29th Jun 2007 07:01
Buckland Group PLC29 June 2007 BUCKLAND GROUP PLC Report and financial statements for the year ended 31 December 2006 Chairman's statement for the year ended 31 December 2006 I present the financial results for the Buckland Group plc for the year ended 31December 2006. At the half year we reported a loss of £148,397. The second half shows a loss of£147,494, but reflects an improvement in trading performance as this includes acharge of £146,221 for exceptional items. The full year therefore shows a Group loss of £295,891 (2005: loss of£2,029,416). Sales at £2,752,230 (2005: £3,443,290) are down mainly due todiscontinued operations. The loss per share improved to 0.036p compared with aloss of 0.51p in 2005. No dividend is proposed. At the end of 2006 the majority of the Board became dissatisfied with theunsatisfactory performance and direction of the Group and decided to reassessthe management of the Group and its future strategy. The result was a change inthe composition of the Board during the first half of 2007 and theimplementation of a new strategy. The new strategic plan required the Group to raise further funds and to improvethe balance sheet by converting debt and loan notes to equity. The fund raisingof £900,000 (as detailed in the circular to shareholders on 6 June 2007) willallow the Group to plan production more effectively and build sufficient stocksto fill the supply chain. This will allow order shipment to the customer by seacontainer, which will reduce airfreight significantly, saving in the region of£130,000 per year based on current levels of production.The concentration in Thailand of all production and administrative functions, inthe first half of 2007, and the closure of all UK based operations, except for aEuropean sales presence and a minimal head office function, has further reducedcosts and improved efficiency. It is anticipated that as a result of the changesthere will be further improvement in the Group's performance in the six monthsto June 30 2007. The new funding will also enable an increase in sales activity with a focus onmoving into new markets where we can leverage the benefits of an economic labourforce and our expertise in the manufacture of small components. The prospects for the group are now very positive. Philip E PalmerChairmanJune 2007 Consolidated profit and loss account for the year ended 31 December 2006 Note Continuing Discontinued Year ended Year ended operations operations 31 December 31 December 2006 2005 £ £ Turnover 2 2,752,230 - 2,752,230 3,443,290 Cost of (2,047,723) (322) (2,048,045) (2,954,418)sales -------- ---------- --------- ---------- Grossprofit/(loss) 704,507 (322) 704,185 488,872 Administrativeexpenses (1,170,428) (13,968) (1,184,396) (1,607,272) Exceptionalitems 6 162,467 61,418 223,885 (1,004,465) OtheroperatingIncome - - - 63,838 -------- ---------- --------- ----------Operating(loss)/profiton ordinaryactivitiesbeforeinterest 7 (303,454) 47,128 (256,326) (2,059,027) -------- ---------- Profit ondisposal offixed assets - 100,660 Interestreceivable 8 33 218 Interestpayable andsimilarcharges 9 (39,598) (71,267) --------- ---------- Loss onordinaryactivitiesbefore andaftertaxationtransferred toreserves 12,24 (295,891) (2,029,416) ========= ========== (Loss)/Profitper ordinaryshare:Basic anddiluted 11 (0.04 p) 0.00 p (0.04p) (0.51p) ========== ========== ========= ========== The accompanying notes form an integral part of these financial statements. Consolidated statement of total recognised gains and losses andconsolidated reconciliation of movements in shareholders' fundsfor the year ended 31 December 2006 Year ended Year ended 31 December 31 December 2006 2005 £ £Consolidated statement of total recognised gainsand losses Loss for the year (295,891) (2,029,416)Exchangetranslation losson foreigncurrencynetinvestments insubsidiaryundertakings (35,701) 24,366 --------- ---------- Total recognisedloss for the year (331,592) (2,005,050) ========= ========== Consolidated reconciliation of movements inshareholders' funds Total recognisedloss (331,592) (2,005,050) New ordinary sharecapital subscribedfor and allottedin the period, including sharepremium (net ofexpenses) 50,000 1,414,497 --------- ---------- Net reduction inequityshareholders'funds (281,592) (590,553) Opening equityshareholders'funds (540,751) 49,802 --------- ---------- Closing equityshareholders'(deficit)/funds (822,343) (540,751) ========= ========== The accompanying notes form an integral part of these financial statements. Consolidated balance sheet at 31 December 2006 Note At At 31 December 2006 31 December 2005 £ £ £ £Fixed assetsIntangible assets 13 - 243,387Tangible assets 14 116,405 256,791 -------- -------- 116,405 500,178Current assetsStocks 16 259,571 425,052Debtors 17 534,490 937,668Cash at bank and 26b 7,245 29,717in hand -------- -------- 801,306 1,392,437Creditors:amounts fallingdue 18 (1,624,054) (2,324,585)within one year -------- -------- Net current (822,748) (932,148)liabilities -------- -------- Total assets lesscurrent (706,343) (431,970)liabilities Creditors:amounts fallingdueafter more than 19 (116,000) (9,371)oneyear Provision forliabilities 20 - (99,410)and charges -------- -------- Net liabilities (822,343) (540,751) ======== ======== Capital andreservesCalled up share 23 3,533,397 3,526,492capitalShare premium 24 1,084,627 1,041,532accountProfit and loss 24 (5,440,367) (5,108,775)account -------- -------- Shareholders' (822,343) (540,751)deficit ======== ======== The accompanying notes form an integral part of these financial statements.Company balance sheet at 31 December 2006 Note At At 31 December 2006 31 December 2005 £ £ £ £Fixed assetsInvestments 15 162 162 Current assetsDebtors 17 126,842 877,996Cash at bank and in - 4,882hand -------- -------- 126,842 882,878Creditors: amountsfallingdue 18 (644,626) (577,038)within one year -------- -------- Net current(liabilities)/ (517,784) 305,840assets -------- -------- Total assets lesscurrent (517,622) 306,002liabilities Creditors: amountsfallingdueafter more than one 19 (116,000) -year -------- -------- Net assets/ (633,622) 306,002(liabilities) ======== ======== Capital andreservesCalled up share 23 3,533,397 3,526,492capitalShare premium 24 1,084,627 1,041,532accountProfit and loss 24 (5,251,646) (4,262,022)account -------- -------- Shareholders'(deficit)/funds (633,622) 306,002 ======== ======== Consolidated cash flow statement for the year ended 31 December 2006 Note Year ended Year ended 31 31 December December 2005 2006 £ £ Net cashoutflow fromoperatingactivities(seebelow) (702,293) (657,039) Returns oninvestmentsand servicingof finance 26a (39,565) (71,049)Taxation - -Capitalexpenditure 26a (14,509) 54,689Acquisitions 26a - (1,254,243) --------- ---------Cash outflowbeforemanagement ofliquidresources andfinancing (756,367) (1,927,642) Financing 26a 659,217 1,874,218 --------- --------- Decrease incash (97,150) (53,424) ========= ========= Reconciliation of net cash flow to movement in 26bnet debtDecrease incash in theperiod (97,150) (53,424)Cash inflowfrom increasein debt (609,217) (459,721)Non cashmovements 656,559 (30,000) --------- ---------Change in netdebt resultingfrom cashflows (49,808) (543,145) Exchangemovement - 1,719 --------- ---------Movement innet debt inthe period (49,808) (541,426) Opening netdebt (830,528) (289,102) --------- --------- Closing netdebt (880,336) (830,528) ========= ========= Reconciliation of operating loss to netcash inflow/(outflow) from operatingactivitiesOperating loss (256,326) (2,059,027)Depreciation 95,658 176,532Amortisationof goodwill 35,749 171,450Impairment ofgoodwill 207,639 1,004,465(Utilisation)/Movement onprovision forrestructuringcosts (99,410) 99,410Closure ofsubsidiaries (431,524) -Loss on saleof fixedassets 9,721 -Decrease instocks 122,374 317,464Increase indebtors (318,041) (606,425)Increase/(decrease) increditors (31,275) 228,590Other non cashoperatingadjustment (36,858) 10,502 --------- --------- Net cashoutflow fromoperatingactivities (702,293) (657,039) ========= ========= The accompanying notes form an integral part of these financial statements. Notes forming part of the financial statements for the year ended 31 December2006 1 Accounting policies The financial statements have been prepared under the historical cost conventionand are in accordance with applicable United Kingdom accounting standards. Theprincipal accounting policies of the Group are set out below. In accordance withFinancial Reporting Standard ('FRS') 18 "Accounting policies" the Group hasreviewed its accounting policies and estimation techniques and consider thatthese policies are the most appropriate. Turnover Turnover represents supplies of components used in consumer electronics productsand gas ignition systems to third parties, excluding Value Added Tax or localsales tax where appropriate. Turnover is recognised upon delivery and itstreatment is in line with FRS 5. Basis of consolidation The group has used the acquisition method of accounting to consolidate theresults of subsidiary undertakings. The results of subsidiary undertakings areincluded in the group results from the date of acquisition. The consolidatedfinancial statements incorporate the financial statements of Buckland Group plcand all of its subsidiary undertakings made up to 31 December 2006. Subsidiariesare consolidated until they cease to be under the control of the Group. Goodwill Goodwill arising on an acquisition of a subsidiary undertaking is the differencebetween the fair value of the consideration paid and the fair value of theassets and liabilities acquired. It is amortised through the profit and lossaccount over the directors' estimate of its useful economic life from the dateof acquisition. Any permanent diminutions in value are written off. Valuation of investments Investments held as fixed assets are stated at cost less any amounts written offin respect of permanent diminution in value. Depreciation Depreciation is provided to write off the cost less estimated residual value, ona straight line basis, of all fixed assets evenly over their expected usefuleconomic lives. Asset lives are as follows: Leasehold improvements - 5 yearsFixtures and fittings and equipment - between 3 and 10 yearsPlant, Machinery and Motor vehicles - between 3 and 5 years Financial Instruments The group does not use derivative financial instruments. Financial assets arerecognised in the balance sheet at the lower of cost and net realisable value.Income and expenditure arising on financial instruments is recognised on theaccruals basis, and credited or charged to the profit and loss account in thefinancial period to which it relates. Foreign currency Foreign currency transactions of individual companies are translated at therates ruling when they occurred. Foreign currency monetary assets andliabilities are translated at the rates ruling at the balance sheet dates. Anydifferences are taken to the profit and loss account. The profit and loss accounts of foreign subsidiary undertakings are translatedinto sterling at the average rate of exchange for the period. Assets andliabilities of foreign subsidiary undertakings are translated into sterling atthe rates of exchange ruling at the balance sheet date. Differences on exchangearising from the translation of the opening net investment in subsidiaries aretaken directly to reserves. All other exchange differences are dealt withthrough the profit and loss account. 1 Accounting policies (continued) Product research and development Product research and development costs are charged to profit and loss account inthe period in which the expenditure is incurred. Stocks Stocks are valued at the lower of cost and net realisable value. Cost iscalculated as follows: Raw materials - purchase cost on a first in, first out basis.Work in progress and finished - cost of raw materials and labour togethergoods with attributable overheads Net realisable value is based on estimated selling price less additional coststo completion and disposal. Deferred taxation Deferred tax has been provided in accordance with FRS 19. Deferred tax is recognised on all timing differences where the transactions orevents that give the group an obligation to pay more tax in the future, or aright to pay less tax in the future, have occurred by the balance sheet date.Deferred tax assets are recognised when it is more likely than not that theywill be recovered. Deferred tax is measured using rates of tax that have beenenacted or substantially enacted by the balance sheet date. Leased assets Assets acquired under hire purchase contracts and finance leases are capitalisedin the balance sheet. The corresponding leasing commitments are shown as amountspayable to the lessor. Depreciation on the relevant assets is charged to theprofit and loss account. Lease payments are analysed between capital and interest components. Theinterest element of the payment is charged to the profit and loss account overthe period of the lease and is calculated so that it represents a constantproportion of the balances of capital repayments outstanding. The capitalelement reduces the amounts payable to the lessor. Rentals paid under operating leases are charged to the profit and loss accounton a straight line basis over the lease period. Retirement benefits The company operates a defined contributions pension scheme. The pension costscharged against operating profits are the contributions payable to a foreignscheme in respect of the accounting period. Invoice Discounting The Group discounts a proportion of its trade debts. The accounting policy is toinclude trade debt within trade debtors due within one year and record cashadvances within creditors due within one year.Discounting fees and interest are charged to the profit and loss account whenincurred. Bad debts are borne by the Group and are charged to the profit andloss account when incurred. 2 Turnover, profit, net assets and other operating income Turnover is related to the manufacture of components used in gas cooking and gasheating appliances. An analysis by geographical market follows: Year ended 31 December Year ended 31 December 2006 2005Turnover by origin £ £ Europe 906,894 1,984,775Asia 1,845,336 1,458,515 --------- --------- 2,752,230 3,443,290 ========= ========= Year ended Year ended 31 December 31 December 2006 2005Turnover by destination £ £ Europe 1,844,947 2,776,658Rest of the World 907,283 666,632 --------- --------- 2,752,230 3,443,290 ========= ========= Loss before tax and net assets relating to each major geographical market arenot disclosed as, in the opinion of the directors, their disclosure would beseriously prejudicial to the interests of the group. An analysis by segment follows: Year ended 31 Year ended December 31 December 2006 2005Turnover £ £ Electronic Components - 337,607Gas Ignition Equipment 2,752,230 3,105,683 --------- --------- 2,752,230 3,443,290 ========= ========= Year ended 31 Year ended December 31 December 2006 2005Operating loss on ordinary activities before £ £interest Electronic Components - (540,762)Gas Ignition Equipment (256,326) (1,518,265) --------- --------- (256,326) (2,059,027) ========= ========= Year ended 31 December Year ended 31 December 2006 2005Net liabilities £ £ Electronic Components - (72,888)Gas Ignition Equipment (822,343) (467,863) --------- --------- (822,343) (540,751) ========= ========= 3 Corresponding figures for discontinued operations Comparative figures for the 2005 performance of the activities discontinued in2005 and 2006 are set out below: Year ended 31 December 2005 Continuing Discontinued in 2005 Total £ £ £ Turnover 3,105,683 337,607 3,443,290 Cost of sales (2,285,742) (668,676) (2,954,418) --------- ---------- ---------Gross profit 819,941 (331,069) 488,872 Administrative expenses (1,441,567) (1,170,170) (2,611,737)Other operating income 16,225 47,613 63,838 --------- ---------- ---------Operating loss on ordinaryactivities before interest (605,401) (1,453,626) (2,059,027) ========= ========== ========= 4 Employees Group Company Year ended Year ended Year ended Year ended 31 31 December 31 31 December 2005 December December 2006 2006 2005Staff costs excluding £ £ £ £directors consist of: Wages andsalaries 550,807 1,179,937 - -Pension costs 3,114 4,364 - -Socialsecurity costs 20,735 60,568 - - --------- --------- --------- --------- 574,656 1,244,869 - - ========= ========= ========= ========= The average monthly number of employees of the group, excluding directors,during the year was as follows: Group Company Number Number Number Number 2006 2005 2006 2005 Manufacturing 154 245 - -Sales 2 4 - -Administration 6 9 - 3Research anddevelopment 3 5 - - --------- ---------- --------- --------- 165 263 - 3 ========= ========== ========= ========= 5 Directors' emoluments Year ended Year ended 31 December 31 December 2006 2005 £ £ Fees 136,000 119,286 ========= ========= Directors fees include payments to third parties amounting to £76,218 No director receives contributions to a pension scheme. 6 Exceptional items Year ended Year ended 31 December 31 December 2006 2005 £ £ Impairment of goodwill (207,639) (1,004,465)Gain on cessation ofsubsidiaries. 431,524 - --------- --------- 223,885 (1,004,465) ========= ========= In view of the substantial reorganisation during 2006 and subsequent to the yearend, the Directors feel it is appropriate to impair all the goodwill. The gain on cessation of subsidiaries is in connection with the liquidation ofDK Gas Components Ltd and the decision to dissolve the non trading subsidiariesHoldsafe Limited and Ravago Plastics Limited. 7 Operating loss Year ended Year ended 31 31 December December 2006 2005This has been arrived at after charging / £ £(crediting) : Depreciation - own assets 86,848 103,440 - leased assets 8,810 11,261Impairment provisionagainst tangible fixedassets - 61,832Amortisation of goodwill 35,749 171,450Loss on disposal oftangible assets 9,721 -Exceptional items (223,885) 1,004,465Reorganisation costs - 99,410Operating lease rentals - other 83,950 86,205Auditors' remuneration - audit services 25,000 38,750 - non-audit services: 5,000 6,000 taxation - audit of subsidiaries 2,143 4,356Research and developmentexpenditure 8,427 20,233Net profit on foreignexchange (5,309) (72,079) ========= ========= Reorganisation costsDuring 2006 the Group relocated all of its UK manufacturing operations toThailand. The reorganisation costs of £99,410 comprised redundancy costs and thecosts of transferring plant and equipment and was provided for in 2005. 8 Interest receivable Year ended Year ended 31 December 31 December 2006 2005 £ £ Interest on bank balances 33 218 ========= ========= 9 Interest payable and similar charges Year ended Year ended 31 December 31 December 2006 2005 £ £ Interest on bank loans and overdrafts 33,040 37,334Finance charges payableunder finance leases andhire purchase contracts 3,481 4,009Other loans 3,077 29,924 --------- --------- 39,598 71,267 ========= ========= 10 Taxation Year ended Year ended 31 December 31 December 2006 2005 £ £Current tax:UK corporation tax on loss for the period - -Foreign corporation tax on profits for the - -year --------- --------- - - ========= ========= The tax assessed for the period is higher than thestandard rate of corporation tax in the UK (30%).The differences are explained below: Loss on ordinary activities before tax (295,891) (2,029,416) ========= ========= Loss on ordinary activities multiplied bystandard rate of corporation tax in the UK of30% (88,767) (608,825) Effects of:Expenses not deductible for tax purposes 75,000 21,818Non taxable income (129,457) (3,399)Utilisation of tax losses - (9,599)Current year tax losses 143,224 600,005 --------- ---------Current tax charge for the period - - ========= ========= Current tax losses relate to £103,037 of UK losses and £40,187 of losses inThailand. 11 Loss per share The calculation of basic and diluted loss per share is based on the loss for theyear attributable to ordinary shareholders of £295,891 (2005: loss £2,029,416)and the weighted average number of shares in issue during the year of809,862,908 (2005: 393,618,826). The loss relating to continuing activities is £303,454 (2005: £1,488,654) andthe profit relating to discontinued activities is £47,128 (2005: loss £40,762). Note 23 shows that share options exist at 20% of issued share capital. Theseshare options have an anti- dilutive effect on the earnings per share since theexercise prices are in excess of the market price. 12 Loss for the financial period The parent company has taken advantage of section 230 of the Companies Act 1985and has not included its own profit and loss account in these financialstatements. The parent company's loss after tax for the year was £989,624 (2005loss £1,149,341). 13 Intangible assets Goodwill on:Group Acquisition Acquisition Acquisition of Total Purchased Goodwill of business of of Holdsafe Euro Asia Kigass Limited Connectors Co. Limited £ £ £ £CostAt 1 January2006 1,100,989 357,491 97,472 1,555,952Addition in the - - - -Year ---------- --------- ---------------- ---------At 31December 2006 1,100,989 357,491 97,472 1,555,952 ---------- --------- ---------------- --------- AmortisationAt 1 January2006 1,100,989 114,104 97,472 1,312,565Provision forthe period - 35,749 - 35,749Impairmentcharge - 207,638 - 207,638 ---------- --------- ---------------- ---------At 31 December2006 1,100,989 357,491 97,472 1,555,952 ---------- --------- ---------------- --------- Net book valueAt 31 December - - - -2006 ========== ========= ================ ========= At 31 December2005 - 243,387 - 243,387 ========== ========= ================ ========= The Directors have reviewed the Group's amortisation policy on intangible assetsand in light of the significant reorganisation embarked on over the last fewyears and since the year-end, have decided to impair the full value of thegoodwill acquired 14 Tangible assets Group Leasehold Plant, and Total improvement equipment £ £ £CostAt 1 January2006 88,107 1,041,886 1,129,993Additionsduring theyear - 30,139 30,139Disposals - (266,814) (266,814)Exchangedifferences 615 4,814 5,429 --------- -------- ---------At 31 December2006 88,722 810,025 898,747 --------- -------- --------- DepreciationAt 1 January2006 85,304 787,898 873,202 Provided forin the year 1,288 94,370 95,658Disposals - (190,789) (190,789)Impairment provision - - -Exchangedifferences 470 3,801 4,271 --------- -------- ---------At 31 December2006 87,062 695,280 782,342 --------- -------- --------- Net book valueAt 31 December2006 1,660 114,745 116,405 ========= ======== ========= At 1 January2006 2,803 253,988 256,791 ========= ======== ========= The net book value of tangible fixed assets included within plant, machinery andmotor vehicles, includes an amount of £2,555 (2005: £38,624) in respect ofassets held under finance leases and hire purchase contracts. Depreciationcharged in the year on assets held under finance lease was £8,810 (2005:£11,261). 15 Fixed asset investments Subsidiary undertakingsCompany £ CostAt 1 January 2006 1,022,896Additions - ---------At 31 December 2006 1,022,896 --------- Provisions at 1 January 2006 1,022,734Provided during the year - ---------Provisions at 31 December 2006 1,022,734 --------- Net book value at 31 December 2006 162 ========= Net book value at 31 December 2005 162 ========= 15 Fixed asset investments (continued) As at 31 December 2006 the Group held 100% of the share capital of the followingcompanies. Subsidiary Country of Nature of business Date ofundertaking incorporation acquisition/ set up Euro Asia Connectors Thailand Non-trading 6 March 1998Co Ltd *Euro Asia Connectors Hong Kong Trading 19 March 1999Co (Hong Kong) LtdEuro Asia Strip Thailand Non-trading 24 April 2000Tinning Ltd *Ravago Plastics Ltd United Application to strike 5 June 2002 Kingdom off 3 April 2007 Holdsafe Ltd * United Dissolved 23 January 22 October Kingdom 2007 2002 Derlite Co. Limited Thailand Manufacturing 21 February(Thailand) * 2003 Buckland Group (Hong Hong Kong Trading 29 OctoberKong) Ltd 2003 DK Gas Components Ltd United In liquidation 14 18 February* Kingdom July 2006 2005 Derlite Ltd * United Trading June 2006 Kingdom All companies within the Group have co-terminous year ends. * indicates an investment held through an intermediate holding company. 16 Stocks Group 31 December 2006 31 December 2005 £ £ Raw materials 66,616 301,996Work in progress 31,150 17,896Finished goods 161,805 105,160 --------- --------- 259,571 425,052 ========= ========= There is no material difference between the replacement cost of stocks and theamounts stated above. 17 Debtors: amounts falling due within one year Group Company 31 December 31 December 31 December 31 December 2006 2005 2006 2005 £ £ £ £ Trade debtors 501,501 797,756 - 13,128Amounts owed bygroupundertakings - - 125,757 858,529Other debtors 29,648 114,978 - 1,594Prepayments andaccrued income 3,341 24,934 1,085 4,745 -------- -------- -------- -------- 534,490 937,668 126,842 877,996 ======== ======== ======== ======== At 31 December 2006 £537,981 (2005: £728,121 ) of the trade debtors have beenfactored. 18 Creditors: amounts falling due within one yearGroup Company 31 December 31 December 31 December 31 December 2006 2005 2006 2005 £ £ £ £ Bank loans and otherborrowings 392,429 552,587 - -Bank overdrafts 29,351 44,778 23,997 -Other loans 345,892 231,105 210,348 231,105Trade creditors 611,620 978,504 200,492 252,810Amounts owed to groupundertakings - - 133,652 7,447Corporation tax - - - -Obligations underfinance leases andhire purchasecontracts 3,909 22,402 - -Other taxation andsocial security 75,135 273,381 5,314 6,715Accruals 165,718 221,828 70,823 78,961 -------- -------- -------- -------- 1,624,054 2,324,585 644,626 577,038 ======== ======== ======== ======== Amounts due under finance leases and hire purchase contracts are secured on theassets to which they relate. The bank loans and other borrowings relate to the factored trade debtors. 19 Creditors: amounts falling due after more than one year Group Company 31 December 31 December 31 December 31 December 2006 2005 2006 2005 £ £ £ £ Obligationsunder financeleases and hirepurchasecontracts - 9,371 - -Corporate loannotes 116,000 - 116,000 - -------- -------- -------- -------- 116,000 9,371 116,000 - ======== ======== ======== ======== Amounts due under finance leases and hire purchase contracts are secured on theassets to which they relate. On the 25 August 2006 the company resolved to create £125,000 of 12% 2008 loannotes. At 31 December 2006 £116,000 had been issued in exchange for debt orcash. 20 Provision for liabilities and charges £ Provisions at 1 January 2006 99,410 Reorganisation costs provision utilised during the year (99,410) ---------Provisions at 31 December 2006 - ========= The Group completed the relocation all of its UK manufacturing operations toThailand in the first half of 2006. The reorganisation costs of £99,410 relatedto redundancy payments and the cost of transferring plant and equipment. 21 Financial Instruments The company's treasury policy is to avoid transactions of a speculative nature.The main risks arising from the group's financial instruments are interest raterisk and foreign currency risk. The directors review and agree policies formanaging each of these risks and they are summarised below. Short term debtors and creditors Short term debtors and creditors have been excluded from all the followingdisclosures, other than the currency risk disclosures. Interest rate riskThe group finances its operations through bank borrowings. The group exposure tointerest rate fluctuations on its borrowings is managed by the use of both fixedand floating facilities. It is the Group's policy that approximately one thirdof its borrowings should be at a fixed rate and at the year end 30% per cent ofthe borrowings were on such terms. LoansLoans amounting to £210,348 (2005: £231,105) are unsecured, repayable on demand,due to a shareholder, Groupe Industriel, and include interest at 10% per annum.Of the amount due £147,174 (2005: £141,623) is related to capital and £63,174(2005: £89,482) to interest. Loans amounting to £115,544 (2005: £35,000), secured by a debenture over theassets of Buckland Group (Hong Kong) Ltd, repayable on demand and are subject tointerest at 10% per annum. Of the amount due £105,140 (2005: £35,000) is relatedto capital and £10,405 (2005: £nil) to interest. A loan of £20,000 (2005: £20,000) is due to Mr Leon Sharples. The loan isinterest free, unsecured and repayable on demand. Bank loans Other borrowings amounting to £392,429 (2005: £552,588 ) relate to invoicefinance facilities. The borrowings bear interest of 2.50% over base rate (2005:2.75% per annum). Bank overdrafts Other overdrafts amounting to £29,351 (2005: £44,778 ) are secured by a fixedand floating charge over the Company's assets and personal guarantees from MrPalmer and Mr Sharples. The overdraft bears interest of 4% over base rate. Liquidity riskThe group seeks to manage financial risk, to ensure sufficient liquidity isavailable to meet foreseeable needs and to invest cash assets safely andprofitably manage the liquidity through the use of overdraft. It is the Group'spolicy to factor its trade debtors wherever practicable. 21 Financial Instruments (continued) Maturity of financial liabilities The group financial liabilities analysis at 31 December 2006 was as follows: Group 2006 2005 £ £Borrowings are repayable as follows: Within one yearBank loans and overdrafts 421,780 597,365Other loans 345,892 231,105Finance leases 3,909 22,404 Between two and five yearsLoan notes 116,000 -Finance leases - 9,371 After five yearsFinance leases - - ---------- ---------- 887,581 860,245 ========== ========== Borrowing facilitiesAt 31 December 2006 the Group had un-drawn committed borrowing facilities £nil(2005: £nil ). Currency riskThe Group does not hedge its exposure of foreign investments held in foreigncurrencies. The Group considers that the prevailing financial conditions inThailand preclude the need to hedge against the Baht. The Group is exposed to translation and transaction foreign exchange risk. Inrelation to translation risk the proportion of assets held in the foreigncurrency is matched to an appropriate level of borrowings in the same currency. The Group has overseas subsidiaries operating in Thailand and Hong Kong whoserevenues and expenses are denominated in local currencies and sterling. Thedirectors protect the Group's sterling balance sheet from movements in the USdollar/local currency exchange rates, by financing its net investments in itssubsidiaries, with the exception of Thailand, by means of local currencyborrowings. The majority of the Group's sales are to the United Kingdom, USA/Mexico and Asia. These sales are invoiced primarily in GB £, US dollars and Euros. The table below shows, in sterling, the extent to which group companies havemonetary assets and liabilities in currencies other than their local currency.Foreign exchange differences on re-translation of these assets are taken to theprofit and loss account of the Group companies and the group. Functional currency of Net foreign currency monetary assets/operation (liabilities) Euro GBP US dollars At 31 December 2006 GBP (210,348) - (56,615) -------- -------- -------- (210,348) - (56,615) ======== ======== ======== At 31 December 2005Euro 135 3,334GBP (251,661) - (191,592) -------- -------- -------- (251,661) 135 (188,258) ======== ======== ======== Credit riskThe Group is mainly exposed to credit risk from credit sales. It is grouppolicy, implemented locally, to assess the credit risk of new customers beforeentering contracts. Such credit ratings, taking into account local businesspractices are then factored into any decisions. The Group does not enter intoany derivatives to manage credit risk. Fair valuesThe fair value of short term deposits, long term borrowings, loans, overdraftand other financial assets approximates to the carrying amount because of theshort maturity of these instruments. 22 Deferred tax Group CompanyUnprovided deferred 31 31 31 31tax December December December December 2006 2005 2006 2005 £ £ £ £ Acceleratedcapitalallowances (598) (598) (598) (598)Losses (1,642,743) (1,499,519) (1,162,210) (1,059,173) -------- -------- -------- --------Unrecogniseddeferred taxasset (1,643,341) (1,500,117) (1,162,808) (1,059,771) ======== ======== ======== ======== No provision for the deferred tax asset has been made in the group or companydue to the uncertainty of the group or company being able to generate sufficientfuture taxable profits from which the future reversal of the timing differencescan be deducted. 23 Called up share capital 2006 2006 2005 2005 Number £ Number £ AuthorisedNew Ordinary shares0.01p each 30,165,809,008 3,016,581 30,165,809,008 3,016,581 ---------- -------- ---------- --------Deferred shares 9.5peach 15,409,000 1,463,855 15,409,000 1,463,855New Deferred shares of0.49p each 404,779,408 1,983,419 404,779,408 1,983,419 ---------- -------- ---------- -------- 30,585,997,416 6,463,855 30,585,997,416 6,463,855 ========== ======== ========== ======== Allotted, called upand fully paidNew Ordinary shares of0.01p each 861,226,247 86,123 792,178,629 79,218 ---------- -------- ---------- --------Deferred shares 9.5peach 15,409,000 1,463,855 15,409,000 1,463,855New Deferred shares of0.49p each 404,779,408 1,983,419 404,779,408 1,983,419 ---------- -------- ---------- -------- 1,281,414,655 3,533,397 1,212,367,037 3,526,492 ========== ======== ========== ======== The deferred shares, which are not listed, have no voting rights, no rights todividends and are not entitled to any payment on winding up. On 21st July 2006 the Company issued 35,714,285 new ordinary shares of 0.01peach at a premium of 0.06p per shares. On 13th December 2006 there was an issue of 33,333,333 new ordinary shares of0.01p each at a premium 0.065p each. At the same time it was announced that afurther 73,333,333 ordinary shares were to be issued but these were not issueduntil after the year end. Options The company has entered into the following option arrangements under which theholders are entitled to subscribe for a percentage of the company's ordinaryshare capital from time to time. Holder Options outstanding Percentage at 31 December 2005 and 31 December 2006 Wharton Holdings 2,075,405 at 15p 13.38Corporation 501,750 at 10p 20,633,700 at 0.75p 44,488,500 at 0.50p 64,792,520 at 0.10pConsortia Trustees Limited 1,026,845 at 15p 6.62 248,250 at 10p 10,208,902 at 0.75p 22,011,500 at 0.50p 32,057,285 at 0.10p The options held by Wharton Holdings Corporation are held on behalf ofdiscretionary trusts, the beneficiaries of which include the families of MrRogers and Mr Sharples. Those held by Consortia Trustees Limited are held onbehalf of a discretionary trust, beneficiaries of which include the family of MrPalmer. 23 Called up share capital (continued) The following is a summary of the principal terms of the options. (a) The price at which the option holders are entitled to subscribe forordinary shares is 15p in respect of the rights which accrued to the optionholders on 19 September 1997 and on 6 March 1998. The exercise price in respectof rights which accrued to option holders in December 1999 is 10p per share andin respect of rights which accrued on 6 March and 17 April 2003 is 0.75p pershare. For rights which accrued on 30 October 2003 and on 18 February 2005 theoption price is 0.50p per share and for rights accruing on 15 December 2005 is0.1p per share. (b) In respect of any ordinary shares for which the holder is entitled tosubscribe as a result of a rights issue, placing, open offer or similar theexercise price shall be the price at which such ordinary shares are issued. (c) In respect of any ordinary shares for which the holder is entitled tosubscribe as a result of any capitalisation of reserves or profits, or a capitalreduction or otherwise or on the making of an exempt distribution by virtue ofChapter II Part VI of the Income and Corporation Taxes Act 1998, the exerciseprice may be varied. (d) In respect of any ordinary shares for which the option holder is entitledto subscribe as a result of the exercise by any other person, firm orcorporation of any rights granted to subscribe for ordinary shares (whether byway of option, warrant or otherwise), the exercise price per ordinary shareshall be equal to the average market price of the ordinary shares on each of thefive business days preceding the date of the exercise of the said rights, asderived from the Stock Exchange Daily Official List. (e) The options may be exercised in whole or in part on any one or moreoccasions at any time between 1 October 1998 and 30 September 2009. (f) The ordinary shares allotted to the option holder shall rank pari passuin all respects with the ordinary shares of the company then in issue and shallcarry the right to receive all dividends and other distributions declared, madeor paid by the company in respect of the ordinary shares on and after the dateof the exercise of any of the options. 24 Reserves Group Share Profit premium account and loss account £ £ At 1 January 2006 1,041,532 (5,108,775)Loss for the year (295,891)Premium on issue of new ordinary sharecapital net of expenses 43,095Exchange differences (35,701) --------- ---------At 31 December 2006 1,084,627 (5,440,367) ========= ========= CompanyAt 1 January 2006 1,041,532 (4,262,022)Loss for the year (989,624)Premium on issue of new ordinary sharecapital net of expenses 43,095 --------- ---------At 31 December 2006 1,084,627 (5,251,646) ========= ========= 25 Commitments under operating leases As at 31 December 2006, the group had annual commitments under non-cancellableoperating leases as set out below. Group Company 31 December 31 December 31 December 31 December 2006 2005 2006 2005Operating leases £ £ £ £which expire: Within oneyear - 25,938 - -In two to fiveyears 41,142 41,142 - - --------- --------- --------- --------- 41,142 67,080 - - ========= ========= ========= ========= 26 Notes to the cash flow statement (a) Gross cash flows 31 December 31 December 2006 2005 £ £Returns on investments and servicing offinanceInterest received 33 218Interest paid (39,598) (71,267) --------- --------- (39,565) (71,049) ========= ========= AcquistionsCash consideration - 1,166,000Acquisition expenses - 88,243 --------- --------- - 1,254,243 ========= ========= Capital expenditurePayments to acquire tangible fixedassets (30,139) (130,945)Receipts from sale of tangible fixedassets 15,630 185,634 --------- --------- (14,509) 54,689 ========= ========= FinancingNew ordinary share capital net ofexpenses 50,000 1,414,497Issue of loan notes 116,000 -Increase in bank loans andotherborrowings 499,833 483,942Repayment of finance leases (6,616) (24,221) --------- --------- 659,217 1,874,218 ========= ========= (b) Analysis of At Cash Exchange Non cash Atchanges in net debt movement movements 1 Flow 31 January December 2006 2006 £ £ £ £ £ Cash in hand and atbank 29,717 6,376 - (28,848) 7,245Bank overdrafts (44,778) (103,526) - 118,953 (29,351) --------- --------- --------- --------- -------- (15,061) (97,150) - 90,105 (22,106) Bank loans andOther borrowings (783,692) (615,833) - 545,204 (854,321)Finance leases (31,775) 6,616 - 21,250 (3,909) --------- --------- --------- --------- --------Net (debt) (830,528) (706,367) - 656,559 (880,336) ========= ========= ========= ========= ======== The non cash movements relate to subsidiary bank and loan balances fallingoutside of the control of the group due to the liquidation or dissolution of thesubsidiary. 27 Post balance sheet events The reorganisation of the group has continued after the end of the year with thetransfer of the activities of Derlite Ltd in the United Kingdom to Derlite CoLtd in Thailand. This company ceased to trade on 30 April 2007 and will bedissolved once all liabilities have been met. The dormant subsidiary, Holdsafe Limited, was dissolved on the 23 January 2007and the Directors are allowing Ravago Plastics Limited to be struck off theregister in July 2007. On the 6 June 2007 the Directors announced their plans to restructure the sharecapital by the consolidation of every 100 0.01p ordinary share into one newordinary share of 1p. The Directors also announced their proposal to place 12,857,142 new ordinaryshares to raise £900,000 to replay high cost borrowings and finance extraworking capital to remove the need for expensive worldwide air-freight costs. At the same time the Directors have negotiated a debt for equity swap amountingto about £510,000. This has been accepted with the convertible corporate loannote holders and providers of outstanding loan capital. On the 6 June 2007 the group agreed to acquire all the share capital of GasIgnition Limited, a company incorporated by Mr Palmer and Mr Sharples to supplygas boiler and industrial ignitors. The business was valued at £150,000 and MrPalmer and Mr Sharples have accepted the issue of 2,142,857 new shares inBuckland plc as consideration. Changes to the board of Directors were effected on the 6 June 2007 with theresignation of Mr Rogers. There will be a termination payment of £60,000 inrespect of his notice period. 28 Related party transactions During the year, Gas Ignition Limited, a company owned by Mr Palmer and MrSharples, bought gas igniters from Derlite Limited totalling £22,043 (2005£nil). Derlite Limited also provided sales and administration services for a sumof £12,059 (2005 £nil). At the end of the year Gas Ignition owed Derlite Limited£17,913 (2005 £nil). Mr Palmer and Mr Sharples have provided personal guarantees in respect of theoverdraft facility of Buckland plc in the sum of £20,000. A loan from Mr Sharples was outstanding at the year-end of £20,000 (2005:£20,000). 29 Pension During the year one of the subsidiaries, DK Gas Limited, operated a definedcontribution scheme in which that assets of the scheme where held separately tothe assets of the Group. During the year contributions were made totalling£3,114 (2005 £4,364) of which total contributions outstanding at the year-endwere £nil (2005 £4,277). On the 14 July 2006 DK Gas Limited was placed intoCreditors Voluntary Liquidation and the pension scheme proceeded to be wound up. Copies of the report and accounts have been sent to shareholders today and areavailable free of charge from: Seymour Pierce Limited20 Old BaileyLondonEC4M 7EN This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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