TIDMTCN
RNS Number : 5558D
Tricorn Group PLC
30 June 2021
30 June 2021
Tricorn Group plc
("Tricorn")
Final Results for 18 month period ended 30 September 2020
Tricorn (AIM: TCN.L), the AIM listed tube manipulation
specialist, announces its audited final results for the 18 month
period ended 30 September 2020.
The Annual Report and Accounts for the 18 months ended 30
September 2020 have been published to the Company's website (
www.tricorn.uk.com ) and posted to those shareholders who are
registered to receive physical copies.
For further information please contact:
Tricorn Group plc www.tricorn.uk.com
Andrew Moss, Chairman Tel +44 (0)7768 306 701
Michael Stock, Chief Executive/Group Finance Director Tel +44
(0)7894 784 106
Arden Partners (Nominated Adviser and Broker) Tel +44 (0)20 7614
5900
Steve Douglas
Richard Johnson
Notes to Editors:
Tricorn is a value-added manufacturer and specialist manipulator
of pipe and tubing assemblies to niche markets worldwide.
Headquartered in Malvern, UK, Tricorn has manufacturing
facilities in USA and UK employing approximately 240 employees and
has an additional joint venture facility in China.
References in this announcement to page numbers relate to the
relevant pages of the Annual Report.
Chairman's Statement
Performance in the 18 month period ended 30 September 2020
As a result of the impact of COVID-19, the Group changed its
accounting reference date from 31 March to 30 September and this
report therefore relates to the 18 month period commencing on 1
April 2019 and ending on 30 September 2020 (the "Period").
On 16 June 2020, the Company announced the appointment of
Michael Stock as Group Finance Director, replacing Phillip Lee who
had been with the Group for 11 years. Michael Stock joined the
Group on 3 August 2020 and, following a review of the capabilities
of the finance team, determined the need to hire a new, stronger
and more experienced team. Under his leadership, this new team
conducted an internal review of the performance of the Group and
various matters came to light in the preparation of the Group's
financial statements for the Period. These were announced on 16
November 2020 with further updates being made in December 2020 and
January 2021. Further details on these matters are provided in the
Chief Executive and Group Finance Director's Report below.
The breakdown in the control and oversight of the finance
function during the period is extremely disappointing. The focus of
the new team has been to implement robust controls over current
financial reporting to ensure confidence in the results presented.
Despite significant work being done by the new finance team the
legacy issues have resulted in the auditor disclaiming their
opinion on the financial statements of the Group and Company for
the Period as it has not been possible to fully reconstruct the
historic accounting records by the time we are due to report.
Notwithstanding the limitations relating to the accounting records
to support the transactions the comments on the results throughout
the annual report are our understanding of the results based on the
financial reporting system in place and the work done by the
finance team after the year end.
The first six months of the Period commenced with encouraging
trading conditions but, by the end of this six month segment, UK
markets were slowing. In the USA, whilst volumes were holding up,
margins were under pressure from tariffs imposed on imported goods
from China. The Group successfully completed its investment in a
painting facility in the USA providing the capability to bring
in-house painting processes previously out-sourced. This has
provided both manufacturing cost savings and lead time reductions
and is welcomed by our customers.
Trading during the second six-month period was initially in-line
with the outlook presented with our interim results for the six
months ended 30 September 2019, namely that UK markets were at a
low ebb and US markets were weakening. We took measures to reduce
our cost base to reflect lower levels of activity, but remained
optimistic about the opportunities for the Group. On 5 February
2020, we successfully completed a placing and open offer of new
ordinary shares raising net of costs, GBP1.34m. The planned use for
these funds was to: strengthen the balance sheet; provide working
capital headroom to enable growth opportunities to be pursued
across the Group; and fund capital expenditure on a new
manufacturing capability in the USA.
During February 2020, the first impact of COVID-19 was
experienced by our joint venture business in China. Many businesses
in China, including our own, were prevented by the Chinese
Government from re-opening after the Spring Festival. However, our
facility remained closed for only two weeks with local management
successfully working with Government officials to put in-place
COVID-19 secure measures to protect the work force. The joint
venture has traded strongly since then with no further COVID-19
related disruption to activities.
We now realise that the unprecedented impact of COVID-19 on the
global economy and our daily lives was first evidenced by the
issues in China and associated supply chain disruption at our major
customers in the early part of March 2020. For Tricorn, this meant
short notice changes in demand schedules, both decreases and
increases, with consequent adverse impacts on labour utilisation
and working capital.
Both Tricorn's UK facilities were temporarily closed on 25 March
2020 amidst safety concerns for employees and following serious
disruption to supply chains and numerous customer closures. The
Group's USA facilities closed a few days later with similar
concerns and challenges. Most of the Group's UK and US employees
were furloughed from the end of March 2020, with the remaining key
staff focused on ensuring that the Group's facilities were in full
compliance with the latest Government guidelines to allow an early
and safe restart once supply chains and customer demand were
re-established.
As we entered the third six month period in April 2020, we were
focused on preparing for the re-opening of our manufacturing
facilities whilst implementing measures to protect all our
employees in accordance with best practice. The Group's UK and US
facilities reopened and have remained open, from 20 April 2020
onwards, albeit with reduced staffing levels and employees
continuing to work from home wherever possible.
We also put in place a number of measures to protect our cash
position. These included utilising the UK Job Retention Scheme and
the USA furlough scheme. We obtained a $0.7m loan under the USA
Payroll Protection Program, which post-period end we were informed
has been forgiven. The Group also obtained an additional GBP1.0m of
funding in June 2020 through the UK Government's Coronavirus
Business Interruption Loan Scheme ("CBILS") facility from its
existing bank, HSBC and more recently, in March 2021, secured an
additional GBP0.5m from the CBILS Invoice Discount Top Up Facility
with HSBC which is backed by a UK Government guarantee.
Revenue and loss before taxation were significantly impacted by
the events and issues of the past 18 months that are described
above. Revenue of GBP25.4m for the Period compares to GBP22.8m for
the 12 months ended 31 March 2019. Loss before taxation was GBP7.7m
(2019: profit GBP1.0m).
People
On 11 January 2021, the Company announced that Mike Welburn,
after 13 years as Chief Executive, was stepping down from the Board
with immediate effect and that Michael Stock, would take on the
combined role of Chief Executive and Group Finance Director. In
addition, David Leakey, who joined the Group as Sales Director in
2011, was appointed Group Sales and Operations Director with
immediate effect.
The Board would like to take the opportunity to thank all our
employees for their hard work and support throughout this difficult
period. Their commitment and dedication ensure that we continue to
drive the business forward and deliver quality products to our
customers.
Outlook
Since February 2020, as a result of the global pandemic, Tricorn
has experienced an extended period of challenging markets and
turbulent trading. We have made significant changes to our senior
executive team, who are focused on improving our operations to
strengthen our commercial opportunities for growth. Customer demand
is steadily improving which is a welcome sign that the Company is
returning to pre-pandemic levels of production activity.
While the Group is currently operating within its borrowing
facilities, these facilities alone will not provide the Group with
the necessary cash to make the required investment to deliver the
strategy and return the Group to profitable cash generation. There
are a number of funding options available to the group which are
currently being considered by management. The Group's bankers
continue to remain supportive during this period.
We anticipate that the impact of COVID-19 and the shipping
delays of imported material will continue to put pressure on labour
costs and associated labour productivity in the near term. The
Group made a solid start to the year with revenue for the first six
months of 2021 in line with the same period in the previous year
and increasing 33% on the previous six month period ending 30
September 2020, although margins continue to see some pressure from
price increases and labour productivity. With a re-energised
leadership team focussing on the business turnaround strategy, the
Directors consider that Tricorn is well positioned to manage these
headwinds and further improve its operational performance to its
customers.
Andrew Moss
Chairman
Chief Executive and Group Finance Director's statement
Operational Review
The Group has five manufacturing facilities across the UK, USA
and China. These locations make Tricorn ideally positioned to
support its blue-chip OEM customer base, many of whom are seeking
to localise supply and technical support for their facilities in
these key regions. At the start of the Period, the Group
consolidated its brands with Franklin Tubular Products Inc and the
more recently announced expansion at Rabun Gap together operating
as Tricorn USA with Malvern Tubular Components Limited and Maxpower
Automotive Limited trading under the common identity of Tricorn UK.
The joint venture in China remains as Minguang-Tricorn Tubular
Products Nanjing Limited.
Tricorn UK
The Group has two manufacturing facilities in the UK, located in
West Bromwich and Malvern. The Malvern facility specialises in the
design and manufacture of larger tubular assemblies and
fabrications for engine, cooling and generator set applications.
Its customer base serves the power generation, oil and gas, mining
and marine application markets. The West Bromwich site is focused
on rigid, nylon and hybrid tubular products for engines, hydraulic
actuation, transmission lubrication and fuel sender sub-systems.
Key end markets are on- and off-road applications, including
construction, trucks and agriculture.
Demand through February 2020 had started to slow in the UK with
further softening thereafter as some customers experienced supply
shortages from China. However, the situation deteriorated rapidly
through March 2020. As set out above, both Tricorn UK facilities
were temporarily closed on 25 March 2020 amidst safety concerns for
employees and following serious disruption to supply chains and
numerous customer closures. The facilities were reopened from 20
April 2020 onwards and have remained open since. Markets gradually
started to improve towards the end of the Period albeit with some
ongoing supply chain concerns.
As discussed in the Chairman's Statement, we have been unable to
obtain full accounting records in the UK for the Period and
therefore our understanding of the results as discussed below are
based on the financial reporting system in place and the work
performed by the finance team to substantiate the results after the
year end.
Revenue for the 18 month trading period of GBP15.3m was 8.5% up
on the corresponding 12 month period (31 March 2019: GBP14.1m).
Segmental loss before taxation was GBP4.3m (31 March 2019: profit
GBP0.9m).
Tricorn USA
In the USA, in May 2019, the Group had extended its capabilities
with the purchase of a custom built powder coat and wet spray
painting line located in leased premises at Rabun Gap, Georgia, a
short distance from its manufacturing facilities at Franklin, North
Carolina. This facility has allowed previously sub-contracted
processes to be brought in-house as well as providing for further
expansion of manufacturing facilities when market conditions
improve.
Market demand slowed in the Period when compared to the previous
period with this reduction escalating through March 2020 due to the
impact of COVID -- 19. Revenue for the Period of GBP10.3m was up
18.4% on the 12 month period ended 31 March 2019 (31 March 2019:
GBP8.7m). Segmental loss before taxation in the Period was GBP2.3m
(31 March 2019: profit GBP46,000).
Joint Venture - China
Our Chinese joint venture, Minguang-Tricorn Tubular Products
Nanjing Limited, performed broadly in line with expectations and
enabled dividend payments to the Group in the period of
GBP0.3m.
Financial Review
Income statement
As highlighted in the Chairman's statement, this 18 month
trading period has been significantly impacted by the effects of
COVID-19 from which the Group is now emerging, and also from an
internal review of the performance of the Group following my
appointment and the subsequent hiring of a new, stronger and more
experienced finance team.
Overall, consolidated revenue for the Period of GBP25.4m
compares to GBP22.8m for the 12 months ended 31 March 2019. The
loss before taxation was GBP7.7m (31 March 2019: profit GBP1.0m).
Given the change of accounting reference date and the extended 18
month reporting period to 30 September 2020 as compared to the 12
month reporting period to 31 March 2019, and the significant impact
of COVID-19 on the trading period, this review analyses the 18
month period in 6-month segments consistent with the Chairman's
statement.
Trading for the 6 months ended 30 September 2019 showed revenue
of GBP10.6m (30 September 2018: GBP11.4m) and a profit before
taxation of GBP0.2m (30 September 2018: GBP0.5m). It was reported
at this time that revenues in the UK were beginning to slow and
that US margins were under pressure from import tariffs. Trading
for the next 6 months to 31 March 2020 showed the impact of this
slowdown and margin pressure and Group revenue for this period was
GBP8.5m (a 19.8% decline from the previous 6 months) (31 March
2019: GBP11.3m) returning a loss before taxation of GBP0.8m (31
March 2019: profit GBP0.5m).
As noted above, February and March 2020 signalled the
significant impact of COVID-19 on our business and this has largely
defined the results in the 6 months ended 30 September 2020 with
Group revenue of GBP6.3m (a further 25.9% decline from the previous
6 months) (30 September 2019: GBP10.6m) and a loss before taxation
of GBP7.1m (30 September 2019: profit before tax GBP0.2m).
The loss before taxation of GBP7.1m in the 6 months to 30
September 2020 was significantly impacted by an internal review of
the financial governance of the Group conducted following my
engagement in August 2020 and the identification of a balance sheet
risk of GBP4.6m which was announced on 16 November 2020. This has
since been investigated and written off in full together with other
more normal adjustments of approximately GBP0.5m, associated with a
robust period-end close process in readiness for the audit of the
Period.
Given the nature of the historic accounting records and
prevailing control environment at the time, it has not been
possible to accurately allocate the adjustment of GBP4.6m to
specific time segments and it might be that some of these
adjustments relate to accounting periods prior to the 18 months
ended 30 September 2020. The Board does not consider it a cost
effective or an economic use of resources to perform this
reallocation exercise and therefore the adjustments have been
reflected in the Period.
Approximately GBP1.1m of the GBP4.6m write-off related to the
Group's US operation. This included a write-off of capitalised
development costs of GBP0.3m and a write-down of net inventory of
GBP0.5m both predominantly relating to a contract loss since the
onset of COVID-19, and a more prudent view on debtor recovery of
GBP0.3m.
In the UK, approximately GBP2.5m of the GBP4.6m was written off.
This included a stock write down of GBP0.7m, an internal audit of
fixed assets resulting in a write off of approximately GBP0.6m,
recognition of a historic understatement of liabilities of GBP1.0m
and a more prudent view on debtor recovery of GBP0.2m.
In addition to the GBP3.6m identified above as specific to the
US and UK operations, it was also reported in the announcement of
16 November 2020 that there existed an intercompany imbalance of
approximately GBP1.0m. This too has been subsequently investigated
and has been written off in the results for the period to 30
September 2020.
Gross margins in the Period were down 8.3% at 30.1% (31 March
2019: 38.4%), impacted by approximately GBP2.0m of adjustment
following the internal performance review referred to above. This
equates to 7.9% of revenue in the period to 30 September 2020 or
8.8% of revenue for the 12 months to 31 March 2019.
Distribution costs at GBP1.1m (31 March 2019: GBP1.0m) represent
4.4% of revenue (31 March 2019: 4.5%).
The Group's administration costs for the Period increased to
GBP13.8m (31 March 2019: GBP6.8m) and includes an adjustment of
approximately GBP3.0m following the internal performance review and
non-underlying charges of GBP0.7m (31 March 2019: GBP0.1m).
Adjusting for this GBP3.7m, administration costs as a percentage of
revenue represent 39.8% (31 March 2019: 29.4%). The increase of
10.4% is predominantly attributable to the significant decline in
volume and the lack of contribution from this lost revenue to the
fixed costs of the business.
The Group's Chinese joint venture ('JV'), Minguang-Tricorn
Tubular Products Nanjing Limited, showed profitability over the
Period, with the Group's share of profit being GBP0.1m (31 March
2019: GBP0.3m) and dividends received from the JV of GBP0.3m (31
March 2019: GBPnil).
EBITDA for the Period was a loss of GBP5.2m (31 March 2019:
profit GBP1.8m). EBITDA in the current period has benefitted from
GBP0.7m as a result of the adoption of IFRS 16 in the period when
compared to the policy applied in the previous year. Finance costs
for the Period were GBP0.5m (31 March 2019: GBP0.2m), of which
GBP0.2m is attributable to the adoption of IFRS16. The Group
delivered a loss before taxation for the Period of GBP7.7m (31
March 2019: profit GBP1.0m).
After adjusting for intangible asset amortisation, goodwill
impairment, Rabun Gap start-up costs and share based payment
charges, the adjusted loss before taxation for the Period was
GBP6.9m (31 March 2019: profit GBP1.1m).
Basic earnings per share (EPS) was (18.81p) (31 March 2019:
2.62p) and after adjusting for non-underlying items, the underlying
EPS* was (17.04p) (31 March 2019: 3.02p).
The Board is not recommending the payment of a dividend for the
Period ended 30 September 2020 (31 March 2019: 0.2p).
Balance Sheet
Total assets of the Group as at 30 September 2020 were GBP14.2m,
a reduction of GBP0.8m on the previous period end (31 March 2019:
GBP15.0m). The decrease is represented by a write-off of assets of
approximately GBP3.0m following the internal performance review,
net of an increase in fixed assets of approximately GBP2.9m
following the adoption of IFRS16 and a goodwill impairment charge
of GBP0.4m which relates to the acquisition of Maxpower Automotive
Limited in 2007. The balance of GBP0.3m is predominantly
attributable to the lower volume of business in the latter trading
months leading up to 30 September 2020 which has resulted in lower
levels of operating working capital.
Total liabilities of the Group as at 30 September 2020 had
increased by GBP4.8m to GBP12.5m (31 March 2019: GBP7.7m)
predominantly due to the recognition of GBP2.9m of lease
commitments following the adoption of IFRS16 and an increase in
borrowings of approximately GBP1.7m (excluding hire purchase and
finance lease liabilities).
On translation of its overseas assets and liabilities, the Group
made an exchange gain of GBP0.5m (31 March 2019: GBP0.1m gain).
This is a non-cash movement and is treated as a movement in other
comprehensive income. As a result, the translation reserve in
shareholders' funds now shows a GBP0.5m surplus (31 March 2019:
GBP14,000 surplus).
Cash Flow
The Group's cashflow from operations in the Period was an
outflow of GBP1.9m (31 March 2019: inflow GBP1.2m). This was
predominantly due to the impact of COVID-19 on the trading
activities for the Period, as the write-off associated with the
internal performance review was primarily non-cash in nature.
After interest payments and net tax receipts, cash outflow from
operating activities during the Period was GBP2.2m (31 March 2019:
inflow GBP0.9m). This excludes cashflows from operating leases
following the adoption of IFRS16 of GBP0.7m which forms part of the
payment of finance lease liabilities in the Group statement of
cashflows of GBP0.9m (31 March 2019: GBP84,000).
During the Period, the net cash outflow from investing
activities was GBP0.3m (31 March 2019: GBP1.0m). Expenditure on the
purchase of plant and machinery was GBP0.3m (31 March 2019:
GBP0.7m). In the year ended 31 March 2019, the Group had
expenditure of GBP0.3m on intangible assets whereas this was GBPnil
in the 18 months to 30 September 2020.
Total operational cash outflow including investing activities
was GBP2.5m (31 March 2019: GBP0.1m) and was financed by a mixture
of net proceeds from the February 2020 Placing and Open Offer of
GBP1.34m (net of costs) and availability of COVID-19 related
facilities in the UK and the USA of approximately GBP1.6m.
As a result of the Group's operating activities in the Period,
net debt (excluding hire purchase agreements and finance lease
liabilities) increased over the prior year by GBP1.8m to GBP4.9m
(31 March 2019: GBP3.1m). Cash and cash equivalents at 30 September
2020 were GBP0.7m (31 March 2019: GBP0.5m). The Group's cash and
cash equivalents as at 28 June 2021 were approximately GBP0.9m.
Michael Stock
Chief Executive and Group Finance Director
* References to adjusted EBITDA, (loss)/profit before taxation
and adjusted earnings per share are before intangible asset
amortisation, goodwill impairment, Rabun Gap start-up costs and
share based payment charge
Principal risks and uncertainties
The management of the business and the nature of the group's
strategy are subject to a number of risks.
The Directors are of the opinion that a thorough risk management
process is adopted which involves the formal review of all the
risks identified below. Where possible, processes are in place to
monitor and mitigate such risks. The Directors have set out below
the principal risks facing the business.
Risk Impact Mitigation
Working Recent poor financial results Various funding options are
capital have led to the Group's available to the Group and
and liquidity borrowing facilities becoming these are currently being
risk fully utilised and the considered by management.
need for further funding The Group's bankers remain
to support the investment supportive during this period.
required to return the
group to profitability The Group maintains communication
and cash generative activities. with key suppliers around
In addition, some suppliers the timing of payment runs
may offer reduced credit and updates on its performance
terms during this time, as necessary.
which could put short term
pressure on the Group's
cash flows and could potentially
lead to the deferral of
investment decisions.
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Internal For a company of its scale, The Directors and management
control Tricorn has had relatively have significantly strengthened
complex operations with the Group's resourcing and
multiple locations and control environment since
multiple information systems. the period end as detailed
This has led to significant in the Audit Committee Report.
control weaknesses being Management is continuing to
identified in the current improve and develop its ongoing
period as disclosed in reporting and control environment
the Chairman's Statement to ensure control weaknesses
and the Audit Committee are mitigated in future.
Report.
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Supply chain Supply chain disruptions At an operational and strategic
caused recently by the level the Group ensures that
COVID-19 pandemic and shipping it develops close relationships
delays of imported materials with its customers and its
can lead to the inability suppliers. By doing this it
to fulfil customer orders, is in a position to understand
leading to a reduction the changing nature of sourcing
in sales and increased and supply chain strategy
pressure on margins. quickly and respond accordingly
to any risks that this might
pose to the Group.
In addition, the Group has
been holding a level of buffer
stock to help mitigate delays
in supply.
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People People drive the success The Group places great importance
of the business. Inability on communication with its
to attract, retain and employees.
develop talent at all levels It aims to offer appropriate
of the organisation could remuneration packages in order
lead to failure in both to mitigate this risk and
short term delivery and seeks to create a supportive
longer term strategic goals. working environment where
employees are encouraged to
learn and develop in their
roles.
----------------------------------- ----------------------------------------
Exchange The Group operates internationally The new management team have
rate risk giving rise to exposure revised the foreign currency
from changes in foreign policies and are creating
currency exchange rates, natural hedges where possible,
the majority of which relates both in relation to translational
to US dollars. Changes and transactional foreign
in foreign currency rates exchange.
could effect the financial
results of the Group.
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Economic As a global business, the The Group monitors the external
and political Group may be affected by economic and commercial environments
uncertainty political, economic or to ensure that it responds
regulatory developments to economic change appropriately
in one or more countries in order to ensure that the
in which we operate. This risk of any impact is mitigated
could include a global
recession, COVID-19, Brexit
and US/China trade relations.
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Customer A significant proportion Management continues to be
concentration of the Group's revenue focused on strengthening customer
is derived from its top relationships and for our
4 customers. The Group's key 4 customers, we ensure
income and each individual that multiple contact points
site's profitability could are maintained, and that communication
be materially adversely is frequent and transparent.
impacted by changes to
our relationship with these As part of the Group's strategy,
key customers, including a significant investment in
a decision to diversify talent is contemplated and
or change how, or from this includes further investment
whom, they source the components in key account management
that we currently provide, resource which will support
an inability to agree on the communication approach
mutually acceptable pricing described above and further
or a significant dispute enhance the positive customer
with the Group. relationships that currently
exist.
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IT systems The Group has a range of Specialist third party IT
and cyber-security systems upon which it relies support provide multi-layer
to receive, process and data backup and storage. Regular
plan customer orders and updates for malware, security
manage its supply chain. and virus protection are installed.
Recent trends are towards
greater EDI linkages which The Group continues to monitor
add complexity and increased its IT requirements and the
risk around data integrity. suitability of its business
platforms and may, at some
Interruption of access point in the future, further
or loss of these systems invest in MRP systems to support
could negatively affect diversification, drive geographic
the Group's ability to consistency across its divisions
produce, despatch and invoice and deliver business efficiency.
customers as well as interrupt
the smooth running of its
own supply chain.
----------------------------------- ----------------------------------------
Section 172(1) statement
Introduction
As required by s172 of the Companies Act 2006, directors of a
company must act in a way they consider, in good faith, would most
likely promote the success of the Group for the benefit of its
shareholders. In so doing, the directors must have regards amongst
other matters to:
-- the likely consequences of any decision in the long term;
-- the interests of the Group`s employees;
-- the need to foster the Group`s business relationships with suppliers, customers and others;
-- the impact of the Group`s operations on the community and the environment;
-- the desirability of the Company maintaining a reputation for
high standards of business conduct; and
-- the need to act fairly with members of the Company.
Examples of how the Directors discharged their s172 duty when
taking the principal decisions during the Period
The Board takes the interests of stakeholders into account when
making decisions. The relevance of each stakeholder group may
increase or decrease by reference to the issue in question, so the
Board seeks to understand the needs and priorities of each group
during its discussions. During a challenging year, the below have
been the principal decisions taken and how stakeholders views have
been considered:
Our Engagement Principal decisions and outcomes
stakeholders
Shareholders The Board's approach to Specific matters on which
The Company's shareholder engagement the Board engaged with shareholders
major is detailed in the Corporate included:
shareholders Governance report on pages * Mitigation against the impact of COVID-19: the
are set 15 to 22. Directors discussed with certain shareholders the
out in the Key interactions included impact of COVID-19 on the financial position of the
Report of through: Group and agreed proposed actions to conserve cash
the Directors * Physical and virtual meetings with major shareholders and mitigate the impact on the trading result
* Information in relation to the fundraising in * Board appointments: feedback and input was provided
February 2020, including a circular containing by a major shareholder around the appointment of the
details of the transactions Chief Executive Officer and Group Finance Director
* Regular contact with key investors outside of the * Fundraising in February 2020: certain existing
reporting cycle shareholders were consulted as to their appetite for
participating in a fundraising, the outcome of which
was equity funding raised of GBP1.34m (net of costs)
* Investor website providing easy access to relevant
materials
* Dividends: in line with the Board's priority of
conserving cash during this period of uncertainty, no
dividends were paid or proposed in relation to the
Period
------------------------------------------------------------ ------------------------------------------------------------
Employees Key interactions included: Specific matters discussed
The Group * Regular communication, guidance and feedback with the Group's employees
employs throughout the COVID-19 pandemic as to measures being included:
staff with taken to ensure a safe working environment, * Safe working practices and attendance at the
the necessary recommended working practices and the financial workplace which led to a number of changes to the
skills to impact on the Group workplace environment to ensure the safety of
drive the employees and those visiting our sites
success
of the * Implementation of a regular feedback method through
business which employees can easily communicate any issues or * Employee responses provided through the regular
concerns with management and offer improvement ideas feedback helped focus the actions of management on
specific areas in relation to ways of working and
office practices
* Town hall meetings will be held to enhance
communications with employees and provide a further
method for employees to connect with management
------------------------------------------------------------ ------------------------------------------------------------
Suppliers Key interactions included: Specific matters discussed
* Regular discussions and updates with suppliers in with the Group's suppliers
relation to the impact of COVID-19 and the short term included:
funding position * The impact of COVID-19 disruption on forecast demand,
capacity and cash flows, which led to some temporary
extensions to payment terms and conditions designed
to balance-out the issues and challenges in the
vertical impact of schedule variability
------------------------------------------------------------ ------------------------------------------------------------
Customers Key interactions included: Specific matters discussed
* Regular account management meetings with key with the Group's customers
customers included:
* Customer feedback on future demand as a result of
COVID-19
* Monthly customer market demand reviews
* Cost impact of any supplier changes leading to
* Weekly schedule reviews required price changes
* Monthly quality reviews * Engineering changes to specific products requiring
new price or tooling investment
* Weekly on-time-delivery reviews
* New project discussions and new product opportunities
* Monthly Board reports against customer performance
* New business negotiations
* Monthly new business and opportunity reviews
------------------------------------------------------------ ------------------------------------------------------------
Lenders Key interactions included: Specific matters discussed
The Group * Input into the Group's fund raising plans in February with the Group's lenders included
has access 2020 * The intention to raise GBP1.34m through a placing in
to debt February 2020
finance
through * Applying for and securing a Coronavirus Business
its banking Interruption Loan Scheme ('CBILS') loan for GBP1m * The impact of COVID-19 on demand and short-term
relationships funding, which led to securing a CBILS loan of GBP1m
in June 2020
* Performance review meetings throughout the year
* Future funding support required as the Group
* Independent audit of the Group's compliance with the continues its turnaround activities and returns to
terms of the invoice discounting facility cash generating levels. The lenders continue to be
supportive of our position.
* Independent Business Review of the Group's financial
position undertaken and now concluded by an
independent audit firm, on behalf of the Group's
lenders
------------------------------------------------------------ ------------------------------------------------------------
Further details
For further details of how the Board operates and the way in
which it makes decisions are detailed in the Corporate Governance
report on pages 15 to 22.
The Strategic Report on pages 2 to 10 was approved by the Board
on 29 June 2021 and signed on its behalf by:
Michael Stock
Chief Executive and Group Finance Director
29 June 2021
Tricorn Group plc is the parent company of a group of specialist
engineering subsidiaries whose activities incorporate high
precision tube manipulation, systems engineering and specialist
fittings.
Directors
The present membership of the Board is set out below.
Directors:
A B Moss
R Allsop
M J Stock (appointed 3 August 2020)
D E Leakey
P Lee (resigned on 3 August 2020)
M I Welburn (resigned 11 January 2021)
Company Secretary:
M C Greensmith
Executive Directors
Michael Stock
Chief Executive Officer and Group Finance Director
Joined Tricorn and appointed to the Board in August 2020 as
Group Finance Director. Appointed as Chief Executive in January
2021. He joins Tricorn from Bromford Industries Limited, which
manufactures precision components for the aerospace sector, where
he was Chief Financial Officer for six years. Prior to that, he was
Chief Financial Officer of LoneStar Group Limited, a manufacturer
and distributor of speciality fasteners and gaskets to the oil
& gas, power generation and petrochemical industries.
David Leakey
Group Sales and Operations Director
Joined Tricorn and appointed to the Board as Group Sales
Director in June 2011 and appointed as Operations Director in
January 2021. He had previously spent 27 years working at Norgren
Ltd, the Motion and Fluid Controls division of IMI Plc. He has most
recently held the role of Global Sales Director in the Energy
Sector, with responsibility for the global business development of
the company's products into the oil and gas markets. David has also
held the position
of Sales Director in Norgren's Life Sciences and Automotive
Sectors.
Non-Executive Directors
Andrew Moss
Non-Executive Chairman
Appointed as Non-Executive Director in November 2014 and
Chairman in December 2014. Member of the Audit, Remuneration and
Nomination Committees. He has over 30 years' experience in
international engineering groups specialising in aviation,
automotive and power electronics products, and advanced composite
materials. He spent 13 years with Umeco Plc, five years of which
was as a main Board Director, resulting in his appointment as Chief
Executive in 2011. Prior to this he was with BTR/Invensys Plc
managing a number of international manufacturing businesses .
Roger Allsop
Non-Executive Director
Purchased Malvern Tubular Components in 1984 and was Chief
Executive of Tricorn up to 2002 after which he became a
Non-Executive Director. Chairman of the Audit, Nomination and
Remuneration Committees. He was previously managing director of
Westwood Dawes plc and a non-executive director of Netcall plc.
Share capital
Details of the Company's share capital, are given in note 25 to
the financial statements. The Group's policy for managing capital
and financing to support the activities of the Group is detailed in
note 24 to the financial statements.
Substantial shareholdings
The only interests in excess of 3% of the issued share capital
of the Company, which have been notified as at 25 June 2021 being
the latest practicable date before publication, were as
follows:
Ordinary
shares of Percentage
10 pence each of capital
Number %
R Allsop 16,847,857 34.23
Hsbc Global Custody Nominee (Uk) Limited 8,109,350 16.48
Rock (Nominees) Limited 3,421,841 6.95
Cheviot Capital (Nominees) LTD 1,744,642 3.54
Lynchwood Nominees Limited 1,605,000 3.26
FNZ Wealth Nominees Limited 1,581,657 3.21
Business review and principal risks and uncertainties
A review of the Group's trading operations and principal risks
and uncertainties is contained in the Strategic Report on page
2.
Employment policies
Management places significant emphasis on training and
developing its employees. In addition, management encourages
self-development which in turn aids succession planning, supporting
the strategic growth of the Group.
Employees are kept up to date with management policies and their
respective duties. Management emphasise the importance of good
communication and relations with all employees throughout the
Group.
It is the policy of the Group that there should be no unfair
discrimination in considering applications for employment,
including those from disabled persons. Employees are given equal
opportunities for career development and promotion.
Management additionally take a proactive approach to the welfare
of the Group's employees and the strong commitment to health and
safety is cascaded down to all levels of the business by senior
management.
Health and safety
The Group recognises its responsibility to ensure that its
employees work in as safe a working environment as possible. Checks
are also implemented to ensure its clients comply with Health and
Safety legislation.
Financial risks and management
The Group's principal financial instruments comprise an invoice
discounting facility, short term borrowings, hire purchase and
finance lease contracts, cash and short-term deposits. The main
purpose of these financial instruments is to raise finance for the
Group's operations. The Group has various other financial
instruments such as trade receivables and trade payables, which
arise directly from its operations.
The main risks arising from the Group's financial instruments
are interest rate risk, liquidity risk, commodity price risk,
foreign currency risk, and credit risk. The Board reviews and
agrees policies for managing each of these risks and they are
summarised below.
Interest rate risk
The policy of the Group is to manage its interest cost using a
mix of fixed and variable rate debt. The Group's exposure to
interest rate fluctuations on its borrowings is currently managed
by the use of floating facilities. The Group finances
specific large plant acquisitions via hire purchase or finance
lease contracts. The interest rate risk on positive cash balances
is not considered to be significant.
Liquidity risk
See risk as discussed within the principal risks and
uncertainties on page 7.
Commodity price risk
The exposure of the Group to the price of steel is high,
therefore selling prices are monitored regularly to reduce the
impact of such risk and opportunities to reduce material costs are
explored constantly. The Group has partly responded to this risk by
sourcing materials in low cost countries. The Group also look to
recharge any increased cost of commodities to customers.
Foreign currency risk
Certain purchases and sales are made in foreign currencies. In
order to minimise the impact of currency movements the Group
utilise short term forward currency contracts. Such cover is
determined by written policies set by the Board. Foreign exchange
differences on retranslation of foreign currency assets and
liabilities are taken to the Group profit or loss.
Credit risk
The Group trades with only recognised, creditworthy third
parties. It is the Group's policy that all customers who wish to
trade on credit terms are subject to comprehensive credit vetting
procedures. In addition, receivable balances are monitored on an
on-going basis with the result that the Group's exposure to bad
debts is not significant.
Going concern
In determining whether the financial statements can be prepared
on a going concern basis, the Directors considered the Group's
business activities, together with the factors likely to affect its
future development, performance and position. The Directors
prepared cash flow forecasts for 24 months from the period end
which considered the financial position of the Group, forecasts,
cash flows and borrowing facilities.
The Board regularly reviews revenue, profitability and cash flow
forecasts. A number of downside sensitised scenarios have been
modelled, the assumptions behind which were challenged. The Board
compares actual performance against budgets and forecasts and
reviews variances to continually refine and improve forecasting
ability from which to make effective decisions.
COVID-19, combined with margin pressures due to supply chain
disruptions, increased pricing and tariffs imposed on goods from
China, resulted in the Group being loss making in the Period,
before the write-offs incurred due to the performance review as
discussed in the Chief Executive and Group Finance Director's
statement. The Group raised equity funding of GBP1.34m (net of
costs) in February 2020 and secured GBP1m support from its bank
through the government backed loan schemes. $0.7m was obtained from
the USA Payroll Protection Program ('PPP'), which has subsequently
been forgiven and in addition, a further $0.7m was received in
April 2021 from the USA PPP, for which the Group will be applying
for this loan to also be forgiven.
The Group has certain borrowing facilities as set out in note
21. Of these facilities, GBP2.6m are repayable on demand and should
this amount be recalled by the bank the Group does not have
sufficient liquid resources to make repayment. In light of this,
and the Group's performance in the Period, an Independent Business
Review ('IBR') has been undertaken on behalf of the Group's
bankers, HSBC Bank plc, by an independent audit firm. The Group's
results and forecasts have been reviewed in detail by the audit
firm, their report has been sent to HSBC and the IBR has now
concluded. HSBC continues to remain supportive of the Group during
this time; credit approval to increase the Group's invoice
discounting facility by 10% on completion of a successful facility
audit has been received and the bank continue to provide the
Group's facilities on the same terms as those in the prior
period.
The Group is now very focused on its turnaround strategy and has
prepared trading forecasts for the five year period. These take
into account improved customer demand following recovery from
COVID-19, diversification of products and customers, appropriate
price increases and supply chain efficiencies. However, substantial
investment is needed in both capital expenditure and people during
the next 12-18 months and the Group's borrowing facilities alone do
not provide the Group with the necessary cash to make the required
investment, deliver the strategy and return the Group to
profitability and cash generative activity levels. There are a
number of options available to the Group to achieve the additional
funding required. While the directors consider it unlikely that
further funding would not be secured, they acknowledge at the date
of approval of the financial statements the requirement for further
funding over and above the existing facilities and the requirement
for ongoing support from their bankers not to recall facilities
repayable on demand present material uncertainties which may cast
significant doubt about the Company's and Group's ability to
continue as a going concern.
Directors' responsibility statement
The Directors are responsible for preparing the Strategic
Report, the Report of the Directors' the Group's Financial
Statements and the Company only financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have to prepare the Group financial statements in accordance with
International Financial Reporting Standards in conformity with the
requirements of the Companies Act 2006 (IFRS) and the Company
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law including FRS 101 ' Reduced Disclosure
Framework'). Under company law the Directors must not approve the
Group and Company financial statements unless they are satisfied
that they give a true and fair view of the state of affairs and
profit or loss of the Group and Company for that period. In
preparing these Group financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them consistently
- make judgements and estimates that are reasonable and prudent
- state whether applicable IFRS have been followed, subject to
any material departures disclosed and explained in the financial
statements
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the Group and Company financial statements
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and Company and hence for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Notwithstanding the matters explained in the Chairman's
statement the directors have responded to implement more enhanced
reporting and robust procedures in respect of internal control and
maintenance of accounting records in order to fulfil their
responsibilities going forward.
The Directors confirm that:
-- so far as each Director is aware, there is no relevant audit
information of which the Group and Company's auditor is unaware;
and
-- the Directors have taken all steps that they ought to have
taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditor is
aware of that information.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Group
and Company's website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Forward-looking statements
This report may contain certain statements about the future
outlook for Tricorn. Although the Directors believe their
expectations are based on reasonable assumptions, any statements
about future outlook may be influenced by factors that could cause
actual outcomes and results to be materially different.
On behalf of the Board
M J Stock
Director
Date: 29 June 2021
Corporate Governance Statement
The Company follows the Quoted Companies Alliance Corporate
Governance Code (the 'QCA Code').
The QCA Code follows ten basic principles. Through a set of
disclosures on their website and in their annual report, companies
are required to provide an explanation of how they consider they
are meeting those principles.
Following the appointment of Michael Stock as Group Finance
Director on 3 August 2020 a new, stronger and more experienced
finance team was hired. Under his leadership, this new team
conducted an internal review of the performance of the Group and
various matters came to light in the preparation of the Group's
financial statements for the Period. These were announced on 16
November 2020 with further updates being made in December 2020 and
January 2021. Further details on these matters are provided in the
Chief Executive and Group Finance Director's Report.
The breakdown in the control and oversight of the finance
function during the period is extremely disappointing. Further
details and responses by the Board and management are disclosed in
the Audit Committee report. Despite significant work being done by
the new finance team the legacy issues have resulted in the auditor
disclaiming their opinion on the financial statements of the Group
and Company for the Period as it has not been possible to fully
reconstruct the historic accounting records.
Given the breakdown in internal control discussed above, the
Company has been unable to comply with the ten principles of the
QCA Code in the current period. The Board is committed to ensuring
that Corporate Governance standards within the Company are improved
with the aim to move to full compliance in due course.
Details in relation to the Company's approach to corporate
governance are found in this statement, together with the Committee
reports that follow.
The QCA Code
Principle 1 - Establish a strategy and business model which
promote long-term value for shareholders
Tricorn's strategy is explained on the Group's website,
www.tricorn.uk.com .
The Group looks to create value for its stakeholders by focusing
on its areas of expertise and being the best at what it does. At
the same time the Group aims to be recognised as the 'best in
class' tube solutions provider. To achieve this, the Group
identifies Strategic Enablers and Growth Priorities. These
are:-
-- Strategic Enablers:-
o Establishing a global manufacturing footprint
o Leveraging the capabilities and know how across the Group
o Maintaining financial disciplines
-- Growth priorities:-
o Focus on large blue-chip OEM customers
o Capitalise on significant growth opportunities
o Drive for operational excellence
At the same time the Group is aware that it faces risks and
challenges to its business and these are detailed and addressed in
the Company's Annual Report and Accounts.
Principle 2 - Seek to understand and meet shareholder needs and
expectations
The Group aims to deliver a balance to shareholders between
capital and income growth, taking into account the Group's growth
expectations over the medium term.
The Board encourages regular interaction and communication with
both private and institutional shareholders and responds to
shareholder queries in a timely manner. As well as hosting
institutional shareholder visits to the Group's UK facilities, the
Board ensures that it is available to present and discuss its
interim and full year results on a one-to-one basis with
shareholders.
The Group's AGM is seen by the Board as an excellent opportunity
to communicate and present to shareholders at one of the Group's UK
manufacturing facilities, where questions can generally be asked
directly of Board members and queries addressed. However, this year
that course will not be possible due to the need for the Company to
comply with governmental guidelines given the continuing impact of
the COVID-19 pandemic. For more detail concerning the Company's AGM
this year please refer to the Explanatory Notes accompanying the
AGM Notice.
Principle 3 - Take into account wider stakeholder and social
responsibilities and their implications for long-term success
The Group is committed to upholding its responsibilities to its
stakeholders, both those internal to the organisation and
external.
The Group's Annual Report and Accounts highlight the policies
that it has in place in respect of its employees. The Group's
employees are vital to its success and the Board regularly seeks
their feedback and conducts surveys on all aspects of employment.
Work councils are also held to encourage employee engagement.
The Group has a varied supplier and blue-chip customer base and
works closely with both stakeholders to ensure that the appropriate
feedback mechanisms are in place.
The community plays an important part in the success of our
businesses and the Group makes sure that, where appropriate, it
engages with the wider community on a regular basis. Examples
include different parts of the Group holding open days and tours,
when permissible, to engage with the community.
Principle 4 - Embed effective risk management, considering both
opportunities and threats, throughout the organisation
The Group discusses the risks to its business within its Annual
Report and Accounts. Within the Annual Report, risks are identified
with explanations outlining how the Group addresses them.
Furthermore, in the Report of the Directors on the Group, those
financial and non-financial risks that may impact upon the business
are identified and then details the processes and procedures that
are in place to mitigate them.
Regular review of performance and risk take place between the
Executive Directors and senior management of the businesses, with
more formal reviews taking place at least monthly. These reviews
assess risks impacting, or which may impact, trading performance.
As a result, each business carries out regular forecasting updates,
which allow for ongoing performance monitoring and actions to be
taken quickly to mitigate risk.
Principle 5 - Maintain the Board as a well functioning, balanced
team led by the chair
The Board is responsible for leading and controlling the Group.
The biographies of the members of the Board are set out in the
Annual Report and Accounts. Andrew Moss as Chairman and Michael
Stock as the Chief Executive Officer and Group Finance Director
have responsibility for the day-to-day running of the Group,
together with David Leakey in his capacity as Group Sales and
Operations Director.
It is recognised, that the dual role held by Michael Stock poses
challenges to segregation of duties. In response to this challenge,
the board have recently recruited Amanda Larnder as Group Head of
Finance to take full responsibility over all financial matters;
including reporting and governance and all financial staffing
issues. Additionally, day to day operations is headed up by David
Leakey who has the responsibility for managing relationships with
and performance to our customers as well as interaction with and
assessment of our suppliers.
The Report provides further information on Directors'
responsibilities. The Board is supplied with regular information
with regards to the operational and financial performance of the
Group. The Board currently comprises two Executive Directors and
two Non-executive Directors and meets formally at least quarterly,
which all Directors are required to attend, and additionally there
are regular operational Board meetings at which performance and
overall trading are reviewed in depth. Information relating to the
meetings is circulated in advance by the Company Secretary and
minutes of the meeting are produced as an accurate record.
The Board is supported by Audit, Remuneration and Nomination
committees. There are specific matters which are reserved for the
Board, which are available on the Group's website. In addition, the
terms of reference for each of the committees can also be found on
the Group's website.
Principle 6 - Ensure that between them the Directors have the
necessary up-to-date experience, skills and capabilities
The Nomination Committee oversees the process of recruitment,
where new appointments to the Board are necessary. Their
recommendations are then put to the Board. The search for new
appointees is conducted according to the relevant skills and
experience that an individual can bring to the role. Appointments
are made on merit against specific criteria giving due regard to
the benefits of diversity.
The biographies of the Board of Directors, which are available
both in the Annual Report and Accounts and also on the Group's
website, provide details of the employment history of each of the
Directors, and also their relevant experience as it relates to the
Group.
The training and development needs of Board members are
considered on an ongoing basis and are encouraged as a way of
ensuring that each Board member has the appropriate experience and
skills for the Group.
Principle 7 - Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
The Board carries out an evaluation of its performance annually.
The KPIs of the Group are used to assess performance which aligns
to shareholders' expectations.
Each Director is subject to a re-election process at the Group's
AGM, with one Director being put forward for re-election each
year.
Principle 8 - Promote a corporate culture that is based on
ethical values and behaviours
The Group's Corporate Strategy sets the overriding framework
under which the Group promotes a culture that maximises performance
with regard to its employees, customers and suppliers, the
environment and community.
The Directors lead by example and work with senior management to
implement the processes and procedures within the Group's
subsidiary businesses. Policies covering whistleblowing and
anti-bribery are widely communicated and respected. Furthermore,
each of the Group's businesses has developed specific employment
manuals providing employees with up-to-date rules and regulations,
health and safety criterion, as well as pay grades, progression and
appraisal processes. Employees are also encouraged to consider and
present opportunities for improvement within their area of
work.
The Group aims to attract, employ and retain the highest calibre
of employees. Each business looks to recruit apprentices, where
opportunities present themselves, and each business currently
employs apprentices in various disciplines. Communication with
employees is seen as critical to the success of each of the Group's
businesses, with regular briefings, newsletters, forums and open
days proving successful.
The reward strategy of the Group aims to offer competitive pay
and benefits. At the same time, employees have the opportunity to
train and become competent in further disciplines to enhance their
pay.
Health and Safety is of paramount importance to the Group and
each employee is made aware of their obligations to maintain a safe
workplace. All employees undergo appropriate training and are
regularly assessed to ensure their continuing competence.
The Group is committed to lean principles in the manufacturing
process. Such principles enable the Group to reduce its
manufacturing waste, aim to lower carbon emissions and improve the
utilisation of packaging materials to reduce the Group's impact on
the environment. Other measures the Group employs include the safe
disposal of waste through the manufacturing process and reducing
energy consumption where possible.
The Group focuses on large blue-chip OEM customers and ensures
that it works closely with its customers through all aspects of the
relationship. The Group is keen to satisfy customer requirements
through engineered solutions and high quality products, which lead
to a positive customer relationship. The Group's suppliers are
expected to have in place appropriate health and safety,
environmental, labour and human rights standards that the Group
itself is expected to adhere to. The Group has detailed terms and
conditions which are issued to both customers and suppliers. This
details the terms under which the Group is prepared to trade,
including payment terms. Where it is important to the relationship,
and in the best interests of the Group, specific agreements or long
term contracts with customers and suppliers will be negotiated and
entered into.
Principle 9 - Maintain governance structures and processes that
are fit for purpose and support good decision-making by the
Board
The Corporate Governance section of the Group's Annual Report
and Accounts covers a number of points around the governance
structure of the Group.
As previously indicated, the Board is supported by the Audit,
Remuneration and Nomination committees, with terms of reference for
each committee available on the Group's website
Principle 10 - Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders and other
relevant stakeholders
The Board encourages regular interaction and communication with
both private and institutional shareholders and responds to
shareholder queries in a timely manner. As well as hosting
institutional visits to the Group's UK facilities, when possible,
the Board ensures that it is available to present and discuss its
interim and full year results on a one-to-one basis with
shareholders.
The Group's AGM is generally seen by the Board as an excellent
opportunity to communicate and present to shareholders at one of
the Group's UK manufacturing facilities, where questions can
generally be asked directly of Board members and queries addressed.
However, in the light of the UK Government's COVID-19 guidance, the
2021 AGM will be a closed meeting although investors are encouraged
to communicate with the Board by using the e-mail address
agm@tricorn.uk.com
The Audit Committee comprises:
-- Roger Allsop, Chairman of the Committee, Independent Non-Executive Director
-- Andrew Moss, Non-Executive Chairman
All of the Committee members are Independent Non-Executive
Directors and have no personal or financial interests, other than
as shareholders, in the matters considered by the Committee.
Role and operation of the Committee
The Audit Committee is responsible for ensuring that Tricorn
maintains a strong control environment. It provides governance over
the Group's financial reporting, including oversight and review of
the systems of internal control and risk management and the
performance of external audit functions.
The Committee is very disappointed and concerned by the
breakdown of controls and lack of oversight of the finance function
which, due to insufficient historic information, has led to the
auditor disclaiming their opinion on the financial statements for
the Group and Company for the Period. The actions of the Audit
Committee have been discussed below.
A copy of the Committee's formal terms of reference, which are
reviewed and approved annually, can be obtained from the Company
Secretary or from the Corporate Governance section of the Company's
website (www.tricorn.uk.com). The Executive Directors, other senior
management and external auditors may attend meetings by invitation
of the Committee members.
The Committee's principal duties are to:
-- make recommendations to the Board on the appointment,
re-appointment or removal of the external auditor and the amount of
its remuneration;
-- discuss and agree the scope of the audit and review the
auditor's management letter and the Group's response;
-- review half-year and annual financial statements and formal
announcements relating to financial performance;
-- review the adequacy and effectiveness of the Group's internal
financial controls, and internal control and risk management
systems;
-- consider compliance with relevant laws and regulations;
-- consider findings of internal investigations and management's response; and
-- review the Committee's terms of reference and recommend any
proposed changes to the Board for approval.
Considerations in 2020
During the Period the Committee considered the following
matters:
-- the suitability of the Group's accounting policies and practices;
-- the half-year and period-end financial results;
-- the scope and cost of the external audit;
-- the auditor's report for 2019;
-- the appointment of BDO LLP as the Group's external auditor;
-- the review and approval of the external auditor's plan for
2020, which detailed the proposed audit scope and risk and
governance assessment;
-- the review and approval of the external auditor's fees for 2020; and
-- the internal control environment across the Group.
Significant issues in relation to the financial statements
Given the challenging conditions faced during the Period,
including the material control weaknesses and accounting errors
identified, combined with the impact of COVID-19, the Committee
focused its efforts on ensuring that the control environment is
improved and is appropriate for the future of the Group.
The Committee, management and the external auditor considered
and concluded on a number of significant matters in relation to the
financial statements. Those matters are set out below:
Area of How the matter was addressed by the Audit Committee
focus
Disclaimer Following the appointment of the Group Finance Director
of audit in August 2020, a performance review of the business
opinion was conducted. This identified numerous accounting
errors which have been corrected as disclosed in the
Chief Executive and Group Finance Director's statement
as well as being previously announced to the market.
In addition, certain accounting records relating to
the period ending 30 September 2020 cannot be located.
The external auditors have been unable to fully complete
their audit in relation to the Period and have therefore
not expressed an opinion on the financial statements
of the Group and Company. The Committee and the Board
have agreed to file the financial statements without
an audit opinion in order to meet the legal filing
deadline.
The weaknesses in controls which led to the accounting
errors are of significant concern to the Committee
and the Committee has been working with the Directors
and management to overhaul controls and significantly
improve the control environment. The following improvement
activities have been agreed and are in the process
of being implemented:
* Strengthening of the finance team by considering
resource levels and hiring a more skilled and
experienced team;
* Ensuring an appropriately qualified management
structure is in place, with clear lines of
responsibility;
* Review of existing systems and processes to ensure
they are fit for purpose;
* Review of internal controls by the new finance team
with a continuous improvement and control update to
be provided at each Committee meeting;
* Improving controls around monthly reporting of
performance, and against budget and forecast;
* Automating detective controls as far as available
within the systems environment; and
* Ensuring central control over key areas such as cash
and banking facilities, capital expenditure
authorisation and contracts.
--------------------------------------------------------------
Going Due to COVID-19, the Group's underlying performance,
concern and the control weaknesses and accounting errors identified,
assessment the Committee increased its focus on the short to medium
term profit and cash forecasts prepared by management.
The Committee discussed the forecasts with management
and challenged the appropriateness of the assumptions
made including the achievability of the business plans,
the downside scenarios and the related cash flow forecasts.
The Committee reviewed the Group's liquidity requirements
and borrowing facilities and considered whether the
going concern assessment is appropriate for the Group.
Following this review the Committee and management
agreed that a material uncertainty in the preparation
of the financial statements on a going concern basis
exists as the process for securing the future funding
required is in its infancy and therefore the outcome
is unknown, at the time of publishing this report.
--------------------------------------------------------------
Risk management
The Committee ensures that the Group's principal risks and
uncertainties have been appropriately identified and assessed. It
reviews those key risks and the quality of the assurance on the
effectiveness of the controls that mitigate those risks, allowing
it to conclude on the principal risks for disclosure in the Annual
Report.
Governance
Following the control weaknesses discussed above and the
challenging Period experienced by the Group, the Board is
considering a new Independent Non-Executive Director to strengthen
the Committee and bring additional Governance to the Group through
increased support and challenge of management.
External audit
The Committee has responsibility to ensure that there is a
sufficiently robust and effective external audit through
considering the independence of the external auditor, the
appointment and re-appointment of the external auditor and all
reports from the external auditor. The Committee reviews and makes
recommendations regarding the appointment of the external auditor.
In making this recommendation, the Committee considers auditor
effectiveness and independence, and any other factors which may
impact upon the external auditor's re-appointment. After careful
consideration, the Committee did not recommend the re-appointment
of Grant Thornton UK LLP as auditor of the Group. The Committee
recommended the appointment of BDO LLP as the preferred new
auditor, which was approved at the 2019 Annual General Meeting.
Directors' remuneration
The Board recognises that Directors' remuneration is of
legitimate concern to the shareholders and is committed to
following current best practice. The Group operates within a
competitive environment, performance depends on the individual
contributions of the Directors and employees and it believes in
rewarding vision and innovation.
In response to COVID-19 and the financial impact on the Group,
the Non-Executive Directors agreed to take voluntary fee reductions
during the period. Since the period end, the Non-Executive
Directors have continued to receive a reduction in fees and the
Executive Directors have also taken voluntary salary reductions to
conserve cash.
Policy on executive directors' remuneration
Detail of individual Directors' remuneration is set out in note
5 to the financial statements. The policy of the Board is to
provide executive remuneration packages designed to attract,
motivate and retain Directors of the calibre necessary to maintain
the Group's position and to reward them for enhancing shareholder
value and return. It aims to provide sufficient levels of
remuneration to do this, but to avoid paying more than is necessary
and reflects the Directors' responsibilities. A separate
Remuneration Committee chaired by R Allsop has been established
comprising the non-executive Directors.
Basic annual salary
The Remuneration Committee reviews each Executive Director's
basic salary annually. In deciding upon appropriate levels of
remuneration the Board believes that the Group should offer levels
of base pay reflecting individual responsibilities and which are
commensurate with similar jobs in other business sectors.
Annual bonus payments, benefits and pension arrangements
M I Welburn, P Lee and D E Leakey participated in a performance
related bonus arrangement through Tricorn Group plc. M I Welburn, M
J Stock, P Lee and D E Leakey benefitted from the provision of
private medical insurance, the provision of company cars or car
allowance and are eligible to participate in a contributory pension
scheme. R Allsop and A B Moss receive no bonus, pension or benefits
in kind.
Notice periods
There are no Directors' service contracts with notice periods in
excess of one year. The notice periods for the Executive Directors
and Non-Executive Directors are as follows:
Type Notice period
R Allsop Letter of appointment 6 months
---------------------- --------------
D E Leakey Service agreement 3 months
---------------------- --------------
P Lee* Service agreement 6 months
---------------------- --------------
A B Moss Letter of appointment 1 month
---------------------- --------------
M J Stock** Letter of appointment 6 months
---------------------- --------------
M I Welburn*** Service agreement 12 months
---------------------- --------------
* Resigned from the Board 3 August 2020
** Appointed to the Board 3 August 2020
*** Resigned from the Board 11 January 2021
Share option incentives
The Company has adopted a number of individual unapproved and
enterprise management incentive scheme share option agreements to
motivate and retain key personnel of the Group. At 30 September
2020 the following options were held by the Directors:
Lapsed Granted Exercised
At beginning during during during the At end of Exercise
of period the period the period period financial period 2020 price
Number Number Number Number Number GBP
----------------------------- ------------ ----------- ----------- ----------- ---------------------- ----------
Unapproved share options
M J Stock* - - 1,000,000 - 1,000,000 0.10
M I Welburn** 361,844 361,844 - - - 0.10
M I Welburn 1,000,000 1,000,000 - - - 0.10
M I Welburn - - 3,767,331 - 3,767,331 0.10
D E Leakey 500,000 - - - 500,000 0.175
D E Leakey 500,000 - - - 500,000 0.10
D E Leakey - - 435,000 435,000 0.10
Enterprise management
incentive scheme (EMI)
options
P Lee*** 500,000 - - 500,000 - 0.10
P Lee 921,000 921,000 - - - 0.10
M I Welburn 1,263,156 1,263,156 - - - 0.10
----------------------------- ------------ ----------- ----------- ----------- ---------------------- ----------
Unapproved share options
M I Welburn's unapproved share option was granted on 6 August
2020, over 3,767,331 shares. This scheme has vested and is in force
for five years with an exercise price of 10p per share. Following
his resignation, M I Welburn left the Company on 30 April 2021 and
his share options have now lapsed.
D E Leakey has an unapproved option over 500,000 shares at 17.5p
granted on 30 June 2015. A further option over 500,000 shares was
granted on 4 April 2016 at an option price of 10p. Both options
vest immediately and run for 10 years. An additional option over
435,000 shares was granted on 6 August 2020 at an exercise price of
10.0p and is in force for five years.
M J Stock's unapproved share option was granted on 6 August 2020
over 1,000,000 shares. The scheme has vested and is in force for
five years with an exercise price of 10p per share.
* Appointed to the Board 3 August 2020
** Resigned from the Board 11 January 2021
*** Resigned from the Board and left the Company 3 August
2020
The exercise periods for share options were set by the
Remuneration Committee in order to incentivise and retain key
executives. All share disposals will be limited to one third of the
option in any given year without prior Board approval. The market
price of the Company's shares at 30 September 2020 was 8.50p (31
March 2019: 19.00p) and the range during the 18 month period was
7.25p to 19.50p (year ended 31 March 2019: 17.50p to 38.00p).
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF TRICORN GROUP
PLC
Disclaimer of Opinion
We were engaged to audit the financial statements of Tricorn
Group plc (the 'Parent Company') and its subsidiaries (the 'Group')
for the period ended 30 September 2020 which comprise consolidated
statement of comprehensive income, consolidated and company
statement of financial position, consolidated and company statement
of changes in equity and the consolidated statement of cash flows
and notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and
International Accounting Standards in conformity with the
requirements of the Companies Act 2006. The financial reporting
framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 101
Reduced Disclosure Framework (United Kingdom Generally Accepted
Accounting Practice).
We do not express an opinion on the accompanying financial
statements of the Group and Parent Company. Because of the
significance of the matter described in the basis for disclaimer of
opinion section of our report, we have not been able to obtain
sufficient appropriate audit evidence to provide a basis for an
audit opinion on these financial statements.
Basis for disclaimer of opinion
Following changes in the finance team during the period and
shortly after the period end it was identified that accounting
records had not been accurately maintained during the period ended
30 September 2020. In addition, primary records to support various
transactions cannot be located and, at the time of our report, the
directors are in the process of attempting to obtain relevant copy
information to substantiate the historic financial information.
This process will not be completed before the legal obligation to
file financial statements for the period ended 30 September 2020
and therefore the Directors have concluded that it is in the best
interest of the Parent Company and shareholders to file these
financial statements.
Therefore, we have been unable to confirm or verify by
alternative means the existence, completeness or valuation of the
assets and liabilities reported in the statement of financial
position at 31 March 2019 or the nature and timing of material
transactions that been recorded in the statement of comprehensive
income for the period ended 30 September 2020. We have been able to
carry out certain procedures to confirm the existence and valuation
of the assets and liabilities included in the statement of
financial position at 30 September 2020 but we have not been able
to fully conclude this work as a result of the lack of available
evidence. In addition, we have not been able to assess if the
assets and liabilities at 30 September 2020 are complete given the
inherent limitation on our work and the lack of evidence to support
the transactions that have occurred during the period.
As a result of these matters, we are unable to determine whether
any adjustments might have been found necessary in respect of
recorded or unrecorded elements making up the consolidated
statement of comprehensive income, consolidated and company
statement of financial position, consolidated and company statement
of changes in equity and the consolidated statement of cash
flows.
Opinions on other matters prescribed by the Companies Act
2006
Because of the significance of the matter described in the basis
for disclaimer of opinion section of our report, we have been
unable to form an opinion, whether based on the work undertaken in
the course of the audit:
-- the information given in the strategic report and the
Directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the Directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
Notwithstanding our disclaimer of an opinion on the financial
statements, in the light of the knowledge and understanding of the
company and its environment obtained in the course of the audit
performed subject to the pervasive limitation described above, we
have not identified material misstatements in the strategic report
or the directors' report.
Arising from the limitation of our work referred to above:
-- we have not obtained all the information and explanations
that we considered necessary for the purpose of our audit; and
-- we were unable to determine whether adequate accounting records have been kept, and
-- returns adequate for our audit have not been received from branches not visited by us.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our responsibility is to conduct an audit of the Group and
Parent Company's financial statements in accordance with
International Standards on Auditing (UK) (ISAs (UK)) and to issue
an auditor's report.
However, because of the matters described in the basis for
disclaimer of opinion section of our report, we were not able to
obtain sufficient appropriate audit evidence to provide a basis for
an audit opinion on these financial statements.
We are independent of the Group and Parent Company in accordance
with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC's Ethical
Standard, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Gareth Singleton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Birmingham, UK
29 June 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
GROUP INCOME STATEMENT
For the 18 month period ended 30 September 2020
Note 18 month 18 month 18 month
period period period
ended ended ended Year ended Year ended Year ended
30 September 30 September 30 September 31 March 31 March 31 March
2020 2020 2020 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Underlying Non-underlying Group Underlying Non-underlying Group
Revenue 3 25,371 - 25,371 22,763 - 22,763
Cost of sales (17,723) - (17,723) (14,025) - (14,025)
------------- -------------- ------------- ------------ -------------- ------------
Gross profit 7,648 7,648 8,738 - 8,738
Distribution costs (1,117) - (1,117) (1,022) - (1,022)
Administration costs
- General
administration
costs (13,094) - (13,094) (6,701) - (6,701)
- Goodwill impairment 11 - (391) (391)
- Intangible asset
amortisation 12 - (73) (73) - (102) (102)
- Rabun Gap start-up
costs - (115) (115) - - -
- Share based payment
charge 6 - (142) (142) - (36) (36)
------------- -------------- ------------- ------------ -------------- ------------
Total administration
costs (13,094) (721) (13,815) (6,701) (138) (6,839)
Operating
(loss)/profit 3,4 (6,563) (721) (7,284) 1,015 (138) 877
------------- -------------- ------------- ------------ -------------- ------------
Share of profit
from joint venture 14 124 - 124 282 - 282
Finance costs 8 (497) - (497) (209) - (209)
------------- -------------- ------------- ------------ -------------- ------------
(Loss)/profit before
tax (6,936) (721) (7,657) 1,088 (138) 950
Income tax
credit/(charge) 9 12 - 12 (66) - (66)
------------- -------------- ------------- ------------ -------------- ------------
(Loss)/profit after
tax from continuing
operations (6,924) (721) (7,645) 1,022 (138) 884
Attributable to:
Equity holders
of the parent company (6,924) (721) (7,645) 1,022 (138) 884
============= ============== ============= ============ ============== ============
Earnings per share:
Basic (loss)/earnings
per share 10 (18.81p) 2.62p
Diluted
(loss)/earnings
per share 10 (18.81p) 2.39p
All of the activities of the Group are classed as continuing
unless otherwise stated.
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the 18 month period ended 30 September 2020
18 month
period
ended Year ended
30 September 31 March
2020 2019
GBP'000 GBP'000
(Loss)/profit for the period/year (7,645) 884
Other comprehensive income
Items that will subsequently be reclassified
to profit or loss
Foreign exchange translation differences 548 125
Total comprehensive (loss)/income attributable
to equity holders of the parent (7,097) 1,009
============= ============
GROUP STATEMENT OF CHANGES IN EQUITY
For the 18 month period ended 30 September 2020
Share
based Profit
Share Share Merger Trans-lation payment and loss
Capital premium reserve reserve reserve account Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2018 3,379 1,692 1,388 (111) 349 (431) 6,266
Share based payment
charge - - - - 36 - 36
Total transactions
with owners - - - - 36 - 36
Total comprehensive
income - - - 125 - 884 1,009
--------- -------- -------- ------------ --------- --------- --------
Balance at 31 March
2019 3,379 1,692 1,388 14 385 453 7,311
Share based payment
charge - - - - 142 - 142
Share option lapse - - - - (202) 202 -
Issue of new shares 1,542 - - - - - 1,542
Cost of issue of
new shares - - - - - (151) (151)
Dividends paid - - - - - (69) (69)
________ ________ ________ ________ ________ ________ ________
Total transactions
with owners 1,542 - - - (60) (18) 1,464
Total comprehensive
income - - - 548 - (7,645) (7,097)
Balance at 30 September
2020 4,921 1,692 1,388 562 325 (7,210) 1,678
========= ======== ======== ============ ========= ========= ========
GROUP STATEMENT OF FINANCIAL POSITION
As at 30 September 2020
31 March
Note 30 September 2020 2019
GBP'000 GBP'000
Assets
Non-current
Goodwill 11 - 391
Intangible assets 12 51 401
Property, plant and equipment 13 6,846 4,668
Investment in joint venture 14 1,104 1,191
----------------- ---------
8,001 6,651
Current
Inventories 16 1,828 3,040
Trade and other receivables 17 3,698 4,854
Cash and cash equivalents 18 665 493
Corporation tax - 6
----------------- ---------
6,191 8,393
Total assets 14,192 15,044
================= =========
Liabilities
Current
Trade and other payables 20 (3,753) (3,854)
Borrowings 21 (4,987) (3,675)
Corporation tax (60) (70)
(8,800) (7,599)
Non-current
Borrowings 21 (3,696) (109)
Deferred tax 19 (18) (25)
----------------- ---------
(3,714) (134)
Total liabilities (12,514) (7,733)
Net assets 1,678 7,311
================= =========
Equity attributable to owners of the parent
Share capital 25 4,921 3,379
Share premium account 1,692 1,692
Merger reserve 1,388 1,388
Translation reserve 562 14
Share based payment reserve 325 385
Profit and loss account (7,210) 453
Total equity 1,678 7,311
================= =========
The financial statements were approved by the Board of Directors
on 29 June 2021 and were signed on its behalf by:
Michael Stock Andrew Moss
Chief Executive and Group Finance Director Chairman
Company number: 01999619
GROUP STATEMENT OF CASH FLOWS
For the 18 month period ended 30 September 2020
Year ended
31 March
18 month period ended 30 September 2020 2019
Note GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit after taxation from continuing
operations (7,645) 884
Adjustment for:
- Depreciation 4 1,463 575
- Goodwill impairment 4 391 -
- Loss on disposal of intangible asset 4 286 -
- Loss on fixed asset disposals 4 389 -
- Net finance costs in income statement 8 497 209
- Amortisation charge 4 73 102
- Share based payment charge 6 142 36
- Share of joint venture operating profit (124) (282)
- Taxation (credit)/charge recognised in income
statement 9 (12) 66
- Decrease in trade and other receivables 1,156 128
- Decrease in trade payables and other payables (101) (462)
- Decrease/(increase) in inventories 1,212 (173)
- FX movement 396 106
----------------------------------------- ------------
Cash generated by operations (1,877) 1,189
Interest paid (295) (246)
Income taxes received - -
----------------------------------------- ------------
Net cash (used in) / generated by operating
activities (2,172) 943
Cash flows from investing activities
Purchase of plant and equipment (311) (723)
Proceeds from plant and equipment sales 12 -
Additions in intangible assets - (278)
Dividends received from investments 303 -
----------------------------------------- ------------
Net cash generated by / (used in) investing
activities 4 (1,001)
Cash flows from financing activities
Issue of ordinary share capital 1,542 -
Costs of issue of ordinary share capital (151) -
Dividends paid (69) -
Bank borrowings 1,000 -
Proceeds from overseas short term borrowing 627 304
Proceeds/(repayment) of UK short term borrowings 262 (361)
Payment of finance lease liabilities (871) (84)
----------------------------------------- ------------
Net cash generated by / (used in) financing
activities 2,340 (141)
Net increase/(decrease) in cash and cash equivalents 172 (199)
Cash and cash equivalents at beginning of period/year 493 692
----------------------------------------- ------------
Cash and cash equivalents at end of period/year 665 493
========================================= ============
The accompanying notes form an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
For the 18 month period ended 30 September 2020
1 general information
Tricorn Group plc and subsidiaries' (the 'Group') principal
activities comprise high precision tube manipulation and systems
engineering.
The Group's customer base includes major blue chip companies
with world-wide activities in key market sectors, including Power
Generation, Oil & Gas, Off Highway, Commercial Vehicles,
Agriculture and Automotive.
As a result of the impact of COVID-19, the Group's accounting
reference date has been extended in the period from 31 March to 30
September. As such the current accounting period covers the 18
month period ended 30 September 2020. The prior year reflects the
12 month period to 31 March 2019.
Tricorn Group plc is the Group's ultimate parent Company. It is
incorporated and domiciled in the United Kingdom. The address of
Tricorn Group plc's registered office, which is also its principal
place of business, is Spring Lane, Malvern Link, Malvern,
Worcestershire, WR14 1DA. Tricorn Group plc's shares are listed on
the Alternative Investment Market of the London Stock Exchange.
The consolidated financial statements have been approved for
issue by the Board of Directors on 29 June 2021. Amendments to the
financial statements are not permitted after they have been
approved.
2 accounting policies
Basis of preparation
This financial information has been prepared under the required
measurement bases specified under International Financial Reporting
Standards (IFRS) and in accordance with applicable IFRS in
conformity with the requirements of the Companies Act 2006 and IFRS
as issued by the International Accounting Standards Board.
The Group distinguishes between underlying and non-underlying
items in its Consolidated Income Statement. Non-underlying items
are material items which arise from unusual non-recurring or
non-trading events. They are disclosed on the face of the
Consolidated Income Statement where in the opinion of the Directors
such disclosure is necessary in order to fairly present the results
for the period. Non-underlying items comprise exceptional costs of
Group restructuring, intangible assets amortisation and share based
payment charges.
Going concern
In determining whether the financial statements can be prepared
on a going concern basis, the Directors considered the Group's
business activities, together with the factors likely to affect its
future development, performance and position. The Directors
prepared cash flow forecasts for 24 months from the period end
which considered the financial position of the Group, forecasts,
cash flows and borrowing facilities.
The Board regularly reviews revenue, profitability and cash flow
forecasts. A number of downside sensitised scenarios have been
modelled, the assumptions behind which were challenged. The Board
compares actual performance against budgets and forecasts and
reviews variances to continually refine and improve forecasting
ability from which to make effective decisions.
COVID-19, combined with margin pressures due to supply chain
disruptions, increased pricing and tariffs imposed on goods from
China, resulted in the Group being loss making in the Period,
before the write-offs incurred due to the performance review as
discussed in the Chief Executive and Group Finance Director's
statement. The Group raised equity funding of GBP1.34m (net of
costs) in February 2020 and secured GBP1m support from its bank
through the government backed loan schemes. $0.7m was obtained from
the USA Payroll Protection Program ('PPP'), which has subsequently
been forgiven and in addition, a further $0.7m was received in
April 2021 from the USA PPP, for which the Group will be applying
for this loan to also be forgiven.
The Group has certain borrowing facilities as set out in note
21. Of these facilities, GBP2.6m are repayable on demand and should
this amount be recalled by the bank the Group does not have
sufficient liquid resources to make repayment. In light of this,
and the Group's performance in the Period, an Independent Business
Review ('IBR') has been undertaken on behalf of the Group's
bankers, HSBC Bank plc, by an independent audit firm. The Group's
results and forecasts have been reviewed in detail by the audit
firm, their report has been sent to HSBC and the IBR has now
concluded. HSBC continues to remain supportive of the Group during
this time; credit approval to increase the Group's invoice
discounting facility by 10% on completion of a successful facility
audit has been received and the bank continue to provide the
Group's facilities on the same terms as those in the prior
period.
The Group is now very focused on its turnaround strategy and has
prepared trading forecasts for the five year period. These take
into account improved customer demand following recovery from
COVID-19, diversification of products and customers, appropriate
price increases and supply chain efficiencies. However, substantial
investment is needed in both capital expenditure and people during
the next 12-18 months and the Group's borrowing facilities alone do
not provide the Group with the necessary cash to make the required
investment, deliver the strategy and return the Group to
profitability and cash generative activity levels. There are a
number of options available to the Group to achieve the additional
funding required. While the directors consider it unlikely that
further funding would not be secured, they acknowledge at the date
of approval of the financial statements the requirement for further
funding over and above the existing facilities and the requirement
for ongoing support from their bankers not to recall facilities
repayable on demand present material
uncertainties which may cast significant doubt about the
Company's and Group's ability to continue as a going concern.
Overall considerations
The significant accounting policies that have been used in the
preparation of these consolidated financial statements are
summarised below.
The consolidated financial statements have been prepared using
the measurement bases specified by IFRS for each type of asset,
liability, income and expense. The measurement bases are more fully
described in the accounting policies below.
The accounting estimates and assumptions are consistent with the
Group's latest approved budget forecast where applicable.
Judgements are based on the information available at each reporting
date. All estimates are based on the best information available to
management.
The Group presents separately underlying and other items in the
income statement in order to provide a more transparent view of
underlying performance and trends. The Directors consider that the
underlying income statement is a more appropriate reflection of the
Group's performance.
Where the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group shall report in its financial
statements provisional amounts for the items for which the
accounting is incomplete. During the measurement period, the Group
shall retrospectively adjust the provisional amounts recognised at
the acquisition date to reflect new information obtained about
facts and circumstances that existed as of the acquisition date
and, if known, would have affected the measurement of the amounts
recognised as of that date. The measurement period shall not exceed
one year from the acquisition date.
Adoption of new standards
The Group has adopted IFRS 16 Leases and has introduced a
single, on-balance sheet accounting model for lessees, eliminating
the distinction between operating and finance leases. As a result,
the Group has recognised GBP3.2m of right-of-use assets and
corresponding lease liabilities on the date of initial application
(1 April 2019). These are included within property, plant and
equipment and loans and borrowings respectively in the consolidated
statement of financial position.
The Group has now adopted IFRS 16 Leases under the modified
retrospective approach. The adoption of IFRS 16 under the modified
retrospective approach affects only the current reporting period
and does not require restatement of the prior year i.e. it is
presented, as previously reported, under IAS 17 and related
interpretations. The Group has applied the practical expedients
permitted by IFRS 16 of not recognising right-of-use assets and
liabilities for leases with less than 12 months of lease term
remaining, and of applying a single discount rate to a portfolio of
leases with reasonably similar characteristics on transition. The
impact of transition to IFRS 16 is summarised below. These are the
first financial statements of the Group to apply IFRS 16
leases.
Table reconciling lease commitment on 31 March 2019 to lease
liabilities on 1 April 2019:
01-Apr-19
GBP'000
Operating lease commitment on 31 March 2019 2,372
---------------------------------------------- ----------
Short-term and low value leases (14)
Extension and termination options 1,600
Effect of discounting (765)
Lease liabilities recognised on 1 April 2019 3,193
---------------------------------------------- ----------
The weighted average rate applied is 3.5% reflecting the
incremental borrowing rate on 1 April 2019.
Significant accounting estimates and judgements
Certain estimates and judgements need to be made by the
Directors of the Group which affect the results and position of the
Group as reported in the financial statements. Estimates and
judgements are required at the reporting date regarding whether
certain assets/ liabilities that are recorded at fair value which
requires a number of estimates and assumptions to be made.
The major areas for estimation within the financial statements
are as follows:
-- Performance of impairment reviews to assess the carrying value of goodwill (see note 11).
In valuing goodwill and intangible assets, management has made
certain assumptions in terms of cash flows attributable to cash
generating units to which goodwill and intangibles have been
allocated. As a result, estimates of future cash flows are
required, together with an appropriate discount factor for the
purpose of determining the present value of the future cash flows.
As disclosed in note 11 the goodwill was fully impaired in the
year, given the forecast cashflows for the foreseeable future
reasonable changes in discount rate and growth rate would not
change the conclusion that the goodwill has been fully
impaired.
-- Estimates of inventory recoverability. Management review
ageing of inventory, movement levels throughout the period and
forecast future usage levels to set an adequate inventory provision
to cover obsolete inventory lines. Management also calculate a
general stock provision over slow moving stock based on last usage
dates. Stock that has not been used for over two years is provided
for in full and stock that has not been used for more than one
year, but has been used within the last two years, is provided for
at fifty percent. Factors that could impact estimated demand and
selling prices are the timing and success of technological
developments, competitor actions, supplier prices and economic
trends. The carrying value of gross stock, before the stock
provision, at the period end was GBP2,948,000 (31 March 2019:
GBP3,646,000).
-- In July 2016, the Group increased its holding and now holds a
63% share in a joint venture in China, Minguang-Tricorn Tubular
Products Nanjing Limited. The Group accounts for the joint venture
under the equity accounting method rather than full consolidation,
on the basis that no one party to the venture has sole authority
for decisions reserved for the Board, as detailed in note 14.
Consolidation and investments in subsidiaries
The Group financial statements consolidate those of the parent
company and all of its subsidiaries as of 30 September 2020. The
parent controls a subsidiary if it is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has
the ability to affect those returns through its power over the
subsidiary. The consolidated financial statements of the Group
incorporate the financial statements of the parent Company as well
as those entities controlled by the Group by full
consolidation.
Acquired subsidiaries are subject to application of the
acquisition method. This involves the valuation at fair value of
all identifiable assets and liabilities, including contingent
liabilities of the subsidiary, at the acquisition date, regardless
of whether or not they were recorded in the financial statements of
the subsidiary prior to acquisition. On initial recognition, the
assets and liabilities of the subsidiary are included in the
Consolidated Statement of Financial Position at their fair value,
which are also used as the basis for subsequent measurement in
accordance with the Group accounting policies. Goodwill represents
the excess of fair value consideration over the fair value of the
Group's share of the identifiable net assets of the acquired
subsidiary at the date of acquisition. Acquisition costs are
expensed as incurred.
If the fair value of identifiable net assets exceeds the sum
calculated above, the excess amount (i.e. gain on a bargain
purchase) is recognised in profit or loss immediately.
Intra-group balances and transactions, and any unrealised gains
or losses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Investments in joint ventures
A joint venture is an arrangement that the Group controls
jointly with one or more other investors, and over which the Group
has rights to a share of the arrangement's net assets rather than
direct rights to underlying assets and obligations for underlying
liabilities.
Investments in joint ventures are accounted for using the equity
method. Any goodwill or fair value adjustment attributable to the
Group's share in the joint venture is not recognised separately and
is included in the amount recognised as investment.
The carrying amount of the investment in joint ventures is
increased or decreased to recognise the Group's share of the profit
or loss and other comprehensive income of the associate and joint
venture, adjusted where necessary to ensure consistency with the
accounting policies of the Group.
Unrealised gains and losses on transactions between the Group
and its joint ventures are eliminated to the extent of the Group's
interest in those entities. Where unrealised losses are eliminated,
the underlying asset is also tested for impairment.
The investment in the joint venture is initially recognised at
cost. When the investor has previously held an investment in the
joint venture, accounted for in line with the above policy, the
deemed cost of the investment in the joint venture is the fair
value of the original investment at the date that joint control is
achieved plus the consideration paid for the additional stake. Any
difference between the cost of the investment and the entity's
share of the net fair value of the investee's identifiable assets
and liabilities, is included in the carrying amount of the
investment and represents either positive or negative goodwill.
Business combinations completed prior to date of transition to
IFRS
The Group has elected not to apply IFRS 3 Business Combinations
retrospectively to business combinations prior to the date of
transition to IFRS, 1 April 2006. Accordingly the classification of
the combination (acquisition, reverse acquisition or merger)
remains unchanged from that used under UK GAAP. Assets and
liabilities are recognised at date of transition if they would be
recognised under IFRS, and are measured using their UK GAAP
carrying amount immediately post-acquisition as deemed cost under
IFRS, unless IFRS requires fair value measurement. Deferred tax is
adjusted for the impact of any consequential adjustments after
taking advantage of the transitional provisions.
Revenue recognition
The Group's material revenue stream is in respect of the sale of
tubular components. Revenue is measured by reference to the fair
value of consideration received or receivable by the Group for
goods supplied, excluding VAT and trade discounts. Revenue is
recognised upon the transfer of control to the customer.
When determining whether to recognise revenue, the Group adopts
the five step process proposed by IFRS 15. The Group contracts with
customers to deliver specific parts according to specific delivery
schedules, sales prices are fixed, discounts are not offered,
amounts are not refundable once received and there are no ongoing
performance obligations. Therefore, the Group recognises revenue
once delivery has occurred.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs of ordinarily interchangeable items are assigned using
the first in, first out cost formula. Cost of work in progress and
finished goods includes materials, direct labour and an
attributable proportion of manufacturing overheads based on normal
levels of activity. Provisions are made against inventories where
there is evidence that the carrying amount has fallen below
recoverable amount.
Goodwill
Goodwill arising on consolidation represents the excess of the
fair value of consideration transferred over the Group's interest
in the fair value of the identifiable assets and liabilities of a
subsidiary at the date of acquisition. Goodwill which is recognised
as an asset is reviewed for impairment at least annually. Any
impairment is recognised immediately through profit or loss and is
not subsequently reversed.
Impairment
The Group's goodwill, intangible assets and property, plant and
equipment are subject to impairment testing.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units). Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies
of the related business combination and represent the lowest level
within the Group at which management controls the related cash
flows.
Goodwill with an indefinite useful life is tested for impairment
at least annually. All other individual assets or cash-generating
units are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less costs to sell and value in
use, based on an internal discounted cash flow evaluation.
Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying
amount of goodwill.
Any remaining impairment loss is charged pro rata to the other
assets in the cash generating unit. With the exception of goodwill,
all assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist.
If the impairment is subsequently reversed, the carrying amount,
except in the case of goodwill, is increased to the revised
estimate of its recoverable amount, limited to the carrying value
that would have been determined had no impairment been recognised
previously. Impairment losses in respect of goodwill are not
subsequently reversed.
Intangible assets acquired as part of a business combination
In accordance with IFRS 3 Business Combinations, an intangible
asset acquired in a business combination is deemed to have a cost
to the Group of its fair value at the acquisition date. The fair
value of the intangible asset reflects market expectations about
the probability that the future economic benefits embodied in the
asset will flow to the Group. Where an intangible asset might be
separable, but only together with a related tangible or intangible
asset, the Group of assets is recognised as a single asset
separately from goodwill where the individual fair values of the
assets in the Group are not reliably measurable. Where the
individual fair value of the complementary assets are reliably
measurable, the Group recognises them as a single asset provided
the individual assets have similar useful lives.
Other intangible assets
Product development costs
Expenditure on the research phase of projects to develop new
customised products for customers is recognised as an expense as
incurred. Costs that are directly attributable to a project's
development phase are recognised as intangible assets, provided
they meet the following recognition requirements:
-- the development costs can be measured reliably;
-- the project is technically and commercially feasible;
-- the Group intends to and has sufficient resources to complete the project;
-- the Group has the ability to use or sell the product; and
-- the product will generate probable future economic benefits.
Development costs not meeting these criteria for capitalisation
are expensed as incurred. Directly attributable costs include
employee costs incurred on product development along with an
appropriate portion of relevant overheads.
Intangible amortisation
Intangible assets are amortised over the following periods:
Brand names 15 years
Customer contracts 5 years
Product development costs 3 years
Foreign currencies
These financial statements are presented in UK Sterling which is
the functional currency of the parent and the presentational
currency of the Group.
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the
rates of exchange ruling at the reporting date. Exchange
differences are dealt with through profit or loss.
Property, plant and equipment
Property, plant and equipment are carried at acquisition cost
less subsequent depreciation and impairment losses. Depreciation is
charged on these assets, after adjusting for their residual values,
on a straight line basis over the estimated useful economic life of
each asset. The useful lives of property, plant and equipment can
be summarised as follows:
Buildings 3 to 40 years
Plant and equipment 3 to 17 years
Motor vehicles 4 years
Leases
Year ending 31 March 2019
Until 31 March 2019, leases of property, plant and equipment
were classified as either finance leases or operating leases.
The economic ownership of a leased asset is transferred to the
lessee if the lessee bears substantially all the risks and rewards
related to the ownership of the leased asset and is then disclosed
and accounted for as a finance lease asset. The related asset is
recognised at the time of inception of the lease at the fair value
of the leased asset or, if lower, the present value of the lease
payments plus incidental payments, if any, to be borne by the
lessee. A corresponding amount is recognised as a finance leasing
liability, irrespective of whether some of these lease payments are
payable up-front at the date of inception of the lease.
Subsequent accounting for assets held under hire purchase and
finance lease agreements, i.e. depreciation methods and useful
lives, correspond to those applied to comparable acquired assets.
The corresponding hire purchase and finance leasing liability is
reduced by lease payments less finance charges, which are expensed
to finance costs. Finance
charges represent a constant periodic rate of interest on the
outstanding balance of the hire purchase and finance lease
liability.
All other leases are treated as operating leases. Payments on
operating lease agreements are recognised as an expense on a
straight-line basis. Associated costs, such as maintenance and
insurance, are expensed as incurred.
The Group does not act as a lessor.
18 months period ended 30 September 2020
From 1 April 2019, under IFRS 16, leases are recognised as
right-of-use assets, presented as a separate category in the
statement of financial positions m and with a corresponding
liability from the date at which the leased asset is available for
use by the company.
The Group recognises a right-of-use asset and a corresponding
lease liability for all lease agreements in which it is the lessee
(with the exception of short-term and low value leases as defined
in IFRS 16 which are recognised as an operating expense on a
straight-line basis over the term). The lease liability is
initially measured at the present value of the lease payments that
are not paid at the commencement date, discounted by using the rate
implicit in the lease. If this rate cannot be readily determined,
the Group uses its incremental borrowing rate. The right-of-use
asset recognised initially is the amount of the lease liability,
adjusted for any lease payments and lease incentives made before
the commencement date, in accordance with IFRS 16.24.
Taxation
Current income tax assets and/or liabilities comprise those
obligations to, or claims from, fiscal authorities relating to the
current or prior reporting period, that are unpaid at the reporting
date. They are calculated according to the tax rates and tax laws
applicable to the fiscal periods to which they relate, based on the
taxable profit for the financial period.
Deferred income taxes are calculated using the liability method
on temporary differences. This involves the comparison of the
carrying amounts of assets and liabilities in the consolidated
financial statements with their respective tax bases. However, in
accordance with the rules set out in IAS 12, no deferred taxes are
recognised in conjunction with the initial recognition of goodwill
on acquisitions. This applies also to temporary differences
associated with shares in subsidiaries if reversal of these
temporary differences can be controlled by the Group and it is
probable that reversal will not occur in the foreseeable future. In
addition, tax losses available to be accounting policies carried
forward as well as other income tax credits available to the Group
are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognised to the extent that it is
probable that they will be able to be offset against future taxable
income. Deferred tax assets and liabilities are calculated, without
discounting, at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or
substantively enacted at the reporting date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the income statement. Only changes in
deferred tax assets or liabilities that relate to a change in value
of assets or liabilities that is charged directly to equity are
charged or credited directly to other comprehensive income.
Employee benefits
Defined contribution pension scheme
Pensions to employees are provided through contributions to
individual personal pension plans. A defined contribution plan is a
pension plan under which the Group pays fixed contributions to an
independent entity. The Group has no legal or constructive
obligations to pay further contributions after payment of the fixed
contribution.
The contributions recognised in respect of personal pension
plans are expensed as they fall due. Liabilities and assets may be
recognised if underpayment or prepayment has occurred and are
included in current liabilities or current assets as they are
normally of a short term nature.
Other employee benefits
Short-term employee benefits, including holiday entitlement are
included in other employee obligations at the undiscounted amount
that the Group expects to pay as a result of the unused
entitlement.
Financial instruments
IFRS 9 Financial instruments requires the classification of
financial instruments into different types for which the accounting
requirement is different. The Group has classified its financial
instruments as follows:
-- short-term fixed deposits, principally comprising funds held
with banks and other financial institutions;
-- trade and other receivables are held at amortised cost;
-- trade and other payables are held at amortised cost;
-- borrowings are classified as other liabilities held at amortised cost.
Financial instruments are initially measured at fair value.
Their subsequent measurement depends on their classification:
-- loans and receivables and other liabilities are held at amortised cost; and
-- instruments that are held for trading are held at fair value.
Changes in fair value are included in the income statement.
Trade & other receivables
The Group makes use of a simplified approach in accounting for
trade & other receivables, recording the loss allowance as
lifetime expected credit losses. These are the expected shortfalls
in contractual cash flows, considering the potential for default at
any point during the life of the financial instrument. In
calculating the lifetime credit losses, the Group uses its
historical experience, external indicators and forward looking
information to calculate the expected losses.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and
overdrafts as well as short term highly liquid investments such as
bank deposits.
Equity
Share capital is determined using the nominal value of shares
that have been issued. Equity instruments issued by the Company are
recorded at the proceeds received, net of direct issue costs. When
the Company purchases its own shares, the consideration is
deductible from equity attributable to the Company's equity holders
until the shares are either cancelled or reissued. When this
happens, any consideration received is included in equity
attributable to equity holders. Treasury shares are held at
cost.
The share premium account represents premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from share
premium, net of any related income tax benefits.
The merger reserve represents the difference between the issue
price and the nominal value of shares issued as consideration for
the acquisition of a subsidiary undertaking when the Company has
taken advantage of merger relief.
All current and prior period results are taken to the income
statement.
Share based employee remuneration
All share-based payment arrangements are recognised in the
consolidated financial statements. The Group operates
equity-settled share-based remuneration plans for remuneration of
its employees. All employee services received in exchange for the
grant of any share-based remuneration are measured at their fair
values. These are indirectly determined by reference to the fair
value of the share options awarded. Their value is appraised at the
grant date and excludes the impact of any non-market vesting
conditions (for example, profitability and sales growth
targets).
All share-based remuneration is ultimately recognised as an
expense in the profit or loss with a corresponding credit to the
share based payment reserve, net of deferred tax where applicable.
If vesting periods or other vesting conditions apply, the expense
is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable.
Estimates are subsequently revised, if there is any indication that
the number of share options expected to vest differs from previous
estimates. No adjustment is made to the expense recognised in prior
periods if fewer share options ultimately are exercised than
originally estimated.
Upon exercise of share options, the proceeds received net of any
directly attributable transaction costs up to the nominal value of
the shares issued are allocated to share capital with any excess
being recorded as share premium. Share based charges for employees
who leave the Group and whose options lapse, are written back to
the profit and loss reserve.
Provisions for liabilities
Provisions are recognised when present obligations will probably
lead to an outflow of economic resources from the Group and they
can be reliably estimated. A present obligation arises from the
presence of a legal or constructive obligation that has resulted
from past events.
Provisions are measured at the estimated expenditure required to
settle the present obligation, based on the most reliable evidence
available at reporting date and all future estimated cash flows are
discounted to arrive at the present value of the provision.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost using the effective rate of interest method.
Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for
at least 12 months after the reporting date.
3 segmental reporting
The Group has carried out a review of its organisational
structure and concluded that segmental results will now be reported
on a geographic basis as follows:-
-- UK - Comprising all UK based trading divisions
-- US - Comprising all North America based trading divisions
-- The joint venture in China will continue to be reported
separately
18 month period ended
30 September 2020 UK US China Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
- from external customers 15,041 10,330 - - 25,371
- from other segments 222 2 - (224) -
Segment revenues 15,263 10,332 - (224) 25,371
Underlying operating loss* (4,013) (2,053) - (497) (6,563)
Goodwill impairment - - - (391) (391)
Intangible asset amortisation (25) - - (48) (73)
Rabun Gap start-up costs - (115) - - (115)
Share based payment charge - - - (142) (142)
Operating loss (4,038) (2,168) - (1,078) (7,284)
Share of profit from joint venture - - 124 - 124
Net finance costs (271) (172) - (54) (497)
---------- --------- --------- ------------- ---------
Loss before tax (4,309) (2,340) 124 (1,132) (7,657)
---------- --------- --------- ------------- ---------
Other segment information:
Segmental assets (current) 5,112 2,304 - (1,225) 6,191
Segmental assets (non-current) 5,453 2,509 - 39 8,001
Total Assets 10,565 4,813 - (1,186) 14,192
Capital expenditure 294 444 - 52 790
Depreciation 907 543 - 13 1,463
*- Before goodwill impairment, intangible asset amortisation, Rabun Gap start-up costs and
share based payment charges
The Group's revenue from external customers (by destination) may
be summarised as follows:
18 month period
ended 30 September
2020
GBP'000
United Kingdom 11,890
Europe 877
Americas 11,648
Rest of World 956
-------------------
25,371
===================
During the 18 months ended 30 September 2020, there were three
(31 March 2019: three) customers which accounted for more than 10%
of total revenue. Customer A accounted for GBP10.1m (31 March 2019:
GBP7.6m), Customer B accounted for GBP3.6m (31 March 2019: GBP2.9m)
and Customer C accounted for GBP3.4m (31 March 2019: GBP3.5m)
Year ended 31 March 2019 UK US China Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
- from external customers 14,022 8,741 - - 22,763
- from other segments 59 - - (59) -
Segment revenues 14,081 8,741 - (59) 22,763
Underlying operating profit/(loss)* 1,035 155 - (175) 1,015
Intangible asset amortisation (56) - - (46) (102)
Share based payment charge - - - (36) (36)
Operating profit/(loss) 979 155 - (257) 877
Share of profit from joint venture - - 282 - 282
Net finance costs (76) (109) - (24) (209)
-------- -------- ------ ------------ --------
Profit/(loss) before tax 903 46 282 (281) 950
-------- -------- ------ ------------ --------
Other segment information:
Segmental assets (current) 10,272 3,198 - (5,077) 8,393
Segmental assets (non-current) 4,288 2,973 - (610) 6,651
Total Assets 14,560 6,171 - (5,687) 15,044
Capital expenditure 457 291 - - 748
Depreciation 360 215 - - 575
*- Before intangible asset amortisation and share based payment charges
The Group's revenue from external customers (by destination) may
be summarised as follows:
Year ended 31
March 2019
GBP'000
United Kingdom 10,877
Europe 750
Americas 10,620
Rest of World 516
-------------
22,763
=============
Alternative Performance Measures
In reporting financial information, the Group presents
alternative performance measures (APMs), which are not defined or
specified under the requirements of IFRS. The Group believes that
these APMs, which are not considered to be a substitute for or
superior to IFRS measures, provide depth and understanding to the
users of the financial statements to allow for further assessment
of the underlying performance for the Group.
The Board considers that underlying operating profit/loss is the
most appropriate measure which the users of the financial
statements can assess the ongoing performance of the group.
Operating profit/loss is a defined IFRS measure which the Group
adjusts to remove items which are non-recurring or are not cash
expenses in nature.
The adjustments made to operating profit are to add back
goodwill impairment and Rabun Gap start-up costs as they are
non-trading one-off events, and intangible asset amortisation and
share based payment charges as they are not cash related items.
4 (LOSS)/PROFIT before taxation
The profit on ordinary activities before taxation is stated
after charging:
Year ended
18 month period ended 30 September 2020 31 March 2019
GBP'000 GBP'000
Auditors' remuneration:
Audit of parent company 74 14
Audit of subsidiaries - 46
--------------------------------------- --------------
Total audit 74 60
Non-audit services :
Corporate taxation 12 12
R&D claims - 3
--------------------------------------- --------------
Total non-audit services 12 15
Total fees 86 75
--------------------------------------- --------------
Other:
Government job retention scheme income (571) -
Other government assistance and grants (19) -
Loss on fixed asset disposal 389 -
Goodwill impairment 391 -
Intangible assets 73 102
Write off of intangibles 286 -
Property, plant and equipment - owned 825 546
Property, plant and equipment - leased 638 29
======================================= ==============
5 directors' emoluments
18 month
period Year
ended ended
30 September 31 March
2020 2019
Benefits Benefits
Basic in kind Pension Total Basic Bonus in kind Pension Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
A B Moss 53 - - 53 40 - - - 40
R Allsop 20 - - 20 15 - - - 15
M J Stock* 34 - 2 36 - - - - -
M I Welburn*
(resigned
11 January
2021) 236 36 16 288 154 15 24 10 203
P Lee* (resigned
6 August 2020) 200 31 15 246 144 14 21 10 189
D E Leakey* 201 4 7 212 116 12 10 8 146
------- -------- --------- ------------- ------- ------- -------- --------- ---------
744 71 40 855 469 41 55 28 593
======= ======== ========= ============= ======= ======= ======== ========= =========
* The Executive Directors are classified as the key management
personnel of the Group as defined in IAS 24 Related Party
Disclosures.
Employers National Insurance Contributions made relating to
Directors' emoluments were GBP0.1m during the 18 month period ended
30 September 2020 (31 March 2019: GBP0.1m).In response to COVID-19
and the financial impact on the Group, the Non-Executive Directors
agreed to take voluntary fee reductions during the period. Since
the period end, the Non-Executive Directors have continued to
receive a reduction in fees and the Executive Directors have also
taken voluntary salary reductions to conserve cash.
Share-based payment charge by Director (note 6)
18 month
period
ended Year ended
30 September 31 March
2020 2019
GBP'000 GBP'000
M J Stock* 21 -
M I Welburn* 79 -
P Lee* - -
D E Leakey* 20 7
-------------- -------------- -----------
120 7
-------------- -------------- -----------
6 EMPLOYEES COSTS
18 month period ended 30 September 2020 Year ended 31 March 2019
Number Number
The average number of persons (including
Directors) employed by the
group during the period/year was:
Production 203 248
Sales, distribution and administration 56 56
259 304
========================================= ==========================
Staff costs during the period/year were as
follows: 18 month period ended 30 September 2020 Year ended 31 March 2019
GBP000 GBP000
Wages and salaries 10.219 7,689
Social security costs 805 656
Other pension costs 161 110
Share based payment charge 142 36
----------------------------------------- --------------------------
11,327 8,491
========================================= ==========================
7 SHARE BASED EMPLOYEE REMUNERATION
There are two share based remuneration schemes in operation:
-- Approved Enterprise Management Incentive (EMI) scheme
-- Unapproved share options.
Life
Exercised in Lapsed in At 30 remaining on
At 31 Granted in 18 18 month 18 month September Exercise options at
March 2019 month period period period 2020 price 30 September
No. of shares No. of shares No. of shares No. of shares No. of shares Pence 2020 Months
Enterprise
Management
Incentive
(EMI) Scheme
Exercise date:
March 2009 -
March 2019 500,000 - 500,000 - - 10p -
August 2010 -
August 2020 2,184,156 - - 2,184,156 - 10p -
------------- ------------- ------------- ------------- -------------
2,684,156 - 500,00 2,184,156 -
============= ============= ============= ============= =============
The weighted average exercise price of the EMI scheme at 30
September 2020 was nil (31 March 2019: 10p). Zero options were
available for exercise at 30 September 2020 (31 March 2019:
2,499,956).
Life
Exercised in Lapsed in At 30 remaining on
At 31 Granted in 18 18 month 18 month September Exercise options at
March 2019 month period period period 2020 price 30 September
No. of shares No. of shares No. of shares No. of shares No. of shares Pence 2020 Months
Unapproved
share options
Exercise date:
September 2010
- September
2020 1,000,000 - - 1,000,000 - 10p -
September 2010
- September
2020 361,844 - - 361,844 - 10p -
June 2015 -
June 2025 500,000 - - - 500,000 17.5p 57
March 2015 -
March 2025 250,000 - - 250,000 - 17p -
April 2016 -
April 2026 600,000 - - - 600,000 10p 66
January 2018 -
January 2028 650,000 - - 250,000 400,000 21.5p 87
August
2020-August
2025 - 5,302,331 - - 5,302,331 10p 58
------------- ------------- ------------- ------------- -------------
3,361,844 5,302,331 - 1,861,844 6,802,331
============= ============= ============= ============= =============
Total share
options 6,046,000 5,302,331 500,000 4,046,000 6,802,331
============= ============= ============= ============= =============
The weighted average exercise price of the unapproved share
options at 30 September 2020 was 11.23p (31 March 2019: 13.90p).
6,802,331 options were available for exercise at 30 September 2020
(31 March 2019: 3,361,844).
The market price of the Company's shares at 30 September 2020
was 8.50p (31 March 2019: 19.00p) and the range during the year was
7.25p to 19.50p (31 March 2019: 17.50p to 38.00p).
The unapproved option schemes have been valued by management
using the Black Scholes valuation model. Key inputs into the model
are expected share price volatility of 35%-60% and the expected
risk free interest rates of 1.25%-2.33%.
In total at 30 September 2020 GBP142,000 (31 March 2019:
GBP36,000) of share based employee remuneration expense has been
included in the consolidated income statement. No liabilities were
recognised due to share based transactions.
8 finance income and expense
18 month period ended 30 September 2020 Year ended 31 March 2019
GBP'000 GBP'000
Other income -
Finance income - -
========================================= ==========================
Invoice discounting interest 273 176
Bank Loan 14 -
Interest on short term borrowing 22 25
Interest on hire purchase agreements and
finance leases 188 8
Finance expense 497 209
========================================= ==========================
9 taxation on (LOSS)/Profit on ordinary activities
The tax is based on the (loss)/profit for the financial period
and represents:
18 month period ended 30 September 2020 Year ended 31 March 2019
GBP'000 GBP'000
UK corporation tax - 30
Overseas taxes - 36
Adjustments in respect of prior years (5) -
----------------------------------------- --------------------------
Current tax charge for the period/year (5) 66
Deferred taxation (note 19) (7) -
Tax on (loss)/profit on ordinary activities (12) 66
========================================= ==========================
The tax assessed is different to the standard rate of
corporation tax in the UK of 19% (2019: 19%). The differences are
explained as follows:
18 month
period ended Year ended
30 September 31 March
2020 2019
GBP'000 GBP'000
(Loss)/profit on ordinary activities before
tax (7,657) 950
=============== ============
(Loss)/profit on ordinary activities multiplied
by standard rate of corporation tax in the
UK of 19% (2019: 19%) (1,455) 181
Effect of:
Movement in unprovided deferred tax asset 1,369 (96)
Expenses not deductible for tax purposes 74 -
Overseas tax charge - 36
Deduction for R&D - (64)
Other differences - 9
(12) 66
=============== ============
At 30 September 2020 the Group had tax losses of approximately
GBP5.0m (31 March 2019: GBP0.6m) to offset against future profits
within the United Kingdom.
10 EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the 18 month
period.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of shares
and the post-tax effect of dividends and/or interest, on the
assumed conversion of all dilutive options and other dilutive
potential ordinary shares.
Reconciliations of the earnings and weighted average number of
shares used in the calculations are set out below:
30 September 2020
Weighted average
number of Earnings per
Profit shares share
GBP'000 Number '000 Pence
Basic earnings per share (7,645) 40,640 (18.81)
-------- ----------------- -------------
Dilutive shares -
Diluted earnings per share (7,645) 40,640 (18.81)
-------- ----------------- -------------
31 March 2019
Weighted average
number of Earnings per
Profit shares share
GBP'000 Number '000 Pence
Basic earnings per share 884 33,795 2.62
-------- ----------------- -------------
Dilutive shares 3,248
Diluted earnings per share 884 37,043 2.39
-------- ----------------- -------------
The Directors consider that the following adjusted earnings per
share calculation is a more appropriate reflection of the Group's
performance.
30 September 2020
Weighted average
number of Earnings per
Profit shares share
GBP'000 Number '000 Pence
Basic earnings per share (7,645) 40,640 (18.81)
-------- ----------------- -------------
Goodwill impairment 391
Amortisation of intangible asset 73
Rabun Gap start-up costs 115
Share based payment charge 142
Adjusted earnings per share (6,924) 40,640 (17.04)
-------- ----------------- -------------
Dilutive shares -
Diluted adjusted earnings per
share (6,924) 40,640 (17.04)
-------- ----------------- -------------
31 March 2019
Weighted average
number of Earnings per
Profit shares share
GBP'000 Number '000 Pence
Basic earnings per share 884 33,795 2.62
-------- ----------------- -------------
Amortisation of intangible asset 102
Share based payment charge 36
Adjusted earnings per share 1,022 33,795 3.02
-------- ----------------- -------------
Dilutive shares 3,248
Diluted adjusted earnings per
share 1,022 37,043 2.76
-------- ----------------- -------------
11 GOODWILL
Total
GBP'000
Cost
At 1 April 2019 391
Additions -
At 30 September 2020 391
=======
Impairment
At 1 April 2019 -
Impairment (391)
At 30 September 2020 (391)
=======
Net book value
At 1 April 2019 391
At 30 September 2020 -
-------
Goodwill above relates to the following cash generating
units:
Date of Original cost
acquisition GBP'000
Maxpower Automotive Limited June 2007 391
An impairment review was carried out at the period end based on
the expected cash flows arising from trading activities relating to
the cash generating unit of Maxpower Automotive Limited and
following the review goodwill was fully impaired. The level of
impairment is not affected by reasonable changes in assumptions
used in the calculation.
12 intangible assets
Product development
costs Brand Customer
Names contracts Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2019 841 450 312 1,603
Additions - - - -
Foreign exchange
revaluation 8 - - 8
Disposals * (285) - - (285)
At 30 September 2020 564 450 312 1,326
==================== ======== =========== ========
Amortisation
At 1 April 2019 (538) (352) (312) (1,202)
Charge for the period (26) (47) - (73)
-------------------- -------- ----------- --------
At 30 September 2020 (564) (399) (312) (1,275)
==================== ======== =========== ========
Net book value
At 31 March 2018 82 128 - 210
-------------------- -------- ----------- --------
At 31 March 2019 303 98 - 401
-------------------- -------- ----------- --------
At 30 September 2020 - 51 - 51
==================== ======== =========== ========
* This relates to a project which was abandoned during the
year.
All intangible asset amortisation is included in the Group
income statement under amortisation of intangibles as detailed on
the face of the Group income statement.
The brand names have a remaining useful economic life of 4
years. The product development costs have, on average, a remaining
useful economic life of 3 years.
13 PROPERTY, plant and equipment
Land and Plant and Motor Right-of-use assets
buildings equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2018 1,497 9,005 43 - 10,545
Additions 2 746 - - 748
Foreign exchange revaluation 115 55 - - 170
----------- ----------- ---------- -------------------- --------
1,614 9,806 43 - 11,463
At 1 April 2019
On adoption of IFRS 16 at 1 April 2019 - - - 3,193 3,193
Additions 111 314 - 682 1,107
Disposals (85) (4,588) (37) - (4,710)
Foreign exchange revaluation 29 47 - 4 80
----------- ----------- ---------- -------------------- --------
At 30 September 2020 1,669 5,579 6 3,879 11,133
=========== =========== ========== ==================== ========
Depreciation
At 1 April 2018 157 6,020 43 - 6,220
Charge for the year 37 538 - - 575
194 6,558 43 - 6,795
At 1 April 2019
Charge for the period 156 742 - 727 1,625
Disposal (83) (4,034) (37) - (4,154)
Foreign exchange revaluation 3 20 - (2) 21
At 30 September 2020 270 3,286 6 725 4,287
=========== =========== ========== ==================== ========
Net book value
At 31 March 2018 1,340 2,985 - - 4,325
At 31 March 2019 1,420 3,248 - - 4,668
At 30 September 2020 1,399 2,293 - 3,154 6,846
----------- ----------- ---------- -------------------- --------
Right-of-use assets
Land and Plant and Motor
buildings equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
On adoption of IFRS 16 at 1 April 2019 3,002 157 34 3,193
Additions 243 220 11 474
Reclassifications - 208 - 208
Disposals - - - -
Foreign exchange revaluation 4 - - 4
----------- ----------- ---------- --------
At 30 September 2020 3,249 585 45 3,879
=========== =========== ========== ========
Depreciation
On adoption of IFRS 16 at 1 April 2019 - - - -
Reclassifications - 69 - 69
Charge for the period 456 178 24 658
Disposal - - - -
Foreign exchange revaluation (1) (1) - (2)
At 30 September 2020 455 246 24 725
=========== =========== ========== ========
Net book value
At 31 March 2019 - - - -
At 30 September 2020 2,794 339 21 3,154
----------- ----------- ---------- --------
The net book value of property, plant and equipment at 31 March
2019 was GBP348,000 in respect of assets held under finance leases
and hire purchase contracts. At September 2020 the Group had
adopted IFRS 16 and all assets held under leases are shown as
right-of-use assets.
The borrowings of the Group are secured by a floating and fixed
charge over the assets of the Group.
14 INVESTMENT IN JOINT VENTURE
Details of the group's material joint venture at the end of the
reporting period is as follows:
Name of joint Principal business Country Proportion of ownership
venture activity of incorporation interest held by the group
30 September
2020 31 March 2019
Minguang-Tricorn Manufacturer People's
Tubular Products of large diameter Republic
Nanjing Limited tubular assemblies of China 63% 63%
In July 2013, the Group agreed terms for the formation of the
joint venture above. In May 2016, the Group increased its
shareholding from 51% to 63% via a contribution of plant, machinery
and inventory into the joint venture. At this time the joint
venture partner also made a contribution of cash into the joint
venture. Minguang-Tricorn Tubular Products Nanjing Limited is still
deemed to be a joint venture of the Group as the appointment of its
Directors and the allocation of voting rights for key business
decisions, require the unanimous approval of its venturers.
The investment in Minguang-Tricorn Tubular Products Nanjing
Limited is accounted for using the equity method in accordance with
IFRS 11. Summarised financial information for Minguang-Tricorn
Tubular Products Nanjing Limited is set out below:
30 September 2020 31 March 2019
GBP'000 GBP'000
Non-current assets 439 458
Current assets (a) 2,237 1,739
Total assets 2,676 2,197
=================== ===============
Current liabilities 1,025 486
Total liabilities 1,025 486
=================== ===============
(a) Includes cash and cash equivalents 326 151
30 September 2020 31 March 2019
GBP'000 GBP'000
Revenue 3,993 2,767
------------------- ---------------
Profit for the period/year 197 282
------------------- ---------------
Depreciation (169) (91)
------------------- ---------------
A reconciliation of the above summarised financial information
to the carrying amount of the investment in Minguang-Tricorn
Tubular Products Nanjing Limited is set out below:
30 September 2020 31 March
2019
GBP'000 GBP'000
Net Assets
Brought forward at the beginning of the period/year 1,751 1,315
Total comprehensive profit 197 436
Dividends paid (508) -
Carried forward at the end of the 18 month period/year 1,440 1,751
Proportion of ownership interest held by the Group 63% 63%
Interest in joint venture 907 1,103
Foreign exchange gain on translation of investment 133 24
Goodwill 64 64
Carrying amount of the investment at the end of the financial period/year 1,104 1,191
Dividends totalling GBP303,000 were received from
Minguang-Tricorn Tubular Products Nanjing Limited during the period
(31 March 2019: GBPnil).
Minguang-Tricorn Tubular Products Nanjing Limited is a private
company, therefore no quoted market prices are available for its
shares.
15 SUBSIDIARIES
At 30 September 2020 the subsidiaries of the Group were as
follows:
Description % of nominal
Name of subsidiary Country of of shares value of Principal business
undertaking incorporation held shares held activity
Manufacturer
Tricorn UK Limited United Kingdom Ordinary 100 of tubular components
Hallco 348 Limited United Kingdom Ordinary 100 Non-trading
Maxpower Automotive
Limited United Kingdom Ordinary 100 Non-trading
Maxpower Enterprise
Management Consulting
(Wuxi) Co., Ltd* China Ordinary 100 Non-trading
Manufacturer
of tubular assemblies
and components
to highway and
Franklin Tubular heavy duty truck
Products Inc USA Ordinary 100 market
Robert Morton DG
Limited United Kingdom Ordinary 100 Dormant
Malvern Tubular
Components Limited
(formerly Hallco
347 Limited) United Kingdom Ordinary 100 Dormant
* Held by a subsidiary undertaking
16 Inventories
31 March
30 September 2020 2019
GBP'000 GBP'000
Raw materials 1,072 2,024
Work in progress 385 423
Finished goods 371 593
------------------- ----------
1,828 3,040
=================== ==========
In the 18 month period ended 30 September 2020, a total of
GBP12.6m of inventory (31 March 2019: GBP8.4m) was included in the
income statement as an expense.
An amount of GBP1.1m (2019 - GBP0.6m) was provided for as at 30
September 2020
17 TRADE AND OTHER RECEIVABLES
31 March
30 September 2020 2019
GBP'000 GBP'000
Trade receivables 2,938 3,998
Impairment of trade receivables (286) (26)
------------------- ----------
2,652 3,972
Amounts owed by related parties 744 262
Other receivables 16 122
Prepayments 286 498
------------------- ----------
Total 3,698 4,854
=================== ==========
At 30 September 2020, some of the unimpaired trade receivables
are past their due date but all are considered recoverable. The age
of financial assets past due but not impaired, is as follows:
31 March
30 September 2020 2019
GBP'000 GBP'000
Not more than one month 249 183
Not more than two months 155 -
Not more than three months 79 5
More than three months 118 -
601 188
=================== ==========
Trade and other receivables are usually due within 30-90 days
and do not bear any effective interest rate. All trade receivables
are subject to credit risk exposure. However, the Group does not
identify specific concentrations of credit risk with regards to
trade and other receivables as the amounts recognised represent a
large number of receivables from various customers. This ageing
excludes any amounts owed by related parties.
The fair value of these short term financial assets is not
individually determined as the carrying amount is a reasonable
approximation of fair value.
For the 18 month period ended 30 September 2020, the Group has
applied the simplified approach to provisioning for expected credit
losses (ECL) prescribed by IFRS 9, which permits the use of the
lifetime expected loss provisioning for all trade receivables. The
provisions for impairment calculated under IAS 39 are not
materially different and accordingly there are no transition
adjustments to the prior year.
The Group measures the loss allowance for trade receivables at
an amount equal to lifetime ECL expected credit loss. The ECL on
trade receivables are estimated using a provision matrix by
reference to past default experience of the debtor and an analysis
of the debtor's current financial position, adjusted for factors
that are specific to the debtors, general economic conditions of
the industry in which the debtors operate and an assessment of both
the current as well as the forecast direction of conditions at the
reporting date.
The Group will also, using this and all other information
available, make specific judgements about receivables which may
need to be individually assessed for impairment. Where required
these are marked as Credit Impaired amounts and detailed analysis
undertaken to assess the amount likely to be recovered including
consideration of the effect of credit enhancements.
18 cash and cash equivalents
31 March
30 September 2020 2019
GBP'000 GBP'000
Cash and cash equivalents 665 493
=================== ==========
Cash and cash equivalents consist of cash on hand and balances
with banks only. At the 30 September 2020, GBP493,000 (31 March
2019: GBP452,000) of cash on hand and balances with banks were held
by the subsidiary undertakings, however this balance is available
for use by the Group.
19 DEFERRED TAXATION
The deferred tax included in the statement of financial position
arose in the following areas:
Assets Assets Liabilities Liabilities
31 March 31 March
30 September 2020 2019 30 September 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Intangible assets - - (11) (20)
Accelerated capital allowances - - (94) (174)
Short term timing differences 25 16 - -
Losses - 70 - -
Share based payment 62 83 - -
87 169 (105) (194)
=================== ========== =================== =============
The movement in the deferred taxation account during the 18
month period was:
Assets Assets Liabilities Liabilities
31 March 31 March
30 September 2020 2019 30 September 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Balance brought forward 169 68 (194) (184)
Group income statement movement arising during
the period/year (82) 101 89 (10)
Balance carried forward 87 169 (105) (194)
=================== ========== =================== =============
As at 30 September 2020 the Group has unprovided deferred tax
assets as follows:
Unprovided Unprovided
31 March
30 September 2020 2019
GBP'000 GBP'000
Trading losses 1,939 558
================= ==========
20 trade and other payables
31 March
30 September 2020 2019
GBP'000 GBP'000
Trade and other payables 1,381 2,889
Amounts owed by related parties 755 227
Other taxation and social security 594 427
Accruals 1,023 311
3,753 3,854
================= ==========
Due to the short term duration of trade and other payables the
carrying value in the statement of financial position represents
the fair value of the liabilities.
21 borrowings
31 March
30 September 2020 2019
GBP'000 GBP'000
Current borrowings
Invoice discounting facility 1,375 1,382
Bank borrowings 67 -
Other short term borrowings 3,141 2,223
Lease liabilities (note 22) 404 70
4,987 3,675
=================== ==========
Non-current borrowings
Bank borrowings 933 -
Lease liabilities (note 22) 2,763 109
3,696 109
=================== ==========
Interest on the invoice discounting facility, which is secured
on the debtors financed, is paid at the rate of 2.10% over bank
base rate per annum.
Bank borrowings of GBP1.0m relate to funding received from the
UK Government's CBILS. This loan has a 6-year term with no interest
being payable during the first year as part of the government
assistance. The annual interest rate charged thereafter is 3.99%
over base rate with capital repayments also due. The future
contracted payments, including interest is GBP1.1m with GBP0.1m due
in less than one year and the balance due in more than one
year.
Other short term borrowing refers to the Group's overdraft
facility and the US revolving credit facility, both of which incur
interest at a rate of 2.50% over bank base rate; as these balances
are repayable on demand the future contracted payments is
considered to be the same as the carrying amount. This also
includes GBP0.5m for the US Government's Payroll Protection Program
(PPP) loan which was made to protect US jobs during the COVID-19
period. After a successful application for this loan to be
forgiven, this loan was converted into a grant post year end.
22 lease liabilities
The Future contractual payment, including interest for lease
liabilities are as follows:
Within Within 1-2 Within More than
1 year years 2-5 years 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 September 2020 516 465 1,036 1,789 3,806
======= ========== ========== ========= =======
31 March 2019 78 62 61 - 201
======= ========== ========== ========= =======
The Group has now adopted IFRS 16 Leases under the modified
retrospective approach. The adoption of IFRS 16 Leases under the
modified retrospective approach affects only the current reporting
period and does not require restatement of the comparative year.
The impact of this adoption in this note gives an additional
liability of GBP2.9m.
The contractual hire purchase agreements and finance lease
liabilities are secured against the assets to which they
relate.
23 FINANCIAL INSTRUMENTS
The Group uses financial instruments comprising cash and short
term deposits, invoice discounting, other short term borrowings and
hire purchase agreements and finance leases. The Group has items
such as trade receivables and trade payables that arise directly
from its operations.
Trade and other receivables and trade and other payables
The Group manages its trade receivables to ensure that credit
risk is minimised by avoiding concentration with any one customer.
All trade receivables have set credit terms which are
monitored.
The invoice discounting facility provides immediate funds on
approved trade receivables.
The Group works to ensure that it receives acceptable trading
terms from its suppliers.
Liquidity risk
Liquidity risk arises due to the Group's requirement to fund
working capital and investment in the business. The Group's
objective is to maintain a balance between continuity of funding
and flexibility through the use of deposits, bank loans, invoice
discounting, other short term borrowings and finance lease and hire
purchase contracts. Money on deposit is held on treasury reserve,
partly to finance working capital and also to help finance future
acquisitions. Trade and other creditors have a maturity within 3
months and the carrying value is the same as the contractual
payment. The contractual payments for borrowings are disclosed in
note 21 and 22.
Interest rate risk
The Group's policy is to manage its interest cost using a mix of
fixed and variable rate debt. The Group's exposure to interest rate
fluctuations on its borrowings is managed by the use of both fixed
and floating facilities. The Group finances specific large plant
acquisitions via hire purchase or finance lease contracts. The
Group pays interest on:
-- Short term borrowings at between 2.1% over base rate.
-- Finance leases at 2.0% to 18.5% over base rate.
If the base rate were to increase from its current level of 0.1%
to 0.25% as per the level prior to COVID-19, this would impact the
annual interest charge of approximately GBP9,000.
Foreign currency risk
The Group transacts certain purchases and sales in foreign
currencies. At 30 September 2020 there were no foreign currency
forward contracts in force (31 March 2019: nil).
Foreign exchange differences on retranslation of monetary
foreign currency assets and liabilities are taken to the income
statement of the Group.
If the US Dollar and Euro were to fall/rise against GBP by 10%
at the average annual rate at 30 September 2020 then Group profits
would rise/fall by GBP119,000 at 30 September 2020 (year ended 31
March 2019: GBP102,000). For future periods management are
considering creating a more natural hedge in the currencies to
offset against the short position. This will be achieved by
invoicing selected customers in the respective currencies as
opposed to GBP.
Commodity price risk
The Group's exposure to the price of steel is high, therefore
selling prices are monitored regularly to reduce the impact of such
risk and opportunities to reduce material costs are explored
constantly. The Group has partly responded to this risk by sourcing
materials in low cost countries. In addition, any increases in the
cost of steel would be passed onto customers.
If steel prices were to fall/rise by 10% on the closing 18 month
period end price, and the Group was unable to pass the increase
onto customers, then Group profits would rise/fall by GBP177,000 at
30 September 2020 (year ended 31 March 2019: GBP135,000) and equity
and reserves would increase/reduce by the same amount.
Financial assets and liabilities
The IFRS 9 categories of financial assets included in the
statement of financial position and the headings in which they are
included are as follows:
31 March
30 September 2020 2019
GBP'000 GBP'000
Non-financial asset 286 498
Loans and other receivables at amortised cost 4,077 4,849
------------------ ----------
Total assets 4,363 5,347
------------------ ----------
The financial assets are included in the statement of financial position in the
following 31 March
headings: 30 September 2020 2019
GBP'000 GBP'000
Current assets
Trade and other receivables 3,412 4,356
Cash and cash equivalents 665 493
------------------ ----------
4,077 4,849
------------------ ----------
The IFRS 9 categories of financial liabilities included in the statement of financial
position 31 March
and the headings in which they are included are as follows: 30 September 2020 2019
GBP'000 GBP'000
Non-financial liability 594 427
Financial liabilities measured at amortised cost 11,842 7,211
------------------ ----------
Total liabilities 12,436 7,638
------------------ ----------
The financial liabilities are included in the statement of financial position in the
following 31 March
headings 30 September 2020 2019
GBP'000 GBP'000
Current liabilities
Trade and other payables 3,159 3,427
Borrowings 4,987 3,675
Non-current liabilities
Borrowings 3,696 109
------------------ ----------
11,842 7,211
------------------ ----------
The non-current financial liabilities fall due as follows:
Within Within More than
1-2 years 2-5 years 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000
30 September 2020
Lease liabilities 369 822 1,572 2,763
Bank borrowings 200 600 133 933
---------- ---------- --------- -------
556 1,406 1,703 3,696
========== ========== ========= =======
31 March 2019
Lease liabilities 55 54 - 109
Bank borrowings - - - -
---------- ---------- --------- -------
55 54 - 109
========== ========== ========= =======
24 capital management policies procedures
The Group's capital management objectives are:
-- to ensure that the Group can continue as a going concern:
-- to ensure the Group has adequate resources to support the strategy of the Group; and
-- to provide a return to the Group's shareholders.
The Group's capital equals total equity less cash and cash
equivalents. The Group's financing includes total equity plus
borrowings. The borrowings have been taken out to provide working
capital for the Group.
25 share capital
31 March
30 September 2020 2019
GBP'000 GBP'000
Authorised
100,000,000 ordinary shares of 10 pence each 10,000 10,000
================= ==========
Allotted and issued
30 September 2020: 49,219,285 (31 March 2019: 33,795,000) ordinary shares of 10 pence
each 4,921 3,379
================= ==========
500,000 ordinary shares were allotted and issued on 13 June
2019. 14,924,285 ordinary shares were allotted and issued on 6
February 2020.
All 10 pence ordinary shares carry the same voting rights and
rights to discretionary dividends.
26 Contingent liabilities
There were no contingent liabilities at 30 September 2020 or 31
March 2019.
27 capital commitments
At 30 September 2020 the Group had capital commitments of GBPnil
(31 March 2019: GBPnil).
28 impact of TRANSItion to IFRS 16 LEASES
The impact of the transition to IFRS 16 to the Group's primary
financial statements was as follows:
Impact on the Group income statement
for the 18 month period ended
30 September 2020
Amounts without
As reported IFRS 16 adjustments adoption
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ------------------------ ---------------------------
Operating loss (7,284) (102) (7,386)
------------------------------------- ----------- ------------------------ ---------------------------
Share of profit from joint ventures 124 - 124
Finance costs (497) 172 (325)
------------------------------------- ----------- ------------------------ ---------------------------
(Loss)/profit before tax (7,657) 70 (7,587)
Income tax credit 12 - 12
------------------------------------- ----------- ------------------------ ---------------------------
(Loss)/profit after tax from
continuing operations (7,645) 70 (7,575)
===================================== =========== ======================== ===========================
Impact on the Group statement
of financial position as at 30
September 2020
Amounts without
As reported IFRS 16 adjustments adoption
GBP'000 GBP'000 GBP'000
Non-current assets
-------------------------------- ----------- ----------------------- --------------------------
Property, plant and equipment 6,846 (2,859) 3,987
-------------------------------- ----------- ----------------------- --------------------------
Change in total assets (2,859)
-------------------------------- ----------- ----------------------- --------------------------
Borrowings
-------------------------------- ----------- ----------------------- --------------------------
Current borrowings (4,987) 304 (4,683)
Non-current borrowings (3,696) 2,625 (1,071)
-------------------------------- ----------- ----------------------- --------------------------
Change in total liabilities 2,929
-------------------------------- ----------- ----------------------- --------------------------
Change in total equity 70
-------------------------------- ----------- ----------------------- --------------------------
Impact on the Group statement
of cash flows for the 18 month
period ended Amounts without
30 September 2020 As reported IFRS 16 adjustments adoption
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
--------------------------------------- ----------- ------------------- ---------------
(Loss)/profit after taxation
from continuing operations (7,645) 70 (7,575)
Adjustment for:
- Depreciation 1,463 (596) 867
- Net finance costs in income
statement 497 (172) 325
--------------------------------------- ----------- ------------------- ---------------
Change in cash generated by operations (698)
Cash flows from financing activities
--------------------------------------- ----------- ------------------- ---------------
Payment of finance lease liabilities (871) 698 (173)
--------------------------------------- ----------- ------------------- ---------------
Net cash used in financing activities 698
======================================= =========== =================== ===============
Net increase in cash and cash
equivalents 172 - 172
Cash and cash equivalents at
beginning of period/year 493 - 493
Cash and cash equivalents at
end of period/year 665 - 665
======================================= =========== =================== ===============
29 transactions with related parties
Malvair Properties Limited, a company in which R Allsop, a
non-executive director, has a beneficial interest, owns a property
occupied by a Group company under an operating lease. The company
incurred operating lease charges of GBP0.2m during the 18 month
period relating to this lease (31 March 2019: GBP0.2m).
The Group received dividends in the period of GBP0.3m from its
joint venture in China, Minguang-Tricorn Tubular Products Nanjing
Limited. During the 18 month period ended 30 September 2020 the
Group has made sales to the joint venture of GBP0.5m (31 March
2019: GBP0.5m) and purchases from the joint venture of GBP0.5m (31
March 2019: GBP0.1m). At the balance sheet date amounts held in
trade and other receivables and owed to the Group by the joint
venture amounted to GBP0.7m (31 March 2019: GBP0.3m), and amounts
held in trade and other payables and owed by the Group to the joint
venture of GBP0.8m (31 March 2019: GBP0.2m).
30 audit exemption for subsidiary undertakings
For the 18 month period ended 30 September 2020, the Group has
taken advantage of the exemption offered in sections 479A - 479C of
the Companies Act 2006 and its subsidiary undertakings have not
been subject to an individual annual audit. Tricorn Group plc has
given a statutory guarantee to each of the following subsidiary
undertakings guaranteeing their liabilities, a copy of which will
be filed at Companies House.
At 30 September 2020 the Company holds 100% of the ordinary
share capital of the following subsidiaries which have taken this
exemption:
-- Maxpower Automotive Limited - Company number 04438100
-- Tricorn UK Limited - Company number 00370553
-- Hallco 348 Limited - Company number 3965426"
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END
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