REG - 600 Group PLC - Results for the year ended 31 March 2021
The 600 Group plc
A leaner and more efficient business well placed for the future
Results for the year ended 31 March 2021
The 600 Group PLC ("the Group"), the diversified industrial engineering company (AIM: SIXH), today announces its results for year ended 31 March 2021.
Financial highlights
· Revenue from continuing operations down by 20% at $53.6m (2020: $67.2m) due to the impact of COVID-19 on trading.
· Group profit before tax and adjusting items of $1.1m (2020: $1.1m), in-line with previous year due to management's swift response to the COVID-19 pandemic.
· Profit before tax after adjusting items of $0.09m (2020: loss $0.63m).
· Group net debt as at 31 March 2021 (excluding IFRS16 lease liabilities) $12.7m (28 March 2020: $14.2m).
· Current Group order book $22m against $11m at the same time last year.
Strategic & operational highlights
· Impact of COVID-19 minimized through management's swift response:
o Decisive action taken to reduce costs and utilize government backed schemes where possible.
o The result is a leaner and more efficient organization which retained its highly skilled workforce and technical competencies, allowing it to react quickly as trading conditions improved.
· Net debt reduced and the successful restructuring of the Group's loan notes provides further financial flexibility.
o $2.2m of 31 March 2021 Group net debt will be eligible for forgiveness from September 2021 as a US Paycheck Protection Program ("PPP") loan.
· Strong pipeline of opportunities across all divisions and a growing Group order book with the Group positioned to take advantage of its operational gearing as volumes continue to increase.
o Particular strength in the pipeline for the Group's higher margin, growth market Industrial Laser Division is very encouraging - with CMS taking a number of large new orders including the largest in its history.
· Additional Board appointments and management changes, as separately announced.
Paul Dupee, Executive Chairman of the Group, commented:
"The Coronavirus pandemic provided an exceptional challenge and changed business as we know it. However, our management team's ability to adapt, respond quickly and act decisively has allowed us to minimize the impact during the year and move forward with a leaner and more efficient business.
"We now have a healthy order book and a strong pipeline of opportunities across the business. Most pleasingly, the order book for our higher margin laser division, an area we are actively seeking to grow, is especially strong. Our ability to retain our highly skilled workforce and technical competencies during the upheaval of COVID-19, means we are well set to continue to take advantage of these opportunities.
"Despite some ongoing uncertainty created by COVID-19, the Board continues to believe in the long-term fundamentals of the Group; in brand promotion, investment in new, higher end product capabilities and diversification into new markets and selective acquisitions. The Board is excited about the possibilities that lie ahead."
Enquiries:
The 600 Group PLC
Paul Dupee, Executive Chairman
Neil Carrick, Company Secretary
Tel: +1-407-818-1123 / 01924 415000
Instinctif Partners
Tim McCall
Tel: 0207 457 2020
Cenkos Securities plc (Nominated Adviser and Broker)
Ben Jeynes / Max Gould (Corporate Finance)
Alex Pollen/ Henry Nicol (Sales)
Tel: 020 7397 8900
Chairman's statement
Overview
It should come as no surprise that the Coronavirus pandemic has changed business as we know it. As we deal with the significant impact on our top-line - with revenues falling by just over 20% to $53.6m - we remain optimistic as we maintained our *underlying pre tax profit of $1.1m and our skilled workforce, due in large part to our operational cost savings and government assistance programs. Because of our ability to anticipate and respond quickly, the Group is now seeing a considerable increase in demand as well as improved size and quality of the orderbooks.
As we continue to navigate our new business normal and capitalise on the growth of our North American presence, we are also actively seeking to expand our laser business - with US markets being a priority. With our team of innovators and expert engineers, we are confident in our ability to impact this market. We are excited about the possibilities that lie ahead and what this means for both our company and our valued investors.
Divisional Overview
The UK Machine Tool business suffered a significant revenue decrease of 38% and closed temporarily altogether in May of 2020 as a result of lockdowns across the UK and Europe.
Following the closure, we furloughed staff and took advantage of the UK Coronavirus Job Retention Scheme. Doing so allowed us to implement a number of cost reduction measures and preserve the core skill base of our business. From online machine demonstrations to virtual showroom visits, we have continued to respond to the changing circumstances we are experiencing and, as a result, generated a 2% net operating margin against the 8% margin of the previous year.
Although the US Machine Tool business experienced a similar downturn, we acted quickly and utilized the Paycheck Protection Program (PPP). We remained open and quickly recovered with a 20% reduction in revenue while returning a slightly improved net operating profit over the previous year.
The Industrial Laser division faced a similar outcome with site visit restrictions and a lack of trade shows which limited sales and new business opportunities. However, we again responded with online demos and implemented necessary cost reductions while taking advantage of the Paycheck Protection Program (PPP). While the market for large, high-end custom machines manufactured by the CMS business acquired in June 2019 remained difficult, the move of TYKMA away from a primarily commodity product focus to a custom machine focus helped maintain revenue and improve operating margins.
Our Borrowings
Group net debt (excluding IFRS16 lease liabilities) and including the second round of $2.2m of PPP funding loans was $12.7m as of March 31, 2021, compared to $14.2m at the end of March 2020. The first round of PPP loans of $2.2m were forgiven at the start of March 2021, and the second round of loans are on the same terms and available for forgiveness starting in September of this year. These are dependent on employment terms, payroll expenditure and certain facility costs with any amount not forgiven repayable over a two-year period at an interest rate of 1%. We also reached an agreement with our loan note holders in July 2021 to extend the repayment date to 14 August 2023. This will provide adequate time for the Group to recover from the pandemic and organise refinancing.
Our People
At the very core of our business is our people. While this pandemic has presented its own set of challenges, we have also found ample opportunity to grow and reinvigorate our company at every level. We believe it's the hard work, dedication and support of our employees that has opened the doors to our newest initiatives, and ultimately, our future.
Our Future
Orderbooks have seen a notable uptick since March 2021, with particularly strong activity in the higher-margin laser division. So while the pandemic continues to affect many aspects of our everyday business and some questions remain, one thing is certain: Our management teams have responded better than we could have ever thought possible and our ability to overcome has resulted in a leaner, more efficient organization; one that takes advantage of the operational goals that lie ahead and turns every challenge into a new opportunity. The Board continues to believe in our long-term fundamentals of brand promotion, investment in new, higher-end product capabilities and diversification into new markets with selective acquisitions.
Paul Dupee
Chairman
1 September 2021
*Underlying profit is before adjusting items, which are explained in note 11 Alternative Performance Measures and set out in note 3
Strategic Report
Our businesses
The 600 Group PLC ("the Group") is a leading engineering group with a world class reputation in the design, manufacture and distribution of industrial laser systems and design and distribution of machine tools and associated precision engineered components. The Group operates from locations in North America, Europe and Australia selling into more than 100 countries worldwide.
Group businesses serve customers across a very broad range of industry sectors, from medical, pharmaceutical and education through to automotive, aerospace and defence equipment. A large proportion of revenue is derived from sales via third party distribution channels who support these industries locally.
The Group products are noted for their quality and reliability and consequently the Group benefits from a high degree of loyalty and repeat business. Given the large number of customers and established distributors in many countries there are no major sales concentrations of customers or products. In the year ended 31 March 2021 the top 20 customers, of which 11 (2020: 15) were distributors, contributed 24% (2020: 26%) of revenues.
Revenues
Revenues are generated across many diverse geographical territories:
Percentage of worldwide revenues
(by destination)
2021
%
2020
%
United States of America
70
66
United Kingdom
14
17
Europe (excluding UK)
7
7
Rest of the World
9
10
Total
100
100
Macroeconomic and industry trends
Industrial laser systems
The use of industrial lasers for material processing continues to expand worldwide with laser systems now becoming a mainstream manufacturing process. Applications include laser machining, including cutting and drilling, marking, ablation and a host of other niche processes. One of the main drivers of this industry has been legislation and the continual increase in the requirement for traceability of products in all industries from aerospace and transport to medical and pharmaceutical.
The global industrial laser market is estimated to be in the region of $5bn but given this number relates just to the laser sources, the actual market for systems incorporating these lasers and associated equipment and software is estimated to be much larger in the region of $15-$20bn. The industry had seen mid-single digit increases until 2019 when a fall was recorded. Metal cutting is by far the largest application by value and the market is dominated by China which is the largest producer and consumer of industrial lasers. The fall in the overall market in 2019 was estimated to be in the region of 12% and largely driven by Chinese decline in cutting systems which mirrored the decline in machine tools, both of which are heavily influenced by Chinese demand. The effects of the COVID-19 pandemic led to significant reductions in volumes in the early part of 2020 but as China, in particular, opened up, volumes recovered and the overall market was estimated to be similar to that of 2019 as a result. The European and American markets however were slower to recover and took until Q1 of 2021 to show significant signs of a return to more normal levels of activity.
The laser marking and micro-materials processing subset of the market (in which the Group competes) is smaller than the macro-materials processing subset and has seen low single digit growth in recent years. Growth is underpinned by enhanced performance in the speed, cost and quality of the systems being implemented compared to other techniques as well as by legislative changes driving a requirement for greater traceability of products and components. The industry subset occupied by the Group has however seen a proliferation of vendors and selling price pressure at the lower commodity end of the market thus whilst unit volumes have continued to increase, revenue has been held back. It is for this reason the Group took the decision to focus on the higher end custom products where its strengths in design and proprietary software provide greater opportunities to grow and enhance margin and where the acquisition of CMS in June 2019 significantly enhanced these capabilities.
Industry predictions for the laser industry expect the recovery in volumes to continue through 2021 with the overall increase ranging from 10% to 15%.
Machine tools and precision engineered components
The worldwide machine tool industry was estimated by Oxford Economics in their Spring 2021 report at around $74bn for the 2019 calendar year but with a fall in 2020 of around 15% due to the effects of the pandemic and then a rebound of around the same amount in 2021 expected. The market continues to be driven by the investment intentions of manufacturers and is sensitive to changes in the economic and financial climate. Demand responds to economic trends which typically lag the main cycle of the economy.
The global market is dominated by China with consumption of $22.3bn in 2019 but this is largely served domestically with China also being the largest producer. The USA is the second largest consumer of machine tools at $9.8bn followed by Germany at $8bn.
Our main markets
The main markets we operate in are the USA, Europe and Australia. All these markets suffered reduced demand as a result of the COVID-19 global pandemic. These markets have shown a gradual improvement from late in 2020 and into 2021 with a significant improvement seen from March 2021 onwards. The possibility of disruption remains due to the ongoing effects of COVID-19 and possible new outbreaks and variants.
Activity in the year
Industrial laser systems
All areas of the business were affected by the COVID-19 pandemic with revenue falling 10% on the previous year. Operations did remain open with staff working flexibly and from home as required to meet demand as it occurred.
The existing TYKMA Electrox business continued to move more into the custom higher specification market as increased competition and price deflation continued in the lower end standard products sector. The higher end large projects undertaken by the CMS business suffered delays in customer decisions on new projects and both businesses took advantage of the USA Paycheck Protection Program (PPP) scheme to keep teams and key skills together during periods of reduced demand. Cost reduction measures were introduced, along with online machine demonstrations and remote working to keep sales activity moving.
Activity levels did gradually pick up and the businesses experienced a significant uplift in activity and orders from March 2021 onwards, particularly in the higher margin large custom units. The integration of the sales operations of TYKMA and CMS and other back-office functions has progressed well with each operating unit benefitting from the increased operational facilities and the cross fertilisation of skills and ideas. Work has also continued on the development of the proprietary software for TYKMA / Electrox which will provide upgrade opportunities to customers going forward as well as adding new functionality and compatibility with other systems and operations.
Results for the financial year were as follows:
2021
$ 000
2020
$ 000
Revenues
21,331
23,695
Underlying operating profit
1,836
1,689
Underlying operating margin
8.6%
7.1%
Underlying operating profit is before adjusting items, which are explained in note 11 Alternative Performance Measures and set out in note 3.
Machine tools and precision engineered components
This division operates from sites in the UK, USA, and Australia providing solutions for metal processing through the design and development of machine tools sold under the brand names Colchester, Harrison and Clausing and the design and supply of precision engineering components under the brand name Pratt Burnerd. There are also spares, accessories and service operations which support the significant number of machines sold over the Group's long history of supplying quality equipment. Sales are made worldwide, with a mix of direct sales and distribution in North America, Europe, and Australia and a network of distributors in all other key end-user markets.
The machine tools division's overall revenue was also severely affected by the COVID-19 pandemic with a fall of 26% on the previous year. The UK operation suffered the worst effects with the plant closed for the month of May 2020 and staff furloughed and working remotely as required. Site visits in the UK and Europe became extremely difficult and the business responded with online machine demonstrations and showroom visits. UK revenue fell by 38% on the prior year and consequently operating margins reduced down to 2% against 8% for the prior year.
Work on establishing a German operation for Colchester has continued during the year and a new lease on premises near Dusseldorf was entered into in May 2021 to provide a direct sales and service operation alongside the existing distribution infrastructure in this important European market.
The US machine tool business struggled similarly with the effects of the pandemic but has come out of the downturn more quickly than the UK with overall revenues only falling 20% on the prior year and is now back to pre-pandemic levels of activity. The business also took advantage of the PPP scheme, initiated cost savings and furloughed workers as required, but has been able to keep core skills together and has responded quickly to the increasing demand.
The Australian machine tools business was not immune to the pandemic and was forced to implement cost savings and furloughed staff, taking advantage of Government assistance schemes and was able to match the previous year's revenue with an improvement in operating margins.
The financial results of these activities were as follows:
2021
$ 000
2020
$ 000
Revenues
32,219
43,511
Underlying operating profit
2,801
3,216
Underlying operating margin
8.7%
7.4%
Group Results
Revenue from continuing operations reduced by just over 20% to $53.6m (2020: $67.2m) and Group profit before tax and adjusting items was $1.1m (2020: $1.1m). The profit before tax after adjusting items was $0.09m (2020: loss $0.63m).
Adjusting items
The directors have highlighted transactions which are material and unrelated to the normal trading activity of the Group.
In the opinion of the directors the disclosure of these entries should be reported separately for a better understanding of the underlying trading performance of the Group. These underlying figures are used by the Board to monitor business performance, form the basis of bonus incentives and are used for the purposes of the bank covenants.
These non-GAAP measures are explained in note 11 alternative performance measures and set out in note 3. All adjusting items are taken into account in the GAAP figures in the Income Statement.
As a result of the outsourcing of manufacturing in the UK, the existing premises were vacated and, given the uncertainty over economic conditions as a result of the Coronavirus pandemic, it was not known if a sub-let could be achieved. Consequently the right of use asset was impaired and unavoidable costs associated with the ongoing lease were provided for in the prior year, totalling $0.8m. An assignment of the lease for the remaining term was agreed in February 2021 and consequently a number of these provisions are no longer required, resulting in a credit of $0.6m this year.
As part of the ongoing restructuring of the Australian operation the freehold premises in Brisbane were sold in October 2020, generating a profit of $0.5m and proceeds of $1.7m.
Abortive costs on acquisitions it was decided not to proceed with as a consequence of the pandemic were $0.1m (2020: $0.7m including acquisition costs on CMS) and the cost of the Group restructure with certain management functions moving to Orlando Florida was $0.9m, including the compensation for loss of office of the CFOs and COO.
Amortisation of the intangible assets acquired through the CMS deal of $0.3m (2020: $0.3m) and the amortisation of the loan note discount and costs of $0.6m (2020: $0.5m) are also included in adjusting items.
In the prior year the buy-out of the Group pension scheme was completed, in April 2019, and a profit of $0.8m was recorded in the Income Statement as the final cash refund of surplus of $5.2m, net of tax, was higher than originally estimated.
Taxation
The current year charge for taxation is $2.7m. This is made up of deferred tax entries and provisions for current tax in the USA. No taxation was actually paid in the year. The recoverability of US losses in the near term were re-assessed in light of the recent trading results and the fact that the PPP forgiveness is not taxable resulting in the carrying value of the deferred tax asset in the balance sheet being reduced by $2.3m. In the prior year as a result of adjustments to deferred taxes and taxable losses there was a credit for taxation of $1.2m.
The UK businesses continue to benefit from substantial previous tax losses and no taxation is payable in the UK. There are substantial deferred tax assets in the UK of $3.8m and $2.4m in the US that are not recorded on the balance sheet. The US businesses are subject to Federal taxation on their profits at the rate of 21% but also suffer State taxes which increases their overall composite rate to 25%.
Net profit and earnings per share
The total continuing amount attributable to equity holders of the parent for the current financial year amounted to a loss of $2.6m (2020: profit of $0.6m) with pre-adjusting items loss of $1.8m (2020: profit $2.3m).
Underlying basic earnings from continuing operations before adjusting items and related taxation were a loss of 1.53 cents (equivalent to 1.17p) per share (2020: 1.97 cents profit, equivalent to 1.55p) and basic earnings per share were a loss of 2.19 cents (equivalent to 1.67p) (2020: 0.51 cents profit, equivalent to 0.40p) - see note 6 for details.
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements and PPP forgiveness was $1.6m (2020: $3.1m).
Working capital reduced during the year in response to the reduced revenues due to the COVID-19 pandemic, in particular with inventories reducing by $1.9m ($2.3m at a fixed exchange rate). Inventory levels have increased since the year end in response to the substantial increase in order activity.
Interest paid on borrowings was in line with the previous year at $1.1m with the largest component of this being the fixed interest on the £8.5m ($11.2m) 8% loan notes.
Capital expenditure consisted of the final stages of development work on the upgrading of the industrial laser division proprietary software of $0.2m, plus demonstration and rental laser systems capitalised and applications lab equipment for the laser business of $0.5m.
As part of the restructuring of the Australian machine tool business the Brisbane freehold premises were sold in October 2020 for $1.7m, generating a profit of $0.5m above its revalued amount. A lease of a smaller section of the building has been taken to maintain a sales and service operation in this important area.
Net borrowings
Group net debt at 31 March 2021 excluding lease liabilities reduced to $12.7m against $14.2m in the prior year.
The debt at 31 March 2021 includes $2.2m of second round Paycheck Protection Program loans (PPP) from the USA Government granted in March 2021 to the three USA businesses and which will become due for forgiveness in September 2021 based upon certain conditions, including payroll numbers and payments for payroll and rent. The initial loans of $2.2m granted in May 2020 were forgiven in February 2021 and included in the net operating expenses in the Consolidated Income Statement. Any amount not forgiven is repayable as a 2 year loan at 1% interest rate.
In order to provide headroom through these unprecedented times of the COVID-19 pandemic the UK machine tools business drew down a £1.2m ($1.7m) 3 year term loan with a bullet repayment on 1 September 2023 and interest at 1.92% under the Government backed Coronavirus Large Business Interruption Loan Scheme (CLBILS). There are no covenants on the loan.
Net bank indebtedness of $1.5m at 31 March 2021 (2020: $4.8m) includes cash in hand of $5.0m, the remaining $2.5m of term loan used to part finance the CMS acquisition in 2019 and the Government assistance loans from the UK and USA of $3.9m.
The £8.5m 8% Loan notes are GBP denominated and consequently on retranslation this year the balance is $11.2m compared to $9.4m at the previous year end. The extension of the repayment date of the loan notes to 14 August 2023 was agreed in July 2021 but as this was after the year end date, the loan notes are shown within current liabilities on the Consolidated Statement of Financial Position at 31 March 2021. The associated warrants to subscribe for new ordinary shares at 20p were similarly extended to the same date. The loan notes are shown net of un-amortised discounting and costs and also amounts disclosed in equity reserve which amount to $0.2m in the current financial year (2020: $0.2m).
Working capital facilities totaling $11.4m were renewed with HSBC UK, Bank of America and Westpac Australia during the year and are due to be reviewed in the normal course in early 2022. They are expected to be continued on the same basis. The Group maintains a mixture of term loans and revolving working capital facilities with maturities between 1 and 3 years. Headroom on bank facilities was $11.2m at the year-end (2020: $8.7m) with $5.0m cash in hand (2020: $2.9m) and all financial covenants in place were met during the year.
Gearing (excluding lease liabilities) amounted to 48% of aggregate net assets (2020: 50%).
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement on pages 1 to 2 and the Strategic Report on pages 3 to 8.
The financial position of the Group, liquidity, cash flows and borrowing facilities are described in this Strategic Report. Further details on the Group's cash and bank borrowings are included in notes 9 and 10.
The UK bank facilities with HSBC have no specific financial covenants. Trade loans and invoice financing need to be backed by the assets they are funding. There are no covenants in respect of the new Coronavirus Large Business Interruption Loan scheme (CLBILS) taken out in August 2020. The borrowings with Bank of America are subject to adjusted EBITDA to a fixed charge and to senior debt and an overall asset cover test. The $7.5m of short-term trade and credit facilities are due to be reviewed again in February 2022 and are expected to continue in the ordinary course of business on the same terms. Given the UK and USA working capital facilities are largely un-drawn this creates significant headroom in bank facilities and as a result reasonable downside modelling does not create liquidity issues.
The Director's believe that the Group is well placed to manage its business risks and, after making enquiries of divisional management, including a review of forecasts and assumptions, which take account of reasonably possible changes in trading activity and considering the existing banking facilities and stress tests on covenants which continue to show headroom, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the next 12 months following the date of approval of the financial statements. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.
Retirement benefits
The UK pension scheme buy-out was completed in late April 2019 and the remaining surplus in the scheme of $8.3m repaid to the Group after deduction of 35% tax, with the Group receiving the net $5.2m at the end of May 2019. As a result of the accounting surplus on the UK scheme at 30 March 2019 being $7.5m, a profit on disposal of the pension scheme of $0.8m was recorded in the consolidated income statement in adjusting items in the prior year and associated taxation of $0.3m recognised through other comprehensive income in the prior year.
The US retiree health scheme and pension fund deficits decreased to $1.0m (2020: $1.3m) during the current year.
Key performance indicators (KPIs)
The Group monitors performance against key financial objectives that the Directors judge to be effective in measuring the delivery of strategic aims and managing and controlling the business. These focus at Group level on revenue and underlying operating profit.
At individual business unit level, KPIs also include working capital control, and customer related performance measures such as on-time delivery and minimisation of warranty concerns.
These key performance indicators are measured and reviewed against budget projections and prior year on a regular basis and this enables the business to set and communicate its performance targets and monitor its performance against these targets. Given the Global effects of the COVID-19 pandemic, comparison against prior periods has been difficult and relatively meaningless, and market estimates have been very volatile and unpredictable. Revenue targets are to outperform the market forecasts by 1% (3% is considered a normal ongoing level of growth) and to achieve over a 10% underlying operating margin target.
The Group's recent performance on these financial KPIs is set out as follows:
KPI
2021
2020
Revenue (annual growth rate)
(20%)
3.1%
Underlying operating margin (% of revenue)
4.9%
4.1%
All figures are pre adjusting items.
These KPIs are used to assess performance and manage the business and have been discussed in the strategic report and divisional commentary on pages 3 to 5.
Principal risks
The Board of Directors has identified the main categories of business risk in relation to the implementation of the Group's strategic aims and objectives, and has considered reasonable steps to prevent, mitigate or manage these risks.
Macro-economic - the Group's businesses are active in markets which can be cyclical in nature as the overall level of market demand is dependent upon capital investment intentions. Economic or financial market conditions determine global demand and could adversely affect our customers, distributors, operations, suppliers, and other parties with whom we transact. Such factors as the ongoing Brexit issues and the COVID-19 pandemic during the financial year are examples of factors which have resulted in changes in demand. The Directors seek to ensure that overall risk is mitigated by avoiding excessive concentration of exposure to any given geographical or industry segment, or to any individual customer. Market conditions, lead indicators and industry forecasts are monitored for any early warning signs of changes in overall market demand, and measures to exploit opportunities or manage elevated risks are taken as appropriate. Key business risks are set out in the strategic review.
Production and supply chain - the continuity of the Group's business activities is dependent upon the cost-effective supply of products for sale from our own facilities, and those of our key vendors. Supply can be disrupted by a variety of factors including raw material shortages, labour disputes and unplanned machine down time. Delays in the shipment of goods as a result of Brexit and the Worldwide disruption to container traffic as a result of the pandemic and latterly the issues with the blockage in the Suez Canal have and continue to affect lead times and create some disruption. The Directors are mindful that a small number of key manufacturing outsource partners of the machine tool division are located in relatively close proximity to each other in Taiwan.
Taiwan is ranked by Gardner Research as the eighth largest producer nation of machine tools, with global production valued at almost US $1.7 billion. Taiwanese suppliers represent approximately one third of the total cost of sales for the Group. Group businesses mitigate such risk by carefully selecting high quality vendors and maintaining long term constructive and open relationships. The effectiveness of such mitigation would be limited, however, in certain catastrophic circumstances (for example, extreme weather or seismic activity in the vicinity), against which the Group carries appropriate insurance. Additionally, supply sources in India and Europe have been explored and an increasing amount of product is now made in the USA as well.
Laws and regulations - Group businesses may unknowingly fail to comply with all relevant laws and regulations in the countries in which they operate and contract business. There is a risk of breach of legal, safety, environmental or ethical standards which can be more difficult to identify, comprehend, or monitor in certain territories than others. The Directors believe that they have taken all reasonable steps to ensure that operations are conducted to high ethical, environmental and health and safety standards. Controls are in place to keep regulatory and other requirements under careful review, and scrutinise any identified instances of elevated risk.
Information Technology ("IT") - Group IT systems and the information they contain are subject to security risks including the unexpected loss of continuity from virus or other issues, and the deliberate breach of security controls for commercial gain or mischief.
Any such occurrences could have a significant detrimental effect on the Group's business activities. These risks are mitigated by the utilisation of physical and embedded security systems, regular back-ups and comprehensive disaster recovery plans.
Market risks
The Group's main exposure to market risk arises from increases in input costs in so far as it is unable to pass them on to customers through price increases. The Group does not undertake any hedging activity in this area and all materials and utilities are purchased in spot markets. The Group seeks to mitigate increases in input costs through a combination of continuous improvement activities to minimise increases in input costs and passing cost increases on to customers, where this is commercially viable.
The Group is also aware of market risk in relation to the dependence upon a relatively small number of key vendors in its supply chain. This risk could manifest in the event of a commercial or natural event leading to reduced or curtailed supply. The Group seeks to mitigate these risks by maintaining transparent and constructive relationships with key vendors, sharing long term plans and forecasts, and encouraging effective disaster recovery planning. Alternative sources of supply in different geographic regions have also been put in place.
Other risks and uncertainties
Pension funding risk was a significant risk to the Group, but this has largely been eliminated by the buy-out of the UK final salary scheme. There remains a small closed pension arrangement in the USA and a requirement to provide health insurance cover to a limited extent to a number of retired people in the USA. The Directors regularly review the performance of the pension scheme and any recovery plan. Proactive steps are taken to identify and implement cost effective activities to mitigate the pension scheme liabilities and insurance premium of the retiree health scheme.
The remaining main risks faced by the Group are to its reputation as a consequence of a significant failure to comply with accepted standards of ethical and environmental behaviour.
The Directors have taken steps to ensure that all of the Group's global operations are conducted to the highest ethical and environmental standards. Regulatory requirements are kept under review, and key suppliers are vetted in order to minimise the risk of the Group being associated with a company that commits a significant breach of applicable regulations.
Paul Dupee
Chairman
1 September 2021
Consolidated income statement
For the 52-week period ended 31 March 2021
Before
After
Before
After
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Items
Items
Items
Items
Items
Items
ended
ended
Ended
ended
ended
ended
31 March
31 March
31 March
28 March
28 March
28 March
2021
2021
2021
2020
2020
2020
Notes
$000
$000
$000
$000
$000
$000
Continuing
Revenue
1
53,550
-
53,550
67,206
-
67,206
Cost of sales
(34,554)
(79)
(34,633)
(43,491)
(254)
(43,745)
Gross profit
18,996
(79)
18,917
23,715
(254)
23,461
Net operating expenses
(16,376)
(765)
(17,141)
(20,988)
(1,742)
(22,730)
Profit on disposal of property
3
-
452
452
-
-
-
Profit on disposal of pension scheme
-
-
-
-
809
809
Operating profit
2,620
(392)
2,228
2,727
(1,187)
1,540
Financial income
4
3
-
3
5
22
27
Financial expense
4
(1,499)
(642)
(2,141)
(1,664)
(536)
(2,200)
Profit/(loss) before tax
1,124
(1,034)
90
1,068
(1,701)
(633)
Income tax (charge)/credit
5
(2,920)
257
(2,663)
1,228
-
1,228
(Loss)/profit for the period on continuing activities
(1,796)
(777)
(2,573)
2,296
(1,701)
595
Loss on discontinued operations
-
-
-
(417)
(543)
(960)
(Loss)/profit for the period attributable to the equity holders of the parent
(1,796)
(777)
(2,573)
1,879
(2,244)
(365)
Basic earnings per share - continuing activities
6
(1.53c)
(2.19c)
1.97c
0.51c
Diluted earnings per share - continuing activities
6
(1.53c)
(2.19c)
1.92c
0.50c
Basic earnings per share
6
(1.53c)
(2.19c)
1.61c
(0.31c)
Diluted earnings per share
6
(1.53c)
(2.19c)
1.57c
(0.31c)
As explained in note 3, the directors have highlighted adjusting items which are material or unrelated to the normal trading activity of the group. The "before adjusting items" column in the consolidated income statement shows non-GAAP measures. The "after adjusting items" column shows the GAAP measures.
Consolidated statement of comprehensive income
For the 52-week period ended 31 March 2021
52-week
52-week
period ended
period ended
31 March
28 March
2021
2020
$000
$000
Loss for the period
(2,573)
(365)
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
Re-measurement of defined benefit asset
210
(36)
Property revaluation
-
199
Deferred taxation
(51)
(282)
Total items that will not be reclassified to the Income Statement:
159
(119)
Items that are or may in the future be reclassified to the Income Statement:
Foreign exchange translation differences
514
(606)
Total items that are or may in the future be reclassified to the Income Statement:
514
(606)
Other comprehensive income /(expense) for the period, net of income tax
673
(725)
Total comprehensive expense for the period
(1,900)
(1,090)
Attributable to:
Equity holders of the Parent Company
(1,900)
(1,090)
Consolidated statement of changes in equity
As at 31 March 2021
As at
As at
31 March 2021
28 March 2020
$000
$000
Non-current assets
Property, plant and equipment
2,808
4,060
Goodwill
13,174
13,174
Other intangible assets
3,726
3,868
Right of use assets
8,988
9,060
Deferred tax assets
2,765
4,415
31,461
34,577
Current assets
Inventories
17,941
19,054
Trade and other receivables
8,570
8,084
Taxation
-
222
Deferred tax assets
809
1,148
Cash and cash equivalents
4,997
2,878
32,317
31,386
Total assets
63,778
65,963
Non-current liabilities
Employee benefits
(968)
(1,261)
Loans and other borrowings
(1,590)
(11,654)
Government loans
(1,656)
-
Lease liabilities
(7,801)
(8,344)
Provisions
(248)
-
(12,263)
(21,259)
Current liabilities
Trade and other payables
(8,162)
(8,298)
Lease liabilities
(1,505)
(1,608)
Deferred tax liabilities
-
(236)
Taxation
(546)
-
Provisions
(188)
(590)
Government loans
(2,234)
-
Loans and other borrowings
(12,202)
(5,414)
(24,837)
(16,146)
Total liabilities
(37,100)
(37,405)
Net assets
26,678
28,558
Shareholders' equity
Called-up share capital
1,803
1,803
Share premium account
3,828
3,828
Revaluation reserve
-
1,348
Equity reserve
201
201
Translation reserve
(6,616)
(7,130)
Retained earnings
27,462
28,508
Total equity
26,678
28,558
Consolidated statement of changes in equity
As at 31 March 2021
Ordinary
Share
share
premium
Revaluation
Translation
Equity
Retained
capital
account
reserve
reserve
reserve
Earnings
Total
$000
$000
$000
$000
$000
$000
$000
At 30 March 2019
1,746
2,885
1,149
(6,524)
201
30,186
29,643
Loss for the period
-
-
-
-
-
(365)
(365)
Other comprehensive income/(expense):
Foreign currency translation
-
-
-
(606)
-
-
(606)
Property revaluation
-
-
199
-
-
-
199
Net defined benefit movement
-
-
-
-
-
(36)
(36)
Deferred tax
-
-
-
-
-
(282)
(282)
Total comprehensive expense
-
-
199
(606)
-
(683)
(1,090)
Transactions with owners:
Share capital subscribed for
57
943
-
-
-
-
1,000
Dividend
-
-
-
-
-
(1,088)
(1,088)
Credit for share-based payments
-
-
-
-
-
93
93
Total transactions with owners
57
943
-
-
-
(995)
5
At 28 March 2020
1,803
3,828
1,348
(7,130)
201
28,508
28,558
Loss for the period
-
-
-
-
-
(2,573)
(2,573)
Other comprehensive income/(expense):
Foreign currency translation
-
-
-
514
-
-
514
Property disposal
-
-
(1,348)
-
-
1,348
-
Net defined benefit movement
-
-
-
-
-
210
210
Deferred tax
-
-
-
-
-
(51)
(51)
Total comprehensive expense
-
-
(1,348)
514
-
(1,066)
(1,900)
Transactions with owners:
Dividend
-
-
-
-
-
-
-
Credit for share-based payments
-
-
-
-
-
20
20
Total transactions with owners
-
-
-
-
-
20
20
At 31 March 2021
1,803
3,828
-
(6,616)
201
27,462
26,678
Consolidated cash flow statement
For the 52-week period ended 31 March 2021
52-week
52-week
period ended
period ended
31 March 2021
28 March 2020
$000
$000
Cash flows from operating activities
Loss for the period
(2,573)
(365)
Adjustments for:
Amortisation
417
325
Depreciation
760
651
Depreciation of right of use assets
1,217
1,254
Net financial expense
2,138
2,173
PPP funding forgiven
(2,234)
-
Non-cash adjusting items
(357)
879
(Profit)/loss on disposal of property, plant and equipment
(489)
32
Loss on assets held for resale
-
127
Profit on disposal of pension fund
-
(809)
Equity share option expense
20
93
Income tax charge / (credit)
2,663
(1,228)
Operating cash flow before changes in working capital and provisions
1,562
3,132
(Increase)/decrease in trade and other receivables
(56)
2,587
Decrease in inventories
1,887
67
Decrease in trade and other payables
(631)
(973)
Employee benefit contributions
(118)
(78)
Proceeds from Pension fund disposal
-
5,213
Cash generated by operations
2,644
9,948
Interest paid
(1,126)
(1,141)
Lease interest
(373)
(375)
Net cash flows from operating activities
1,145
8,432
Cash flows generated from/ (used in) investing activities
Interest received
3
5
Proceeds from sale of property, plant and equipment
1,745
57
Proceeds from assets held for sale
-
926
Payment for acquisition of subsidiary, net of cash acquired
-
(6,072)
Purchase of property, plant and equipment
(494)
(649)
Development and IT software expenditure capitalised
(228)
(351)
Net cash flows generated from/(used in) investing activities
1,026
(6,084)
Cash flows used in financing activities
Dividends paid
-
(1,088)
(Repayment of)/proceeds from external borrowing
(5,063)
1,928
US PPP grants
4,468
-
UK CLBILS loan
1,656
-
Lease payments
(1,383)
(1,212)
Net cash flows used in financing activities
(322)
(372)
Net increase in cash and cash equivalents
1,849
1,976
Cash and cash equivalents at the beginning of the period
2,878
948
Effect of exchange rate fluctuations on cash held
270
(46)
Cash and cash equivalents at the end of the period
4,997
2,878
Notes to the financial information
1. Basis of preparatioN
The consolidated financial statements of the Group have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.
The Financial information set out in this preliminary announcement does not constitute the company's Consolidated Financial Statements for the financial years ended 31 March 2021 or 28 March 2020 but is derived from those Financial Statements. Statutory Financial Statements for 2020 have been delivered to the Registrar of Companies and those for 2021 will be delivered following the company's AGM.
The Auditors, BDO LLP, have reported on those financial statements. Their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their reports and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.
The Statutory accounts are available on the Company's website and will be posted to shareholders who have requested a copy and thereafter by request to the company's registered office.
2. Segment information
IFRS 8 - "Operating Segments" requires operating segments to be identified on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. The chief operating decision maker has been identified as the Board of Directors. The Board review the Group's internal reporting in order to assess performance and allocate resources.
The Board consider there to be two operating segments being machine tools and precision engineered components, and industrial laser systems.
The Board assess the performance of the operating segments based on a measure of underlying operating profit/(loss). This measurement basis excludes the effects of adjusting items from the operating segments. "Head Office and unallocated" represent central functions and costs.
The following is an analysis of the Group's revenue, results and net assets by reportable segment:
Continuing
52 Weeks ended 31 March 2021
Machine
tools
& precision
engineered
components
Industrial laser systems
Head Office
& unallocated
Total
Segmental analysis of revenue
$000
$000
$000
$000
Total revenue
32,219
21,331
-
53,550
Segmental analysis of operating profit/(loss) before Adjusting Items
2,801
1,836
(2,017)
2,620
Adjusting Items
452
(79)
(765)
(392)
Group operating profit/(loss)
3,253
1,757
(2,782)
2,228
Other segmental information:
Reportable segment assets
33,469
13,424
16,998
63,891
Reportable segment liabilities
(10,781)
(5,586)
(20,187)
(36,554)
Fixed asset additions
176
432
114
722
Depreciation and amortisation
1,007
1,016
371
2,394
Continuing
52 Weeks ended 28 March 2020
Machine
tools
& precision
engineered
components
Industrial laser systems
Head Office
& unallocated
Total
Discontinued
Segmental analysis of revenue
$000
$000
$000
$000
$000
Group Total
Total revenue
43,511
23,695
-
67,206
830
68,036
Segmental analysis of operating profit/(loss) before Adjusting Items
3,216
1,689
(2,178)
2,727
(417)
2,310
Adjusting Items
-
(254)
(933)
(1,187)
(543)
(1,730)
Group operating profit/(loss)
3,216
1,435
(3,111)
1,540
(960)
580
Other segmental information:
Reportable segment assets
35,073
14,164
16,726
65,963
-
65,963
Reportable segment liabilities
(18,085)
(6,990)
(12,330)
(37,405)
-
(37,405)
Fixed asset additions
368
330
302
1,000
-
1,000
Depreciation and amortisation
901
883
446
2,230
-
2,230
Inter-segment pricing is determined on an arm's length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.
Disaggregation of revenue is shown by origin, destination and product group in the following two tables:
Disaggregation of revenue by origin
2021
2020
$000
%
$000
%
UK
10,131
18.9
16,453
24.5
North America
40,784
76.2
48,094
71.6
Australasia
2,635
4.9
2,659
3.9
53,550
100.0
67,206
100.0
Disaggregation of revenue by destination:
2021
2020
$000
%
$000
%
Gross sales revenue:
UK
7,441
13.9
11,500
17.1
Other European
3,838
7.2
5,032
7.5
North America (USA)
37,469
70.0
43,804
65.2
Africa
240
0.4
538
0.8
Australasia
2,429
4.5
2,561
3.8
Central America
1,118
2.1
1,101
1.6
Middle East
299
0.6
1,346
2.0
Far East
716
1.3
1,324
2.0
53,550
100.0
67,206
100.0
Disaggregation of revenue by product group:
2021
2020
$000
%
$000
%
Sector
CNC lathes
4,988
9.3
6,282
9.4
Conventional lathes
10,108
18.9
13,968
20.8
CNC other
896
1.7
1,351
2.0
Conventional other
7,025
13.1
9,126
13.6
Workholding
5,180
9.7
6,611
9.8
Spares & service
3,665
6.8
3,120
4.6
Lasers
19,901
37.2
23,263
34.6
Laser spares and service
1,787
3.3
3,485
5.2
Total
53,550
100.0
67,206
100.0
Timing of revenue recognition
Products and services transferred at a point in time
45,784
85.5
57,811
86.0
Products and services transferred over time
7,766
14.5
9,395
14.0
Total
53,550
100.0
67,206
100.0
There are no customers that represent 10% or more of the Group's revenues.
Assets and liabilities related to contracts with customers:
The group has recognised the following assets and liabilities related to contracts with customers.
2021
2020
$000
$000
Current contract liabilities relating to deposits from customers
624
385
2021
2020
$000
$000
Current contract assets relating to amounts due from customers
344
246
Remaining performance obligations
The vast majority of the group's contracts are for the delivery of goods within the next 12 months for which the practical expedient in paragraph 121(a) of IFRS 15 applies.
The following table shows how much of the revenue recognised in the current reporting year relates to brought forward contract liabilities:
2021
2020
$'000
$'000
Revenue recognised that was included in the contract liability balance at the beginning of the year
385
538
3. adjusting ITEMS
2021
2020
$000
$000
Items included in cost of sales:
US Tariffs & Duty charges relating to prior years (h)
(79)
(254)
(79)
(254)
Items included in operating expenses:
Restructuring cost (j)
(928)
-
Unavoidable lease costs (b)
350
(378)
Right of use asset impairment (b)
227
(392)
Acquisition costs (e)
(71)
(684)
Amortisation of intangible assets acquired (f)
(343)
(288)
(765)
(1,742)
Profit on disposal of Australian property (i)
452
-
Profit on sale of pension (a)
-
809
(313)
(933)
Items included in financial (income)/expense:
Pensions interest on surplus (c)
-
22
Financial income
-
22
Amortisation of Loan notes and costs (d)
(642)
(536)
Total adjusting items before tax
(1,034)
(1,701)
Income tax on adjusting items
257
-
Total adjusting items after tax
(777)
(1,701)
Loss on discontinued activity (g)
-
(543)
The directors have highlighted transactions which are material or unrelated to the normal trading activity of the Group.
In the opinion of the directors the disclosure of these transactions should be reported separately for a better understanding of the underlying trading performance of the Group. These underlying figures are used by the Board to monitor business performance, form the basis of bonus incentives and are used for the purposes of the bank covenants.
These non-GAAP measures are explained in note 11 alternative performance measures and set out below. All adjusting items are taken into account in the GAAP figures in the Income Statement.
The items below correspond to the table below:
a) The buy-out of the Group pension scheme was completed in April 2019 and a profit of $0.8m was recorded as the amount received was higher than the carrying value of the asset previously recognised.
b) As a result of the outsourcing of manufacturing in the UK, the existing premises were vacated and given the uncertainty over economic conditions as a result of the Coronavirus pandemic it was not known if a sub-let could be achieved. This was further compounded by a flooding event which prevented a deal with a prospective tenant and consequently the right of use asset was impaired and unavoidable costs associated with the ongoing lease were provided for in the prior year totalling $0.8m. During the current year an assignment of the lease for the remaining term was agreed in February 2021 and therefore a number of these provisions are no longer required, resulting in a credit of $0.6m this year.
c) received from the scheme in respect of this transaction which arises as a pension accounting entry under the required standard due to the surplus in the scheme recorded in the balance sheet.
d) The amortisation of the loan note discount and costs amounted to $0.6m (2020: $0.5m). These are non-cash movements which unwind over the term of the notes.
e) Abortive costs on acquisitions it was decided not to proceed with as a consequence of the pandemic were $0.1m (2020: $0.7m on acquisition costs including CMS Inc.).
f) A charge of $0.3m (2020: $0.3m) arose as a result of amortisation of intangible assets acquired through the CMS Inc deal.
g) In the prior year a charge had been incurred of $0.5m which included additional costs for the closure of the Gamet business in October 2019 as well as a loss on disposal as a result of receiving less than originally anticipated.
h) A charge of $0.1m (2020: $0.3m) was expensed in cost of sales relating to US duty and tariff charges from prior years
i) As part of the ongoing restructuring of the Australian operation the freehold premises in Brisbane were sold in October 2020 generating a profit of $0.5m and proceeds of $1.7m.
j) The cost of the Group restructure with certain management functions moving to Orlando Florida was $0.9m, including the compensation for loss of office of the CFOs and COO.
4. Financial income and expense
2021
2020
$000
$000
Bank and other interest
3
5
Interest on employee benefit surplus
-
22
Financial income
3
27
Bank overdraft and loan interest
(172)
(315)
Other loan interest
(907)
(918)
Loan note interest
(642)
(536)
Finance charges
(12)-
(12)
Lease interest
(373)
(375)
Interest on employee benefit liabilities
(35)
(44)
Financial expense
(2,141)
(2,200)
5. Taxation
2021
$000
2020
$000
Current tax:
- UK Corporation tax at 19% (2020: 19%):
Overseas taxation:
- current period
(526)
151
Total current tax (charge)/credit
(526)
151
Deferred taxation:
- current period
(1,929)
891
- effect of rate change in UK
-
143
- prior period
(208)
43
Total deferred taxation (charge) / credit
(2,137)
1,077
Taxation (charged)/credited to the income statement
(2,663)
1,228
The rate for deferred tax in the UK was changed from 17% to 19% in the prior year and remains at 19% in the current year. The rate for Federal tax in the USA is 21% and in addition businesses suffer State taxes estimated at 4%.
Tax reconciliation
The tax charge assessed for the period is higher than (2020: lower than) the standard rate of corporation tax in the UK of 19% (2020: 19%). The differences are explained below:
2021
2020
$000
$000
Profit/(loss) before tax
90
(633)
Profit/(loss) before tax multiplied by the standard rate of corporation tax
in the UK of 19% (2020: 19%)
17
(120)
Effects of:
- income not taxable and/or expenses not deductible
297
68
- overseas tax rates
169
55
- property disposal
(250)
-
- US state taxes
43
60
- utilisation of discontinued business losses
-
(243)
- deferred tax prior period adjustment
208
(43)
- impact of rate change in the UK on deferred tax
-
(143)
- tax losses utilised not previously recognised
-
(4)
- deferred tax de-recognised/ (recognised) on losses in the period
2,179
(858)
Taxation charged/ (credited) to the income statement
2,663
(1,228)
6.Earnings per share
The calculation of the basic loss per share for continuing operations of (2.19c) (2020: profit 0.51c) is based on the earnings for the financial period attributable to the Parent Company's shareholders of a loss of ($2,573,000) (2020: profit $595,000) and on the weighted average number of shares in issue during the period of 117,473,341 (2020: 116,450,053). At 31 March 2021, there were 2,040,000 (2020: 8,400,000) potentially dilutive shares (share options or warrants with an exercise price below the average share price for the year) with a weighted average effect of 2,040,000 (2020: 2,877,486) shares giving a diluted loss per share for continuing operations of (2.19c) (2020: profit 0.50c). In accordance with IAS 33 - Earnings per Share, the Group shows no dilutive impact in respect of its share options and Deferred Share Plan for the year ended 31 March 2021 as their conversion to ordinary shares would decrease the loss per share from continuing operations.
2021
2020
Weighted average number of shares
Issued shares at start of period
117,473,341
112,973,341
Effect of shares issued in the year
-
3,476,712
Weighted average number of shares at end of period
117,473,341
116,450,053
Weighted average number of the 2,040,000 (2020: 8,400,000) potentially dilutive shares
2,040,000
2,877,486
Total weighted average diluted shares
119,513,341
119,327,539
$000
$000
Total post tax (loss)/profit - continuing operations
(2,573)
595
Total post tax loss including discontinued operations
(2,573)
(365)
Basic EPS
(2.19c)
0.51c
Diluted EPS
(2.19c)
0.50c
Total including discontinued operations
Basic EPS
(2.19c)
(0.31c)
Diluted EPS
(2.19c)
(0.31c)
Underlying earnings
$000
$000
Total post tax (loss)/profit - continuing operations
(2,573)
595
Adjusting items - per note 3
777
1,701
Underlying earnings after tax and adjusting items
(1,796)
2,296
Underlying basic EPS
(1.53c)
1.97c
Underlying diluted EPS
(1.53c)
1.92c
7. Trade and other receivables
2021
2020
$000
$000
Trade receivables
5,149
6,153
Other debtors
1,361
772
Other prepayments
1,716
913
Contract assets
344
246
8,570
8,084
2021
2020
$000
$000
Taxation
-
222
8. Trade and other payables
2021
2020
$000
$000
Current liabilities:
Trade payables
3,792
3,424
Social security and other taxes
344
576
Other creditors
1,254
1,468
Accruals
2,148
2,445
Contract liabilities
624
385
8,162
8,298
2021
2020
$000
$000
Taxation
546
-
9. RECONCILIATION OF NET CASH FLOW TO NET DEBT
2021
2020
$000
$000
Increase/(decrease) in cash and cash equivalents
1,849
(952)
Decrease/(increase) in debt and lease liabilities
6,820
(341)
Decrease/(increase) in net debt from cash flows
8,669
(1,293)
Net debt at beginning of period
(24,142)
(14,541)
Effect of transition to IFRS 16
-
(9,755)
Cash and debt through acquisition
-
1,451
Government assistance loans USA
(2,234)
-
Government assistance loans UK
(1,656)
-
Loan note amortisation
(675)
(421)
Lease liabilities increase
(502)
(74)
Exchange effects on net funds
(1,451)
491
Net debt at end of period
(21,991)
(24,142)
10. Analysis of net DEBT
At
28 March
Exchange
At
31 March
2020
movement
Other
Cash flows
2021
$000
$000
$000
$000
$000
Cash at bank and in hand
2,755
255
-
1,277
4,287
Term deposits (included within cash and cash equivalents on the balance sheet)
123
15
-
572
710
2,878
270
-
1,849
4,997
Debt due within one year
(5,414)
-
-
4,437
(977)
Loan notes due within one year
-
-
(11,225)
-
(11,225)
Debt due after one year
(2,217)
-
-
627
(1,590)
Loan notes due after one year
(9,437)
(1,113)
10,550
-
-
Government assistance loans USA
-
-
-
(2,234)
(2,234)
Government assistance loans UK
-
-
-
(1,656)
(1,656)
Lease liabilities
(9,952)
(608)
(502)
1,756
(9,306)
Total
(24,142)
(1,451)
(1,177)
4,779
(21,991)
11. Alternative performance measures
The Directors assess the performance of the Group by a number of measures and frequently present results on an 'underlying' basis, which excludes adjusting items. The Directors believe the use of these 'non-GAAP measures' provide a better understanding of the underlying performance of the Group. In addition, discontinued operations are excluded from underlying figures.
In the review of performance reference is made to 'underlying profit' or 'profit before adjusting items', and in the Consolidated Income Statement the Group's results are analysed between Before adjusting items and After adjusting items.
Adjusting items are detailed in note 3 and are disclosed separately on the basis that this presentation gives a clearer picture of the underlying performance of the group.
These measures are used by the Board to assess performance, form the basis of bonus incentives and are used in the Group's banking covenants. In addition, the Board makes reference to orders and order book or backlog. This represents orders received from customers for goods and services and the amount of such orders not yet fulfilled.
Underlying operating profit
2021
$000
2020
$000
Operating profit
2,228
1,540
Adjusting items included in net operating expenses (see note 3)
392
1,187
Underlying operating profit
2,620
2,727
Underlying (loss)/profit for the period from continuing activities
(Loss)/profit for the period
(2,573)
595
Adjusting items included in cost of sales and net operating expenses (see note 3)
392
1,187
Adjusting items included in Financial income
-
(22)
Adjusting items included in Financial expense
642
536
Tax on adjusting items
(257)
-
Underlying (loss)/ profit for the period on continuing activities
(1,796)
2,296
Underlying EPS
A reconciliation of underlying EPS is included in note 9.
Net debt excluding IFRS 16 leases liabilities
Net debt (see note 24)
(21,991)
(24,124)
Lease liabilities
9,306
9,952
Net debt excluding IFRS 16 lease liabilities
(12,685)
(14,172)
12. Post balance sheet events
The extension of the repayment date of the loan notes to 14 August 2023 was agreed in July 2021 with the related warrants also extended to this date. All other terms and conditions remain the same. As this was after the year end date the loan notes are shown within current liabilities on the Consolidated Statement of Financial Position as at 31 March 2021.
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