Final Results

ENTU (UK) PLC

("Entu" or the "Group")

Results for the Year Ended 31 October 2016

Entu (UK) plc, the home improvements group providing energy efficiency products and services to homeowners and businesses across the UK, announces its results for the 12 months ended 31 October 2016.

Key Points

· EBITDA in line with expectations at £2.7m (2015: £7.6m).

· Fundamental restructuring programme undertaken to reduce risk and focus on core Home Improvements business.

· Adjusting for non-recurring items, underlying margins were steady at 31.3% (2015: 31.6%) and underlying EBITDA was unchanged at £2.4m (2015: £2.4m).

· The restructuring programme, a detailed balance sheet review and revisions to accounting policies resulted in exceptional charges of £4.6m and contributed to losses on discontinued operations of £3.8m, with the Group reporting an overall loss for the year of £5.6m (2015: profit £2.7m).

· No final dividend proposed. Group will return to the dividend list as soon as possible.

· Immediate priorities are improving EPS, generating cash and strengthening controls in the core business.

· Positioned for a return to growth in 2018.

Chief Executive, Ian Blackhurst, commented:

"This has been a very difficult year for the Group. Our challenges began in September 2015 when, following the Government's surprise reduction in solar feed-in-tariffs, we were forced to close our Solar business, leaving the Group with an overhead base designed for a larger business set on growth. 

We had hoped that targeted acquisitions and organic growth in new, commercial business streams would cover the overhead base, but by the half year it was clear that this would not materialise quickly enough and we acted decisively to scale back on acquisitions, close underperforming businesses and execute a radical restructuring programme to improve operational efficiency and reduce costs in our core Home Improvements business. 

The restructuring programme also highlighted operational weaknesses that we are addressing by strengthening our management team and improving controls and processes across the Group.

Despite all the challenges, our core Home Improvements business remains a UK market leader, and the underlying performance and cash generating ability of the Group remains substantially unchanged. There is still much work to do in 2017 and our immediate priorities are to focus on our core strengths, improve returns in our Home Improvements Division and reposition the business for growth in 2018."

For further information, please contact:

Notes to Editors

Entu (UK) plc (AIM: ENTU) is a leading home improvement group providing energy efficiency products and services to homeowners and businesses in the UK.

Headquartered in Cheshire, Entu has national presence through a network of strong regional brands such as Weatherseal, Penicuik and Zenith. The Group operates three business segments: home improvement products, energy generation and energy saving products and repairs and renewals services.

Entu operates in a growing marketplace with myriad opportunities. Entu's primary strategy is to focus on driving organic growth from its diversified, fully integrated product portfolio, and also, over time, through the development of new product and service offerings, in particular, energy efficiency products and services.

The Group was admitted to AIM in October 2014. 

CHAIRMAN'S STATEMENT

Review of the Year

During the year, we have taken difficult, but necessary, actions to focus on improving returns and cash generation in our core Home Improvements business and to reduce risk across the Group.

Shortly before the last year end we closed our Solar business because of the Government's unexpected decision to reduce substantially the feed-in-tariffs for solar energy, rendering that business uneconomic. This left the Group with an overhead base that had been established for a larger and growing business which, as I said last year, either had to be absorbed by acquisitions and growth in new business streams, or cut back to fit a refocussed Home Improvements business. Our preference was to absorb these excess overheads through growth, but we did not consider any of the available acquisition opportunities sufficiently attractive and the new business streams did not produce the growth we were hoping for. Consequently, we restructured operations and cut overheads aggressively to create a robust platform that was fit for purpose and allow the Group to make a sensible return in due course.

In addition to closing our Solar business last year, we also sold our under-performing Norwood Interiors kitchens business, and this year, as part of a wide-ranging restructure of our operations, we closed our Europlas business to create greater focus and to improve returns across the Group. We also sold Astley Façades Limited ("Astley"), which we acquired in March 2015 and grew faster than expected, creating an increased working capital requirement and risk profile that no longer matched the Group's strategy going forward. 

Finally, we undertook a detailed review of all our subsidiary company balance sheets to remove any remnants of those discontinued businesses, in order to provide a stable platform from which to trade forward. This is discussed in more detail in the "Financial Review".

Results

Group revenue from continuing operations was £87.7m (2015: £89.6m) and operating profit from continuing operations before exceptional items was £2.5m (2015: £7.2m).

After exceptional items of £4.6m (2015: £0.5m), the Group made an operating loss of £2.1m (2015: profit £6.7m) and with losses on discontinued operations of £3.8m (2015: £3.0m), the overall loss for the year was £5.6m (2015: profit of £2.7m). This provided a basic loss per share of 8.6p (2015: earnings per share of 4.2p). 

Dividend

The Board declared and paid an interim dividend for the year of 0.5p per share. However, in the light of the restructuring of the Group and the final results for the year, the Board has reconsidered the dividend policy and, as announced on 7 February 2017, determined that it is not appropriate to recommend a final dividend for the year ended 31 October 2016. The Board intends that Entu return to the dividend list as soon as possible and the Directors will assess future dividends as the Group's balance sheet and distributable reserves strengthen.

Board

There have been several changes to the Board during the year. On 14 January 2016, Geoff Stevens stepped down as Chief Financial Officer and assumed the role of Non-Executive Director. After the conclusion of last year's Annual General Meeting, Geoff was appointed Chairman of the Audit Committee and became a member of the Remuneration Committee. On the same date, and following an extensive external search, it was announced that Neill Skinner had joined the Board as Chief Financial Officer on a full time basis. 

Following the restructuring exercise, the Group announced on 19 July 2016 that Andrew Corless, Chief Operating Officer (appointed 14 January 2016), had resigned from the Board to pursue new opportunities.

Darren Cornwall stood down from the Board with effect from 15 April 2016 to work on a more flexible basis. Darren continues to work for the Group developing opportunities which have the scope to add value to the Group's product and service offering as well as assisting in margin improvement plans for execution in the coming months. Darren also provided project support in the corporate transactions described in the

"Review of the Year".

People

On behalf of the Board, I wish to thank all our people for their hard work, professionalism and commitment in delivering the restructuring programme and putting in place the changes necessary to improve the Group's return and cash generation.

Strategy

Whilst the focus in the past year has been on disposals and closures, the immediate focus is on securing gains from operational efficiencies and organic growth to return the Group to an acceptable level of profitability.

In the longer term it remains the Board's strategy to make selective acquisitions, and to enter commercial partnerships and distribution agreements in the product and geographical areas in which we currently operate, providing always that we can see a sensible return within a modest timescale.

 However, the core strategy in the medium term remains unchanged. Entu is one of the UK's leading home energy efficiency groups providing energy efficiency products and services to homeowners and businesses nationwide. We are aiming to build a business that anticipates a broadening of its sales channels and is well placed to serve them, with an increasing range of products, through an efficient and established infrastructure.

The Board intends to take advantage of these new opportunities in time, but in the short term, we need to focus on our core business, improve returns, strengthen our balance sheet and ensure that the risks inherent in the Group remain properly managed and controlled.

David M Forbes

Chairman

CHIEF EXECUTIVE'S STATEMENT

Overview

This has been a challenging year for the Group. In September 2015, the Government announced a surprise and substantial reduction in solar feed-in-tariffs, and we were forced to close our profitable Solar business, a major contributor to our Energy Generation and Savings Division.

This, along with the sale of our Norwood kitchens business earlier in the year, resulted in a significant loss of revenue and contribution, and left us with £3.6m of central overheads designed for a larger business set on growth that would need to be absorbed by our continuing operations. 

We had planned for targeted acquisitions and organic growth in new, commercial business streams, mainly in the Energy Generation and Savings Division, to cover these central overheads. However, the pipeline of acquisition targets did not offer any sufficiently attractive opportunities and growth in the new, commercial business streams was slower than planned. 

Therefore, in May we acted decisively to restructure the Home Improvements Division, scale back our acquisition activity and close underperforming commercial business streams in the Energy Generation and Savings Division. These actions resulted in an exceptional charge of £1.9m in FY2016, and removed £2.1m of cost from the Group on an annualised basis. Combined with the actions we have taken since the year end, which are discussed under "Short-Term Priorities" below, we are targeting an overall annualised saving of £4.0m by the end of FY2017.

We have also strengthened our Executive Team with senior appointments in operations, finance, compliance and human resources.

Group revenues from continuing operations before exceptional items were down slightly at £87.7m (2015: £89.6m), mainly due to lower finance commissions following a reduction in interest rates offered on consumer finance products. However, despite the challenges we faced this year, underlying gross margins were relatively constant at 31.3% (2015: 31.6%) and underlying EBITDA was unchanged at £2.4m (2015: £2.4m).

The overall loss for the year, after exceptional items and losses on discontinued operations, was £5.6m, (2015: profit of £2.7m). The Group's results are discussed in more detail in the "Financial Review".

The decisive actions we have taken will allow us to focus on our core strengths, improve returns in our core Home Improvements Division and reposition the business for growth in 2018. 

Divisional Review

Home Improvements

Our Home Improvements Division is one of the UK's largest providers of replacement windows, doors, conservatories and other home improvement products and, despite the challenges faced by the Group, remains a market leader. The Division sells to retail customers directly through its own brands or indirectly through partnerships with other home improvement businesses.

We had a slow start to the financial year due to management time being focussed on stabilising the Group after the rapid exit from our Solar business in September 2015. However, in the first two months of 2016, we enjoyed our highest ever rise in new orders, which reached record levels in the second quarter of the financial year. 

Whilst this was a significant achievement for the sales teams across the Division, the pressure this order book growth placed on our installation operations, coupled with the focus brought on the business through the restructuring exercise, exposed weaknesses in the Division's operations both in the planning and delivery of new installations and the clearing down of remedial works. This, in turn, led to an increase in our debtor position in 2016. Since May, I have assumed direct responsibility for installation operations and, although it has taken more time to address all the issues than expected originally, significant progress has been made.

The transition to a single national sales and marketing function as part of the restructuring exercise resulted in an inevitable dip in new orders in the third quarter, but this allowed breathing space for our installation operations to bring the order book back into balance with our installation capacity and, by the end of the fourth quarter, we were back on track.

The Division was also successful in securing FCA authorisation as a credit broker for consumer finance products provided through our finance partners.

Energy Generation and Savings

As noted above, our Energy Generation and Saving Division has seen significant change in the year with the closure of new, commercial business streams that were under performing and the sale of Astley. At the year end, the Division comprised our insulation and new commercial LED lighting installation businesses.

Repairs and Renewals Service Agreements ("RRSA")

The RRSA Division offers customers an annual cover plan on many of its core products and the division performed in line with expectations.

Short Term Priorities

We have restructured our business to focus on our core Home Improvements Division. The decisive actions taken in 2016 have stabilised the business, and the priorities for 2017 are to improve returns, increase cash generation further, reduce risk and, ultimately, create a robust platform that will enable us to return to sustainable growth in 2018. To deliver this, we have strengthened our Executive Team with senior appointments in operations, finance, compliance and human resources, who will focus on the following priorities in 2017:

· Deliver £4m annualised savings. We delivered £2.1m of annualised savings from the actions we took in 2016. Through further actions in 2017 to centralise service teams at our Head Office in the North West, focus installation administration in three major hub depots and further operational efficiencies, we plan to deliver a total of an annualised £4m of savings by the end of 2017.

· Improve operational efficiency. As part of the restructure in 2016, we identified a series of measures to improve the efficiency of our service and installation teams to reduce the lead times from sale to installation, which will improve returns and cash collection.

· Leverage supply chain. Through tighter quality control procedures and management of supply contracts, we can reduce wastage further and reduce inefficiency in operations. We will also review our contractual arrangements with suppliers to obtain improved prices and payment terms where we can.

· Improve cash collection. We have undertaken a series of measures to improve cash collection, including the implementation of revised terms and conditions, tighter job completion procedures and the strengthening of the credit control function. We are also focussed on clearing the backlog of remedial work that arose during 2016.

· Strengthen controls and processes. With senior appointments in finance, compliance and human resources, we will strengthen controls and processes across the Group to improve management information systems and reduce risk.

Strategy

Our overall vision to become the UK's leading installer of energy efficient products for retail and commercial customers remains unchanged, and the three steps required to deliver this vision are as follows:

· Step 1 - Focus on Core Strengths. As noted above, our immediate priority is to focus on our core strengths and improve returns, generate cash and reduce risk in our Home Improvements Division. 

· Step 2 - Leverage Our Core Business.  Once we have delivered a robust platform for growth in our core Home Improvements Division, we will look for consolidation opportunities around strong national brands that will allow us to create sales and marketing leverage through higher sales conversion ratios and operational leverage driven by a single, national installation service.

· Step 3 - Build Our Energy Efficiency Offering. We will continue to invest in a select number of corporate relationships where we can build our portfolio of energy efficient products and expand our services into commercial markets in 2017, initially through outsourced delivery. Our key investment criteria, as well as producing returns at least equal to our core Home Improvements business, will be opportunities where we can influence sales directly and, eventually, absorb delivery capability into our national installation platform. 

To provide greater clarity between our existing core retail markets and the significant growth opportunities open to us in commercial markets in 2017, we intend to simplify our internal segmental reporting of results in 2017 to "Retail" (i.e. B2C) and "Commercial" (i.e. B2B) to align our segmental analysis more closely with our expected customer base. Longer term, we also envisage reporting our national installation service, Job Worth Doing, as a separate profit centre.

Outlook

The firm and decisive actions we have taken in 2016 leave us leaner and more focussed. However, there is still much work to do to improve operational efficiency, clear down our backlog of remedial work and strengthen our controls and processes. We have defined plans to reduce costs further, but it remains a challenge to realise all the potential savings in 2017. 

Nevertheless, revenues in the first quarter were ahead of plan and, if we can hold this level of performance and continue to make the progress we have already made in reducing costs, we can end the year in line with expectations with a robust platform for a return to growth in 2018.

Ian Blackhurst

Chief Executive

FINANCIAL REVIEW

Group Result

Continuing Operations Before Exceptional Items

Revenues were down slightly at £87.7m (2015: £89.6m) with nearly all the reduction due to lower finance commissions following a reduction in the interest rates charged on customer finance products.

Reported gross profit was also down at £27.5m (2015: £29.9m), but this year-on-year comparison does not reflect the underlying performance of the Group's continuing operations. As part of a detailed review of subsidiary balance sheets following the restructuring of the Group (see "Exceptional Items" below) we identified £1.6m of exceptional items that reduce the underlying comparative to £28.3m. On this basis, underlying gross margins were steady at 31.3% (2015: 31.6%). 

As expected, EBITDA was £2.7m (2015: £7.6m), but again, a more meaningful year-on-year comparison needs to reflect the £1.6m of exceptional items referred to above. Furthermore, and as noted in the Chief Executive's Statement, the closure of the Solar business resulted in £3.6m of central overheads being disclosed as part of discontinued operations in 2015 which remained part of the continuing business in 2016. Adjusting for both these items in the 2015 comparative, and adjusting the 2016 result by £0.3m for central overheads allocated to discontinued operations in respect of Europlas and Astley, results in underlying EBITDA remaining unchanged at £2.4m. Operating profit was £2.5m (2015: £7.2m).

Overall Result

Exceptional items were £4.6m (2015: £0.5m), comprising of £1.9m of restructuring costs and £2.7m from the balance sheet review, resulting in an operating loss after exceptional items of £2.1m (2015: profit £6.7m).

After net finance costs of £0.2m (2015: £nil) and a tax credit of £0.5m (2015: tax charge £1.0m), the loss for the year from continuing operations was £1.8m (2015: profit £5.7m).

The overall loss for the year was £5.6m (2015: profit £2.7m) after losses from discontinued operations of £3.8m (2015: £3.0m).

Divisional Results

Home Improvements

Home Improvement revenues fell by 2.6% to £77.1m (2015: £79.2m), largely due to lower finance commissions. Underlying gross margin was slightly down at 30.8% (2015: 31.6%), again due to lower finance commissions, and underlying EBITDA was £0.1m (2015: £0.5m), with lower gross profit partly offset by overhead savings.

Operating loss from continuing operations and after exceptional items was £3.9m (2015: profit of £3.7m).

Energy Generation and Saving

Revenues were up 4.3% to £8.0m (2015: £7.7m) due to growth in our new LED installations business. Underlying gross margin also was higher at 18.7% (2015: 15.4%), again due to the higher margin LED business, and underlying EBITDA was £0.1m (2015: loss of £0.2m). 

Operating loss from continuing operations and after exceptional items was £0.4m (2015: profit £0.9m).

Repairs and Renewals Service Agreements ("RRSA")

Revenue was £2.6m (2015: £2.7m), representing a steady proportion of Home Improvements revenues at 3.4% (2015: 3.4%). Operating profit from continuing operations and after exceptional items increased by 8.5% to £2.2m (2015: £2.1m). 

Exceptional Items

The restructuring of the Group's operations, discussed in the Chief Executive's Statement, resulted in an exceptional charge of £1.9m in 2016. This charge is made up of redundancy and other employee related costs of £0.8m, full provision for onerous lease obligations for exited properties and dilapidation costs of £1.0m, and other associated restructuring costs of £0.1m.

Following the restructuring of the Group in the year, we undertook a detailed review of all subsidiary balance sheets and identified £2.7m of additional exceptional charges, bringing the total exceptional items in respect of continuing operations to £4.6m (2015: £0.5m). A detailed breakdown of the exceptional items in respect of continuing operations is set out in Note 5 to the Financial Statements.

The balance sheet review also resulted in a further £2.5m of exceptional charges relating to discontinued operations. These are included in the loss on discontinued operations, and a detailed breakdown is set out in Note 10 to the Financial Statements.

Interest and Taxation

Net finance costs were £0.2m (2015: £nil) and the trading losses in the year resulted in a tax credit of £0.9m (2015: tax charge of £1.0m), with £0.5m in respect of continuing operations and £0.4m for discontinued operations. 

Discontinued Operations

As part of the restructure of the Home Improvements Division, we closed our regional head offices to create a national sales, marketing and operational management structure, closed under-performing depots and exited our Europlas business which operated predominantly in the South West of England. Although Europlas turned a small profit, results were declining and there were significant marketing and operational challenges that management were unable to address. We decided, therefore, to focus resources on improving performance in our larger operations in Home Improvements Division. The loss before taxation on Europlas, after exceptional costs, was £1.6m.

We also decided to sell Astley which we acquired on 27 March 2015 primarily as a platform for our insulation business to expand into new, commercial markets. In the time that we owned Astley, we grew the orderbook from £2m to £21m and secured a number of high-profile contracts. However, the market for Astley's services had moved towards larger, construction contracts and, with the need to restructure the Group and focus on the core Home Improvements Division, the risk profile no longer fitted within the Group. This came into sharp focus when an unexpected contractual issue arose in the late stages of the sale process, as a result of which, we took the difficult decision to sell the business for £1, rather than fund a lengthy dispute process. 

The sale completed on 27 October 2016 and, although this resulted in a loss on sale of £1.7m, and, an overall loss before taxation for the year of £0.7m, Entu made a gross return of £2.7m during its period of ownership, and a net return of £0.9m after loss on sale and disposal costs. 

Finally, the Group continued to incur unanticipated costs in relation to the discontinued Solar business and identified exceptional items as part of the balance sheet review, resulting in a loss before taxation, after exceptional costs, of £1.9m.

A detailed breakdown of the Group's discontinued operations is set out in Note 10 to the Financial Statements.

Dividend

As noted in the Chairman's Statement, the Board declared and paid an interim dividend of 0.5p per share, but in light of the results for the financial year, and as announced on 7 February 2017, the Board has determined that it is not appropriate to recommend a final dividend in respect of the 2016 financial year. The Board will assess its future dividend policy for the Group once distributable reserves are strengthened.

Accounting Policy Review

We conducted a review of our accounting policies to ensure they were in line with best practice and appropriate to the business going forward. This resulted in the accounting for our Repairs and Renewals Service Agreements and finance commissions being changed to reflect more appropriately the timing of revenue recognition as well as other adjustments to bring accounting policies in line across the Group.

The impact of these adjustments on the results for both 2016 and 2015 was less than £0.1m, but resulted in a reduction in opening reserves of £1.6m after a tax credit of £0.4m. 

A detailed analysis of the impact of the change in accounting policies is set out in Note 2 to the Financial Statements.

Balance Sheet

The Group's only freehold site in was sold to Ian Blackhurst at the end of October 2016. The sale price of £0.5m, and the future rental charge, were determined through independent valuers on an arm's length basis and were approved by the Non-Executive Directors in advance of the transaction. This allows the Group more flexibility in its property strategy as support functions become centred in the North West.

Inventories reduced to £1.3m (2015: £1.8m) largely due to a £0.5m exceptional charge resulting from the balance sheet review. Similarly, trade and other receivables fell to £8.1m (2015: £14.1m) largely due to exceptional charges resulting from the balance sheet review and sale of Astley.

Trade payables were £18.5m (2015: £17.5m) with decreases in trade creditors and accruals being offset by an increase in deferred income and advanced payments resulting from the accounting policy changes and leveraging terms with suppliers.

Overall, net liabilities were £8.3m (2015: £0.6m) with the reduction due to losses after exceptional items, discontinued operations and changes in accounting policies.

Capital Structure

During March 2017, the Group extended it facilities with Barclays Bank plc, with the renewal of its £4m revolving credit facility for 12-months alongside the Group's existing variable overdraft facility.

Cash Flow

Net cash generated from operations was £1.4m (2015:£1.2m). Cash outflows in relation to the restructuring programme and losses on discontinued operations were offset by advanced payments of finance commissions and improved terms from suppliers.

Cash outflows on interest, taxation and the purchase of plant and equipment were offset by the receipt from the sale of our Winsford depot. After dividends paid of £2.1m (2015: £2.7m), of which £1.8m related to the final dividend for 2015 and £0.3m to the 2016 interim dividend, there was net decrease in cash and cash equivalents of £0.7m (2015: net decrease of £4.3m).

Short-Term Priorities

This has been a difficult, but necessary year, focussing on reducing central overheads and building a stable platform for future growth. The short-term focus will be on improving returns, generating cash and strengthening controls and processes across the Group to reduce risk further. 

Neill Skinner

Chief Financial Officer

CONSOLIDATED INCOME STATEMENT

Adjusted earnings per share is shown in note 12 to the accounts.

The notes 1 to 31 are an integral part of these Consolidated Financial Statements.

There are no other items of comprehensive income for the year other than the (loss)/profit for the year attributable to the equity holders.

CONSOLIDATED BALANCE SHEET

The Financial Statements were approved by the Board of Directors on 28 March 2017 and authorised for issue on 28 March 2017. They were signed on its behalf by:

Neill Skinner

Chief Financial Officer

28 March 2017

Entu (UK) plc

Registered number 08957339

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share Capital

The share capital account includes the nominal value for all shares issued and outstanding.

Accumulated Losses

The 'Accumulated Losses' column in the Statement of Changes in Equity includes the accumulated profits and losses arising from the Consolidated Income Statement and certain items from the Consolidated Statement of Changes in Equity attributable to equity shareholders, net of distributions to shareholders.

The notes 1 to 31 are an integral part of these Financial Statements.

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Preliminary announcement

While the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies used are consistent with those in the Group's Statutory Financial Statements for the year ended 31 October 2016 which have yet to be published. The key accounting policies applied by the Group have been set out below. The preliminary results for the year ended 31 October 2016 were approved by the Board of Directors on 28 March 2017.

The financial information set out in this preliminary announcement does not constitute the Group's Statutory Financial Statements for the year ended 31 October 2016 but is derived from those Financial Statements which were approved by the Board of Directors on 28 March 2017. The auditors have reported on the Group's Statutory Financial Statements and the report was unqualified and did not contain a statement under section 498 (2) or 498 (3) Companies Act 2006. The Statutory Financial Statements for the year ended 31 October 2016 have not yet been delivered to the Registrar of Companies and will be delivered following the Company's Annual General Meeting.

General information

Entu (UK) plc ('the Company') and its subsidiaries (together "the Group") principal activity during the year was the sale of replacement windows, double glazing, entrance doors, patio doors and exterior improvement products within the United Kingdom. Other activities, included within discontinued operations were solar home improvement products and within the Astley Facades UK group of companies, the provision of façade facilities for both new build construction and refurbishment products.

The Company is incorporated and domiciled in the UK. The Company's registered number is 08957339. The address of its registered office is 7 Road One, Winsford Industrial Estate, Winsford, Cheshire CW7 3PZ.

The Company is a public limited company and has its primary listing on the AIM division of the London Stock Exchange.

The Group Consolidated Financial Statements were authorised for issue by the Board on 28 March 2017.

Directors

The Directors of the Group during the year ended 31 October 2016 were as follows:

Executive

Ian Blackhurst, Chief Executive Officer

Neill Skinner, full time Chief Financial Officer appointed 14 January 2016.

Andrew Corless, Chief Operating Officer, appointed 14 January 2016, resigned 19 July 2016.

Darren Cornwall, Corporate Development Officer, resigned 15th April 2016, (see note 27 for services to the Group after he resigned as Director).

Geoff Stevens resigned as part time Chief Financial Officer 14 January 2016.

Non-Executive

David Forbes, Chairman

Geoff Stevens, appointed 14 January 2016 and appointed Chair of Audit Committee, 29 March 2016.

Lorraine Clinton, Chair of Remuneration Committee.

1. Accounting policies

The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out in this note. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

The Consolidated Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), IFRS Interpretations Committee (IFRS IC) Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The Consolidated Financial Statements have also been prepared under the historical cost convention. Where it is appropriate to modify the historical cost convention, for example to value derivatives at fair value through profit and loss, the Group has a policy to do so.

The Financial Statements have been prepared in GBP, being the Group's presentational and functional currency and have been presented in thousands.

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of critical complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in note 2.

During the year ended 31 October 2016 various prior year adjustments were recorded in order to amend accounting policies, in order to ensure they were in line with best practice and appropriate to the business going forwards. See note 2 to the accounts.

Basis of consolidation

Subsidiaries are defined as entities over which the Group exercises control. The Group controls an entity when the Group has power over an entity, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group has applied IFRS 10 retrospectively in accordance with transition provisions of IFRS 10.

The Group applies the acquisition method to account for business combinations. The cost of an acquisition is measured as the fair value of the assets given, equity interests issued and liabilities incurred or assumed at the date of exchange.

The excess of the cost of an acquisition over the fair value of the Group's share of the identifiable net assets of the subsidiary acquired is recorded as goodwill. If the cost of the acquisition is less than the Group's share of net assets of the subsidiary acquired, the difference is recognised in the statement of comprehensive income.

Acquisition costs are expensed as incurred and included within exceptional items.

The accounting periods of the majority of subsidiary undertakings are coterminous with those of the Company. For subsidiaries with a different year end than the Parent Company, adjustments are made for material transactions or balances.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit and loss.

Adoption of new or amended standards and interpretations in the current year

Changes in accounting policy and disclosures

New standards, amendments and interpretations

No new standards, amendments or interpretations, effective for the first time for the financial year beginning on or after 1 November 2015 have had a material impact on the Group or Parent Company. No standards have been early adopted.

New standards, amendments and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 November 2015 and have not been applied in preparing these Financial Statements. None of these are expected to have a significant effect on the Financial Statements of the Group or Parent Company, except the following, set out in the following sections relating to accounting standards.

Standards

IFRS 9

IFRS 9 'Financial Instruments' addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and established three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through the statement of comprehensive income. The basis of classification depends on the entity's business model and contractual cash flow characteristics of the financial asset. Investment in equity instruments are required to be measured at fair value through the statement of comprehensive income. Investments in equity instruments are required to be measured at fair value through the statement of comprehensive income with the irrevocable option at inception to present changes in fair value in other comprehensive income not recycling.

There is now an expected credit losses model that replaces the incurred loss impairment model used in IAS 39. There were no changes to classification and measurement except for the recognition of changes in own credit risk, for liabilities designated at fair value through profit and loss, recognised in the statement of other comprehensive income. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the 'hedged ratio' to be the same as the one management actually uses for risk management purposes. Contemporaneous documentation is still required but it is different from that currently prepared under IAS 39. The standard is effective for periods beginning on or after 1 January 2018. Early adoption is permitted, subject to EU endorsement. The full impact of IFRS 9 has not yet been assessed.

IFRS 15

IFRS 15 'Revenue from Contracts with Customers' deals with revenue recognition and establishes principles for reporting useful information to users of the Financial Statements about the nature, timing, and uncertainty of revenue and cash flows arising from the entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from that good or service. The standard replaces IAS 18 'Revenue'. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. The full impact of IFRS 15 is in the process of being assessed.

IFRS 16

IFRS 16 'Leases' addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to the users of Financial Statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet as lessees. The standard replaces IAS 17 'Leases' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted, subject to EU endorsement and the entity adopting IFRS 15 'Revenue from Contracts with Customers' at the same time. The full impact of IFRS 16 has not yet been assessed.

Amendments to accounting standards

Annual improvements 2010-2012 (effective 1 July 2014 and endorsed for 1 February 2015)

Annual improvements 2011-2013 (effective 1 July 2014 and endorsed for 1 January 2015)

Amendment to IAS 19 'Employee Benefits' on defined benefit plans (effective 1 July 2014 and endorsed for 1 February 2015).

The adoption of amendments to these standards has not had a material impact for the year ended 31 October 2016.

Going concern

The Financial Statements have been prepared on a going concern basis. For the purpose of considering going concern the Directors have considered a period of at least 12 months from the date of approving these Financial Statements and have made the following assumptions around future trading: (i) revenues over the next 12 months are at similar levels to 2016 reported revenues; (ii) margins show a modest increase over 2016 following actions taken to improve operational efficiency and reduce costs in 2016; (iii) there is no material change to the Group's operating model or existing supply relationships; (iv) the Group is able to retain the benefit of the cost savings realised in 2016 following the actions taken to restructure the Group, as discussed in the "Chief Executive's Statement"; and (v) the key risks set out in the "Principal Risks and Uncertainties" section of the "Strategic Review" will not crystallise or have a material impact upon the Group within the next 12 months. The Directors have modelled a series of sensitivities around these assumptions taking into account reasonable, possible changes in trading performance and determined that there is sufficient headroom in the Group's facilities and/or mitigating actions available. The Directors have no reason to believe that the facilities will not be renewed upon expiry.

Revenue

The Group recognises revenue from the sale of goods and services when it has transferred significant risks and rewards of ownership to the buyer. For most of the Group's products the recognition will be when the installation is substantially complete. Where installation is completed in stages, revenue will be recognised by reference to the stage of completion of the transaction at the balance sheet date.

The Group receives commissions for introducing finance products to customers as finance commission income. Finance commission income is recognised in line with the revenue recognition policy for the product to which the finance commission relates.

Repairs and Renewals Service Agreement (RRSA) income is spread over the life of the relevant agreement and amounts received in advance are treated as deferred income.

Revenue received in advance of the recognition criteria outlined above is accounted for as deferred income within trade and other payables in the Financial Statements. Where the revenue recognition criteria have been met, but revenue has not been invoiced, the revenue is accrued on the balance sheet within prepayments and accrued income or other receivables.

Revenue is recognised net of VAT and any sales discounts and rebates offered.

Exceptional items

Exceptional items are considered by the Directors. The Directors apply judgement in assessing the particular items, which, by virtue of their scale and nature should be disclosed separately, as the Directors consider they are not representative of the underlying trading of the Group. Exceptional items may include restructuring expenses, onerous lease and dilapidation provisions, balance sheet impairments and other non-trading items.

Goodwill

Goodwill represents the excess of the purchase price of a business combination over the Group's interest in the fair value of identifiable net assets, liabilities and contingent liabilities acquired. The purchase price includes the fair value of contingent consideration where appropriate. Direct costs of acquisition are recognised immediately as an expense in profit or loss.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the Consolidated Income Statement. Where the fair value of identifiable assets, liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess is credited in full to the Consolidated Income Statement on the date of acquisition.

Impairments

The carrying values of the Group's assets are reviewed at each balance sheet date.

Goodwill is allocated to each of the Group's cash generating units expected to benefit from the business combination. Cash generating units to which goodwill has been allocated are tested annually for impairment, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.

An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Impairment charges are included in profit or loss.

Other assets are reviewed to see if an indication of impairment exists. If any such indication exists, the assets recoverable amount is estimated.

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of assets is impaired. For example, evidence of impairment might include indications that the asset will fail to generate cash or other forms of cash benefit to the Group in the future.

Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Group's ordinary and deferred shares are classified as equity instruments.

Dividends

Final dividends are recognised when they are approved and become legally payable. Interim dividends are recognised when paid.

Dividends were paid out of Entu (UK) plc reserves, which had sufficient positive reserves at the date of the dividend distribution.

Taxation

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised on other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the balance sheet date in the UK. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax income assets are recognised on deductible temporary differences arising from the investment in subsidiaries, associates and joint arrangements only to the extent that it is probable that the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.

Property plant and equipment

Assets are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the item concerned.

Depreciation is charged so as to write off the cost or valuation of assets, other than land, over their estimated useful lives, using the straight-line method, on the following basis:

Depreciation is included within administrative expenses in the income statement.

Residual values, remaining useful lives and depreciation methods are reviewed annually and adjusted if appropriate.

Profits or losses on disposal of property, plant and equipment are included in the profit or loss for the year within administrative costs.

Trade receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle if the business if longer) they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment is made when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables, and is measured as the difference between the carrying value and the present value of estimated future cash flows. Additionally, management use their judgement to assess the recoverability of debt in the light of circumstances within individual subsidiaries. Subsequent recoveries of previously impaired trade receivables are recognised as a credit to profit as recorded. 

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business, if longer). If not, they are presented as non- current liabilities.

Trade payables are not interest bearing, and are stated at fair value.

Deferred income, payments on account and advance payments are included within the category of trade and other payables and are not interest bearing.

Cash and cash equivalents

In the Consolidated Statement of Cash Flows, cash and cash equivalents include cash in hand, cash deposits held at call with banks and bank overdrafts. In the consolidated balance sheet where there is a bank overdraft which is not subject to a bank offset arrangement, it is included within borrowings in current liabilities.

Financial instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are recognised on the balance sheet at fair value when the Group becomes a party to the contractual provisions of the instrument.

Borrowings

Interest-bearing bank loans and overdrafts are recorded at fair value, net of direct issue costs and directly attributable transaction costs, where applicable. Finance charges, are accounted for on an accruals basis through the income statement.

Operating leases

Payments made under operating leases are recognised in profit and loss on a straight-line basis over the term of the lease. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.

Finance income and costs

Finance income and costs are recognised in the income statement on an accruals basis.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. It excludes borrowing costs. Weighted average cost is used to determine the cost of ordinarily interchangeable items. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Discontinued operations

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations that has been sold, closed, or operations have ceased.

Discontinued operations are presented in the Consolidated Income Statement as a single line which comprises the post-tax profit or loss of the discontinued operations concerned, together with the post-tax gain or loss recognised on sale or closure.

Prior periods are restated for comparative purposes.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chief Operating Decision Maker (CODM), who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Board.

Provisions

A provision is recognised in the balance sheet date if, as a result of a past event, the Group has a present, legal or constructive obligation that can be estimated fairly, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are not recognised for future operating losses.

Provisions recognised are the best estimate of the net expenditure required to settle the obligation at the reporting date, taking into account the nature of the provision.

Employee benefits and share based payments

Pension schemes

The Group operates post- employment benefit schemes in the form of contributions to defined contribution schemes but does not operate a defined benefit pension scheme. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current period and prior periods. Contributions to defined contribution schemes are charged to the Consolidated Income Statement on an accruals basis.

Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates a) when the group can no longer withdraw the offer of those benefits b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits.

Share based payments

The Company offers a Long Term lncentive Plan ('LTIP') and a Management Incentive Plan ('MIP') for a small senior management cohort, a Company Share Option Plan ('CSOP') for a wider management group and an all employee 'Save As You Earn' scheme ('SAYE').

All schemes are subject to a three-year vesting period and are designed to align employee interests with shareholder interests.

Under the terms of these share based compensation plans the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted including any market performance conditions (for example share price) and excluding non-market conditions (such as profitability) and including the impact of any non-vesting conditions for example the requirement of employees to save or hold on to shares for a specific period of time. At the end of each reporting period, the Group adjusts the charge in the income statement in respect of revised estimates of the number of options that are expected to vest based on the non-market vesting conditions and service conditions.

2. Prior year adjustments and critical accounting estimates and judgements

The Group has disclosed certain prior year adjustments relating to changes to accounting policies or the application of those accounting policies. This has had a material impact on revenue recognition and cost of sales within the income statement, as well as impacting the balance sheets and statement of changes in equity for the prior two accounting periods, see 'Prior year adjustments'.

The Group makes certain critical estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Future actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed in 'Critical accounting estimates, judgments and key sources of estimation uncertainty'.

Prior year adjustments

During the year, the Directors undertook a review of the Group's revenue recognition policies and the application of those policies. As a result of this review, the Directors have taken the decision to change their accounting policies for certain revenue streams to better reflect industry practices and to align policies more consistently across the Group.

In accordance with IAS 8, the change in accounting policies has been applied retrospectively and the comparative financial information has been restated, as has the opening balance sheet as at 1 November 2014. The table below sets out the impact of the changes in accounting policies on both the profit for the year ended 31 October 2015 and the equity of the Group as at 1 November 2014 and 31 October 2015.

Impact of prior year adjustments on profit and equity of the Group

(i) Historically the Group recognised revenue in relation to the RRSA programme on a cash received basis. However, as the RRSA programme results in a 12-month commitment to customers the Directors have determined that it would be appropriate to spread the revenue over the 12-month contract period.

(ii) On review of recognition of revenue across the Group's businesses it was concluded that for certain types of installations in certain subsidiaries, there was a different interpretation of the point of completion of installation. In some cases, revenue was being recognised prior to the substantial completion of the installations. The Directors have determined that a consistent measurement criteria should be used across the Group to determine the point at which the substantial risks and rewards of ownership are deemed to have transferred.

(iii) Historically the Group recognised finance commissions on receipt from finance providers. There has been limited history of non-collection of commissions and, therefore, the Directors think it more appropriate to recognise finance commissions in line with the revenue recognition policy to which the product associated the finance commission relates.

(iv) The Group defers sales commissions costs incurred in a financial year which are considered to be directly related to revenue transactions which are not recognised until subsequent financial years. As part of the review of the Group's revenue recognition policy the Group aligned policies on deferred commissions across the Group. This has resulted in certain costs being required to be recognised earlier than previously recognised. The current and prior years cost of sales numbers have been restated in this respect.

(v) Taxation charges have been adjusted in respected of changes to income recognition and deferred commissions.

The overall impact on the restated 2015 Consolidated Income Statement was to increase revenue by £176,000 and increase costs of sales by £214,000, thereby reducing operating profit by £38,000. The changes to revenue recognition and associated cost of sales led to a small tax reduction of £8,000 in the restated 2015 tax charge.

Changes (i)-(iv) impacted on revenue and cost of sales in the restatement of the 2015 comparative in the Consolidated Income Statement Change (v) impacted on the tax charge. The overall impact on profit after tax for the restated 2015 comparative was £30,000. The Consolidated Income Statement for 2015 was also restated in respect of discontinued operations (see note 10) which accounts for the remaining differences between originally reported numbers in 2015 and the restated numbers shown as a comparative for 2015 in the 2016 Consolidated Income Statement.

Impact of prior year adjustments on the Consolidated Balance Sheets of the Group

(i) Changes in accounting policies for RRSA resulted in increased deferred income, which is included in trade and other payables category of liabilities.

(ii) Changes in accounting policies for other revenue recognition had the impact of reducing trade receivables, prepayments, accrued income and other receivables within the trade and other receivables category of asset.

(iii) Changes in accounting policies for finance commission had the impact of increasing the trade and other receivables category of asset.

(iv) Changes in the accounting for deferred commission had the impact of decreasing the trade and other receivables category of asset.

(v) The current taxation liability has been adjusted in respect of the reduction to tax charges as a consequence of changes to income recognition and deferred commissions.

(i) Changes in accounting policies for RRSA resulted in increased deferred income, which is included in trade and other payables category of liabilities.

(ii) Changes in accounting policies for other revenue recognition had the impact of reducing trade receivables, prepayments, accrued income and other receivables within the trade and other receivables category of asset. It also had the impact of increasing the trade and other payables category of liability.

(iii) Changes in accounting policies for finance commission had the impact of increasing the trade and other receivables category of asset.

(iv) Changes in the accounting for deferred commission had the impact of decreasing the trade and other receivables category of asset.

(v) The current taxation liability has been adjusted in respect of the reduction to tax charges as a consequence of changes to income recognition and deferred commissions.

Critical accounting estimates, judgments and key sources of estimation uncertainty

Impairment of goodwill

The assessment of whether impairment charges are required against the carrying value of goodwill is made using value in use calculations. Although these calculations require the use of estimates including the discount rate, long term growth rate and forecasts (see note 13) the Directors do not believe there are any reasonably possible changes to the estimates made which would result in additional impairment charges. The changes in assumptions regarding future trading of discontinued operations resulted in the impairment charges made in the year which have been reflected within exceptional items within the Group's discontinued operations results.

Recoverability of trade receivables

The assessment of whether trade receivables are recoverable requires judgement. An allowance for impairment is made where there is an identified loss event which, based on experience, is evidence of a reduction in the recoverability of cash flows. Additionally, management use their judgement to assess the recoverability of debt in the light of circumstances within individual subsidiaries.

Deferred income and advance payments

Certain payments made by customers, suppliers, and service providers are received in advance of when they are due and are accounted for as creditors within the category deferred income and advance payments. The Directors made the judgement that this best represented the form and substance of the deferred income and advance payments.

Provisions

The Directors recognise a provision on the balance sheet where the Group has a known liability to transfer economic benefits but the liability is uncertain in timing or amount. Management uses judgement in estimating materially accurate outcomes based on estimates of a range of probabilities for each category of provision.

3. Financial risk management

General objectives, policies and processes

The Directors of Entu (UK) plc have overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.

The overall objective of the Directors is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the method used to measure them. Further quantitative information in respect of these risks is presented throughout these Financial Statements.

Financial instruments include trade receivables, trade payables and cash and cash equivalents which are treated as loans and receivables or financial liabilities at amortised cost for IFRS 7 classification purposes.

Credit risk

Credit risk is the risk that financial loss arises from the failure of a customer or counterparty to meet its obligations under a contract. The Group has dedicated standards, policies and procedures to control and monitor all such risks. Although the Group is potentially exposed to credit loss in the event of non-performance by counterparties, such credit risk is managed through third party credit rating agencies (for corporate customers) and internal financial reviews of the counterparties involved, and by limiting the total amount of exposure to any one party.

The credit rating awarded to Barclays Bank from a variety of external agencies is in the range of A to A-.

The Group is also exposed to credit risk in respect of amounts due from trade receivables. Given the nature of the Group's operations and customer base there is no concentration of credit risk to the Group. Therefore, no additional disclosure has been provided in respect of the credit worthiness of counterparties given that they are largely individuals and not companies.

Liquidity risk

Group Finance prepares and monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom through undrawn borrowing facilities. Such forecasting takes into account borrowing limits or covenant compliance. Liquidity risk arises from the Group's management of working capital, being the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group therefore monitors its risk to a shortage of funds through cash management procedures and the regular reviews of cash forecasts. The Group's objective is to maintain a balance in the continuity of its available funds to allow it to invest as necessary.

Capital risk management

The primary objective of the Group's capital management process is to ensure that it maintains a strong credit rating and healthy capital ratios. The Group manages its capital structure and makes adjustments to suit economic conditions. The Group's financing decisions are taken by the Board of Directors based on forecasts of the expected timing and level of capital and operating expenditure required to meet Group's commitments and development plans.

The Group sets the amount of capital required in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the dividends paid to shareholders, return capital to shareholders or issue new shares. The Group does not seek to maintain any particular capital ratio, but will consider opportunities on their merits and fund them in the most effective manner.

Fair value and cash flow interest rate risk

The Group had no outstanding loan balances other than short term overdrafts and revolving credit facilities during the year. Therefore, a change in LIBOR of 1%, being the average change in the LIBOR rate seen over the last 12 months, would change the Group's loss before tax by an insignificant amount of less than £0.1m.

Financial instruments by category

\* This represents the net financial instrument balances included within the consolidated balance sheet net assets and liabilities.

4. Segmental analysis

The Chief Operating Decision Maker (CODM) has been identified as the Executive Board which comprises the two Executive Directors.

The CODM reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports which include an allocation of central costs as appropriate.

The CODM considers the business from an operating perspective, with Home Improvements, Energy Generation and Saving, Repair and Renewal Service Agreements being the three reporting segments. The CODM assesses the performance based on operating profit before exceptional items. Other information provided to the CODM, except as noted below, is measured in a manner consistent with that of the Financial Statements.

All revenue, profit and assets of the Group and all segments arise in the Group's country of domicile, being the United Kingdom.

*Loss before tax from discontinued operations was £4,196,000. A tax credit of £395,000 was utilised in arriving at the loss after tax of £3,801,000.

There was no material inter-segment revenue in the year ended 31 October 2016.

The current year analysis is consistent with the prior year analysis, as restated for discontinued operations and prior year adjustments.

\* There was no tax charge or credit in respect of discontinued operations in the year ended 31 October 2015.

There was no material inter-segment revenue in the year ended 31 October 2015.

5. Exceptional items

Restructuring and commercial

Restructuring costs relate to the restructuring of the Group announced as part of the Group's Interim Results for the six months to April 2016, in July 2016. The costs include: redundancy /other employee related costs arising from a reduction in headcount (£781,000), provision for onerous lease obligations for exited properties / estimated dilapidation costs (£979,000), and other associated restructuring costs (£170,000). Other commercial costs (£547,000) relates to provisions for various commercial matters including associated legal and professional settlement costs.

Other

A detailed review of the Group's subsidiary balance sheets identified £2,104,000 of further exceptional items relating to balances that were not deemed recoverable (with £1,652,000 originating in 2015 and £452,000 originating in earlier years). These adjustments included a large number of relatively small items, principally prepayments and other receivables, which will have no impact on the future cash flows of the Group.

Exceptional costs in the year ended 31 October 2015

Exceptional costs in the prior year relate to costs associated with the acquisition of the Astley business in March 2015. Also included were certain costs relating to planned acquisitions which were subsequently aborted and certain other non- trading items.

Discontinued operations also include costs that are classified as exceptional, which are further set out in note 10.

6. (Loss)/ profit for the year from continuing operations

(i) Additional depreciation charged relating to discontinued operations is included within the total depreciation charge in note 14.

(ii) Cost of inventories written off excludes further write off of inventories disclosed in exceptional items amounting to £482,000 (2015: nil).

(iii) Employee costs relate to continuing operations only. Total employee costs including discontinued operations are shown in note 7.

A more detailed analysis of auditors' remuneration is provided below.

7. Directors and employees

Employee costs

Employee costs in the year include almost a full year of wages and salaries for the Astley business, whereas this was only included for six months in the prior year. The Astley business is included within discontinued operations (note 10).

Directors' remuneration

Additional payments were made to a former Director, see note 27.

Emoluments by Director for all Directors who served during the year ended 31 October 2016, including former Directors Darren Cornwall and Andrew Corless, were as follows:

Benefits include contributions to defined contribution pension schemes of £17,000 in total for Neill Skinner, Ian Blackhurst and former director Andrew Corless. Other benefits include car allowances and healthcare insurance. Former Director Darren Cornwall received payments for services provided post his resignation date of 15 April 2016. See note 27 related party transactions for details of these payments of £53,000 which were made on an arm's length basis.

For the year ended 31 October 2016 the highest paid Director received £261,000 of emoluments. In the prior year ended 31 October 2015, the highest paid Director received total remuneration of £285,000 and pension contributions of £1,200.

Short term employment benefits include a bonus of £55,000. No share options, shares or other benefits were awarded to Directors in the year or upon commencement of employment. There are no pension benefits accruing to Directors, the only pension payments are made to defined contribution schemes. For further disclosures regarding Directors' emoluments, see the Remuneration Report which contains information relating to Directors in office as at 31 October 2016.

8. Finance income and costs

Interest payable includes bank loan and overdraft interest.

9. Taxation

Continuing operations taxation is shown separately on the income statement whereas the taxation relating to discontinued operations is shown within the loss on discontinued operations. See note 10 for analysis of discontinued operations.

Continuing operations

Discontinued operations

Reconciliation of total taxation (credit)/charge

The year ended 31 October 2016 tax credit relating to discontinued operations wholly arises from trading within discontinued operations. None of the tax credit relates to the loss on disposal of discontinued operations. The Group utilises group relief as appropriate amongst trading subsidiaries.

Factors that may affect future tax charges

Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016 (on 7 September 2016). These include reductions to the main rate to reduce the rate to 19% from 1 April 2017 and to 17% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using those estimated tax rates and reflected in these Financial Statements (see note 19).

10. Discontinued Operations

During the year, the Group took the strategic decision to sell the Astley Facades (UK) Limited business (Astley) as well as close its loss making Europlas operations in the South East of England. The Directors consider both businesses to be separate major lines of business and as such the results of both businesses have been presented in discontinued operations in the current year with the prior year financial information being restated in accordance with IFRS 5.

In the year ended 31 October 2015 the Group also took the decision to close its Solar operations and the results were presented as discontinued operations in that year and have been treated consistently in the current financial year. The Norwood UK kitchen interiors business was also discontinued in the year ended 31 October 2015.

The trading results and exceptional items relating to these discontinued operations together with the loss on disposal of Astley were as follows: