks and other financial institutions; • trade and other receivables are held at amortised cost; • trade and other payables are held at amortised cost; • borrowings are classified as other liabilities held at amortised cost. Financial instruments are initially measured at fair value. Their subsequent measurement depends on their classification: • loans and receivables and other liabilities are held at amortised cost; and • instruments that are held for trading are held at fair value. Changes in fair value are included in the income statement. Trade and other receivables The Group makes use of a simplified approach in accounting for trade and other receivables, recording the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating the lifetime credit losses, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected losses. 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. All current and prior period results are taken to the income statement. 36 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN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 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 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. Share-based charges for employees who leave the Group and whose options lapse are written back to the profit and loss reserve. Provisions for liabilities Provisions are recognised when present obligations will probably lead to an outflow of economic resources from the Group and they can be reliably estimated. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at reporting date and all future estimated cash flows are discounted to arrive at the present value of the provision. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost 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. 37 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 3 Segmental reporting The Group operates two main operating segments: • Energy: manipulated tubular assemblies for use in power generation, oil & gas and marine sectors. • Transportation: ferrous, non-ferrous and nylon material tubular assemblies for use in on and off-highway applications. The financial information detailed below is frequently reviewed by the Chief Operating Decision-maker. Year ended 31 March 2019 Revenue – from external customers – from other segments Segment revenues Underlying operating profit/(loss)* Intangible asset amortisation Share-based payment charge Operating profit/(loss) Share of profit from joint venture Net finance costs Profit/(loss) before tax Other segment information: Segmental assets Capital expenditure Depreciation * Before intangible asset amortisation and share-based payment charges. Year ended 31 March 2018 Revenue – from external customers – from other segments Segment revenues Underlying operating profit/(loss)* Fair value charge relating to forward exchange contracts Intangible asset amortisation Share-based payment charge Operating profit/(loss) Share of profit from joint venture Net finance costs Profit/(loss) before tax Other segment information: Segmental assets Capital expenditure Depreciation Energy £’000 Transportation £’000 Unallocated £’000 Total £’000 5,711 59 5,770 508 – – 508 – (36) 472 3,377 331 202 17,052 – 17,052 717 – – 717 – (148) 569 9,822 415 371 – (59) (59) (210) (102) (36) (348) 282 (25) (91) 1,880 2 2 22,763 – 22,763 1,015 (102) (36) 877 282 (209) 950 15,079 748 575 Energy £’000 Transportation £’000 Unallocated £’000 Total £’000 6,279 – 6,279 604 – – – 604 – (37) 567 3,249 299 121 15,901 – 15,901 512 – – – 512 – (102) 410 9,508 526 400 – – – (272) (6) (175) (40) (493) 209 (87) (371) 1,602 3 1 22,180 – 22,180 844 (6) (175) (40) 623 209 (226) 606 14,359 828 522 * Before intangible asset amortisation, share-based payment charges and fair value charges on foreign exchange contracts. 38 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN3 Segmental reporting (continued) The Group’s revenue from external customers (by destination) and its geographic allocation of total assets may be summarised as follows: United Kingdom Europe North America Rest of World United Kingdom Europe North America Rest of World Year ended 31 March 2019 Non-current assets £’000 3,678 – 2,973 – 6,651 Current assets £’000 5,047 – 3,198 148 8,393 Year ended 31 March 2018 Non-current assets £’000 3,392 – 2,451 – 5,843 Current assets £’000 5,142 – 3,159 215 8,516 Revenue £’000 10,877 750 10,620 516 22,763 Revenue £’000 10,805 825 9,861 689 22,180 Total assets £’000 8,725 – 6,171 148 15,044 Total assets £’000 8,543 – 5,610 215 14,359 4 Profit before taxation The profit on ordinary activities before taxation is stated after charging: Auditors’ remuneration: Audit of parent Company Audit of subsidiaries Total audit Non-audit services: Corporate taxation R&D claims Total non-audit services Total fees Operating lease charges: Land and buildings Plant and equipment Motor vehicles Depreciation and amortisation: Intangible assets Property, plant and equipment – owned Property, plant and equipment – leased 2019 £’000 2018 £’000 14 46 60 12 3 15 75 294 110 62 102 546 29 14 44 58 12 3 15 73 316 117 48 176 499 23 39 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 5 Directors’ emoluments 2019 Basic £’000 Bonus £’000 Benefits in kind £’000 2018 2019 2018 Total £’000 Basic £’000 Bonus £’000 Benefits in kind £’000 Total £’000 Pension £’000 Pension £’000 40 15 154 144 116 469 – – 15 14 12 41 – – 24 21 10 55 40 15 193 179 138 565 30 15 150 140 113 448 – – 75 70 56 201 – – 22 22 9 53 30 15 247 232 177 702 – – 10 10 8 28 – – 10 10 8 28 A B Moss R Allsop M I Welburn* P Lee* D E Leakey* * The Executive Directors are classified as the key management personnel of the Group as defined in IAS 24 Related Party Disclosures. Employers’ National Insurance Contributions made relating to Directors’ emoluments were £0.089m (2018: £0.064m). Share-based payment charge by Director (note 6) M I Welburn* P Lee* D E Leakey* 6 Employees costs The average number of persons (including Directors) employed by the Group during the year was: Production Sales, distribution and administration Staff costs during the year were as follows: Wages and salaries Social security costs Other pension costs Share-based payment charge 2019 £’000 2018 £’000 – – 7 7 – – 7 7 2019 Number 2018 Number 248 56 304 2019 £’000 7,689 656 110 36 8,491 227 56 283 2018 £’000 7,381 713 81 40 8,215 40 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN7 Share-based employee remuneration There are two share-based remuneration schemes in operation: • Approved Enterprise Management Incentive (EMI) scheme • Unapproved share options. At 31 March 2018 No. of shares Granted in year No. of shares Exercised in year No. of shares Lapsed in year No. of shares At 31 March 2019 No. of shares Life remaining on options at 31 March 2019 Months Exercise price Pence Enterprise Management Incentive (EMI) Scheme Exercise date: March 2009 – March 2019 August 2010 – August 2020 500,000 2,184,156 2,684,156 – – – – – – – 500,000 – 2,184,156 – 2,684,156 10p 10p – 17 The weighted average exercise price of the EMI scheme at 31 March 2019 was 10p (2018: 10p). 2,499,956 options were available for exercise at 31 March 2019 (2018: 2,499,956). At 31 March 2018 No. of shares 1,000,000 361,844 500,000 250,000 600,000 650,000 3,361,844 6,046,000 Unapproved share options September 2010 – September 2020 September 2010 – September 2020 June 2011 – June 2021 March 2015 – March 2025 April 2016 – April 2026 January 2018 – January 2028 Total share options Granted in year No. of shares Exercised in year No. of shares Lapsed in year No. of shares At 31 March 2019 No. of shares Life remaining on options at 31 March 2019 Months Exercise price Pence – – – – – – – – – – – – – – – – – 1,000,000 10p – 361,844 – 500,000 – 250,000 – 600,000 – 650,000 – 3,361,844 – 6,046,000 10p 17.5p 17p 10p 21.5p 18 18 27 72 84 106 The weighted average exercise price of the unapproved share options at 31 March 2019 was 13.9p (2018: 13.9p). 3,161,844 options were available for exercise at 31 March 2019 (2018: 3,361,844). The market price of the Company’s shares at 31 March 2019 was 19.00p (31 March 2018: 22.00p) and the range during the year was 17.50p to 38.00p (2018: 15.75p to 24.75p). Options over 500,000 shares were issued in the first quarter of the following financial year. The approved and unapproved option schemes have been valued by management using the Black-Scholes valuation model. Key inputs into the model are expected share price volatility of 35%-60% and the expected risk-free interest rates of 1.25%-2.33%. 1,000,000 of the unapproved options and 921,000 of the approved EMI options issued have performance criteria. These options vest in five equal tranches once the share price has achieved the trigger points of 20p, 25p, 30p, 35p and 40p for ten consecutive days. In total, £36,000 (2018: £40,000) of share-based employee remuneration expense has been included in the Consolidated Income Statement. No liabilities were recognised due to share-based transactions. 41 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 8 Finance income and expense Other income Finance income Invoice discounting interest Interest on short-term borrowing Interest on hire purchase agreements and finance leases Finance expense 9 Taxation on loss on ordinary activities The tax is based on the loss for the year and represents: UK corporation tax Overseas taxes Adjustments in respect of prior years Current tax charge for the year Deferred taxation (note 19) Tax on profit/(loss) on ordinary activities 2019 £’000 – – 176 25 8 209 2018 £’000 – – 169 51 6 226 2019 £’000 2018 £’000 30 36 – 66 – 66 39 8 (26) 21 (91) (70) The tax assessed is different to the standard rate of corporation tax in the UK of 19% (2018: 19%). 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 19% (2018: 19%) Effect of: Movement in unprovided deferred tax asset Overseas tax charge Deduction for R&D Adjustments in respect of prior years Deferred tax regarding intangibles Deferred tax on share-based payment charge Other differences 2019 £’000 950 181 (96) 36 (64) – (5) 36 (22) 66 2018 £’000 606 115 (85) 8 (20) (5) – (99) 16 (70) At 31 March 2019 the Group had tax losses of £558,000 (2018: £592,000) to offset against future profits within the United Kingdom. 42 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN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 2019 Weighted average number of shares Number ’000 Earnings per share Pence 33,795 3,248 37,043 2.62 – 2.39 31 March 2018 Weighted average number of shares Number ’000 Earnings per share Pence 33,795 2,546 36,341 2.00 – 1.86 Profit £’000 884 – 884 Profit £’000 676 – 676 The Directors consider that the following adjusted earnings per share calculation is a more appropriate reflection of the Group’s performance. Basic earnings per share Amortisation of intangible asset Share-based payment charge Adjusted earnings per share Dilutive shares Diluted adjusted earnings per share Basic earnings per share Fair value of foreign exchange contracts Amortisation of intangible asset Share-based payment charge Adjusted earnings per share Dilutive shares Diluted adjusted earnings per share 31 March 2019 Weighted average number of shares Number ’000 Earnings per share Pence 33,795 2.62 33,795 3,248 37,043 3.02 – 2.76 31 March 2018 Weighted average number of shares Number ’000 Earnings per share Pence 33,795 2.00 33,795 2,546 36,341 2.65 – 2.47 Profit £’000 884 102 36 1,022 – 1,022 Profit £’000 676 6 175 40 897 – 897 43 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 11 Goodwill Cost At 31 March 2017, 31 March 2018 and 31 March 2019 Impairment At 31 March 2017, 31 March 2018 and 31 March 2019 Net book value At 31 March 2017 At 31 March 2018 At 31 March 2019 Goodwill above relates to the following cash-generating units: Maxpower Automotive Limited Total £’000 391 – 391 391 391 Date of acquisition Original cost £’000 June 2007 391 391 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 10.0%. 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 rate of 10.0% growth rates and expected changes to selling prices and direct costs. Apart from the considerations described in determining the value-in-use of the cash-generating unit above, the Group management does not believe that reasonably possible changes in 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 believes that no impairment is required. Management is not aware of any other changes that would necessitate changes to its key estimates. 44 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN12 Intangible assets Cost At 1 April 2018 Additions At 31 March 2019 Amortisation At 1 April 2018 Charge for the year At 31 March 2018 Net book value At 31 March 2017 At 31 March 2018 At 31 March 2019 Product development costs £’000 Brand names £’000 Customer contracts £’000 563 278 841 (481) (57) (538) 227 82 303 450 – 450 (322) (30) (352) 158 128 98 312 – 312 (312) – (312) – – – Total £’000 1,325 278 1,603 (1,115) (87) (1,202) 385 210 401 All intangible asset amortisation is included in the Group income statement under amortisation of intangibles as detailed on the face of the Group income statement. The brand names have a remaining useful economic life of four years. The product development costs have, on average, a remaining useful economic life of three years. 13 Property, plant and equipment Cost At 1 April 2017 Additions Foreign exchange revaluation At 1 April 2018 Additions Foreign exchange revaluation At 31 March 2019 Depreciation At 1 April 2017 Charge for the year At 1 April 2018 Charge for the year At 31 March 2019 Net book value At 31 March 2017 At 31 March 2018 At 31 March 2019 Land and buildings £’000 Plant and equipment £’000 Motor vehicles £’000 1,680 – (183) 1,497 2 115 1,614 120 37 157 37 194 1,560 1,340 1,420 8,275 828 (98) 9,005 746 55 9,806 5,535 485 6,020 538 6,558 2,740 2,985 3,248 43 – – 43 – – 43 43 – 43 – 43 – – – Total £’000 9,998 828 (281) 10,545 748 170 11,463 5,698 522 6,220 575 6,795 4,300 4,325 4,668 The net book value of property, plant and equipment includes £348,000 (2018: £377,000) in respect of assets held under finance leases and hire purchase contracts. The borrowings of the Group are secured by a floating and fixed charge over the assets of the Group. 45 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 14 Investment in joint venture Details of the Group’s material joint venture at the end of the reporting period is as follows: Name of joint venture Principal business activity Country of incorporation Minguang-Tricorn Tubular Products Nanjing Limited Manufacturer of large diameter tubular assemblies People’s Republic of China Proportion of ownership interest held by the Group 31 March 2019 31 March 2018 63% 63% In July 2013, the Group agreed terms for the formation of the joint venture above. In May 2016, the Group increased its shareholding from 51% to 63% via a contribution of plant, machinery and inventory into the joint venture. At this time the joint venture partner also made a contribution of cash into the joint venture. Minguang-Tricorn Tubular Products Nanjing Limited is still deemed to be a joint venture of the Group as the appointment of its Directors and the allocation of voting rights for key business decisions, require the unanimous approval of its venturers. The investment in Minguang-Tricorn Tubular Products Nanjing Limited is accounted for using the equity method in accordance with IFRS 11. Summarised financial information for Minguang-Tricorn Tubular Products Nanjing Limited is set out below: Non-current assets Current assets (a) Total assets Current liabilities Total liabilities (a) Includes cash and cash equivalents Revenue Profit for the year Depreciation 2019 £’000 458 1,739 2,197 486 486 2018 £’000 555 1,576 2,131 860 860 151 121 2019 £’000 2,767 282 (91) 2018 £’000 2,498 209 (101) A reconciliation of the above summarised financial information to the carrying amount of the investment in Minguang- Tricorn Tubular Products Nanjing Limited is set out below: Net assets Brought forward at the beginning of the year Total comprehensive profit Carried forward at the end of the year 2019 £’000 1,315 436 1,751 2018 £’000 984 331 1,315 Proportion of ownership interest held by the Group 63% 63% Interest in joint venture Foreign exchange gain on translation of investment Goodwill Carrying amount of the investment at the end of the financial year 1,103 24 64 1,191 829 24 64 917 No dividends were received from Minguang-Tricorn Tubular Products Nanjing Limited during the year. Minguang-Tricorn Tubular Products Nanjing Limited is a private company, therefore no quoted market prices are available for its shares. 46 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN15 Subsidiaries At 31 March 2019 the subsidiaries of the Group were as follows: Name of subsidiary undertaking Country of incorporation Description of shares held Malvern Tubular Components Limited United Kingdom Ordinary Hallco 348 Limited (formerly RMDG Aerospace Limited) Maxpower Automotive Limited United Kingdom Ordinary United Kingdom Ordinary Maxpower Automotive Components Manufacturing (Wuxi) Limited China Ordinary Franklin Tubular Products Inc. USA Ordinary Robert Morton DG Limited* Hallco 347 Limited United Kingdom United Kingdom Ordinary Ordinary * Held by a subsidiary undertaking. 16 Inventories Raw materials Work in progress Finished goods % of nominal value of shares held 100 100 Principal business activity Manufacturer of tubular components Non-trading 100 Manufacturer of highway and automotive tubular and pipe components 100 Manufacturer of highway and automotive tubular and pipe components. Dormant in the year Manufacturer of tubular assemblies and components to highway and heavy duty truck market Dormant Dormant 100 100 100 2019 £’000 2,024 423 593 3,040 2018 £’000 1,794 327 746 2,867 2018 £’000 4,080 (25) 4,055 219 262 421 4,957 In the year to 31 March 2019, a total of £8,427,759 of inventory (2018: £8,513,211) was included in the income statement as an expense. 17 Trade and other receivables Trade receivables Impairment of trade receivables Amounts owed by related parties Other receivables Prepayments and accrued income Total 2019 £’000 3,998 (26) 3,972 262 122 498 4,854 At 31 March 2019, 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: 47 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 17 Trade and other receivables (continued) Not more than one month Not more than two months Not more than three months 2019 £’000 183 – 5 188 2018 £’000 187 – 5 192 Trade and other receivables are usually due within 30-75 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 regards 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. 18 Cash and cash equivalents Cash and cash equivalents 2019 £’000 493 2018 £’000 692 Cash and cash equivalents consist of cash on hand and balances with banks only. At the year end £452,000 (2018: £615,000) of cash on hand and balances with banks were held by the subsidiary undertakings, however this balance is available for use by the Group. 19 Deferred taxation The deferred tax included in the statement of financial position arose in the following areas: Intangible assets Accelerated capital allowances Short-term timing differences Losses Share-based payment The movement in the deferred taxation account during the year was: Balance brought forward Group income statement movement arising during the year Balance carried forward Assets Liabilities 2019 £’000 – – 16 70 83 169 2018 £’000 – – 27 23 119 169 2019 £’000 (20) (174) – – – (194) Assets Liabilities 2019 £’000 68 101 169 2018 £’000 68 101 169 2019 £’000 (184) (10) (194) 2018 £’000 (25) (169) – – – (194) 2018 £’000 (184) (10) (194) As at 31 March 2019 the Group has unprovided deferred tax assets as follows: Trading losses Unprovided 2019 £’000 Unprovided 2018 £’000 558 592 This deferred tax asset is not recognised due to uncertainty over its recoverability. At 31 March 2019 the Group had tax losses of £71,000 (2018: £71,000) to offset against future profits within the United Kingdom. Tax losses available to utilise outside of the UK at 31 March 2019 are £2,830,000 (2018: £2,538,000). 48 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN20 Trade and other payables Trade and other payables Amounts owed by related parties Other taxation and social security Accruals 2019 £’000 2,889 227 427 311 3,854 2018 £’000 2,975 266 374 734 4,349 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. 21 Borrowings Current borrowings Invoice discounting facility Hire purchase agreements and finance lease liabilities (note 22) Non-current borrowings Hire purchase agreements and finance lease liabilities (note 22) 2019 £’000 3,605 70 3,675 109 109 2018 £’000 3,437 85 3,522 152 152 The future contractual payments, including interest, for bank borrowings and the invoice discounting facility are as follows: In one year or less or on demand Invoice discounting facility Other short-term borrowing 2019 £’000 3,605 – 3,605 2018 £’000 3,437 – 3,437 Invoice discounting facility Interest on the invoice discounting facility, which is secured on the debtors financed, is paid at the rate of 2.10% over bank base rate per annum. 22 Hire purchase agreements and finance lease liabilities The commitments under hire purchase agreements and finance lease liabilities are as follows: 31 March 2019 Payments Discounting 31 March 2018 Payments Discounting Within 1 year Within 1–2 years Within 2–5 years 78 (8) 70 96 (11) 85 62 (7) 55 83 (9) 74 61 (7) 54 89 (11) 78 The hire purchase agreements and finance lease liabilities are secured against the assets to which they relate. Total 201 (22) 179 268 (31) 237 49 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 23 Financial instruments The Group uses financial instruments comprising cash and short-term deposits, invoice discounting, other short-term borrowings 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 invoice discounting facility provides immediate funds on approved trade receivables. The Group works to ensure that it receives acceptable trading terms from its suppliers. Liquidity risk Liquidity risk arises due to the Group’s requirement to fund working capital and investment in the business. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of deposits, bank loans, invoice discounting, other short-term borrowings 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: • Short-term borrowings at between 2.1% over base rate and 12%. • Finance leases at 2.0% to 2.5% over base rate. If the Group’s interest rates were to rise/fall by 10% then the interest charge within the financial statements would increase/decrease by £2,000 (2018: £2,000) equity and reserves would reduce/increase by the same amount, and the interest charge would be £207,000/£211,000 (2018: £224,000/£228,000). Foreign currency risk The Group transacts certain purchases and sales in foreign currencies. At 31 March 2019 there were no (2018: two) foreign currency forward contracts in force. Foreign exchange differences on retranslation of monetary foreign currency assets and liabilities are taken to the income statement of the Group. If the US Dollar and Euro were to fall/rise against GBP by 10% on the closing rate and average annual rate at 31 March 2019 then Group profits would rise/fall by £102,000 at 31 March 2019 (2018: £133,000) and equity and reserves would increase/reduce by the same amount. Commodity price risk The Group’s exposure to the price of steel is high, therefore selling prices are monitored regularly to reduce the impact of such risk and opportunities to reduce material costs are explored constantly. The Group has partly responded to this risk by sourcing materials in low-cost countries. In addition, any increases in the cost of steel would be passed onto customers. If steel prices were to fall/rise by 10% on the closing year end price, and the Group was unable to pass the increase onto customers, then Group profits would rise/fall by £135,000 at 31 March 2019 (2018: £177,000) and equity and reserves would increase/reduce by the same amount. 50 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN23 Financial instruments (continued) Financial assets and liabilities The IFRS 9 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 at amortised cost 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 2019 £’000 498 4,849 5,347 2019 £’000 4,356 493 4,849 2018 £’000 421 5,228 5,649 2018 £’000 4,536 692 5,228 The IFRS 9 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 Fair value of foreign exchange contracts 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 Borrowings Non-current liabilities Borrowings 2019 £’000 427 – 7,211 7,638 2019 £’000 3,427 3,675 109 7,211 2018 £’000 374 6 7,649 8,029 2018 £’000 3,975 3,522 152 7,649 All financial liabilities mature in less than one year, except for £0.055m (2018: £0.074m) which matures in one to two years and £0.054m (2018: £0.079m) which matures in two to five years. 51 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 23 Financial instruments (continued) Fair value hierarchy The following analyses 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. There are no financial assets and one financial liability measured at fair value in the statement of financial position at 31 March 2019 (2018: none). All financial liabilities are level 1. 24 Capital management policies procedures The Group’s capital management objectives are: • to ensure that the Group can continue as a going concern; • to ensure the Group has adequate resources 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. 25 Share capital Authorised 100,000,000 ordinary shares of 10 pence each Allotted and issued 2019: 33,795,000 (2018: 33,795,000) ordinary shares of 10 pence each All 10 pence ordinary shares carry the same voting rights and rights to discretionary dividends. 26 Contingent liabilities There were no contingent liabilities at 31 March 2019 or 31 March 2018. 27 Capital commitments At 31 March 2019 the Group had capital commitments of £Nil (2018: £Nil). 2019 £’000 2018 £’000 10,000 10,000 3,379 3,379 52 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN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 2019 Land and buildings £’000 313 1,216 630 2,159 2018 Land and buildings £’000 251 600 150 1,001 2019 Other £’000 126 87 – 213 2018 Other £’000 131 190 – 321 29 Transactions with related parties Malvair Properties Limited, a company in which R Allsop, a non-executive Director, has a beneficial interest, owns a property occupied by a Group company under an operating lease. The company incurred operating lease charges of £0.150m (2018: £0.150m) during the year relating to this lease. The Group also has a joint venture in China, Minguang-Tricorn Tubular Products Nanjing Limited. During the year the Group has made sales to the joint venture of £0.545m (2018: £0.375m) and purchases from the joint venture of £0.134m (2018: £0.410m). At the balance sheet date amounts held in trade and other receivables and owed to the Group by the joint venture amounted to £0.262m (2018: £0.219m), and amounts held in trade and other payables and owed by the Group to the joint venture amounted to £0.227m (2018: £0.266m). 53 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsTRICORN GROUP PLC COMPANY STATUTORY FINANCIAL STATEMENTS for the year ended 31 March 2019 Company Statement of Changes in Equity Company Statement of Financial Position Notes to the Financial Statements 55 56 57 54 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNCOMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 31 March 2019 Balance at 1 April 2017 Share-based payment charge Total transactions with owners Dividends from subsidiary companies Loss and total comprehensive expense Balance at 31 March 2018 Share-based payment charge Total transactions with owners Dividends from subsidiary companies Loss and total comprehensive expense Balance at 31 March 2019 Share capital £’000 3,379 – – – – 3,379 – – – – 3,379 Share premium £’000 1,692 – – – – 1,692 – – – – 1,692 Share- based payment reserve £’000 309 40 40 – – 349 36 36 – – 385 Merger reserve £’000 1,592 – – – – 1,592 – – – – 1,592 Profit and loss account £’000 (890) – 2,000 (283) 827 – – (218) 609 Total £’000 6,082 40 40 2,000 (283) 7,839 36 36 (218) 7,657 55 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsCOMPANY STATEMENT OF FINANCIAL POSITION At 31 March 2019 Note 7 8 9 10 2019 £’000 3 6,814 6,817 4,086 41 4,127 2018 £’000 2 6,814 6,816 4,232 77 4,309 (3,287) (3,286) 840 7,657 3,379 1,692 385 1,592 609 7,657 1,023 7,839 3,379 1,692 349 1,592 827 7,839 Fixed assets Tangible assets Investments Current assets Debtors: amounts due within one year Cash at bank and in hand Creditors: amounts falling due within one year Net current liabilities Net assets Capital and reserves Called up share capital Share premium account Share-based payment reserve Merger reserve Profit and loss account Equity shareholders’ funds The financial statements were approved by the Board of Directors on 31 May 2019. The Company’s loss for the year was £218,000 (2018: loss of £283,000). M I Welburn Director Company number: 1999619 56 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 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 Basis of preparation The financial statements have been prepared under the historical cost convention and in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework and the Companies Act 2006. Functional and presentation currency The financial statements are presented in British Pounds Sterling. Financial Reporting Standard 101 – reduced disclosure exemptions The Company has taken advantage of the following disclosure exemptions under FRS 101: • The requirement of IFRS 7 Financial Instruments Disclosure • The requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement • The requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comprehensive information in respect of: − paragraph 79(a)(iv) of IAS 1; − paragraph 73(e) of IAS 16 Property, Plant and Equipment; − paragraph 118(e) of IAS 38 Intangible Assets; − paragraph 76 and 79(d) of IAS 40 Inventory Property; and − paragraph 50 of IAS 41 Agriculture • The requirements of paragraph 10(d), 10(f), 16, 38A, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial Statements • The requirements of IAS 7 Statement of Cash Flows • The requirements of paragraph 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors • The requirements of paragraph 17 and 18a of IAS 24 Related Party Disclosures Investments Investments held by the Company are included at cost less accumulated impairment. 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 income statement. 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. 57 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 2 Accounting policies (continued) Deferred taxation Deferred tax is recognised on all timing differences where the transactions or events that give the Company an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantially enacted by the balance sheet date. Share-based payments All share-based payment arrangements are recognised in the parent Company’s financial statements. The Company operates equity-settled share-based remuneration plans for remuneration of employees of 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 income statement. 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. 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 income statement 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 income statement in these financial statements. The Company’s loss for the year was £218,000 (2018: Loss of £283,000). The auditors’ remuneration incurred by the Company during the year for audit services totalled £14,000 (2018: £14,000), and for tax compliance services totalled £2,000 (2018: £2,000). 58 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCN4 Directors’ and employees’ remuneration Staff costs during the year were as follows: Wages and salaries Social security costs Other pension costs 2019 £’000 671 89 27 787 2018 £’000 847 64 18 929 The average number of persons (including Directors) employed by the Company during the year was ten (2018: ten). 5 Directors’ emoluments All details on Directors’ remuneration are given in note 5 of the Group financial statements. 6 Share-based employee remuneration All details on share options are included in note 7 of the Group financial statements. 7 Fixed asset investments Cost At 1 April 2018 and 31 March 2019 Impairment At 1 April 2018 Charge At 31 March 2019 Net book value At 31 March 2019 At 31 March 2018 Total £’000 9,729 (2,915) – (2,915) 6,814 6,814 At 31 March 2019 the Company holds 100% of the ordinary share capital of the following subsidiaries: Name of subsidiary undertaking Country of incorporation Description of shares held % of nominal value of shares held Malvern Tubular Components Limited United Kingdom Ordinary Hallco 348 Limited (formerly RMDG Aerospace Limited) Maxpower Automotive Limited United Kingdom Ordinary United Kingdom Ordinary 100 100 100 Maxpower Automotive Components Manufacturing (Wuxi) Limited* China Ordinary 100 Franklin Tubular Products Inc. USA Ordinary 100 Robert Morton DG Limited* Hallco 347 Limited United Kingdom United Kingdom Ordinary Ordinary 100 100 * Held by a subsidiary undertaking. Principal business activity Manufacturer of tubular components Non-trading Manufacturer of highway and automotive tubular and pipe components Manufacturer of highway and automotive tubular and pipe components. Dormant this year Manufacturer of tubular assemblies and components to highway and heavy duty truck market Dormant Dormant 59 TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsNOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2019 8 Debtors Amounts owed by subsidiary undertakings Other debtors Prepayments and accrued income 9 Creditors: amounts due within one year Bank borrowings Trade creditors Amounts due to subsidiary undertakings Other taxes and social security Fair value of foreign exchange contracts Accruals and deferred income Borrowings are repayable as follows: Within one year – bank borrowings 10 Share capital 2019 £’000 3,802 242 42 4,086 2019 £’000 201 15 2,854 28 – 189 3,287 2019 £’000 201 201 2019 £’000 2018 £’000 4,011 193 28 4,232 2018 £’000 332 11 2,470 24 6 443 3,286 2018 £’000 332 332 2018 £’000 Authorised 100,000,000 ordinary shares of 10 pence each Allotted and issued 2019: 33,795,000 (2018: 33,795,000) ordinary shares of 10 pence each 10,000 10,000 3,379 3,379 All 10 pence ordinary share capital carry the same voting rights and rights to discretionary dividends. 11 Contingent liabilities A cross-guarantee exists between all companies in the Group for all amounts payable to the bank. The maximum potential liability to the Company at 31 March 2019 is £3.117m (2018: £2.781m). There were no further contingent liabilities at 31 March 2019 or 31 March 2018. 12 Capital commitments There were no capital commitments at 31 March 2019 or at 31 March 2018. 13 Related parties The Company has taken advantage of the exemption available under section 17 and 18a to not disclose transactions with wholly owned subsidiaries in the Group. 60 TRICORN GROUP PLC Annual Report and Accounts 2019Stock Code: TCNCOMPANY INFORMATION Company registration number: 1999619 Registered office: Directors: Spring Lane Malvern Link Malvern Worcestershire WR14 1DA Mr Andrew Brian Moss (Chairman and non-executive Director) Michael Ian Welburn (Chief Executive Officer) Phillip Lee (Finance Director) David Edward Leakey (Sales Director) Roger Allsop (Non-executive Director) Secretary: Phillip Lee Nominated adviser and Nominated broker: Registrars: Bankers: Solicitors: Auditors: Shore Capital & Corporate Limited Cassini House 57-58 St. James’s Street London SW1A 1LD Neville Registrars Limited Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA HSBC Bank plc 5 Broad Street Worcester WR1 2EJ Harrison Clark 5 Deansway Worcester WR1 2JG Grant Thornton UK LLP Statutory Auditors and Chartered Accountants The Colmore Building 20 Colmore Circus Birmingham West Midlands B4 6AT TRICORN GROUP PLC Annual Report and Accounts 2019www.tricorn.uk.comOur FinancialsTricorn Group plc Spring Lane, Malvern Link Malvern, Worcestershire WR14 1DA T: 01684 569956 F: 01684 892337 Visit us online at www.tricorn.uk.com 

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