APC Technology Group PLC · 2020. 11. 17. · APC Technology Group PLC Annual Report and Accounts 2015 1 2015 Highlights • Good progress made against objectives set out in Group-wide

APC Technology Group PLC

Annual Report and Accounts 2015

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APC Technology Group PLC Annual Report and Accounts 2015

Contents

STRATEGIC REVIEW

1 – Welcome to APC Technology Group2 – The Group at a Glance3 – Group Operations Overview5 – Chairman’s Statement6 – Chief Executive’s Review9 – Strategic Report

CORPORATE GOVERNANCE

11 – Board of Directors12 – Report of the Directors14 – Corporate Governance Statement15 – Report of the Remuneration Committee16 – Statement of Directors’ responsibilities17 – Independent Auditor’s Report

Contains public sector information licensed under the Open Government Licence v3.0.

FINANCIAL STATEMENTS

18 – Consolidated Statement of Income19 – Consolidated Statement of Financial Position20 – Company Statement of Financial Position21 – Consolidated Statement of Changes in Equity22 – Company Statement of Changes in Equity23 – Consolidated and Company Statement of Cash Flows24 – Notes Forming Part of the Financial Statements

OTHER INFORMATION

45 – Notice of Annual General Meeting46 – Company Information

1APC Technology Group PLC Annual Report and Accounts 2015

2015 Highlights

• Good progress made against objectives set out inGroup-wide operational review

• Restructured Board focused on cross-sellingstrategy between Energy, Water and ComponentDistribution customer bases

• Non-core businesses rationalised, cost savinginitiatives introduced to deliver £1m of annualisedcost savings

• Strengthened order book and significant newcontract wins announced since year-end.

• Revenue increased by 51% to £31.1m(2014: £20.6m)

• £21m of recurring or repeat revenue across1,500 customers

• 13% increase in like-for-like revenues (excludingacquisition of Green Compliance plc)

• Gross profit before exceptional costs £7.8m(2014: £7.6m)

• Operating loss before exceptional costs,amortisation, share-based payments andacquisition costs £1.1m loss (2014: £0.6m profit)

• Post-tax loss of £5.8m (2014: £0.3m profit),after £3.9m exceptional costs, includingdiscontinued activities

Financial highlights Post period end

Welcome toAPC Technology Group

APC Technology Group PLC is one of the UK’s leading distributors of specialist electronic components and provides a range of cleantech and sustainability products and services that help organisations improve operational and financial performance.

2 APC Technology Group PLC Annual Report and Accounts 2015

The Group at a GlanceThe Group delivers connectivity, sustainability and compliance to customers through a range of high-reliability electronic components and cleantech products and services.

APC Group structure

Our products and services are offered through two divisions, Advanced Power Components and Minimise Group. APC Intelligence is an integral part of our proposition to customers (rather than a separate company) providing detailed data and analytics that help shape our clients’ future activities

Advanced Power Components

Advanced Power Components distributes specialist and high-reliability electronic components and connectivity solutions to some of the UK’s leading organisations across a wide range of market sectors.

Minimise Group

Minimise Group helps customers improve sustainability and increase profitability through integrated energy efficiency and water management products, services and solutions.

Infection Control

Our Medigenic product range includes market-leading infection prevention keyboards specifically developed for the National Health Service for use in hospitals and environments where the risk of cross infection is high. Medigenic keyboards feature an indicator light and an alarm to alert users to clean the keyboard at timed intervals and can be wiped clean without having to disconnect the keyboard from the computer. Used widely throughout the NHS, they form part of a growing range of infection prevention products from APC which include high performance displays, medical PCs and ultraviolet disinfection products.

TECHNOLOGY FOCUS


Our Group provides high-reliability electronic components and cleantech products and services that deliver connectivity, sustainability and compliance to a wide range of national and international customers.

Through the products we offer, we enable our customers to improve efficiency, push technological boundaries and drive business performance at both an operational and a financial level.

In the last 12 months much effort has gone into expanding both our client base and the range of products we offer across the Group, reducing our reliance on one or two larger customers for work in specific areas and providing us with greater opportunities for cross-selling and introducing a wider range of products. Our Group now operates across a very broad range of market sectors, including aerospace, retail, transport, healthcare, oil and gas, facilities management, manufacturing and commercial property.

Technology and intelligence are key drivers in our offer to clients. From our energy efficiency programmes for Royal Mail Group and the highly specialised components we supply to defence, aerospace and other major markets, to our latest ‘Internet of Things’ offering, innovative technology and the data and analytics intelligence that this delivers are providing increased opportunities and enabling stronger, deeper relationships with customers.

While our formal divisional structure remains, our businesses and teams are now working much more closely across our Group, as identified in the operational review undertaken towards the end of the year. This collaboration and sharing of information should result in new opportunities for all our businesses over the future months.

Group Operations Overview


GROUP OPERATIONS OVERVIEW CONTINUED

Energy Monitoring and Control

Our energy monitoring and control technology provides customers with detailed energy consumption and conditions monitoring data, enabling them to see exactly how, when and where their energy is being used. Wireless sensors are fitted to energy using equipment or machinery, reporting continuous usage information around the clock in real-time. This information is then displayed on user-friendly dashboards, enabling the customer to see granular energy consumption by piece of equipment, by site and by hourly, daily and monthly performance. This data enables us to work with customers to identify where and how future energy efficiencies can be made.

TECHNOLOGY FOCUS

Minimise Group (Cleantech) Minimise Group offers energy efficiency and water management products, services and solutions that enable clients to improve sustainability and increase profitability.

These include water management and compliance, energy reduction strategies and products – for example energy monitoring programmes and the design, supply and installation of LED lighting – and energy consultancy, measurement and verification services.

Over the last year, our Water business, which incorporates Green Compliance Ltd, has introduced a number of new products into the market. These include Compliance Online, an online water monitoring technology, Legionella Training and, most recently, Integrated Water Management, a full service water consultancy offering. With the Water business now managing over 2,500 properties and with further energy and water reduction products now being marketed under exclusive licence, there are exciting revenue generation opportunities from both new and existing customers.

Our Energy business has grown its client base significantly and now works with leading UK organisations in logistics, commercial property, facilities management and transport as well as in retail, offering granular real-time energy monitoring and data services and focusing on LED lighting projects where our inclusive ‘design to installation’ offer gives us control of all project management and delivery.

Consultancy business Minimise Solutions has been bolstered by the acquisition of leading energy measurement and verification specialist EEVS, significantly strengthening the Group’s overall offering in this area. The team continues to develop consultative work, helping many businesses comply with ESOS, the government’s Energy Savings Opportunity Scheme, as well as working on broader energy management and reduction programmes, for example the Energy Efficiency Programme for Royal Mail Group, which runs across 70 of their largest Royal Mail and Parcelforce sites nationwide.

Advanced Power Components (Distribution)

Advanced Power Components (APC) is a leading distributor of high-reliability and specialist electronic components and connectivity solutions and is the historical bedrock of the Group’s activities.

The core of APC’s business is the provision of high quality, high performance components to the defence, aerospace, space, industrial, medical and healthcare sectors. This product offering is backed by our team’s technical and design expertise and is typically distributed under exclusive agreement with market leading suppliers and manufacturers. In total APC represents over 60 manufacturers of electronic components and systems for the UK market, many of these being long-standing relationships.

A number of new lines with excellent opportunity for future sales growth have been added over the year. Our new Visedo product line offers electric drivetrain components for heavy work machinery, marine vessels and bus applications, saving fuel while reducing both emissions and noise levels. Our infection prevention and control offering, which includes mobile device disinfection and infection prevention keyboards, is showing strong sales and excellent further growth potential. And we have added several new products to our range of Ioxus ultracapacitors, which provide peak power delivery when paired with low-cost batteries or as a stand-alone power source, storing twice the energy of a standard ultracapacitor due to their lithium-ion manufacture.

APC has also recently launched a new ‘Internet of Things’ (IoT) service offering, to provide customers with a range of components, including sensors, gateways, wireless communications, as well as displays, keyboards and embedded computer systems, to make the smart integration of IoT and clean technologies a reality. This is a marketplace with enormous potential and will be a focus for business development over the coming year.


Chairman’s Statement

invoice finance facility with ABN Commercial Finance out to 31 December 2016.

DividendThe Board has again reviewed the Group’s dividend policy. Whilst it maintains its desire to pay dividends in the long-term, it continues to believe that greater returns in the near-term are available from investing available funds in opportunities for profitable, cash-generative growth. The Board is therefore not recommending a dividend for 2015 (2014: £nil).

Board of DirectorsDuring the financial year, and subsequently, there have been several changes in the composition of the Board.

In August 2015 Mark Robinson stepped down as Chief Executive Officer. Richard Hodgson was appointed to the Board as Chief Financial Officer in September 2014, following the acquisition of Green Compliance plc, and replaced Mark as CEO in August 2015. Following the completion of the Operational Review, Andrew Shortis, Managing Director of Sustainable Technologies, stepped down from the Board in November 2015. Tessa Laws resigned as a Non-executive Director in February 2015.

These changes mean that the Group moves forward with a leaner Board, split equally between executive and non-executive roles. It is our intention to appoint a further Non-executive Director in the foreseeable future.

I would like to thank Mark, Andrew and Tessa for their hard work and commitment during their time with the Group.

FutureAt the end of the period we undertook a comprehensive review of the Group’s operations which resulted in a number of actions being taken to improve profitability and enhance growth. Under the guidance of our new Chief Executive, Richard Hodgson, the Group is now focused on realising the potential of its profitable businesses, both through winning new customers and capitalising on cross-selling opportunities wherever possible. FY2015 was a challenging year for APC but with the business now stabilised and a clear new strategy in place, there is cause for a renewed sense of optimism.

I would like to take this opportunity to thank our management, staff and advisors for their dedication and commitment to the Group and to express our appreciation to our partners and shareholders for their continued patience and support.

Leonard SeeligChairman7 January 2016

This has been a challenging year of change, not only in our business but also in the environment in which we operate. The dramatic drop in energy prices, along with the uncertainty of changing government policy in the energy and efficiency sectors, led the Board and management to review its activities during the period and make difficult decisions to reposition the Group for future profitable growth.

Our electronic component distribution business enjoyed a steady, profitable year.

Our cleantech business, Minimise Group, experienced challenging trading conditions in the LED lighting field, both in the UK and North America, with adverse effects on the Group’s results. Our water management business, established in September 2014 with the acquisition of Green Compliance plc, has been successfully integrated into the Group and, in addition to its own stable and profitable business, has started to produce opportunities for cross-selling with other Group businesses. Significant progress has been made in building a full energy and water management solutions business, enhanced by the acquisition of EEVS Insight Ltd in July 2015.

The Operational Review undertaken by myself and the Board examined the whole Group and has resulted in a renewed focus on the core businesses that are both profitable and cash generative with a large element of recurring revenue. These core businesses are built around products and services that are both in demand and have impressive customer bases providing opportunity for cross-selling.

TradingTotal turnover during the year was £31,069,000 which was a significant increase on the prior year (2014: £20,634,000). This encouraging revenue growth was underlined by a 13% increase in like-for-like sales, demonstrating that our products and services represent an attractive customer solution in a competitive and challenging marketplace. Sales of the Group’s energy and water saving and efficiency products and services alone grew by 125% to £18,411,000 (2014: £8,178,000). £10.6 million of these sales were represented by Minimise Energy Limited’s sales and installation of LED lighting, the Group’s energy monitoring business, Minimise Solutions, made an increased contribution and Green Compliance plc’s water management and hygiene services contributed £7.8 million in almost a full year since its acquisition in September 2014. Sales in Advanced Power Components, our electronic component distribution business, were £12,658,000 (2014: £12,456,000), a solid performance in a slow market, with a particularly strong performance by the HiRel (high reliability) components business unit. The result for the year, before exceptional items, amortisation, share based payments and acquisition costs, was a loss of £1,139,000 (2014: £573,000 profit) manifesting the difficult trading conditions in Minimise Energy. These issues are described further in the Chief Executive’s Review. The Group’s post-tax loss was £5,774,000 (2014: £302,000 profit), but this included an exceptional loss of £3,871,000, of which £1,245,000 related to discontinued activities.

LiquidityThe financial year ended with net debt of £1,986,000 (2014: £326,000). We are very pleased to have renewed our £6 million


Chief Executive’s ReviewAs reported in the Chairman’s Statement, our operating units experienced varying trading conditions during the year. Our component distribution and water management businesses performed well, but our energy management businesses experienced challenging conditions, which had an adverse effect on the Group’s overall results.

As a result, the Board decided in August to initiate an Operational Review to examine all aspects of our business and determine which areas should form our core businesses going forward and which businesses needed to be rationalised or discontinued.

Electronic Component Distribution (Advanced Power Components)Revenues in our specialist electronic component distribution business, trading as Advanced Power Components, increased by 1.6% compared with 2014 in a challenging market. This business has consistently demonstrated that it is stable, profitable and cash-generative with a steady daily invoicing flow and a relatively short working capital cycle. Its success is attributable to our continued focus on specialist applications where our sales engineers provide a value-added technical interface between the specialist component manufacturers that we represent and our customers’ design engineering teams. Our staff’s technical expertise is particularly valuable in situations where the end-use equipment is operating in extreme conditions or running applications where component failure would be catastrophic. This is a key factor in differentiating us from other component distribution companies. More latterly our connectivity components are well positioned in the fast-growing market for the ‘Internet of Things’ (IoT).

This business is seen as a cornerstone of the Group’s activities going forward. It continues to be managed as a single reporting unit, within which separately branded specialist sales teams focus on specific product ranges and address targeted markets. The performance of these units is described below:

HiRel: Record sales exceeded all prior years attributable to design-in success and accelerated customer project schedules. Key applications in the year under review included components for flight critical systems on civil aircraft, satellites and space exploration and oil and gas ‘down hole’ applications encountering extreme temperatures.

Hero: This business has seen the first real signs of success in the sale of ultracapacitors into a variety of applications including renewable energy systems. Hero has also launched an exciting new product range targeting IoT applications.

Novacom: Performance was adversely affected by the rationalisation of some product lines, not yet fully compensated for by their replacements. However, the first quarter of fiscal year 2016 has started well with an impressive order book already secured.

Contech: This unit has some great components, which reduce infection and increase hygiene levels in medical environments. This is obviously a key potential cross-sell into our water hygiene business.

Locator: Obsolescence management and an increasing incidence of counterfeit components in all high reliability markets fuels the services and expertise we provide in sourcing obsolete components. In particular, Locator is currently engaging with a major rail transport customer to address a very significant legacy of obsolescence.

Time: The demand for accurate timing systems has remained buoyant, resulting in steady trading for this business.

Sustainable Technologies (Minimise Group)Our sustainable technologies business trades as Minimise Group. This business is designed to improve our customers’ sustainability and profitability through an integrated range of energy efficiency and water management products, services and solutions.

Minimise Solutions: The Solutions team is actively engaged across the Group’s customer base with a view to delivering energy and water management programs designed to reduce customers’ natural resource consumption and cost. This is achieved through the introduction of monitoring and control technology and data analytics. This technology is typically sold on multi-year contracts to enable the team to build long-term relationships with their customers and to deliver recurring and repeat revenue. Group or third party products and services are then introduced to achieve stated natural resource reduction goals. The impending deadline for Energy Savings Opportunity Scheme (ESOS) compliance and the UK Government’s recent extension of this has helped generate substantial new business for Minimise Solutions.

http://www.apc-hero.co.uk/

http://www.apc-novacom.co.uk/

http://www.apc-contech.co.uk/

http://www.apc-locator.co.uk/

http://www.apc-time.co.uk/

http://minimiseenergy.com/minimise-solutions.html

http://www.apc-hirel.co.uk/

Internet of Things (IoT) Technologies

Our IoT product offering includes components used by manufacturers of electronics equipment for the rapidly growing ‘Internet of Things’ marketplace. At a component level we offer the essential building blocks of a typical IoT system including sensors, energy harvesting, wireless communications, GPS positioning and gateways. We also have displays, keyboards and embedded computer systems which form the basis of both customised end-user hardware and data analysis and services. This is backed by high level design support and customer service to make smart integration of key technologies a reality.

TECHNOLOGY FOCUS


Monitoring and control hardware along with reporting software is pivotal to the Group’s strategy of informing clients in the consumption of utilities and measuring the results of action taken. During the year our remote monitoring technology has seen significant growth and already has 14,000 sensors and probes enabled for monitoring with nearly 1,000 gateways configured on active systems. Minimise Solutions installed these in the premises of several blue-chip customers. This expertise has also been extended from the energy sector into water management with the Compliance Online water temperature monitoring system for Green Compliance.

Minimise Water (incorporating Green Compliance): Since its acquisition in September 2014, Green Compliance has traded in line with expectations, achieving sales of £7.8m in the financial year, maintaining its contracted water management and hygiene monitoring customer base.

Since the acquisition we have launched our Integrated Water Management product offering which is seeing significant sales traction. Many businesses today look at their water management from a single perspective. This might be cost, compliance or general usage and is often to meet a specific need or objective. Integrated Water Management from Minimise Water looks at how businesses use water from every angle, identifying how they can manage water usage more effectively to meet an enhanced range of objectives and add real value. We regard water as a commercial business resource and can help customers maximise both its use and its effectiveness. Water usage monitoring positions our customers well for water deregulation in 2017.

Since the end of the fiscal year our water business has seen contract sales success, being selected as sole water management supplier for a major hotel group and appointed to provide water treatment services to 1,500 key government sites across the South West. These wins, alongside other contract renewals secured since the end of the fiscal year, represent a significant annual recurring revenue stream whilst also securing opportunities to cross-sell the wider Group’s products and services.

Long-standing Group client Network Rail, which has been using our energy monitoring and control technology at over 20 UK sites for the past two years, has now installed our new Compliance Online water temperature monitoring system at its London Bridge site. One of five new products launched since July 2015 by Minimise Water,

Compliance Online automates continuous temperature monitoring of water systems to reduce the risk of legionella and provide robust real-time reporting. We are seeing significant interest and trials from residential, food manufacturing and educational services for this product.

Minimise Energy (MEL): Historically this business had relied heavily on a major customer, Wm Morrison Supermarkets Plc (“Morrisons”). The year under review saw renewed involvement with Morrisons augmented by several other significant contracts, thus spreading the Group’s risk. However, the business unit’s turnover profile remained uneven and the resources needed to manage this large installation programme progressively eroded profitability during the year. In addition, the manufacture of LED lighting in the Far East has meant excessive freight costs and a lengthy working capital cycle, including high levels of stockholding and associated warehouse costs, which in one significant case has been exacerbated by delays in installation by the customer’s third party contractor. The conclusions of the Operational Review described below have identified changes in MEL’s business model to ensure that these negative factors are mitigated or eliminated.

The Operational Review has concluded that MEL and the supply and installation of LED lighting remains a core business going forward, sold alongside an overall solution designed to reduce energy consumption. As a result, the business model is being overhauled. In future, large installation projects will be taken on only if the terms of trade negotiated with the customer allow profit and working capital utilisation to be optimised. The core focus of the team will be on the design, specification, supply and installation of individual LED projects across a diverse customer base, in order to maximise delivery efficiency and profitability. The Group’s customer base and the 2,500 properties managed by Minimise Water provide a large opportunity for our team. This new approach will also enable a significant element of fixed costs to be taken out of the business and working capital to be managed more conservatively.

The Operational Review has also identified several areas of our sustainable technologies business where investment of significant additional resources cannot be justified at the present time without seriously diluting resources available to our core businesses. These businesses will be curtailed or discontinued as appropriate.

http://minimiseenergy.com/minimise-energy.html

http://www.greencompliance.com/

Ultracapacitors

Ioxus Ultracapacitors are a high power energy solution, providing peak power delivery when paired with low-cost batteries or as a stand-alone power source. Our large cell ultracapacitors or modules can improve upon the characteristics of battery powered products, make hybrid electric vehicles more efficient and increase battery life of battery-based applications. When paired with batteries, they can optimise an electric vehicle’s ability to store energy, extending time before recharge. They are uniquely capable of providing burst power and pulse energy and, in powering hybrid drives, helping reduce fuel consumption and emissions of internal combustion engines.

TECHNOLOGY FOCUS


CHIEF EXECUTIVE’S REVIEW CONTINUED

Financial results Group revenue for the financial year was £31,069,000 (2014: £20,634,000). Gross margins improved, resulting in a gross profit of £7,813,000 for the year compared with £7,558,000 in 2014. Operating loss before exceptional costs, amortisation, share based payments and acquisition costs was £1,139,000 (2014: £573,000 profit), generating a loss per share of 1.4p compared with earnings of 1.0p per share last year. The financial year saw the first full year inclusion of Green Compliance whose main trading business is water hygiene and treatment. Assets and goodwill acquired in that transaction are set out in the note to the financial statements.

Loss before tax from continuing operations for the year was £4,799,000, compared with profit before tax of £382,000 in 2014. The loss is after accounting for: one-off exceptional costs in relation to restructuring of £1,732,000, one-off professional fees in relation to the acquisition of Green Compliance of £616,000 and non-cash amortisation of the intangible customer lists acquired of £690,000.

Funding and cash flow In the financial year there was a cash outflow from operating activities of £2,790,000 compared with an outflow of £657,000 in 2014. The Group ended the year with a gross cash balance of £1,239,000 (2014: £552,000).

The Group’s net debt at 31 August 2015 was £1,986,000 (2014: £326,000). During the year under review the Group had an invoice discounting facility with ABN Commercial Finance of up to £6,000,000, of which £2,543,000 had been drawn down at the year-end (31 August 2014: £752,000). The Group has no other bank debt.

During the year, the Board authorised two share placings with existing and new investors and two Directors, which raised a total of £3,579,000 before expenses, to strengthen the balance sheet and provide funds for further expansion.

OutlookThe objective of the Operational Review was to focus on our profitable and cash generative products and services and by doing so to deliver a stable platform for growth.

For the component distribution and water businesses, the focus is to ensure that the profitable success achieved in these businesses is supported and built upon. Within these businesses we have over 1,500 customers who regularly buy from us. These long-standing relationships produce a high level of recurring revenue, which provides stability from which we can grow. Many of our customers are leading UK business and market leaders and in most cases there is opportunity for us to provide them with a much greater depth and breadth of product offering. The profitable growth potential within our existing businesses is therefore significant and can come from customers and areas where we already generate revenue.

The detailed review of Minimise Group has identified a clear strategy for the profitable sale of our first class LED offering across a diverse customer base, delivered by a streamlined business.

The 2015 loss before tax was heavily impacted by one-off costs, losses from discontinued businesses and overhead increases that have now been removed from the Group. Cash was similarly impacted and whilst we are mindful of our working capital resources we believe that the measures already being implemented will provide a stable platform for profitable growth and cash generation through both margin improvement and transactional sales delivery. Since the year-end we have already removed £1m of annualised cost.

Capitalising on the potential of delivering existing products and services into existing customers will be our primary focus for FY2016. Longer-term we are confident of the growth opportunities in the markets in which we operate and with the products and expertise at our disposal. We will continue to build our solutions sales capability to take full advantage of them.

Richard HodgsonChief Executive7 January 2016

Compliance Online

Launched in August 2015, Compliance Online improves the quality of a customer’s legionella compliance and reduces the cost of conditions testing and compliance reporting. Developed by adapting our real-time monitoring technology, Compliance Online delivers continuous data on a customer’s water system. It captures temperature and other information relevant to critical requirements, uncovering potential risks and providing the data for identifying efficiencies in working practices. Our technology can monitor single or multiple sites and removes the need for conventional data collection, reducing both manpower and transport costs.

TECHNOLOGY FOCUS


The Directors have pleasure in submitting their Statutory Strategic Report for APC Technology Group PLC (“the Company”) and its subsidiary undertakings (together “the Group”) for the year ended 31 August 2015.

Principal activitiesThe principal activity of the Group and Company during the year was the supply and distribution of specialist electronic components and the sale of sustainability products and services in energy and water management.

Strategy and objectivesThe Group’s strategy and medium to long-term objectives are set out in the Chairman’s Statement and described more fully in the Chief Executive’s Review, together with a description of the Group’s business model and how it has developed in the year under review.

Financial resultsThe results for the year are set out in the Chief Executive’s review.

The Board considered the carrying value of goodwill at 31 August 2015 and concluded that no impairment was required. No development expenditure was capitalised in the year (2014: £87,000).

Funding and cash flowThe cash flow during the year and the year-end cash position are dealt with in the Chief Executive’s Review.

During the year the Board authorised two share placings with certain existing and new investors and Directors, which raised a total of £3,579,000 before expenses, to strengthen the balance sheet and provide funds for further expansion. Share options exercised during the year generated gross proceeds of £4,000 (2014: £286,000). On the basis of current financial projections and available funds and facilities, the Directors are satisfied that the Group and parent company have adequate resources to continue in operation for the foreseeable future.

Key performance indicatorsThe Directors set budgets for the year which are reviewed against the management accounts on a monthly basis. In addition to these results the Directors review a number of key performance indicators to assess the performance of the Group and assist in decision making. The principal indicators monitored are:

Gross margin to sales ratio: The Board recognises the importance of growing the Group’s turnover but believes that this should only be done at acceptable margins. To that end, targets are set and monitored. The margin achieved in 2015 was 25.1% (2014: 36.6%). The decrease was attributable to a decline in profitability in Minimise Energy contracts during the year.

Overheads to sales ratio: The Board recognises the importance of controlling administrative expenses in line with the overall level of business. As a technical sales business, sufficient resources are required to provide the differentiation essential to enable the business to offer added value to our customers and to ensure that the business is developed to deliver profit both in the current period and future years.

The overheads to sales ratio in 2015 (excluding exceptional costs and discontinued activities) decreased to 28.8% (2014: 33.7%)

Profit before tax ratio: The Board recognises that delivering a profit before tax (PBT) is fundamental to the health of the business and monitors the PBT, excluding exceptional items and discontinued activities, as a percentage of sales, to ensure that an acceptable return is made. In 2015 the Group achieved an actual loss before tax to sales ratio on this basis of 7.0% (2014: 1.85% profit). This was largely attributable to the decline in profitability of Minimise Energy contracts described above.

In addition to measures of the profitability of the business, the Board measures working capital efficiency to ensure that the funds invested in the business are effectively managed and ensure that the business has sufficient liquidity to meet its near term obligations. The key performance indicators used to monitor working capital performance are:

Inventory turns: The Group maintains inventory so that it can meet customer demand for scarce and long lead-time items and to fulfil customer orders where deliveries are scheduled over a number of months or years. During 2015 the inventory turned over 8.8 times (2014: 5.8 times). The higher inventory turn was mainly due to the influence of the Green Compliance business, which is less material-intensive.

Trade receivables days: In line with other companies in the sector the Group extends credit facilities to customers that have a sufficiently good credit rating. As at 31 August 2015 the receivables days calculated on a count-back basis was 31 days (2014: 45 days). The 2014 calculation excluded a receivable from one large customer at the year-end.

Trade payables days: The Group receives credit from a number of suppliers and recognises the importance of paying its suppliers in a timely manner. As at 31 August 2015 the payables days calculated on a count-back basis was 48 days (2014: 31 days).

Capital expenditureThe Group’s capital expenditure in the financial year amounted to £72,000, compared with £252,000 in 2014.

Strategic Report


The Directors recognise that risk is inherent in any

business and seek to manage risk in a controlled

manner. The key business risks are set out as follows:

Risk Nature Mitigation

Economic The Group is subject to many of the same general economic risks faced by other businesses and especially so during periods of slow growth, as experienced in recent years.

In its Distribution business the Group seeks to mitigate this risk by concentrating on defence, aerospace, transportation, medical and industrial sectors, which have historically been less susceptible to short-term economic fluctuations. The market for sustainable technology products is seeing increasing demand driven by higher energy costs and legislative pressure to reduce global carbon dioxide emissions.

Commercial The Group operates in a competitive marketplace and faces competition from a number of other companies.

The risk is managed by giving primary focus to products where the Group is the sole UK distributor and where the specific designs are registered with the product manufacturer so that the Group is sole sourced for that particular application. The Group’s sustainable technology products and services are differentiated by their technology and operating performance and by their holistic approach to energy saving across the different Group businesses.

Supply chain

The Group represents and distributes a range of products from a number of different suppliers and a significant proportion of the Group’s business is long-term and repeat business. To be able to deliver continuous supply to customers the Group is dependent on continuity of supply over the long term.

The Group has an exposure to lengthy working capital cycles caused by stockholding of goods manufactured overseas.

To manage this risk the Group has established close working relationships with its key suppliers and diversified the range of products offered to the market.

A major objective of the Operating Review is to shorten the working capital cycle by concentrating the Group’s business on contracts where stockholdings can be minimised.

Financing During the year the Group’s funding requirements were met through short-term invoice discounting facilities, supplemented by share placings.

The Board meets regularly with all its funders to ensure a good working relationship. The invoice discounting facilities have been extended and the share placings during the year have strengthened the balance sheet.

Financial The Group has a specific exposure to credit risk, interest rate and exchange rate fluctuations. There is a natural hedge between buying and selling currencies for most of the Group’s business units, the main exception being UK sales of Minimise Energy lighting products.

The Group has established a number of policies to mitigate the risks presented, further details of which are presented in note 22 to the financial statements

In addition to regular Board Meetings, the Group holds frequent Executive and Management Meetings at which business risks are reviewed. Any areas that are causing concern are discussed and actions are identified and taken to address specific concerns.

The risks outlined above are not an exhaustive list of risks faced by the Group and are not intended to be presented in any order of priority.

ConclusionThe Group’s results reflect the significant investment it continued to make during the financial year to exploit the numerous opportunities for energy-efficiency products and services facing the Group across

the energy and water sectors, exacerbated by negative trends in the profitability of some Minimise Energy contracts as the year progressed. The share placings during the year have strengthened the balance sheet and helped to mitigate the adverse effects of the trends described above.

By order of the Board

Richard HodgsonChief Executive7 January 2016

Risks and uncertainties

STRATEGIC REPORT CONTINUED


Leonard Seelig(Non-executive Chairman)

Leonard has had a successful career in finance spanning over 25 years and including senior positions in the US and Europe with America’s largest banks. Leonard has recently been appointed to the Board of a mobile software company newly listed on AIM. He is also actively involved both at an operating and board level in several companies in the green technology space, including: an anaerobic digestion operating and development company; a European on-shore wind developer with well-developed assets in Northern Ireland, Poland and elsewhere; and a solar energy development finance company actively involved throughout Europe and increasingly in North America and select emerging markets. Leonard’s educational background includes a Bachelor of Commerce from the University of Witwatersrand in South Africa, and a Master of Science in Agricultural Economics from Texas A&M University in America.

John (Ian) Davidson(Non-executive, Senior Independent Director)

Ian has over 40 years’ experience in the electronic components industry. He has led start-up and turnaround situations as well as running a number of substantial distribution businesses for Diploma PLC, Lex Electronics and most recently the Addtron group of companies. During his career he has worked with the most technically advanced products, been involved with companies such as Intel, NEC and Motorola and recognises the importance of differentiation and focus for business success.

Richard Hodgson(Chief Executive)

Richard qualified as a chartered accountant whilst working for the financial services group Deloitte in London. He then spent several years in the music industry, working as Finance Director for Universal Music International and Warner Music International. This was followed by seven years in the business services industry as European Finance Director for Iron Mountain Europe, Chief Financial Officer for Triplearc plc, an AIM listed print management company, and Chief Financial Officer for Reconomy, a private equity backed waste management company. He was appointed Chief Financial Officer of Green Compliance plc in April 2010 and was appointed Chief Financial Officer of APC Technology Group PLC upon the Company’s acquisition of Green Compliance plc in September 2014. He was appointed Chief Executive in August 2015.

Phil Lancaster(Managing Director – APC Distribution)

Phil joined the Group in 1995 as a product manager and in June 2000 was appointed General Manager of APC’s distribution business. He was responsible for developing APC as a dominant technically based sales presence in the UK’s military and aerospace markets. Phil was appointed to the Board in September 2003 and then to Operations Director in April 2006. He has been responsible for improving operating efficiencies and for the successful integration of the Company’s acquisitions. In 2013 Phil was appointed Managing Director of the Group’s Electronic Components Distribution division.

Board of Directors


The Directors have pleasure in presenting their report and the audited financial statements of APC Technology Group PLC (“the Company”) and its subsidiary undertakings (together “the Group”) for the year ended 31 August 2015.

Principal activitiesThe principal activity of the Group and Company in the year under review was the supply and distribution of specialist electronic components and the sale of sustainability products and services in energy and water management.

Results for the year and dividendThe Group’s result on ordinary activities after taxation was a loss of £5,774,000 (2014: £302,000 profit) and is dealt with as shown in the consolidated statement of income on page 18. The loss for 2015 includes exceptional costs of £2,626,000 and a loss of £1,245,000 relating to discontinued activities.

No interim dividend was paid and it is proposed that no final dividend will be paid this year (2014: £nil).

Review of the business and future outlook A review of the Group’s activities during the year and future outlook, together with the risks and uncertainties faced by the Group, are set out in the Chairman’s Statement, Chief Executive’s Review and Strategic Report on pages 5 to 10.

Events after the reporting periodSince the year-end the Group has announced the results of an Operating Review, as a result of which certain of the Group’s non-core activities are to be curtailed or discontinued, as described in the Chief Executive’s Review on pages 6 to 8.

Options over 30,000 shares were exercised on 4 September 2015 with proceeds of £3,000.

Share capitalDetails of the Company’s share capital are set out in note 20 to the financial statements. The following shares were issued during the year:

Date Reason for issue Shares issued

15 September 2014 Acquisition of Green Compliance plc 13,404,95225 September 2014 Exercise of options 45,00011 December 2014 Share placing 10,375,00019 February 2015 Share placing 6,590,91019 February 2015 Directors’ subscription 227,27231 July 2015 Acquisition of EEVS Insight Limited 986,273

Total shares issued in the year 31,629,407

At 31 August 2015 (the balance sheet date) the total number of shares in issue was 91,573,948.

Since that date the following shares have been issued:

Date Reason for issue Shares issued

4 September 2015 Exercise of options 30,000

As at 7 January 2016, the date of this report, the total number of shares in issue was 91,603,948.

Substantial interestsAs at 5 January 2016, the last practical date before publication of the financial statements, the Group has been notified of the following interests of 3% or more in its issued capital of 91,603,948 Ordinary Shares.

Number of shares

Percentage of issued

capital

Roger Robinson and related family trusts 9,522,414 10.4%Hargreave Hale Limited (see note below) 8,819,091 9.6%Octopus investments 4,386,364 4.8%James Weeks 4,288,440 4.7%John Mitchell and related family trusts 3,999,029 4.4%Unicorn AIM VCT plc 3,612,655 3.9%Lance Ridden 3,101,439 3.4%Marco Franchi 2,866,697 3.1%Stuart Hawthorne 2,750,000 3.0%

Note: Hargreave Hale’s holdings are held in several different funds, each with less than 3% beneficial holding.

DirectorsThe names of the Directors who served during the year are set out below. L. R. SeeligM. R. Robinson (resigned 21 August 2015)R. G. Hodgson (appointed 12 September 2014)P. J. LancasterA. P. Shortis (appointed 21 January 2015)J. M. Davidson T. R. Laws (resigned 26 February 2015)

Since the financial year-end A. P. Shortis has resigned, on 23 November 2015.

P. J. Lancaster retires by rotation and, being eligible, offers himself for re-election. Mr Lancaster’s biography is set out in the Board of Directors section on page 11 of this report. Mr Lancaster has a service agreement as described in the Report of the Remuneration Committee on page 15. A resolution to reappoint Mr Lancaster will be proposed at the forthcoming Annual General Meeting (Resolution 2).

Directors’ interestsDetails of share options held by the Directors over the Ordinary Shares of the Group are set out in the Report of the Remuneration Committee.

Employment policiesThe Directors recognise the important role played by the Group’s employees in its past success and future development and are committed to providing an environment which will attract, motivate and reward high quality employees.

Financial participation in the Group’s growth and success is encouraged by means of the share option scheme, as set out in the Report of the Remuneration Committee on page 15.

It is the policy of the Directors to encourage the employment and training of disabled people wherever appropriate and to evaluate all employees on the basis of merit.

REPORT OF THE DIRECTORS


Policy and practice on payment of creditorsWhilst the Group does not have a formal payment code, the Group agrees payment terms with its suppliers when it enters into binding purchase contracts. It is the Group’s policy to adhere to the payment terms agreed with its suppliers whenever it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. The ratio between the amounts invoiced to the Group by its suppliers during the year ended 31 August 2015 and the amounts owed to its trade creditors at the year-end was 48 days (2014: 31 days).

Going concern basis of accountingThe financial statements have been prepared on a going concern basis, as management believes the Group will be able to meet its liabilities as they fall due. The Group incurred a consolidated loss after tax of £5,774,000 for the year, £3,871,000 of which related to exceptional and non-recurring expenses (Note 4) and discontinued operations (Note 9). Cash from operations for the year was negatively impacted by £2,790,000; this was funded by two share placings, which raised a total of £3,403,000 after costs of issuance, and a £874,000 drawdown on the Group’s invoice financing facility described in Note 17.

The operating loss before exceptional and non-recurring expenses, amortisation, share-based payments and acquisition costs was £1,139,000, of which £1,227,000 related to the sustainability business, Minimise Group, which experienced challenging trading conditions in the LED lighting field, both in the UK and North America, with adverse effects on the Group’s working capital. Management has implemented a number of intiatives to eliminate cost and improve control over contract tendering and execution which management expects will restore profitability to this part of the operation.

Management has examined going concern against a detailed profit, working capital, and cash flow forecast to December 2016. Based upon this review, the actions taken to restore profitability to the Minimise Group, the extension of the £6,000,000 invoice discounting facility to December 2016, and prudent working capital management, the Board believes the Group will continue to be able to meet its liabilities as they fall due. Management also has the ability to raise capital through issuance of additional loan notes or further private share placings if required.

Research and developmentCapitalised development costs at the year-end were £16,000 (2014: £87,000), reflecting amortisation of amounts capitalised in 2014 relating to Minimise Energy’s programme of developing innovative LED lighting products. During the year the Minimise Group further developed the technologies utilised in its range of products and services across the Group. The Board reviewed its research and development expenditure and concluded that it was not appropriate to capitalise any further such expenditure in the year under review.

DonationsDuring the period £1,780 (2014: £1,663) was donated to charities. There were no political donations.

AuditorRSM UK Audit LLP (formerly Baker Tilly UK Audit LLP) have indicated their willingness to continue as auditor.

As far as the Directors are aware there is no relevant audit information of which the Group’s auditor is unaware. The Directors have taken all the steps that ought to have been taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information.

Annual General MeetingThe Annual General Meeting of the Company will be held on Thursday 25 February 2016 at 12 noon at the offices of Cantor Fitzgerald Europe, One Churchill Place, Canary Wharf, London E14 5RB The text of all of the proposed Resolutions is set out in the Notice of Annual General Meeting on page 45.

In addition to the normal resolutions approving the accounts and appointing the auditors (Resolutions 1 and 3), the agenda includes a resolution re-electing Phillip Lancaster as a Director as set out above (Resolution 2).

The agenda also includes resolutions providing the Board with sufficient headroom to raise additional funds by the issue of shares on a non-pre-emptive basis (Resolutions 4 and 5), which allow funds to be raised on a non-pre-emptive basis up to a limit of 25% of the existing share capital as at the date of this report.

By Order of the Board

H. F. EdmondsSecretary7 January 2016


Since November 2002 the Company’s shares have been listed on the Alternative Investment Market (AIM). As an AIM listed company, the Company is not required to follow the provisions of the UK Corporate Governance Code published by the Financial Reporting Council. The Board is accountable to the Company’s shareholders for good governance and this statement describes principles of corporate governance that have been applied by the Company.

The Board of DirectorsThe activities of the Group are ultimately controlled by the Board of Directors. All Directors are subject to retirement and re-election by rotation.

During the year under review the Board consisted of either three or four Executive Directors and either two or three Non-executive Directors. The Non-executive Directors represent a strong and independent element and their views carry considerable weight in the Board’s decision-making process. The Senior Independent Director is Ian Davidson.

The Group has a formal policy setting out the matters that require approval of the Board. This covers the major areas of decision-making in all aspects of the Group’s affairs.

Committees of the BoardThe Audit Committee meets at least twice a year and considers the appointment of the external auditors as well as discussing with them the findings of the audit and any reports to the management or those charged with governance arising from it. The Committee is also responsible for monitoring compliance with accounting and legal requirements and for reviewing the interim and annual reports before publication. The Audit Committee consisted of Leonard Seelig (Chairman) and Ian Davidson throughout the financial year. Meetings of the committee are attended by the Finance Director and other Executive Directors when appropriate.

The Remuneration Committee has consisted of Leonard Seelig (Chairman), Ian Davidson and Tessa Laws (prior to her resignation in February 2015). The committee is responsible for setting the remuneration of Directors and senior management, as well as reviewing the remuneration policy throughout the Group. The Report of the Remuneration Committee is set out on page 15.

Owing to the small size of the Group’s Board, it is not considered necessary to have a formal Nomination Committee for the purpose of making recommendations regarding senior Board appointments. All of the members of the Board are involved in the decision-making process for Board and other senior management appointments.

Internal controlThe Directors are responsible for establishing and maintaining the Group’s system of internal control. This system of internal control is designed to safeguard the Group’s assets and to ensure that proper accounting records are maintained and that financial information produced by the Group is reliable. There are inherent limitations in any system of internal control and such a system can provide only reasonable, but not absolute, assurance against material misstatement or loss.

CORPORATE GOVERNANCE STATEMENT


The Remuneration Committee consists of Leonard Seelig (Chairman) and Ian Davidson. It was formed in order to review the remuneration of Executive Directors and senior management, together with remuneration policy for the Group as a whole, and to make recommendations to the Board.

Remuneration policyRemunerationIn order to safeguard the interests of the Group, the Committee aims to provide Executive Directors and employees of the Group with a remuneration package set to attract, retain and motivate Directors and employees of the appropriate calibre. Bonus schemes are determined for each financial year, based on the Group’s financial performance, targets for which are approved by the Remuneration Committee.

Share optionsAPC Technology Group PLC has operated several share options plans for Directors and employees since its flotation in 1996. On 6 September 2013 the Board approved the establishment of a new plan, the 2013 Employee Share Option Scheme, which superseded a 2003 plan and all options granted to employees and Executive Directors since then have been subject to the rules of that plan.

The 2003 and 2013 Employee Share Option Schemes require that certain performance conditions must be satisfied before options may be exercised. The performance conditions are based on achievement of budgeted profit before taxation.

Details of the share options granted to Directors and outstanding as at 31 August 2015 are listed below:

Date granted Latest date exercisable

Ordinary Shares

of 2pExercise

Price

R. G. Hodgson 26 February 2015 25 February 2025 1,000,000 22.0pP. J. Lancaster 24 September 2013 23 September 2023 500,000 38.75pJ. M. Davidson 22 January 2010 21 January 2020 25,000 10.0p

20 September 2012 19 September 2022 75,000 10.0p17 December 2013 16 December 2023 50,000 85.0p

L. R. Seelig 25 January 2013 24 January 2023 100,000 24.75p17 December 2013 16 December 2023 200,000 85.0p

In each case these options are exercisable in various proportions dependent upon the performance of the Group. The earliest date on which each proportion can be exercised is the date on which the results for the relevant financial year are announced.

Service contractsEach of the Executive Directors that served in the year had a service agreement that may be terminated by either party upon giving between six months and one year’s written notice to expire at any time. Non-executive Directors have letters of appointment which are terminable at the will of either party.

Pensions The Group makes contributions to defined contribution pension schemes for the benefit of the Executive Directors. The Group maintains healthcare insurance for the benefit of the Executive Directors and certain employees and their dependents.

Directors’ emoluments (audited)

Salary andfees

£’000Bonus£’000

Benefits inkind

£’000

Employers national

insurance £’000

Total emoluments (excluding pensions) Pension contributions

2015£’000

2014£’000

2015£’000

2014£’000

M. R. Robinson (resigned 21 August 2015) 140 – 15 18 173 206 3 3P. J. Lancaster 120 – 15 15 150 167 6 6R. G. Hodgson 165 – 8 21 194 – – –A. P. Shortis (resigned 23 November 2015) 135 – 3 17 155 – 3 –L. R. Seelig 38 – – – 38 35 – –T. R. Laws (resigned 26 February 2015) 6 – – – 6 12 – –J. M. Davidson 19 – – – 19 15 – –R. S. Smith (resigned 2 June 2014) – – – – – 116 – 6

623 – 41 71 735 551 12 15

Benefits in kind shown in the table above comprise the provision of a motor car and/or private health insurance.

No Directors exercised share options during the year.

REPORT OF THE REMUNERATION COMMITTEE


The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements, in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (EU) and have elected under company law to prepare the Company financial statements in accordance with IFRS as adopted by the EU.

The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and the Company and the financial performance of the Group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.

In preparing the Group and Company financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently;

• Make judgements and accounting estimates that are reasonable and prudent;

• State whether they have been prepared in accordance with IFRSs adopted by the EU; and

• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the APC Technology Group PLC website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES


We have audited the Group and parent company financial statements (“the financial statements”) on pages 18 to 44. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs more fully explained in the Directors’ Responsibilities Statement set out on page 16, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at http://www.frc.org.uk/auditscopeukprivate.

Opinion on financial statementsIn our opinion: • the financial statements give a true and fair view of the state of the

Group’s and the parent’s affairs as at 31 August 2015 and of the Group’s loss for the year then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF APC TECHNOLOGY GROUP PLC

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Colin Roberts, FCA (Senior Statutory Auditor)For and on behalf of RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP), Statutory Auditor

Chartered AccountantsThird Floor, One London Square, Cross Lanes,Guildford, GU1 1UN7 January 2016


2015 2014

Note

Results from

operations£’000

Exceptional and non-

recurring expenses

(Note 4)£’000

Total£’000

Total£’000

Revenue 2 31,069 – 31,069 20,634Cost of sales (23,256) (757) (24,013) (13,076)

Gross profit 7,813 (757) 7,056 7,558Administrative expenses (8,961) (1,182) (10,143) (6,957)Share of results of associates 14 9 – 9 (28)

Operating (loss)/profit before amortisation, share based payments and acquisition costs 3 (1,139) (1,939) (3,078) 573

Amortisation of intangible asset 3 (690) (71) (761) – Share based payments 3 (99) – (99) (103) Cost of acquisitions 24 – (616) (616) (43)

Operating (loss)/profit 3 (1,928) (2,626) (4,554) 427

Financing income 5 4 – 4 14Financing costs 5 (249) – (249) (59)

(Loss)/profit before taxation (2,173) (2,626) (4,799) 382Taxation expense 8 270 – 270 (80)

(Loss)/profit for the period from continuing operations (1,903) (2,626) (4,529) 302Discontinued operations 9Loss for the year from discontinued operations, net of tax – (1,245) (1,245) –

(Loss)/profit for the year (1,903) (3,871) (5,774) 302

Attributable to:Equity holders of the parent (1,876) (3,871) (5,747) 554Non-controlling interests (27) – (27) (252)

(1,903) (3,871) (5,774) 302

Earnings per share from continuing and discontinuing operations attributable to the equity holders of the parent during the year:

2015 2014

Basic earnings per share 10From continuing operations (5.3p) 1.0pFrom discontinued operations (1.5p) –

From profit for the year (6.8p) 1.0p

Diluted earnings per share 10From continuing operations – 0.9pFrom discontinued operations – –

From profit for the year – 0.9p

Earnings – operating profit before exceptional costs, amortisation, share based payments and acquisition costs 10 (1.4p) 1.0p

There is no dilutive effect of options in 2015 due to the Group loss.

There were no other items of comprehensive income. Accordingly, no consolidated statement of comprehensive income has been prepared. There were no discontinued activities in 2014.

CONSOLIDATED STATEMENT OF INCOMEFOR THE YEAR ENDED 31 AUGUST 2015


Note2015

£’0002014

£’000

Non-current assetsIntangible assets 11 16,353 7,260Property, plant and equipment 12 227 343Associates and financial assets 14 1,524 1,571Deferred tax asset 15 – 33

18,104 9,207

Current assetsInventories 16 2,633 2,237Trade and other receivables 17 4,327 4,011Current tax asset 29 –Cash and cash equivalents 23 1,239 552

8,228 6,800

Total assets 26,332 16,007

Current liabilitiesTrade and other payables 18 (8,588) (3,651)Borrowings 18 (2,565) (754)Current tax liability 18 – (99)

(11,153) (4,504)

Total assets less current liabilities 15,179 11,503

Non-current liabilitiesFinancial liabilities 19 (660) (102)Deferred tax liability 15 (828) (16)

Net assets 13,691 11,385

Equity attributable to the equity holders of the parentCalled-up share capital 20 1,831 1,199Share premium account 11,302 8,244Share option reserve 497 398Merger reserve 4,635 –Translation reserve (10) (10)Retained earnings (4,344) 1,611

Equity attributable to the equity holders of the parent 13,911 11,442

Non-controlling interests (220) (57)

Total equity 13,691 11,385

The financial statements on pages 18 to 44 were approved and authorised for issue by the Board of Directors on 7 January 2016 and were signed on its behalf by:

R. G. HodgsonDirector

APC Technology Group PLCRegistered No: 01635609

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 AUGUST 2015


Note2015

£’0002014

£’000

Non-current assetsIntangible assets 11 2,583 2,583Property, plant and equipment 12 50 123Investment in subsidiaries 13 11,159 6,203Associates and financial assets 14 1,545 1,601Deferred tax asset 15 – 31

15,337 10,541

Current assetsInventories 16 583 497Trade and other receivables 17 7,702 3,030Cash and cash equivalents 23 305 395

8,590 3,922

Total assets 23,927 14,463

Current liabilitiesTrade and other payables 18 (2,762) (1,778)Borrowings 18 (1,222) (348)

(3,984) (2,126)

Total assets less current liabilities 19,943 12,337

Non-current liabilitiesBorrowings 19 (839) (224)

Net assets 19,104 12,113

Equity attributable to equity holders of the companyCalled-up share capital 20 1,831 1,199Share premium account 11,302 8,244Share option reserve 497 398Merger reserve 4,635 –Retained earnings 839 2,272

Total equity 19,104 12,113

The financial statements on pages 18 to 44 were approved and authorised for issue by the Board of Directors on 7 January 2016 and were signed on its behalf by:

R.G. HodgsonDirector

COMPANY STATEMENT OF FINANCIAL POSITIONAS AT 31 AUGUST 2015


Attributable to the equity holders of the parent

Non-controlling

Interests

Sharecapital£’000

Sharepremiumaccount

£’000

Share option

valuationreserve

£’000

Mergerreserve

£’000

Translationreserve

£’000

Retainedearnings

£’000Total

£’000

Retainedearnings

£’000Total

£’000

At 31 August 2013 1,147 8,010 295 – – 1,180 10,632 (41) 10,591

Profit for the year – – – – – 554 554 (252) 302Other comprehensive income – – – – (10) – (10) (7) (17)

Total comprehensive income for the year – – – – (10) 554 544 (259) 285

Transactions with equity holders of the parentIssue of new shares 52 234 – – – – 286 – 286Group and non-controlling interest in new subsidiary – – – – – 304 304 202 506Non-controlling interest acquired – – – – – (41) (41) 41 –IAS27 transfer to reserves – – – – – (386) (386) – (386)Share option charge – – 103 – – – 103 – 103

52 234 103 – – (123) 266 243 509

At 31 August 2014 1,199 8,244 398 – (10) 1,611 11,442 (57) 11,385

Loss for the year – – – – – (5,747) (5,747) (27) (5,774)Other comprehensive income – – – – – – – – –

Total comprehensive income for the year – – – – – (5,747) (5,747) (27) (5,774)

Transactions with equity holders of the parentIssue of new shares 345 3,234 – – – – 3,579 – 3,579Issue of ordinary shares related to a

business combination 287 – – 4,635 – – 4,922 – 4,922Overseas repayment of capital – – – – – (208) (208) (136) (344)Costs associated with share issue – (176) – – – – (176) – (176)Share option charge – – 99 – – – 99 – 99

632 3,058 99 4,635 – (208) 8,216 (136) 8,080

At 31 August 2015 1,831 11,302 497 4,635 (10) (4,344) 13,911 (220) 13,691

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 AUGUST 2015


Share Share optionShare premium valuation Merger Retained

capital account reserve reserve earnings Total

£’000 £’000 £’000 £’000 £’000 £’000

CompanyAt 31 August 2013 1.147 8,010 295 – 1,707 11,159

Profit for the year – – – – 565 565

Total comprehensive income for the year – – – – 565 565

Transactions with ownersIssue of new shares 52 234 – – – 286Share option charge – – 103 – – 103

52 234 103 – – 389

At 31 August 2014 1,199 8,244 398 – 2,272 12,113

Loss for the year – – – – (1,433) (1,433)

Total comprehensive income for the year – – – – (1,433) (1,433)

Transactions with ownersIssue of new shares 345 3,234 – – – 3,579Issue of ordinary shares related to a business combination 287 – – 4,635 – 4,922Costs associated with share issue – (176) – – – (176)Share option charge – – 99 – – 99

632 3,058 99 4,635 – 8,424

At 31 August 2015 1,831 11,302 497 4,635 839 19,104

Notes to the Consolidated and Company statements of changes in equity

Share capital and premiumWhen shares are issued, the nominal value of the shares is credited to the share capital reserve. Any premium paid above the nominal value is taken to the share premium reserve. APC Technology Group PLC shares have a nominal value of 2p per share.

Share option valuation reserveThe share option valuation reserve arises as the expense of issuing share-based payments is recognised over time. The reserve will fall as share options vest and are exercised, and the impact of the subsequent dilution of earnings crystallises, but the reserve may equally rise or see any reduction offset, as new potentially dilutive share options are issued.

Merger reservesThe merger reserve arises where more than 90% of the shares in a subsidiary are acquired and the consideration includes the issue of new shares by the Company, thereby attracting merger relief under the Companies Act 2006.

Retained earningsThe retained earnings reserve records the accumulated profits and losses of the Group since inception of the business. Where subsidiary undertakings are acquired, only profits arising from the date of acquisition are included. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 AUGUST 2015


Note

Group2015

£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Reconciliation of cash flows from operating activities

Profit/(loss) before taxation including discontinued operations for the financial year (6,044) 382 (1,398) 422

Share of results of associates (9) 28 – –Loss on disposal of property, plant and equipment 56 5 51 5Finance costs 249 59 127 39Finance income (4) (14) (4) (14)(Increase)/decrease in financial assets 156 (156) 156 (156)Taxation (receipts)/payments 13 (52) – –Depreciation of property, plant and equipment 132 99 39 32Amortisation of intangibles 761 – – –(Increase)/decrease in inventories (396) (645) (86) –(Increase)/decrease in trade and other receivables 1,429 (24) (4,672) 15(Decrease)/increase in trade and other payables 768 (813) 979 (231)Acquisition of non-controlling interest – 371 – –Share-based payments charge 99 103 66 103

Net cash (used in)/from operating activities (2,790) (657) (4,742) 215

Cash flows from investing activitiesAcquisition of property, plant and equipment (72) (202) (17) (51)Acquisition of subsidiary undertakings, net of cash acquired 240 (385) – (385)Other investment (100) (200) (100) (200)Eligible development costs capitalised – (87) – –

Net cash used in investing activities 68 (874) (117) (636)

Cash flows from financing activitiesFinance income 4 14 – 14Finance costs (249) (59) (123) (39)Proceeds of share issue 3,403 286 3,403 286Finance leases (57) 42 – –Short-term borrowings 872 639 874 236Overseas repayment of capital (344) – – –Issue/(repayment) of loan notes (220) (21) 615 –

Net cash from financing activities 3,409 901 4,769 497

Increase/(decrease) in net cash 23 687 (630) (90) 76

Cash and cash equivalents as at 1 September 23 552 1,182 395 319Increase/(decrease) in net cash 687 (630) (90) 76

Cash and cash equivalents as at 31 August 23 1,239 552 305 395

CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 AUGUST 2015


1. Accounting policiesThe principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently to all the years presented, unless otherwise stated.

GeneralAPC Technology Group PLC is a public limited company (“the Company”) incorporated in the United Kingdom under the Companies Act 2006 (registration number 01635609).

The Company is domiciled in the United Kingdom and its registered address is 47 Riverside, Medway City Estate, Rochester, Kent ME2 4DP. The Company’s Ordinary Shares are traded on the Alternative Investment Market (“AIM”) of the London Stock Exchange. The Group’s principal activities are the distribution of specialist electronic components and helping customers improve sustainability and increase profitability through integrated energy efficiency and water management products, services and solutions.

Basis of preparationStatement of complianceThese financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets at fair value, as required by IAS 39 Financial Instruments: Recognition and Measurement. The basis of consolidation is set out below. These financial statements have been prepared in accordance with IFRS as adopted by the European Union, and with those parts of the Companies Acts applicable to companies reporting under IFRS.

A separate statement of comprehensive income for the parent company has not been presented as permitted by section 408(3) of the Companies Act 2006. The parent Company incurred a loss after tax of £1,433,000 (2014: £565,000 profit).

Functional and presentational currencyThese consolidated financial statements are presented in UK Sterling, which is the Company’s functional currency. All financial information presented in UK Sterling has been rounded to the nearest thousand unless otherwise stated.

Use of estimates and judgementsThe preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts in the financial statements. The areas involving a higher degree of judgement or complexity, or areas where assumptions or estimates are significant to the financial statements, are disclosed below.

Going concern basis of accountingThese financial statements have been prepared on a going concern basis, as management believes the Group will be able to meet its liabilities as they fall due.

The Group incurred a consolidated loss after tax of £5,774,000 for the year, £3,871,000 of which related to exceptional and non-recurring expenses (Note 4) and discontinued operations (Note 9). Cash from operations for the year was negatively impacted by £2,790,000; this was funded by two share placings, which raised a total of £3,403,000 after costs of issuance, and a £874,000 drawdown on the Group’s invoice financing facility described in Note 17.

The operating loss before exceptional and non-recurring expenses, amortisation, share-based payments and acquisition costs was £1,139,000, of which £1,227,000 related to the sustainability business, Minimise Group, which experienced challenging trading conditions in the LED lighting field, both in the UK and North America, with adverse effects on the Group’s working capital. Management has implemented a number of initiatives to eliminate cost and improve control over contract tendering and execution which management expects will restore profitability to this part of the operation.

Management has examined going concern against a detailed profit, working capital, and cash flow forecast to December 2016. Based upon this review, the actions taken to restore profitability to the Minimise Group, the extension of the £6,000,000 invoice discounting facility to December 2016, and prudent working capital, management believes the Group will continue to be able to meet its liabilities as they fall due. Management also has the ability to raise capital through issuance of additional loan notes or further private share placings if required.

Accounting developmentsAccounting standards issued but not yet effective

At the date of authorisation of these financial statements, there were a number of other Standards and Interpretations (International Financial Reporting Interpretation Committee – IFRIC) which were in issue but not yet effective, and therefore have not been applied in these Financial Statements. The Directors have not yet assessed the impact of the adoption of these Standards and Interpretations for future periods.

Standard Effective date

Amendments to IFRS 11 ‘Acquisitions of Interests in Joint Operations’ * 1 January 2016Amendments to IAS 16 and IAS 38 ‘Clarification of Acceptable Methods of Depreciation and Amortisation’* 1 January 2016IFRS 9 ‘Financial Instruments‘* 1 January 2019IFRS 15 ’Revenue from Contracts with Customers’* 1 January 2017Amendment to IAS 19 ‘Employee Benefits’ 1 February 2015

* Not yet endorsed by the EU.

NOTES FORMING PART OF THE FINANCIAL STATEMENTS


RevenueRevenue represents income for the sales of goods and services, net of discounts, returns and rebates, to external customers at invoice value less value added tax. Revenue is recognised when the services have been provided or goods are despatched and the risks and rewards of ownership have been transferred to the customer, there is no continuing management involvement and the amount of revenue can be measured reliably. Commission income is recognised when payment has been received from the principal.

Basis of consolidationThe consolidated statement of comprehensive income and statement of financial position include the accounts of the Company and all its subsidiaries made up to 31 August 2015. The results of subsidiaries acquired are included in the consolidated statement of comprehensive income from the date control passes. Intra-group revenues and profits are eliminated fully on consolidation.

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.

GoodwillGoodwill represents the excess of the cost of a business combination over, in the case of business combinations completed prior to 1 January 2010, the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired and, in the case of business combinations completed on or after 1 January 2010, the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.

For business combinations completed prior to 1 January 2010, cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Changes in the estimated value of contingent consideration arising on business combinations completed by this date are treated as an adjustment to cost and, in consequence, result in a change in the carrying value of goodwill.

For business combinations completed on or after 1 January 2010, cost comprised the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, re-measured subsequently through profit or loss. For business combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.

Goodwill is capitalised as an intangible asset. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

Goodwill is reviewed for impairment at least every six months. The recoverable amount is estimated at each statement of financial position date. An impairment loss is recognised when the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Any impairment is recognised immediately in the statement of comprehensive income and is not subsequently reversed.

Intangible assetsThe fair value of acquired customer contracts is capitalised and, subject to impairment reviews, amortised over the estimated life of the customer contracts acquired of seven years. The amortisation is calculated so as to write off the fair value of the customer contracts less their estimated residual values. An impairment review of customer contracts is undertaken when events or circumstances indicate the carrying amount may not be recoverable.

Research and developmentIn accordance with IAS38 Intangible Assets, expenditure incurred on research and development is distinguished as relating to a research phase or to a development phase. All research phase expenditure is charged to the statement of income. Development expenditure is capitalised as an internally generated intangible asset only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits. Expenditure that cannot be classified into these two categories is treated as being incurred in the research phase.

Expenditure capitalised is amortised over its useful economic life, up to a maximum of 15 years from entry into service of the product. Amortisation is included within administrative expenses in the Consolidated Statement of Income.


NOTES FORMING PART OF THE FINANCIAL STATEMENTS continued

1. Accounting policies continuedProperty, plant and equipmentDepreciation is provided at the following annual rates in order to write off each asset over its estimated useful life:

Short leaseholds Over the remaining period of the lease – straight line

Plant and machinery Straight line between 3 and 5 years

Fixtures, fittings, tools and equipment Straight line between 3 and 5 years

Exhibition and demonstration equipment Straight line between 2 and 3 years

Property, plant and equipment are measured at historical cost less accumulated depreciation.

Impairment reviews of fixed assets are undertaken if there are indications that the asset’s recoverable amount may be less than the carrying values.

InvestmentsInvestments in subsidiary undertakings held as non-current assets are stated at cost less any provision for impairment. Investment in assets available for sale are carried at fair value and any movement in fair value is recognised in the statement of comprehensive income.

InventoriesInventories are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow moving items, on a first in first out basis.

TaxationThe taxation expense represents the sum of the tax currently payable and deferred tax. Tax currently payable is based on taxable profits or losses for the period and is calculated using enacted tax rates.

Deferred taxation is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group has chosen not to adopt a policy of discounting the deferred tax provision. Deferred tax assets are recognised only to the extent that the Directors consider it more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted.

Foreign currenciesAssets and liabilities in foreign currencies are translated into sterling at the rate of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transactions. Resulting exchange differences are taken into account in arriving at the operating result.

LeasesProperty plant and equipmentLeases where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased asset and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges. The remaining future rental obligations, net of finance charges, are included in finance lease liabilities in current or non-current liabilities. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

OtherLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

PensionThe Group operates a stakeholder defined contribution scheme for Directors and staff and also contributes to personal pension schemes of other Directors and staff. The assets of the scheme are held separately from those of the Group in an independently administered fund. Contributions are charged to the statement of comprehensive income when they fall due for payment or when the employee provides the services giving rise to the pension contribution.

Financial instrumentsThe 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 assets are recognised when the Group has rights or other access to economic benefits. Such assets consist of cash, a contractual right to receive cash or other financial assets, or a contractual right to exchange financial instruments with another entity on potentially favourable terms. Financial liabilities are recognised when there is an obligation and that obligation is a contractual liability to deliver cash or another financial asset or exchange financial instruments with another entity on potentially unfavourable terms. When these criteria no longer apply, a financial asset or liability is no longer recognised.


Financial assets and liabilities are recognised at fair value, which in the case of trade receivables and trade payables is similar to cost, and are detailed in note 23.

Where the fair value of an asset falls below the asset’s carrying value, any difference is, in the case of non-current assets, provided for, if it is regarded that the impairment is permanent. In the case of current assets, provision is made only to the extent that it is considered as resulting in a lower net realisable value.

Invoice discountingThe Group has an agreement with ABN Amro Commercial Finance whereby its trade receivables are invoice discounted, with recourse after 120 days. On the basis that the benefits and risks attaching to the debts remain with the Company, the gross debts are included as an asset within trade receivables and the proceeds received are included within current liabilities as short-term borrowings under invoice discounting facilities.

Share optionsThe Group issues equity-settled share-based payments to certain employees in the form of share options over shares in the parent company. Equity-settled share-based payments are measured at fair value at the date of the grant, calculated using an independent valuation model, taking into account the terms and conditions upon which the options were granted. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date. The fair value is expensed on a straight line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest, with the corresponding credit to equity.

Critical accounting estimates and judgementsThe preparation of these consolidated financial statements requires the Directors to make judgements and estimates that affect the reported amounts of assets and liabilities at each reporting date and the reported amounts of revenue and profits during the reporting periods. Actual results could differ from these estimates. Information about such judgements and estimations are contained in individual accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting judgements will, by definition, seldom equal the related actual results. 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 below:

• Goodwill has been tested for impairment by comparing the amount of goodwill against a multiple of forecast profit and/or revenue expected to be generated in the future by the appropriate cash-generating unit.

• The recoverability of investment in subsidiaries, associates and other financial assets has been tested for impairment by comparing the amount of cost of the asset against a multiple of forecast profit and/or revenue expected to be generated in the future by the appropriate cash-generating unit.

• The fair value of share-based payments is measured using an option pricing model which inherently makes use of significant estimates and assumptions concerning the future applied by the directors.

• Recoverable amounts of trade and other debtors are assessed on the basis of future assumptions and the likelihood that assets will be realised.

• Deferred tax assets and liabilities are assessed on the basis of assumptions regarding the future, the likelihood that assets will be realised and liabilities will be settled, and estimates as to the timing of those future events and as to the future tax rates that will be applicable.

• Management have considered the amortisation period on the customer lists based on the average customer relationship of the largest customers. Customer lists are amortised over 7 years.

• The annual impairment assessment in respect of goodwill requires estimates of the value-in-use of cash-generating units to which goodwill has been allocated to be calculated. As a result, estimates of future cash flows are required, together with an appropriate discount factor for the purpose of determining the present value of those cash flows. The basis of review of the carrying value of goodwill is detailed in note 11. Management do not consider that any reasonably foreseeable changes in the key assumptions would result in an impairment of the goodwill allocated.

2. Revenue and segmental informationOperating SegmentsIFRS 8 “Operating Segments”, requires consideration of the chief operating decision maker (‘CODM’) within the Group. In line with the Group’s internal reporting framework and management structure, the key strategic and operating decisions are made by the CEO, who reviews internal monthly management reports, budget and forecast information as part of this process.

Accordingly the CEO is deemed to be the CODM.

Operating segments have then been identified based on the reporting information and management structures within the Group. The Group had one customer representing over 10% of revenue (£3,632,000), revenue from which is classed within the Cleantech segment.

The Group operates in two trading business segments:

• The distribution of specialist electronic components (Distribution).• The sale of smart energy saving products and water services (Cleantech).

The Group also contains a central services segment that provides support to the trading businesses.



2. Revenue and segmental information continuedOperating Segments continuedIn the table below reportable segment assets and liabilities include inter-segment balances. These have been included to reflect the assets and liabilities of the segment as monies are freely moved around the Group to provide funding for working capital where required. The central services have been allocated between the two revenue-earning segments. The head office costs represent exceptional costs/(credits) associated with acquisitions and goodwill.

Segmental InformationDistribution

£’000Cleantech

£’000Head office

£’000Total£’000

2015 Revenue Total 12,658 18,995 – 31,653Inter-segment – (584) – (584)

Revenue from external customers 12,658 18,411 – 31,069

Profit /(loss) before tax 696 (1,021) (1,158) (1,483)Amortisation of intangible asset (690)Exceptional items (2,626)Taxation 270

Profit after tax before discontinued items (4,529)

Statement of Financial PositionAssets 10,609 15,723 – 26,332Liabilities (3,771) (8,870) – (12,641)

Net assets 6,838 6,853 – 13,691

OtherNet finance income/(expense) (122) (123) – (245)Capital expenditure 17 55 – 72Property, plant and equipment 51 176 – 227Depreciation (39) (93) – (132)

Segmental InformationDistribution

£’000Cleantech

£’000Head office

£’000Total£’000

2014 Revenue Total 12,456 8,178 – 20,634Inter-segment – – – –

Revenue from external customers 12,456 8,178 – 20,634

Profit/(loss) before tax 508 (83) (43) 382Fair value adjustments –Taxation (80)

Profit after tax 302

Statement of Financial PositionAssets 6,628 9,379 – 16,007Liabilities (2,350) (2,272) – (4,622)

Net assets 4,278 7,107 – 11,385

OtherNet finance income/(expense) (25) (20) – (45)Capital expenditure 51 201 – 252Property, plant and equipment 123 220 – 343Depreciation (33) (66) – (99)Capitalised development expenditure – 87 – 87

Revenue by geographic location 2015

£’0002014

£’000

UK 28,959 18,856North America 828 491Europe and Asia 1,282 1,287

Total Revenue 31,069 20,634


3. Operating profitThe operating profit is stated after charging:

2015£’000

2014£’000

Operating leases – land and buildings 280 175Operating leases – short leaseholds 480 177Operating leases – plant and machinery 14 140Depreciation – owned assets 91 68Depreciation of assets held under hire purchase agreements 41 31Loss/(profit) on foreign exchange (16) 34Auditors’ remuneration – audit of parent company and consolidated accounts 46 45Auditors’ remuneration – audit of subsidiary company 54 25Auditors’ remuneration – taxation advice – 10Auditors’ remuneration – interim statement – 4Directors’ emoluments 747 566Loss/(gain) on disposal of fixed assets 56 5Share based payments 99 103Amortisation of intangible assets 690 –Impairment of R&D 71 –

4. Exceptional and non-recurring expenses2015

£’0002014

£’000

Corporate re-organisation (compromise agreements and redundancy costs) 975 –Costs associated with aborted contract 757 –Costs incurred in preparation for acquisition of Green Compliance Plc 616 43Write off financial assets 156 –Impairment of R&D capitalised costs 71 –Alignment of Group accounting policies 51 –

2,626 43

Exceptional items are items that by virtue of their nature and incidence, have been disclosed separately in order to draw them to the attention of the reader of the financial information as these costs are deemed as exceptional as they do not represent normal trading activities of the business.

5. Net financing

2015£’000

2014£’000

Financing incomeOther interest receivable 4 14

Financing costsOther interest payable 55 4Other finance costs 194 55

249 59

6. Employee information2015

£’0002014

£’000

Wages and salaries 8,306 3,657Social security costs 978 369Private health costs 42 41Other pension costs 148 57Share option charge 99 103

Staff costs (including Directors’ emoluments) 9,573 4,227

The average monthly number of employees, including Directors, comprised:

2015Number

2014Number

Sales and distribution 143 55Operations and administration 89 37

232 92



7. Directors’ emolumentsDirectors’ emoluments are included in the staff costs in note 6. The Directors are considered to be the only key management personnel.

Details of Directors’ emoluments are included in the Report of the Remuneration Committee on page 15. Total Directors’ emoluments, excluding employers national insurance contributions and pension contributions were £664,000 (2014: £498,000), total pension contributions £12,000 (2014: £15,000) and unrealised gains on share options exercised in the year £Nil (2014: £382,000). The highest paid Director received emoluments of £194,000 (2014: £184,000), pension contributions of £Nil (2014: £3,000) and unrealised gains on share options exercised £Nil (2014: 205,000).

8. Taxation(a) Analysis of charge in period

2015£’000

2014£’000

Current tax:UK corporation tax on profits for the current year (91) 119Adjustments in respect of prior years (58) –

Total current tax (149) 119Deferred tax (note 15) (121) (39)

Tax charge/(credit) on profit on continuing operations (270) 80

(b) Factors affecting the tax charge for the periodThe tax charge for the period is different to the standard rate of corporation tax in the UK. The composite rate of corporation tax for this purpose has been taken as 20.58% for 2015 (2014: 21.58%).

The differences are explained below:

2015£’000

2014£’000

Profit on continuing operations before tax (4,799) 382

Rate of corporation tax 20.58% 21.58%

Tax on profit based on standard rate (987) 83Effects of:

Accelerated capital allowances – (19)Expenses not deductible for tax purposes 105 45Deferred tax not recognised 574 –Share options exercised in year 33 (138)Share options vested but not exercised – (33)Losses in overseas subsidiaries – 136Difference in deferred tax rate 22 –Effects of associates – 6Prior period adjustments (58) –Other 41 –

Total tax charge/(credit) for the period (270) 80

9. Discontinued operations

The losses relating to Minimise Generation Limited, Green Compliance Limited, and Green Compliance Fire Division have been classified as discontinued as at the reporting date.

There were no significant balances held in the balance sheet of these entities at the reporting date. As a result there has not been a re-measurement of assets or disposal group.

Analysis of the result of discontinued operations is as follows:2015

£’000

Revenue 91Expenses (1,336)

Loss before tax of discontinued operations (1,245)


10. Earnings per shareThe calculation of basic earnings per share is based on the profit after taxation attributable to equity holders of the parent company for the period and the weighted average number of shares in issue during the period.

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding by the dilutive effect of Ordinary Shares that the Company may potentially issue relating to its share option scheme.

Earnings per share on operating profit, before exceptional costs, share based payments and loss on discontinued operations, are considered to be the most realistic measure of earnings and the calculation is based on the weighted average number of shares.

The result for the year and the weighted average number of shares used in the calculations are set out below:

2015£’000

2014£’000

Continuing earnings: (loss)/profit attributable to equity holders of the parent (4,502) 554Discontinuing earnings: (loss)/profit attributable to equity holders of the parent (1,245) –

From (loss)/profit for the year (5,747) 554

Earnings: operating (loss)/profit before exceptional and non-recurring expenses, share based payments, amortisation and loss on discontinued operations (1,139) 573

Weighted average number of shares (thousands) 84,004 58,087Dilutive/free shares 273 1,084Diluted number of shares 84,277 59,171

11. Intangible non-current assetsThe Group’s intangible assets consist of goodwill and customer list acquired upon the acquisition of Green Compliance plc.

The goodwill balance brought forward arose partly on the acquisition of Silver Birch Marketing Limited and Go! Technology Limited in 2003, partly on the acquisition of Hero Electronics Limited in 2006, partly through the acquisition of Novacom Microwaves Limited and Contech Electronics Limited in 2008 and partly through the acquisition of the business assets and trade of Quo Vadis Limited in 2011. The Company’s goodwill arises on the transfer to the Company of the net assets of wholly owned subsidiaries and represents the excess of the consideration for the transfer over book value of the assets transferred.

In September 2014 the Group acquired 100% of Green Compliance plc (and its subsidiaries) and in July 2015 the Group acquired EEVS Insight Limited. In accordance with the provisions of IFRS 3 the Directors were required to consider the carrying value of the net assets at acquisition. In order to establish a Fair Value the Directors considered the current and anticipated future performance of the business using the same discount rates and growth factors that it adopts when carrying out annual impairment reviews, see below. Once the Fair Value was established, on consolidation, goodwill of £4,817,000 and £205,000 arose.

The Directors have undertaken an impairment review of the carrying value of the Group’s goodwill as at 31 August 2015, based on the current and anticipated performance of each cash-generating unit. The impairment review of goodwill was based on forecast income for each business segment and reflects past experience where appropriate. Forecasts cover a 12 year period (cash flow projections for five years plus a terminal value), reflecting the long-term nature of the businesses. The calculations are based on future operating cash flows derived using management’s latest forecasts and can be summarised as follows:

Carryingvalue of

goodwill£000

Period overwhich cashflows haveprojected

Growth ratebeyond

management approvedforecasts

Discount ratefor cash flow

projectionsCash-generating unit

Electronic component distribution 2,583 5 years 0% – 3% 11.9%Cleantech 9,611 5 years 0% – 3% 11.9%

The Directors are satisfied that any reasonable changes made to the underlying assumptions made in the impairment review would not result in a change to the carrying value of the goodwill.



11. Intangible non-current assets continuedThe table below sets out the goodwill attributable to each business segment:

Distribution£’000

Cleantech£’000

Total£’000

As at 31 August 2014 2,583 4,590 7,173

As at 31 August 2015 2,583 9,611 12,195

Development costs represent acquired development expenditure on assets where it is probable that the future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured reliably.

The customer list intangible asset was established at the point of acquisition of Green Compliance Plc. An amortisation period of 7 years was established based on existing long standing customer relationships. The intangible asset is reviewed annually and the Directors are satisfied that there are no indicators of impairment and so no impairment is required.

The movement in intangible assets during the year arose as follows:

Group

Developmentcosts£’000

Customer list

£’000Goodwill

£’000Total

£’000

CostBalance at 1 September 2013 29 – 7,303 7,332Additions through business combinations 87 – – 87

Balance at 31 August 2014 116 – 7,303 7,419

Balance at 1 September 2014 116 – 7,303 7,419Development costs capitalised in the year – – – –Additions through business combinations – 4,832 5,022 9,854

Balance at 31 August 2015 116 4,832 12,325 17,273

Amortisation

Balance at 1 September 2013 29 – 130 159Charged in year1 – – – –Impairment – – – –

Balance at 31 August 2014 29 – 130 159

Balance at 1 September 2014 29 – 130 159Charged in year1 – 690 – 690Impairment 71 – – 71

Balance at 31 August 2015 100 690 130 920

Net book value

As at 31 August 2014 87 – 7,173 7,260

As at 31 August 2015 16 4,142 12,195 16,353

1 Amortisation charged in the year is presented in administration expenses in the Consolidated Statement of Income.


11. Intangible non-current assets continued

CompanyGoodwill

£’000Total

£’000

CostBalance at 1 September 2013 2,583 2,583

Balance at 31 August 2014 2,583 2,583

Balance at 1 September 2014 2,583 2,583

Balance at 31 August 2015 2,583 2,583

Amortisation

Balance at 1 September 2013 – –

Balance at 31 August 2014 – –

Balance at 1 September 2014 – –

Balance at 31 August 2015 – –

Net book value

As at 31 August 2014 2,583 2,583

As at 31 August 2015 2,583 2,583

12. Property, plant and equipment

Group

Shortleaseholds

£’000

Plantand

machinery£’000

Fixtures,fittings

tools andequipment

£’000

Motor vehicles

£’000Total

£’000

CostAs at 1 September 2013 147 53 586 76 862Additions 98 37 67 50 252Disposals (5) (9) (115) – (129)

As at 31 August 2014 240 81 538 126 985

As at 1 September 2014 240 81 538 126 985Additions 12 11 49 – 72Disposals – (12) (427) (20) (459)

As at 31 August 2015 252 80 160 106 598

DepreciationAs at 1 September 2013 135 50 479 6 670Charge for the year1 17 13 38 31 99Disposals (5) (9) (113) – (127)

As at 31 August 2014 147 54 404 37 642

As at 1 September 2014 147 54 404 37 642Charge for the year1 41 8 51 32 132Disposals – (12) (376) (15) (403)

As at 31 August 2015 188 50 79 54 371

Net book valueAs at 31 August 2013 12 3 107 70 192

As at 31 August 2014 93 27 134 89 343

As at 31 August 2015 64 30 81 52 227

1 Depreciation charged during the year is presented in administrative expenses in the consolidated statement of income.



12. Property, plant and equipment continued

Company

Shortleaseholds

£’000

Plantand

machinery£’000

Fixtures,fittings

tools andequipment

£’000Total

£’000

CostAs at 1 September 2013 144 25 579 748Additions 22 2 27 51Disposals (5) (12) (117) (134)

As at 31 August 2014 161 15 489 665

As at 1 September 2014 161 15 489 665Additions – – 17 17Disposals – (12) (427) (439)

As at 31 August 2015 161 3 79 243

DepreciationAs at 1 September 2013 135 24 481 640Charge for the year 4 1 27 32Disposals (5) (12) (113) (130)

As at 31 August 2014 134 13 395 542

As at 1 September 2014 134 13 395 542Charge for the year 9 – 30 39Disposals – (12) (376) (388)

As at 31 August 2015 143 1 49 193

Net book valueAs at 31 August 2013 9 1 98 108

As at 31 August 2014 27 2 94 123

As at 31 August 2015 18 2 30 50

13. Investment in subsidiary undertakings2015

£’0002014

£’000

CompanyCost as at beginning of year 6,203 5,789Additions from acquisitions 4,922 371Additions for share based payments of subsidiaries 34 43

Cost as at end of year 11,159 6,203

Additions from acquisitions in the year represent the 100% acquisition of Green Compliance Plc and its subsidiaries and 100% acquisition of EEVS Insight Limited.


Details of the Company’s subsidiaries, associates and other investments at 31 August 2015 were as follows:

Name Place of incorporation Proportion of ownership Principal activity

Active subsidiariesMinimise Energy Limited * England and Wales 100% Supply of LED lightsMinimise Controls Limited ** England and Wales 100% Supply of lighting controlsMinimise Energy Solutions Limited * England and Wales 100% Manufacture of imop®Minimise Solutions Limited * England and Wales 100% Energy savings solutionsMinimise Generation Limited ** England and Wales 100% Energy generationMinimise Water Limited ** England and Wales 100% Water managementMinimise Finance Ltd ** England and Wales 100% Energy-related financeMinimise Group Limited * (formerly Minimise Holdings Limited) England and Wales 100% Holding CompanyMinimise Holdings USA Inc. ** Delaware, USA 100% Holding CompanyMinimise Energy America LLC *** Florida, USA 60% Energy savings solutionsMinimise Energy Canada Limited *** Canada 60% Energy savings solutionsGreen Compliance plc * (see note) England and Wales 100% Holding CompanyGreen Compliance Water Division Limited **** England and Wales 100% Water managementEEVS Insight Limited * England and Wales 100% Energy savings solutions

Dormant subsidiariesAdvanced Power Components Limited * England and Wales 100%Novacom Microwaves Limited * England and Wales 100%Contech Electronics Limited * England and Wales 100%Hero Electronics Limited * England and Wales 100%Silver Birch Marketing Limited * England and Wales 100%Go! Technology Limited * England and Wales 100%Minimise Taiwan Limited ** England and Wales 100%Minimise IP Inc *** Delaware, USA 100%Towerite Limited ***** England and Wales 100%Maplin A Division of Waterchem Limited ***** England and Wales 100%Simon West Limited **** England and Wales 100%Green Compliance Energy Consultancy Limited **** England and Wales 100%Innovative HIP Limited **** England and Wales 100%Green Compliance EBT Limited **** England and Wales 100%Pure Group Management Limited **** England and Wales 100%Pure Commissioning Limited ***** England and Wales 100%Water Pure Systems Limited ***** England and Wales 100%Purotech Limited ***** England and Wales 100%Green Compliance Fire Services Limited **** England and Wales 100%Green Compliance Fire 1 Limited **** England and Wales 100%Green Compliance Fire 2 Limited **** England and Wales 100%Green Compliance Fire 3 Limited **** England and Wales 100%Green Compliance Fire 4 Limited **** England and Wales 100%Green Compliance Fire 5 Limited **** England and Wales 100%Ridgegate Limited **** England and Wales 100%Firewatcher Extinguisher Company Limited **** England and Wales 100%Green Compliance Pest and Environmental Services Limited **** England and Wales 100%Envirocare GB Limited **** England and Wales 100%Enviroguard (UK) Limited **** England and Wales 100%

AssociatesInvisible Systems Holdings Ltd England and Wales 25% Monitoring Systems

Other investmentsOpen Energy Market Ltd England and Wales 15% Energy procurement

* Subsidiary of APC Technology Group PLC** Subsidiary of Minimise Group Limited*** Subsidiary of Minimise Holdings USA Inc**** Direct subsidiary of Green Compliance plc ***** Indirect subsidiary of Green Compliance plcNote: Since the financial year-end Green Compliance plc has re-registered as a private company, Green Compliance Limited.



14. Associates and other financial assets

Associates£’000

Other investments

£’000

Other financial

assets£’000

Total£’000

As at 31 August 2013 1,243 – – 1,243Loan interest capitalised – – 13 13Acquisition of shares in Open Energy Market Limited – 200 – 200Share of retained loss for the period (28) – – (28)Loans reinstated – – 143 143

As at 31 August 2014 1,215 200 156 1,571

As at 1 September 2014 1,215 200 156 1,571Loan interest capitalised – – – –Acquisition of shares in Open Energy Market Limited – 100 – 100Share of retained profit for the period 9 – – 9Provision for doubtful debt – – (156) (156)

As at 31 August 2015 1,224 300 – 1,524

The Group’s share of equity accounting investments in 2014 and 2015 relates to Invisible Systems Limited, a company in which the Group acquired a 25% holding in 2013, and is as follows:

Group2015

£’000

Group2014

£’000

Assets: Non-current assets 15 10 Current assets 141 110Liabilities: Current liabilities (67) (40) Non-current liabilities – –

Net assets 89 80

RevenueProfit/(loss) before financing and taxation 9 (28)Net financing – –

Results recognised in the consolidated income statement 9 (28)Dividends received – –

Retained profit/(loss) 9 (28)

Other investments relates to the Group’s purchase of an additional 5% holding in Open Energy Market Limited (OEM), a company incorporated in England and Wales, at a cost of £100,000. OEM’s principal activity consists of energy procurement. At the year end the Group owns 15% of the issued share capital.

15. Deferred taxGroup

2015£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Deferred tax asset – 33 – 31Deferred tax liability (828) (16) – –

(828) 17 – 31

The following are the major deferred tax assets/(liabilities) recognised by the Group and Company and the movements thereon during the current year:

Company

Acceleratedtax

depreciation£’000

Customerlists

£’000

Shareoptions

exercised£’000

Total£’000

As at 1 September 2013 (6) – – (6)Credit to the Group statement of consolidated income 6 – 31 37

As at 1 September 2014 – – 31 31Charge to the Group statement of consolidated income – – (31) (31)

As at 31 August 2015 – – – –


15. Deferred tax continued

Group

Acceleratedtax

depreciation£’000

Customerlists

£’000

Shareoptions

exercised£’000

Total£’000

As at 1 September 2013 (22) – – (22)Credit to the Group statement of consolidated income 6 – 33 39

As at 1 September 2014 (16) – 33 17

Acquired in the year through business combination – (966) – (966)Credit to the Group statement of consolidated income 16 138 (33) 121

As at 31 August 2015 – (828) – (828)

Deferred income tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related benefit through future taxable profits is probable. No deferred tax asset has yet been created in respect of unutilised losses carried forward in the Group’s North American subsidiaries. A deferred tax liability has been recognised at the year ended 2015 in respect of the customer list intangible asset recognised on acquisition of Green Compliance plc.

16. InventoriesGroup

2015£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Finished goods 2,633 2,237 583 497

The cost of inventories recognised as expense and included in cost of sales amounted to £14,778,000 (2014: £13,052,000). The Directors have reassessed the level of stock provisioning required in the light of stock utilised during the year and potential sales opportunities available in the foreseeable future. This has resulted in a net increase in provisions of £163,000 (2014: decrease £168,000).

17. Trade and other receivablesGroup

2015£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Trade receivables 3,547 3,618 1,849 1,707Amounts owed by subsidiary undertakings – – 5,665 1,104Amounts owed by associates 60 60 60 60VAT recoverable 11 62 – –Other receivables 125 13 2 4Prepayments 584 258 126 155

4,327 4,011 7,702 3,030

During the year the Group had a flexible debt finance facility with ABN Amro Commercial Finance through which the majority of its trade receivables were eligible to be discounted, with recourse after 120 days. The gross amount of these trade receivables is shown above. At 31 August 2015 the Group had drawn down advances totalling £2,543,000 (2014: £752,000) which are shown in note 18 under short term bank borrowings under invoice discounting facility. The total amount eligible to be discounted as at 31 August 2015 was £3,505,000 (2014: £1,965,000). Since the year-end the facility has been renewed to December 2016.

The aged analysis of trade receivables is shown in note 23 Financial Instruments.

18. Current liabilitiesGroup

2015£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Trade payables 3,645 1,730 1,817 1,289Corporation tax payable – 99 – –Other taxes and social security 932 128 283 79VAT payable 590 135 183 128Short term borrowings under invoice discounting facility 2,543 752 1,222 348Other short term borrowings – 2 – –Finance leases 22 22 – –Accruals and other payables 3,421 1,636 479 282

11,153 4,504 3,984 2,126



19. Non-current liabilitiesGroup

2015£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Amounts due to subsidiary undertakings – – 224 224Loan notes 615 – 615 –Finance leases 45 102 – –

660 102 839 224

Amounts due to subsidiary undertakingsThe amounts due to subsidiary undertakings arise as a result of the transfer to the Company of net assets of its subsidiaries Silver Birch Marketing Limited and Go! Technology Limited on 31 August 2003, Hero Electronics Limited on 31 August 2006 and Novacom Microwaves Limited and Contech Electronics Limited on 31 August 2008. These amounts represent interest-free inter-company loans.

Finance leasesThe Group has entered into a number of finance leases with Volkswagen Finance. Each lease is based on a 48 month contract, with the first lease due to end in March 2016. The non-current portion of the lease was £45,000 at 31 August 2015 (2014: £102,000).

Loan notesThe Group has a convertible loan note instrument of which of £615,000 was drawn at year end which bears interest at 10% with a 31 July 2017 maturity date. These interest rates are fixed and the Group is therefore not exposed to changes in interest rates in respect of these liabilities.

The conversion option on the loan notes constitutes an embedded derivative and is measured at fair value on an annual basis, with movements taken to the income statement. The Directors have assessed the fair value of the embedded derivative to be £Nil.

20. Share capital

Group and companyNo of

shares2015

£’000No of

shares2014

£’000

Allotted, issued and fully paid: Ordinary Shares of 2p eachAt 31 August 2015 91,573,948 1,831 59,944,541 1,199

During the year under review the following Ordinary Shares of 2p each were issued by the Company:

Reason for issue Date Shares Price

Acquisition of Green Compliance plc 15/09/2014 13,404,952 35.50pExercise of options 25/09/2014 45,000 9.00pShare placing 11/12/2014 10,375,000 20.00pShare placing 19/02/2015 6,590,910 22.00pDirectors’ subscription 19/02/2015 227,272 22.00pAcquisition of EEVS Insight Limited 31/07/2015 986,273 16.675p

Total shares issued in year 31,629,407Shares in issue at 31 August 2014 59,944,541

Shares in issue at 31 August 2015 91,573,948


20. Share capital continuedShare optionsThe following options over the Company’s Ordinary Shares were outstanding at 31 August 2015:

Dategranted

Earliest dateexercisable

Latest dateexercisable

OrdinaryShares of 2p

Exerciseprice

2003 Employee Share Option Scheme 29/09/2006 see note b 28/09/2016 30,000 13.75p10/11/2006 see note b 09/11/2016 84,500 14.75p23/01/2008 see note b 22/01/2018 52,755 14.75p23/04/2008 see note b 22/04/2018 71,250 18.50p10/07/2008 see note b 09/07/2018 136,850 17.00p22/01/2010 see note b 21/01/2020 130,000 10.00p29/09/2010 see note b 28/09/2020 50,000 11.25p25/02/2011 see note b 24/02/2021 937,500 12.75p16/05/2011 see note b 15/05/2021 75,000 14.50p30/05/2012 see note b 29/05/2022 123,500 7.50p20/09/2012 see note b 19/09/2022 435,000 10.00p20/12/2012 see note b 19/12/2022 100,000 15.25p

2013 Employee Share Option Scheme 05/09/2013 see note c 04/09/2023 450,000 32.50p24/09/2013 see note c 23/09/2023 2,000,000 38.75p27/03/2014 see note c 26/03/2024 395,000 53.25p18/07/2014 see note c 17/07/2024 325,000 32.50p26/02/2015 see note d 25/02/2025 2,000,000 22.00p

Unapproved share option scheme 22/12/2006 see note e 21/12/2016 35,000 23.00p22/01/2010 see note e 21/01/2020 25,000 10.00p20/09/2012 see note e 19/09/2022 75,000 10.00p25/01/2013 see note e 24/01/2023 100,000 24.75p03/10/2013 see note e 02/10/2023 100,000 27.75p17/12/2013 see note e 16/12/2023 250,000 85.00p

7,981,355

The weighted average price of options over the Company’s Ordinary Shares at 31 August 2015 was 25.28p (2014: 26.12p).

Reconciliation of movement in share options outstandingOrdinary

Shares of 2p

Share options outstanding as at 31 August 2013 5,631,492

Issued 4,324,000Lapsed (199,250)Exercised (2,389,142)


Issued 2,000,000Lapsed (1,340,745)Exercised (weighted average share price at exercise 31.625p) (45,000)


Notes:a. On 17 June 2003 the Board of Directors approved a share option scheme, the 2003 Employee Option Scheme (“the 2003 Scheme”). The scheme, which operates under

the guidelines of the Government’s Enterprise Management Incentive (EMI), provides for options to be exercisable at a pre-determined exercise price, subject to attainment of performance conditions over a three year period. Options are exercisable in tranches depending on the Group’s cumulative growth in pre-tax earnings over a three year period. This process operates on a sliding scale for growth levels between RPI and RPI plus 16%.

b. On 19 April 2011 the Board of Directors amended the performance criteria of the options granted under the 2003 Scheme so that shares would vest over a five year period following grant, depending on achievement of the Group’s budgeted profit before tax. Previously performance conditions were linked to the growth in the Company’s earnings per share in the financial years following the grant of the option. The change was made to ensure that the performance criteria were more easily understood by employees and were more directly related to employee performance.

c. On 6 September 2013 the Board approved a new share option scheme, the 2013 Employee Option Scheme (“the 2013 Scheme”). This scheme replaces the 2003 scheme for any options granted from 1 September 2013 onwards and also operates under EMI rules. Under the 2013 Scheme shares vest over a six year period following the grant depending on achievement of the Group’s budgeted profit before tax.

d. The options granted to Executive Directors on 26 February 2015 under the 2013 Scheme are subject to separate performance conditions linked to increases in the Company’s share price.

e. The options to Non-executive Directors were granted with exercise prices equal to or greater than the market price ruling on the respective dates of the grant. These options were not granted under the 2003 or 2013 Schemes, but are subject to the same performance conditions as the options granted under those schemes and are exercisable in tranches, as described in note a to c above.



20. Share capital continuedThe middle market price of the Company’s shares at 31 August 2015 was 9.625p. During the year under review the middle market price range was 8.25p to 39.20p.

In accordance with IFRS2 a share option charge of £99,000 (2014: £103,000) has been made to the Consolidated Statement of Income.

The following additional information is relevant to the determination of the fair value of the options granted in the year:

2015 2014

Option pricing model used Monte-Carlo Black ScholesShare price The share price at the date of grant is

25.5p. The exercise price is 22pShare price is the same as exercise price at

the time the option is issuedExpected volatility Annualised volatility of 70.47% 55.41% - 64.24%Expected life of option 2 years 11 months 1.74 to 8.18Expected dividend yield Nil NilRisk free interest rate 0.72% 0.20% to 3.68%

The Company granted a warrant to its former Nominated Adviser in the year ended 2014, Strand Hanson Limited, to subscribe for up to 576,670 shares at an exercise price of 17.75 pence per share, expiring on 25 September 2018. 190,000 warrants were exercised in December 2013 and 386,670 warrants remain outstanding.

21. Operating lease obligationsAs at 31 August 2015 the Group had future aggregate minimum commitments under leases expiring as shown below:

Group2015

£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Land and buildingsPayable in less than one year 273 184 100 100Payable between one and five years 429 308 190 101Payable in five years or more 33 117 33 117

735 609 323 318

Motor vehiclesPayable in less than one year 405 18 91 18Payable between one and five years 253 167 46 167

658 185 137 185

OtherPayable in less than one year 14 – 14 –Payable between one and five years 46 – 46 –

60 – 60 –

22. Financial instruments (Group and Company) – risk managementThe Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s financial performance.

The Group’s financial instruments comprise cash and liquid resources and various items such as trade payables and receivables that arise directly from its operations. The Group is exposed to the following risks:

• Credit risk• Foreign currency risk• Liquidity risk• Fair value interest rate risk

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. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group’s exposure to financial instrument risk management policies. The objective of the Board is to set policies that seek to reduce the risk as far as possible without unduly affecting the Group’s competitiveness and effectiveness.

Further details of these policies are set out below:


22. Financial instruments (Group and Company) – risk management continuedCredit riskThe Group is exposed to credit risk primarily on its trade receivables, which are spread over a range of customers. There are no specific concentrations of credit risk. The maximum credit risk exposure relating to financial assets is represented by their carrying value at the statement of financial position date.

The Group assesses the risk associated with each customer based on independent credit rating agency reports and on its own experience with the customer before entering into binding contracts. Each customer account is reviewed on an on-going basis based on available information and payment history.

The maximum exposure to credit risk is represented by the carrying values of trade receivables in the consolidated and Company statement of financial position as shown in note 17.

The credit risk on liquid funds is limited as the funds are held at banks with high credit ratings assigned by international credit rating agencies.

Foreign currency riskThe Group has exposure to transactional and translational currency exposures.

Transactional currency exposure risk arises when the Group enters into contracts in currencies other than the Group functional currency. Transactional risk is mitigated by a) the creation of a natural hedge between buying and selling currencies, b) use of currency hedging contracts and c) the inclusion of a foreign currency price escalation clause in sales contracts.

Translational currency exposure risk arises when financial instruments valued in the consolidated and Company statement of financial position are denominated in a currency other than the Group’s functional currency. Translation risk is mitigated by the Group entering into currency option contracts. There were no open currency option contracts at the year-end (2014: £Nil).

Liquidity riskThe Group has established borrowing facilities with ABN Amro Commercial Finance for working capital finance through an invoice discounting facility and a loan note facility. The Group maintains near term cash flow forecasts that enable it to identify its near term borrowings requirement so that remedial action can be taken if necessary.

Fair value interest rate riskAll borrowing is approved by the Board of Directors to ensure that it is conducted at the most competitive rates available to it.

23. Financial instrumentsCapital risk managementThe Group defines the capital that it manages as the Group’s total equity. The Group’s objectives when managing capital are to:

• Safeguard the Group’s ability to continue as a going concern.• Have available the necessary financial resources to allow the Group to deliver benefits from its operational activities and investments.• Optimise the return to investors based on the level of risk undertaken.

In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets, pay dividends or return capital to shareholders.

The Group’s capital and equity ratios are shown in the table below:

2015£’000

2014£’000

Total equity attributable to owners of the parent 13,911 11,442Total net assets 13,691 11,385

Equity ratio 101.6.% 100.5%

Financial assetsDetails of financial assets are included in notes 14 and 17, but financial assets exclude prepayments and VAT recoverable. The currency profiles of the Group’s financial assets comprising cash at bank and in hand at 31 August were:

Group2015

£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

CurrencyDenominated in sterling 951 508 15 395Denominated in US dollars 212 15 213 –Denominated in Canadian dollars – 29 – –Denominated in Euros 76 – 77 –

1,239 552 305 395

Cash at banks, included in cash and cash equivalents, are with institutions with credit ratings of A or better. It is the Company’s policy to maintain cash at a level to meet liabilities immediately due for payment so that the amount drawn from the invoice discounting facility is kept to a minimum.



23. Financial instruments continuedCapital risk management continuedThe maximum exposure to credit risk from trade receivables at 31 August 2015 is disclosed in note 17. The following table shows an aged analysis of trade receivables for the Group.

2015£’000

2015%

2014£’000

2014%

0 - 30 days 2,146 60.5% 725 20.0%31 - 60 days 757 21.4% 1,184 32.7%61 - 90 days 400 11.3% 198 5.5%91 - 120 days 16 0.4% 1,327 36.7%Over 120 days 228 6.4% 184 5.1%

3,547 100.0% 3,618 100.0%

The Group reviews trade receivables balances on a routine basis and makes provision for any amounts where it believes the receivable is likely to be uncollectable. In 2015 the bad debt provision was £473,000 (2014: £165,000).

Financial liabilitiesThe following is an analysis of the maturities of the financial liabilities excluding amounts owed in relation to corporation tax, payroll taxes and VAT in the consolidated statement of financial position:

Carryingamount

£’000

6 monthsor less£’000

6 - 12months

£’000

1 or moreyears£’000

2015Invoice discounting finance facility 2,543 2,543 – –Finance leases 67 11 11 45Trade and other payables 7,066 7,066 – –Loan notes 615 – – 615

10,291 9,620 11 660

2014Invoice discounting finance facility 752 752 – –Finance leases 124 11 11 102Trade and other payables 3,763 3,763 – –

4,639 4,526 11 102

Fair values of financial assets and liabilitiesThe fair value of the Group’s financial assets and liabilities are not materially different from their book values and therefore the Directors consider no hierarchical analysis is necessary.

Net foreign currency monetary assets and (liabilities)Net foreign currency monetary assets and (liabilities) comprise the monetary assets and (liabilities) of the Group that are not denominated in sterling, the Group’s functional currency. Net foreign currency monetary assets and (liabilities) (including short-term debtors and creditors) were as follows:

2015£’000

2014£’000

Denominated in US dollars 101 (692)Denominated in Canadian dollars (43) 31Denominated in Euros 87 (257)

145 (918)

Borrowing facilitiesDuring the year the Group has had a flexible debt finance facility with ABN Commercial Finance with a cap of £6 million across the Group; these facilities are secured by way of a fixed and floating charge over the whole assets of the Group and the Company. Borrowing against this facility amounted to £2,543,000 at 31 August 2015 (2014: £752,000), undrawn funds available on the invoice discounting facilities were £962,000 at 31 August 2015 (2014: £2,051,000). The facility has been renewed to 31 December 2016 post year end.

Derivative financial instrumentsThe Group maintains a natural hedge between buying and selling currencies and from time to time enters into foreign exchange hedge transactions to protect it against adverse currency movements. In addition, from time to time, the Company enters into currency options to protect it against translation risk of the net foreign currency assets and liabilities. There were no such options at the year end.


24. Acquisitions in the yearBusiness combinations are accounted for using the acquisition accounting method as at the acquisition date, which is the date at which control is transferred to the Group. Goodwill is measured at the acquisition date as the fair value of consideration, less the recognised amount of the identifiable assets and liabilities assumed. The value of non-controlling interest recognised at the date of acquisition is calculated as a proportion of net assets of the entity acquired.

Acquisition of Green Compliance plcOn 12 September 2014 the Group acquired through an all-share offer 100% of the share capital of Green Compliance plc (“Green Compliance”), a company incorporated in England and listed on AIM, whose principal activity comprises the provision of water quality monitoring services, in order to broaden its cleantech activities into the market for water management. The purchase consideration consisted of the issue of 2 new Ordinary Shares in APC Technology Group PLC for every 71 shares in Green Compliance.

As a result of the acquisition, the Group is expected to increase its presence in the water management business and utilise the water client base to cross sell existing APC Group products and services into the larger water customer base.

A full year’s trading has been included in the consolidation. The continuing parts of the water business have contributed £7,760,000 of revenue and a profit before tax of £344,000.

Acquisition of EEVS Insight LimitedOn 30 July 2015 the Group acquired EEVS Insight Limited, whose principal activity is performance analysis and verification services for any sustainability project, product, service or investment in the energy efficiency space. The consideration consisted of £164,461 satisfied by the issue of 986,273 new Ordinary Shares of 2 pence each in APC.

The services provided by EEVS enable procurement decisions to be based on hard evidence gathered and presented using internationally recognised processes and the Group believes that it will benefit from the increased confidence it can give organisations who are interested in investing in low energy lighting and other energy efficiency related projects, services and products.

One month’s trading has been included within the consolidated Group results. A revenue of £24,000 and a loss before tax of £91,000 has been recognised. Full year results show a revenue of £244,000 and a loss before tax of £260,000.

Recognised amounts of identifiable assets acquired and liabilities assumed:

Green Compliance

PLC£’000

EEVS Insight

Limited£’000

Cash and cash equivalents 213 27Customer lists 4,832 –Trade and other receivables 1,656 89Trade and other payables (4,042) (157)Borrowings (917) –Loan note (835) –Deferred taxes (966) –

(59) (41)Goodwill 4,817 205

Total purchase consideration: Share offer 4,758 164

Acquisition related costs of £616,000 have been charged to exceptional costs in the consolidated income statement for the year ended 2015.

25. Related party transactionsKey management information is included in the Report of the Remuneration Committee on page 15.

Transactions with related parties and the resulting balances for the year ended 31 August 2015 are summarised below:

a) Transactions with Invisible Systems LimitedIn the ordinary course of business the Group has entered into transactions with Invisible Systems Limited, a company in which the Group owns 25% of the ordinary share capital, as set out in note 14.

Group2015

£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Sales 6 1 – 1Purchases 455 200 – –Amounts owed by Invisible Systems Limited – 60 – 60Amounts owed to Invisible Systems Limited 6 18 – 2



25. Related party transactions continuedb) Transactions with NewLawsLegalIn the ordinary course of business the Group has entered into transactions with NewLawsLegal, a legal firm owned by Ms Tessa Laws, a Director of APC Technology Group PLC during part of the year. NewLawsLegal has provided legal services to the Group.

Group2015

£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Purchases 4 26 4 26Amounts owed to NewLawsLegal – 4 – 14

c) Transactions with Idea Business Solutions LtdIn the ordinary course of business the Group has entered into transactions with Idea Business Solutions Ltd, a company controlled by Mr John Davidson, a Director of APC Technology Group PLC. Idea Business Solutions Ltd provides consulting services to the Group.

Group2015

£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Purchases 25 24 25 24Amounts owed to Idea Business Solutions Ltd 6 2 6 2

d) Transactions with Kent Precision Products Limited and Kent Precision Tooling LimitedIn the ordinary course of business the Group has entered into transactions with Kent Precision Products Limited and Kent Precision Tooling Limited, companies controlled by David West. Mr West is the brother of Paul West, who was a Director of the Company’s subsidiary Minimise Energy Limited during part of the financial year.

Group2015

£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Purchases 10 32 – –Amounts owed to the above companies – 4 – –

e) Transactions with Joule Funding LimitedIn the ordinary course of business the Group has entered into transactions with Joule Funding Limited, a company in which Andrew Shortis, a Director of the Company during the financial year, is a Director.

Group2015

£’000

Group2014

£’000

Company2015

£’000

Company2014

£’000

Purchases 60 – 60 –Amounts owed to Joule Funding Limited 30 – 30 –

f) Loans from DirectorsRichard Hodgson, a Director of the Company, holds a convertible loan note of £10,000. The loan note accrues interest at 7.5% and had a maturity date of 31 July 2015, but has been rolled over into the new loan note bearing interest at 10% with a maturity date of 31 July 2017.

Edward Brown, a former director of Green Compliance plc, had convertible loan notes of £5,000, bearing interest at 7.5% with a maturity date of 31 July 2015, which were fully redeemed on that date.

John Charlton, a director of Green Compliance plc for part of the financial period, had a convertible loan note of £10,000, bearing interest at 7.5% with a maturity date of 31 July 2015, which was fully repaid on that date.

John Dobson, a director of Green Compliance Water Division Limited for part of the financial period, had a convertible loan note of £25,000, bearing interest at 7.5% with a maturity date of 31 July 2015, which was fully repaid on that date.

26. Post Balance Sheet EventsExercise of share optionsOptions over 30,000 shares were exercised on 4 September 2015 with proceeds of £3,000.

Operations reviewPrior to the year-end the Board commenced a comprehensive review of its operations. The results of this review have been announced since the year-end and include the curtailment or cessation of several non-core activities. Following the completion of the Operations Review, Andrew Shortis has resigned from the Board.

The effect of discontinued operations on the results for the year is shown in note 9 of the financial statements.


NOTICE IS HEREBY GIVEN that the Annual General Meeting of APC Technology Group PLC (the Company) will be held at the offices of Cantor Fitzgerald Europe, One Churchill Place, Canary Wharf, London E14 5RB on Thursday 25 February 2016 at 12.00 noon, for the purpose of considering and, if thought fit, passing the following Resolutions:

Ordinary Resolutions1. To receive and, if thought fit, adopt the Report of the Directors and the financial statements for the year ended 31st August 2015, with the

auditor’s report thereon.

2. To re-elect Phillip James Lancaster as a Director of the Company.

3. To re-appoint RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP) as auditors of the Company and to authorise the Directors to fix their remuneration.

4. That the Board be and it is hereby generally and unconditionally authorised to exercise all powers of the Company to allot relevant securities (within the meaning of Section 551 of the Companies Act 2006) up to an aggregate nominal amount of £610,693 (i.e. approximately one-third of the issued shares at the date of this report) provided that this authority shall expire on the date of the next Annual General Meeting of the Company, or on 25 May 2017 (whichever is the earlier), save that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Board may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.

Special Resolution5. That subject to the passing of Resolution 4 above, the Board be and it is hereby empowered pursuant to Section 570 of the Companies

Act 2006 to allot equity securities (within the meaning of Section 560 of the said Act) for cash pursuant to the authority conferred by the previous resolution as if sub-section (1) of Section 561 of the said Act did not apply to any such allotment provided that this power shall be limited:

(a) to the allotment of equity securities in connection with a rights issue in favour of ordinary shareholders where the equity securities respectively attributable to the interests of all ordinary shareholders are proportionate (as near as may be) to the respective numbers of Ordinary Shares held by them: and

(b) to the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate nominal value of £458,020 (i.e. approximately 25% of the issued shares at the date of this report).

By Order of the Board

H. F. EdmondsSecretary

7 January 2016

NOTICE OF ANNUAL GENERAL MEETING

Registered Office:47 RiversideMedway City EstateRochesterKentME2 4DP

Notes1. Only holders of Ordinary Shares, or their duly authorised representatives, are entitled to attend and vote at this meeting. A member so entitled may appoint one or more

proxies to attend and vote instead of him. A proxy need not be a member of the Company. Forms of Proxy need to be deposited with the Company’s registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, B63 3DA, not later than 48 hours before the time of the meeting. Completion of a Form of Proxy will not preclude a member attending and voting in person at the meeting.

2. A pre-paid Form of Proxy is enclosed for holders of Ordinary Shares.3. Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that, in order to have the right to attend and vote at the meeting (and

also for the purpose of calculating how many votes a person entitled to vote and attend may cast), a person must be entered on the register of holders of the Ordinary Shares of the Company by no later than 12.00 noon on Tuesday 23 February 2016, being 48 hours before the time fixed for the meeting. Changes to entries on the register after this time shall be disregarded in determining the rights of any person to attend or vote at the meeting.


COMPANY INFORMATION

Secretary and Registered OfficeHugh Edmonds, FCA47 Riverside Medway City Estate RochesterKent ME2 4DP

Company Registration Number 01635609

RegistrarsNeville Registrars LimitedNeville House 18 Laurel Lane Halesowen B63 3DA

Nominated Adviser & Stockbroker Cantor Fitzgerald EuropeOne Churchill PlaceCanary WharfLondon E14 5RB

AuditorRSM UK Audit LLPThird Floor One London SquareCross Lanes Guildford GU1 1UN

Financial Public RelationsRedleaf CommunicationsFirst Floor4 London Wall BuildingsBlomfield StreetLondon EC2M 5NT

SolicitorsBPE Solicitors LLPSt James’ HouseSt James’ SquareCheltenhamGL50 3PR


NOTES


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APC Technology Group PLC

Head office:47 Riverside,Medway City Estate,Rochester,Kent ME2 4DP

01634 290588

www.apcplc.com

Documents

APC Technology Group PLC · 2020. 11. 17. · APC Technology Group PLC Annual Report and Accounts 2015 1 2015 Highlights • Good progress made against objectives set out in Group-wide