TIDMRHL
RNS Number : 6484O
Redhall Group PLC
31 January 2019
For immediate release 31 January 2019
Redhall Group plc
("Redhall" or the "Company")
Preliminary Results
Redhall Group plc (AIM: RHL), the high integrity manufacturing
and services group, announces its unaudited full year results for
the year ended 30 September 2018.
Highlights:
-- Group revenue of GBP37.8 million was 3% lower than the
GBP38.9 million reported in 2017. Excluding GBP6.1 million of 2017
revenue associated with ceased operations*, Group revenue increased
by GBP5.0 million to GBP37.8 million (2017 revenue excluding ceased
operations*: GBP32.8 million).
-- Group adjusted operating profit** excluding exceptional items
of GBP0.2 million was significantly lower than the GBP1.4 million
reported in 2017. Excluding GBP1.3 million of 2017 adjusted
operating profit** before exceptional items associated with ceased
operations*, Group adjusted operating profit** excluding
exceptional items was flat at GBP0.2 million.
-- Group adjusted operating profit** margin before exceptional
costs, excluding ceased operations* reduced slightly to 0.4% (2017:
0.5%), largely driven by product mix, with a higher proportion of
lower margin fabrication projects compared to higher value
engineered products, and additional costs incurred due to project
delays.
-- Group operating loss was GBP3.8 million (2017: GBP0.3
million) this includes an IFRS 2 credit of GBP0.2 million (2017:
charge of GBP0.4 million), amortisation of intangible assets of
GBP0.3 million (2017: GBP0.3 million) and exceptional costs of
GBP3.9 million (2017: GBP1.1 million).
-- The Order Book as at year end was GBP21 million, an increase
of 20% compared to prior year end (30 September 2017: GBP17
million). This value does not include the Framework Agreement with
Cavendish Nuclear, anticipated to be worth up to GBP18 million for
the first three years of activity. Market conditions remain
encouraging and the Group has a strong pipeline of
opportunities
-- Net Debt increased by GBP5.7 million to GBP5.6 million at the
year-end (30 September 2017: net cash GBP0.1 million), largely
driven by increased working capital requirements on major projects;
contract assets grew by GBP5.9 million, which is largely expected
to unwind in 2019
-- Redhall remains committed to the long-term Health and Safety
of our employees, customers and suppliers. We are focused on
driving continuous improvement in safe working practices and
behaviours across the business
-- We continue to pursue our strategy of driving margin
improvement and business stability through operational excellence
and believe that this will deliver long-term success for the
Group
* Ceased operations includes the remaining elements of R
Blackett Charlton Ltd, Redhall Nuclear Ltd and Redhall Marine which
ceased in the prior year. These parts of the business contributed
GBP6.1 million of revenue and GBP1.3 million of operating profit
before exceptional items. Included within this was a reduction of
GBP1.2 million of administration expenses.
**Adjusted operating profit/(loss) is operating profit/(loss)
before IFRS 2 (charge)/credit and amortisation of intangible assets
acquired with business combinations
Martyn Everett, Chairman of Redhall, commented:
"Market conditions remain encouraging in the majority of the
Group's core sectors and the Group benefits from a secure order
book and a strong pipeline of opportunities.
"We continue to pursue our strategy of the operational
transformation of our manufacturing business and believe that this
pursuit of operational excellence will deliver long-term success
for the Group."
Contact details:
Redhall Group plc Tel: +44 (0) 1924 385 386
Russ Haworth, Interim Chief Executive
Officer
Simon Comer, Chief Financial Officer
Buchanan, Financial PR
Mark Court, Sophie Wills, Hannah Ratcliff Tel: +44 (0) 20 7466 5000
GCA Altium, NOMAD and Financial Advisors
Tim Richardson Tel: +44 (0) 20 7484 4040
WH Ireland Ltd, Broker
Adrian Hadden, Jessica Cave, James Sinclair-Ford Tel: +44 (0) 20 7220 1666
CHAIRMAN'S STATEMENT
The Redhall Group is highly regarded by its customers for its
high integrity manufacturing and services and for its ability to
work in complex, secure and hazardous environments. This customer
recognition has enabled the Group to continue to secure key
contracts, particularly for highly engineered manufactured products
in the nuclear and rail sectors. The Group continues to pursue a
strategy of operational excellence and continuous improvement to
drive its pipeline of opportunities in target markets. This
strategy seeks to deliver sustainable financial performance and
provide a platform for growth.
It was disappointing to have to announce on 26 September 2018
that progress during the year had not been at the pace that the
Board had originally anticipated and that the Group's full year
performance would be materially below previous expectations. Delays
on a number of key projects outside of the Group's control and
slower than expected operational efficiency gains were identified
as the key drivers of this underperformance.
The Group order book as at 30 September 2018 stood at GBP21
million, up 20% compared with last year (30 September 2017: GBP17
million using the same basis of measurement).
Trading Results
Revenue in the year ended 30 September 2018 from continuing
operations was GBP37.8 million (2017: GBP38.9 million). Operating
loss was GBP3.8 million (2017: GBP0.3 million). Adjusted operating
profit before exceptional items was GBP0.2 million (2017: GBP1.4
million). Adjusted diluted loss per ordinary share for the
continuing business amounted to a loss of 0.12 pence per ordinary
share (2017: profit of 0.20 pence per ordinary share).
The Group's reported loss for the year was GBP3.9 million (2017:
GBP1.4 million) which represents a loss of 1.24 pence per ordinary
share (2017: loss of 0.59 pence per ordinary share).
Financial Position
The Group has considered its obligation, in relation to the
assessment of the going concern of the Group and each statutory
entity within it and have reviewed the current budget, cash
forecasts and assumptions as well as performing sensitivity
analysis and a review of the main risk factors facing the Group.
Whilst the Directors acknowledge that uncertainty exists in
relation to the timing of award, commencement and performance on
key new contracts during the forecast period, as well as a certain
level of uncertainty regarding the continuing performance of key
ongoing contracts, based on their review of current budget cash
flows and assumptions and based on sensible downside sensitivity
scenarios, the Directors do not believe that these uncertainties
are material and the Group's ability to operate within existing
loan and banking facilities is sufficient to fund its activities
for not less than 12 months from the date of approval of these
financial statements.
On 7 November 2018 a temporary uplift of GBP1.2 million was
granted by HSBC to the Group's GBP2.0 million overdraft facility,
extending through to 31 January 2019. In addition, on 24 January
2019 the Group raised additional short-term loans of GBP2.0 million
from major shareholders of the Group (GBP1.0 million from Lombard
Odier and GBP1.0 million from Downing LLP). These loans, which
expire on 1 October 2019, have been raised to fund unusually high,
short-term working capital balances, which are being driven
principally by two of the Company's major contracts.
In the current year the Group adopted IFRS 15 Revenue from
Contract with Customers which had the impact of a GBP3.9 million
reduction to opening reserves. The adjustment relates to the
recognition of customer claims according to the Group's assessment
of each contract's performance obligation to be delivered to its
customers. The full impact is shown in Note 26.
Dividend
The Board is not recommending a dividend for the year to 30
September 2018 (2017: nil).
People
On behalf of the Board I would like to thank all of our
employees for their energy and commitment throughout the year. We
operate in technically demanding markets and we rely on our highly
qualified and experienced operatives to deliver the high standards
required by our customers. Our commitment to invest in the
development of our management teams, commenced last year, remains
ongoing.
Board Changes
There were a number of Board changes during the year, both
Executive and Non-Executive roles.
Joe Oatley joined the Board on 15 May 2018 as the Senior
Independent Non-Executive Director. Joe was most recently the Chief
Executive of Cape plc and he brings a wealth of experience to the
Board. Phillip Hilling, who joined the Board as a Non-Executive
Director in October 2011, stepped down on 30 June 2018.
On 2 July 2018, Simon Comer joined the Board as Chief Financial
Officer, replacing Chris Kelly, who had worked at the Group since
May 2014. Simon has a track record of senior financial roles at
engineering businesses.
Shortly after the year end, on 25 October 2018, Wayne Pearson,
who had served as Chief Executive Officer since April 2018 and
previously as Chief Operating Officer, resigned from the Board.
Russ Haworth, a highly experienced executive with a track record in
the aerospace, manufacturing and engineering sectors, has been
appointed to the Board as Interim Chief Executive Officer. The
process for the appointment of a full-time Chief Executive Officer
is underway.
On behalf of the Board, I would like to welcome the Directors
who have joined the Group. I would also like to thank those
Directors who have left the Group and wish them well for the
future.
Corporate Governance
Maintaining high standards of corporate governance is one of the
key responsibilities of the Board. I am therefore pleased to
confirm that, in compliance with AIM Rules for Companies, the Board
formally adopted the 2018 QCA Corporate Governance Code with effect
from 25 September 2018. Enhanced disclosures in this regard have
been made on the Group's website and will be included in the 2018
Annual Report. Further details are available on the investor
section of the Group's website.
Outlook
Market conditions remain encouraging in the majority of the
Group's core sectors and the Group benefits from a secure order
book and a strong pipeline of opportunities. We continue to pursue
our strategy of the operational transformation of our manufacturing
business and believe that this pursuit of operational excellence
will deliver long-term success for the Group. The near-term
performance of the Group remains difficult to predict, being
materially affected by the timing of both contract deliveries and
awards, and the pace of operational transformation.
Martyn Everett
Chairman
31 January 2019
STRATEGIC REPORT
I was delighted to join the Redhall Board as Interim Chief
Executive Officer in October 2018, shortly after the financial year
end. While the Group as a whole has had a challenging year, my
initial assessment is that the fundamentals of the businesses
within the Group, and their target markets, remain attractive.
There is much work to do but I am positive about the future
prospects for the Group.
I am supportive of the objectives of the business transformation
strategy as set out by the Board last year. In summary, this
strategy seeks to drive margin improvement and business stability
through operational excellence, a competitive cost base and a
balanced order book. With these elements in place, the Group will
be well-positioned for further investment and growth. The limited
progress to date is a function of implementation, which we are now
addressing.
The improvement of operational performance has been a recurrent
focus for me in previous executive roles and I am very pleased to
be able to apply this experience at Redhall.
It will take time to fully deliver the desired business
improvements, but I am confident that we can take important steps
towards that objective in the short-term. My initial focus has been
on business basics, ensuring we have capable, efficient processes
which match the overall business and customer requirements. We must
also become more agile in matching customer driven contract
variations, flexing and closely managing our costs and outputs.
I am pleased to report the continued growth of the Group order
book which at 30 September 2018 stood at GBP21 million (30
September 2017: GBP17 million using the same basis of measurement).
This does not include the value of the framework agreement with
Cavendish Nuclear, anticipated to be worth up to GBP18 million over
the first three years of activity. The majority of the order book
is derived from high integrity manufacturing projects for the
nuclear, defence and rail sectors.
The Group uses adjusted operating profit* to reflect the
underlying profitability of the Group as the GAAP measure
incorporates non-repeating exceptional costs which would distort
comparisons of KPI's. Adjusted operating profit on continuing
operations was GBP0.2 million (2017: GBP1.4 million) on revenue of
GBP37.8 million (2017: GBP38.9 million), representing a net
adjusted operating margin of 0.4% (2017: 3.7%). Before deducting
Group and central services costs, the adjusted operating profit was
GBP2.4 million (2017: GBP3.6 million).
Health & Safety
The health and safety of our employees and those who may be
affected by our business remains our highest priority. All of our
subsidiaries have accredited management systems to control health
and safety risks to OHSAS 18001 and environmental management
systems certified to BS EN ISO 14001.
During the year, our main subsidiaries obtained a minimum of the
Gold Award for health and safety from The Royal Society for the
Prevention of Accidents (RoSPA). These awards, which receive
entries from organisations around the world, recognise achievements
in health and safety management systems, including practices such
as leadership and workforce involvement.
Trading
The Group's performance in the year to 30 September 2018 was
disappointing compared to original expectations but the
fundamentals of the businesses within the Group, and their target
markets, are positive.
We believe that our Group companies are leaders in their
respective fields, allowing them to work with many of the key
operators within their markets. The focus of the Group remains on
performance improvement and growth through cultivating customer
relationships, devising bid-winning strategies and delivering our
quality products and services efficiently.
*Adjusted operating profit/(loss) is profit/(loss) before
financial expenses, IFRS 2 charge, tax, exceptional items and
amortisation of intangible assets acquired with business
combinations.
Booth Industries
Booth is a leading provider of high integrity steel doors for a
broad range of specialist applications across a range of industrial
sectors.
Activity in the year was again dominated by the manufacture of
highly engineered doors, predominately for the nuclear, defence and
rail sectors. During the year, the business commenced delivery of
high-performance doors to a new Anglo-France defence Technology
Development Centre in France and the UK's Crossrail project.
The financial performance of the business for the full year was
lower than the prior year. Revenues were weighted toward the second
half of the year, with the first-half impacted by delays in
activity on a number of contracts.
Although the business has made slower than expected progress on
improving operational efficiencies between engineering, manufacture
and installation, this remains a key opportunity and focus.
Significant improvements have been made in improving the process
for identifying new business opportunities and follow through of
high-quality tender documentation which matches customer
expectations.
We continued to invest in product development to expand the core
range of high integrity doors, investing GBP0.6 million during the
year.
The business maintains a strong pipeline of opportunities in its
core markets. Whilst defence and infrastructure markets continue to
represent a significant proportion of the pipeline, we are also
seeing more opportunities to deliver high performance,
multi-function doors into new markets. The UK rail market remains
attractive with continued investment in major infrastructure
projects connected to extending the London Underground network. The
recovery in the oil and gas sector represents a renewed opportunity
and the business has received a number of preliminary enquiries
from this sector.
Jordan Manufacturing
Jordan manufactures and fabricates bespoke equipment in carbon
steel, stainless steel and complex alloys for the nuclear, defence,
industrial and architectural sectors.
The business has been very successful in securing work during
the year. Order intake was robust with the award of three contracts
with Balfour Beatty for the supply of specialist manufactured metal
products for incorporation in the marine works at Hinkley Point C
('Hinkley'). These contracts substantially increased the scope of
work at Hinkley for which Jordan was named preferred bidder. The
business was also successful in securing a sizeable contract in the
defence sector.
In addition to secured orders in the year, the business was
successful in winning a significant long-term framework agreement
for Cavendish Nuclear for glove boxes on the Sellafield nuclear
site in Cumbria. The potential value of this framework agreement is
not included in the Group's reported order book. The business also
made good progress on the implementation of the "runners and
repeaters" strategy across a more diverse range of sectors, which
is a key element of improving its resilience.
The performance of Jordan in the year has been significantly
affected by changes to the timing of the Hinkley project, both the
contract award and subsequent deliveries. In particular, the change
in our immediate customer on the project caused a delay in signing
the contract to March 2018, significantly reducing first half
revenues. With production works on Hinkley commencing in August
2018, revenues recovered strongly towards the end of the financial
year.
The business has invested in specialist welding skills and
technology to bring about the efficient delivery of the Hinkley
contract, which will continue throughout 2018 and into 2019, and is
well equipped and located to benefit from additional potential work
on Hinkley.
As a result of significant bid activity this year, we have a
substantial pipeline of quality tendered projects which we remain
optimistic of securing. We are also confident that Jordan will have
the opportunity to secure several large runner and repeater
programmes that will give us a strong baseload of future work.
Redhall Jex
Jex provides design, manufacture, installation, relocation and
refurbishment of process equipment, structural steelwork and
packing lines. While the food market remains a key focus, the
business is looking to expand into other industrial sectors and has
been successful in adding electrical contracting to its portfolio
of expertise.
Order intake in the year, particularly in the second half, was
lower than expected as some customers maximised their production,
resulting in lower than usual levels of project work for the
business.
Revenue was slightly lower than the previous year. However,
operating profits improved, supported by the successful
consolidation of the activities of Jex in Grimsby into the Trafford
Park facility. During the year, the business successfully completed
the delivery and installation of a rubber micronisation plant for
Michelin-owned Lehigh Technologies in Spain. This plant is designed
to cryogenically grind shredded tyres into powder for re-use in new
tyre manufacture.
Our key customers operate in fast moving environments which
involve a high level of innovation and process change to keep pace
with trends in the market. All of our major food sector customers,
including Kellogg's, Mondelez, Mars and Nestlé, have committed
capital spend programmes for 2019 and we are now seeing positive
levels of bidding for a 2019 pipeline of opportunities. We also
expect deferred project activity to start in 2019.
We therefore expect the business to continue to perform well
into 2019, albeit we note increasing price pressure from
competitors.
Redhall Networks
Networks specialises in the installation, commissioning and
maintenance of mechanical and electrical equipment for the private
communications network sector.
Order intake and revenues in the year were lower than the
previous year, mainly due to delays in the roll out of their 5G
networks by certain telecommunications operators following auctions
and awards earlier in the year.
Due to the nature of contract visibility in the Networks market,
the order book remains commensurate with short-term order
intake.
Mobile communications are an ever-increasing part of the UK's
national infrastructure. We are confident that the maintenance,
upgrading and consolidation of the network by the operators will
provide us with a return to strong volumes and growing
profitability. The business also sees significant opportunities in
the short and medium-term following the Home Office's decision to
extend the lifespan of the existing Emergency Services Network by
three years.
Going forward, the business will focus on increasing its service
offering to existing and new clients by investing in more
technically differentiated resources to deliver the installation
and commissioning of radio equipment. The business is now seeing
initial activity related to the roll out of the 5G network.
Other Companies
The remaining elements of R Blackett Charlton Ltd, Redhall
Nuclear Ltd and Redhall Marine Ltd ceased in the prior year. These
parts of the business contributed GBP6.1 million of revenue and
GBP1.3 million of operating profit before exceptional items in the
prior year.
Summary
The Group's performance in the year to 30 September 2018 was
disappointing compared to original expectations but the
fundamentals of the businesses within the Group, and their target
markets, are positive. Our focus in the current year is on
delivering the business transformation strategy and converting our
pipeline of new business opportunities. I look forward to providing
updates on progress in due course.
Russ Haworth
Interim Chief Executive Officer
31 January 2019
-
FINANCIAL REVIEW
Operating Results
Group revenue of GBP37.8 million was 3% lower than the GBP38.9
million reported in 2017. The remaining elements of R Blackett
Charlton Ltd, Redhall Nuclear Ltd and Redhall Marine Ltd ceased in
the prior year. These parts of the business contributed GBP6.1
million of revenue and GBP1.3 million of operating profit before
exceptional items in the prior year. Therefore, Group revenue from
ongoing operations increased by GBP5.0 million to GBP37.8 million
(2017: GBP32.8 million).
The Group operating loss was GBP3.8 million (2017: GBP0.3
million) this includes an IFRS 2 credit of GBP0.2 million (2017:
charge of GBP0.4 million), amortisation of intangible assets of
GBP0.3 million (2017: GBP0.3 million) and exceptional costs of
GBP3.9 million (2017: GBP1.1 million). Group adjusted operating
profit excluding the above was GBP0.1 million (2017: GBP0.8 million
profit).
The Group adjusted operating profit* before central costs was
GBP2.4 million (2017: GBP3.6 million). This demonstrates the
underlying profitability of the businesses prior to the deduction
of central costs. Group adjusted operating profit after central
costs for the ongoing operations was flat compared to prior year at
GBP0.2 million (2017 adjusted operating profit for the ongoing
businesses: GBP0.2 million). Including GBP1.3 million of the 2017
operating profit associated with now ceased operations, Group
adjusted operating of GBP0.2 million was significantly lower than
the GBP1.4 million reported in 2017. Adjusted operating margin for
the ongoing operations reduced slightly compared to the prior year,
largely driven by product mix, with a higher proportion of lower
margin fabrication projects compared to higher value engineered
products, and additional costs incurred due to project delays.
After financing charges of GBP0.6 million (2017: GBP0.9
million), the adjusted loss before tax from continuing items
amounted to GBP0.6 million (2017: loss of GBP0.1 million).
Working capital
Working capital excluding cash and cash equivalents at 30
September 2018 was GBP4.3 million (2017: GBP1.8 million after
restatement for IFRS 15 per Note 26 below) reflecting the increased
work on large nuclear and infrastructure projects.
This is largely expected to unwind during the financial year
ending 30 September 2019.
Exceptional Items
Certain charges and credits to the income statement, due to
their size and incidence, have been separately identified as
exceptional items. Exceptional costs in the Group's continuing
businesses consisted of GBP0.3 million relating to the closure of a
site in Grimsby for Redhall Jex, GBP0.6 million relating to the
restructuring of management teams, GBP0.4 million of legal costs on
claims and GBP2.5 million relating to impairment of goodwill.
Exceptional costs on discontinued operations net of tax was GBPnil
(2017: GBP0.3 million).
*Adjusted operating profit/(loss) is profit/(loss) before
financial expenses, IFRS 2 charge, tax, exceptional items and
amortisation of intangible assets acquired with business
combinations.
Interest
The Group incurred financing charges of GBP0.6 million during
the year (2017: GBP0.9 million) which comprised interest and
arrangement fees of GBP0.4 million (2017: GBP0.7 million) and a
pension scheme net finance charge of GBP0.2 million (2017: GBP0.2
million).
Taxation
The Group tax credit for the year was GBP0.3 million (2017: tax
credit of GBP0.1 million). The tax charge and movements in deferred
tax are shown in Notes 6 and 12 below. The Group has tax losses
carried forward of GBP21.7 million upon which deferred tax assets
have not been recognised.
Dividends
The Board is not recommending a dividend.
Cashflow & Net Borrowings
Group net debt at the year-end amounted to GBP5.6 million (2017:
net cash of GBP0.1 million) largely driven by a build-up of
Contract Assets associated with major nuclear and infrastructure
projects and consisted of net debt with HSBC of GBP3.7 million, a
term loan from funds managed by Lombard Odier of GBP1.7 million and
GBP0.3 million due under finance leases. The Group had overdraft
and revolving credit facilities of GBP5.5 million and an accordion
facility of GBP2.5 million with HSBC of which GBP0.1 million of the
overdraft and GBP3.5 million of the revolving credit facility were
drawn at year end. All of the Group's facilities expire in July
2021.
In January 2019 the Group arranged short-term loans from Lombard
Odier for GBP1.0 million and Downing LLP for GBP1.0 million with
repayment due on 1 October 2019. This additional financing has been
raised by the group to fund unusually high, short-term working
capital balances, which are being driven principally by two of the
Company's major contracts.
In addition, the Group had amounts due under finance leases at
the year-end of GBP0.3 million (2017: GBP0.3 million). Net cash
outflows from operating activities during the year amounted to
GBP4.2 million (2017: GBP3.4 million).
The Group made a significant investment in new product
development of GBP0.6 million and capital expenditure of GBP1.1
million (2017: GBP0.3 million and GBP0.9 million).
Goodwill & Impairment Reviews
An impairment review of goodwill and intangible assets was
carried out as at the year-end resulting in an impairment of GBP2.5
million and reducing the balance in the consolidated accounts to
GBP18.6 million (2017: GBP20.9 million). Details of the
calculations and assumptions used for the impairment review are
shown in Note 11 below.
Equity
Shareholders equity decreased by GBP8.9 million during the year.
This comprised the loss for the year of GBP4.1 million an increase
in the pension deficit net of deferred tax of GBP0.7 million,
GBP0.1 million deferred tax on equity and GBP3.9 million opening
reserve transition to IFRS 15.
Pension Scheme
A formal valuation of the defined benefit scheme was carried out
as at 5 April 2015. The results of this valuation have been updated
to 30 September 2018 by a qualified independent actuary to
determine the IAS 19 position. The IAS 19 net deficit at the
year-end increased to GBP0.81 million (2017: GBP0.45 million). The
increase in deficit arises due to the decrease in gilt and bond
yields in the year, more cautious mortality assumptions, partially
offset by strong asset performance. There has been a 20% reduction
in the number of members since April 2015 as members have taken
advantage of pension freedoms and the Company has worked with the
Trustees to implement liability management exercises. The Company
will continue to work with the Trustees to identify opportunities
to reduce the risks inherent in a scheme of this nature.
The pension scheme is of a long-term nature and the portfolio of
assets invested by the fund are selected to match the maturity of
the liabilities. The Trustees seek advice on the periodic
allocation of the scheme's assets in order to match the future
liabilities. The Company has entered into an agreement with the
Trustees to fund the deficit identified at the date of the
triennial valuation and made payments of GBP140,000 per annum until
5 April 2018 and is making payments of GBP305,000 per annum
thereafter until 5 April 2027. The next triennial valuation will be
carried out as at 5 April 2018.
Based on information received from our actuarial advisors the
potential quantum of any future adjustment for GMP equalisation is
expected to be around GBP0.2 million to GBP0.3 million.
IFRS 15
To ensure shareholders have the highest level of visibility, the
Board have decided in accordance with the early adoption provisions
of IFRS15, to implement the standard one year ahead of schedule.
Under this adoption the impact was a reduction to opening reserves
of GBP3.9 million. The impact of the adoption is shown in Note 26
below.
Simon Comer
Chief Financial Officer
31 January 2019
Consolidated Income Statement
(Unaudited) Year to 30 Year to 30 September
September 2018 2017
Before Exceptional Before Exceptional
exceptional items exceptional items
Note items (Note 2) Total items (Note 2) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 1 37,761 - 37,761 38,905 - 38,905
Cost of sales (29,956) - (29,956) (29,066) (243) (29,309)
===================================================== === =========== =========== ======== =========== =========== ============
Gross profit 7,805 - 7,805 9,839 (243) 9,596
Administrative expenses (7,721) (1,379) (9,100) (9,083) (841) (9,924)
Other expenses - (2,473) (2,473) - - -
===================================================== === =========== =========== ======== =========== =========== ============
Operating profit/(loss) 1 84 (3,852) (3,768) 756 (1,084) (328)
===================================================== === =========== =========== ======== =========== =========== ============
Continuing businesses 2,432 (1,379) 1,053 3,632 (1,084) 2,548
Central costs (2,273) - (2,273) (2,202) - (2,202)
===================================================== === =========== =========== ======== =========== =========== ============
Adjusted operating profit/(loss)* 159 (1,379) (1,220) 1,430 (1,084) 346
Amortisation of acquired
intangible assets 11 (269) (2,473) (2,742) (287) - (287)
IFRS 2 (charge)/credit 194 - 194 (387) - (387)
===================================================== === =========== =========== ======== =========== =========== ============
Operating profit/(loss) 84 (3,852) (3,768) 756 (1,084) (328)
===================================================== === =========== =========== ======== =========== =========== ============
Financial expenses 5 (646) - (646) (857) - (857)
===================================================== === =========== =========== ======== =========== =========== ============
Loss before tax from
continuing operations 4 (562) (3,852) (4,414) (101) (1,084) (1,185)
Tax credit 6 232 67 299 81 - 81
===================================================== === =========== =========== ======== =========== =========== ============
Loss on continuing operations (330) (3,785) (4,115) (20) (1,084) (1,104)
Loss on discontinued
operations net of tax 10 - - - - (265) (265)
===================================================== === =========== =========== ======== =========== =========== ============
Loss attributable to
equity holders
=========== =========== ======== =========== =========== ============
of the Parent Company (330) (3,785) (4,115) (20) (1,349) (1,369)
===================================================== === =========== =========== ======== =========== =========== ============
Loss per share 8
Basic (1.24)p (0.59)p
Diluted (1.24)p (0.59)p
*Adjusted operating profit/(loss) is operating profit/(loss)
before IFRS 2 (charge)/credit and amortisation of intangible assets
acquired with business combinations. The Group uses adjusted
operating profit to reflect the underlying profitability of the
Group as the GAAP measure incorporates non-repeating exceptional
costs which would distort comparisons of KPI's.
Consolidated Statement of Comprehensive Income
(Unaudited)
Year to Year to
30 September 30 September
Note 2018 2017
GBP000 GBP000
Loss for the year (4,115) (1,369)
Other comprehensive income:
Items that will not be reclassified
to profit or loss:
Remeasurement of defined benefit
liability (loss)/gain 20 (697) 3,234
Tax on actuarial (loss)/gain 6 118 (566)
======================================= ==== ============ ============
Other comprehensive income for the
year net of tax (579) 2,668
======================================= ==== ============ ============
Total comprehensive income attributable to
equity holders of the Parent Company (4,694) 1,299
============================================= ============ ============
Consolidated Balance Sheet
(Unaudited)
As at As at
30 September 30 September
Note 2018 2017
GBP000 GBP000
Assets
Non-current assets
Property, plant and equipment 9 3,140 2,488
Intangible assets 11 2,841 2,569
Purchased goodwill 11 15,832 18,305
Deferred tax asset 12 1,320 1,021
=============================== ==== ============ ============
23,133 24,383
Current assets
Inventories 13 814 626
Trade and other receivables 14 15,516 13,778
Cash and cash equivalents and
overdraft - 2,370
Assets held for sale 15 141 141
=============================== ==== ============ ============
16,471 16,915
Liabilities
Current liabilities
Trade and other payables 16 (12,065) (8,645)
Borrowings and overdraft 17 (209) (266)
Current tax payable 16 - -
=============================== ==== ============ ============
(12,274) (8,911)
Non-current liabilities
Borrowings 17 (5,425) (1,969)
Retirement benefit obligations 20 (808) (450)
=============================== ==== ============ ============
(6,233) (2,419)
=============================== ==== ============ ============
Net assets 21,097 29,968
=============================== ==== ============ ============
Shareholders' equity
Share capital 18 12,297 12,297
Revaluation reserve 102 102
Other reserve 1,446 1,690
Retained earnings 7,252 15,879
=============================== ==== ============ ============
Total equity 21,097 29,968
=============================== ==== ============ ============
The Group adopted IFRS 15 Revenue from Contracts with Customers
on 1 October 2017 retrospectively with the cumulative effect of
initial application recognised as an adjustment to opening equity
(Note 26).
R D Haworth S P Comer
Interim Chief Executive Officer Chief Financial Officer
Company registered number - 263995
Consolidated Statement of Changes in Equity
Share Share Merger Revaluation Other Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2016 12,284 28,326 12,679 102 1,389 (39,255) 15,525
Share capital issued during
the year net of expenses 13 12,608 - - - - 12,621
Capital reduction net of expenses - (40,934) (12,679) - - 53,583 (30)
Employee share-based compensation
- current year - - - - 221 - 221
- prior year amounts realised - - - - (11) - (11)
Employee share-based compensation
- deferred tax - - - - 343 - 343
======================================== ======= ======== ======== =========== ======= ======== =======
Transactions with owners 12,297 - - 102 1,942 14,328 28,669
Loss for the year - - - - - (1,369) (1,369)
Movement between reserves - - - - (252) 252 -
Other comprehensive income for
the year - - - - - 2,668 2,668
======================================== ======= ======== ======== =========== ======= ======== =======
Total comprehensive income for
the year - - - - (252) 1,551 1,299
At 30 September 2017 12,297 - - 102 1,690 15,879 29,968
Adjustment as a result of transitioning
to IFRS 15
======= ======== ======== =========== ======= ======== =======
on 1 October 2017 - - - - - (3,933) (3,933)
======================================== ======= ======== ======== =========== ======= ======== =======
Adjusted equity as at 1 October
2017 12,297 - - 102 1,690 11,946 26,035
Employee share-based compensation
- current year - - - - 37 - 37
- prior year amounts realised - - - - (52) - (52)
Employee share-based compensation
- deferred tax - - - - (229) - (229)
======================================== ======= ======== ======== =========== ======= ======== =======
Transactions with owners 12,297 - - 102 1,446 11,946 25,791
======================================== ======= ======== ======== =========== ======= ======== =======
Loss for the year - - - - - (4,115) (4,115)
Movement between reserves - - - - - - -
Other comprehensive income for
the year - - - - - (579) (579)
======================================== ======= ======== ======== =========== ======= ======== =======
Total comprehensive income for
the year - - - - - (4,694) (4,694)
======================================== ======= ======== ======== =========== ======= ======== =======
At 30 September 2018 (Unaudited) 12,297 - - 102 1,446 7,252 21,097
======= ======== ======== =========== ======= ======== =======
Other reserves comprise share-based compensation GBP406,000
(2017: GBP420,000), equity reserve relating to the grant of options
on
conversion of debt during 2016 GBP925,000 (2017: GBP925,000)
deferred tax of GBP113,000 and other reserves of GBP2,000 (2017:
GBP2,000).
The Group adopted IFRS 15 Revenue from Contracts with Customers
on 1 October 2017 retrospectively with the cumulative effect of
initial application recognised as an adjustment to opening equity
(Note 26).
Consolidated Cash Flow Statement
(Unaudited)
Year to Year to
30 30
September September
Note 2018 2017
GBP000 GBP000
Cash flows from operating activities
Loss after taxation (4,115) (1,369)
Adjustments for:
Depreciation 351 392
Amortisation of intangible assets 524 447
Impairment losses on intangible assets and
goodwill 2,473 -
Difference between pension charge and cash
contributions (119) (88)
(Gain)/loss on disposal of property, plant
and equipment (20) 210
Share-based payments (credit)/charge* (15) 210
Financial income - -
Financial expenses 146 857
Deferred tax credit (299) (81)
(Increase)/decrease in trade and other receivables (5,670) (2,511)
Decrease/(increase) in inventories (188) 10
Increase/(decrease) in trade and other payables 3,420 (641)
===========
Cash absorbed by operations (3,512) (2,564)
Interest paid (475) (807)
======================================================================================================= =========== =========
Net cash absorbed by operating activities (3,987) (3,371)
===========
Cash flows from investing activities
Purchase of property, plant and equipment (1,193) (883)
Purchase of intangible assets (589) (284)
Proceeds from disposal of fixed assets - 300
Proceeds from disposal of assets held for
sale - -
======================================================================================================= =========== =========
Net cash used in investing activities (1,782) (867)
======================================================================================================= =========== =========
Cash flows from financing activities
Proceeds from issue of share capital (net
of costs incurred) - 8,871
Finance lease borrowing 25 384
Repayment of finance leases (94) (61)
Proceeds from borrowing 3,525 -
Repayment of facility - -
Repayment of long-term borrowing - (3,804)
======================================================================================================= =========== =========
Net cash generated by financing activities 3,456 5,397
======================================================================================================= =========== =========
Net increase/(decrease) in cash and cash equivalents (2,313) 1,152
Cash and cash equivalents at beginning of
year 2,173 1,021
======================================================================================================= =========== =========
Cash and cash equivalents at end of year (140) 2,173
===========
See note 10 for cash flows relating to discontinued
activities
*IFRS 2 amount charged to reserves net of employer's national
insurance
Notes to the Consolidated Financial Statements
1. Segment analysis
IFRS 8 "Operating Segments" requires an entity to report on
those operating segments that engage in business activities from
which it may earn revenues and incur expenses; whose operating
results are regularly reviewed by the chief operating decision
maker ("CODM"); and for which discrete financial information is
available. The CODM has been identified ultimately as the Board of
Directors.
The Group's businesses are all market leaders in the provision
of high integrity manufacturing and services delivered into complex
and hazardous environments, share resources and have similar
characteristics.
The Board assesses the performance of the operating segments
based on a measure of operating profit or loss which excludes the
effects of exceptional items. Central costs and unallocated items
represent head office functions and items such as amortisation of
acquired intangible assets arising on the acquisition of
businesses. Central costs include the costs of the Group's
centralised Finance, IT and HR functions.
Site Services
During the second half of the year ended 30 September 2015, the
activities of the Site Services segment were discontinued. The
results of this discontinued activity are disclosed in Note 10.
Continuing operations
Geographical segments
(Unaudited)
2018 2017
GBP000 GBP000
Revenue by destination
United Kingdom 35,026 34,318
Other European Union countries 1,897 2,794
Other overseas locations 838 1,793
=============================== =========== ======
37,761 38,905
=============================== =========== ======
All of the Group's assets and capital expenditure originate in
the United Kingdom.
Analysis of revenue by category
All of the revenue of the Group relates to the provision of high
integrity manufacturing and services delivered into complex and
hazardous environments.
Customers accounting for more than 10% of revenue
One customer accounted for more than 10% of revenue in the year
and accounted for revenue of GBP8.9 million (2016: one customer
accounting for GBP5.0 million of revenue).
2. Exceptional items
The Board has separately identified, by virtue of their size or
incidence, certain credits and charges to the consolidated income
statement that should be separately disclosed to enable users of
the financial information to better understand the underlying
performance of the Group:
Continuing operations
(Unaudited) 2018 2017
GBP000 GBP000
Cost of sales
Business closure costs - 243
Other redundancy and restructuring costs - -
- 243
========================================= ================ ======
Administrative expenses
Business closure costs 317 205
Other redundancy, restructuring and
legal costs 1,062 429
Loss on disposal of properties - 207
1,379 841
========================================= ================ ======
Other expenses
Impairment losses on intangible assets
and goodwill 2,473 -
2,473 -
========================================= ================ ======
Exceptional items before tax 3,852 1,084
Tax credit (67) -
Exceptional items after tax 3,785 1,084
========================================= ================ ======
Business closure costs represents the costs of closure of a
facility in Grimsby for Redhall Jex. It includes redundancy,
disruption costs and asset write-downs and related property
costs.
Other redundancy and restructuring costs reflect the costs of
resizing the businesses. These are split between cost of sales and
administrative expenses on the basis of the function of the
business to which they relate.
Discontinued operations
Exceptional costs of GBPnil (2017: GBP265,000 - relates to final
account settlement).
3. Staff numbers & costs
(Unaudited)
2018 2017
Number Number
Average numbers employed, including Directors
Continuing business 335 363
Discontinued business - 3
Head office and Central 23 23
============================================== =========== ======
358 389
============================================== =========== ======
GBP000 GBP000
Aggregate payroll costs
Wages and salaries 14,969 15,625
Social security costs 1,626 1,707
Other pension costs 411 428
Share-based payments (credit)/ charge (194) 387
============================================== =========== ======
16,812 18,147
============================================== =========== ======
(Unaudited)
2018 2017
GBP000 GBP000
Directors' remuneration
Emoluments for services as Directors 1,090 601
Social security costs 134 77
Pension contributions 60 51
============================================== =========== ======
1,284 729
============================================== =========== ======
The emoluments of the highest paid Director were GBP424,000
(2017: GBP251,000) and contributions to his pension arrangement
were GBPnil (2017: GBP27,000). Further details of Directors'
emoluments as required by AIM Rule 19 are set out in the Report of
the Directors and form part of the audited financial
statements.
Share based payments (credit)/charge relates to accrued NIC
costs on share options
Directors' pension benefits
The Group paid contributions of GBP60,000 in total into the
personal pension plans of three Directors for the year ended 30
September 2018 (2017: GBP51,000 in respect of three Directors).
4. Loss before tax
Loss before tax is stated after charging/(crediting) the
following:
(Unaudited)
2018 2017
GBP000 GBP000
Depreciation of owned property, plant and
equipment 354 392
Amortisation of intangible assets 524 447
Loss on disposal of property, plant and equipment - 210
Audit and non-audit services:
Fees payable to the Company's auditor for
the audit of the Company's annual accounts 24 24
Fees payable to the Company's auditor and
its associates for other services:
The audit of the Company's subsidiaries pursuant
to legislation 68 56
Audit related assurance services 5 10
Corporate finance services - -
All other services 2 2
Hire of plant 689 684
Plant operating lease rentals 201 275
Other operating lease rentals 658 786
Exceptional items (note 2) - continuing 2,931 1,084
Exceptional items (note 2) - discontinued 602 265
===========
5. Financial income & expenses
(Unaudited) 2018 2017
GBP000 GBP000
Financial expenses
Interest on loans and overdrafts (475) (632)
Net finance expense on pension scheme* (171) (225)
======================================= ================ ======
(646) (857)
*Includes GBP159,000 of pension administration expenses paid for
by the Company (2017: GBP135,000).
6. Tax expense
(Unaudited) 2018 2017
GBP000 GBP000
(a) Recognised in the income statement
Current tax charge:
Current year 92 66
Adjustment in respect of prior years 19 65
================================================ ================ =======
Current tax charge 111 131
================================================ ================ =======
Deferred tax credit (62) (90)
Effect of change of tax rate 6 (13)
Prior years (354) (109)
================================================ ================ =======
Deferred tax credit (410) (212)
================================================ ================ =======
Tax credit in the income statement (299) (81)
================================================ ================ =======
Tax credit in the income statement - continuing
operations (299) (81)
2018 2017
GBP000 GBP000
(b) Reconciliation of the effective tax rate
Loss before tax - continuing operations (4,414) (1,185)
Loss before tax - discontinued operations - (265)
Loss before tax (4,414) (1,450)
Tax at standard rate of UK corporation tax
of 19% (2017: 19.5%) (839) (283)
Expenses not deductible for tax purposes 549 39
Income not taxable for tax purposes (45) (3)
Tax losses not recognised 975 245
Adjustments in relation to prior periods (334) (44)
Change in tax rate (6) (13)
Share options (32) 34
IFRS 15 Adjustment (594) -
Other 27 (56)
================================================ ================ =======
Tax credit in the income statement (299) (81)
================================================ ================ =======
Tax credit in the income statement - continuing
operations (299) (81)
2018 2017
GBP000 GBP000
(c) Deferred tax charge/(credit) recognised
in other comprehensive income
On actuarial gain/(loss) (118) 566
Accelerated capital allowances - -
================================================ ================ =======
(118) 566
================================================ ================ =======
(d) A deferred tax credit of GBP229,000 (2017: GBP343,000) is
included in equity relating to share-based payments.
7. Dividends on equity shares
No dividend is recommended for the year (2017: nil)
8. Loss per share
Basic and diluted loss per share
The calculation of the basic loss per share of 1.24p (30
September 2017: loss per share 0.59p) is based on 332,900,684
ordinary shares (30 September
2017: 232,080,273) being the weighted average number of ordinary
shares in issue throughout the period and on a loss of GBP4,115,000
(30 September
2017: loss of GBP1,369,000).
The loss attributable to ordinary shareholders and weighted
average number of ordinary shares for the purpose of calculating
the diluted loss per share for both the year ended 30 September
2018 and 30 September 2017 are identical to those used for the
basic loss per share. This is because the exercise of share options
would have the effect of reducing the loss per share and is,
therefore, not a dilution under the terms of IAS 33. At 30
September 2018 there were 25,640,436 outstanding options under
relevant schemes and 18,510,959 shares under option to funds
managed by LOIM. These may impact earnings per share in the
future.
Adjusted earnings per share
The Directors have included additional earnings per share
calculations based on the underlying performance of the business,
on adjusted bases (i.e. based on profit before exceptional items,
IFRS 2 charge and amortisation of acquired intangible assets and on
a fully taxed basis). The impact of the dilutive share options is
taken into account where these measures result in earnings per
share. The basic and adjusted weighted average numbers of shares
and the adjusted earnings have been calculated as follows:
(Unaudited)
2018 2017
Number Number
Basic weighted average number of ordinary shares 332,900,684 232,080,273
Dilutive potential ordinary shares arising
from share options 44,151,395 45,151,395
================================================== =========== ===========
Adjusted weighted average number of ordinary
shares 377,052,079 277,231,668
================================================== =========== ===========
GBP000 GBP000
Earnings:
Loss before tax* (4,414) (1,450)
Exceptional items 3,852 1,349
Amortisation of acquired intangible assets 269 287
IFRS 2 charge/(credit) (194) 387
================================================== =========== ===========
Adjusted profit/(loss) before tax (487) 573
Tax at 19% (2017: 19.5%) 93 (112)
================================================== =========== ===========
Adjusted loss after tax (394) 461
================================================== =========== ===========
Adjusted, fully taxed basic profit per ordinary
share (0.12)p 0.20p
================================================== =========== ===========
Adjusted, fully taxed diluted profit per ordinary
share (0.12)p 0.17p
================================================== =========== ===========
Continuing operations
GBP000 GBP000
Loss before tax (4,414) (1,185)
Exceptional items 3,852 1,084
Amortisation of acquired intangible assets 269 287
IFRS 2 charge/(credit) (194) 387
================================================== =========== ===========
Adjusted profit/(loss) before tax (487) 573
Tax at 19% (2017: 19.5%) 93 (112)
================================================== =========== ===========
Adjusted profit/(loss) after tax (394) 461
================================================== =========== ===========
Adjusted, fully taxed diluted profit/(loss)
per ordinary share (0.12)p 0.17p
================================================== =========== ===========
Discontinued operations
GBP000 GBP000
Loss before tax - (265)
Exceptional items - 265
Amortisation of acquired intangible assets - -
================================================== =========== ===========
Adjusted loss before tax - -
Tax at 19% (2017: 19.5%) - -
================================================== =========== ===========
Adjusted loss after tax - -
================================================== =========== ===========
Adjusted, fully taxed diluted loss per ordinary
share 0.00p 0.00p
================================================== =========== ===========
*Loss before tax from continuing operations plus loss on
discontinued operations net of tax.
9. Property, plant & equipment
Long leasehold Freehold Machinery,
land, buildings land and equipment
and improvements buildings and vehicles Total
GBP000 GBP000 GBP000 GBP000
Cost or Valuation
At 1 October 2016 1,256 989 7,099 9,344
Additions 25 - 858 883
Disposals (637) - (2,373) (3,010)
Adjustments 298 - (582) (284)
Transfer to assets
held for sale (190) - - (190)
At 1 October 2017 752 989 5,002 6,743
Additions 33 43 1,117 1,193
Disposals (35) - (12) (47)
Adjustments * - (17) (210) (227)
At 30 September 2018
(Unaudited) 750 1,015 5,897 7,662
===================== ================ ========= ============ =======
Depreciation
At 1 October 2016 (358) (54) (6,284) (6,696)
Charge for the year (41) (7) (344) (392)
Disposals 127 - 2,373 2,500
Adjustments (114) (2) 400 284
Transfer to assets
held for sale 49 - - 49
At 1 October 2017 (337) (63) (3,855) (4,255)
Charge for the year (52) (7) (292) (351)
Disposals 30 - 9 39
Adjustments - 22 23 45
At 30 September 2018
(Unaudited) (359) (48) (4,115) (4,522)
===================== ================ ========= ============ =======
Net book value
At 30 September 2018
(Unaudited) 391 967 1,782 3,140
===================== ================ ========= ============ =======
At 30 September 2017 415 926 1,147 2,488
===================== ================ ========= ============ =======
At 30 September 2016 898 935 815 2,648
===================== ================ ========= ============ =======
The long leasehold and freehold land and buildings were revalued
to market value as at 30 September 2012. The valuations were
conducted by Knight Frank LLP, Humberts, Chartered Surveyors,
Joseph Jackson & Sons, Chartered Surveyors, Nattrass Giles,
Chartered Surveyors and PPH Commercial, Chartered Surveyors. These
valuations were undertaken in accordance with the Appraisal and
Valuation Manual of The Royal Institution of Chartered Surveyors in
the United Kingdom.
Depreciation amounting to GBP263,000 (2017: GBP75,000) has been
charged to cost of sales and that amounting to GBP88,000 (2017:
GBP317,000) has been charged to administrative expenses.
* Cost adjustments in the year to 30 September 2018 has
GBP207,000 of reclassification between property plant and equipment
to intangible assets
If freehold land and buildings had not been re-valued, they
would have been included at the following historical cost
amounts:
Long leasehold Freehold
land, buildings land and
and improvements buildings
GBP000 GBP000
Cost 244 570
Accumulated depreciation (55) (177)
=============================== ================ =========
Net book value at 30 September
2018 (Unaudited) 189 393
=============================== ================ =========
Net book value at 30 September
2017 192 399
=============================== ================ =========
Certain machinery and equipment is currently funded by finance
lease or hire purchase agreements.
The Group's property, plant and equipment is pledged as security
to the Group's lenders under the terms of a debenture.
10. Discontinued operations
Income and expenditure incurred on discontinued operations
during the prior period related to the completion and agreement of
final accounts of a small number of contracts at customer
sites.
(Unaudited) 2018 2017
GBP000 GBP000
Revenue - -
Cost of sales - -
============================================ ================ ======
Gross profit - -
Administrative expenses - -
============================================ ================ ======
Adjusted operating loss before exceptionals - -
Exceptional items - (265)
Operating loss before loss on disposal
of operations - (265)
Loss on disposal of operations - -
Operating loss and loss before taxation - (265)
Taxation credit/(charge) - -
============================================ ================ ======
Loss after taxation from discontinued
operations - (265)
============================================ ================ ======
The adjusted operating loss before exceptionals is stated after
amortisation of acquired intangible assets of GBPnil (2017:
GBPnil).
Geographical segments
Unaudited)
2018 2017
GBP000 GBP000
Revenue by destination
United Kingdom - -
================================================= =========== ======
- -
================================================= =========== ======
All of the Group's assets and capital expenditure
originate in the United Kingdom.
Analysis of revenue by category
(Unaudited)
2018 2017
GBP000 GBP000
Sales of services - -
================================================= =========== ======
- -
================================================= =========== ======
Practically all of the Group's revenue is
considered to be contract revenue as defined
by IFRS15.
11. Intangible assets & purchased goodwill
Acquired Intangible
intangible Development assets
assets costs sub-total Goodwill
GBP000 GBP000 GBP000 GBP000
Cost
At 1 October 2016 6,021 1,001 7,022 21,533
Internally generated development
costs - 284 284 -
At 1 October 2017 6,021 1,285 7,306 21,533
Internally generated development
costs - 589 589 -
Impairment of goodwill - - - (2,473)
Adjustments * - 207 207 -
At 30 September 2018 (Unaudited) 6,021 2,081 8,102 19,060
================================= ========== =========== ========== ========
Amortisation
At 1 October 2016 (3,878) (412) (4,290) (3,228)
Charge for the year (287) (160) (447) -
At 1 October 2017 (4,165) (572) (4,737) (3,228)
Charge for the year (269) (255) (524) -
At 30 September 2018 (Unaudited) (4,434) (827) (5,261) (3,228)
================================= ========== =========== ========== ========
Net book value
At 30 September 2018 (Unaudited) 1,587 1,254 2,841 15,832
================================= ========== =========== ========== ========
At 30 September 2017 1,856 713 2,569 18,305
================================= ========== =========== ========== ========
At 30 September 2016 2,143 589 2,732 18,305
================================= ========== =========== ========== ========
All amortisation has been charged to administrative expenses for
each of the years ended 30 September 2018 and 2017.
Acquired intangible assets comprise customer contracts and
customer relationships in connection with acquired businesses and
were separately identified and valued at acquisition. They are
being amortised over their useful economic lives which range
between 5 years and 20 years. Those acquired intangible assets with
a useful economic life of 5 years have been fully amortised. The
remaining amortisation period for those acquired intangible assets
not yet fully amortised ranges between 4 and 7 years.
Development costs are being amortised over their useful economic
lives which do not exceed 8 years.
* Cost adjustments in the year to 30 September 2018 has
GBP207,000 of reclassification between property plant and equipment
to intangible assets.
Goodwill
The carrying amount of goodwill at 30 September 2018 relates to
the acquisitions of businesses by the Group in each of the two
years ended 30 September 2007 and 2009. There are no intangible
assets with indefinite useful lives. The goodwill arising from
those acquisitions is attributable to the workforce of those
businesses.
(Unaudited)
2018 2017
GBP000 GBP000
Goodwill 18,305 18,305
===========
Impairment (2,473) -
=============== =========== ======
At end of year 15,832 18,305
Impairment review process
The Group tests goodwill and the associated intangible assets
and other assets annually for impairment, or more frequently if
there are indications that an impairment may have occurred. Testing
for impairment is performed at the operating segment level ("groups
of units") which is the level at which management monitors goodwill
for internal purposes.
The recoverable amounts of the groups of units are based on
their values in use. The key assumptions for the value in use
calculations are set out below. The Directors estimate discount
rates using pre-tax rates that reflect current market assessments
of the time value of money for the Group. Other assumptions reflect
external data where appropriate and management's best
estimates.
The values in use are calculated by reference to discounted cash
flows based upon the following year's budget and after this period,
growth for the purpose of this exercise was assumed to continue at
no more than 2.0% pa, which is in line with longer term rates of
inflation.
Assumptions
The key assumptions (being those to which the recoverable amount
is most sensitive) used in the estimation of the recoverable amount
are:
(Unaudited) 2018 2017
% %
Discount rate 13.0 9.0
Terminal value growth rate 2.0 2.0
Sales growth rate (average of next
five years) 2.8 10.8
The discount rate was a pre-tax measure based on the capital
asset pricing model weighted-average cost of capital adjusted to
reflect a size premium, risks specific to the cash flows and a
market participant's capital structure. The increase from a
discount rate of 9% to 13% reflects the Director's assessment of
risk applied to the review.
Sensitivity analysis
Revenue projections and the discount rate are the key
assumptions used in the forecast for goodwill impairment.
2018
Change in Change in
Assumption Value Impact
Discount rate +/- 1.0% +9% / -7%
Terminal value growth rate +/- 0.5% +3% / -3%
Sales growth rate (average of next
five years) +/- 1.0% +2% / -2%
12. Deferred tax assets & liabilities
Recognised deferred tax assets and liabilities
The net deferred tax asset at the year-end and movement during
the year is analysed as follows:
Credit/(charge)
to
(Unaudited)
Balance as Disposal Balance as
at Consolidated Credit of at
1 October 2017 Income directly to 30 September
Statement equity investment 2018
GBP000 GBP000 GBP000 GBP000 GBP000
Accelerated capital
allowances/ 372 (118) - - 254
revaluation gains
on fixed assets
Short term timing
differences 265 59 - - 324
Losses 506 126 - - 632
Intangible assets (612) 343 - - (269)
Retirement benefits 76 - 118 - 194
Share options 414 - (229) - 185
1,021 410 (111) - 1,320
==================== ========== ================ =============== ========== ============
Credit/(charge)
to
Balance as Disposal Balance as
at Consolidated (Charge)/credit of at
1 October directly to 30 September
2016 Income Statement equity investment 2017
GBP000 GBP000 GBP000 GBP000 GBP000
Accelerated capital
allowances/ 262 110 - - 372
revaluation gains
on fixed assets
Short term timing
differences 123 142 - - 265
Losses 656 (150) - - 506
Intangible assets (651) 39 - - (612)
Retirement benefits 642 - (566) - 76
Share options - 71 343 - 414
1,032 212 (223) - 1,021
==================== ========== ================ =============== ========== ============
Unrecognised deferred tax assets
Deferred tax assets have not been recognised on tax losses of
GBP21,700,000 (2017: GBP18,450,000) as their recovery is
insufficiently certain in the longer term. GBP18,600,000 are
related to the discontinued site services segment.
Effect of reduction in the main rate of Corporation tax
The reduction in the main rate of corporation tax from 19% to
17% was substantively enacted on 6 September 2016. This will have
effect from 1 April 2020. Accordingly, deferred tax balances have
been recognised at the reduced rate of 17% in these financial
statements.
13. Inventories
(Unaudited)
2018 2017
GBP000 GBP000
Raw materials 814 626
============== =========== ======
Inventories comprise products which are not generally subject to
rapid obsolescence on account of technological advancement,
deterioration in condition or market trends. Consequently, the
Directors consider that there is little risk of significant
adjustments to the Group's inventory assets during the next
financial year. The Group's inventories are pledged as security to
the Group's lenders under the terms of a debenture.
14. Trade & other receivables
(Unaudited)
2018 2017
GBP000 GBP000
Amounts falling due within one year:
Trade receivables 2,136 3,114
Contract assets 10,951 9,215
Other receivables 1,192 827
Prepayments and accrued income 1,237 622
===================================== =========== ======
15,516 13,778
===================================== =========== ======
The carrying amount of all trade and other receivables is
considered to be a reasonable reflection of their fair value. Trade
receivables includes retentions amounting to GBP292,000 (2017:
GBP248,000), of which GBP292,000 (2017: GBP126,000) was due within
12 months of the year end. All trade and other receivables have
been reviewed for indications of impairment. Certain trade
receivables were found to be impaired and the movement in the
provisions during the year were as follows:
(Unaudited)
2018 2017
GBP000 GBP000
At start of the year 27 27
Provisions released or utilised - -
Provisions made 2 -
================================ =========== ======
At end of the year 29 27
================================
The maximum exposure to credit risk at the balance sheet date is
the carrying value of each class of receivables noted above. The
Group does not hold any collateral as security. The Group's trade
receivables and amounts recoverable on contracts are pledged as
security to the Group's lenders under the terms of a debenture.
Some unimpaired trade receivables are past their due date for
payment as at 30 September 2018. The ageing of financial assets
past their due date but not impaired is as follows:
(Unaudited)
2018 2017
GBP000 GBP000
Not more than 3 months 260 256
More than 3 months but not more than 6 months 59 51
More than 6 months but not more than 1 year 87 50
More than 1 year 57 88
===========
Total past due trade receivables 463 445
Trade receivables not yet past due 1,673 2,669
===========
Total trade receivables 2,136 3,114
The aggregate amount of costs incurred plus recognised profits
(less recognised losses) for all long-term contracts in progress at
the balance sheet date was GBP47,763,000 (2017: GBP48,695,000).
Work in progress comprises these aggregate costs less amounts
billed on account of GBP37,344,000 (2017: GBP40,383,000). The net
balance is analysed as follows:
(Unaudited)
2018 2017
GBP000 GBP000
Contract assets (above) 10,951 9,215
Contract liabilities (note 16) (632) (903)
===========
10,319 8,312
Amounts recoverable on contracts are not due for payment under
the contractual terms between the Group and its customers. Hence
they are not past due at the balance sheet date.
15. Assets held for sale
Assets held for sale relates to the long leasehold property at
Bath Street in Newcastle which as at 30 September 2018 was in the
books of R Blackett Charlton Limited. The sale of this property was
completed on 27 December 2018.
16. Trade & other payables
(Unaudited)
2018 2017
GBP000 GBP000
Trade payables 6,342 4,186
Contract liabilities 632 903
Other tax and social security 1,206 1,030
Other payables 579 580
Accruals and deferred income 3,306 1,946
===========
Total trade and other payables 12,065 8,645
Current tax payable - -
=========================================== =========== ======
12,065 8,645
The carrying amounts are considered not to
be materially different from fair value.
17. Borrowings
(Unaudited)
2018 2017
GBP000 GBP000
Current:
Overdraft 140 197
Finance leases 69 69
===========
209 266
Non-current:
Financial leases 185 254
Bank and other loans 5,240 1,715
5,425 1,969
===================== ===========
The bank and other loans are denominated in sterling and are
secured by way of a debenture and a composite guarantee from each
Group company. The interest rate is based on LIBOR and has averaged
4.70% (2017: 4.80%). The loans are repayable as follows:
(Unaudited)
2018 2017
GBP000 GBP000
Less than one year 69 69
Between one and two years 69 70
Between two and five years 5,356 1,899
===========
5,494 2,038
===========
HSBC Bank plc facilities provide for a GBP3,525,000 revolving
credit facility which has been fully drawn, a GBP2,475,000
accordion facility (GBPnil drawn) and a GBP2,000,000 overdraft
facility (GBP140,000 drawn as at 30 September 2018). The group also
has a term loan facility with funds managed by LOIM of
GBP1,715,000. Neither loan requires amortisation and both expire in
July 2021.
In January 2019 the group entered into loan arrangements with
funds managed by LOIM for GBP1,000,000 and Downing LLP for
GBP1,000,000, both of these have expiry dates in October 2019.
The Group has not entered into any interest rate hedges during
the course of the year and did not have any interest rate hedges in
place at the year-end (2017: None).
18. Share capital
On 5 July 2017, the Company issued 132,850,000 new ordinary
shares of 0.01p at a price of 10p per share by way of a placing and
debt conversion. Expenses associated with the placing, open offer
and debt conversion amounted to GBP664,000 and were charged to the
share premium account.
Allotted, called up and
fully paid:
(Unaudited)
2018 2017
Number GBP000 Number GBP000
At 30 September
Ordinary shares of 0.01p
each 332,900,684 33 332,900,684 33
Deferred shares of 24.99p
each 49,077,469 12,264 49,077,469 12,264
381,978,153 12,297 381,978,153 12,297
Ordinary shares of 0.01
pence
(Unaudited)
2018 2017
Number GBP000 Number GBP000
At start of year 332,900,684 33 200,050,684 20
Placing and open offer - - 95,350,000 9
Debt conversion - - 37,500,000 4
At end of year 332,900,684 33 332,900,684 33
Deferred shares of 24.99
pence
(Unaudited)
2018 2017
Number GBP000 Number GBP000
At start of year 49,077,469 12,264 49,077,469 12,264
Conversion - - - -
At end of year 49,077,469 12,264 49,077,469 12,264
The Deferred Shares do not entitle their holders to receive any
dividend or other distribution. On a return of assets in a winding
up, the holders of Deferred Shares are entitled to a repayment only
after repayment of capital on the Ordinary Shares plus
GBP10,000,000 per Ordinary Share. Holders of Deferred Shares do not
have the right to receive notice of any General Meeting of the
Company nor the right to attend, speak or vote at any such
meeting.
Share options
Share option scheme Date of grant Shares under option Exercise price Exercise dates:
(Unaudited)
2018 2017 Earliest Latest
2007 PSP 1/10/2015 23,640,436 23,640,436 8.45p 1/10/2017 1/10/2027
2007 PSP 3/2/2016 - 3,000,000 9.30p 3/2/2018 3/2/2028
2007 DSOP Approved 29/9/2017 320,000 320,000 16.2p 29/9/2020 29/9/2027
2007 DSOP Un-approved 29/9/2017 1,680,000 1,680,000 16.2p 29/9/2020 29/9/2027
On 30 September 2015, the Company issued options over 18,510,959
shares to funds managed by LOIM. The options are exercisable at the
option of either funds managed by LOIM or the Company subject to
the holding of funds managed by LOIM or other related parties of
LOIM not exceeding 29.9% of the issued ordinary share capital of
the Company. The options were issued as part of a debt for equity
conversion in September 2015.
19. Commitments
(Unaudited)
2018 2017
Capital commitments GBP000 GBP000
Contracted - -
=================== =========== ======
No provision has been made for capital commitments.
Operating lease commitments
Total future minimum lease payments under non-cancellable
operating leases are payable as follows:
(Unaudited) 2018 2017
Land and buildings Other assets Land and buildings Other assets
GBP000 GBP000 GBP000 GBP000
Within one year 631 126 658 201
Between two and five
years 1,560 19 1,740 167
After more than five
years 268 - 1,333 -
============
2,459 145 3,731 368
============
Amounts due after more than five years includes leasehold ground
rent on properties with an unexpired lease term currently of 53
years.
There was no sublease income during the year (2017: GBPnil).
Operating lease agreements do not contain any contingent rent or
other onerous clauses or financial restrictions.
20. Retirement benefit obligation
The Group sponsors a defined benefit pension scheme in the
United Kingdom, the Booth Industries Group PLC Staff Pension and
Life Assurance Scheme ("the Booth Scheme") and operates a small
number of defined contribution pension schemes and makes
contributions to personal pension plans.
a) Defined benefit scheme
Pension benefits are linked to the members' final pensionable
salaries and service at their retirement date (or date of leaving
if earlier). The scheme is closed to new entrants. The scheme is
governed by a Board of Trustees who meet on a quarterly basis. The
Group has opted to recognise all actuarial gains and losses
immediately through the Consolidated Statement of Comprehensive
Income.
The most recent formal actuarial valuation was carried out as at
6 April 2015. The results of this valuation have been updated to 30
September 2018 by an independent qualified actuary. The assumptions
used were as follows:
Assumptions
The following were the principle actuarial assumptions at the
reporting date:
(Unaudited) 2018 2017
Discount rate 2.80% 2.80%
Retail Prices Index
(RPI) inflation 3.10% 3.10%
Consumer Prices Index
(CPI) inflation 2.00% 2.00%
Salary increases n/a n/a
Rate of increases to pensions in payment
subject to inflationary increases:
- RPI capped at 5%
pa 2.10% 3.00%
- RPI capped at 2.5%
pa 1.70% 2.30%
- CPI capped at 3%
pa 1.80% 1.80%
- CPI capped at 5% pa with
minimum 3% pa 3.20% 3.10%
Revaluation of deferred pensions
(non-GMP) 2.00% 2.00%
Mortality basis pre
and post retirement 120% S2PMA/S2PFA 130% S2PMA/S2PFA
+ 2 years
CMI 2016 with
CMI 2017 with a a
long term rate long term
of rate of
improvement improvement
of 1% pa of 1% pa
Allowance for cash
commutation 95% of maximum 95% of maximum
Proportion married 80% for males 80% for males
70% for females 70% for females
Asset class 2018 2017
% of total % of total
Market value scheme assets Market value scheme assets
GBP000 GBP000
Equities 4,992 22% 12,763 56%
Diversified Growth
Funds 8,917 40% 1,639 7%
Bonds - - 2,221 10%
Gilts 834 4% 3,234 14%
Liability Driven
Investments 3,505 16% 1,003 4%
Multi-asset Credit 2,217 10% - -
Property - - 1,812 8%
Cash Fund 1,383 6% - -
Cash 447 2% 227 1%
Total 22,295 100% 22,899 100%
=============
Actual return on
assets over period 694 1,578
Pension expense
Amounts recognised within administrative expenses
within the income statement are:
(Unaudited)
2018 2017
GBP000 GBP000
Charge for current service cost - -
Administration costs (104) (52)
(104) (52)
Following the 6 April 2015 valuation the Group agreed to pay
annual contributions of GBP365,000 for the year to 5 April 2016,
followed by contributions of GBP140,000 for the following 2 years.
Contributions will then increase to GBP305,000 per annum until 5
April 2027. Total employer contributions in 2018 were GBP223,000
(2017: GBP140,000).
The amounts credited/(charged) to financial
income and expense are:
(Unaudited)
2018 2017
GBP000 GBP000
Return on assets recorded as interest* 464 390
Interest on pension scheme liabilities (635) (615)
Net financial expense (171) (225)
*Includes GBP159,000 of pension administration expenses paid for
by the Company (2017: GBP135,000).
Total actuarial gains and losses recognised in the consolidated
statement of comprehensive income
The cumulative actuarial loss recognised in the consolidated
statement of comprehensive income from 1 October 2006 (being the
transition date to the adoption of International Financial
Reporting Standards) is GBP2,092,000 (2017: loss GBP1,395,000).
Analysis of movement in retirement benefit
obligation
(Unaudited)
2018 2017
GBP000 GBP000
Retirement benefit obligation at start of
the year 23,349 26,253
Current service cost - -
Interest cost on retirement benefit obligation 635 615
Contributions by employees - -
Benefits paid and transfers out (1,417) (1,224)
Past service credit (232) -
Actuarial (gains)/losses 768 2,295
===============================================
Retirement benefit obligation at end of year 23,103 23,349
===============================================
Change in fair value of scheme assets during
the year
(Unaudited)
2018 2017
GBP000 GBP000
Fair value at start of the year 22,899 22,457
Interest income 623 525
Actual return on assets less interest 71 1,053
Employer contributions 223 140
Member contributions - -
Benefits paid (1,417) (1,224)
Administration costs (104) (52)
Fair value at end of the year 22,295 22,899
Sensitivity analysis
Reasonably possible changes at the reporting date to one of the
relevant actuarial assumptions, holding other assumptions constant,
would have affected the defined benefit obligation by the
percentage amounts shown below:
(Unaudited)
2018 2017
Change in Change in
defined
Change in defined benefit Change in benefit
Assumption assumption obligation assumption obligation
+ 7% / -
Discount rate +/- 0.5% pa + 7% / - 6% +/- 0.5% pa 6%
RPI and CPI inflation +/- 0.5% pa + 3% /- 2% +/- 0.5% pa + 3% / -2%
Future salary increases n/a n/a n/a n/a
Assumed life expectancy + 1 year + 4% + 1 year + 4%
GMP equalisation
Since the balance sheet date, the Lloyds GMP inequalities
judgement was published on 26 October. This judgement is expected
to have an impact on all pension schemes that were contracted-out
of the State Second Pension (previously SERPS) between 17 May 1990
and 5 April 1997, including the Booths Industries Group Plc Staff
Pension & Life Assurance Scheme.
The judgement may require the trustees of the scheme to review
certain members' pension benefits and make adjustments, including
the possibility of back-payments in some cases. Whilst the amounts
for individual members are likely to be small, the sum total of any
new liabilities could be material.
This is a post-balance sheet event that we anticipate could
therefore have an impact on our disclosed pension liabilities at
future balance sheet dates. Any adjustments to liabilities may need
to be charged to profit and loss in the future, although if this is
appropriate we would expect this charge to be an exceptional item.
In discussions with our actuarial advisors, an early indication of
the potential quantum of any adjustment is around GBP0.2m -
GBP0.3m.
b) Defined contribution schemes and personal pension plans
The Group operates a small number of defined contribution
pension schemes and contributes to a number of personal pension
plans. The total expense for these schemes during the year was
GBP411,000 (2017: GBP428,000).
21. Contingent liabilities
The contingent liability of the Group for bank guarantees at 30
September 2018 amounted to GBPnil (2017: GBPnil).
22. Share-based payments
The Group has three share-based payment schemes for employee
remuneration. Details of the schemes, under which options have been
granted, are set out below.
a) Redhall Group plc 2007 Performance Share Plan
A discretionary long term incentive plan comprising two parts.
Part 1 enables options to be granted at no cost to participants,
whilst Part 2 enables conditional shares to be awarded.
(Unaudited)
2018 2017
Weighted average Weighted average
exercise price exercise price
Number - Pence Number - Pence
Outstanding at 1 October 26,640,436 8.55 27,640,436 8.63
Vested - - - -
Lapsed (3,000,000) (9.30) (1,000,000) (10.77)
Outstanding at 30 September 23,640,436 8.45 26,640,436 8.55
b) Redhall Group plc 2007 Discretionary Share Option Plan
A plan which allows for the grant, to selected employees of the
Group, of rights to acquire ordinary shares in the Company. These
options may be granted as tax favoured options under the HM Revenue
& Customs ("HMRC") approved addendum to the plan, or as
non-HMRC approved share options. The vesting period is three
years.
Details of the share options outstanding during the year
are:
Approved share options
(Unaudited)
2018 2017
Weighted average Weighted average
exercise price exercise price
Number - Pence Number - Pence
Outstanding at 1 October 320,000 16.2 45,400 66.0
Issued - - 320,000 16.2
Lapsed - - (45,400) (66.0)
Outstanding at 30 September 320,000 16.2 320,000 16.2
Exercisable at 30 September - - - -
No options were exercised during the period (2017: None). The
options outstanding at 30 September 2018 had a weighted average
remaining contractual life of 9.0 years.
Non-approved share
options
(Unaudited)
2018 2017
Weighted average Weighted average
exercise price exercise price
Number - Pence Number - Pence
Outstanding at 1 October 1,680,000 16.2 204,600 66.0
Issued - - 1,680,000 16.2
Lapsed - - (204,600) (66.0)
Outstanding at 30 September 1,680,000 16.2 1,680,000 16.2
Exercisable at 30 September - - - -
The options outstanding at 30 September 2018 had a weighted
average remaining contractual life of 10.0 years.
c) Fair value of share-based payments
The fair value of services received in return for share options
granted in the year are measured by reference to the fair value of
options granted. An award was made under the DSOP during the year.
The estimate of the fair value received for the DSOP awards made
during the year was calculated using a Black Scholes model adopting
the following assumptions.
2017 2016
DSOP Award PSP Awards
Fair value at measurement date 0.35p 1.6p
Share price at grant date 9.375p 5.5p - 6.375p
Vesting price 16.2p 8.45p - 10.8p
Expected volatility (based on historic volatility) N/A 50%
Risk free interest rate 1.4% 0.54%
Dividend yield 0% 0%
Option life 3 years 2 years
The underlying expected share price volatility was determined by
reference to historical data. The Company expects the volatility of
its share price to reduce as it matures. The risk free rate was
determined by the implied yield available on a zero coupon
government bond at the date of grant. Adjustments are made to
reflect expected and actual forfeitures during the vesting period
due to the failure to satisfy service conditions. In total a credit
of GBP14,000 has been recognised in the consolidated income
statement for 2018 which has been credited to other reserves (2017:
GBP210,000).
23. Financial instruments
The financial assets of the Group are categorised as
follows:
As at 30 September 2018 (Unaudited) Loans and Non-financial Assets Balance
held for sheet
receivables assets sale total
GBP000 GBP000 GBP000 GBP000
Trade and other receivables 13,087 2,429 - 15,516
Other current assets - 814 - 814
Cash and cash equivalents - - - -
Other non-financial assets - 23,351 - 23,351
Assets held for sale - - 141 141
13,087 26,594 141 39,822
As at 30 September 2017 Loans and Non-financial Assets Balance
held for sheet
receivables assets sale total
GBP000 GBP000 GBP000 GBP000
Trade and other receivables 12,329 1,499 - 13,778
Other current assets - 626 - 626
Cash and cash equivalents 2,370 - - 2,370
Other non-financial assets - 23,362 - 23,362
Assets held for sale - - 141 141
14,699 25,437 141 40,277
The financial liabilities of the
Group are categorised as follows:
As at 30 September 2018 (Unaudited)
Liabilities
Other financial not
liabilities
at within scope Balance
amortised sheet
cost of IAS 39 total
GBP000 GBP000 GBP000
Trade and other payables 11,009 1,206 12,215
Bank overdraft 140 - 140
Finance leases 254 - 254
Loan - non current 5,240 - 5,240
Other non-financial liabilities - 808 808
16,643 2,014 18,657
As at 30 September 2017
Liabilities
Other financial not
liabilities
at within scope Balance
amortised sheet
cost of IAS 39 total
GBP000 GBP000 GBP000
Trade and other payables 7,615 1,030 8,654
Bank overdraft 197 - 197
Finance leases 323 - 323
Loan - non current 1,715 - 1,715
Other non-financial liabilities - 450 450
9,850 1,480 11,330
24. Risk management objectives & policies
The Group has some exposure to market risk, interest rate risk
and limited exposure to currency risk, through its use of financial
instruments which result from its operating and investing
activities. The Group's risk management is coordinated centrally
following guidelines laid down by the Board and is focused on
controlling costs and securing cash flows in the short to medium
term by minimising the exposure to adverse movements in the
financial markets. All non-routine transactions require Board
approval. The Group does not engage in speculative transactions on
financial markets.
The most significant financial risks to which the Group is
exposed and the manner in which they are managed are described
below.
Capital risk management
The Group manages its capital to ensure that entities of the
Group will be able to continue as a going concern, whilst
maximising the return to stakeholders through optimisation of the
debt and equity balance. The capital structure of the Group
consists of cash and cash equivalents, bank borrowings and equity
attributable to holders of the parent, comprising issued share
capital and reserves as disclosed in the Consolidated Statement of
Changes in Equity. The Group's borrowings are subject to covenant
tests on cash generation. Forecast and actual compliance with
covenants is monitored on a regular basis and cash and borrowings
balances are monitored on a daily basis. The Group is not subject
to external imposed capital requirements, other than the minimum
capital requirements and duties regarding reduction of capital, as
imposed by the Companies Act 2006 for all public limited companies.
The Board's dividend policy is to seek a minimum of three times
cover on taxed earnings.
Liquidity sensitivity
The Group's objective is to maintain a balance between
continuity of funding and flexibility through the use of borrowings
with a range of maturities Generally, management believes it is
appropriate to have facilities and borrowings on a floating
interest rate basis, although this is kept under review.
The objective is to maintain sufficient resource to meet the
funding needs for the foreseeable future. The Group facilities were
renewed in July 2017. At 30 September 2018 there was a bank loan
facility of GBP3,525,000, an accordion facility of GBP2,475,000 and
an overdraft and ancillaries facility of GBP2,000,000 of which
GBP140,000 was drawn. The Group also had a term loan facility of
GBP1,715,000 with funds managed by LOIM. In January 2019 the group
entered into loan arrangements with funds managed by LOIM for
GBP1,000,000 and Downing LLP for GBP1,000,000, both of these have
expiry dates in October 2019. On 7 November 2018 a temporary uplift
of GBP1.2m was granted by HSBC extending through to 31 January
2019. The Group's financial liabilities have contractual maturities
(including interest payments where applicable) which are summarised
below:
(Unaudited)
As at 30 September
2018 Greater
61 days 7 months 13 months than 2 years More than
0 - 60 up to 5
days to 6 months to 12 months to 2 years years 5 years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other
payables 10,517 18 - - 324 - 10,859
Finance leases 11 23 35 69 116 - 254
Loans - - - - 5,240 - 5,240
Bank overdraft 140 - - - - - 140
10,668 41 35 69 5,680 - 16,493
As at 30 September
2017 Greater
61 days 7 months 13 months than 2 years More than
0 - 60 up to 5
days to 6 months to 12 months to 2 years years 5 years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Trade and other
payables 7,252 25 - - 338 - 7,615
Finance leases 11 23 35 70 184 - 323
Loans - - - - 1,715 - 1,715
Bank overdraft 197 - - - - - 197
7,460 48 35 70 2,237 - 9,850
Interest rate sensitivity
Cash is held on treasury deposit and earns interest at variable
rates. The revolving loan and overdraft facility bear interest that
is variable and linked to LIBOR. No instruments have been entered
into to mitigate interest rate risk, although this is kept under
review. The interest rate is based on LIBOR and has averaged 4.70%
(2017: 4.80%). If interest rates had differed by +/-1% from that
actually experienced the impact on the interest charge and profit
before tax for the year would have been +/- GBP103,000 (2017:
+/-GBP132,000). Similarly, the impact on equity would have been +/-
GBP83,000 (2017: +/-GBP106,000).
Foreign currency sensitivity
Currency options are used to provide protection against foreign
exchange exposures, typically in relation to contract amounts
receivable that are significant. Net monetary assets and
liabilities of the Group that are not denominated in Sterling are
as follows:
(Unaudited) As at 30 September 2018
US Dollar Euro Total
GBP000 GBP000 GBP000
Financial assets 2 - 2
Financial liabilities - (63) (63)
2 (63) (61)
As at 30 September 2017
US Dollar Euro Total
GBP000 GBP000 GBP000
Financial assets 12 661 673
Financial liabilities - (197) (197)
12 464 476
The Group had entered into time option contracts to hedge a
total of 150,000 euro at 30 September 2018 (2017: 1,465,000 euro).
Such financial derivatives are used only to manage risk and
speculation is not permitted. The impact of movements in the
Sterling exchange rate at the year end is not material because the
exposure to foreign currency is not significant.
Credit risk analysis
The Group's exposure to credit risk is limited to the carrying
amount of financial assets recognised in the balance sheet and
summarised below:
(Unaudited)
2018 2017
GBP000 GBP000
Cash and cash equivalents - 2,370
Trade receivables 2,136 3,114
Contract assets 10,951 9,215
Contract liabilities (632) (903)
========================== =========== ======
12,455 13,796
The Group monitors the credit risk of material customers and
other counterparties and incorporates this information into its
credit risk controls. Management considers that all of the
financial assets noted above are of good credit quality, including
those that are past their due date for payment (see note 14).
In respect of trade and other receivables and contract assets
less contract liabilities, the Group is not exposed to any
significant credit risk with any group of counterparties with
similar characteristics. The Group does perform significant amounts
of work for individual clients and does have significant amounts
due to it in connection with those activities although these
represent normal levels given the nature of work being performed.
These balances individually represent less than 19% of the total
amounts due. The amounts due are spread across a number of
contracts and operating segments, and are with predominantly UK
based clients that are all blue-chip companies with substantial
resource or UK Government backed organisations. As such the
Directors do not believe that they represent
a significant credit risk to the Group, and based on historical
information about customer default rates they consider the credit
quality of trade receivables that are not past due or impaired to
be good. The credit risk for liquid funds is considered to be
negligible because the counterparty, HSBC Bank plc, is of good
standing.
None of the Group's financial assets are secured by collateral
or other credit enhancements.
The fair value information for financial assets and financial
liabilities not measured at fair value has not been provided as the
carrying amount is considered a reasonable approximation of fair
value. As no financial assets or liabilities are held at fair
value, no disclosure of the fair value hierarchy is considered
necessary.
25. Related party transactions
In July 2017 the Group renewed its borrowing facilities
including a term loan facility with funds managed by LOIM. In
January 2019 the group entered into loan arrangements with funds
managed by LOIM for GBP1,000,000 and Downing LLP for GBP1,000,000,
both of these have expiry dates in October 2019. Details of the
facility are given in note 17.
The funds are major shareholders in the Group. The amount of
interest payable under the facility in the year to 30 September
2018 amounted to GBP232,000 (2017: GBP232,000). There was a
non-executive director's fee paid to LOIM (as disclosed in the
Report of the Directors). Other than remuneration paid to key
management (Note 3), there are no other transactions or balances
that fall due for disclosure under IAS 24.
26. Impact of the adoption of IFRS 15 Revenue from Contracts
with Customers
Impact Areas
Except for the adoption of IFRS 15, the Group has consistently
applied the accounting policies to all periods presented in these
consolidated financial statements.
The Group has adopted IFRS 15 Revenue from Contracts with
Customers from 1 October 2017. As a result, the Group has changed
its accounting policy for revenue recognition.
The Group has applied IFRS 15 using the cumulative effect of
initially applying the new revenue standard as an adjustment to the
opening balance of equity at 1 October 2017. Therefore, the
comparative information has not been restated and continues to be
reported under IAS
11 and IAS 18. The details of the significant changes and the
quantitative impact of the changes are set out below:
Adjustment: Relates to the recognition of the impact on
transition to IFRS 15 at 1 October 2017 of a (GBP3.9 million)
adjustment to equity and Trade and other receivables (Contract
Assets). The adjustment relates to the recognition of customer
claims according to the Group's assessment of each contract's
performance obligation to be delivered to its customers, this
includes (GBP2.3 million) relating to now closed operations.
Impact on transition at 1 October 2017
(Unaudited)
As at As at
30 September
2017 Adjustment 1 October 2017
GBP000 GBP000 GBP000
Assets
Non-current assets
Property, plant and equipment 2,488 - 2,488
Intangible assets 2,569 - 2,569
Purchased goodwill 18,305 - 18,305
Deferred tax asset 1,021 - 1,021
============ ==========
24,383 - 24,383
Current assets
Inventories 626 - 626
Trade and other receivables 13,778 (3,933) 9,845
Cash and cash equivalents and overdraft 2,370 - 2,370
Assets held for sale 141 - 141
============ ==========
16,915 (3,933) 12,982
Liabilities
Current liabilities
Trade and other payables (8,645) - (8,645)
Borrowings and overdraft (266) - (266)
Current tax payable - - -
============ ==========
(8,911) - (8,911)
Non-current liabilities
Borrowings (1,969) - (1,969)
Retirement benefit obligations (450) - (450)
(2,419) - (2,419)
============ ==========
Net assets 29,968 (3,933) 26,035
============ ==========
Shareholders' equity
Share capital 12,297 - 12,297
Revaluation reserve 102 - 102
Other reserve 1,690 - 1,690
Retained earnings 15,879 (3,933) 11,946
============
Total equity 29,968 (3,933) 26,035
Impact on transition at 1 October 2017 (Unaudited)
The following tables summarise the impacts of adopting IFRS 15
for the year ended 30 September 2018.
a) Consolidated Income Statement (Unaudited)
As Reported Balances without
Adoption of
IFRS 15
Year to Year to
30 September 30 September
2018 Adjustment 2018
GBP000 GBP000 GBP000
Revenue 37,761 (461) 37,300
Cost of sales (29,956) - (29,956)
Gross profit 7,805 (461) 7,344
Administrative expenses (9,100) - (9,100)
Other expenses (2,473) - (2,473)
Operating profit/(loss) (3,768) (461) (4,229)
Continuing businesses 1,053 (461) 592
Central costs (2,273) - (2,273)
Adjusted operating profit/(loss) (1,220) (461) (1,681)
Amortisation of acquired intangible
assets (2,742) - (2,742)
IFRS 2 (credit)/charge 194 - 194
Operating profit/(loss) (3,768) (461) (4,229)
Financial expenses (646) - (646)
Loss before tax from continuing
operations (4,414) (461) (4,875)
Tax credit 299 - 299
Loss on continuing operations (4,115) (461) (4,576)
Loss on discontinued operations
net of tax - - -
Loss attributable to equity holders
of the Parent Company (4,115) (461) (4,576)
b) Consolidated Statement of Comprehensive
Income (Unaudited)
As Reported Balances without
Adoption of
IFRS 15
Year to Year to
30 September 30 September
2018 Adjustment 2018
GBP000 GBP000 GBP000
Loss for the year (4,115) (461) (4,576)
Other comprehensive income:
Items that will not be reclassified
to profit or loss:
Remeasurement of defined benefit
liability (697) - (697)
Tax on actuarial gain 118 - 118
Other comprehensive income for
the year net of tax (579) - (579)
Total comprehensive income attributable
to
equity holders of the Parent Company (4,694) (461) (5,115)
c) Consolidated Balance Sheet (Unaudited)
As Reported Balances without
Adoption of
IFRS 15
As at As at
30 September 30 September
2018 Adjustment 2018
GBP000 GBP000 GBP000
Assets
Non-current assets
Property, plant and equipment 3,140 - 3,140
Intangible assets 2,841 - 2,841
Purchased goodwill 15,832 - 15,832
Deferred tax asset 1,320 - 1,320
============ ==========
23,133 - 23,133
Current assets
Inventories 814 - 814
Trade and other receivables 15,516 3,472 18,988
Cash and cash equivalents and overdraft - - -
Assets held for sale 141 - 141
16,471 3,472 19,943
Liabilities
Current liabilities
Trade and other payables (12,065) - (12,065)
Borrowings and overdraft (209) - (209)
Current tax payable - - -
(12,274) - (12,274)
Non-current liabilities
Borrowings (5,425) - (5,425)
Retirement benefit obligations (808) - (808)
(6,233) - (6,233)
Net assets 21,097 3,472 24,569
Shareholders' equity
Share capital 12,297 - 12,297
Revaluation reserve 102 - 102
Other reserve 1,446 - 1,446
Retained earnings 7,252 3,472 10,724
Total equity 21,097 3,472 24,569
d) Consolidated Cash Flow Statement
(Unaudited)
As Reported Balances without
Adoption of
IFRS 15
As at As at
30 September 30 September
2018 Adjustment 2018
GBP000 GBP000 GBP000
Cash flows from operating activities
Loss after taxation (4,115) (461) (4,576)
Adjustments for:
Depreciation 351 - 351
Amortisation of intangible assets 524 - 524
Impairment losses on intangible
assets and goodwill 2,473 - 2,473
Difference between pension charge
and cash contributions (119) - (119)
Loss on disposal of property, plant
and equipment (20) - (20)
Share-based payments charge (15) - (15)
Financial income - - -
Financial expenses 146 - 146
Deferred tax credit (299) - (299)
(Increase)/decrease in trade and
other receivables (5,670) 461 (5,209)
Decrease/(increase) in inventories (188) - (188)
Decrease in trade and other payables 3,420 - 3,420
==========
Cash absorbed by operations (3,512) - (3,512)
Interest paid (475) - (475)
============ ==========
Net cash absorbed by operating
activities (3,987) - (3,987)
Cash flows from investing activities
Purchase of property, plant and
equipment (1,193) - (1,193)
Purchase of intangible assets (589) - (589)
Proceeds from disposal of fixed
assets - - -
Proceeds from disposal of assets
held for sale - - -
============
Net cash used in investing activities (1,782) - (1,782)
Cash flows from financing activities
Proceeds from issue of share capital
(net of costs incurred) - - -
Finance lease borrowing 25 - 25
Repayment of finance leases (94) - (94)
Proceeds from borrowing 3,525 - 3,525
Repayment of facility - - -
Repayment of long-term borrowing - - -
Net cash generated by financing
activities 3,456 - 3,456
Net increase/(decrease) in cash
and cash equivalents (2,313) - (2,313)
Cash and cash equivalents at beginning
of year 2,173 - 2,173
Cash and cash equivalents at end
of year (140) - (140)
============
27. Basis of Preparation
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2018
or 2017. The financial information for 2017 is derived from
statutory accounts for the year ended 30 September 2017 which have
been delivered to the registrar of companies. The auditor has
reported on the 2017 accounts: their report was (i) unqualified;
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
audit report and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
The unaudited consolidated financial information in this report
has been prepared in accordance with the accounting policies
disclosed in the Group's 2017 Annual Report and Accounts, except as
disclosed in Note 26.
The statutory accounts for the year ended 30 September 2018,
will be finalised on the basis of the financial information
presented by the Directors in this unaudited preliminary
announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
The financial information contained within the preliminary
announcement for the year ended 30 September 2018 was approved by
the Board on 30 January 2019 and has been agreed with the Company's
auditor for release.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DMGFMVMMGLZG
(END) Dow Jones Newswires
January 31, 2019 02:01 ET (07:01 GMT)
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