TIDMSIXH
RNS Number : 4706K
600 Group PLC
02 September 2021
The 600 Group plc
A leaner and more efficient business well placed for the
future
Results for the year ended 31 March 2021
The 600 Group PLC ("the Group"), the diversified industrial
engineering company (AIM: SIXH), today announces its results for
year ended 31 March 2021.
Financial highlights
-- Revenue from continuing operations down by 20% at $53.6m
(2020: $67.2m) due to the impact of COVID-19 on trading.
-- Group profit before tax and adjusting items of $1.1m (2020:
$1.1m), in-line with previous year due to management's swift
response to the COVID-19 pandemic.
-- Profit before tax after adjusting items of $0.09m (2020: loss $0.63m).
-- Group net debt as at 31 March 2021 (excluding IFRS16 lease
liabilities) $12.7m (28 March 2020: $14.2m).
-- Current Group order book $22m against $11m at the same time last year.
Strategic & operational highlights
-- Impact of COVID-19 minimized through management's swift response:
o Decisive action taken to reduce costs and utilize government
backed schemes where possible.
o The result is a leaner and more efficient organization which
retained its highly skilled workforce and technical competencies,
allowing it to react quickly as trading conditions improved.
-- Net debt reduced and the successful restructuring of the
Group's loan notes provides further financial flexibility.
o $ 2.2m of 31 March 2021 Group net debt will be eligible for
forgiveness from September 2021 as a US Paycheck Protection Program
("PPP") loan.
-- Strong pipeline of opportunities across all divisions and a
growing Group order book with the Group positioned to take
advantage of its operational gearing as volumes continue to
increase.
o Particular strength in the pipeline for the Group's higher
margin, growth market Industrial Laser Division is very encouraging
- with CMS taking a number of large new orders including the
largest in its history.
-- Additional Board appointments and management changes, as separately announced.
Paul Dupee, Executive Chairman of the Group, commented:
"The Coronavirus pandemic provided an exceptional challenge and
changed business as we know it. However, our management team's
ability to adapt, respond quickly and act decisively has allowed us
to minimize the impact during the year and move forward with a
leaner and more efficient business.
"We now have a healthy order book and a strong pipeline of
opportunities across the business. Most pleasingly, the order book
for our higher margin laser division, an area we are actively
seeking to grow, is especially strong. Our ability to retain our
highly skilled workforce and technical competencies during the
upheaval of COVID-19, means we are well set to continue to take
advantage of these opportunities.
"Despite some ongoing uncertainty created by COVID-19, the Board
continues to believe in the long-term fundamentals of the Group; in
brand promotion, investment in new, higher end product capabilities
and diversification into new markets and selective acquisitions.
The Board is excited about the possibilities that lie ahead."
Enquiries:
The 600 Group PLC
Paul Dupee, Executive Chairman Tel: +1-407-818-1123 / 01924
Neil Carrick, Company Secretary 415000
Instinctif Partners Tel: 0207 457 2020
Tim McCall
Cenkos Securities plc (Nominated Tel: 020 7397 8900
Adviser and Broker)
Ben Jeynes / Max Gould (Corporate
Finance)
Alex Pollen/ Henry Nicol (Sales)
Chairman's statement
Overview
It should come as no surprise that the Coronavirus pandemic has
changed business as we know it. As we deal with the significant
impact on our top-line - with revenues falling by just over 20% to
$53.6m - we remain optimistic as we maintained our *underlying pre
tax profit of $1.1m and our skilled workforce, due in large part to
our operational cost savings and government assistance programs.
Because of our ability to anticipate and respond quickly, the Group
is now seeing a considerable increase in demand as well as improved
size and quality of the orderbooks.
As we continue to navigate our new business normal and
capitalise on the growth of our North American presence, we are
also actively seeking to expand our laser business - with US
markets being a priority. With our team of innovators and expert
engineers, we are confident in our ability to impact this market.
We are excited about the possibilities that lie ahead and what this
means for both our company and our valued investors.
Divisional Overview
The UK Machine Tool business suffered a significant revenue
decrease of 38% and closed temporarily altogether in May of 2020 as
a result of lockdowns across the UK and Europe.
Following the closure, we furloughed staff and took advantage of
the UK Coronavirus Job Retention Scheme. Doing so allowed us to
implement a number of cost reduction measures and preserve the core
skill base of our business. From online machine demonstrations to
virtual showroom visits, we have continued to respond to the
changing circumstances we are experiencing and, as a result,
generated a 2% net operating margin against the 8% margin of the
previous year.
Although the US Machine Tool business experienced a similar
downturn, we acted quickly and utilized the Paycheck Protection
Program (PPP). We remained open and quickly recovered with a 20%
reduction in revenue while returning a slightly improved net
operating profit over the previous year.
The Industrial Laser division faced a similar outcome with site
visit restrictions and a lack of trade shows which limited sales
and new business opportunities. However, we again responded with
online demos and implemented necessary cost reductions while taking
advantage of the Paycheck Protection Program (PPP). While the
market for large, high-end custom machines manufactured by the CMS
business acquired in June 2019 remained difficult, the move of
TYKMA away from a primarily commodity product focus to a custom
machine focus helped maintain revenue and improve operating
margins.
Our Borrowings
Group net debt (excluding IFRS16 lease liabilities) and
including the second round of $2.2m of PPP funding loans was $12.7m
as of March 31, 2021, compared to $14.2m at the end of March 2020.
The first round of PPP loans of $2.2m were forgiven at the start of
March 2021, and the second round of loans are on the same terms and
available for forgiveness starting in September of this year. These
are dependent on employment terms, payroll expenditure and certain
facility costs with any amount not forgiven repayable over a
two-year period at an interest rate of 1%. We also reached an
agreement with our loan note holders in July 2021 to extend the
repayment date to 14 August 2023. This will provide adequate time
for the Group to recover from the pandemic and organise
refinancing.
Our People
At the very core of our business is our people. While this
pandemic has presented its own set of challenges, we have also
found ample opportunity to grow and reinvigorate our company at
every level. We believe it's the hard work, dedication and support
of our employees that has opened the doors to our newest
initiatives, and ultimately, our future.
Our Future
Orderbooks have seen a notable uptick since March 2021, with
particularly strong activity in the higher-margin laser division.
So while the pandemic continues to affect many aspects of our
everyday business and some questions remain, one thing is certain:
Our management teams have responded better than we could have ever
thought possible and our ability to overcome has resulted in a
leaner, more efficient organization; one that takes advantage of
the operational goals that lie ahead and turns every challenge into
a new opportunity. The Board continues to believe in our long-term
fundamentals of brand promotion, investment in new, higher-end
product capabilities and diversification into new markets with
selective acquisitions.
Paul Dupee
Chairman
1 September 2021
*Underlying profit is before adjusting items, which are
explained in note 11 Alternative Performance Measures and set out
in note 3
Strategic Report
Our businesses
The 600 Group PLC ("the Group") is a leading engineering group
with a world class reputation in the design, manufacture and
distribution of industrial laser systems and design and
distribution of machine tools and associated precision engineered
components. The Group operates from locations in North America,
Europe and Australia selling into more than 100 countries
worldwide.
Group businesses serve customers across a very broad range of
industry sectors, from medical, pharmaceutical and education
through to automotive, aerospace and defence equipment. A large
proportion of revenue is derived from sales via third party
distribution channels who support these industries locally.
The Group products are noted for their quality and reliability
and consequently the Group benefits from a high degree of loyalty
and repeat business. Given the large number of customers and
established distributors in many countries there are no major sales
concentrations of customers or products. In the year ended 31 March
2021 the top 20 customers, of which 11 (2020: 15) were
distributors, contributed 24% (2020: 26%) of revenues.
Revenues
Revenues are generated across many diverse geographical
territories:
Percentage of worldwide revenues 2021 2020
(by destination) % %
United States of America 70 66
United Kingdom 14 17
Europe (excluding UK) 7 7
Rest of the World 9 10
Total 100 100
Macroeconomic and industry trends
Industrial laser systems
The use of industrial lasers for material processing continues
to expand worldwide with laser systems now becoming a mainstream
manufacturing process. Applications include laser machining,
including cutting and drilling, marking, ablation and a host of
other niche processes. One of the main drivers of this industry has
been legislation and the continual increase in the requirement for
traceability of products in all industries from aerospace and
transport to medical and pharmaceutical.
The global industrial laser market is estimated to be in the
region of $5bn but given this number relates just to the laser
sources, the actual market for systems incorporating these lasers
and associated equipment and software is estimated to be much
larger in the region of $15-$20bn. The industry had seen mid-single
digit increases until 2019 when a fall was recorded. Metal cutting
is by far the largest application by value and the market is
dominated by China which is the largest producer and consumer of
industrial lasers. The fall in the overall market in 2019 was
estimated to be in the region of 12% and largely driven by Chinese
decline in cutting systems which mirrored the decline in machine
tools, both of which are heavily influenced by Chinese demand. The
effects of the COVID-19 pandemic led to significant reductions in
volumes in the early part of 2020 but as China, in particular,
opened up, volumes recovered and the overall market was estimated
to be similar to that of 2019 as a result. The European and
American markets however were slower to recover and took until Q1
of 2021 to show significant signs of a return to more normal levels
of activity.
The laser marking and micro-materials processing subset of the
market (in which the Group competes) is smaller than the
macro-materials processing subset and has seen low single digit
growth in recent years. Growth is underpinned by enhanced
performance in the speed, cost and quality of the systems being
implemented compared to other techniques as well as by legislative
changes driving a requirement for greater traceability of products
and components. The industry subset occupied by the Group has
however seen a proliferation of vendors and selling price pressure
at the lower commodity end of the market thus whilst unit volumes
have continued to increase, revenue has been held back. It is for
this reason the Group took the decision to focus on the higher end
custom products where its strengths in design and proprietary
software provide greater opportunities to grow and enhance margin
and where the acquisition of CMS in June 2019 significantly
enhanced these capabilities.
Industry predictions for the laser industry expect the recovery
in volumes to continue through 2021 with the overall increase
ranging from 10% to 15%.
Machine tools and precision engineered components
The worldwide machine tool industry was estimated by Oxford
Economics in their Spring 2021 report at around $74bn for the 2019
calendar year but with a fall in 2020 of around 15% due to the
effects of the pandemic and then a rebound of around the same
amount in 2021 expected. The market continues to be driven by the
investment intentions of manufacturers and is sensitive to changes
in the economic and financial climate. Demand responds to economic
trends which typically lag the main cycle of the economy.
The global market is dominated by China with consumption of
$22.3bn in 2019 but this is largely served domestically with China
also being the largest producer. The USA is the second largest
consumer of machine tools at $9.8bn followed by Germany at
$8bn.
Our main markets
The main markets we operate in are the USA, Europe and
Australia. All these markets suffered reduced demand as a result of
the COVID-19 global pandemic. These markets have shown a gradual
improvement from late in 2020 and into 2021 with a significant
improvement seen from March 2021 onwards. The possibility of
disruption remains due to the ongoing effects of COVID-19 and
possible new outbreaks and variants.
Activity in the year
Industrial laser systems
All areas of the business were affected by the COVID-19 pandemic
with revenue falling 10% on the previous year. Operations did
remain open with staff working flexibly and from home as required
to meet demand as it occurred.
The existing TYKMA Electrox business continued to move more into
the custom higher specification market as increased competition and
price deflation continued in the lower end standard products
sector. The higher end large projects undertaken by the CMS
business suffered delays in customer decisions on new projects and
both businesses took advantage of the USA Paycheck Protection
Program (PPP) scheme to keep teams and key skills together during
periods of reduced demand. Cost reduction measures were introduced,
along with online machine demonstrations and remote working to keep
sales activity moving.
Activity levels did gradually pick up and the businesses
experienced a significant uplift in activity and orders from March
2021 onwards, particularly in the higher margin large custom units.
The integration of the sales operations of TYKMA and CMS and other
back-office functions has progressed well with each operating unit
benefitting from the increased operational facilities and the cross
fertilisation of skills and ideas. Work has also continued on the
development of the proprietary software for TYKMA / Electrox which
will provide upgrade opportunities to customers going forward as
well as adding new functionality and compatibility with other
systems and operations.
Results for the financial year were as follows:
2021 2020
$ 000 $ 000
Revenues 21,331 23,695
Underlying operating
profit 1,836 1,689
Underlying operating
margin 8.6% 7.1%
Underlying operating profit is before adjusting items, which are
explained in note 11 Alternative Performance Measures and set out
in note 3.
Machine tools and precision engineered components
This division operates from sites in the UK, USA, and Australia
providing solutions for metal processing through the design and
development of machine tools sold under the brand names Colchester,
Harrison and Clausing and the design and supply of precision
engineering components under the brand name Pratt Burnerd. There
are also spares, accessories and service operations which support
the significant number of machines sold over the Group's long
history of supplying quality equipment. Sales are made worldwide,
with a mix of direct sales and distribution in North America,
Europe, and Australia and a network of distributors in all other
key end-user markets.
The machine tools division's overall revenue was also severely
affected by the COVID-19 pandemic with a fall of 26% on the
previous year. The UK operation suffered the worst effects with the
plant closed for the month of May 2020 and staff furloughed and
working remotely as required. Site visits in the UK and Europe
became extremely difficult and the business responded with online
machine demonstrations and showroom visits. UK revenue fell by 38%
on the prior year and consequently operating margins reduced down
to 2% against 8% for the prior year.
Work on establishing a German operation for Colchester has
continued during the year and a new lease on premises near
Dusseldorf was entered into in May 2021 to provide a direct sales
and service operation alongside the existing distribution
infrastructure in this important European market.
The US machine tool business struggled similarly with the
effects of the pandemic but has come out of the downturn more
quickly than the UK with overall revenues only falling 20% on the
prior year and is now back to pre-pandemic levels of activity. The
business also took advantage of the PPP scheme, initiated cost
savings and furloughed workers as required, but has been able to
keep core skills together and has responded quickly to the
increasing demand.
The Australian machine tools business was not immune to the
pandemic and was forced to implement cost savings and furloughed
staff, taking advantage of Government assistance schemes and was
able to match the previous year's revenue with an improvement in
operating margins.
The financial results of these activities were as follows:
2021 2020
$ 000 $ 000
Revenues 32,219 43,511
Underlying operating
profit 2,801 3,216
Underlying operating
margin 8.7% 7.4%
Group Results
Revenue from continuing operations reduced by just over 20% to
$53.6m (2020: $67.2m) and Group profit before tax and adjusting
items was $1.1m (2020: $1.1m). The profit before tax after
adjusting items was $0.09m (2020: loss $0.63m).
Adjusting items
The directors have highlighted transactions which are material
and unrelated to the normal trading activity of the Group.
In the opinion of the directors the disclosure of these entries
should be reported separately for a better understanding of the
underlying trading performance of the Group. These underlying
figures are used by the Board to monitor business performance, form
the basis of bonus incentives and are used for the purposes of the
bank covenants.
These non-GAAP measures are explained in note 11 alternative
performance measures and set out in note 3. All adjusting items are
taken into account in the GAAP figures in the Income Statement.
As a result of the outsourcing of manufacturing in the UK, the
existing premises were vacated and, given the uncertainty over
economic conditions as a result of the Coronavirus pandemic, it was
not known if a sub-let could be achieved. Consequently the right of
use asset was impaired and unavoidable costs associated with the
ongoing lease were provided for in the prior year, totalling $0.8m.
An assignment of the lease for the remaining term was agreed in
February 2021 and consequently a number of these provisions are no
longer required, resulting in a credit of $0.6m this year.
As part of the ongoing restructuring of the Australian operation
the freehold premises in Brisbane were sold in October 2020,
generating a profit of $0.5m and proceeds of $1.7m.
Abortive costs on acquisitions it was decided not to proceed
with as a consequence of the pandemic were $0.1m (2020: $0.7m
including acquisition costs on CMS) and the cost of the Group
restructure with certain management functions moving to Orlando
Florida was $0.9m, including the compensation for loss of office of
the CFOs and COO.
Amortisation of the intangible assets acquired through the CMS
deal of $0.3m (2020: $0.3m) and the amortisation of the loan note
discount and costs of $0.6m (2020: $0.5m) are also included in
adjusting items.
In the prior year the buy-out of the Group pension scheme was
completed, in April 2019, and a profit of $0.8m was recorded in the
Income Statement as the final cash refund of surplus of $5.2m, net
of tax, was higher than originally estimated.
Taxation
The current year charge for taxation is $2.7m. This is made up
of deferred tax entries and provisions for current tax in the USA.
No taxation was actually paid in the year. The recoverability of US
losses in the near term were re-assessed in light of the recent
trading results and the fact that the PPP forgiveness is not
taxable resulting in the carrying value of the deferred tax asset
in the balance sheet being reduced by $2.3m. In the prior year as a
result of adjustments to deferred taxes and taxable losses there
was a credit for taxation of $1.2m.
The UK businesses continue to benefit from substantial previous
tax losses and no taxation is payable in the UK. There are
substantial deferred tax assets in the UK of $3.8m and $2.4m in the
US that are not recorded on the balance sheet. The US businesses
are subject to Federal taxation on their profits at the rate of 21%
but also suffer State taxes which increases their overall composite
rate to 25%.
Net profit and earnings per share
The total continuing amount attributable to equity holders of
the parent for the current financial year amounted to a loss of
$2.6m (2020: profit of $0.6m) with pre-adjusting items loss of
$1.8m (2020: profit $2.3m).
Underlying basic earnings from continuing operations before
adjusting items and related taxation were a loss of 1.53 cents
(equivalent to 1.17p) per share (2020: 1.97 cents profit,
equivalent to 1.55p) and basic earnings per share were a loss of
2.19 cents (equivalent to 1.67p) (2020: 0.51 cents profit,
equivalent to 0.40p) - see note 6 for details.
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements
and PPP forgiveness was $1.6m (2020: $3.1m).
Working capital reduced during the year in response to the
reduced revenues due to the COVID-19 pandemic, in particular with
inventories reducing by $1.9m ($2.3m at a fixed exchange rate).
Inventory levels have increased since the year end in response to
the substantial increase in order activity.
Interest paid on borrowings was in line with the previous year
at $1.1m with the largest component of this being the fixed
interest on the GBP8.5m ($11.2m) 8% loan notes.
Capital expenditure consisted of the final stages of development
work on the upgrading of the industrial laser division proprietary
software of $0.2m, plus demonstration and rental laser systems
capitalised and applications lab equipment for the laser business
of $0.5m.
As part of the restructuring of the Australian machine tool
business the Brisbane freehold premises were sold in October 2020
for $1.7m, generating a profit of $0.5m above its revalued amount.
A lease of a smaller section of the building has been taken to
maintain a sales and service operation in this important area.
Net borrowings
Group net debt at 31 March 2021 excluding lease liabilities
reduced to $12.7m against $14.2m in the prior year.
The debt at 31 March 2021 includes $2.2m of second round
Paycheck Protection Program loans (PPP) from the USA Government
granted in March 2021 to the three USA businesses and which will
become due for forgiveness in September 2021 based upon certain
conditions, including payroll numbers and payments for payroll and
rent. The initial loans of $2.2m granted in May 2020 were forgiven
in February 2021 and included in the net operating expenses in the
Consolidated Income Statement. Any amount not forgiven is repayable
as a 2 year loan at 1% interest rate.
In order to provide headroom through these unprecedented times
of the COVID-19 pandemic the UK machine tools business drew down a
GBP1.2m ($1.7m) 3 year term loan with a bullet repayment on 1
September 2023 and interest at 1.92% under the Government backed
Coronavirus Large Business Interruption Loan Scheme (CLBILS). There
are no covenants on the loan.
Net bank indebtedness of $1.5m at 31 March 2021 (2020: $4.8m)
includes cash in hand of $5.0m, the remaining $2.5m of term loan
used to part finance the CMS acquisition in 2019 and the Government
assistance loans from the UK and USA of $3.9m.
The GBP8.5m 8% Loan notes are GBP denominated and consequently
on retranslation this year the balance is $11.2m compared to $9.4m
at the previous year end. The extension of the repayment date of
the loan notes to 14 August 2023 was agreed in July 2021 but as
this was after the year end date, the loan notes are shown within
current liabilities on the Consolidated Statement of Financial
Position at 31 March 2021. The associated warrants to subscribe for
new ordinary shares at 20p were similarly extended to the same
date. The loan notes are shown net of un-amortised discounting and
costs and also amounts disclosed in equity reserve which amount to
$0.2m in the current financial year (2020: $0.2m).
Working capital facilities totaling $11.4m were renewed with
HSBC UK, Bank of America and Westpac Australia during the year and
are due to be reviewed in the normal course in early 2022. They are
expected to be continued on the same basis. The Group maintains a
mixture of term loans and revolving working capital facilities with
maturities between 1 and 3 years. Headroom on bank facilities was
$11.2m at the year-end (2020: $8.7m) with $5.0m cash in hand (2020:
$2.9m) and all financial covenants in place were met during the
year.
Gearing (excluding lease liabilities) amounted to 48% of
aggregate net assets (2020: 50%).
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's Statement on pages 1 to 2 and the
Strategic Report on pages 3 to 8.
The financial position of the Group, liquidity, cash flows and
borrowing facilities are described in this Strategic Report.
Further details on the Group's cash and bank borrowings are
included in notes 9 and 10.
The UK bank facilities with HSBC have no specific financial
covenants. Trade loans and invoice financing need to be backed by
the assets they are funding. There are no covenants in respect of
the new Coronavirus Large Business Interruption Loan scheme
(CLBILS) taken out in August 2020. The borrowings with Bank of
America are subject to adjusted EBITDA to a fixed charge and to
senior debt and an overall asset cover test. The $7.5m of
short-term trade and credit facilities are due to be reviewed again
in February 2022 and are expected to continue in the ordinary
course of business on the same terms. Given the UK and USA working
capital facilities are largely un-drawn this creates significant
headroom in bank facilities and as a result reasonable downside
modelling does not create liquidity issues.
The Director's believe that the Group is well placed to manage
its business risks and, after making enquiries of divisional
management, including a review of forecasts and assumptions, which
take account of reasonably possible changes in trading activity and
considering the existing banking facilities and stress tests on
covenants which continue to show headroom, have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the next 12 months following the date of
approval of the financial statements. Accordingly, they continue to
adopt the going concern basis in preparing the consolidated
financial statements.
Retirement benefits
The UK pension scheme buy-out was completed in late April 2019
and the remaining surplus in the scheme of $8.3m repaid to the
Group after deduction of 35% tax, with the Group receiving the net
$5.2m at the end of May 2019. As a result of the accounting surplus
on the UK scheme at 30 March 2019 being $7.5m, a profit on disposal
of the pension scheme of $0.8m was recorded in the consolidated
income statement in adjusting items in the prior year and
associated taxation of $0.3m recognised through other comprehensive
income in the prior year.
The US retiree health scheme and pension fund deficits decreased
to $1.0m (2020: $1.3m) during the current year.
Key performance indicators (KPIs)
The Group monitors performance against key financial objectives
that the Directors judge to be effective in measuring the delivery
of strategic aims and managing and controlling the business. These
focus at Group level on revenue and underlying operating
profit.
At individual business unit level, KPIs also include working
capital control, and customer related performance measures such as
on-time delivery and minimisation of warranty concerns.
These key performance indicators are measured and reviewed
against budget projections and prior year on a regular basis and
this enables the business to set and communicate its performance
targets and monitor its performance against these targets. Given
the Global effects of the COVID-19 pandemic, comparison against
prior periods has been difficult and relatively meaningless, and
market estimates have been very volatile and unpredictable. Revenue
targets are to outperform the market forecasts by 1% (3% is
considered a normal ongoing level of growth) and to achieve over a
10% underlying operating margin target.
The Group's recent performance on these financial KPIs is set
out as follows:
KPI 2021 2020
Revenue (annual growth rate) (20%) 3.1%
Underlying operating margin
(% of revenue) 4.9% 4.1%
All figures are pre adjusting items.
These KPIs are used to assess performance and manage the
business and have been discussed in the strategic report and
divisional commentary on pages 3 to 5.
Principal risks
The Board of Directors has identified the main categories of
business risk in relation to the implementation of the Group's
strategic aims and objectives, and has considered reasonable steps
to prevent, mitigate or manage these risks.
Macro-economic - the Group's businesses are active in markets
which can be cyclical in nature as the overall level of market
demand is dependent upon capital investment intentions. Economic or
financial market conditions determine global demand and could
adversely affect our customers, distributors, operations,
suppliers, and other parties with whom we transact. Such factors as
the ongoing Brexit issues and the COVID-19 pandemic during the
financial year are examples of factors which have resulted in
changes in demand. The Directors seek to ensure that overall risk
is mitigated by avoiding excessive concentration of exposure to any
given geographical or industry segment, or to any individual
customer. Market conditions, lead indicators and industry forecasts
are monitored for any early warning signs of changes in overall
market demand, and measures to exploit opportunities or manage
elevated risks are taken as appropriate. Key business risks are set
out in the strategic review.
Production and supply chain - the continuity of the Group's
business activities is dependent upon the cost-effective supply of
products for sale from our own facilities, and those of our key
vendors. Supply can be disrupted by a variety of factors including
raw material shortages, labour disputes and unplanned machine down
time. Delays in the shipment of goods as a result of Brexit and the
Worldwide disruption to container traffic as a result of the
pandemic and latterly the issues with the blockage in the Suez
Canal have and continue to affect lead times and create some
disruption. The Directors are mindful that a small number of key
manufacturing outsource partners of the machine tool division are
located in relatively close proximity to each other in Taiwan.
Taiwan is ranked by Gardner Research as the eighth largest
producer nation of machine tools, with global production valued at
almost US $1.7 billion. Taiwanese suppliers represent approximately
one third of the total cost of sales for the Group. Group
businesses mitigate such risk by carefully selecting high quality
vendors and maintaining long term constructive and open
relationships. The effectiveness of such mitigation would be
limited, however, in certain catastrophic circumstances (for
example, extreme weather or seismic activity in the vicinity),
against which the Group carries appropriate insurance.
Additionally, supply sources in India and Europe have been explored
and an increasing amount of product is now made in the USA as
well.
Laws and regulations - Group businesses may unknowingly fail to
comply with all relevant laws and regulations in the countries in
which they operate and contract business. There is a risk of breach
of legal, safety, environmental or ethical standards which can be
more difficult to identify, comprehend, or monitor in certain
territories than others. The Directors believe that they have taken
all reasonable steps to ensure that operations are conducted to
high ethical, environmental and health and safety standards.
Controls are in place to keep regulatory and other requirements
under careful review, and scrutinise any identified instances of
elevated risk.
Information Technology ("IT") - Group IT systems and the
information they contain are subject to security risks including
the unexpected loss of continuity from virus or other issues, and
the deliberate breach of security controls for commercial gain or
mischief.
Any such occurrences could have a significant detrimental effect
on the Group's business activities. These risks are mitigated by
the utilisation of physical and embedded security systems, regular
back-ups and comprehensive disaster recovery plans.
Market risks
The Group's main exposure to market risk arises from increases
in input costs in so far as it is unable to pass them on to
customers through price increases. The Group does not undertake any
hedging activity in this area and all materials and utilities are
purchased in spot markets. The Group seeks to mitigate increases in
input costs through a combination of continuous improvement
activities to minimise increases in input costs and passing cost
increases on to customers, where this is commercially viable.
The Group is also aware of market risk in relation to the
dependence upon a relatively small number of key vendors in its
supply chain. This risk could manifest in the event of a commercial
or natural event leading to reduced or curtailed supply. The Group
seeks to mitigate these risks by maintaining transparent and
constructive relationships with key vendors, sharing long term
plans and forecasts, and encouraging effective disaster recovery
planning. Alternative sources of supply in different geographic
regions have also been put in place.
Other risks and uncertainties
Pension funding risk was a significant risk to the Group, but
this has largely been eliminated by the buy-out of the UK final
salary scheme. There remains a small closed pension arrangement in
the USA and a requirement to provide health insurance cover to a
limited extent to a number of retired people in the USA. The
Directors regularly review the performance of the pension scheme
and any recovery plan. Proactive steps are taken to identify and
implement cost effective activities to mitigate the pension scheme
liabilities and insurance premium of the retiree health scheme.
The remaining main risks faced by the Group are to its
reputation as a consequence of a significant failure to comply with
accepted standards of ethical and environmental behaviour.
The Directors have taken steps to ensure that all of the Group's
global operations are conducted to the highest ethical and
environmental standards. Regulatory requirements are kept under
review, and key suppliers are vetted in order to minimise the risk
of the Group being associated with a company that commits a
significant breach of applicable regulations.
Paul Dupee
Chairman
1 September 2021
Consolidated income statement
For the 52-week period ended 31 March 2021
Before After Before After
Adjusting Adjusting Adjusting Adjusting Adjusting Adjusting
Items Items Items Items Items Items
ended ended Ended ended ended ended
31 March 31 March 31 March 28 March 28 March 28 March
2021 2021 2021 2020 2020 2020
Notes $000 $000 $000 $000 $000 $000
-------------------------------- ----- --------- --------- --------- --------- --------- ---------
Continuing
Revenue 1 53,550 - 53,550 67,206 - 67,206
Cost of sales (34,554) (79) (34,633) (43,491) (254) (43,745)
-------------------------------- ----- --------- --------- --------- --------- --------- ---------
Gross profit 18,996 (79) 18,917 23,715 (254) 23,461
Net operating expenses (16,376) (765) (17,141) (20,988) (1,742) (22,730)
Profit on disposal of property 3 - 452 452 - - -
Profit on disposal of pension
scheme - - - - 809 809
-------------------------------- -----
Operating profit 2,620 (392) 2,228 2,727 (1,187) 1,540
Financial income 4 3 - 3 5 22 27
Financial expense 4 (1,499) (642) (2,141) (1,664) (536) (2,200)
Profit/(loss) before tax 1,124 (1,034) 90 1,068 (1,701) (633)
Income tax (charge)/credit 5 (2,920) 257 (2,663) 1,228 - 1,228
-------------------------------- ----- --------- --------- --------- --------- --------- ---------
(Loss)/profit for the period
on continuing activities (1,796) (777) (2,573) 2,296 (1,701) 595
Loss on discontinued operations - - - (417) (543) (960)
-------------------------------- ----- --------- --------- --------- --------- --------- ---------
(Loss)/profit for the period
attributable to the equity
holders of the parent (1,796) (777) (2,573) 1,879 (2,244) (365)
Basic earnings per share -
continuing activities 6 (1.53c) (2.19c) 1.97c 0.51c
Diluted earnings per share
- continuing activities 6 (1.53c) (2.19c) 1.92c 0.50c
Basic earnings per share 6 (1.53c) (2.19c) 1.61c (0.31c)
Diluted earnings per share 6 (1.53c) (2.19c) 1.57c (0.31c)
As explained in note 3, the directors have highlighted adjusting
items which are material or unrelated to the normal trading
activity of the group. The "before adjusting items" column in the
consolidated income statement shows non-GAAP measures. The "after
adjusting items" column shows the GAAP measures.
Consolidated statement of comprehensive income
For the 52-week period ended 31 March 2021
52-week 52-week
period period
ended ended
31 March 28 March
2021 2020
$000 $000
----------------------------------------------------- --------- ---------
Loss for the period (2,573) (365)
Other comprehensive income/(expense)
Items that will not be reclassified to the Income
Statement:
Re-measurement of defined benefit asset 210 (36)
Property revaluation - 199
Deferred taxation (51) (282)
------------------------------------------------------ --------- ---------
Total items that will not be reclassified to
the Income Statement: 159 (119)
------------------------------------------------------ --------- ---------
Items that are or may in the future be reclassified
to the Income Statement:
Foreign exchange translation differences 514 (606)
Total items that are or may in the future be
reclassified to the Income Statement: 514 (606)
------------------------------------------------------ --------- ---------
Other comprehensive income /(expense) for the
period, net of income tax 673 (725)
Total comprehensive expense for the period (1,900) (1,090)
------------------------------------------------------ --------- ---------
Attributable to:
Equity holders of the Parent Company (1,900) (1,090)
------------------------------------------------------ --------- ---------
Consolidated statement of changes in equity
As at 31 March 2021
As at As at
3 1 March 2021 28 March
2020
$000 $000
------------------------------ -------------- --------
Non-current assets
Property, plant and equipment 2,808 4,060
Goodwill 13,174 13,174
Other intangible assets 3,726 3,868
Right of use assets 8,988 9,060
Deferred tax assets 2,765 4,415
31,461 34,577
------------------------------ -------------- --------
Current assets
Inventories 17,941 19,054
Trade and other receivables 8,570 8,084
Taxation - 222
Deferred tax assets 809 1,148
Cash and cash equivalents 4,997 2,878
-------------------------------- --------
32,317 31,386
------------------------------ -------------- --------
Total assets 63,778 65,963
-------------------------------- -------------- --------
Non-current liabilities
Employee benefits (968) (1,261)
Loans and other borrowings (1,590) (11,654)
Government loans (1,656) -
Lease liabilities (7,801) (8,344)
Provisions (248) -
(12,263) (21,259)
------------------------------ -------------- --------
Current liabilities
------------------------------ -------------- --------
Trade and other payables (8,162) (8,298)
Lease liabilities (1,505) (1,608)
Deferred tax liabilities - (236)
Taxation (546) -
Provisions (188) (590)
Government loans (2,234) -
Loans and other borrowings (12,2 02) (5,414)
(24,837) (16,146)
------------------------------ -------------- --------
Total liabilities (37,100) (37,405)
-------------------------------- -------------- --------
Net assets 26,678 28,558
-------------------------------- -------------- --------
Shareholders' equity
Called-up share capital 1,803 1,803
Share premium account 3,828 3,828
Revaluation reserve - 1,348
Equity reserve 2 01 201
Translation reserve (6, 616 ) (7,130)
Retained earnings 2 7,462 28,508
-------------------------------- -------------- --------
Total equity 26,678 28,558
-------------------------------- -------------- --------
Consolidated statement of changes in equity
As at 31 March 2021
Ordinary Share
share premium Revaluation Translation Equity Retained
capital account reserve reserve reserve Earnings Total
$000 $000 $000 $000 $000 $000 $000
-------------------------------------- -------- --------- ----------- ----------- --------- -------- -------
At 30 March 2019 1,746 2,885 1,149 (6,524) 201 30,186 29,643
-------------------------------------- -------- --------- ----------- ----------- --------- -------- -------
Loss for the period - - - - - (365) (365)
Other comprehensive income/(expense):
Foreign currency translation - - - (606) - - (606)
Property revaluation - - 199 - - - 199
Net defined benefit movement - - - - - (36) (36)
Deferred tax - - - - - (282) (282)
Total comprehensive expense - - 199 (606) - (683) (1,090)
-------------------------------------- -------- --------- ----------- ----------- --------- -------- -------
Transactions with owners:
Share capital subscribed for 57 943 - - - - 1,000
Dividend - - - - - (1,088) (1,088)
Credit for share-based payments - - - - - 93 93
Total transactions with owners 57 943 - - - (995) 5
-------------------------------------- -------- --------- ----------- ----------- --------- -------- -------
At 28 March 2020 1,803 3,828 1,348 (7,130) 201 28,508 28,558
-------------------------------------- -------- --------- ----------- ----------- --------- -------- -------
Loss for the period - - - - - (2,573) (2,573)
Other comprehensive income/(expense):
Foreign currency translation - - - 514 - - 514
Property disposal - - (1,348) - - 1,348 -
Net defined benefit movement - - - - - 210 210
Deferred tax - - - - - (51) (51)
Total comprehensive expense - - (1,348) 514 - (1,066) (1,900)
-------------------------------------- -------- --------- ----------- ----------- --------- -------- -------
Transactions with owners:
Dividend - - - - - - -
Credit for share-based payments - - - - - 20 20
-------------------------------------- -------- --------- ----------- ----------- --------- -------- -------
Total transactions with owners - - - - - 20 20
At 31 March 2021 1,803 3,828 - (6,616) 201 27,462 26,678
-------------------------------------- -------- --------- ----------- ----------- --------- -------- -------
Consolidated cash flow statement
For the 52-week period ended 31 March 2021
52-week 52-week
period ended period ended
31 March 2021 28 March
2020
$000 $000
---------------------------------------------------- ------------- ------------
Cash flows from operating activities
Loss for the period (2,573) (365)
Adjustments for:
Amortisation 417 325
Depreciation 760 651
Depreciation of right of use assets 1,217 1,254
Net financial expense 2,138 2,173
PPP funding forgiven (2 , 234) -
Non-cash adjusting items (357) 879
(Profit)/loss on disposal of property, plant
and equipment (489) 32
Loss on assets held for resale - 127
Profit on disposal of pension fund - (809)
Equity share option expense 20 93
Income tax charge / (credit) 2,663 (1,228)
----------------------------------------------------- ------------- ------------
Operating cash flow before changes in working
capital and provisions 1,5 62 3,132
(Increase)/decrease in trade and other receivables (56) 2,587
Decrease in inventories 1,887 67
Decrease in trade and other payables ( 6 31 ) (973)
Employee benefit contributions (11 8) (78)
Proceeds from Pension fund disposal - 5,213
Cash generated by operations 2,644 9,948
Interest paid (1,126) (1,141)
Lease interest (373) (375)
Net cash flows from operating activities 1,145 8,432
----------------------------------------------------- ------------- ------------
Cash flows generated from/ (used in) investing
activities
Interest received 3 5
Proceeds from sale of property, plant and
equipment 1,745 57
Proceeds from assets held for sale - 926
Payment for acquisition of subsidiary, net
of cash acquired - (6,072)
Purchase of property, plant and equipment (494) (649)
Development and IT software expenditure capitalised (228) (351)
Net cash flows generated from/(used in) investing
activities 1,026 (6 ,084 )
----------------------------------------------------- ------------- ------------
Cash flows used in financing activities
Dividends paid - (1,088)
(Repayment of)/proceeds from external borrowing (5,063) 1,928
US P PP grants 4,4 68 -
UK CLBILS loan 1 ,656 -
Lease payments (1,383) (1,212)
Net cash flows used in financing activities (322) (372)
----------------------------------------------------- ------------- ------------
Net increase in cash and cash equivalents 1,849 1,976
Cash and cash equivalents at the beginning
of the period 2,878 948
Effect of exchange rate fluctuations on cash
held 270 (46)
----------------------------------------------------- ------------- ------------
Cash and cash equivalents at the end of the
period 4,997 2,878
----------------------------------------------------- ------------- ------------
Notes to the financial information
1. Basis of preparatioN
The consolidated financial statements of the Group have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
The Financial information set out in this preliminary
announcement does not constitute the company's Consolidated
Financial Statements for the financial years ended 31 March 2021 or
28 March 2020 but is derived from those Financial Statements.
Statutory Financial Statements for 2020 have been delivered to the
Registrar of Companies and those for 2021 will be delivered
following the company's AGM.
The Auditors, BDO LLP, have reported on those financial
statements. Their reports were unqualified, did not draw attention
to any matters by way of emphasis without qualifying their reports
and did not contain statements under Section 498(2) or (3) of the
Companies Act 2006.
The Statutory accounts are available on the Company's website
and will be posted to shareholders who have requested a copy and
thereafter by request to the company's registered office.
2. Segment information
IFRS 8 - "Operating Segments" requires operating segments to be
identified on the basis of internal reporting about components of
the Group that are regularly reviewed by the chief operating
decision maker to allocate resources to the segments and to assess
their performance. The chief operating decision maker has been
identified as the Board of Directors. The Board review the Group's
internal reporting in order to assess performance and allocate
resources.
The Board consider there to be two operating segments being
machine tools and precision engineered components, and industrial
laser systems.
The Board assess the performance of the operating segments based
on a measure of underlying operating profit/(loss). This
measurement basis excludes the effects of adjusting items from the
operating segments. "Head Office and unallocated" represent central
functions and costs.
The following is an analysis of the Group's revenue, results and
net assets by reportable segment:
Continuing
------------------------------------------------------
Machine
52 Weeks ended 31 March tools
2021 & precision
engineered Industrial Head Office
components laser systems & unallocated Total
Segmental analysis of revenue $000 $000 $000 $000
-------------------------------- ------------ -------------- -------------- --------
Total revenue 32,219 21,331 - 53,550
-------------------------------- ------------ -------------- -------------- --------
Segmental analysis of operating
profit/(loss) before Adjusting
Items 2,801 1,836 (2,017) 2,620
-------------------------------- ------------ -------------- -------------- --------
Adjusting Items 452 (79) (765) (392)
-------------------------------- ------------ -------------- -------------- --------
Group operating profit/(loss) 3,253 1,757 (2,782) 2,228
-------------------------------- ------------ -------------- -------------- --------
Other segmental information:
Reportable segment assets 33,469 13,424 16,998 63,891
Reportable segment liabilities (10,781) (5,586) (20,187) (36,554)
Fixed asset additions 176 432 114 722
Depreciation and amortisation 1,007 1,016 371 2,394
Continuing
------------------------------------------------------
Machine
52 Weeks ended 28 March tools
2020 & precision
engineered Industrial Head Office
components laser systems & unallocated Total Discontinued
Segmental analysis of
revenue $000 $000 $000 $000 $000 Group Total
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Total revenue 43,511 23,695 - 67,206 830 68,036
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Segmental analysis of
operating profit/(loss)
before Adjusting Items 3,216 1,689 (2,178) 2,727 (417) 2,310
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Adjusting Items - (254) (933) (1,187) (543) (1,730)
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Group operating profit/(loss) 3,216 1,435 (3,111) 1,540 (960) 580
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Other segmental information:
Reportable segment assets 35,073 14,164 16,726 65,963 - 65,963
Reportable segment liabilities (18,085) (6,990) (12,330) (37,405) - (37,405)
Fixed asset additions 368 330 302 1,000 - 1,000
Depreciation and amortisation 901 883 446 2,230 - 2,230
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Inter-segment pricing is determined on an arm's length basis.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis.
Segment capital expenditure is the total cost incurred during
the period to acquire segment assets that are expected to be used
for more than one period.
Disaggregation of revenue is shown by origin, destination and
product group in the following two tables:
Disaggregation of revenue by origin 2021 2020
------------- -------------
$000% $000%
------------------------------------ ------ ---- ------ ----
UK 10,131 18.9 16,453 24.5
North America 40,784 76.2 48,094 71.6
Australasia 2,635 4.9 2,659 3.9
------------------------------------ ------ ----- ------ -----
53,550 100.0 67,206 100.0
------------------------------------ ------ ----- ------ -----
Disaggregation of revenue by destination:
2021 202 0
------------- -------------
$000% $000%
Gross sales revenue:
--------------------- ------ ----- ------ -----
UK 7,441 13.9 11,500 17.1
Other European 3,838 7.2 5,032 7.5
North America (USA) 37,469 70.0 43,804 65.2
Africa 240 0.4 538 0.8
Australasia 2,429 4.5 2,561 3.8
Central America 1,118 2.1 1,101 1.6
Middle East 299 0.6 1,346 2.0
Far East 716 1.3 1,324 2.0
--------------------- ------ ----- ------ -----
53,550 100.0 67,206 100.0
--------------------- ------ ----- ------ -----
Disaggregation of revenue by product group:
2021 2020
------------- --------------
$000% $000%
Sector
CNC lathes 4,988 9.3 6,282 9.4
Conventional lathes 10,108 18.9 13,968 20.8
CNC other 896 1.7 1,351 2.0
Conventional other 7,025 13.1 9,126 13.6
Workholding 5,180 9.7 6,611 9.8
Spares & service 3,665 6.8 3,120 4.6
Lasers 19,901 37.2 23,263 34.6
Laser spares and service 1,787 3.3 3,485 5.2
--------------------------------------- ------ ----- ------ ------
Total 53,550 100.0 67,206 100.0
--------------------------------------- ------ ----- ------ ------
Timing of revenue recognition
Products and services transferred at a
point in time 45,784 85.5 57,811 8 6.0
Products and services transferred over
time 7,766 14.5 9,395 1 4.0
--------------------------------------- ------ ----- ------ ------
Total 53,550 100.0 67,206 1 00.0
--------------------------------------- ------ ----- ------ ------
There are no customers that represent 10% or more of the Group's
revenues.
Assets and liabilities related to contracts with customers:
The group has recognised the following assets and liabilities
related to contracts with customers.
2021 2020
---- ----
$000 $000
---- ----
Current contract liabilities relating to
deposits from customers 624 385
---- ----
2021 2020
---- ----
$000 $000
---- ----
Current contract assets relating to amounts
due from customers 344 246
---- ----
Remaining performance obligations
The vast majority of the group's contracts are for the delivery
of goods within the next 12 months for which the practical
expedient in paragraph 121(a) of IFRS 15 applies.
The following table shows how much of the revenue recognised in
the current reporting year relates to brought forward contract
liabilities:
2021 2020
----- -----
$'000 $'000
----- -----
Revenue recognised that was included in the contract
liability balance at the beginning of the year 385 538
----- -----
3. adjusting ITEMS
2021 2020
$000 $000
------------------------------------------------------ --------- -------
Items included in c ost of sales:
US Tariffs & Duty charges relating to prior years (h) (79) (254)
(79) (254)
------------------------------------------------------ --------- -------
Items included in operating e xpenses :
Restructuring cost (j) (928) -
Unavoidable lease costs (b) 350 (378)
Right of use asset impairment (b) 227 (392 )
Acquisition costs (e) (71) (684)
Amortisation of intangible assets acquired (f) (343) (288)
------------------------------------------------------ --------- -------
(765) (1,742)
Profit on disposal of Australian property (i) 452 -
Profit on sale of pension (a) - 809
(313) (933)
------------------------------------------------------ --------- -------
Items included in financial (income)/expense:
Pensions interest on surplus (c) - 22
Financial income - 22
------------------------------------------------------ --------- -------
Amortisation of Loan notes and costs (d) (642) (536)
Total adjusting items before tax (1, 034 ) (1,701)
Income tax on adjusting items 2 57 -
Total adjusting items after tax (777) (1,701)
------------------------------------------------------ --------- -------
Loss on discontinued activity (g) - (543)
------------------------------------------------------ --------- -------
The directors have highlighted transactions which are material
or unrelated to the normal trading activity of the Group.
In the opinion of the directors the disclosure of these
transactions should be reported separately for a better
understanding of the underlying trading performance of the Group.
These underlying figures are used by the Board to monitor business
performance, form the basis of bonus incentives and are used for
the purposes of the bank covenants.
These non-GAAP measures are explained in note 11 alternative
performance measures and set out below. All adjusting items are
taken into account in the GAAP figures in the Income Statement.
The items below correspond to the table below:
a) The buy-out of the Group pension scheme was completed in
April 2019 and a profit of $0.8m was recorded as the amount
received was higher than the carrying value of the asset previously
recognised.
b) As a result of the outsourcing of manufacturing in the UK,
the existing premises were vacated and given the uncertainty over
economic conditions as a result of the Coronavirus pandemic it was
not known if a sub-let could be achieved. This was further
compounded by a flooding event which prevented a deal with a
prospective tenant and consequently the right of use asset was
impaired and unavoidable costs associated with the ongoing lease
were provided for in the prior year totalling $0.8m. During the
current year an assignment of the lease for the remaining term was
agreed in February 2021 and therefore a number of these provisions
are no longer required, resulting in a credit of $0.6m this
year.
c) received from the scheme in respect of this transaction which
arises as a pension accounting entry under the required standard
due to the surplus in the scheme recorded in the balance sheet.
d) The amortisation of the loan note discount and costs amounted
to $0.6m (2020: $0.5m). These are non-cash movements which unwind
over the term of the notes.
e) Abortive costs on acquisitions it was decided not to proceed
with as a consequence of the pandemic were $0.1m (2020: $0.7m on
acquisition costs including CMS Inc.).
f) A charge of $0.3m (2020: $0.3m) arose as a result of
amortisation of intangible assets acquired through the CMS Inc
deal.
g) In the prior year a charge had been incurred of $0.5m which
included additional costs for the closure of the Gamet business in
October 2019 as well as a loss on disposal as a result of receiving
less than originally anticipated.
h) A charge of $0.1m (2020: $0.3m) was expensed in cost of sales
relating to US duty and tariff charges from prior years
i) As part of the ongoing restructuring of the Australian
operation the freehold premises in Brisbane were sold in October
2020 generating a profit of $0.5m and proceeds of $1.7m.
j) The cost of the Group restructure with certain management
functions moving to Orlando Florida was $0.9m, including the
compensation for loss of office of the CFOs and COO.
4. Financial income and expense
2021 2020
$000 $000
----------------------------------------- ------- -------
Bank and other interest 3 5
Interest on employee benefit surplus - 22
Financial income 3 27
----------------------------------------- ------- -------
Bank overdraft and loan interest (172) (315)
Other loan interest (907) (918)
Loan note interest (642) (536)
Finance charges (12)- (12)
Lease interest (373) (375)
Interest on employee benefit liabilities (35) (44)
Financial expense (2,141) (2,200)
----------------------------------------- ------- -------
5. Taxation
2021 2020
$000 $000
---------------------------------------------------- ------- ------
Current tax:
- UK Corporation tax at 19% (2020: 19%):
Overseas taxation:
- current period (526) 151
---------------------------------------------------- ------- ------
Total current tax (charge)/credit (526) 151
---------------------------------------------------- ------- ------
Deferred taxation:
- current period (1,929) 891
- effect of rate change in UK - 143
- prior period (208) 43
---------------------------------------------------- ------- ------
Total deferred taxation (charge) / credit (2,137) 1,077
---------------------------------------------------- ------- ------
Taxation (charged)/credited to the income statement (2,663) 1,228
---------------------------------------------------- ------- ------
The rate for deferred tax in the UK was changed from 17% to 19%
in the prior year and remains at 19% in the current year. The rate
for Federal tax in the USA is 21% and in addition businesses suffer
State taxes estimated at 4%.
Tax reconciliation
The tax charge assessed for the period is higher than (2020:
lower than) the standard rate of corporation tax in the UK of 19%
(2020: 19%). The differences are explained below:
2021 202 0
-----
$000 $000
--------------------------------------------------------- ----- -------
Profit/(loss) before tax 90 (633)
--------------------------------------------------------- ----- -------
Profit/(loss) before tax multiplied by the standard rate
of corporation tax
in the UK of 19% (2020: 19%) 17 (120)
Effects of:
- income not taxable and/or expenses not deductible 297 68
- overseas tax rates 169 55
- property disposal (250) -
- US state taxes 43 60
- utilisation of discontinued business losses - (243)
- deferred tax prior period adjustment 208 (43)
- impact of rate change in the UK on deferred tax - (143)
- tax losses utilised not previously recognised - (4)
- deferred tax de-recognised/ (recognised) on losses in
the period 2,179 (858)
Taxation charged/ (credited) to the income statement 2,663 (1,228)
--------------------------------------------------------- ----- -------
6.Earnings per share
The calculation of the basic loss per share for continuing
operations of (2.19c) (2020: profit 0.51c) is based on the earnings
for the financial period attributable to the Parent Company's
shareholders of a loss of ($2,573,000) (2020: profit $595,000) and
on the weighted average number of shares in issue during the period
of 117,473,341 (2020: 116,450,053). At 31 March 2021, there were
2,040,000 (2020: 8,400,000) potentially dilutive shares (share
options or warrants with an exercise price below the average share
price for the year) with a weighted average effect of 2,040,000
(2020: 2,877,486) shares giving a diluted loss per share for
continuing operations of (2.19c) (2020: profit 0.50c). In
accordance with IAS 33 - Earnings per Share, the Group shows no
dilutive impact in respect of its share options and Deferred Share
Plan for the year ended 31 March 2021 as their conversion to
ordinary shares would decrease the loss per share from continuing
operations.
2021 2020
----------------------------------------------------------- ----------- -----------
Weighted average number of shares
Issued shares at start of period 117,473,341 112,973,341
Effect of shares issued in the year - 3,476,712
----------------------------------------------------------- ----------- -----------
Weighted average number of shares at end of period 117,473,341 116,450,053
----------------------------------------------------------- ----------- -----------
Weighted average number of the 2,040,000 (2020: 8,400,000)
potentially dilutive shares 2,040,000 2,877,486
----------------------------------------------------------- ----------- -----------
Total weighted average diluted shares 119,513,341 119,327,539
----------------------------------------------------------- ----------- -----------
$000 $000
----------- -----------
Total post tax (loss)/profit - continuing operations (2,573) 595
Total post tax loss including discontinued operations (2,5 73 ) (36 5 )
----------------------------------------------------------- ----------- -----------
Basic EPS (2.19c) 0.51c
Diluted EPS (2.19c) 0.50c
Total including discontinued operations
Basic EPS (2.19c) (0.31c)
Diluted EPS (2.19c) (0.31c)
----------------------------------------------------------- ----------- -----------
Underlying earnings $000 $000
----------------------------------------------------------- ----------- -----------
Total post tax (loss)/profit - continuing operations (2,5 73 ) 595
Adjusting items - per note 3 777 1,701
Underlying earnings after tax and adjusting items (1,7 96 ) 2,296
----------------------------------------------------------- ----------- -----------
Underlying basic EPS (1.53c) 1.97c
Underlying diluted EPS (1.53c) 1.92c
7. Trade and other receivables
2021 2020
$000 $000
------------------ ----- -----
Trade receivables 5,149 6,153
Other debtors 1,361 772
Other prepayments 1,716 913
Contract assets 344 246
------------------ ----- -----
8,570 8,084
------------------ ----- -----
2021 2020
$000 $000
------------------ ----- -----
Taxation - 222
------------------ ----- -----
8. Trade and other payables
2021 2020
$000 $000
-------------------------------- ----- -----
Current liabilities:
Trade payables 3,792 3,424
Social security and other taxes 344 576
Other creditors 1,254 1,468
Accruals 2,148 2,445
Contract liabilities 624 385
8,162 8,298
-------------------------------- ----- -----
2021 2020
$000 $000
-------------------------------- ----- -----
Taxation 546 -
9. RECONCILIATION OF NET CASH FLOW TO NET DEBT
2021 2020
$000 $000
-------------------------------------------------- -------- --------
Increase/(decrease) in cash and cash equivalents 1,849 (952)
Decrease/(increase) in debt and lease liabilities 6,820 (341)
-------------------------------------------------- -------- --------
Decrease/(increase) in net debt from cash flows 8,669 (1,293)
Net debt at beginning of period (24,142) (14,541)
Effect of transition to IFRS 16 - (9,755)
Cash and debt through acquisition - 1,451
Government assistance loans USA (2,234) -
Government assistance loans UK (1,656) -
Loan note amortisation (675) (421)
Lease liabilities increase (502) (74)
Exchange effects on net funds (1,451) 491
-------------------------------------------------- -------- --------
Net debt at end of period (21,991) (24,142)
-------------------------------------------------- -------- --------
10. Analysis of net DEBT
At At
28 March Exchange 31 March
2020 movement Other Cash flows 2021
$000 $000 $000 $000 $000
-------------------------------- ---------- ---------- -------- ---------- ----------
Cash at bank and in hand 2,755 255 - 1,277 4,287
Term deposits (included within
cash and cash equivalents on
the balance sheet) 123 15 - 572 710
2,878 270 - 1,849 4,997
Debt due within one year (5,414) - - 4,437 (977)
Loan notes due within one year - - (11,225) - (11,225)
Debt due after one year (2,217) - - 627 (1,590)
Loan notes due after one year (9,437) (1,113) 10,550 - -
Government assistance loans USA - - - (2,234) (2,234)
Government assistance loans UK - - - (1,656) (1,656)
Lease liabilities (9,952) (608) (502) 1,756 (9,306)
Total (24,142) (1,451) (1,177) 4,779 (21,991)
-------------------------------- ---------- ---------- -------- ---------- ----------
11. Alternative performance measures
The Directors assess the performance of the Group by a number of
measures and frequently present results on an 'underlying' basis,
which excludes adjusting items. The Directors believe the use of
these 'non-GAAP measures' provide a better understanding of the
underlying performance of the Group. In addition, discontinued
operations are excluded from underlying figures.
In the review of performance reference is made to 'underlying
profit' or 'profit before adjusting items', and in the Consolidated
Income Statement the Group's results are analysed between Before
adjusting items and After adjusting items.
Adjusting items are detailed in note 3 and are disclosed
separately on the basis that this presentation gives a clearer
picture of the underlying performance of the group.
These measures are used by the Board to assess performance, form
the basis of bonus incentives and are used in the Group's banking
covenants. In addition, the Board makes reference to orders and
order book or backlog. This represents orders received from
customers for goods and services and the amount of such orders not
yet fulfilled.
Underlying operating profit
2021 2020
$000 $000
--------------------------------------------------------------- -------- --------
Operating profit 2,228 1,540
Adjusting items included in net operating expenses (see
note 3) 392 1,187
--------------------------------------------------------------- -------- --------
Underlying operating profit 2,620 2,727
--------------------------------------------------------------- -------- --------
Underlying (loss)/profit for the period from continuing
activities
(Loss)/profit for the period (2,573) 595
Adjusting items included in cost of sales and net operating
expenses (see note 3) 392 1,187
Adjusting items included in Financial income - (22)
Adjusting items included in Financial expense 642 536
Tax on adjusting items (257) -
Underlying (loss)/ profit for the period on continuing
activities (1,796) 2,296
--------------------------------------------------------------- -------- --------
Underlying EPS
A reconciliation of underlying EPS is included in note
9.
Net debt excluding IFRS 16 leases
liabilities
Net debt (see note 24) (21,991) (24,124)
Lease liabilities 9,306 9,952
Net debt excluding IFRS 16 lease
liabilities (12,685) (14,172)
--------------------------------------------------------------- -------- --------
12. Post balance sheet events
The extension of the repayment date of the loan notes to 14
August 2023 was agreed in July 2021 with the related warrants also
extended to this date. All other terms and conditions remain the
same. As this was after the year end date the loan notes are shown
within current liabilities on the Consolidated Statement of
Financial Position as at 31 March 2021.
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END
FR SSLEFFEFSELU
(END) Dow Jones Newswires
September 02, 2021 02:00 ET (06:00 GMT)
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