CARCLO PLC - Annual Report 2019 | FinancialReports.eu

Annual Report

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2019

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Carclo Technical Plastics Pvt Ltd, Bangalore, India

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Year ended Year ended
31 March 31 March
2019 2018
£000 £000
144,851 146,214
8,419 10,811
6,358 9,071
7.0p 9.8p
1,315 10,811
(746) 9,071
(2.7p) 9.8p
(12,593) 9,907
(14,654) 8,167
(25.4p) 11.6p
7,104 -
13,908 904
38,481 31,476
49,121 29,798
89,653
50,589
5,972
146,214
6,673
6,422
747
(3,031)
10,811
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Unaudited Unaudited
Exceptional
Statutory Underlying proforma proforma
items
adjustment adjusted
CTP operating profit (£m) 6.5 0.3 6.8 - 6.8
LED Technologies operating (loss) / profit (£m) (13.3) 9.4 (3.9) 7.1 3.2
Aerospace operating profit (£m) 1.3 - 1.3 - 1.3
Central costs (£m) (7.1) 4.2 (2.9) - (2.9)
Group operating (loss) / profit (£m) (12.6) 13.9 1.3 7.1 8.4
Other finance expense (£m) (2.1) - (2.1) - (2.1)
Group (loss) / profit before taxation (£m) (14.7) 13.9 (0.8) 7.1 6.3
Taxation (£m) (4.0) 2.8 (1.2) - (1.2)
Group (loss) / profit for the year (£m) (18.7) 16.7 (2.0) 7.1 5.1
Basic loss per share (pence) (25.4) (2.7) 7.0
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The adjustments comprise:

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£m CTP LED Central Total
Redundancies and restructuring costs 0.3 0.4 0.7
One-off costs in relation to Wipac operational issues 0.9 0.9
Board recruitment fees 0.2 0.2
Defined benefit pension scheme GMP equalisation 3.6 3.6
Impairment charge 8.5 8.5
0.3 9.4 4.2 13.9
Proforma unaudited exceptional price concession 7.1 7.1
0.3 16.5 4.2 21.0
Taxation (1) 2.8 2.8
0.3 16.5 7.0 23.8
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(1) The taxation adjustment comprises the write down in the UK deferred tax asset of £2.9m and (£0.1m) of other items.

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Location- Market-
Based Based
Methodology Methodology
Emissions from:
Combustion of fuel and
operation of facilities 1,523 1,523
(tCO2e)
Electricity purchased for
22,760 25,514
own use (tCO2e)
Total (tCO2e) 24,283 27,037
Intensity ratio (tCO2e per 167.7 186.7
£1 million of revenue)
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Percentage
Emissions from: 2019 2018 change
Combustion of fuel and operation of facilities
1,523 1,323 15.1%
(tCO2e)
Electricity purchased for own use (tCO2e) 22,760 21,436 6.2%
Total (tCO2e) 24,283 22,759 6.7%
Group revenue (£ million) 144.8 146.2
Intensity ratio (tCO2e per £1 million of revenue) 167.7 155.7 7.7%
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COMPOUND ANNUAL GROWTH RATE (“CAGR”) The geometric progression ratio that provides a constant rate of return over
a time period
CONSTANT CURRENCY Retranslated at the prior year’s average exchange rate. Included to explain the effect of
changing exchange rates during volatile times to assist the reader’s understanding
GROUP CAPITAL EXPENDITURE Fixed asset additions
NET BANK INTEREST Interest receivable on cash at bank less interest payable on bank loans and overdrafts.
Reported in this manner due to the global nature of the Group and its banking
agreements
NET DEBT Cash and cash deposits less current and non-current interest-bearing loans, borrowings
and finance leases. Used to report the overall financial debt of the Group in a manner
that is easy to understand
OPERATIONAL GEARING Ratio of fixed overheads to sales
UNDERLYING Adjusted to exclude all exceptional items (exceptional items in this definition does not
include the proforma unaudited exceptional price concession)
UNDERLYING EBITDA Profit before interest tax, depreciation, amortisation adjusted to exclude all exceptional
items (exceptional items in this definition does not include the proforma unaudited
exceptional price concession)
UNDERLYING EARNINGS PER SHARE Earnings per share adjusted to exclude all exceptional items (exceptional items in this
definition does not include the proforma unaudited exceptional price concession)
UNDERLYING OPERATING PROFIT Operating profit adjusted to exclude all exceptional items (exceptional items in this
definition does not include the proforma unaudited exceptional price concession)
UNDERLYING PROFIT BEFORE TAX Profit before tax adjusted to exclude all exceptional items (exceptional items in this
definition does not include the proforma unaudited exceptional price concession)
PROFORMA ADJUSTED Adjusted to exclude all exceptional items and the proforma unaudited exceptional price
concession on exit of mid-volume automotive business
PROFORMA ADJUSTED EBITDA Profit before interest tax, depreciation, amortisation adjusted to exclude all exceptional
items and the proforma unaudited exceptional price concession on exit of mid-volume
automotive business
PROFORMA ADJUSTED EARNINGS PER SHARE Earnings per share adjusted to exclude all exceptional items and the proforma unaudited
exceptional price concession on exit of mid-volume automotive business
PROFORMA ADJUSTED OPERATING PROFIT Operating profit adjusted to exclude all exceptional items and the proforma unaudited
exceptional price concession on exit of mid-volume automotive business
PROFORMA ADJUSTED PROFIT BEFORE TAX Profit before tax adjusted to exclude all exceptional items and the proforma unaudited
exceptional price concession on exit of mid-volume automotive business
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31 March 31 October
2019 2019
Schroder Investment
11.1% 11.1%
Management Limited
Duroc AB 10.0% 13.0%
Janus Henderson Investors 9.5% 9.3%
Aberforth Partners LLP 8.4% 0.0%
Lakestreet Capital Partners
6.1% 10.9%
AG
Axxion S.A. 5.9% 0.0%
The NFU Mutual Insurance
3.8% 1.4%
Society Limited
Hargreaves Lansdown
3.4% 4.4%
Asset Management
BMO Global Asset
3.3% 0.0%
Management
Redmayne-Bentley LLP 3.3% 3.3%
Killik & Co 0.0% 4.7%
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Board Meetings Remuneration Audit Nomination
No. No. No. No. No. No. No. No.
Held Attended Held Attended Held Attended Held Attended
M Derbyshire 4 4 1 1 1 1 1 1
P Slabbert 15 15 5 5 4 4 4 4
J Oatley 11 11 4 4 3 3 3 3
D Toohey 15 15 5 5 4 4 4 4
C Malley 11 11 - - - - - -
S Matthews-DeMers 12 12 - - - - - -
M Rollins 15 15 3 3 1 1 4 4
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Element	of	Remuneration	Purpose and Link to Strategy	Operation	Maximum	Performance Targets

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PENSION Provides market competitive retirement benefitsOpportunity for executives to contribute to their own retirement plan Executive Directors receive a contribution to HMRC approved personal pension arrangement or a payment in lieu of pension contributions The maximum employer contribution is 20% of salary restricted to a maximum £40k. Future recruited directors will only receive a contribution in line with the general workforce. N/A
100% of salary holding for
executive directors. The
Committee will monitor progress
against this requirement on an
Executive directors are required to annual basis.
SHARE OWNERSHIP GUIDELINES To provide alignment between executives and shareholders build and maintain a shareholding equivalent to one year’s base salary through the retention of vested share awards or through A reasonable time limit is considered to be 5 years.Directors will be required to retain N/A
open market purchases until the 50% of post-tax PSP vestings
guideline is met as shares for the first 5 years of
their employment. If the required
holding has not been achieved
by that point the percentage will
increase to 75%
Reviewed annually by the
Board, normally effective 1 April.
Chairman and Non-Executive No prescribed maximum annual
Directors receive a basic fee for increase, but it is expected that
their respective roles. Additional fee increases will normally be
fees are paid to Non-Executive in line with general increase for
DIRECTORS FEESNON EXECUTIVE Reflects time commitments and responsibilities of each roleReflects market competitive fees Directors for additional services such as chairing the Audit and Remuneration committees. Fee levels are benchmarked with reference to sector comparators the wider workforce. However, in the event that there is a material misalignment with the market or change in complexity, responsibility or time commitment Non-executive directors do not participate in variable pay arrangements or receive any pension provision.
and FTSE-listed companies of required to fulfil a non-executive
similar size and complexity. The director role, the Board has
required time commitment and discretion to make an appropriate
responsibilities are taken into adjustment to the fee level
account when reviewing fee levels.
All fees are paid in cash.
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300
270 270 270
250
200
158 158 158
150
100
50
Minimum On Target Maximum Minimum On Target Maximum
Chief Executive Finance Director
Remuneration £000
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those conditions being met) of the forfeited awards. Any such ‘buyout’ awards will typically be made under the existing annual bonus and LTIP scheme, although in exceptional circumstances the Committee may exercise the discretion available under Listing Rule 9.4.2 R to make awards using a different structure. Any ‘buy-out’ awards would have a fair value no higher than the awards forfeited. Shareholders will be informed of any such payments at the time of appointment.

For an internal executive director appointment, the Remuneration Committee will be consistent with the Policy adopted for external appointees detailed above. Any variable pay element awarded in respect of the prior role may be allowed to pay out according to its terms. Where an individual has contractual commitments made prior to their promotion to Executive Director level, the Company will continue to honour these arrangements.

For external and internal appointments, the Committee may agree that the Company will meet certain relocation and/or incidental expenses as appropriate.

In the case of hiring or appointing a new non-executive director a base fee in line with the prevailing fee schedule would be payable for Board membership, with additional fees payable for additional services, such as chairing a Board committee or being the senior independent director.

Service contracts

The executive directors are employed under contracts of employment with Carclo. The principal terms of the executive directors’ service contracts are as follows:

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Effective date of Notice period Notice period
Executive director Position contract From Company From Director
A Collins Chief Executive 1 October 2019 1 month 1 month
M Rollins Executive chairman 11 January 2019 N/A N/A
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*after a fixed 6-month period

M Rollins acted as Executive Chairman from 11 January 2019 until 30 September 2019 when he returned to his position as non-executive chairman on the appointment of A Collins as interim Chief Executive Officer.

Non-executive directors are appointed under arrangements that may generally be terminated at will by either party without compensation and their appointment is reviewed annually.

Letters of appointment are provided to the chairman and non-executive directors. Non-executive directors have letters of appointment effective for a period of three years and are subject to annual re-election at the AGM.

Directors’ letters of appointment and the unexpired period of their appointments (where appropriate after extension by re-election) are set out below:

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Date of Unexpired term Date of Last reappointment
Non-executive director most recent letter as at 31 March 2019 appointment at AGM
P Slabbert 1 April 2018 To 2019 AGM 1 April 2015 25 September 2019
D Toohey 1 April 2018 To 2019 AGM 1 April 2015 25 September 2019
J Oatley 20 July 2018 To 2019 AGM 20 July 2018 25 September 2019
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Directors’ service contracts and letters of appointment are available for inspection at the Company’s registered office.

This section has been updated to reflect the position as at 31 March 2019 in respect of the Directors’ service contracts and letters of appointment. The position as at the time the Remuneration Policy was approved is set out in the Remuneration Policy which is available on the Company’s website.

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Summary of shareholder voting on remuneration matters

The following table shows the results of the shareholder vote on the 2017/18 Remuneration Report at the 2018 AGM:

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Total number % of
of votes votes cast
For (including discretionary) 41,937,015 97.6
Against 1,045,099 2.4
Total votes cast (excluding withheld votes) 42,982,114 100.00
Votes withheld 827,871
Total votes cast (including withheld votes) 43,809,985
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The following table shows the results of the shareholder vote on the Remuneration Policy at the 2017 AGM:

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Total number % of
of votes votes cast
For (including discretionary) 44,766,409 96.2
Against 1,785,647 3.8
Total votes cast (excluding withheld votes) 46,552,056 100.00
Votes withheld 55,650
Total votes cast (including withheld votes) 46,607,706
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Executive director changes

As announced on 11 January 2019, the Group Chief Executive, C Malley, resigned from the Board with immediate effect.

Also, on 11 January 2019, it was announced that M Rollins would assume the role of Executive Chairman until such point as a new Chief Executive Officer could be appointed. On 1 October 2019 on the appointment of A Collins as interim Chief Executive Officer, M Rollins resumed his role as Non-Executive Chairman. Sarah Matthews-DeMers resigned from the Board on 23 October ahead of her departure from the Group on 31 October.

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Single total figure of remuneration for executive directors (audited)

The table below sets out a single figure for the total remuneration received by each executive director for the year ended 31 March 2019 and the prior year:

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LTIP and
Other Share
Payment for Based
Salary loss of office Benefits (1) Annual Bonus Payments Pension (2) Total
Name £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
C Malley 254 324 N/A N/A 25 32 N/A N/A N/A 58 27 35 306 449
M Rollins 19 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 19 N/A
R Brooksbank N/A 218 N/A 265 N/A 13 N/A N/A N/A 27 N/A 35 N/A 558
S Matthews-DeMers 153 N/A N/A N/A 8 N/A N/A N/A N/A N/A 23 N/A 184 N/A
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Single total figure of remuneration for Non Executive directors (audited)

The table below sets out a single figure for the total remuneration received by each non-executive director for the year ended 31 March 2019 and the prior year:

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Base fee £ Committee fees £ Total £
Non Executive 2019 2018 2019 2018 2019 2018
Director
M Derbyshire 26,743 89,551 - - 26,743 89,551
J Oatley 25,688 - 4,314 4,631 30,002 32,208
P Slabbert 36,769 36,769 8,675 6,175 45,444 42,944
D Toohey 36,769 36,769 - - 36,769 36,769
M Rollins 54,406 9,192 1,844 1,544 56,250 10,736
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Incentive outcomes for the year ended 31 March 2019 (audited)

Annual performance bonus outcome 2018/19

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Outcome % Salary Maximum Potential % Salary
Name Financial Strategic Payable Financial Strategic Payable
C Malley 0.00 0.00% 0.00% 100.00 0.00 100
S Matthews-DeMers 0.00 0.00% 0.00% 75.00 0.00 75
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This therefore resulted in 0.0% vesting for the 2016 award as follows:

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Number of shares at Number of shares to Number of shares to
Executive grant vest lapse Estimated value (£)
C Malley 210,000 0 210,000 0
R Brooksbank 98,000 0 98,000 0
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Scheme interests awarded in the year ended 31 March 2019 (audited) 2018/19 LTIP

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Shares subject to Share price at date of Face value at date
Executive Director Date of grant awards made during award of award
the year
C Malley 31 July 2018 304,000 113.5p £345,040
S Matthews-DeMers 31 July 2018 204,000 113.5p £231,540
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Awards take the form of conditional share awards and were made to the extent of 100% of salary in the respect of C Malley and S Matthews-DeMers.

The awards measured performance on the following basis:

Consistent with past awards, the extent to which awards granted in the year ending 31 March 2019 will vest will be dependent on two independent performance conditions with 50% determined by reference to the Company’s TSR and 50% determined by reference to the Company’s EPS, as follows:

The TSR element of an award will vest in full if the TSR ranks in the upper quartile, as measured over the three-year period relative to the constituents of the FTSE Small Cap Index, excluding investment trusts, at the beginning of that period. This element of the award is reduced to 25% on a pro rata basis for median performance and is reduced to nil for below median performance; and
The EPS element of an award will vest in full if EPS growth exceeds inflation, as measured by the Retail Prices Index, by an average of 12% per annum or more over the three-year period. This element of the award is reduced to 25% on a pro rata basis if EPS growth exceeds inflation by an average of 5% per annum over the period and is reduced to nil if EPS growth fails to exceed inflation by 5% per annum.

As noted above, S Matthews-DeMers will be leaving the Group on 31 October 2019, and her PSP award will lapse as a result.

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S MATTHEWS-DEMERS “BUY OUT” AWARD

In accordance with its Remuneration Policy and the provisions of Listing Rule 9.4.2(2), the Company agreed to grant S Matthews-DeMers a “buy out” award to compensate her for the awards over shares that she has forfeited as a result of ceasing employment with her previous employer.

A review was undertaken taking account of the nature, time horizons, and performance requirements (including the likelihood of those conditions being met) of the forfeited awards. Consequently, an award over shares in the Company was made to her, with such shares under award having a value of £30,000 on the date of grant. The buyout award does not have any financial performance conditions and, subject to her continued employment, vests in respect of 50% of the shares under award on the first anniversary of her commencing employment, that being 18 July 2019, and the remaining 50% vesting on the second anniversary, that being 18 July 2020. There is a 2-year holding period following the vesting of the award.

For the purposes of complying with the Listing Rules, the following cannot be altered to S Matthews-DeMers’ advantage without the prior approval of shareholders in general meeting (except for minor amendments to benefit the administration of the award, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for the executive or for a member of the group):

the person to whom shares are provided under the buy-out award,
the limitations on the number or amount of the shares subject to the buy-out award,
the maximum entitlement under the buy-out award, and
the basis for determining the entitlement to, and the terms of shares to be provided and for the adjustment thereof (if any) if there is a variation in share capital.

The buy-out award is not pensionable.

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Shares subject to Share price at date of Face value at date
Executive Director Date of grant awards made during award of award
the year
S Matthews-DeMers 10 August 2018 31,948 94.0p £30,000
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When S Matthews-DeMers ceases employment, the unvested portion of the buy-out award will lapse, and the shares subject to the vested portion will remain subject to the 2-year holding period.

Implementation of remuneration policy for the year ending 31 March 2020

A summary of how the Directors’ Remuneration Policy will be applied during the year ending 31 March 2020 is set out below:

Basic salary

As reported in the Annual Statement on page 41 the Remuneration Committee agreed to increase the Finance Director’s base salary level by 3.0%:

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2019/2020 2018/2019 % increase
S Matthews-DeMers £224,540 £218,000 3.0
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S Matthews-DeMers joined the Board on 18 July 2018. She was paid an annual salary of £218,000, meaning that she earned £153,000 prorated for the financial year in question.

M Rollins acted as Executive Chairman from January 2019 to September 2019. He elected not to receive any salary for taking on the additional executive responsibilities and consequently his remuneration for 2019/20 remains solely the fee he receives as Chairman. This is to remain unchanged for 2019/20.

A Collins joined the Board on 1 October 2019. He will be paid an annual salary of £450,000 meaning that he will earn £225,000 pro-rated for the financial year in question.

The majority of the Group’s senior executives are also receiving an increase in salary of 3% for 2018/19. Elsewhere, the Group’s other employees are, in general, receiving pay rises ranging from 0.0% to 5.0% depending on promotional increases, individual performance and wage inflation in the geography in which they are located.

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Provision 2019/2020 2018/2019 % increase
Chairman £89,551 £89,551 0.0
Base fee £36,769 £36,769 0.0
Senior Independent Director fee £2,500 £ 2,500 0.0
Committee Chair fees £6,175 £6,175 0.0
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Percentage change in chief executive remuneration

The table below shows the percentage change in the chief executive’s salary, benefits and annual bonus between the financial year ended 31 March 2018 and 31 March 2019 compared to that of the total amounts for all UK employees of the Group for each of these elements of pay.

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2019 2018 % change
£’000 £’000
Salary
Chief executive 273 324 (15.7%)
UK employee average 30 29 3.4%
Benefits
Chief executive 25 32 (21.9%)
UK employee average 1 1 0.0%
Annual bonus
Chief executive 0 0 n/a
Note 1
UK employee average 0 0 n/a
Number Number
Average number of UK employees 699 596 17.3%
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Relative importance of spend on pay

The table below shows the Group’s actual expenditure on pay (for all employees) relative to retained (losses)/profits for the financial years ending 31 March 2018 and ending 31 March 2019

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2019 2018 % change
£’000 £’000
Staff costs 41,796 37,714 10.8%
Retained (loss) profit (18,632) 8,492 (319.4%)
Number Number
Number of Employees 1,563 1,442 8.4%
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Carclo FTSE Small Cap Ex Investment Trusts
900.0
800.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0.0
Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18
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Table of historical data (chief executive)

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Chief executive single figure of remuneration (£000) 433 491 249 2,764 328 538 462 836 449 325
Annual bonus payout - - - - - 71 21 96 - -
(as % of maximum)
PSP vesting 50 50 50 100 - - 50 50 32.5 -
(as % of maximum)
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Figures for 2010 to 2013 relate to I Williamson who was succeeded as chief executive by C Malley on 27 March 2013. C Malley resigned as Chief Executive and stood down from the Board on 11 January 2019.

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Directors’ interests (audited)

The interests of the directors and their connected persons in the ordinary shares of the Company as at 31 March 2019 were as follows:

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31 March 2019 31 March 2018
Ordinary shares Options Ordinary shares Options
S Matthews-DeMers 20,450 - - -
- - - -
M Derbyshire
M Rollins 100,000 - 100,000 -
P Slabbert 30,000 - 30,000 -
- - - -
D Toohey
- - - -
J Oatley
i) There have been no changes in the directors’ interests since the year-end.
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Directors’ shareholding requirement (audited)

The table below shows the shareholding of each executive director against their respective shareholding requirement as at 31 March 2019:

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Shares held
Vested but Unvested and
Owned subject to subject to Shareholding Current Prior year
outright or holding vesting requirement shareholding shareholding
Director vested period conditions (% salary) (% salary) (% salary)
S Matthews-DeMers 20,450 - 235,948 100 9.0 N/A
M Rollins 100,000 - - N/A N/A
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S Matthews-DeMers will be leaving Carclo plc on 31 October 2019. The Remuneration Committee has determined that M Rollins was not to be bound by the shareholding requirements.

Directors’ interests in shares in Carclo long-term incentive plans (audited)

Details of share awards under the Carclo PSP made to executive directors are shown below

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Market value
per share
Director and year At 1 April At 31 March at date of award Determination
of award 2018 Granted Vested Lapsed 2019 £ Date
S Matthews-DeMers
PSP 2018 - 204,000 - - 204,000 1.135 31.7.21
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Overview
Materiality: £434k (2018:£450k)
group financial
statements as 0.3% of group revenue (2018: 5.3%
a whole ofgroup profit before tax)
Coverage 95% of group revenue (2018: 99% of
group profit before tax)
Key audit matters vs 2018
Recurring risks Defined benefit pension ►
obligation (Group and
Parent Company)
Valuation of Carclo ►
Technical Plastics
(CTP) Goodwill
New risks Going concern
Valuation of LED
Technologies (LED)
cash generating unit
The impact of
uncertainties due to
the UK exiting the
European union on our
audit
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The risk Our response
Going concern Disclosure quality Our procedures included:
We draw attention to note 1to the There is little judgement • Our sector experience: With the assistance of our restructuring
financial statements which indicates that involved in the directors’ specialists assessed and challenged the key assumptions in the
the Group’s net debt at 31 March 2019 conclusion that risks and prospective financial information prepared by management.
was £38.5m, increasing from £31.5m circumstances described • Funding assessment: We obtained and inspected the banking
at 31 March 2018, and the Group’s and in note 1 to the financial agreement to ascertain the committed level of financing, duration
the parent Company’s ability to continue statements represent a and related covenant requirements, and inspected correspondence
as a going concern is dependent on material uncertainty over the from the lenders confirming their agreement to the change in the
both the Group’s ability to meet its ability of the Group and the definition of the covenants and evaluated the directors’ assessment
forecasts and remain within the overall parent Company to continue of the impact on banking facilities of both a sale of Wipac and the
bank and other debt facilities and be as a going concern for a impact of alternative options in the absence of a successful disposal
in compliance with covenants and the period of at least a year from of Wipac.
Group’s ability to refinance it’s bank the date of approval of the
facility in January 2021. The Group’s and financial statements. • Historical comparisons: We compared the prior period’s
the Parent Company’s ability to continue prospective financial information against the prior period’s actual
as a going concern is also dependent on However, clear and full results and compared the current period’s prospective financial
a disposal of the Wipac business. There disclosure of all the reasonably information with the post-year end actual results to assess historical
are a number of uncertainties in relation possible scenarios relating to reliability of the forecasting.
to disposal proceeds and timing. In the the key uncertainties and the
• Sensitivity analysis: We considered sensitivities relating to the
event that a disposal is not achieved the directors’ rationale for the use
timing and disposal proceeds of the planned Wipac sale, the timing
continued operation of Wipac depends of the going concern basis of
of potential cash receipts from alternative options in the absence of
on significant support from customers, preparation, including that
the successful disposal of Wipac and sensitivities relating to other key
which is subject to review on a week to there is a related material assumptions in the prospective financial information taking account
week basis. uncertainty, is a key financial
of reasonably possible (but not unrealistic) adverse effects that
statement disclosure. The
could arise from these risks individually and collectively in relation to
These events and conditions, along focus of our audit was
available facility headroom and covenant compliance.
with the other matters explained in that all of those reasonably
note 1, constitute a material uncertainty possible scenarios have been • Evaluating directors’ intent: We evaluated the achievability
that may cast significant doubt on the adequately disclosed. Auditing of the actions the directors consider they would take to improve
Group’s and the parent Company’s standards require that to be the position should the sale of Wipac not be achieved within an
ability to continue as a going concern. reported as a key audit matter. appropriate timeframe should other key risks materialise.
Our opinion is not modified in respect • Assessing transparency: We assessed the completeness and
of this matter. accuracy of the matters covered in the going concern disclosure by
comparing them to the outcome of our procedures detailed above.
Our results: We found the disclosure of the material uncertainty to be
acceptable.
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The risk Our response
The impact of Unprecedented levels of uncertainty We developed a standardised firm-wide approach to the consideration
uncertainties due to the of the uncertainties arising from Brexit in planning and performing our
UK exiting the European All audits assess and challenge the audits.
Union. reasonableness of estimates, in particular
as described in respect of the valuation Our procedures included:
Refer to pages 38 and 39 of CTP Goodwill, and related disclosures
• Brexit knowledge: We considered the directors’ assessment of
(Audit Committee Report) and the appropriateness of the going
Brexit-related sources of risk for the Group’s business and financial
concern basis of preparation of the
financial statements. All of these depend resources compared with our own understanding of the risks. We
on assessments of the future economic considered the directors’ plans to take action to mitigate the risks.
environment and the Group’s future • Sensitivity analysis: When addressing the risk of the valuation of
prospects and performance. CTP Goodwill and Going concern and other areas that depend on
forecasts, we compared the directors’ analysis to our assessment
In addition, we are required to consider of the full range of reasonably possible scenarios resulting from
the other information presented in the Brexit uncertainty and, where forecast cash flows are required to be
Annual Report including the principal discounted, considered adjustments to discount rates for the level of
risks disclosure and the viability remaining uncertainty.
statement and to consider the directors’
statement that the annual report and • Assessing transparency: As well as assessing individual disclosures
financial statements taken as a whole is as part of our procedures over the valuation of CTP Goodwill and
fair, balanced and understandable and Going concern we considered all of the Brexit related disclosures
provides the information necessary for together, including those in the strategic report, comparing the
shareholders to assess the Group’s overall picture against our understanding of the risks.
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In addition, we are required to consider the other information presented in the Annual Report including the principal risks disclosure and the viability statement and to consider the directors’ statement that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

Our results: As reported under the valuation of CTP Goodwill and Going concern, we found the resulting estimates and related disclosures of the valuation of CTP Goodwill and disclosures in relation to going concern to be acceptable. However, no audit should be expected to predict the unknowable factors or all possible future implications for a Group and this is particularly the case in relation to Brexit.

Brexit is one of the most significant economic events for the UK and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unkown.

Our response

The risk

Our procedures included:

Valuation of goodwill in CTP Forecast based valuation

(£21.7million; 2018: Goodwill allocated to the CarcloTechnical £21.4million) Plastics (CTP) cash generating unit (“CGU”) is significant and the estimated Refer to pages 38 and 39 recoverable amount, based on value in use (Audit Committee Report), (“VIU”), is subjective due to the inherent page 75 (accounting policy) uncertainty involved in forecasting and and page 93 (financial discounting future cash flows. As stated disclosures). in note 12, minor changes in the discount rate or profit forecasts would lead to an impairment.

Historical comparisons: We analysed the Group’s previous projections against actual outcomes to assess historical reliability of the forecasting. Where there were historical inaccuracies we performed additional sensitivity analysis.
Benchmarking assumptions: We compared the Group’s trading forecasts against current trading performance and against anticipated long term growth rates for the sectors and countries within which the entity operates.
Sensitivity analysis: We performed analysis of reasonably possible downsides and breakeven analysis on the key assumptions including terminal growth rates, discount rate, operating profit and operating profit margins.

The effect of this matter is that, as part of our risk assessment, we determined that the value in use of goodwill has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole, and possibly many times that amount. The financial statements (note 12) disclose the sensitivity estimated by the Group.

Our sector experience: With the assistance of our own valuation specialists we assessed and challenged the discount rate. We benchmarked each input in the discount rate calculation against our own expectations considering the current financial circumstances of the Group, and we compared the overall discount rate to an expected range based on our own benchmarks.
Our sector experience: We assessed whether the allocation of central costs to the Group’s CGUs was comparable with the revised strategy for the Group.
Comparing valuations: We compared the sum of the discounted cash flows to the Group’s market capitalisation to assess the reasonableness of those cash flows.
Assessing transparency: We assessed whether the Group’s disclosures about the basis of valuation methodology and sensitivity of the outcome of the impairment assessment to changes in key assumptions reflected the risks inherent in the valuation of goodwill.

Our results: We found the resulting estimate of the recoverable amount of goodwill and related disclosures to be acceptable (2018 result: acceptable).

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The risk Our response
Recoverable amount of Subjective valuation and allocation of impairment Our procedures included:
LED cash generating unit loss
• Methodology choice: We evaluated the
appropriateness and application of the valuation
(£27.8 million; 2018: The valuation of the LED Technologies (LED) cash
model used to measure the recoverable amount of
£75.6million) generating unit (“CGU”) has been determined by a fair
the CGU.
value less costs of disposal (“FVLCOD”) model based
Refer to pages 38 and 39 on an estimated value which would be expected to be • Comparing valuations: We compared the
(Audit Committee Report), recovered through a distressed sale process and is also recoverable amount of PPE to external information,
page 75 (accounting policy) based on an indicative price of what a third party would specifically land and buildings to independent
and page 94 (financial be willing to pay for the business. The model is derived property valuations, plant and machinery to post year
disclosures). from a post year end valuation and so there is inherent end sales and remaining assets to an independent
subjectivity in determining conditions which existed estimate.
at the balance sheet date. As an impairment has been
recognised on the LED CGU any changes in the value • Historical comparisons: We compared the
arising during the sale process having a direct impact will recoverable amount of working capital balances to
affect the carrying value of the CGU. actual realisation of assets post year-end.
• Assessing valuer’s credentials: We evaluated the
The value of the goodwill was a small proportion of the
external expert’s competence and independence.
total asset value of the CGU so was fully impaired, and
then an assessment was performed on the remaining • Assessing transparency: We assessed whether
assets, including PPE, to write the other assets down to the Group’s disclosures of the recoverable amount
their recoverable amount. The total impairment recorded of the LED CGU reflected the risks inherent in the
against the assets in this CGU is £8.5m. valuation and the estimates applied when allocating
the impairment loss.
The effect of these matters is that, as part of our
Our results: We found the resulting estimate of the
risk assessment, we determined that the recoverable
recoverable amount of the LED GCU after impairment,
amount of the LED CGU has a high degree of estimation
the allocation of the impairment loss and related
uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial disclosures to be acceptable.
statements as a whole, and possibly many times that
amount. The financial statements (note 12) disclose the
sensitivity estimated by the Group.
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The risk Our response Valuation of defined Subjective valuation Our procedures included: benefit pension scheme Estimates and assumptions are made in valuing the • Our sector experience: We challenged, with obligation Group and parent Company’s post-retirement defined benefit plan obligations (before deducting scheme the assistance of our actuarial specialist, the key assumptions applied including the discount rate, (Group and Parent Company) assets), including in particular the discount rate, the inflation rates, the impact of equalisation of benefits (£215.4m 2018: £199.8m) inflation assumptions and the mortality assumptions. (‘GMP equalisation’)and mortality against externally Small changes in these assumptions and estimates derived data. Refer to pages 38 and 39 would have a significant effect on the Group and parent (Audit Committee Report), Company’s net pension deficit. • Assessing transparency: We considered the page 77 (accounting policy) adequacy of disclosures made in respect of the and page 100 (financial The effect of these matters is that, as part of our sensitivity of the obligation to changes in these disclosures). risk assessment, we determined that the defined assumptions. benefit pension scheme obligation has a high degree of estimation uncertainty, with a potential range of Our results: We found the valuation of the Group reasonable outcomes greater than our materiality for the pension scheme obligation to be acceptable and related financial statements as a whole, and possibly many times disclosures (2018 result: acceptable). that amount. The financial statements (note 22) disclose the sensitivity estimated by the Group.

Our results: We found the valuation of the Group pension scheme obligation to be acceptable and related disclosures (2018 result: acceptable).

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Group revenue
£144.8m (2018: £146.2m)
Group revenue
Group materiality
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Group Materiality £434k (2018: £450k)

£434k Whole financial statements materiality (2018: £450k)

£290k

Range of materiality at 7 components (£53k-£290k) (2018: £23k to £300k)

£15k Misstatements reported to the audit committee (2018: £23k)

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Group Loss before tax (2018: group
profit before tax)
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Group revenue
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4
95% 96%
(2018 98%) (2018 96%)
96
95
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Group total assets
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95%
(2018 99%)
99
95
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Key: Full scope for group audit purposes 2019 Specified risk-focused audit procedures 2019 Full scope for group audit purposes 2018 Specified risk-focused audit procedures 2018 Residual components

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2019 2018
Notes £000 £000
Revenue 3 144,851 146,214
Statutory operating (loss) / profit 3, 5 (12,593) 9,907
Finance revenue 8 58 99
Finance expense 8 (2,119) (1,839)
(Loss) / profit before tax (14,654) 8,167
Income tax (expense) / credit 9 (3,978) 325
(Loss) / profit after tax (18,632) 8,492
Attributable to -
Equity holders of the parent (18,632) 8,492
(18,632) 8,492
The above results were derived from continuing operations.
(Loss) / earnings per ordinary share 10
Basic (25.4) p 11.6 p
Diluted (25.4) p 11.6 p
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* The group has initially applied IFRS 15 using the cumulative effect method. Under this method, the comparative information is not restated.
See note 4.
Alternative Performance Measures - Underlying operating profit and proforma
unaudited adjusted operating profit
2019 2018
£000 £000
Statutory operating (loss) / profit
(12,593) 9,907
Exceptional items
Rationalisation and restructuring costs 7 1,935 556
Compensation for loss of office 7 - 265
Charge in respect of retirement benefits - see note 22 7,22 3,559 -
Impairment review of LED Technologies - see notes 12 and 13 7 8,480 -
Other 7 (66) 83
Underlying operating profit
1,315 10,811
Proforma unaudited adjustment - Exceptional price concession on exit of mid-volume 7 7,104 -
automotive business
Proforma unaudited adjusted operating profit 8,419 10,811
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**Other items comprise litigation costs, costs associated with proposed offer, impairment of CIT and profit on disposal of surplus properties

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2019 2018
£000 £000
(Loss) / profit for the year (18,632) 8,492
Other comprehensive income -
Items that will not be reclassified to the income statement
Remeasurement (losses) / gains on defined benefit scheme (16,293) 2,150
Deferred tax arising (5,260) (392)
Total items that will not be classified to the income statement (21,553) 1,758
Items that are or may in future be classified to the income statement
Foreign exchange translation differences 1,260 (2,943)
Net investment hedge (425) 705
Deferred tax arising (61) 138
Total items that are or may in future be classified to the income statement 774 (2,100)
Other comprehensive (expense), net of tax (20,779) (342)
Total comprehensive (expense) / income for the period (39,411) 8,150
Attributable to -
Equity holders of the parent (39,411) 8,150
- -
Non-controlling interests
Total comprehensive (expense) / income for the period (39,411) 8,150
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2019 2018
Notes £000 £000
Assets
Intangible assets 12 24,144 25,311
Property, plant and equipment 13 42,495 46,446
Investments 14 7 7
Deferred tax assets 21 442 8,731
Trade and other receivables 17 126 143
Total non current assets 67,214 80,638
Inventories 15 19,657 19,812
Contract assets 16 20,264 -
Trade and other receivables 17 32,101 46,449
Cash and cash deposits 18 10,330 12,962
Non current assets classified as held for sale 19 - 200
Total current assets 82,352 79,423
Total assets 149,566 160,061
Liabilities
Interest bearing loans and borrowings 20 1,048 29,253
Deferred tax liabilities 21 4,051 4,070
Provisions 23 - 323
Trade and other payables 25 132 208
Retirement benefit obligations 22 49,121 29,798
Total non current liabilities 54,352 63,652
Trade and other payables 24 31,444 28,313
Current tax liabilities 867 731
Contract liabilities 4 2,540 -
Provisions 23 333 161
Interest bearing loans and borrowings 20 47,763 15,185
Total current liabilities 82,947 44,390
Total liabilities 137,299 108,042
Net assets 12,267 52,019
Equity
Ordinary share capital issued 26 3,671 3,664
Share premium 7,359 7,359
Translation reserve 27 7,008 6,234
Retained earnings 27 (5,745) 34,788
Total equity attributable to equity holders of the parent 12,293 52,045
Non-controlling interests (26) (26)
Total equity 12,267 52,019
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The group has initially applied IFRS 15 using the cumulative effect method. Under this method, the comparative information is not restated. See note 4.

Approved by the board of directors and signed on its behalf by -

Mark Rollins

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Peter Slabbert

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31 October 2019

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Attributable to equity holders of the company Non-
Share Share Translation Retained controlling Total
capital premium reserve earnings Total interests equity
£000 £000 £000 £000 £000 £000 £000
Balance at 1 April 2017 3,650 7,359 8,334 24,946 44,289 (26) 44,263
Profit for the year - - - 8,492 8,492 - 8,492
Other comprehensive income/loss -
Foreign exchange translation differences - - (2,943) - (2,943) - (2,943)
Net investment hedge - - 705 - 705 - 705
Remeasurement gains on defined benefit scheme - - - 2,150 2,150 - 2,150
Taxation on items above - - 138 (392) (254) - (254)
Total comprehensive income/(loss) for the period - - (2,100) 10,250 8,150 - 8,150
Transactions with owners recorded directly in equity -
Share based payments - - - (40) (40) - (40)
Exercise of share options 14 - - (262) (248) - (248)
- - - - - - -
Issue of share capital, net of costs
Dividends to shareholders - - - - - - -
Taxation on items recorded directly in equity - - - (106) (106) - (106)
Balance at 31 March 2018 3,664 7,359 6,234 34,788 52,045 (26) 52,019
Balance at 1 April 2018, as previously reported 3,664 7,359 6,234 34,788 52,045 (26) 52,019
Adjustment on initial application of IFRS 15, net of tax. - - - (69) (69) - (69)
Adjusted balance at 1 April 2018 3,664 7,359 6,234 34,719 51,976 (26) 51,950
Loss for the year - - - (18,632) (18,632) - (18,632)
Other comprehensive income/(loss) -
Foreign exchange translation differences - - 1,260 - 1,260 - 1,260
Net investment hedge - - (425) - (425) - (425)
Remeasurement losses on defined benefit scheme - - - (16,293) (16,293) - (16,293)
Taxation on items above - - (61) (5,260) (5,321) - (5,321)
Total comprehensive income/(loss) for the period - - 774 (40,185) (39,411) - (39,411)
Transactions with owners recorded directly in equity -
Share based payments - - - 36 36 - 36
Exercise of share options 7 - - (97) (90) - (90)
Taxation on items recorded directly in equity - - - (218) (218) - (218)
Balance at 31 March 2019 3,671 7,359 7,008 (5,745) 12,293 (26) 12,267
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The group has initially applied IFRS 15 using the cumulative effect method. Under this method, the comparative information is not restated. See note 4.

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2019 2018
Notes £000 £000
Cash generated from operations 29 4,145 6,257
Interest paid (1,202) (1,016)
Tax paid (1,107) (1,693)
Net cash from operating activities 1,836 3,548
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 333 48
Interest received 58 99
Acquisition of property, plant and equipment (6,897) (8,773)
Acquisition of intangible assets - computer software (87) (350)
Net cash from investing activities (6,593) (8,976)
Cash flows from financing activities 215 750
Drawings on term new loans facilities 26 -
Cash outflow in respect of performance share plan awards (52) (248)
Repayment of finance leases (453) -
Net cash from financing activities (264) 502
Net decrease in cash and cash equivalents (5,021) (4,926)
Cash and cash equivalents at beginning of period (2,223) 3,381
Effect of exchange rate fluctuations on cash held 206 (678)
Cash and cash equivalents at end of period (7,038) (2,223)
-
Cash and cash equivalents comprise
Cash and cash deposits 10,330 12,962
Bank overdrafts (17,368) (15,185)
(7,038) (2,223)
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3 Segment reporting continued

Analysis by business segment

The segment results for the year ended 31 March 2019 were as follows –

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Technical LED Group
Plastics Technologies Aerospace Unallocated Eliminations total
£000 £000 £000 £000 £000 £000
Consolidated income statement
-
Total revenue 93,506 47,479 6,720 - (2,854) 144,851
Less inter-segment revenue (2,663) (191) - - 2,854 -
External revenue 90,843 47,288 6,720 - - 144,851
Expenses (83,997) (51,145) (5,422) (2,972) - (143,536)
Underlying operating profit/loss 6,846 (3,857) 1,298 (2,972) - 1,315
Proforma unaudited adjustment - exceptional - 7,104 - - - 7,104
price concession on exit of mid-volume
automotive business
Proforma unaudited adjusted 6,846 3,247 - 1,298 (2,972) - 8,419
operating profit / (loss)
Rationalisation costs (514) (971) - (451) - (1,936)
Costs associated with proposed offer - - - (52) - (52)
Profit arising on the disposal of surplus properties 118 - - - - (118)
Impairment of LED Technologies - (8,479) - - - (8479)
Charge in respect of retirement benefits - - - (3,559) - (3,559)
Proforma unaudited adjustment - exceptional
price concession on exit of mid-volume - (7,104) - - - (7,104)
automotive business
Statutory operating profit/(loss) 6,450 (13,307) 1,298 (7,034) - (12,593)
Net finance expense (2,061)
Income tax credit (3,978)
Loss after tax (18,632)
Technical LED Group
Plastics Technologies Aerospace Unallocated Eliminations total
£000 £000 £000 £000 £000 £000
Consolidated statement of financial position
Segment assets 92,387 46,557 6,352 4,270 - 149,566
Segment liabilities (17,037) (25,071) (1,046) (94,145) - (137,299)
Net assets 75,350 21,486 5,306 (89,875) - 12,267
Other segmental information
Capital expenditure on property, plant and equipment 1,937 5,574 311 - - 7,822
Capital expenditure on computer software 42 23 - 22 - 87
Depreciation 4,009 1,071 178 2 - 5,260
Amortisation of computer software 20 73 - 100 - 193
Amortisation of other intangibles 56 30 - - - 86
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3 Segment reporting continued

The segment results for the year ended 31 March 2018 were as follows –

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Technical LED Group
Plastics Technologies Aerospace Unallocated Eliminations total
£000 £000 £000 £000 £000 £000
Consolidated income statement
Total revenue 92,237 50,707 6,072 - (2,802) 146,214
Less inter-segment revenue (2,584) (118) (100) - 2,802 -
Total external revenue 89,653 50,589 5,972 - - 146,214
Expenses (82,980) (44,167) (5,225) (3,031) - (135,403)
Underlying operating profit 6,673 6,422 747 (3,031) - 10,811
Rationalisation costs (98) - - (458) - (556)
Compensation for loss of office - - - (265) - (265)
Costs arising on the disposal of surplus properties - - - 4 - 4
Impairment of CIT Technology - - - (66) - (66)
Litigation costs - - - (21) - (21)
Operating profit/(loss) 6,575 6,422 747 (3,837) - 9,907
Net finance expense (1,740)
Income tax expense 325
Profit after tax 8,492
Technical LED Group
Plastics Technologies Aerospace Unallocated Eliminations total
£000 £000 £000 £000 £000 £000
Consolidated statement of financial position
Segment assets 100,640 44,164 6,486 8,771 - 160,061
Segment liabilities (22,516) (9,698) (784) (75,044) - (108,042)
Net assets 78,124 34,466 5,702 (66,273) - 52,019
Other segmental information
Capital expenditure on property, plant and equipment 6,079 2,966 81 149 - 9,275
Capital expenditure on computer software 37 53 - 260 - 350
- - - - - -
Capital expenditure on other intangibles
Depreciation 3,592 938 165 37 - 4,732
Amortisation of computer software 19 30 - 112 - 161
Amortisation of other intangibles 56 31 - 33 - 120
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3 Segment reporting continued

Analysis by geographical segment

The business operates in three main geographical regions - the United Kingdom, North America and in lower cost regions including the Czech Republic, China and India, and the geographical analysis was as follows -

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Expenditure on tangible
fixed assets and
External revenue Net segment assets computer software
2019 2018 2019 2018 2019 2018
£000 £000 £000 £000 £000 £000
United Kingdom 39,559 40,948 (44,777) (10,732) 6,731 7,323
North America 46,566 45,199 30,114 30,569 770 860
Rest of world 58,726 60,067 26,930 32,182 408 1,442
144,851 146,214 12,267 52,019 7,909 9,625
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The analysis of segment revenue represents revenue from external customers based upon the location of the customer.

The analysis of segment assets and capital expenditure is based upon the location of the assets.

The material components of unallocated segment assets and liabilities are retirement benefit obligation net liabilities of £49.121 million (2018 - net liabilities of £29.798 million), and net borrowings of £37.374 million (2018 - £38.545 million).

One Technical Plastics customer accounted for 17.6% of Group revenues (2018 – 17.6%) and one LED Technologies customer accounted for 13.1% of group revenues (2018 - 16.2%) and similar proportions of trade receivables. No other customer accounted for more than 10.0% of revenues in the year or prior year.

The unallocated segment relates to central costs and non-trading companies.

Deferred tax assets by geographical location are as follows, United Kingdom £nil (2018 - £8.335 million), North America £0.139 million (2018 - £0.186 million), Rest of world £0.303 million (2018 - £0.209 million).

Total non-current assets by geographical location are as follows, United Kingdom £ 25.434 million (2018 - £28.850 million), North America £21.918 million (2018 - £21.593 million), Rest of world £19 million (2018 - £21.314 million).

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4 Revenue from Contracts with Customers continued

b) Disaggregation of revenue

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Technical Technical LED LED Aerospace Aerospace Group Group
Plastics Plastics Technologies Technologies total total
2019 2018 2019 2018 2019 2018 2019 2018
£000 £000 £000 £000 £000 £000 £000 £000
Major products/service lines
Manufacturing 80,099 76,056 33,434 26,922 6,720 5,972 120,253 108,950
Tooling 10,744 13,597 13,854 23,667 - - 24,598 37,264
90,843 89,653 47,288 50,589 6,720 5,972 144,851 146,214
Timing of revenue recognition
Products transferred at a point in time 80,099 76,056 33,434 26,922 6,720 5,972 120,253 108,950
Products and services transferred over 10,744 13,597 13,854 23,667 - - 24,598 37,264
time
90,843 89,653 47,288 50,589 6,720 5,972 144,851 146,214
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The Group has initally applied IFRS 15 using the cumulative effect method. Under this method, the comparative information is not restated.

c) Contract balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

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31 March 1 April
2019 2018
£000 £000
Trade receivables (see note 17) 23,046 19,693
Contract assets (see note 16) 20,264 -
Contract liabilities (2,540) -
43,539 19,693
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The contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the reporting date on its tooling and premium automotive lighting contracts.

The contract assets are transferred to receivables when the rights become unconditional. The contract liabilities relate to the advance consideration received from customers before the related revenue has been recognised; this applies to tooling contracts in both Premium Automotive Lighting and Technical Plastics.

Premium Automotive Lighting contracts are complex and there is no typical timing of payment. Accordingly contract assets and contract liabilities can vary depending on the circumstances of an individual contract.

The Group has initally applied IFRS 15 using the cumulative effect method. Under this method, the comparative information is not restated.

4 Revenue from Contracts with Customers continued

d) Transaction price to remaining performance obligations

The following table includes revenue expected to be recognised in the future related to performance obligations that are (partially) unsatisfied at the reporting date:

Revenue expected to be received

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----- Start of picture text -----

2020 2021 2022 2023
£000 £000 £000 £000
Tooling - Technical Plastics £1,112 - - -
Tooling - LED Technologies £3,567 - - -
4,679 - - -
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e) Impacts on financial statements

The following tables summarise the impacts of adopting IFRS 15 on the Group’s consolidated financial statements for the year ending 31 March 2019 -

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Balances without
As reported Adjustments adoption of IFRS 15
£000 £000 £000
Consolidated statement of financial position
31 March 2019
Deferred tax assets 442 - 442
Inventories 19,657 - 19,657
Trade and other receivables 32,227 (1,724) 30,503
Contract assets 20,264 (2,122) 18,142
Other assets 76,976 - 76,976
Total assets 149,566 (3,846) 145,720
Deferred tax liabilities
Trade and other payables 4,051 - 4,051
Contract liabilities 31,576 (3,047) 28,529
Provisions 2,540 (1,133) 1,407
Other liabilities 333 - 333
Total liabilities 98,799 - 98,799
137,299 (4,180) 133,119
Retained earnings
Other equity (5,745) 334 (5,411)
Total equity 18,012 - 18,012
12,267 334 12,601
Balances without
As reported Adjustments adoption of IFRS 15
£000 £000 £000
Consolidated statement of profit or loss and OCI
31 March 2019
Revenue 144,851 3,264 148,115
Raw materials and consumables (74,344) - (74,344)
Other operating charges (19,048) (2,999) (22,047)
Other administrative expenses (64,052) - (64,052)
Net finance expenses (2,061) - (2,061)
Income tax expense (3,978) - (3,978)
Profit for the period (18,632) 265 (18,367)
Other comprehensive income (20,779) - (20,779)
Total comprehensive income (39,411) 265 (39,146)
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Adjustments to revenue, other operating charges, trade and other receivables, trade and other payables, contract assets and contract liabilities resulting from the adoption of IFRS 15 relate principally to the use of the output basis of revenue recognition for Premium Automotive Lighting tooling contracts.

5 Operating (loss)/profit

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2019 2018
£000 £000
Operating (loss) / profit is arrived at as follows -
Revenue 144,851 146,214
Increase in stocks of finished goods and work in progress (1,613) 934
143,238 147,148
Raw materials and consumables 72,731 70,719
Personnel expenses (see note 6) 41,796 37,714
Impairment loss on trade and other receivables, including contract assets 21 -
Amortisation of intangible assets 279 281
Depreciation of property, plant and equipment 5,260 4,732
Auditor's remuneration -
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 119 84
Fees payable to the Company’s auditor and its associates for other services:
The audit of the Company’s subsidiaries, pursuant to legislation 106 101
Audit related assurance services 15 10
Tax advisory services - 27
Total 240 222
Operating lease rentals -
Property 1,900 1,535
Plant and machinery 372 392
Total 2,272 1,927
Rationalisation costs (see note 7) 1,935 556
Costs associated with proposed offer (see note 7) 52 -
Litigation costs (see note 7) - 21
Profit arising on the disposal of surplus properties (see note 7) (118) (4)
Charge in respect of retirement benefits (see note 22) 3,559 -
Compensation for loss of office (see note 7) - 265
Impairment of LED Technologies (see note 7) 8,480 -
Impairment review of CIT Technology (see note 7) - 66
Foreign exchange (gains) (220) (8)
Pension scheme administration costs 496 713
Other operating charges 19,048 20,037
155,831 137,241
Statutory operating (loss) / profit (12,593) 9,907
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6 Personnel Expenses

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2019 2018
£000 £000
Wages and salaries 35,528 31,720
Social security contributions 4,673 4,891
Charge in respect of defined contribution and other pension plans 1,559 1,143
Share based payments (see note 26) 36 (40)
41,796 37,714
Exceptional charges re past service costs (see notes 7 / 22) 3,559 -
45,355 37,714
Redundancy costs of £0.250 million (2018 - £0.226 million) are excluded from the above
analysis and included in note 7.
Directors' remuneration and emoluments, which are included in this analysis,
are described in the directors' remuneration report on pages 41 to 56.
The gains made by the directors on the vesting of PSP awards during the period were:
2019 2018
£000 £000
CJ Malley 76 197
SL Matthews-DeMers - -
The average monthly number of persons employed by the group during the year was as follows -
2019 2018
Number of Number of
employees employees
By segment
Unallocated 22 21
Technical Plastics 957 998
LED Technologies 451 351
Aerospace 71 72
1,501 1,442
By geographic location
United Kingdom 699 596
North America 334 310
Rest of world 468 536
1,501 1,442
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7 Exceptional items

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2019 2018
£000 £000
Rationalisation costs (1,935) (556)
Charge in respect of retirement benefits - see note 22 (3,559) -
Impairment review of LED Technologies - see notes 12 and 13 (8,480) -
Litigation costs - (21)
Costs associated with proposed offer (52) -
Compensation for loss of office - (265)
Profit arising on the disposal of surplus properties 118 4
Impairment review of CIT Technology - (66)
Exceptional items (13,908) (904)
Proforma unaudited adjustment - Exceptional price concession on exit of mid-volume (7,104) -
automotive business
(21,012) (904)
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Rationalisation costs included Wipac consultancy costs and stock write-offs along with the cost of restructuring the CTP Czech business and other redundancy costs in the US and the UK.

The £3.6 million charge in relation to retirement benefits relates to the cost of GMP equalisation. See note 22 for further details.

Further details of the LED impairment are given in notes 12 and 13.

During the year a £0.1 million profit was made on the disposal of the remaining Harthill property.

The £7.1 million proforma unaudited adjustment related to the exceptional price concession on exit of mid volume automotive business.

8 Finance revenue and expense

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2019 2018
£000 £000
Finance revenue comprises -
Interest receivable on cash at bank 58 99
Finance revenue 58 99
Finance expense comprises -
Bank loans and overdrafts (1,202) (1,009)
Finance lease interest (72) -
Other (57) -
Net interest on the net defined benefit liability (788) (830)
Finance expense (2,119) (1,839)
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9 Income tax expense

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2019 2018
£000 £000
The expense recognised in the consolidated income statement comprises -
United Kingdom corporation tax
Corporation tax on (losses) / profits for the current year 108 -
Adjustments for prior years (83) 652
Overseas taxation
Current tax (1,272) (1,047)
Adjustments for prior years - (91)
Total current tax net expense (1,247) (486)
Deferred tax expense
Origination and reversal of temporary differences -
Deferred tax 1,026 (899)
Deferred tax - exceptional derecognition of deferred tax assets (3,978) -
Adjustments for prior years 221 (280)
Rate change - 1,990
Total deferred tax (charge) / credit (2,731) 811
Total income tax (expense) / credit recognised in the consolidated income statement (3,978) 325
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Group factors affecting the tax charge for the year -

The tax assessed for the year is lower (2018 - lower) than the standard rate of corporation tax in the UK. The differences are explained as follows -

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2019 2018
£000 % £000 %
(Loss) / profit before tax (14,654) 8,167
Income tax using standard rate of UK corporation tax of 19% (2018 - 19%) (2,784) 19.0 1,552 19.0
Other items not deductible for tax purposes (486) 3.3 77 0.9
Provision made against recoverability of Wipac assets 2,677 (18.3) - -
Adjustments in respect of overseas tax rates 207 (1.4) 341 4.2
Other temporary differences 142 (1.0) (142) (1.7)
Exceptional derecognition of deferred tax assets 3,978 (27.1) - -
Adjustment to current tax in respect of prior periods (UK and overseas) 83 (0.6) (561) (6.9)
Adjustments to deferred tax in respect of prior periods (UK and overseas) (221) 1.5 280 3.4
Foreign taxes expensed in the UK 382 (2.6) 118 1.5
Rate change on deferred tax - - (1,990) (24.4)
Total income tax (charge) / credit 3,978 (27.2) (325) (4.0)
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On 22 December 2017 the Tax Cuts and Jobs Act in the USA was substantively enacted and reduced the federal corporate income tax rate from 35% to 21%. As at 31 March 2018 this reduced the carrying value of the Group’s net USA deferred tax liabilities by £1.990 million with a corresponding tax credit being recognised in the consolidated income statement.

A net tax charge of £2.76 million (2018 credit: £0.203 million) has been classified as exceptional items, mainly in relation to derecognition of UK deferred tax assets in the year.

Tax on items charged outside of the Consolidated Income Statement -

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2019 2018
£000 £000
Deferred tax relating to actuarial remeasurement of the defined benefit scheme 5,260 392
Share based payments 218 106
Foreign exchange movements 61 (138)
Total income tax credited to equity 5,539 360
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10 Earning per share

The calculation of basic earnings per share is based on the (loss) / profit attributable to equity holders of the parent company divided by the weighted average number of ordinary shares outstanding during the year.

The calculation of diluted earnings per share is based on the (loss) / profit attributable to equity holders of the parent company divided by the weighted average number of ordinary shares outstanding during the year (adjusted for dilutive options).

The following details the result and average number of shares used in calculating the basic and diluted earnings per share -

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2019 2018
£000 £000
(Loss) / profit after tax from continuing operations (18,632) 8,492
- -
Loss attributable to non-controlling interests
(Loss) / profit after tax, attributable to equity holders of the parent (18,632) 8,492
2019 2018
Shares Shares
Weighted average number of ordinary shares in the year 73,374,078 73,210,394
Effect of share options in issue - 1,296
Weighted average number of ordinary shares (diluted) in the year 73,374,078 73,211,690
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In addition to the above, the company also calculates an earnings per share based on underlying profit as the Board believes this to be a better yardstick against which to judge the progress of the Group. Underlying profit is defined as profit before impairments, rationalisation costs, one-off retirement benefit effects, exceptional bad debts, exceptional stock losses, business closure costs, litigation costs and the impact of property and business disposals, net of attributable taxes. These items are excluded as they do not reflect the underlying performance of the group as they are non-recurring.

The following table reconciles

the Group’s profit to underlying profit used in the numerator in calculating underlying earnings per share; and
the Group’s profit to proforma unaudited underlying profit used in the numerator in calculating proforma unaudited adjusted earnings per share.

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2019 2018
£000 £000
(Loss) / profit after tax, attributable to equity holders of the parent (18,632) 8,492
Exceptional items
Rationalisation costs, net of tax 1,837 419
Costs associated with proposed offer 52 -
Compensation for loss off office, net of tax - 215
Litigation costs, net of tax - 17
Impairment review of LED Technologies, net of tax 8,480 -
Impairment review of CIT Technology, net of tax - 53
Charge in respect of retirement benefits, net of tax 3,559 -
Profit arising on the disposal of surplus properties, net of tax (118) (3)
Non-operating exceptional items
Tax credit resulting from the US Tax Cuts and Jobs Act - (1,990)
Derecognition of UK deferred tax assets 2,858 -
Underlying profit attributable to equity holders of the parent (1,964) 7,203
Proforma unaudited adjustment - exceptional price concession on exit from mid-volume -
7,104
automotive business
Proforma unaudited adjusted profit attributable to equity holders of the parent 5,140 7,203
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The US Tax Cuts and Jobs Act was substantively enacted during the year ended 31 March 2018 and reduced the federal corporate income tax rate from 35% to 21%. This resulted in a one-off tax credit to the income statement of £1.990 million.

10 Earnings per share continued

The following table summarises the earnings per share figures based on the above data -

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2019 2018
Pence Pence
Basic (loss) / earnings per share - continuing operations (25.4) 11.6
Basic (loss) / earnings per share - total (25.4) 11.6
Diluted (loss) / earnings per share - continuing operations (25.4) 11.6
Diluted (loss) / earnings per share - total (25.4) 11.6
Underlying (loss) / earnings per share - basic (2.7) 9.8
Underlying (loss) / earnings per share - diluted (2.7) 9.8
Proforma unaudited adjusted earnings per share - basic 7.0 9.8
Proforma unaudited adjusted earnings per share - diluted 7.0 9.8
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11 Dividends paid and proposed

The directors are not proposing a final dividend for the year ended 31 March 2019. No interim dividend has been paid after the year end.

12 Intangible assets

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Patents and Customer
development related Computer
Goodwill costs intangibles software Total
£000 £000 £000 £000 £000
Cost
Balance at 31 March 2017 25,692 29,814 1,050 1,808 58,364
Additions - - - 350 350
Disposals - - - (32) (32)
Effect of movements in foreign exchange (313) - (53) (41) (407)
Balance at 31 March 2018 25,379 29,814 997 2,085 58,275
Additions - - - 87 87
Reclassification from tangible, non-current assets - - - 47 47
Effect of movements in foreign exchange 305 - 45 38 388
Balance at 31 March 2019 25,684 29,814 1,042 2,257 58,797
Amortisation
Balance at 31 March 2017 1,474 29,614 429 1,145 32,662
Amortisation for the year - 53 67 161 281
Impairment - 66 - - 66
Disposals - - - (31) (31)
Effect of movements in foreign exchange 18 - (3) (29) (14)
Balance at 31 March 2018 1,492 29,733 493 1,246 32,964
Amortisation for the year - 20 66 193 279
Impairment 1,060 61 53 191 1,365
Effect of movements in foreign exchange 17 - 15 13 45
Balance at 31 March 2019 2,569 29,814 627 1,643 34,653
Carrying amounts
At 1 April 2017 24,218 200 621 663 25,702
At 31 March 2018 23,887 81 504 839 25,311
At 31 March 2019 23,115 - 415 614 24,144
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Impairment reviews were carried out at 31 March 2019 and an impairment of £1.365 million was recognised on intangible assets in respect of the LED Technologies cash generating unit.

12 Intangible assets (continued)

Impairment tests for cash generating units containing goodwill

Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units (“CGUs”) that are expected to benefit from that business combination. The carrying amount of the goodwill has been allocated to the Group’s principal CGUs, being the operating segments described in the operating segment descriptions in note 3.

The following cash generating units have significant carrying amounts of goodwill post impairment -

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----- Start of picture text -----

2019 2018
£000 £000
Technical Plastics 21,747 21,402
LED Technologies - 1,088
Aerospace 1,368 1,397
23,115 23,887
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Technical Plastics

The impairment review of the Technical Plastics cash generating unit was based on a calculation of value in use. This calculation used board approved cash flow projections based on actual operating results and current forecasts.

Operating results, being the key assumption within the model, have been forecast for a period of four years. A four year period has been utilised given the relatively stable nature of the segment. Year one, year two and year three (2019/20, 2020/21 and 2021/22) were based on detailed budgets prepared by management. Year four is extrapolated using these budgets and assuming growth in the range 2.1% - 4.5% per annum (2018 - 3.0% - 5.1% per annum) dependent upon the markets served. From year five onwards growth is assumed to lie within the range 2.1% - 4.5% per annum (2018 - 1.9% - 4.2% per annum).

The cash flows were discounted at pre-tax rates in the range 9.8% - 14.3% (2018 - 9.3% - 12.8%). These rates are calculated and reviewed annually. Changes in income and expenditure are based on expectations of future changes in the market.

Sensitivity testing of the recoverable amount to reasonably possible changes in key assumptions has been performed. Subsequent to the balance sheet date the CGU has been trading ahead of its plan, however with all other assumptions being unchanged, a 0.1% increase in the discount rate or a 0.8% decrease in profitability would reduce the headroom on the Technical Plastics CGU to nil. Should the discount rate increase further than this or the profitability decrease further then an impairment of the goodwill would be likely.

Aerospace

The impairment review of the Aerospace cash generating unit was based on a calculation of value in use. This calculation used board approved cash flow projections based on actual operating results and current forecasts.

Operating results, being the key assumption within the model, have been forecast for a period of four years. A four year period has been utilised given the relatively stable nature of the segment. Year one, year two and year three (2019/20, 2020/21 and 2021/22) were based on detailed budgets prepared by management. Year four was extrapolated using these budgets and assuming growth of 0.0% per annum (2018 - 3.0% per annum). From year five onwards growth was assumed to be 0.0% per annum (2018 - 3.0% per annum).

The cash flows were discounted at pre-tax rates in the range 10.0% - 10.3% (2018 - 7.8%). These rates are calculated and reviewed annually. Changes in income and expenditure are based on expectations of future changes in the market.

The valuation of the Aerospace cash generating unit indicates sufficient headroom such that a reasonably possible change to key assumptions is unlikely to result in an impairment of the related goodwill.

LED Technologies

The significant operational issues experienced by the LED Technologies cash generating unit (“CGU”) during the year led to a reduction in the recoverable value of the CGU. There has been a change in the valuation technique used to value this CGU and the impairment review of the LED Technologies CGU was based on an estimate of fair value less costs of disposal “FVLCOD” as this shows a higher recoverable amount than value in use.

The valuation of the LED Technologies CGU has been determined by a FVLCOD model based on an estimated value which would be expected to be recovered through a distressed sale process and is also based on an indicative price of what a third party would be willing to pay for the business. This valuation also includes the estimated costs of disposal. This valuation is a level 3 measurement which is based on inputs which are normally unobservable to market participants. The FVLCOD recoverable amount was lower than the carrying value of the assets in this CGU and therefore an impairment loss was recorded.

The goodwill and intangibles relating to the LED Technologies division were impaired and a charge of £1.060 million and £0.305 million was recognised. The property, plant and equipment was impaired down to its recoverable amount which was based on an estimated value which would be expected to be recovered through a distressed sale process. The impairment recognised against property, plant and equipment was £7.115 million. Other working capital balances within the LED Technologies CGU were not impaired on the basis that the assets were held at the recoverable amount.

The recoverable amount of the LED Technologies CGU is shown in the Segment reporting note 3.

13 Property, plant and equipment

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Land and Assets under Plant and
buildings construction equipment Total
£000 £000 £000 £000
Cost
Balance at 31 March 2017 27,148 - 69,638 96,786
Additions 2,722 2,867 3,686 9,275
Disposals - - (1,877) (1,877)
Effect of movements in foreign exchange (999) - (1,478) (2,477)
Balance at 31 March 2018 28,871 2,867 69,969 101,707
Additions 814 2,357 4,651 7,822
Disposals (125) - (1,073) (1,198)
Reclassification 67 - (136) (69)
Effect of movements in foreign exchange 635 - 817 1,452
Balance at 31 March 2019 30,262 5,224 74,228 109,714
Depreciation and impairment losses
Balance at 31 March 2017 6,649 - 46,714 53,363
Depreciation charge for the year 1,102 - 3,630 4,732
Disposals - - (1,808) (1,808)
Effect of movements in foreign exchange (300) - (726) (1,026)
Balance at 31 March 2018 7,451 - 47,810 55,261
Depreciation charge for the year 1,266 - 3,994 5,260
Disposals - - (1,057) (1,057)
Reclassification - - (22) (22)
Impairment 589 2,724 3,802 7,115
Effect of movements in foreign exchange 237 - 425 662
Balance at 31 March 2019 9,543 2,724 54,952 67,219
Carrying amounts
At 1 April 2017 20,499 - 22,924 43,423
At 31 March 2018 21,420 2,867 22,159 46,446
At 31 March 2019 20,719 2,500 19,276 42,495
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At 31 March 2019, properties with a carrying amount of £4.429 million were subject to a registered charge in favour of the Group pension scheme (2018 - £5.999 million).

At 31 March 2019, following the impairment review of the LED Technologies cash generating unit set out in Note 12, a £7.115 million impairment of tangible fixed assets was recognised.

14 Investments

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2019 2018
£000 £000
Equity securities at FVOCI 7 -
Equity securities available for sale - 7
7 7
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At 1 April 2018 on implementation of IFRS 9, the Group designated the quoted investments as equity securities at FVOCI because these equity securities represent investments that the Group intends to hold for the long-term for strategic purposes. In 2018, these investments were classified as available for sale.

15 Inventories

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2019 2018
£000 £000
Raw materials and consumables 11,207 9,749
Work in progress 699 796
Finished goods 7,751 9,267
19,657 19,812
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The value of inventories is stated after impairment for obsolescence and write downs to net realisable value of £2.030 million (2018 - £1.427 million).

16 Contract assets

Contract assets - see note 4

2019 £000	2018 £000
20,264
	~~-~~

The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all contract assets.

To measure the expected credit losses, contract assets have been grouped based on shared credit risk characteristics. The contract assets relate to unbilled work in progress and are therefore not past due. The group has reviewed the risk characteristics and consider them to be the same as the trade receivables not past due for the same types of contracts. The group has concluded that the expected loss rates for the contract assets are therefore £Nil.

17 Trade and other receivables

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2019 2018
£000 £000
Amounts due within one year 23,093 19,725
Trade receivables (47) (32)
Less impairment provision 23,046 19,693
Accrued income - 20,996
Prepayments 5,160 2,728
Other debtors 3,895 3,032
32,101 46,449
Amounts due after one year
Other debtors and prepayments 126 143
126 143
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The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.

To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. On that basis, the loss allowance as at 31 March 2019 was determined as follows for trade receivables:

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2019 2018
Gross Expected Gross Expected
carrying Loss loss carrying Loss loss
amount allowance rate amount allowance rate
£000 £000 % £000 £000 %
Not past due 17,728 - 0.0% 15,408 - 0.0%
Past due 0 - 30 days 4,055 - 0.0% 3,838 - 0.0%
Past due 31 - 60 days 321 6 1.9% 243 - 0.0%
Past due 61 - 120 days 214 - 0.0% 90 - 0.0%
More than 120 days 751 17 2.3% 116 2 1.7%
23,069 23 4.1% 19,695 2 1.7%
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17 Trade and other receivables continued

The movement in the allowance for impairment in respect of trade receviables and contract assets during the period was as follows:

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2019 2018
£000 £000
Balance at 1 April per IAS 39 2 15
- -
Adjustment on initial application of IFRS 9
Balance at 1 April per IFRS 9 2 15
Amounts written off - (13)
Net measurement of loss allowance 21 -
Balance at 31 March 23 2
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Comparative amounts for 2018 represent the allowance account for impairment losses under IAS 39.

18 Cash and cash deposits

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2019 2018
£000 £000
Cash at bank and in hand 10,330 12,962
10,330 12,962
19 Non current assets classified as held for sale
2019 2018
£000 £000
Surplus land and buildings - 200
Net assets held for sale - 200
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19 Non current assets classified as held for sale

During the year to 31 March 2019 surplus land and buildings at the closed Harthill, Scotland site with a written down value of £0.200 million were sold for proceeds of £0.318 million.

20 Interest bearing loans and borrowings

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2019 2018
£000 £000
Current -
Bank overdrafts 17,368 15,185
Bank loans 29,893 -
Finance lease liabilities 494 -
Other loans 8 -
47,763 15,185
Non current -
Bank loans repayable between one and two years - 29,253
Finance lease liabilities 1,030 -
Other loans 18 -
1,048 29,253
Total interest bearing loans and borrowings 48,811 44,438
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20 Interest bearing loans and borrowings continued

The bank overdrafts are predominantly in sterling and bear interest at 1.75% above prevailing UK bank base rates. At 31 March 2019 the gross amount of overdraft facilities available was £18.0 million (2018 - £16.0 million) of which £12.3 million was utilised at the year end (2018 - £7.0 million) net of qualifying cash balances.

Bank loans include £29.9 million (2018 - £29.3 million) secured on the assets of the Group.

At 31 March 2019 the Group had medium term multi-currency revolving loan facilities totalling £30.0 million (2018 - £30.0 million). These facilities were entered into on 27 March 2015 with the Group’s principal UK banker. They were due to expire on 27 March 2020 but, subsequent to the year end, these facilities have been extended to 31 January 2021. At 31 March 2019 these facilities were drawn to the extent of £29.9 million (2018 - £29.3 million) and incur interest at the rate of between 1.75% and 3.10% above LIBOR.

The bank loan facilities are secured by guarantees from certain Group companies and by fixed and floating charges over certain of the assets of a number of the Group’s companies. At 31 March 2019 the gross value of the assets secured, which includes applicable inter company balances, amounted to £75.7 million (2018 - £58.2 million). Excluding inter company balances the value of the security was £74.4 million (2018 - £42.5 million).

Reconciliation of movements of liabilities to cash flows arising from financing activities

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Bank overdrafts
used for cash Finance
management Bank lease Other
purposes loans liabilities loans Total
£000 £000 £000 £000 £000
Balance at 31 March 2017 18,888 29,406 - - 48,294
Changes from financing cash flows
Drawings on term loan facilities - 750 - - 750
Cash outflow in respect of performance share plan awards (248) - - - (248)
Total changes from financing cash flows (248) 750 - - 502
The effect of changes in foreign exchange rates (38) (903) - - (941)
Other changes
Liability changes
Changes in bank overdraft (4,334) - - - (4,334)
Interest expense 1,016 - - - 1,016
Interest receivable (99) - - - (99)
Total liability-related other changes (3,417) - - - (3,417)
- - - - -
Total equity-related other changes
Balance at 31 March 2018 15,185 29,253 - - 44,438
Changes from financing cash flows
Drawings on term loan facilities - 215 - - 215
New loans - - - 26 26
Cash outflow in respect of performance share plan awards (52) - - - (52)
Repayment of finance leases - - (453) - (453)
Total changes from financing cash flows (52) 215 (453) 26 (264)
The effect of changes in foreign exchange rates (11) 425 - - 414
Other changes
Liability changes
Changes in bank overdraft 1,102 - - - 1,102
New finance leases - - 1,977 - 1,977
Interest expense 1,202 - - - 1,202
Interest receivable (58) - - - (58)
Total liability-related other changes 2,246 - 1,977 - 4,223
- - - - -
Total equity-related other changes
Balance at 31 March 2019 17,368 29,893 1,524 26 48,811
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21 Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following -

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2019 2018
£000 £000
Assets -
Property, plant and equipment - 2,808
Employee benefits - 5,066
Short term timing differences 155 175
Share based payments - 212
Tax losses 287 470
Deferred tax assets 442 8,731
Liabilities -
Intangible assets 2,416 2,407
Property, plant and equipment 1,480 1,497
Short term timing differences 35 166
Tax losses - -
Foreign tax on undistributed foreign profits 120 -
Deferred tax liabilities 4,051 4,070
Net deferred tax (liability) / asset (3,609) 4,661
Unrecognised deferred tax assets and liabilities
Deferred tax assets have not been recognised in respect of the following items -
2019 2018
£000 £000
Tax losses - trading 1,768 939
Tax losses - capital 227 227
Tax losses - non trading 267 -
Property, plant and equipment 2,724 -
Short term timing differences 92 -
Employee benefits 8,350 -
13,428 1,166
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Deferred tax assets have not been recognised on the balance sheet to the extent that the underlying timing differences are not expected to reverse. The nature of the tax regimes in certain regions in which Carclo operates are such that tax losses may arise even though the business is profitable. This situation is expected to continue in the medium term. Capital losses will be recognised at the point when a transaction gives rise to an offsettable capital gain. This was not the case at 31 March 2019. Similarly non trading losses will only be utilised against future non trading profits. No such non trading profits are foreseen at 31 March 2019.

£0.3 million of the tax losses recognised at 31 March 2019 are time restricted to 5 years, the remainder are available to carry forward without time restriction.

At 31 March 2019 £0.1 million of deferred tax liabilities were recognised for taxes that would be deductible on the unremitted earnings of the Group’s overseas subsidiary undertakings (2018 - nil). As the Group policy is to continually reinvest in those businesses, provision has not been made against unremitted earnings that are not planned to be remitted. If all earnings were remitted it is estimated that £0.8 million of additional tax would be payable (2018 - £0.9 million). It is expected that the additional withholding tax, that may be payable in the event that after Brexit dividends from subsidiaries localised in the EU were to become subject to withholding tax is £0.1 million.

Deferred tax assets and liabilities at 31 March 2019 have been calculated based on the rates substantively enacted at the balance sheet date. The UK Finance Bill 2016 provides for reductions in the UK corporation tax rate from 19% to 17% from 1 April 2020; this rate became substantively enacted on 6 September 2016.

On 22 December 2017 the Tax Cuts and Jobs Act in the USA was substantively enacted and reduced the federal corporate income tax rate from 35% to 21%. At 31 March 2018 this reduced the carrying value of the Group’s net USA deferred tax liabilities by £2.0 million with a corresponding tax credit being recognised in the consolidated income statement.

21 Deferred tax assets and liabilities (continued)

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Balance Balance
as at Recognised Recognised as at
1 Apr 18 in income in equity 31 Mar 19
£000 £000 £000 £000
Property, plant and equipment 1,311 (2,730) (61) (1,480)
Intangible assets (2,407) (9) - (2,416)
Employee benefits 5,066 194 (5,260) -
Share based payments 212 6 (218) -
Short term timing differences 9 111 - 120
Tax losses 470 (183) - 287
Foreign tax on undistributed foreign profits - (120) - (120)
4,661 (2,731) (5,539) (3,609)
Balance Balance
as at Recognised Recognised as at
1 Apr 17 in income in equity 31 Mar 18
£000 £000 £000 £000
Property, plant and equipment 1,978 (667) - 1,311
Intangible assets (4,060) 1,497 156 (2,407)
Employee benefits 5,525 (67) (392) 5,066
Share based payments 321 (3) (106) 212
Short term timing differences (56) 65 - 9
Tax losses 484 (14) - 470
- - - -
Foreign tax on undistributed foreign profits
4,192 811 (342) 4,661
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22 Retirement benefit obligations

The Group operates a defined benefit UK pension scheme which provides pensions based on service and final pay. Outside of the UK, retirement benefits are determined according to local practice and funded accordingly.

In the UK, Carclo plc sponsors the Carclo Group Pension Scheme (the “Scheme”), a funded defined benefit pension scheme which provides defined benefits for some of its members. This is a legally separate, trustee administered fund holding the Scheme’s assets to meet long term pension liabilities for some 3,009 current and past employees as at 31 March 2018.

The Trustees of the Scheme are required to act in the best interest of the Scheme’s beneficiaries. The appointment of the Trustees is determined by the Scheme’s trust documentation. It is policy that one third of all Trustees should be nominated by the members. The Trustees currently comprise three company-nominated trustees (of which one is independent and one is chairman) as well as two member-nominated trustees. The Trustees are also responsible for the investment of the Scheme’s assets.

The Scheme provides pensions and lump sums to members on retirement and to their dependants on death. The level of retirement benefit is principally based on final pensionable salary prior to leaving active service and is linked to changes in inflation up to retirement. The defined benefit scheme is closed to new entrants who now have the option of entering into a defined contribution scheme and the Company has elected to cease future accrual for existing members of the defined benefit scheme such that members who have not yet retired are entitled to a deferred pension.

The Company currently pays contributions to the Scheme as determined by regular actuarial valuations. The Trustees are required to use prudent assumptions to value the liabilities and costs of the Scheme whereas the accounting assumptions must be best estimates.

The Scheme is subject to the funding legislation, which came into force on 30 December 2005, outlined in the Pensions Act 2004. This, together with documents issued by the Pensions Regulator, and Guidance Notes adopted by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension plans in the UK.

A full actuarial valuation was carried out as at 31 March 2015 in accordance with the scheme funding requirements of the Pensions Act 2004. The funding of the Scheme is agreed between the Group and the Trustees in line with those requirements. These in particular require the surplus or deficit to be calculated using prudent, as opposed to best estimate actuarial assumptions. This 31 March 2015 actuarial valuation showed a deficit of £46.1 million. Under the recovery plan agreed with the Trustees following the 2015 valuation, the Group agreed that it would aim to eliminate the deficit over a period of 14 years 8 months from 1 November 2015 by the payment of annual contributions of £1.2 million which increase at 2.9% per annum, together with the assumed asset returns in excess of the rate used to discount the liabilities. Under that plan, the amount payable for the year ending 31 March 2020 would have been £1.3 million plus expenses of the Scheme and the Pension protection 22

100

22 Retirement benefit obligations (continued)

Fund (“PPF”) levy. The triennial actuarial valuation as at 31 March 2018 is currently being carried out but has not yet been finalised. The recovery plan will be updated following that valuation. After the year end an agreement was reached with the Trustees as to the level of contribution for the next 18 months. For the year ending 31 March 2020, the contributions will total £2.0 million including scheme expenses and PPF levy.

For the purposes of IAS19 the preliminary results of the actuarial valuation as at 31 March 2018, which was carried out by a qualified independent actuary, have been updated on an approximate basis to 31 March 2019. There have been no changes in the valuation methodology adopted for this period’s disclosures compared to the previous period’s disclosures.

The Scheme exposes the Group to actuarial risks and the key risks are set out in the table below. In each instance these risks would detrimentally impact the Group’s balance sheet position and may give rise to increased interest costs in the Group income statement. The Trustees could require higher cash contributions or additional security from the Group.

The Trustees manage governance and operational risks through a number of internal controls policies, including a risk register and integrated risk management.

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Risk Description Mitigation
Investment risk Weaker than expected The Trustees continually monitor investment risk and performance and have established
investment returns result in an investment sub-committee which includes a Group representative, meets regularly
a worsening in the Scheme’s and is advised by professional investment advisors. Fiduciary investment management
funding position. operates for tactical investment management of the plan assets.
The Scheme invests approximately 72.5% of its asset value in a portfolio of diversified
growth funds which aims to generate strong returns with less short-term volatility than
equities.
Interest rate risk A decrease in corporate bond The Trustees’ investment strategy includes investing in liability-driven investments and
yields increases the present bonds whose values increase with decreases in interest rates.
value of the IAS 19 defined Approximately 75% of the Scheme’s funded liabilities are currently hedged against
benefit obligations. interest rates using liability-driven investments and the Trustees have a step plan to
A decrease in gilt yields results incrementally increase this level of hedging as its funding position improves.
in a worsening in the Scheme’s Note that the Scheme hedges interest rate risk on a statutory and long-term funding
funding position. basis (gilts) whereas AA corporate bonds are implicit in the IAS 19 discount rate and so
there is some mismatching risk to the Group should yields on gilts and corporate bonds
diverge.The Scheme’s exposure to corporate bonds mitigates this risk to some extent.
Inflation risk An increase in inflation results The Trustees’ investment strategy includes investing in liability-driven investments which
in higher benefit increases will move with inflation expectations and hedge approximately 80% of total inflation
for members which in turn linked liabilities. The growth assets held are expected to provide protection over inflation
increases the Scheme’s in the long term.
liabilities. Approximately 110% of the Scheme’s funded liabilities are currently hedged against
inflation.
Mortality risk An increase in life expectancy The Trustees’ actuary provides regular updates on mortality, based on scheme experience,
leads to benefits being payable and the assumption continues to be reviewed.
for a longer period which
results in an increase in the
Scheme’s liabilities.
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The amounts recognised in the balance sheet in respect of the defined benefit scheme were as follows -

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2019 2018
£000 £000
Present value of funded obligations (215,391) (199,883)
Fair value of scheme assets 166,270 170,085
Recognised liability for defined benefit obligations (49,121) (29,798)
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The present value of Scheme liabilities is measured by discounting the best estimate of future cash flows to be paid out of the Scheme using the projected unit credit method. The value calculated in this way is reflected in the net liability in the balance sheet as shown above.

The projected unit credit method is an accrued benefits valuation method in which allowance is made for projected earnings increases. The accumulated benefit obligation is an alternative actuarial measure of the Scheme’s liabilities whose calculation differs from that under the projected unit credit method in that it includes no assumption for future earnings increases. In this case as the Scheme is closed to future accrual, the accumulated benefit obligation is equal to the valuation using the projected unit credit method.

All actuarial gains and losses will be recognised in the year in which they occur in other comprehensive income. The cumulative remeasurement net loss reported in the statement of comprehensive income since 1 April 2004 is £49.457 million.

The present value of the deficit funding commitment to the Carclo Group Pension Scheme is less than the IAS 19 deficit at the balance sheet date and therefore IFRIC 14 has no effect on the figures disclosed.

101

22 Retirement benefit obligations (continued)

Movements in the net liability for defined benefit obligations recognised in the consolidated statement of financial position -

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2019 2018
£000 £000
Net liability for defined benefit obligations at the start of the year (29,798) (32,503)
Contributions paid 1,238 1,227
Net expense recognised in the consolidated income statement (see below) (4,347) (830)
Remeasurement (losses) / gains recognised directly in equity (16,214) 2,308
Net liability for defined benefit obligations at the end of the year (49,121) (29,798)
Movements in the present value of defined benefit obligations -
2019 2018
£000 £000
Defined benefit obligation at the start of the year 199,883 209,448
Interest expense 5,243 5,285
Actuarial losses due to scheme experience 3,726 334
-
Actuarial losses due to changes in demographic assumptions 8,537
Actuarial losses / (gains) due to changes in financial assumptions 5,900 (2,756)
Benefits paid (11,457) (12,428)
Past service costs (see note 7) 3,559 -
Defined benefit obligation at the end of the year 215,391 199,883
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The English High Court ruling in Lloyds Banking Group Pension Trustees Limited v Lloyds Bank plc and others was published on 26 October 2018, and held that UK pension schemes with Guaranteed Minimum Pensions (GMPs) accrued from 17 May 1990 must equalise for the different effects of these GMPs between men and women. The case also gave some guidance on related matters, including the methods for equalisation.

The Trustees of the plan will need to obtain legal advice covering the impact of the ruling on the plan, before deciding with the employer on the method to adopt. The legal advice will need to consider (amongst other things) the appropriate GMP equalisation solution, whether there should be a time limit on the obligation to make back-payments to members (the “look-back” period) and the treatment of former members (members who have died without a spouse and members who have transferred out for example).

The Trustees commissioned scheme-specific calculations to determine the likely impact of the ruling on the Scheme. The initial analysis suggests that an allowance of 1.68% of the total value of the accrued liabilities would be appropriate and that allowance has been made in these disclosures with a resulting past service cost of £3.559 million recognised in the income statement.

The Scheme liabilities are split between active, deferred and pensioner members at 31 March as follows -

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2019 2018
£000 £000
Active - -
Deferred 43 35
Pensioners 57 65
100 100
Movements in the fair value of Scheme assets -
2019 2018
£000 £000
Fair value of Scheme assets at the start of the year 170,085 176,945
Interest income 4,455 4,455
Return on Scheme assets excluding interest income 1,949 (114)
Contributions by employer 1,238 1,227
Benefits paid (11,457) (12,428)
Fair value of Scheme assets at the end of the year 166,270 170,085
Actual return on Scheme assets 6,404 4,341
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102

22 Retirement benefit obligations (continued)

The fair value of Scheme asset investments was as follows -

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2019 2018
£000 £000
Diversified Growth Funds 126,396 130,537
Bonds and Liability Driven Investments 38,893 39,033
Cash 981 515
166,270 170,085
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None of the fair values of the assets shown above include any of the Group’s own financial instruments or any property occupied, or other assets used, by the Group.

All of the Scheme assets have a quoted market price in an active market with the exception of the Trustees’ bank account balance.

Diversified growth funds are pooled funds invested across a diversified range of assets with the aim of giving long term investment growth with lower short term volatility than equities.

It is the policy of the Trustees and the Group to review the investment strategy at the time of each funding valuation. The Trustees’ investment objectives and the processes undertaken to measure and manage the risks inherent in the Scheme are set out in the Statement of Investment Principles.

A proportion of Scheme’s assets is invested in the BMO LDI Nominal Dynamic LDI Fund, BMO LDI Equity-linked Real DLDI Sub-Fund Weekly and BMO LDI Equity-linked Nominal LDI Sub-Fund which provide a degree of asset liability matching.

The expense recognised in the consolidated income statement was as follows -

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2019 2018
£000 £000
Past service cost 3,559 -
Net interest on the net defined benefit liability 788 830
4,347 830
The expense is recognised in the following line items in the consolidated income statement -
2019 2018
£000 £000
Charged to exceptional items 3,559 -
Other finance revenue and expense - net interest on the net defined benefit liability 788 830
4,347 830
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The principal actuarial assumptions at the balance sheet date (expressed as weighted averages) were -

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2019 2018
Discount rate at 31 March 2.40% 2.70%
Future salary increases N/A N/A
Inflation (RPI) 3.30% 3.45%
Inflation (CPI) 2.20% 2.35%
Allowance for pension in payment increases of RPI or 5% p.a. if less 3.20% 3.35%
Allowance for pension in payment increases of CPI or 3% p.a. if less 2.20% 2.35%
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 3% p.a. 3.30% 3.45%
Allowance for pension in payment increases of RPI or 5% p.a. if less, minimum 4% p.a. 4.00% 4.15%
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The mortality assumptions adopted at 31 March 2019 are 137% of the standard tables S2PxA, Year of Birth, no age rating for males and females, projected using CMI_2018 converging to 1.00% p.a. These imply the following life expectancies -

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2019 2018
Life expectancy for a male (current pensioner) aged 65 19.3 years 18.3 years
Life expectancy at 65 for a male aged 45 20.3 years 19.5 years
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103

22 Retirement benefit obligations (continued)

It is assumed that 75% of the post A-Day maximum for actives and deferreds will be commuted for cash (2018 - 100%).

The pension scheme liabilities are derived using actuarial assumptions for inflation, future salary increases, discount rates, mortality rates and commutation. Due to the relative size of the Scheme’s liabilities, small changes to these assumptions can give rise to a significant impact on the pension scheme deficit reported in the Group balance sheet.

The sensitivity to the principal actuarial assumptions of the present value of the defined benefit obligation is shown in the following table -

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2019 2019 2018 2018
% £000 % £000
Discount rate [1]
Decrease of 0.25% per annum 3.60% 7,754 3.50% 6,996
Decrease of 1.0% per annum 15.7% 33,816 14.6% 29,183
Inflation [2]
Increase of 0.25% per annum 2.00% 4,308 1.90% 3,798
Increase of 1.0% per annum 7.60% 16,370 8.00% 15,991
Life expectancy
Increase of 1 year 3.80% 8,185 3.60% 7,196
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1 At 31 March 2019, the assumed discount rate is 2.40% (2018: 2.70%).

2 At 31 March 2019, the assumed rate of RPI inflation is 3.30% and CPI inflation 2.20% (2018: RPI 3.45% and CPI 2.35%).

The sensitivities shown above are approximate. Each sensitivity considers one change in isolation. The inflation sensitivity includes the impact of changes to the assumptions for revaluation and pension increases.

The weighted average duration of the defined benefit obligation at 31 March 2019 is 14 years (2018: 14 years).

The life expectancy assumption has been applied by allowing for an increase/decrease in life expectation from age 60 of one year, based upon the approximate weighted average age for the Scheme. Whilst this is an approximate approach and will not give the same result as a one year increase in life expectancy at every age, it provides an appropriate indication of the potential impact on the Scheme from changes in life expectancy.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from the prior year.

The history of the Scheme’s deficits and experience gains and losses is shown in the following table -

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2019 2018
£000 £000
Present value of funded obligation (215,391) (199,883)
Fair value of scheme asset investments 166,270 170,085
Recognised liability for defined benefit obligations (49,121) (29,798)
Actual return on scheme assets 6,404 4,341
Actuarial (losses) due to scheme experience (3,726) (334)
-
Actuarial (losses) due to changes in demographic assumptions (8,537)
Actuarial (losses)/gains due to changes in financial assumptions (5,900) 2,756
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23 Provisions

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2019 2018
Site closure Total CIT expected costs Site closure Total
£000 £000 £000s £000 £000
Provisions at the start of the year 484 484 8 685 693
Provision established in the period - - - - -
Provisions used in the period (151) (151) (8) (201) (209)
Provisions at the end of the year 333 333 - 484 484
- - - 323 323
Non-current
Current 333 333 - 161 161
333 333 - 484 484
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Of the £0.484 million provision brought forward, in respect of exit costs for a site leased by a legacy Group business, £0.151 million was used in the period.

104

24 Trade and other payables - falling due within one year

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2019 2018
£000 £000
Trade payables 17,970 17,274
Other taxes and social security costs 2,967 2,818
Other creditors 2,362 4,867
Accruals 8,145 3,354
31,444 28,313
25 Trade and other payables - falling due in more than one year
2019 2018
£000 £000
Other creditors 132 208
132 208
26 Ordinary Share Capital
Ordinary shares of 5 pence each -
Number
of shares £000
Issued and fully paid at 31 March 2018 73,286,918 3,664
Shares issued on exercise of share options 132,275 7
Issued and fully paid at 31 March 2019 73,419,193 3,671
There are no outstanding share options at 31 March 2019.
Outstanding awards under the performance share plan are as follows -
Date Number of Earliest
granted shares Price date of vesting
Performance share plan 13 July 2016 377,000 nil 13 July 2019
14 July 2017 342,333 nil 14 July 2020
31 July 2018 670,000 nil 31 July 2021
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The share options have been awarded to the executive directors and senior managers within the Group.

The vesting conditions for all share option schemes are three years of service plus the satisfaction of specified performance criteria.

Under the provisions of IFRS 2 a charge is recognised for those share options and awards under the performance share plan issued after 7 November 2002. The estimate of the fair value of the services received is measured based on the Black-Scholes model for share options granted under the executive and discretionary share option schemes. The Monte-Carlo model is used to calculate the fair value of the performance share plan awards. The contractual life of the share options (ten years) is used as an input into this model. Expectations of early exercise are incorporated into the model.

The fair value per share of the awards under the performance share plan granted in the year is as follows -

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2019 2018
31 July 2018 14 July 2017
Award Award
Performance share plan
Fair value at grant date 85p 114p
Share price at grant date 107p 159p
Exercise price 0.0p 0.0p
Expected volatility 48.10% 48.63%
Expected dividend yield 0.20% 0.20%
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105

26 Ordinary Share Capital (continued)

The performance share plan award issued on 31 July 2018 has a split performance condition whereby half of the awards would vest after three years based on performance compared to TSR and the remaining half would vest based on EPS performance. Half of the awards will vest on a sliding scale from 25% if EPS growth exceeds RPI by 5% per annum or more over the three year period beginning with the year of grant, rising to 100% if EPS growth exceeds RPI by 12% per annum. The other half of the awards will vest on a sliding scale from 25% if TSR exceeds the median performance of the constituents of the FTSE Small Cap Index over the three year period ending on 31 March 2020 rising to 100% for upper quartile performance.

The expected volatility is based on the historical volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information.

The amounts recognised in the income statement arising from equity settled share based payments was a charge of £0.036 million (2018 - credit of £0.040 million).

The number and weighted average exercise prices of share options and performance share plan awards is as follows -

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2019 2018
Weighted Weighted
average average
exercise Number of exercise Number
price pence shares price pence of shares
Outstanding at 1 April 0.1 1,400,000 0.1 1,511,000
Lapsed during the period - (610,392) - (304,750)
Exercised during the period - (132,275) - (279,250)
Granted during the period - 732,000 - 473,000
Outstanding at the end of the period - 1,389,333 0.1 1,400,000
Exercisable at 31 March - 2,000
Weighted average remaining life at 31 March 0 months 14 months
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The weighted average share price at the date of exercise for the share options exercised in the year to 31 March 2019 was 118.00 pence (2018 - 168.00 pence).

27 Reserves

Translation reserves

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations that are not integral to the operations of the Company, as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.

Retained earnings

Netted against retained earnings is the cost of own shares held by the Group. The Company maintains an employee share ownership plan for the benefit of employees and which can be used in conjunction with any of the Group’s share option schemes. As at 31 March 2019 the plan held 3,077 shares (2018 - 3,077 shares).

28 Financial instruments

The Group’s financial instruments comprise bank loans and overdrafts, cash and short term deposits. These financial instruments are used for the purpose of funding the Group’s operations. In addition the Group has other financial instruments such as trade receivables and trade payables which arise directly from its operational activities.

The Group is exposed to a range of financial risks as part of its day to day activities. These include credit risk, interest rate risk, liquidity risk and foreign currency risk.

a) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or financial institution fails to meet its contractual obligations. The Group’s credit risk is mainly attributable to its trade receivables which the Group mitigates by way of credit insurance. Credit insurance is sought for all customers where exposure is in excess of £10,000. In certain instances credit insurance cannot always be obtained or cover has been withdrawn. In such instances payment terms are re-negotiated and internal credit limits established. The amounts shown in the balance sheet are after making due provision for any doubtful debts.

The Group maintains any surplus cash balances on deposit accounts or legal offset accounts with the Group’s principal bank which has a high credit rating assigned by independent international credit rating agencies. In addition, the Group has undrawn net overdraft facilities of £5.689 million at 31 March 2019 (2018 - £9.006 million) which are available to mitigate any liquidity risk.

106

28 Financial instruments continued

The maximum exposure to credit risk as at 31 March was --

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2019 2018
£000 £000
Quoted investments (see note 14) 7 7
Trade receivables, net of attributable impairment provisions (see note 17) 23,046 19,693
Cash and cash deposits (see note 18) 10,330 12,962
Contract assets (see note 4) 20,264 -
53,647 32,662
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Carclo is a worldwide supplier of components and systems. As a consequence, the Group’s trade receivables and contract assets reside across a broad spectrum of countries with potentially higher attributable credit risk in certain territories. The following tables analyse the geographical location of trade receivables (net of attributable impairment provisions) and of contract assets:

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2019 2018
£000 £000
United Kingdom 5,927 5,222
Rest of Europe 6,059 5,332
North America 6,587 5,777
Rest of world 4,473 3,362
Trade receivables, net of attributable impairment provisions 23,046 19,693
United Kingdom 19,483 -
Rest of Europe 788 -
North America (7) -
Contract assets, net of attributable impairment provisions 20,264 -
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b) Interest rate risk

The Group’s borrowings are on floating rate terms. In the year to 31 March 2019, interest rates have remained low. This has kept the interest charge borne by the Group at a level comparable with the prior year.

The interest rate profile of financial liabilities by currency of the Group as at 31 March was as follows -

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Floating
rate interest
payable
£000
As at 31 March 2019
Sterling 34,594
US dollar 7,782
Euro 6,435
Other -
48,811
As at 31 March 2018
Sterling 30,207
US dollar 7,625
Euro 6,606
Other -
44,438
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107

28 Financial instruments continued

b) Interest rate risk continued

The interest rate profile of financial assets by currency of the Group as at 31 March was as follows -

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Floating
rate interest No interest
receivable receivable Total
£000 £000 £000
As at 31 March 2019
Sterling 684 13 697
US dollar 5,227 3 5,230
Euro 2,088 2 2,090
Other 2,284 29 2,313
10,283 47 10,330
Floating
rate interest No interest
receivable receivable Total
£000 £000 £000
As at 31 March 2018
Sterling 772 11 783
US Dollar 5,490 1 5,491
Euro 4,851 2 4,853
Other 1,810 25 1,835
12,923 39 12,962
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The floating rate of interest earned on cash balances is in the range bank base - 1% to bank base + 2%.

c) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages this risk by maintaining a mixture of committed long term loan facilities and short term overdraft facilities which have been established to ensure that adequate funding is available for its operating, investing and financing activities.

As detailed in note 20, at 31 March 2019 the Group has committed term loan facilities of £30.000 million (2018 - £30.000 million) and additional overdraft facilities totalling £18.009 million (2018 - £15.987 million) which are repayable on demand. The Group’s net debt at 31 March 2019 was £38.481 million (2018 - £31.476 million).The net debt comprises £48.811 million interest bearing loans and borrowings (see note 20) less £10.330 million cash and cash deposits (see note 18).

The Group’s committed term loan facilities are available in the UK; overdraft facilities in the UK totalled £17.000 million at 31 March 2019 and have been reduced to £15.000 million subsequent to the year end following the receipt of an initial Euros 8.7 million of customer payments in respect of LED Technologies contract assets.

The Group performs a detailed, weekly, rolling 13 week cash flow forecast to help manage its short term liquidity risk. Additionally the Board monitors a monthly 12 month Group cash flow forecast comparing it to internal targets and thresholds established with the Group’s bankers.

d) Foreign currency risk

The Group has a number of overseas subsidiary operations. The major overseas subsidiaries are located in the United States, France, the Czech Republic, China and India. Hence the balance sheet of the Group can be affected by the applicable conversion rates, the sterling / US dollar exchange rate in particular. It is the Group’s policy to hedge the effect of such structural currency exposures by having borrowings in the appropriate currencies where it is considered efficient to do so. A loan of US $10.600 million is designated as the hedging instrument against foreign currency exposures in the net investment in the trading subsidiaries in the United States. A loan of 7.500 million is designated as the hedging instrument against foreign currency exposures in the net investment in the European operations.

In addition the Group is subject to transactional foriegn currency exposures arising from the sale and purchase of goods and services in currency other than the company’s local currency. Historically it has been the Group’s policy to hedge such exposure where the net exposure in any one currency exceeds £20,000 on any day using forward contracts. However, within the UK operations opportunities have been exploited to naturally hedge inflows in currency with similar outflows. It is the Group’s policy not to undertake any speculative transactions. naturally hedge inflows in currency with similar outflows. It is the Group’s policy not to undertake any speculative transactions.

108

28 Financial instruments continued

d) Foreign currency risk continued

The fair value of the forward contracts at the start and end of the financial year was immaterial. The cash flows associated with the forward contracts are summarised as follows:

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2019 2018
Less than Less than
6 months 6 - 12 months 6 months 6 - 12 months
£000 £000 £000 £000
Assets 2,601 - 1,143 -
Liabilities - - - -
2,601 - 1,143 -
The balance sheet exposure to currency at the year end arising from trading activities is illustrated in the following analysis by currency of the
Group’s trade receivables and trade payables:
Sterling US dollar Euro Other Total
£000 £000 £000 £000 £000
As at 31 March 2019
Trade receivables, net of attributable impairment provisions 8,070 6,796 4,262 3,918 23,046
Trade payables (5,593) (4,806) (6,454) (1,117) (17,970)
Net 2,477 1,990 (2,192) 2,801 5,076
As at 31 March 2018
Trade receivables, net of attributable impairment provisions 7,667 6,478 3,143 2,405 19,693
Trade payables (5,088) (6,694) (5,072) (420) (17,274)
Net 2,579 (216) (1,929) 1,985 2,419
The following table summarises the main exchange rates used during the year -
Average rate Reporting date mid-market rate
2019 2018 2019 2018
Sterling / US dollar 1.31 1.33 1.30 1.40
Sterling / Euro 1.13 1.13 1.16 1.14
Sterling / Czech koruna 29.2 29.4 30.0 28.8
Sterling / Chinese Renminbi 8.81 8.78 8.76 8.80
Sterling / Indian rupee 91.7 85.5 90.6 91.0
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Fair values

The fair value is the amount at which a financial instrument could be exchanged in an arm’s length transaction between third parties. Where available, market values are used to determine fair values, otherwise fair values are calculated by discounting expected cash flows at prevailing interest and exchange rates. The fair value of the derivatives and financial instruments was not materially different to the book value at 31 March 2019 and 31 March 2018. Unrecognised and deferred gains and losses in respect of derivatives and financial instruments at 31 March 2019 were insignificant.

During the year ended 31 March 2017 contingent consideration in respect of the acquisition of PTD was recognised at fair value and is categorised as Level 3 in the fair value hierarchy. The expected payment reflects the calculated cash out flows under possible earn out scenarios and is discounted using a risk-adjusted discount rate. The significant unobservable inputs inherent are the expected cash payment of USD nil and the discount rate of 10.04%.

The actual cash payment may be either nil or within the range USD 0.800 million to USD 1.000 million depending on the satisfaction of certain performance criteria.

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28 Financial instruments continued

d) Foreign currency risk continued

The table below shows the effect on fair value of changing the significant inputs used in the fair value measurement to another reasonably possible assumption.

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Profit or loss
Favourable Unfavourable
£000 £000
Expected cash payment of USD 0.800 million - 739
Expected cash payment of USD 1.000 million - 923
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The table below analyses and reconciles financial instruments, into a fair value hierarchy based on the valuation technique used to determine fair value.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair values of all financial assets and financial liabilities by class together with their carrying amounts shown in the balance sheet are as follows:

Hedges of net investments in foreign operations

The Group has net investments in foreign operations in its subsidiaries in North America, France, the Czech Republic, China and India, as detailed in Note 3 Segment reporting - Analysis by geographical segment.

A foreign currency exposure arises from the Group’s net investments in subsidiaries with foreign currencies i.e. functional currencies other than sterling. The risk arises from the fluctuations in spot exchange rates between these foreign currencies and sterling (in particular the sterling / US dollar exchange rate), which causes the amount of the Group’s net investment to vary when translated into sterling.

Part of the Group’s net investments in these overseas subsidiaries are hedged by foreign currency denominated secured bank loans, as detailed in Note 20 Interest bearing loans and borrowings. This mitigates the foreign currency risks arising from the subsidiary’s net assets. The loan is designated as a hedging instrument for the changes in the value of the net investments that are attributable to changes in the spot exchange rates.

A summary of the Group’s hedges of net investments in foreign operations is as follows:

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2019 2018
Loans and Carrying amount Loans and Carrying amount
borrowing Assets Liabilities borrowing Assets Liabilities
£000 £000 % £000 £000 %
US Dollar 8,139 42,586 (12,472) 8,450 42,933 (12,364)
Euro 6,477 3,143 (771) 6,413 3,240 (665)
Other - 33,472 (8,914) - 40,702 (11,095)
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To assess hedge effectiveness, the Group determines the economic relationship between the hedging instrument and the hedged item by comparing changes in the carrying amount of the debt that is attributable to a change in the spot rate with changes in the investment in the foreign operation due to movements in the spot rate (the offset method). The Group’s policy is to hedge the net investment only to the extent of the debt principal.

During the year a loss of £0 million was recognised on these hedging instruments within other comprehensive income.

During the year there has been no hedge ineffectiveness recognised in profit or loss.

In managing interest rate and currency risks the Group aims to reduce the impact of short term fluctuations on the Group’s earnings. Over the longer term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings. In the year ended 31 March 2019, it is estimated that a general increase of one percentage point in interest rates would have decreased the Group’s profit before tax by approximately £0.626 million (2018 – £0.554 million decrease). It is estimated that a general increase of 10% in the value of sterling against the above noted main currencies would have decreased the Group’s profit before tax by approximately £1.498 million for the year ended 31 March 2019 (2018 – £1.203 million decrease) which is detailed by currency in the following table:

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28 Financial instruments continued

d) Foreign currency risk continued

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2019 2018
£000 £000
US Dollar 680 648
Euro 426 314
Czech koruna 148 98
Other 244 143
1,498 1,203
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Capital risk management

The capital structure of the Group consists of net debt (comprising borrowings as detailed in note 20 offset by cash and bank balances) and equity of the Group (comprising issued share capital, reserves and retained earnings as detailed in the statement of changes in equity).

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an appropriate capital structure. In order to maintain or adjust the capital structure, the Group will take into account the amount of dividends paid to shareholders, the level of debt and the number of shares in issue. Close control of deployment of capital is maintained by detailed management review procedures for authorisation of significant capital commitments, such as land acquisition, capital targets for local management and a system of internal interest charges, ensuring capital cost impact is understood and considered by all management tiers.

Decisions regarding the balance of equity and borrowings, dividend policy and all major borrowing facilities are reserved for the Board.

29 Cash generated from operations

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2019 2018
£000 £000
(Loss) / Profit for the year (18,632) 8,492
Adjustments for -
Pension fund contributions (1,238) (1,227)
Depreciation charge 5,260 4,732
Amortisation of intangible assets 279 281
-
Exceptional tangible fixed asset write down, arising on rationalisation of business 7,115
Exceptional impairment of intangible assets, arising on rationalisation of business 1,365 66
Loss on disposal of other plant and equipment 7 22
-
Exceptional charge in respect of retirement benefits 3,559
Cash flow relating to provision for site closure costs (151) (209)
Share based payment charge / (credit) 36 (40)
Financial income (58) (99)
Financial expense 2,119 1,839
Taxation 3,978 (325)
Operating cash flow before changes in working capital 3,639 13,532
Changes in working capital
Decrease / (Increase) in inventories 456 (1,218)
(Increase) in contract assets (20,264) -
Decrease / (Increase) in trade and other receivables 14,799 (8,842)
Increase in trade and other payables 2,975 2,785
Increase in contract liabilities 2,540 -
Cash generated from operations 4,145 6,257
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111

30 Financial commitments

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2019 2018
£000 £000
(a) The directors have authorised the following future capital expenditure which is contracted -
77 411
(b) The commitment under non cancellable operating leases was as follows -
2019 2018
£000 £000
within one year 2,340 2,017
within two to five years 6,025 6,275
more than five years 1,272 1,732
9,637 10,024
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31 Related parties

Identity of related parties

The Group has a related party relationship with its subsidiaries (see note 32), its Directors and executive officers and the Group pension scheme. There are no transactions that are required to be disclosed in relation to the Group’s 60% subsidiary Platform Diagnostics Limited.

Transactions with key management personnel

Key management personnel are considered to be the executive directors of the Group.

Details of directors’ remuneration can be found in the remuneration report on pages 41 to 56.

Group pension scheme

During the year Carclo engaged a third party professional firm to administer the Group pension scheme (The Carclo Group Pension Scheme). The associated investment managers’ costs are met by the Scheme in full. From 1 April 2007, it has been agreed with the Trustees of the Scheme that, under the terms of the recovery plan, Carclo would bear the Scheme’s administration costs whilst the Scheme was in deficit, as calculated at the triennial valuation. Carclo incurred administration costs of £0.496 million which has been charged to the Consolidated income statement (2018 - £0.713 million).

After the year end an agreement was reached with the Trustees as to pension contributions for the period to January 2021 that contributions of £225,000 per month would incorporate both deficit recovery contributions, scheme expenses and PPF levy.

32 Group entities

Control of the group

The Group’s ultimate parent company is Carclo plc which is incorporated in England. The ordinary share capital of the subsidiary undertakings are owned by the Company except where indicated.

Investments in subsidiaries

The Group and Company have the following investments in subsidiaries -

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Registered Principal Class of 2019 2018
office address place of business shares held % %
Company
Acre Mills (UK) Limited * UK Ordinary 100 100
Arthur Lee & Sons (Hot Rolling Mills) Limited * UK Ordinary 100 100
Australian Card Clothing Limited * UK Ordinary 100 100
Bruntons Aero Products Limited * UK Ordinary 100 100
Bruntons (Musselburgh) Limited ** UK Ordinary 100 100
Brymill Stockholders Limited * UK Ordinary 100 100
Carclo Diagnostic Solutions Limited * UK Ordinary 100 100
Carclo Group Services Limited * UK Ordinary 100 100
Carclo Holding Corporation 190 Elgin Avenue, Grand Cayman, KY1-9005 Cayman Islands Ordinary 100 100
Carclo Holding Limited * UK Ordinary 100 100
Carclo Investments Limited * UK Ordinary 100 100
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112

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113

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114

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2019 2018
Notes £000 £000 £000 £000
Fixed assets
Tangible assets 35 295 374
Investments in subsidiary undertakings 36 93,795 100,854
94,090 101,228
Current assets
Debtors - amounts falling due within one year 37 72,451 90,936
Debtors - amounts falling due after more than one year 37 4,602 4,214
Cash at bank and in hand 2,852 1,813
79,905 96,963
Creditors - amounts falling due within one year
Trade and other creditors 38 146,864 109,432
146,864 109,432
Net current liabilities (66,959) (12,469)
Total assets less current liabilities 27,131 88,759
Creditors - amounts falling due after more than one 39 - (29,253)
year
Net assets excluding pension liability 27,131 59,506
Pension liability 41 (49,121) (29,798)
Total net assets (21,990) 29,708
Capital and reserves
Called up share capital 26 3,671 3,664
Share premium account 7,359 7,359
Profit and loss account (33,020) 18,685
Shareholders' funds (21,990) 29,708
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These accounts were approved by the board of directors on 31 October 2019 and were signed on its behalf by -

Mark Rollins

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Peter Slabbert

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115

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Share Share Profit and Total
capital premium loss account equity
£000 £000 £000 £000
Balance at 1 April 2017 3,650 7,359 22,370 33,379
Loss for the year - - (5,035) (5,035)
Other comprehensive (expense) / income -
Remeasurement gains on defined benefit scheme - - 2,150 2,150
Taxation on items above - - (392) (392)
Total comprehensive (expense) / income for the period - - (3,277) (3,277)
Transactions with owners recorded directly in equity -
Share based payments - - (40) (40)
Exercise of share options 14 - (262) (248)
Taxation on items recorded directly in equity - - (106) (106)
Balance at 31 March 2018 3,664 7,359 18,685 29,708
Balance at 1 April 2018 3,664 7,359 18,685 29,708
Loss for the year - - (29,873) (29,873)
Other comprehensive expense
Remeasurement losses on defined benefit scheme - - (16,293) (16,293)
Taxation on items above - - (5,260) (5,260)
Total comprehensive expense for the year - - (51,426) (51,426)
Transactions with owners recorded directly in equity -
Share based payments - - 36 36
Exercise of share options 7 - (97) (90)
Taxation on items recorded directly in equity - - (218) (218)
Balance at 31 March 2019 3,671 7,359 (33,020) (21,990)
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34 Basis of preparation for the company

Going Concern

The financial statements are prepared on the going concern basis.

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Operating Review on pages 14 to 15. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Finance Review on pages 16 to 18. The directors’ assessment of the viability of the Group is set out in the Viability Statement on page 22. In addition note 28 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

Net debt at 31 March 2019, excluding operating leases, was £38.5m, increasing from £31.5m at 31 March 2018. The increase was driven by capital investment and the profile of cash receipts from customers for ongoing design, development and tooling programmes and by the significant increase in production volumes in the LED Technologies division which absorbed working capital.

After the year end, net debt levels improved following the decision to exit three mid-volume programmes at Wipac as monies were received from customers in respect of the work done on the design, development and tooling for these programmes. By the end of August 2019, net debt, excluding operating leases, had fallen to £26.2m.

The Directors have prepared base and sensitised cash flow forecasts for a period in excess of eighteen months from the date of their approval of these financial statements. The Directors have also considered the debt facilities available to the Group which are disclosed in note 20 to the financial statements and comprise an overdraft of £15m and a £30m revolving credit facility maturing in January 2021, a period of fifteen

116

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117

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118

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119

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120

35 Tangible fixed assets

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Plant
and
equipment
£000
Cost
Balance at 31 March 2018 1,371
Additions 22
-
Disposals
Balance at 31 March 2019 1,393
Depreciation and impairment losses
Balance at 31 March 2018 997
Depreciation charge 101
-
Disposals
Balance at 31 March 2019 1,098
Carrying amounts
At 31 March 2018 374
At 31 March 2019 295
36 Fixed asset investments
Shares
in group
undertakings
£000
Cost
Balance at 31 March 2018 and at 31 March 2019 151,872
Provisions
Balance at 31 March 2018 51,018
Impairment losses 7,059
Balance at 31 March 2019 58,077
Net book value
At 31 March 2018 100,854
At 31 March 2019 93,795
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During the year the Company provided £1.755 million against its investment in Wipac Limited in light of the operational issues experienced by this subsidiary.

A FVLCOD model was used to assess the recoverable amount of investment in Carclo Technical Plastics Limited. The key assumptions in this model were EBITDA, a market participent multiple and estimated costs of disposal. This determined an impairment of £5.304 million should be recorded. Any changes in these assumptions would result in a different outcome on the carrying value.

Both are wholly owned English subsidiaries. A list of subsidiary undertakings is given in note 32 to the Group financial statements.

121

37 Debtors

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2019 2018
£000 £000
Debtors - amounts falling due within one year -
Amounts owed by group undertakings 71,605 84,944
Other debtors 616 377
Prepayments and accrued income 230 96
Taxation recoverable - -
Deferred tax assets (see note 40) - 5,519
72,451 90,936
Debtors - amounts falling due after more than one year -
Amounts owed by group undertakings 4,602 4,214
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During the year the company provided £13.468 million against expected losses for an amount owed by its investee Wipac Limited, a wholly owned English subsidiary.

38 Trade and other creditors - amounts falling due within one year

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2019 2018
£000 £000
Bank overdrafts 10,410 11,308
Trade creditors 3 2
Taxation and social security 72 84
Accruals and deferred income 804 633
Amounts owed to group undertakings 105,682 97,405
Bank loans 29,893 -
146,864 109,432
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The bank overdrafts are predominantly in sterling and bear interest at 1.75% above prevailing UK bank base rates. At 31 March 2019 the gross amount of overdrafts available was £18.0 million (2018 - £16.0 million) of which £12.3 million was utilised at the year end (2018 - £7.0 million) which is net of qualifying cash balances.

Bank loans include £29.9 million (2018 - £29.3 million) secured on the assets of the Group.

The bank loans are secured by guarantees from certain Group companies and by fixed and floating charges over certain of the assets of a number of the Group’s companies. At 31 March 2019 the gross value of the assets secured, which includes applicable inter company balances, amounted to £75.7 million (2018 - £58.2 million). Excluding inter company balances the value of the security was £74.4 million (2018 - £42.5 million).

39 Creditors - amounts falling due after more than one year

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2019 2018
£000 £000
Bank loans - 29,253
- 29,253
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122

40 Deferred tax assets and liabilities

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Assets Liabilities Net
2019 2018 2019 2018 2019 2018
£000 £000 £000 £000 £000 £000
Deferred tax assets and liabilities are attributable to the following -
Employee benefits - 5,066 - - - 5,066
Tangible fixed assets - 131 - - - 131
Other - 322 - - - 322
Tax assets - 5,519 - - - 5,519
Net of tax - - - - - -
Net tax assets - 5,519 - - - 5,519
Deferred tax assets have not been recognised in respect of the following items -
2019 2018
£000 £000
Tax losses - trading 1,729 940
Tax losses - capital 227 227
Tax losses - non trading 74 -
-
Employee benefits 8,351
Tangible fixed assets 108 -
Other 14 -
10,503 1,167
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Deferred tax assets have not been recognised on the balance sheet to the extent that the underlying timing differences are not expected to reverse in the foreseeable future. The nature of the tax regimes in certain of the regions in which Carclo operates are such that tax losses may arise even though the business is profitable. This situation is expected to continue in the medium term. Capital losses will be recognised at the point when a transaction gives rise to an offsettable capital gain; this was not the case at 31 March 2019. Similarly non trading losses will only be utilised against future non trading profits; no such non trading profits are foreseen at 31 March 2019. Trading losses will only be utilised against future trading profits; no such taxable trading profits are foreseen at 31 March 2019.

The tax losses at 31 March 2019 are available to carry forward without time restriction.

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Movement in deferred tax during the year - Balance Balance
as at Recognised Recognised as at
1 Apr 18 in income in equity 31 Mar 19
£000 £000 £000 £000
Employee benefits 5,066 194 (5,260) -
Tangible fixed assets 131 (131) - -
Other 322 (104) (218) -
5,519 (41) (5,478) -
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Movement in deferred tax during the prior year - Balance Balance
as at Recognised Recognised as at
1 Apr 17 in income in equity 31 Mar 18
£000 £000 £000 £000
Employee benefits 5,525 (67) (392) 5,066
Tangible fixed assets 119 12 - 131
Other 334 94 (106) 322
5,978 39 (498) 5,519
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41 Pension liability

The Group operates a defined benefit UK pension scheme which provides pensions based on service and final pay.

The Company is the sponsoring employer throughout the current and prior period and full disclosures in respect of the plan are given in note 22 of the group financial statements.

42 Reserves

The Company maintains an employee share ownership plan for the benefit of employees and which can be used in conjunction with any of the Group’s share option schemes. As at 31 March 2019 the plan held 3,077 shares (2018 - 3,077 shares). The original cost of these shares was £0.003 million (2018 - £0.003 million). The cost of the shares has been charged against the profit and loss account.

43 Operating leases

Non-cancellable operating lease rentals are payable as follows –

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Land and buildings Other
2019 2018 2019 2018
£000 £000 £000 £000
Less than one year 32 35 6 16
Between one and five years - 140 2 26
Over five years - 35 - -
32 210 8 42
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During the year £0.055 million was recognised as an expense in the profit and loss account in respect of operating leases (2018 - £0.061 million).

44 Contingent liabilities

The Company has entered into cross guarantee arrangements relating to the bank borrowings of its UK and India subsidiary operations. The maximum obligations under these arrangements at 31 March 2019 was £6.5 million (2018 - £2.5 million).

There are contingent liabilities arising in the ordinary course of business, in respect of litigation, which the Directors believe will not have a significant effect on the financial position of the Company or Group.

45 Profit and loss account

The loss after tax for the year dealt with in the accounts of the Company amounts to £29.873 million (2018 - loss of £5.035 million) which, after dividends of £0.000 million (2018 - £0.000 million), gives a retained loss for the year of £29.873 million (2018 - retained loss of £5.035 million).

46 Related parties

The Company has a related party relationship with its subsidiaries (see note 31), its directors and executive officers and the Group pension scheme. There are no transactions that are required to be disclosed in relation to the Group’s 60% subsidiary Platform Diagnostics Limited.

Transactions with related parties are set out in note 31 of the Group financial statements.

Remuneration of the Directors, who are considered to be the key management personnel of the Company, is disclosed in the audited part of the Directors’ Remuneration Report on pages 41 to 56 .

124

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125

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2019 2018 2017 2016 2015
revised
£000 £000 £000 £000 £000
Revenue 144,851 146,214 138,282 118,974 107,503
Proforma unaudited adjusted operating profit 8,419 10,811 12,498 10,034 7,789
Proforma unaudited adjustment - Exceptional price concession (7,104) - - - -
Underlying operating profit 1,315 10,811 12,498 10,034 7,789
Exceptional items (13,907) (904) (541) (4,857) (31,668)
Profit / (loss) before financing costs (12,593) 9,907 11,957 5,177 (23,879)
Net financing charge (2,061) (1,740) (1,479) (1,282) (666)
Profit / (loss) before tax (14,654) 8,167 10,478 3,895 (24,545)
Overseas sales as a percentage of total sales 72.7% 72.0% 70.2% 66.7% 68.0%
Underlying operating margin 0.9% 7.4% 9.0% 8.4% 7.2%
Net margin -10.1% 5.6% 7.6% 3.3% -22.8%
Tax rate -27.2% -4.1% 23.7% 43.8% 7.2%
(Loss) / earnings per share -25.4p 11.6p 11.5p 3.3p -33.2p
Underlying (loss) / earnings per share -2.7p 9.8p 12.1p 10.1p 7.9p
Proforma unaudited adjusted earnings per share 7.0p 9.8p 12.1p 10.1p 7.9p
Dividend per share 0.00p 0.00p 0.00p 0.90p 2.75p
Non current assets 67,214 80,638 79,464 66,660 66,065
Net current assets excluding cash, bank and finance leases 36,838 37,256 29,922 20,211 16,705
Net debt (38,481) (31,476) (26,025) (24,750) (24,518)
Other non current liabilities (53,304) (34,399) (39,098) (29,254) (16,899)
Total shareholders' funds 12,267 52,019 44,263 32,867 41,353
Post tax return on shareholders' funds -152.0% 16.3% 18.1% 6.7% -55.1%
Adjusted average capital employed (equity + net debt) 67,122 76,260 62,984 59,715 65,584
Return on capital employed 2.0% 14.2% 19.8% 17.0% 14.2%
Gearing (excluding net pensions balance) 72.6% 41.0% 36.5% 47.7% 48.0%
Assets per share 17p 71p 61p 50p 62p
Capital expenditure as a multiple of depreciation 1.5x 2.0x 1.8x 2.2x 1.8x
Average number of employees in year 1,501 1,442 1,418 1,340 1,172
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126

(a) Reconciliation of non-GAAP financial measures

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2019 2018
Notes £000 £000
Statutory (loss) / profit after tax (18,632) 8,492
Add back: Total income tax expense / (credit) 9 3,978 (325)
Statutory (loss) / profit before tax (14,654) 8,167
Add back: Net financing charge 8 2,061 1,740
Statutory operating (loss) / profit (12,593) 9,907
Add back: Exceptional items 7 13,908 904
Underlying operating profit 1,315 10,811
Add back: Proforma unaudited adjustment - exceptional price concession 7 7,104 -
Proforma unaudited adjusted operating profit 8,419 10,811
Add back: Amortisation of intangible assets 12 279 281
Add back: Depreciation of property, plant and equipment 13 5,260 4,732
Group proforma unaudited adjusted earnings before interest, tax,
13,958 15,824
depreciation and amortisation ('EBITDA')
Statutory (loss) / profit before tax (14,654) 8,167
Add back: Exceptional items 7 13,908 904
Underlying (loss) / profit before tax (746) 9,071
Add back: Proforma unaudited adjustment - exceptional price concession 7 7,104 -
Proforma unaudited adjusted profit before tax 6,358 9,071
Group statutory tax expense / (credit) 9 3,978 (325)
Add back: Exceptional tax (expense) / credit 9 (2,760) 2,193
Group underlying tax expense 1,218 1,868
- -
Add back: Tax impact of exceptional price concession
Group proforma unaudited adjusted tax expense 1,218 1,868
Group statutory effective tax rate -27.2% -4.1%
Group underlying effective tax rate -163.1% 20.6%
Group proforma unaudited adjusted effective tax rate 19.2% 20.6%
Cash at bank and in hand 18 10,330 12,962
Interest bearing loans and borrowings - current 20 (47,763) (15,185)
Interest bearing loans and borrowings - non-current 20 (1,048) (29,253)
Net Debt (38,481) (31,476)
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127

(b) Share price history

Share price per 5p ordinary share at close of business 31 March 1982 - 11.6p

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Calendar Calendar
year Low High year Low High
2008 47½p 96p 2014 85¼p 292½p
2009 48½p 150½p 2015 87p 169¾p
2010 133½p 241½p 2016 106¾p 169p
2011 239p 349p 2017 120p 180p
2012 287½p 503p 2018 77¼p 127½p
2013 257p 501p 2019 10.8p 81½p
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(c) Share price information

Share price information can be found on the internet at www.carclo-plc.com

(d) Further information on Carclo plc

Further information on Carclo plc can be found on the internet at www.carclo-plc.com

FINANCIAL CALENDAR 2019/20

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General meeting 2019 19 December 2019
Interim report for the half year ending 30 September 2019 December 2019
Preliminary announcement of the results for the year ending 31 March 2020 June 2020
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128

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130

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REGISTERED OFFICE: SPRINGSTONE HOUSE, PO BOX 88, 27 DEWSBURY ROAD, OSSETT, WEST YORKSHIRE WF5 9WS T +44 (0) 1924 268040 F +44 (0) 1924 283226 W www.carclo-plc.com E [email protected]

Designed & printed by OCW Advertising & Marketing Ltd www.ocw.co.uk

AI assistant

CARCLO PLC — Annual Report 2019

5252_dva_2019-03-31_b8b22105-cb64-451d-a504-c1ad35edbe41.pdf

Annual Report

Service contracts

Summary of shareholder voting on remuneration matters

Executive director changes

Single total figure of remuneration for executive directors (audited)

Single total figure of remuneration for Non Executive directors (audited)

Incentive outcomes for the year ended 31 March 2019 (audited)

S MATTHEWS-DEMERS “BUY OUT” AWARD

Implementation of remuneration policy for the year ending 31 March 2020

Basic salary

Percentage change in chief executive remuneration

Relative importance of spend on pay

Table of historical data (chief executive)

Directors’ interests (audited)

Directors’ shareholding requirement (audited)

Valuation of goodwill in CTP Forecast based valuation

£290k

Mark Rollins

Peter Slabbert

3 Segment reporting continued

Analysis by business segment

3 Segment reporting continued

3 Segment reporting continued

Analysis by geographical segment

4 Revenue from Contracts with Customers continued

b) Disaggregation of revenue

c) Contract balances

4 Revenue from Contracts with Customers continued

d) Transaction price to remaining performance obligations

Revenue expected to be received

e) Impacts on financial statements

5 Operating (loss)/profit

6 Personnel Expenses

7 Exceptional items

8 Finance revenue and expense

9 Income tax expense

10 Earning per share

The following table reconciles

10 Earnings per share continued

11 Dividends paid and proposed

12 Intangible assets

12 Intangible assets (continued)

Impairment tests for cash generating units containing goodwill

Technical Plastics

Aerospace

LED Technologies

13 Property, plant and equipment

14 Investments

15 Inventories

16 Contract assets

Contract assets - see note 4

17 Trade and other receivables

17 Trade and other receivables continued

18 Cash and cash deposits

19 Non current assets classified as held for sale

20 Interest bearing loans and borrowings

20 Interest bearing loans and borrowings continued

Reconciliation of movements of liabilities to cash flows arising from financing activities

21 Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

21 Deferred tax assets and liabilities (continued)

22 Retirement benefit obligations

22 Retirement benefit obligations (continued)

22 Retirement benefit obligations (continued)

22 Retirement benefit obligations (continued)

22 Retirement benefit obligations (continued)

23 Provisions

24 Trade and other payables - falling due within one year

26 Ordinary Share Capital (continued)

27 Reserves

Translation reserves

Retained earnings

28 Financial instruments

a) Credit risk

28 Financial instruments continued

b) Interest rate risk

28 Financial instruments continued

CARCLO PLC Annual Report 2019