TIDMSIXH
RNS Number : 9475F
600 Group PLC
20 November 2020
The 600 Group plc
De-risked business well-placed for the future
Results for the year ended 28 March 2020
The 600 Group PLC ("the Group"), the diversified industrial
engineering company (AIM: SIXH), today announces its results for
year ended 28 March 2020.
Financial highlights
-- Revenue from continuing operations increased by 3.1% to $67.2m (2019: $65.2m)
-- Group profit before tax and adjusting items of $1.1m (2019: $4.1m)
-- Loss before tax after adjusting items of $0.63m (2019: profit $4.3m)
-- Given the current uncertainty, no dividend recommended for remainder of the year
Strategic & operational highlights
-- Results impacted by difficult trading environment
o Challenging market conditions compounded by the significant
disruption caused by the Coronavirus pandemic in the second
half
o Decisive action taken to reduce costs and keep the workforce
and technical competencies together so that the Group can react
quickly as markets improve
-- Group de-risked
o Receipt of surplus from the successful pension scheme buy out
and the sale of the Gamet business and property, has stabilised
Group debt levels
o Rationalisation of UK Machine Tool division has reduced
operational risk and future capital expenditure requirements
o Move into higher specification work through the acquisition of
Control Micro Systems supports gross margin, advances capabilities
and brings reduced cyclical customers into the Group
-- Group restructure
o Decision taken to expand and enhance operations in the US with
new office in Orlando, Florida
o As a result, certain management functions will relocate to
Orlando during the course of 2021 but the Group will remain London
listed
o Synergies between laser businesses in Ohio and Florida will be
realised throughout 2021
o Group CFO, Neil Carrick, has decided that for personal reasons
he will be unable to relocate to Orlando and will leave 600 Group
at the end of the next AGM
o New CFO appointed with effect from conclusion of AGM
-- Macro-economic uncertainty continues but positive long-term fundamentals
o Whilst there continues to be reduced activity, orders have
returned to acceptable levels
o Continue to focus on operational efficiencies and increased
operational flexibility
o Opportunities to grow and enhance customer offering through
investment in new, higher end product capabilities and
diversification into new markets
Paul Dupee, Executive Chairman of the Group, commented:
"The Group made significant strides forward in the first half of
the year, eliminating the Group's UK final salary pension scheme,
significantly de-risking the Group's balance sheet, opening of the
new European Technology Centre and acquiring Control Micro Systems,
a highly complementary business to the Group's existing laser
division, which brings ever more sophisticated, value-added and
custom solutions in the use of industrial lasers.
"We have taken the decision to expand our growth in Orlando,
Florida. Orlando leads the US in photonics technology and we see
exciting opportunities in the region. As a result of the Group's
relocation of certain functions, Neil Carrick has decided to leave
the business. I would like to personally thank him for all his hard
work and great contribution during his time with 600 Group. I am
pleased to announce that G.Mitchell (Mitch) Krasny, CPA, will
succeed Neil. Mitch brings with him a great wealth of financial and
operational experience.
" I would like to thank all our employees for their ongoing
support, commitment and dedication to the Group during these
difficult times. Their adaptability has helped us to respond
quickly and mitigate the impact.
"Despite the short-term end-market weaknesses and macroeconomic
uncertainty, 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. We have taken decisive action
to ensure that as market conditions improve, we can react
quickly."
Enquiries:
The 600 Group PLC Tel: 01924 415000
Paul Dupee, Executive Chairman
Instinctif Partners Tel: 0207 457 2020
Mark Garraway
Rosie Driscoll
Spark Advisory Partners Limited Tel: 020 3368 3553
(NOMAD)
Matt Davis
WH Ireland (Broker) Tel: 020 7220 1666
Harry Ansell
Chairman's statement
Overview
The Group made significant strides forward in the first half of
the FY20 year, eliminating the Group's UK final salary pension
scheme, significantly de-risking the Group's balance sheet, opening
the European Technology Centre in May 2019 as the new home of the
re-launched Colchester Machine Tool Solutions and in June 2019
acquiring Control Micro Systems (CMS), a business highly
complementary to the Group's existing laser division and bringing
ever more sophisticated, value-added and custom solutions in the
use of industrial lasers.
The second half of the year has, unfortunately, been dominated
by the downturn in economic conditions, led by the global slowdown
in the auto industry, concerns over a trade war between the USA and
China and the significant worldwide disruption from the Coronavirus
pandemic.
Divisional overview
The benefits of the rationalisation of the UK Machine Tool
division resulted in much improved performance for the year with
revenues up 14% and increased operating margins. The final phase of
this process was completed in the second half of the year with the
sale of the Gamet bearings business and its associated freehold
property. This rationalisation has also reduced operational risk
and future capital expenditure requirements. The US Machine Tool
business, however, suffered in an industry wide slowdown of some
12% and in addition with the Coronavirus pandemic affecting all
areas in the last few months of the financial year, the Machine
Tool division overall was unable to match the performance of the
prior year.
The Industrial Laser division for the first time in over a
decade encountered a contracting market place with global laser
sales falling in the region of 12% and increased competition and
price deflation in the standard laser sector of the industry. The
acquisition of CMS helped revenue from June onwards and the
existing TYKMA Electrox brand made significant moves into more
custom and higher specification work where its strengths in design
and proprietary software provide greater opportunities for growth
and enhanced margins. The acquisition of CMS has significantly
enhanced capabilities and brought reduced cyclical customers into
the Group. Whilst the move into higher specification work helped
maintain gross margins it could not compensate for the fall in
volumes in the standard product and the general market issues
created in the last few months of the period by the Coronavirus
pandemic. As a result, operating profit was lower than the prior
year.
Response to COVID-19
The Group has responded quickly to the Coronavirus pandemic
adopting short time and home working. To help mitigate the
financial effects, the Group has used government stimulus packages,
post March 2020, including loans under the USA Government Paycheck
Protection Program and the UK Coronavirus Large Business
Interruption Scheme (CLBILS). Some staff have been furloughed under
the UK Coronavirus Job Retention Scheme and many employees accepted
temporary salary reductions. The Board has taken action to reduce
overheads and deferred all non-critical capital expenditure.
The de-risking of the Group with the receipt of the surplus from
the successful pension scheme buy out and the sale of the Gamet
business and property has helped stabilise debt levels. Group debt
is currently at $13.8m, excluding lease liabilities but including
the government loan assistance, which is broadly in line with that
at the end of March 2020 and the Group is covenant compliant with
adequate banking facilities.
Given the current circumstances no dividend will be paid this
year.
Group restructure
The Board has taken the decision to expand and enhance growth
and oversight of the operations in the US by opening an office in
Orlando, Florida. Orlando leads the US in photonics technology.
Consequently, certain management functions will relocate there
during the course of 2021. The Group will also continue to realise
the synergies between the laser businesses in Ohio and Florida
throughout 2021. The Group will remain UK domiciled and listed in
London.
Neil Carrick, CFO, has decided that for personal reasons he will
be unable to relocate to Orlando and will leave 600 Group. Neil
joined the business in 2011 and has made a great contribution since
his arrival, particularly in overseeing the buyout of the UK
pension scheme and strengthening the Group's financial position. I
would like to personally thank him for all his hard work. He leaves
the business well-placed for the future.
I am pleased to announce that G. Mitchell (Mitch) Krasny, CPA,
formerly CFO of technology companies, Ucell and Kcell, subsidiaries
of Telia Company, Bulgaria Telecom, TV 3 Russia and CFO Eastern
Europe and Russia for Millicom and Metromedia International will
succeed Neil and be appointed a Director with effect from the end
of the next Annual General Meeting. Mitch brings over 35 years of
financial and operational experience in public and private
companies.
To ensure an orderly handover, Neil will stay with the business
and remain a Director until the conclusion of the next Annual
General Meeting, which is expected to be held no later than 31
December 2020.
People
Our people are central in continuing the improvement of our
business and their safety has been paramount in the recent months.
I would like to thank all our employees for their ongoing support,
commitment and dedication to The 600 Group during these difficult
times. I am hopeful that the sacrifices made will help us to keep
our teams together and come out of this well placed to reap the
benefits when markets return to some normality.
Outlook
Despite the short-term end-market weaknesses and macroeconomic
uncertainty created by the Coronavirus pandemic, 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.
Whilst there continues to be reduced activity, the level of order
backlog has returned to acceptable levels, given the circumstances,
compared to the previous year. The Board have taken decisive action
to reduce costs and to keep the workforce and technical
competencies together to ensure the Group can react quickly as
markets improve.
Paul Dupee
Executive Chairman
19 November 2020
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 28 March
2020 the top 20 customers, of which 15 were distributors,
contributed 26% (2019 - 27%) of revenues.
Revenues
Revenues are generated across many diverse geographical
territories:
Percentage of worldwide revenues 2020 2019
(by destination) % %
United States of America 66 65
United Kingdom 17 15
Europe (excluding UK) 7 10
Rest of the World 10 10
Total 100 100
Macroeconomic and industry trends
Industrial laser systems
Industry use of industrial lasers for material processing has
continued to expand worldwide. Laser systems have now become a
mainstream manufacturing process covering the areas of laser
machining, including cutting and drilling, marking, ablation and a
host of other niche applications. 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 is just 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 is estimated to be in the
region of 12% and largely driven by Chinese decline in cutting
systems which mirrors the decline in machine tools, both of which
are heavily influenced by Chinese demand.
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. 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 and whilst unit volumes have continued
to increase, revenue has been held back. It is for this reason the
Group has focused 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 during the year has significantly enhanced these
capabilities.
The Coronavirus pandemic industry predictions for the laser
industry are similar to machine tools with a rapid decline followed
by recovery later in 2020 and a return to normal growth through
2021.
Machine tools and precision engineered components
The worldwide machine tool industry was estimated by Oxford
Economics at nearly $85bn in annual sales in its Spring 2020
report. 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. 2019 had already
seen a global decline of 10% in machine tool consumption and the
industry has been severely affected by the Coronavirus pandemic,
with estimates of a fall of 28% in World machine tool consumption
in the calendar year 2020. However, growth is expected to return in
2021 with a predicted rebound of 33% improvement.
The global market is dominated by China with consumption of
$29bn but this is largely served domestically with China also being
the largest producer. The USA is the second largest consumer of
machine tools at $9.6bn followed by Germany at $7.8bn.
Our main markets
The main markets we operate in are the USA, Europe and
Australia. All these markets had already seen a degree of demand
weakness towards the end of 2019 led by Global automotive weakness
and the GM strike in the USA and then Boeing's decision to halt
production of its 737 MAX aircraft in January 2020. The Global
effects of the Coronavirus pandemic have impacted all areas in
which the Group operates and it remains to be seen if the predicted
pick up in 2021 becomes reality. In addition the possibility of
disruption remains due to the ongoing Brexit issues in the UK, and
concerns in the USA over tariffs and a trade war with China.
Activity in the 2019/20 financial year
Industrial laser systems
The existing TYKMA Electrox business continued to see increased
competition and price deflation in the lower end standard products
sector and although there was a significant increase in custom
higher specification sales and a further improvement in gross
margins, this was not sufficient to offset the effects of the
volume decline from the standard products. The standard product
business was also affected by the overall decline in the laser
market for the first time in over a decade with Europe and the Far
East sales being affected in particular by the decline in the
automotive sector. The US market weakened with trade war concerns
with China, the General Motors strike and latterly Boeing halting
aircraft production. The Coronavirus pandemic further compounded
these problems and affected the last few months of the financial
year and into the FY21 year.
The acquisition of Control Micro Systems Inc. (CMS) in June 2019
significantly enhanced the Laser Division's competencies in the
more sophisticated value-add custom solutions for customers. The
business brought vision and robotic capabilities and industry
leading positions in the high growth precision medical equipment
and pharmaceuticals markets. Whilst these industries are less
affected by the capital goods cycles the economic conditions and
effects of the Coronavirus pandemic slowed the pace of new projects
in this part of the business. The sales organisation has integrated
well with the existing business and engineering and software
capabilities are being shared to improve services and capabilities
for customers.
The UK spares and service operation and legacy Electrox business
was integrated into the new European Technology Centre machine
tools operation which now supports both the UK and Europe. A direct
sales operation was established in the UK based in this facility
which provides a permanent showroom to demonstrate the full range
of laser machines.
Results for the financial year were as follows:
2020 2019
$ 000 $ 000
Revenues 23,695 20,592
Underlying operating
profit 1,689 2,563
Underlying operating
margin 7.1% 12.4%
Underlying operating profit is before adjusting items, which are
explained in note 14 Alternative Performance Measurers 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 down on the
prior year by 2.4%, but this was against the backdrop of a Global
industry fall of over 10% in the year to December 2019 and the
beginning of the Coronavirus pandemic shutdowns in the last few
months of the financial year. Consequently, operating margins
reduced to 7.4% from the prior year's 8.1%.
The UK operation performed very well in its first full year of
business as the re-launched "Colchester Machine Tool Solutions"
from the new site in West Yorkshire. The new European Technology
Centre integrates a modern, open plan office environment, enhanced
manufacturing and warehousing space as well as serving as a
dedicated year-round product showroom, demonstration and customer
training capability to showcase the business' increasingly
innovative product range.
Revenue was up 14% and operating margins improved again from
6.7% to 7.9%. The business had a good order book at the start of
2020 as a result of increased direct sales in the UK which allowed
it to continue to operate fairly normally until the end of April
when the business then took advantage of Government assistance and
furloughed a number of employees as orders reduced with many
customers shutting down or restricting site access.
The move of premises was part of the restructuring of the UK
operation which saw a de-risking of operations and reduction in the
requirement for ongoing capital expenditure by the outsourcing of
further manufacturing. The process was completed towards the end of
the year with the sale of the Gamet Bearings operation and its
associated property based in Colchester. The revenue and trading
results of this operation have been excluded from the ongoing
trading and disclosed as a discontinued operation in the
Consolidated Income Statement. The assets held for sale were
separately disclosed at their expected fair value in the Statement
of Financial Position at 30 March 2019.
The US machine tool business struggled in a weak market place
affected by concerns over tariffs and a trade war with China, the
General Motors strike late in 2019 and the Boeing delay to
production of its 737 MAX aircraft in January 2020. As a result of
COVID shutdowns in the USA, orders started to reduce towards the
end of the FY20 financial year and action has been taken to reduce
costs and take advantage of Government schemes. As a result of the
near 10% fall in revenues in FY20, operating margins reduced to
8.1% from the previous year's 9.3%.
The Australian machine tools business also struggled in an Asian
market that bore the brunt of the Global machine tool contraction
in addition to difficult economic conditions within Australia.
Consequently, a small operating loss was generated for the year.
The business is restructuring following a number of retirements and
will aim to leverage the Colchester Machine Tool Solutions
rebranding in areas where the brand name remains well known.
The financial results of these activities were as follows:
2020 2019
$ 000 $ 000
Revenues 43,511 44,575
Underlying operating
profit 3,216 3,610
Underlying operating
margin 7.4% 8.1%
Group Results
Revenue from continuing operations increased by 3.1% to $67.2m
(2019: $65.2m) and Group profit before tax and adjusting items was
$1.1m (2019: $4.1m). The loss before tax after adjusting items was
$0.63m (2019: profit $4.3m).
Changes in accounting standards
The Group has adopted the new leasing accounting standard in the
year, IFRS 16, which has required all former operating leases to
now be recognised on the balance sheet as right of use assets and a
corresponding liability created for the future payments. The new
standard has been adopted from 31 March 2019 under the modified
retrospective approach and therefore comparative figures have not
been restated. The rental payments for these leases are no longer
reported in the Consolidated Income Statement and are replaced by
depreciation of the right of use asset and an interest charge on
the lease liabilities. Full details of the effects of this change
can be found in note 11.
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 14 alternative
performance measures and set out in note 3. All adjusting items are
taken into account in the GAAP figures in the Income Statement.
The buy-out of the Group pension scheme was completed in April
2019 and a profit of $0.8m has been recorded in the Income
Statement as the final cash refund of surplus of $5.2m, net of tax,
was higher than originally expected.
As a result of the outsourcing of manufacturing in the UK, the
existing premises were vacated and a sublet was in the process of
being completed when the premises flooded in February 2020. Given
this issue and the uncertainty over economic conditions as a result
of the Coronavirus pandemic it is not known if a sub-let can now be
achieved and consequently the right of use asset has been impaired
resulting in a further charge in the year of $0.4m. A further
provision has been recognised in the year relating to the
unavoidable costs associated with the ongoing lease, resulting in a
charge of $0.4m.
Acquisition costs on CMS and abortive costs on a further two
acquisitions in the year were $0.7m and costs in relation to duty
and tariff misdeclarations between 2016 and 2019 which were
discovered in TYKMA were $0.3m. Amortisation of the intangible
assets acquired through the CMS deal of $0.3m is also included in
adjusting items.
In the prior year before the buy-out of the Group pension scheme
was completed the trustees undertook a number of exercises to
reduce the liabilities of the scheme which had an actuarial cost of
$1.28m. Given these had a beneficial effect on the ultimate buy-out
cost of the scheme they were supported by the Group. This amount
was shown in adjusting items within operating profit in the prior
year.
In the prior year a credit of $1.26m was recorded in financial
income in respect of the final salary pension scheme. No cash was
paid to or received from the scheme in respect of this transaction
which arose as a pension accounting entry under the required
standard due to the surplus in the scheme recorded in the balance
sheet.
In the prior year the carrying value of the amortised cost of
the loan notes was re-assessed and a net credit of $0.82m arose in
financial income as a result of the extension of these instruments
by a further two years. The current year includes amortisation cost
of $0.5m as an adjusting item in financial expense.
An amount of $0.5m (2019 $0.96m) has been recorded to reduce the
value of the Gamet assets sold in line with proceeds of sale.
Taxation
As a result of adjustments to deferred taxes and taxable losses
in the current year there is a credit for taxation of $1.2m (2019
charge of $0.07m) on pre adjusting items profit.
The UK businesses continue to benefit from substantial previous
tax losses and no taxation is payable in the UK. There are
substantial unrecorded deferred tax assets in the UK that are
released onto the balance sheet as existing recorded losses are
utilised which will help maintain a lower tax charge. There remains
an unrecognised deferred tax asset of over $2m in addition to the
recognised asset of $2m in respect of UK tax losses at the year
end. 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 profit of
$0.6m (2019: $4.2m profit) with pre-adjusting items profit of $2.3m
(2019: $4m). The total loss including the effects of the Gamet
discontinued operation is $0.4m (2019: profit $3.1m).
Underlying basic earnings from continuing operations before
adjusting items and related taxation were 1.97 cents (equivalent to
1.55p) per share (2019: 3.53 cents, equivalent to 2.69p) and basic
earnings per share were a profit of 0.51 cents (equivalent to
0.40p) (2019: 3.75 cents profit, equivalent to 2.88p) see note
7.
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements
was $3.1m (2019: $4.8m).
Working capital remains under control and stock levels were
unchanged from the prior year despite the acquisition of CMS during
the year. Trade receivables and payables decrease reflects the
deterioration in trading conditions in the last quarter of the year
which was exacerbated by the start of the Coronavirus pandemic.
Interest paid (excluding the effect of lease accounting) reduced
slightly to $1.1m (2019: $1.2m) although the largest component of
this is fixed, being the interest on the GBP8.5m ($9.6m) 8% loan
notes.
Capital expenditure consisted of the final stages of development
work on the upgrading of the industrial laser division proprietary
software of $0.4m, demonstration and showroom equipment for the
laser business of $0.1m, and machine shop equipment and fixtures to
finalise the new European Technology Centre in the UK for $0.3m.
The development and fit out expenditure will not repeat and the
sale of the Gamet business and outsourcing of manufacturing has
significantly reduced future capital expenditure requirements.
The business and asset sale of the discontinued Gamet Bearings
operation was concluded in October 2019 with the receipt of $0.45m
and the Colchester property sale completed in February 2020 with a
further $0.5m of proceeds received.
The $10m consideration for CMS was funded by $4m of the $5.2m of
pension scheme refund along with the utilisation of existing credit
lines and a new $3.25m 5-year term loan from Bank of America plus
the issue of $1m of shares to the CMS founder, Tim Miller, who
remains with the business.
Dividends of $1.1m were paid during the year (2019: $1.1m).
Net borrowings
Group net debt at 28 March 2020 excluding lease liabilities is
largely unchanged on the prior year at $14.2m (2019 $14.5m)and
comprised net bank indebtedness of $4.8m (2019: $5m) and the
discounted amount outstanding on the loan notes of $9.4m (2019:
$9.5m). 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 (2019: $0.2m).
Working capital facilities totaling $10.6m were renewed with
HSBC and Bank of America during the year and are due to be reviewed
in the normal course over the next few months and are expected to
be continued on the same basis. An additional term loan of $3.25m
was taken out to help fund the acquisition of CMS in June 2019. The
mortgage on the Gamet building of $0.3m was repaid on the sale of
the property in February 2020. The Group maintains a mixture of
term loans and revolving working capital facilities with maturities
between 1 and 4 years. Headroom on bank facilities was $8.7m at the
year-end (2019: $8.7m) and all financial covenants in place were
met during the year.
Subsequent to the year end the Group has taken advantage of
Government schemes and has received $2.2m of loans across our three
USA businesses under the Paycheck Protection Program. These loans
may be forgiven dependent on expenditure on certain items and
employment numbers with any amount not forgiven repayable as a 2
year loan at 1% interest rate. The UK machine tools business
received a $1.5m loan under the Coronavirus Large Business
Interruption Loan Scheme with a 3 year bullet repayment in
September 2023 and 1.92% interest.
The GBP8.5m ($9.6m) 8% loan notes maturity was extended to
February 2022 at the end of February 2019 and the warrants of equal
value to subscribe for new ordinary shares at 20p were similarly
extended to the same date.
Gearing (excluding lease accounting) amounted to 50% of
aggregate net assets (2019: 49%).
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 9.
The financial position of the Group, liquidity, cash flows and
borrowing facilities are described in the Strategic Report. Note 26
to the Financial Statements also sets out the Group's objectives,
policies and processes for measuring and managing its capital and
financial risk management. Details of its financial instruments,
exposure to foreign exchange, credit and interest rate risk is also
covered in note 26. Further details on the Group's cash and bank
borrowings are included in notes 18,19 and 25 of the financial
statements.
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 short term trade
and credit facilities are due to be reviewed over the coming months
and are expected to continue in the ordinary course of business on
the same terms.
The Director's believe that the Group is well placed to manage
its business risks and, after making enquiries including a review
of forecasts and assumptions, which take account of reasonably
possible changes in trading activity and considering the existing
banking facilities, including discussion with the Bank of America
on the possibility of covenant adjustments should this be required,
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.
The continuing uncertainty of the impact of the Covid-19
pandemic on the Group has been considered as part of the Group's
adoption of the going concern basis. Whilst all facilities remain
open there are reduced working hours and staffing levels in place
in certain areas. Operating costs have been reduced, government
employment assistance schemes and government loans have been
utilised where available.
As part of their assessment the Directors have considered
downside scenarios that reflect the current unprecedented
uncertainty in the worldwide markets the Group operates in and
which are considered to be severe but plausible. Revenue deductions
of 25% against the 2020 financial year and 30% against the pre
pandemic 2019 year have been considered against which mitigating
actions of headcount reduction, utilisation of government
assistance, pay reductions and cash preservation actions including
reductions in capital expenditure and deferral of taxation have
been applied.
The results of these scenarios show that there is sufficient
liquidity in the businesses for a period of at least 12 months from
the date of approval of these financial statements. Lenders remain
supportive and have indicated a willingness to assist with covenant
changes in the event that flexibility may be required in the short
term.
In the most severe case where revenue falls are greater than 30%
and lenders elect not to provide covenant flexibility, and trigger
a repayment of outstanding debt, then without further mitigating
actions or additional funding the Group maybe unable to realise
assets and discharge liabilities in the normal course of
business.
Having undertaken this work, the Directors are of the opinion
that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future. 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 is recorded in the consolidated
income statement in adjusting items and associated taxation of
$0.3m is recognised through other comprehensive income.
The US retiree health scheme and pension fund deficits increased
slightly to $1.3m (2019: $1.2m).
Key performance indicators (KPI's)
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, KPI's 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. Revenue
targets are to outperform the market forecasts by 1% (3% market
forecast for 2020) and achieve a 10% underlying operating margin
target.
The Group's recent performance on these financial KPI's is set
out as follows:
KPI 2020 2019
Revenue (annual
growth rate) 3.1% 1.9%
Underlying operating
margin (% of revenue) 4.1% 8.1%
All figures are pre adjusting items
These KPI's 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 concerns over a trade war between
the USA and China and the Coronavirus 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 may
affect lead times and create some disruption. In particular, the
Directors are mindful that a small number of key manufacturing
outsource partners 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 $2.1 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 have been developed as a
consequence 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.
Neil Carrick
Finance Director
19 November 2020
Consolidated income statement
For the 52-week period ended 28 March 2020
Before After Before After
Adjusting Adjusting Adjusting Adjusting Adjusting Adjusting
Items Items Items Items Items Items
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
28 March 28 March 28 March 30 March 30 March 30 March
2020 2020 2020 2019 2019 2019
Notes $000 $000 $000 $000 $000 $000
------------------------------------ ----- --------- --------- --------- --------- --------- ---------
Continuing
Revenue 2 67,206 - 67,206 65,167 - 65,167
Cost of sales (43,491) (254) (43,745) (41,641) - (41,641)
------------------------------------ ----- --------- --------- --------- --------- --------- ---------
Gross profit 23,715 (254) 23,461 23,526 - 23,526
Net operating expenses (20,988) (1,742) (22,730) (18,269) (1,786) (20,055)
Profit on disposal of pension
scheme - 809 809 - - -
------------------------------------ -----
Operating profit/(loss) 2,727 (1,187) 1,540 5,257 (1,786) 3,471
Financial income 4 5 22 27 35 2,077 2,112
Financial expense 4 (1,664) (536) (2,200) (1,236) - (1,236)
Profit/(loss) before tax 1,068 (1,701) (633) 4,056 291 4,347
Income tax (charge)/credit 5 1,228 - 1,228 (66) (48) (114)
------------------------------------ ----- --------- --------- --------- --------- --------- ---------
Profit for the period on continuing
activities 2,296 (1,701) 595 3,990 243 4,233
attributable to equity holders
of the parent
Loss on discontinued operations (417) (543) (960) (146) (961) (1,107)
------------------------------------ ----- --------- --------- --------- --------- --------- ---------
Profit/(loss) for the period
attributable to the equity
holders of the parent 1,879 (2,244) (365) 3,844 (718) 3,126
Basic earnings per share -
continuing activities 7 1.97c 0.51c 3.53c 3.75c
Diluted earnings per share
- continuing activities 7 1.92c 0.50c 3.50c 3.71c
Basic earnings per share 7 1.61c (0.31c) 3.40c 2.77c
Diluted earnings per share 7 1.57c (0.31c) 3.37c 2.74c
Company Number 00196730
As explained in note 3, the directors have highlighted adjusting
items which are material and 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.
The Group has initially applied IFRS16 using the modified
retrospective method. Under this method, the comparative
information is not restated. See note 11.
Consolidated statement of comprehensive income
For the 52-week period ended 28 March 2020
52-week 52-week
period period
ended ended
28 March 30 March
2020 2019
Notes $000 $000
------------------------------------------------------------ --------- ---------
(Loss)/profit for the period (365) 3,126
Other comprehensive income/(expense)
Items that will not be reclassified to the Income
Statement:
Remeasurement of defined benefit asset (36) (43,083)
Property revaluation 199 -
Deferred taxation (282) 15,071
------------------------------------------------------------- --------- ---------
Total items that will not be reclassified to
the Income Statement: (119) (28,012)
------------------------------------------------------------- --------- ---------
Items that are or may in the future be reclassified
to the Income Statement:
Foreign exchange translation differences (606) (3,005)
Total items that are or may in the future be
reclassified to the Income Statement: (606) (3,005)
------------------------------------------------------------- --------- ---------
Other comprehensive expense for the period,
net of income tax (725) (31,017)
Total comprehensive expense for the period (1,090) (27,891)
------------------------------------------------------------- --------- ---------
Attributable to:
Equity holders of the Parent Company (1,090) (27,891)
------------------------------------------------------------- --------- ---------
Consolidated statement of financial position
As at 28 March 2020
As at As at
28 March 2020 30 March
2019
Notes $000 $000
----------------------------------- ----- ------------- --------
Non-current assets
Property, plant and equipment 4,060 3,435
Goodwill 13,174 10,329
Other Intangible assets 3,868 1,110
Right of use assets 11 9,060 -
Deferred tax assets 4,415 4,578
34,577 19,452
----------------------------------- ----- ------------- --------
Current assets
Inventories 19,054 19,030
Trade and other receivables 8 8,084 9,163
Employee Benefits - 7,459
Taxation 8 222 294
Deferred tax assets 1,148 -
Assets classified as held for sale - 1,108
Cash and cash equivalents 2,878 948
----------------------------------- ----- --------
31,386 38,002
----------------------------------- ----- ------------- --------
Total assets 65,963 57,454
----------------------------------- ----- ------------- --------
Non-current liabilities
Employee benefits (1,261) (1,239)
Loans and other borrowings (11,654) (10,173)
Lease liabilities 11 (8,344) -
(21,259) (11,412)
----------------------------------- ----- ------------- --------
Current liabilities
----------------------------------- ----- ------------- --------
Trade and other payables 9 (8,298) (8,095)
Lease liabilities 11 (1,608) -
Deferred tax liabilities (236) (2,541)
Provisions 10 (590) (447)
Loans and other borrowings (5,414) (5,316)
(16,146) (16,399)
----------------------------------- ----- ------------- --------
Total liabilities (37,405) (27,811)
----------------------------------- ----- ------------- --------
Net assets 28,558 29,643
----------------------------------- ----- ------------- --------
Shareholders' equity
Called-up share capital 1,803 1,746
Share premium account 3,828 2,885
Revaluation reserve 1,348 1,149
Equity reserve 201 201
Translation reserve (7,130) (6,524)
Retained earnings 28,508 30,186
----------------------------------- ----- ------------- --------
Total equity 28,558 29,643
----------------------------------- ----- ------------- --------
Consolidated statement of changes in equity
As at 28 March 2020
Ordinary Share
share premium Revaluation Translation Equity Retained
capital account reserve reserve reserve Earnings Total
$000 $000 $000 $000 $000 $000 $000
----------------------------------- -------- ------- ----------- ----------- ------- -------- --------
At 31 March 2018 1,746 2,885 1,149 (3,519) 201 56,131 58,593
----------------------------------- -------- ------- ----------- ----------- ------- -------- --------
Profit for the period - - - - - 3,126 3,126
Other comprehensive income:
Foreign currency translation - - - (3,005) - - (3,005)
Net defined benefit asset movement - - - - - (43,083) (43,083)
Deferred tax - - - - - 15,071 15,071
Total comprehensive income - - - (3,005) - (24,886) (27,891)
----------------------------------- -------- ------- ----------- ----------- ------- -------- --------
Transactions with owners:
Dividend - - - - - (1,104) (1,104)
Credit for share-based payments - - - - - 45 45
----------------------------------- -------- ------- ----------- ----------- ------- -------- --------
Total transactions with owners - - - - - (1,059) (1,059)
----------------------------------- -------- ------- ----------- ----------- ------- -------- --------
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:
Foreign currency translation - - - (606) - - (606)
Property revaluation - - 199 - - - 199
Net defined benefit movement - - - - - (36) (36)
Deferred tax - - - - - (282) (282)
Total comprehensive income - - 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
----------------------------------- -------- ------- ----------- ----------- ------- -------- --------
Consolidated cash flow statement
As at 28 March 2020
52-week 52-week
period ended period ended
28 March 2020 30 March 2019
Notes $000 $000
---------------------------------------------------- ----- ------------- --------------------
Cash flows from operating activities
(Loss)/profit for the period (365) 3,126
Adjustments for:
Amortisation 325 73
Depreciation 651 540
Depreciation of right of use assets 1,254 -
Net financial expense/(income) 4 2,173 (876)
Non-cash adjusting items 879 2,238
Loss/(profit) on disposal of property, plant
and equipment 32 (461)
Loss on assets held for resale 127 -
Profit on disposal of pension fund (809) -
Equity share option expense 93 45
Income tax (credit)/expense 5 (1,228) 114
---------------------------------------------------- ----- ------------- --------------------
Operating cash flow before changes in working
capital and provisions 3,132 4,799
Decrease/(increase) in trade and other receivables 2,587 (451)
Decrease/(increase) in inventories 67 (730)
Decrease in trade and other payables (973) (352)
Employee benefits contributions (78) (13)
Proceeds from Pension fund disposal 5,213 -
Cash generated by operations 9,948 3,253
Interest paid (1,141) (1,236)
Lease interest (375) -
Income tax received/(paid) - (125)
---------------------------------------------------- ----- ------------- --------------------
Net cash flows from operating activities 8,432 1,892
---------------------------------------------------- ----- ------------- --------------------
Cash flows used in investing activities
Interest received 5 1
Proceeds from sale of property, plant and
equipment 57 514
Proceeds from assets held for sale 926 -
Payment for acquisition of subsidiary, net
of cash acquired 15 (6,072) -
Purchase of property, plant and equipment (649) (1,245)
Development and IT software expenditure capitalised (351) (1,399)
Proceeds from sale of development expenditure - 639
Net cash flows used in investing activities (6,084) (1,490)
---------------------------------------------------- ----- ------------- --------------------
Cash flows used in financing activities
Dividends paid 6 (1,088) (1,104)
Proceeds from external borrowing 1,928 2
Lease payments (1,212) -
Net finance (expenditure)/income - 59
---------------------------------------------------- ----- ------------- --------------------
Net cash flows used in financing activities (372) (1,043)
---------------------------------------------------- ----- ------------- --------------------
Net increase/(decrease) in cash and cash
equivalents 12 1,976 (641)
Cash and cash equivalents at the beginning
of the period 948 1,676
Effect of exchange rate fluctuations on cash
held (46) (87)
---------------------------------------------------- ----- ------------- --------------------
Cash and cash equivalents at the end of the
period 2,878 948
---------------------------------------------------- ----- ------------- --------------------
Notes
1.Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with the International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards
Board (IASB), as adopted for use by the European Union (EU)
effective at 28 March 2020, and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS.
The Financial information set out in this preliminary
announcement does not constitute the company's Consolidated
Financial Statements for the financial years ended 28 March 2020 or
30 March 2019 but is derived from those Financial Statements.
Statutory Financial Statements for 2019 have been delivered to the
Registrar of Companies and those for 2020 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 Executive Directors. The Executive Directors
review the Group's internal reporting in order to assess
performance and allocate resources.
The Executive Directors consider there to be two continuing
operating segments being machine tools and precision engineered
components and industrial laser systems.
The Executive Directors 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 and results
by reportable segment:
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
-------------------------------- ------------ -------------- -------------- -------- ------------ -----------
o
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
-------------------------------- ------------ -------------- -------------- -------- ------------ -----------
o
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
Continuing
------------------------------------------------------
Machine
52 Weeks ended 30 March tools
2019 & precision
engineered Industrial Head Office
components laser systems & unallocated Total Discontinued
Segmental analysis of
revenue $000 $000 $000 $000 $000 Group Total
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Total revenue 44,575 20,592 65,167 1,572 66,739
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
o
Segmental analysis of
operating profit/(loss)
before Adjusting Items 3,610 2,563 (916) 5,257 (146) 5,111
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Adjusting Items (1,355) - (431) (1,786) (961) (2,747)
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
Group operating profit/(loss) 2,255 2,563 (1,347) 3,471 (1,107) 2,364
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
o
Other segmental information:
Reportable segment assets 28,126 9,492 18,728 56,346 1,108 57,454
Reportable segment liabilities (11,131) (4,496) (12,184) (27,811) - (27,811)
Fixed asset additions 686 559 - 1,245 - 1,245
Depreciation and amortisation 275 292 46 613 - 613
------------------------------- ------------ -------------- -------------- -------- ------------ -----------
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 2020 2019
------------- -------------
$000% $000%
------------------------------------ ------ ---- ------ ----
UK 16,453 24.5 14,249 21.8
North America 48,094 71.6 47,387 72.8
Australasia 2,659 3.9 3,531 5.4
------------------------------------ ------ ----- ------ -----
67,206 100.0 65,167 100.0
------------------------------------ ------ ----- ------ -----
Disaggregation of revenue by destination:
2020 2019
------------- -------------------
$000% $000%
Gross sales revenue:
--------------------- ------ ----- ------------ -----
UK 11,500 17.1 9,507 14.6
Other European 5,032 7.5 6,951 10.7
North America (USA) 43,804 65.2 42,534 65.2
Africa 538 0.8 644 1.0
Australasia 2,561 3.8 3,370 5.2
Central America 1,101 1.6 126 0.2
Middle East 1,346 2.0 485 0.7
Far East 1,324 2.0 1,550 2.4
--------------------- ------ ----- ------------ -----
67,206 100.0 65,167 100.0
--------------------- ------ ----- ------------ -----
Disaggregation of revenue by product group:
2020 2019
------------- -------------
$000% $000%
Sector
CNC lathes 6,282 9.4 4,761 7.3
Conventional lathes 13,968 20.8 13,941 21.4
CNC other 1,351 2.0 1,209 1.9
Conventional other 9,126 13.6 11,587 17.8
Workholding 6,611 9.8 7,062 10.8
Spares & service 3,120 4.6 5,620 8.6
Lasers 23,263 34.6 19,814 30.4
Laser spares and service 3,485 5.2 1,173 1.8
--------------------------------------- ------ ----- ------ -----
Total 67,206 100.0 65,167 100.0
--------------------------------------- ------ ----- ------ -----
Timing of revenue recognition
Products and services transferred at a
point in time 57,811 65,167
Products and services transferred over
time 9,395 -
--------------------------------------- ------ ----- ------ -----
Total 67,206 65,167
--------------------------------------- ------ ----- ------ -----
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.
2 020 2 019
----------------------------------------- ----- -----
$000 $000
----------------------------------------- ----- -----
Current contract liabilities relating to
deposits from customers 38 5 5 38
----- -----
2 020 2 019
-------------------------------------------- ----- -----
$000 $000
-------------------------------------------- ----- -----
Current contract assets relating to amounts
due from customers 246 -
----- -----
Remaining performance obligations
The vast majority of the groups' 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 carried forward contract
liabilities:
2020 2019
------------------------------------------------- ----- -----
$'000 $'000
------------------------------------------------- ----- -----
Revenue recognised that was included in
the contract liability balance at the beginning
of the year 538 1,244
----- -----
3. 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
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 14 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. During the year ended March 2019 the trustees undertook
a number of exercises to reduce the liabilities of the scheme which
had an actuarial cost. Given these had a beneficial effect on the
ultimate buy out cost of the scheme they were supported by the
Group and a charge of $1.28m plus $0.08m of associated legal costs
was included as a result of work by the Trustees of the UK pension
scheme and the Group in reducing pension liabilities.
b) As a result of the outsourcing of manufacturing in the UK in
the prior year, the existing premises were vacated, and a sublet
was in the process of negotiation. However due to flooding at the
site these negotiations failed to be completed and as a result a
right of use asset impairment charge of $0.4m has been recognised
in the year, in addition to a provision for associated unavoidable
costs, including amortisation and interest under IFRS 16 totaling
$0.4m. In the prior year an onerous lease charge of $0.4m was
recognised and was subsequently incorporated into the right of use
asset impairment on adoption of IFRS 16.
c) A credit of $22K (2019: credit of $1.26m) is recorded in
financial income in respect of the final salary pension scheme. No
cash was paid to or 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 net adjustment to the carrying value of the amortised
loan note costs on their extension in the prior year is shown as a
credit of $0.8m in financial income with the corresponding charge
of $0.5m for the year shown in financial expense. These are non
cash movements and relate to the discounting of the loan notes and
associated costs which unwind over the term of the notes.
e) A charge of $0.7m was incurred as a result of the acquisition
of Control Micro Systems Inc for legal and professional fees.
f) A charge of $0.3m arose as a result of amortisation of
intangible assets acquired through the Control Micro Systems Inc
deal.
g) In the prior period a charge of $0.96m has been recorded
against the value of the Gamet Bearings assets held for sale to
bring their carrying value into line with the expected proceeds of
sale, less costs to sell. In the current year a charge has been
incurred of $0.5m which included additional costs of 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 $0.3m was expensed in cost of sales relating to
US duty and tariff charges from prior years
Adjusting items
2020 2019
$000 $000
------------------------------------------------------ ------- ----------
Items included in c ost of sales:
US Tariffs & Duty charges relating to prior years (h) ( 254) -
(254) -
------------------------------------------------------ ------- ----------
Items included in operating e xpenses :
Pensions charge (a) - (1,277)
Pensions legal costs (a) - (78)
Onerous lease provision (b) - (431)
Unavoidable lease costs (b) (378) -
Right of use asset impairment (b) (392 ) -
Acquisition costs (e) (684) -
Amortisation of intangible assets acquired (f) (288) -
Profit on sale of pension (a) 809
(933) ( 1,786)
------------------------------------------------------ ------- --------
Items included in financial (income)/expense:
Pensions interest on surplus (c) 22 1,255
Adjustment to loan notes (d) - 822
------------------------------------------------------ ------- --------
Financial income 2 2 2 ,077
------------------------------------------------------ ------- --------
Amortisation of Loan notes and costs (d) (536) -
(1,7 01
Total adjusting items before tax ) 291
Income tax on adjusting items - (48)
(1,7 01
Total adjusting items after tax ) 243
------------------------------------------------------ ------- --------
Loss on discontinued activity (g) (543 ) (961)
------------------------------------------------------ ------- --------
4. Financial income and expense
2020 2019
$000 $000
----------------------------------------- ------- -------
Bank and other interest 5 35
Interest on employee benefit surplus 22 1,255
Loan note and net adjustment - 822
----------------------------------------- ------- -------
Financial income 27 2,112
----------------------------------------- ------- -------
Bank overdraft and loan interest (315) (236)
Other loan interest ( 918) (948)
Loan note interest ( 536) -
Other finance charges - (1)
Finance charges ( 12) (6)
Lease interest ( 375) -
Interest on employee benefit liabilities (44) (45)
Financial expense (2,200) (1,236)
----------------------------------------- ------- -------
5. Taxation
2020 2019
$000 $000
---------------------------------------------------- ----- -----
Current tax:
- UK Corporation tax at 19% (2019: 19%):
Overseas taxation:
- current period 151 77
---------------------------------------------------- ----- -----
Total current tax credit 151 77
---------------------------------------------------- ----- -----
Deferred taxation:
- current period 891 92
- effect of rate change in UK 143 -
- prior period 43 (283)
---------------------------------------------------- ----- -----
Total deferred taxation credit/(charge) 1,077 (191)
---------------------------------------------------- ----- -----
Taxation credited/(charged) to the income statement 1,228 (114)
---------------------------------------------------- ----- -----
The rate for deferred tax in UK was changed from 17% to 19% in
the current year. The rate for Federal tax in the USA is 21%.
Tax reconciliation
The tax (credit)/charge assessed for the period is higher than
(2019: lower than) the standard rate of corporation tax in the UK
of 19 % (2019: 19%). The differences are explained below:
2020 2019
-------
$000 $000
------------------------------------------------------ ------- -----
(Loss)/profit before tax (633) 4,347
------------------------------------------------------ ------- -----
( Loss)/ profit before tax multiplied by the standard
rate of corporation tax
in the UK of 19% (2019: 19%) (120) 826
Effects of:
- income not taxable and/or expenses not deductible 68 274
- overseas tax rates 55 14
- pension fund surplus taxed at higher rate - 3
- US state taxes 60 166
- utilisation of discontinued business losses (243) (140)
- deferred tax prior period adjustment (43) -
- impact of rate change in the UK on deferred tax (143) 290
- tax losses utilised not previously recognised (4) (912)
- additional deferred tax recognised on losses in the
period (858) (124)
- R&D claims in the USA (prior periods) - (283)
Taxation (credited)/charged to the income statement (1,228) 114
------------------------------------------------------ ------- -----
6. Dividends
No dividends have been proposed this year. In the prior year a
final dividend of 0.5p was paid on 30 September 2019 to holders on
the register at 30 August 2019.
2020 2019
$000 $000
-------------------------------------------------- ----- -----
Final Dividend paid September 2019 (0.5p/share) 725 -
Interim Dividend paid January 2020 (0.25p/share) 363 -
Final Dividend paid September 2018 (0.5p/share) - 736
Interim Dividend paid December 2018 (0.25p/share) - 368
Total 1,088 1,104
-------------------------------------------------- ----- -----
7. Earnings per share
The calculation of the basic earnings per share of 0.51c (2019:
3.75c) is based on the earnings for the financial period
attributable to the Parent Company's shareholders of a profit of
$595,000 (2019: $4,233,000) and on the weighted average number of
shares in issue during the period of 116,450,053 (2019:
112,973,341). At 28 March 2020, there were 8,400,000 (2019:
7,500,000) potentially dilutive shares on option with a weighted
average effect of 2,877,486 (2019: 1.191,415) shares giving a
diluted earnings per share of 0.50c (2019: 3.71c).
2020 2019
----------------------------------------------------------- ----------- -----------
Weighted average number of shares
Issued shares at start of period 112,973,341 112,973,341
Effect of shares issued in the year 3,476,712 -
----------------------------------------------------------- ----------- -----------
Weighted average number of shares at end of period 116,450,053 112,973,341
----------------------------------------------------------- ----------- -----------
Weighted average number of the 8,400,000 (2019: 7,500,000)
potentially dilutive shares 2,877,486 1,191,415
----------------------------------------------------------- ----------- -----------
Total weighted average diluted shares 119,327,539 114,164,756
----------------------------------------------------------- ----------- -----------
Total post tax earnings - continuing operations 595 4,233
Total post tax earnings including discontinued operations (365) 3,126
---------------------------------------------------------- ------- --------------------
Basic EPS 0.51c 3.75c
Diluted EPS 0.50c 3.71c
Total including discontinued operations
Basic EPS (0.31c) 2.77
Diluted EPS (0.31c) 2.74
---------------------------------------------------------- ------- --------------------
Underlying earnings $000 $000
---------------------------------------------------------- ------- --------------------
Total post tax earnings - continuing operations 595 4,233
Adjusting items - per note 3 1,701 (243)
Underlying earnings after tax 2,296 3,990
---------------------------------------------------------- ------- --------------------
Underlying basic EPS 1.97c 3.53c
Underlying diluted EPS 1.92c 3.50c
8. Trade and other receivables
2020 2019
$000 $000
------------------ ----- -----
Trade receivables 6,153 7,599
Other debtors 772 540
Other prepayments 913 1,024
Contract assets 246 -
------------------ ----- -----
8,084 9,163
------------------ ----- -----
2020 2019
$000 $000
------------------ ----- -----
Taxation 222 294
------------------ ----- -----
9. Trade and other payables
2020 2019
$000 $000
-------------------------------- ----- -----
Current liabilities:
Trade payables 3,424 4,292
Social security and other taxes 576 199
Other creditors 1,468 1,323
Accruals 2,445 1,743
Contract liabilities 385 538
8,298 8,095
-------------------------------- ----- -----
10. Provisions
Unavoidable
lease costs Onerous Warranties Dilapidations Total
lease
$000 $000 $000 $000 $000
-------------------------------------- ------------ --------- ------------ --------------- -------
Provision carried forward at 30 March
2019 - 429 18 - 447
Exchange differences - (23) (2) - (25)
Charged to income statement 378 - - - 378
Transferred on adoption of IFRS 16 - (406) - - (406)
On acquisition of subsidiary - - 120 150 270
Utilised in the period (74) - - - (74)
--------------------------------------
Provision carried forward at 28 March
2020 304 - 136 150 590
-------------------------------------- ------------ --------- ------------ --------------- -------
The timing of warranty payments are uncertain in nature. The
warranty provisions are calculated based on historical experience
of claims received, taking into account recent sales of items which
are covered by warranty. The provision relates mainly to products
sold in the last twelve months. The typical warranty period is now
twelve months.
Onerous lease provisions
Following the move of the UK business to the new facility in
Elland the old premises were in the process of being sub-let when
they were flooded and consequently the right of use asset has been
fully impaired, the provisions at the year end includes expected
unavoidable costs for the remainder of the lease.
11. LEASES
The Group has initially adopted IFRS 16 Leases from 31 March
2019. The effect of initially applying this standard is to increase
both the assets and liabilities of the Group through the
recognition on the balance sheet of the operating leases in respect
of rented properties, plant and machinery and vehicles.
The group has adopted IFRS 16 using the modified retrospective
approach from 31 March 2019 and therefore has not restated
comparatives for the 2019 reporting period, as permitted under the
specific transitional provisions in the standard. The
reclassifications and the adjustments arising from the new leasing
rules are therefore recognised in the opening balance sheet on 31
March 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 31 March 2019. The weighted average lessee's incremental
borrowing rate applied to the lease liabilities on 31 March 2019
was 3.69%.
$000
Operating lease commitments disclosed as at 30 March 2019 13,093
Discounted using the lessee's incremental borrowing rate at
the date of initial application (3,328)
Other short term operating leases (87)
----------------
Lease liability recognised as at 31 March 2019 9,678
----------------
Of which are:
Current lease liabilities 1,199
Non-current lease liabilities 8,479
----------------
Lease liability recognised as at 31 March 2019 9,678
----------------
At the date of acquisition CMS held $1.477m of right of use
assets, all of which related to building leases.
The associated right-of-use assets were measured at the amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the
balance sheet as at 30 March 2019.
The right of use assets relate to the following asset types:
Plant and
Property Vehicles machinery Total
$000 $000 $000 $000
--------------------------------- -------- -------------------- --------- ------
Cost or valuation
At 30 March 2019 - - - -
Effect on transition to IFRS 16 9,584 27 67 9,678
Exchange differences (315) (1) (1) (317)
Additions during period - 76 - 76
Addition on acquisition 1,477 - - 1,477
At 28 March 2020 10,746 102 66 10,914
--------------------------------- -------- -------------------- --------- ------
Depreciation
At 30 March 2019 - - - -
Effect on transition to IFRS 16 429 - - 429
Exchange difference (59) - - (59)
Impairment charged in the period 230 - - 230
Charge for period 1,177 56 21 1,254
At 28 March 2020 1,777 56 21 1,854
--------------------------------- -------- -------------------- --------- ------
Net book value
At 28 March 2020 8,969 46 45 9,060
--------------------------------- -------- -------------------- --------- ------
At 30 March 2019 - - - -
--------------------------------- -------- -------------------- --------- ------
The lease liabilities at the year-end were as follows:
28 March 2020
Current Non-current Total
$000 $000 $000
Lease liabilities 1,608 8,344 9,952
Lease liabilities 1,608 8,344 9,952
--------- ------------- -------------
During the year lease payments amounted to $1.525m, of which
$375K was in respect of interest charges. The undiscounted payments
under the leases fall due as follows:
28 March 2020
$000
Up to one year 1,608
One to five years 5,562
Over five years 4,426
------------------
Total undiscounted payments due under leases 11,596
==================
The change in accounting policy affected the following items in
the balance sheet on 31 March 2019:
31 March 2019
$000
Right of use assets 9,678
Lease liabilities (9,678)
--------------
Net impact upon retained earnings -
==============
The introduction of IFRS16 did not have an impact upon the
Group's recognised deferred tax balances.
Impact on segment disclosures and earnings per share
Adjusted EBITDA, segment assets and segment liabilities for
March 2020 all increased as a result of the change in accounting
policy. Lease liabilities are now included in segment liabilities.
The impact on the segments affected by the change in policy
are:
Adjusted EBITDA Segment assets Segment liabilities
$000 $000 $000
Machine Tools & Precision Engineered
Components 904 7,174 (7,290)
Industrial Laser Systems 430 1,886 (1,925)
Head Office & unallocated 191 - (601)
--------------- -------------- -------------------
Total 1,525 9,060 (9,816)
--------------- -------------- -------------------
EBITDA for the period was increased by $1.52m and Basic Earnings
per share was reduced by 0.01c for the twelve months to 28 March
2020 as a result of the adoption of IFRS 16. At year end the right
of use asset in the Head Office segment had been fully impaired as
per note 3.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
-- reliance on previous assessments on whether leases are onerous;
-- the accounting for operating leases with a remaining lease
term of less than 12 months as at 31 March 2019 as short-term
leases;
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application: and
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
The Group's leasing activities and how these are accounted
for.
The Group leases various factories, equipment and cars. Rental
contracts are typically made for fixed periods of 3 to 5 years for
equipment and 5-15 years for properties. These may have extension
options. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants, but leased assets may not
be used as security for borrowing purposes.
Until the 2019 financial year, leases of property, plant and
equipment were classified as either finance or operating leases.
Payments made under operating leases (net of any incentives
received from the lessor) were charged to profit or loss on a
straight-line basis over the period of the lease. From 31 March
2019, leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged
to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period. The right-of-use asset is depreciated over the
shorter of the asset's useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments (where they exist
within a lease):
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date
less any lease incentives received;
-- any initial direct costs; and
-- restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets comprise small
items of workshop equipment, office furniture and machines.
12. RECONCILIATION OF NET CASH FLOW TO NET DEBT
2020 2019
$000 $000
------------------------------------------------- -------- --------
(Decrease)/increase in cash and cash equivalents (952) (641)
(Increase)/decrease in debt and finance leases (341) (61)
------------------------------------------------- -------- --------
(Increase)/decrease in net debt from cash flows (1,293) (702)
Net debt at beginning of period (14,541) (15,600)
Effect of transition to IFRS 16 (9,755) -
Cash and debt through acquisition 1,451 -
Loan note credit/(amortisation) (421) 982
Lease liabilities increase (74) -
Exchange effects on net funds 491 779
------------------------------------------------- -------- --------
Net debt at end of period (24,142) (14,541)
------------------------------------------------- -------- --------
13. Analysis of net DEBT
At Effect o Cash At
30 March Exchange on transition and debt 30 March
on
2019 movement to IFRS acquisition Other Cash flows 2020
16
$000 $000 $000 $000 $000 $000 $000
---------------------------------- --------- ---------- --------------- ----------- ----- ---------- ---------
Cash at bank and in hand 818 (39) - 2,928 - (952) 2,755
Term deposits (included
within cash and cash equivalents
on the balance sheet) 130 (7) - - - 123
948 (46) - 2,928 - (952) 2,878
Debt due within one year (5,189) 41 - - - (266) (5,414)
Debt due after one year ( 572) 17 - - - (1,662) (2,217)
Loan notes due after one (9,5 17
year ) 501 - - (421) - (9,437)
Finance leases (211) - 211 - - - -
Lease liabilities - (22) (9,966) (1,477) (74) 1,587 (9,952)
Total (14,541) 491 (9,755) 1,451 (495) (1,293) (24,142)
---------------------------------- --------- ---------- --------------- ----------- ----- ---------- ---------
14. 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
2020 2019
$000 $000
-------------------------------------------------------------- ------ -------
Operating profit 1,540 3,471
Adjusting items included in net operating expenses (see
note 3) 1,187 1,786
-------------------------------------------------------------- ------ -------
Underlying operating profit 2,727 5,257
-------------------------------------------------------------- ------ -------
Underlying profit for the period from continuing activities
Profit for the period 595 4,233
Adjusting items included in net operating expenses (see
note 3) 1,187 1,786
Adjusting items included in Financial income (22) (2,077)
Adjusting items included in Financial expense 536 -
Tax on adjusting items 48
Underlying profit for the period 2,296 3,990
-------------------------------------------------------------- ------ -------
Underlying EPS
A reconciliation of underlying EPS is included in note
7
15. Acquisition of control micro systems inc (cms)
On 21 June 2019, with an effective acquisition date of 1 June
2019, 600 Group PLC acquired the entire issued share capital of
Control Micro Systems Inc ("CMS"), a provider of turnkey,
custom-designed and fully-automated laser process machines and
systems to a diverse base of US and international blue-chip
customers across a range of industries, including industry-leading
positions in the high-growth precision medical equipment,
pharmaceutical and aerospace sectors, for a consideration of $10m,
comprising of $9m in cash and $1m of 600 Group plc shares
Details of the purchase consideration, the net assets acquired,
and goodwill are as follows:
$000
Purchase consideration
Cash paid 9,000
4,500,000 600 Group plc ordinary shares 1,000
-------
Total purchase consideration 10,000
=======
The assets and liabilities recognised as a result of the
acquisition are as follows:
Provisional
Fair value
$000
Cash and cash equivalents 2,928
Cash investment 107
Plant and equipment 675
Customer relationships 2,743
Inventories 556
Trade and other receivables 1,527
Contract assets 138
Right of use assets 1,477
Lease liabilities (1,477)
Trade and other payables (524)
Contract liabilities (457)
Provisions (270)
Deferred Taxation (197)
Taxes payable (71)
Net identifiable assets acquired 7,155
Add: goodwill 2,845
------------------------------------ -----------
Fair value of consideration paid 10,000
The goodwill is attributable to CMS's assembled workforce and
its strong position and profitability in the pharmaceutical,
healthcare and aerospace sectors. None of the goodwill is expected
to be deductible for tax purposes.
Acquisition-related costs
Acquisition-related costs of $0.7m are included in adjusting
items within net operating expenses in the income statement.
Revenue and profit contribution
The acquired business contributed revenues of $7.3m and net
profit of $0.44m to the group for the period from 1 June 2019 to 28
March 2020. If the acquisition had occurred on 31 March 2019, it is
estimated that consolidated revenue and consolidated profit after
tax, on continuing activities, for the year ended 28 March 2020
would have been $68.9m and $0.5m respectively.
16. Post balance sheet events
The freehold property in Brisbane, Australia was sold on 24
October 2020 for $1.6m.
Subsequent to the year end the Group has taken advantage of
Government schemes and has received $2.2m of loans across the three
USA businesses under the Paycheck Protection Program. These loans
may be forgiven dependent on expenditure on certain items and
employment numbers with any amount not forgiven repayable as a 2
year loan at 1% interest rate.
The UK machine tools business received a $1.5m loan under the
Coronavirus Large Business Interruption Loan Scheme with a 3 year
bullet repayment in September 2023 and 1.92% interest.
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END
FR DDBDBUXBDGGC
(END) Dow Jones Newswires
November 20, 2020 02:00 ET (07:00 GMT)
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