ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH

Transcription

1 ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH

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3 CONTENTS Chairman s introduction 4 Strategic report 6 Management team 10 Directors report 12 Corporate governance 15 Remuneration report 18 Independent auditors report to the members of InTechnology plc 22 Consolidated statement of comprehensive income 24 Statements of changes in shareholders equity 25 Balance sheets 27 Cash flow statements 28 Notes to the financial statements 29 Notice of Annual General Meeting 56 Form of proxy for InTechnology plc 61 Corporate information 63 3

4 CHAIRMAN S INTRODUCTION The recent year to 31 March 2014 has been one of substantial change to the trading profile of our Company. Just after we circulated last year s audited results we were approached with an offer to purchase for cash the whole of our Managed Services ( IMS ) business. Your Board had been aware of consolidation taking place in the Managed Services sector and that we had to become either a consolidator or be acquired. After lengthy negotiations and due diligence it was considered the better option was to sell the IMS business to Redcentric Plc. The eventual sale completed on 6 December 2013 and after completion accounts were subsequently agreed the sale proceeds were 64.7 million, giving rise to a profit on disposal of 11.8 million. Your Board took professional advice that no charge to corporation tax arises. Our financial results are therefore greatly impacted by the above transaction which account for IMS as a discontinued operation up to the sale date. Our revenues from continuing operations are 0.8m (2013: 0.9m) and we incurred an operating loss of 2.0m (2013: 3.2m loss). Profit on disposal of IMS was 11.8m. Group profit before tax including discontinued operations was 7.8m (2013: 0.2m loss). Our share of losses after tax of our associate company, Mobile Tornado Group Plc ( MT ), was 1.2m loss (2013: 1.4m loss). During the year MT strengthened its balance sheet by the issue of new ordinary shares. 4m gross cash was raised from new shareholders and your Company converted 4m debt to equity thus maintaining our 49.9 per cent holding in MT. We also converted further debt into redeemable preference shares and the existing preference shares convertible terms were cancelled but interest increased to 10 per cent per annum. MT gave a public trading update on 23 April 2014 and remains confident of its progress to sustained profits and cash generation. Your Company s executive directors have close management ties with MT and so concur with this confidence. Net cash at the year-end was 65.6m (2013: 3.3m) and all loans were repaid or sold with IMS. As you are aware we have announced and paid on 8 April 2014 a special dividend of 37 pence per fully paid Ordinary share. Prior to the year end all vested share options were exercised and calls made to deferred payment shareholders which resulted in 1.8m cash being received. Your Company commences this new financial year with sufficient cash to fund the working capital requirements of our remaining subsidiary company ventures in Digital Health and Wi-Fi systems. The Strategic report explains this in more detail. I wish to thank on your behalf all our staff, long serving and newly joined, whose energy, professional skills and loyalty will greatly assist us with our new ventures. I also wish to thank all IMS staff who left us last December for their efforts in making IMS an attractive well run business. Many of them exercised their options in InTechnology and are now shareholders. I also thank all our partners in all areas of the business. The Rt. Hon. Lord Parkinson Chairman 15 September

5 The Rt. Hon. Lord Parkinson Chairman 15 September 2014

6 STRATEGIC REPORT Overview Last year s results are dominated by the sale of our Managed Data and Voice Services business ( IMS ) on 6 December 2013 for 64.7m cash. This transaction leaves the balance sheet at the year end with 65.6m cash and no debt. We continue trading into the new financial year with the Digital Health business that commenced in 2012, our Call Recording business, Live-PA, and a new UK venture into Wi-Fi solutions and services. The Board declared on 18 March a special dividend of 37 pence per ordinary share paid on 8 April 2014 totalling 53.4 million leaving sufficient cash to fund the working capital of our recent new ventures whilst they reach operating profits and generate cash. Our associate company, Mobile Tornado Group plc, successfully issued new shares to investors for cash and we converted some of our debt for new equity thus maintaining our 49.9 per cent holding. Trading and operating performance Revenues from continuing operations 0.8m (2013: 0.9m) Revenues from discontinued operations 28.4m to 6 December (2013: 40.9m for 12 months) Continuing operations group operating loss 2.0m (2013: 3.2m loss) Profit on disposal of InTechnology Managed Services Ltd ( IMS ) 11.8m Share of post-tax loss of our Associate, Mobile Tornado Group plc, 1.2m (2013: 1.4m) Taxation credit 0.07m (2013: 0.4m) Group profit for the year 7.9m (2013: 0.7m loss) Cash 65.6m (2013: 8.0m) Debt nil (2013: 4.7m) Key Performance Indicators ( KPIs ): following the sale of IMS the directors shall decide on new KPIs for the Continuing businesses during the new financial year. Sale of IMS Last summer we were approached by Redcentric plc to discuss the sale of IMS. After a few months of negotiations the board unanimously agreed the sale for 64.7m cash on 6 December The reasons for the sale of IMS, which accounted for over 90 per cent of revenues and all the operating profit and cash generation of the Group, was twofold. First, the managed services sector is undergoing consolidation and we had either to be a consolidator or be acquired. The attraction offered by Redcentric was that their enlarged group would strengthen our IMS business and thus, secondly, safeguard the jobs of the IMS staff, many of whom had been with us for several years. In January 2014 we agreed completion accounts with Redcentric resulting in a final sale consideration of 64.7m. We had sold on the basis of no cash or debt and the cash withheld on sale was slightly higher than anticipated. Part of the sale process involved the relocation of our remaining staff to Cardale House, an existing nearby leasehold property in Harrogate. 6

7 INTECHNOLOGY PLC Peter Wilkinson Chief Executive Officer 15 September 2014

8 STRATEGIC REPORT CONTINUED Continuing businesses. Following the sale of IMS we had three continuing businesses, and our investment in Mobile Tornado Group plc. Digital Health This trades in the Group through both InTechnology plc and InHealthcare Ltd (100 per cent subsidiary) and we bring our core competencies of delivering end-to-end managed services to Digital Health. Digital Health commenced trading during 2012 and offers solutions to providers of clinical services in the UK Healthcare Sector. Our solutions are specifically designed to allow patients to self-manage their conditions, whilst still under close, but remote, supervision of their clinicians. Solutions we currently deliver include INR (Stroke) Management, Hyper Tension and Under Nutrition. Research carried out alongside our clinical partners has identified over 100 applications suited to our services. Crucial and central to delivering our services is the software development to enable clinicians to access patient data. We continue to develop our software which represents a major part of the Digital Health operating costs. Version 2 is scheduled for release later in By March 2014 Digital Health had contracted with five NHS trusts (hospitals) for pilot trials of some services and with the Department of Health and we are about to commence a trial for multiple services in the Primary Care Services (GP) sector. InTechnology Wi-Fi Ltd During November 2013 I invested through my family company in Alvarion, an Israeli based Wi-Fi manufacturer that had entered into Administration. Timing was crucial and there was hardly any time to conduct due diligence or to negotiate terms. However, as part of the acquisition of Alvarion my private family company, HOLF Investments Ltd acquired the exclusive UK rights to market Alvarion products and services. InTechnology Wi-Fi Ltd was incorporated on 17 January 2014 and is owned 60 per cent by InTechnology plc and 40 per cent by HOLF Investments Ltd. We have identified three niche UK markets for the Alvarion products; Sports stadiums most have no Wi-Fi capability and there is poor cellular service because of the crowds Towns and cities we believe these to have great potential Events as with sports stadiums, events attracting large crowds have difficulty in providing smart phone usage. We have commenced marketing to these niche markets and to date the response has been very encouraging and our first contract has been negotiated with an events company. An approach to football clubs appears very promising but our proposition will entail a high capital expenditure. Therefore Intechnology shall provide the working capital and HOLF Investments shall fund all capital expenditure. Live-PA Limited ( Live-PA ) (76.0 per cent owned since 1 April 2013) Live-PA has developed call recording software for Microsoft Lync voice software. The product is globally marketed through a partner company but sales are dependent on the adoption of Lync voice products and then for users requiring call recording. Sales remain disappointing and so we have deployed all Live-PA staff into our other businesses, thus reducing operating costs to almost nil. 8

9 Investment in associate undertakings Mobile Tornado Group plc ( MT ) (49.9 per cent owned and listed on AIM) In order to improve the balance sheet of MT, which we have in the past provided working capital by way of loans, it issued 40 million new ordinary shares at 20 pence each. Half were subscribed by new institutional investors for cash raising 4m and InTechnology converted debt for 20 million ordinary shares thus retaining our 49.9 per cent holding in MT. In addition we converted further debt into new 10 per cent cumulative redeemable Preference shares and changed the existing preference shares to the same terms. At 31 March 2014 we have 5.7 million of preference shares. Mobile Tornado issued a trading update on 23 April 2014 which states that whilst trading losses are still being incurred the existing sales contracts to major mobile network operators for Push-To- Talk services are still being rolled out, and negotiations are close to fruition with certain countries for its Homeland Security encrypted products. Cash and working capital requirements Cash at the year end was 65.6 million and there was no debt. As shareholders are aware your board declared on 18 March a special dividend of 37 pence per fully paid ordinary share that was paid on 8 April Share option holders exercised their options prior to this and also the board made a call on all nil paid ordinary shareholders. This resulted in 1.8 million cash received prior to the year end. After the dividend of 53.4 million was paid on 8 April your company has retained sufficient cash to provide working capital to the new ventures of Digital Health and Wi-Fi. Outlook It is perhaps easier to comment on our associate, Mobile Tornado, than on fairly new ventures into Digital Health and Wi-Fi. We have been expecting Mobile Tornado to move into sustained profit and cash flow generation for some years. However it does now appear to have contracted sufficient business that once deployed will enable these objectives. In addition its move into Homeland Security markets will hopefully enable a good return on our investment to date. Now let me turn to the Digital Health and Wi-Fi businesses. Each is in a separate and distinct market, but both have our pedigree of providing an end-to-end managed service that we successfully delivered to the managed data and voice markets that IMS operated in. We believe that we shall deliver good results in these markets. Peter Wilkinson Chief Executive Officer 15 September

10 MANAGEMENT TEAM Non-executive Directors The Rt. Hon. Lord Parkinson Chairman and Senior Non-executive Director Lord Parkinson was appointed to the Board in July 2000 as a non-executive Director and is Chairman of the Audit Committee and a member of the Remuneration Committee. Lord Parkinson is a Member of the House of Lords and was a Member of Parliament from 1970 to 1992, during which time he held a number of senior ministerial positions including Secretary of State for Trade and Industry, Energy and Transport. He was Chairman of the Conservative Party from 1981 to 1983 and again from 1997 to A qualified chartered accountant, Lord Parkinson is currently Chairman and Director of a number of other companies. Charles Scott Non-executive Director Charles Scott joined the Board in April 2001 as a non-executive Director. A chartered accountant, he was Chairman of William Hill plc before retiring on 31 August 2010 and is a non-executive Director of Flybe Group Plc and EMCORE Corporation. He is Chairman of the Remuneration Committee. 10

11 Executive Directors Peter Wilkinson Chief Executive Officer Peter Wilkinson founded STORM in 1983 and VData in 1998 and both these businesses were sold, in a reverse takeover, to InTechnology plc in The businesses were sold respectively in 2006 and In 1995, he started Planet Online Ltd, the Internet service provider, which was subsequently sold to Energis in He retained Planetfootball.com which was reversed into Sports Internet Group plc in 1999 and subsequently sold to BSkyB plc in In 1998, Peter invented the free ISP model Freeserve, the Internet access service which was launched by DSG International plc. Peter is non-executive Chairman of Mobile Tornado Group plc, an AIM listed telecoms technology company, and holds a 11% stake. InTechnology plc has a 49.9% stake in Mobile Tornado Group plc. He is a director and majority shareholder of HOLF Investments Ltd which controls Alvarion Telecom UK Ltd and also owns 40% of InTechnology Wi-Fi Ltd. Andrew Kaberry Finance Director Andrew Kaberry, a chartered accountant, has worked with Peter Wilkinson since 1984 as Finance Director of STORM and Vdata and was appointed to the Board of InTechnology plc in July He has significant experience of the computer industry including Finance Director of Planet Online Limited. Richard James Company Secretary Richard James qualified as a solicitor with Allen & Overy in 1986 and was a Partner at Pinsent Curtis in 1991, before moving to Hammonds as a Partner in After advising Peter Wilkinson on the acquisition of Planetfootball.com by Sports Internet Group plc, Richard was appointed as Managing Director of Planetfootball.com and Company Secretary of Sports Internet Group plc. Richard was appointed to the Board of InTechnology plc in September 2000 as a Director and Company Secretary. Bryn Sage Director, and CEO InHealthcare Ltd Bryn Sage has spent his career in the IT industry beginning as a computer engineer in In 1986, he joined STORM and progressed through the company to the position of Sales Director in He was appointed to the Board of InTechnology plc in July 2000, and was Chief Operating Officer until the sale of IMS in December

12 DIRECTORS REPORT The Directors present their annual report and audited financial statements of the Company and the Group for the year ended 31 March Principal activities InTechnology plc provides digital health services and Wi-Fi systems to the UK market. Business review The information that fulfils the requirements of the Business Review can be found in the Strategic report on pages 6 to 9. Our review of the principal risks and uncertainties of the business is set out on pages 16 to 17. Results and dividends The Directors do not recommend the payment of a dividend in respect of the year ended 31 March 2014 (2013: nil). The directors declared a Special dividend on 18 March 2013 at the rate of 37 pence per fully paid ordinary share to be paid on 8 April 2014 as an interim dividend for the year to 31 March The profit made for the financial year of 7,901,000 (2013: 738,000 loss) will be added to reserves. Capital reduction At a General Meeting of the company held on 21 January 2014, convened at short notice by members holding in excess of 95% of the shares, a special resolution was passed to cancel the share premium account of 54,040,000 and capital redemption reserve account of 480,000 thus increasing distributable reserves by 54,520,000. The resolution was confirmed by an order of the High Court of Justice, Chancery Division and registered at Companies House on 28 January Share capital Details of changes in share capital are set out in note 19 to the financial statements. Directors The Directors of the Company during the year ended 31 March 2014, together with brief biographies, are shown on pages 10 to 11. Re-election of Directors In accordance with the Company s Articles of Association, Directors will retire by rotation. Accordingly, Charles Scott and Andrew Kaberry will retire by rotation and, being eligible, offer themselves for re-election at the forthcoming AGM. Directors remuneration and interests The Remuneration report is set out on pages 18 to 21. It includes details of Directors remuneration, interests in the shares of the Company, share options and pension arrangements. The Company s Register of Directors Interests, which is open to inspection at the Company s registered office, contains full details of Directors shareholdings and options to subscribe for shares. The Board s Corporate Governance report, including the Directors statement on responsibilities for the preparation of financial statements, is set out on pages 15 to 17. Details of related party transactions involving Directors of the Company are given in note 23 to the financial statements. 12

13 Substantial shareholdings The Company has received notification that the following six shareholders are interested in more than 3% of the issued ordinary share capital of the Company (totalling 89%): Going Concern Percentage of shares held Peter Wilkinson 54.3% Artemis fund managers 11.3% Jon Wood 7.3% Henderson fund managers 6.6% Andrew Kaberry 5.3% Herald Investment Trust 4.2% Under company law, the Directors are required to consider whether it is appropriate to prepare financial statements on the basis that the Company is a going concern. As part of its normal business practice budgets, cash flow forecasts and longer term financial projections are prepared. All loans have now been fully repaid. The Directors are therefore satisfied that the Company and the Group have adequate resources to enable them to continue in business for the foreseeable future. The Directors have therefore adopted the going concern basis in the preparation of the financial statements. Employees The Group places considerable value on the involvement of its employees and has continued its practice of keeping them informed of matters affecting them as employees and the various factors affecting the performance of the Group. The Directors recognise that continued and sustained improvement in the performance of the Group depends on its ability to attract, motivate and retain employees of the highest calibre. Furthermore, the Directors believe that the Group s ability to sustain a competitive advantage over the long term depends to a large part on ensuring that all employees contribute to the maximum of their potential. The Group is committed to improving the performance of all employees through development and training. The Group is an equal opportunity employer. The Group s policies seek to promote an employment environment free from discrimination, harassment and victimisation and to ensure that no employee or applicant is treated less favourably on the grounds of gender, marital status, age, race, colour, nationality or national origin, disability or sexual orientation or is disadvantaged by conditions or requirements, which cannot objectively be justified. Entry into, and progression within the Group, is solely determined on the basis of work criteria and individual merit. The Group continues to give full and fair consideration to applications for employment made by disabled persons, having regard to their respective aptitudes and abilities. The policy includes, where practicable, the continued employment of those who may become disabled during their employment and the provision of training and career development and promotion, where appropriate. Research and development The Group continues to undertake the development of new products with the objective of increasing future profitability. The cost to the Group is written off to the Statement of comprehensive income as incurred. Policy and practice on payment of creditors It is the Group s policy to agree terms and conditions for its business transactions with its suppliers. The Group seeks to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. In the year ended 31 March 2014 average creditor days for the Group and Company were 20 days (2013: 26 days). 13

14 DIRECTORS REPORT CONTINUED Charitable and political donations The contributions made by the Group during the year for charitable purposes totalled 1,950 (2013: 1,183). The Group made no political contributions (2013: nil). Environment The Group recognises the importance of environmental responsibility. The nature of its activities has a minimal effect on the environment but where they do, the Group acts responsibly and is aware of its obligations at all times. Annual General Meeting The next AGM of the Company will be held on 31 October Details of the business to be proposed at the AGM are contained within the Notice of Annual General Meeting, which is set out on pages 56 to 57. Independent auditors PricewaterhouseCoopers LLP have indicated their willingness to continue in office and a resolution proposing that they be reappointed as independent auditors and authorising the Directors to fix their remuneration will be proposed at the Annual General Meeting. By order of the Board Richard James Company Secretary 15 September

15 CORPORATE GOVERNANCE InTechnology plc is an unlisted public company and is not therefore required to comply with the provisions of the UK Corporate Governance Code (the Code ). The following disclosures are made voluntarily. Principles of Corporate Governance The Board recognises the value of good corporate governance as a positive contribution to the well being of the business and believes in applying these principles in a sensible and pragmatic manner that are considered appropriate to the nature and size of the Group. Board of Directors The Board of Directors consists of six members, including a non-executive Chairman and one other non-executive Director. The roles of Chairman and Chief Executive Officer are separated and clearly defined. The activities of the Company are controlled by the Board, which meets throughout the year. There is a formal schedule of matters specifically reserved for the full Board s decision, together with a policy enabling Directors to take independent advice in the furtherance of their duties at the Company s expense. The Board programme is designed so that Directors have regular opportunity to consider the Company s strategy, policies, budgets, progress reports and financial position and to arrive at a balanced assessment of the Company s position and prospects. Re-election of Directors As required by the Company s Articles of Association, Directors offer themselves for re-election at least once every three years. Any Director appointed during the year is required to seek reappointment by shareholders at the next Annual General Meeting. The biographical details of all the Directors are set out on pages 10 to 11. The Board is assisted by the Company Secretary, who provides a point of reference and regular support for all Directors and senior managers. He has responsibility for ensuring that Board procedures are followed, for establishing the Company s corporate governance policies and for assisting the Board in facilitating compliance by the Company with its legal obligations. The Board receives reports from the following three committees: The Audit Committee Comprises two non-executive Directors and is chaired by Lord Parkinson. Its duties include a comprehensive review of the annual and interim financial statements prior to Board approval and distribution to members. The Audit Committee meets at least twice a year to review the findings of the external auditors, key accounting policies and judgements. It has unrestricted access to the Company s auditors. The Remuneration Committee Comprises two non-executive Directors and is chaired by Charles Scott. It meets at least once a year and is responsible for making recommendations to the Board on remuneration policy for executive Directors and for setting salaries, incentive payments and the granting of share options. The Executive Operating Board This comprises the executive Directors and certain senior business managers, and is chaired by the Chief Executive Officer. It acts as a general operating management committee and meets twice monthly for most of the year. It authorises recruitment and capital expenditure and reviews operational and financial performance. Relations with shareholders The Company seeks to ensure that all shareholders are kept informed about the Company and its activities. A comprehensive annual report is sent to shareholders. The annual report is put on the websites of Asset Match ( and the Company ( The Annual General Meeting is a forum for shareholders participation with the opportunity to meet and question Board members. 15

16 CORPORATE GOVERNANCE CONTINUED Internal control The Board of Directors acknowledges its overall responsibility for the Company s systems of internal control and for monitoring their effectiveness. The Board has control over strategic, financial and compliance issues and has introduced a structure of responsibility with appropriate levels of authority. The Company s Directors and varying levels of management have clear responsibilities in ensuring that the control environment operates efficiently. Clear lines of responsibility are developed through the Company s organisational structure. Ethical policies are communicated through all forms of personnel training and via appropriate procedures, in establishing a code of ethics. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Company s systems are designed to provide reasonable assurance that problems are identified on a timely basis and are dealt with appropriately. The principal features of the Company s internal financial control structures can be summarised as follows: (a) Preparation of budgets and forecasts approved by the Board. (b) Monthly management accounts, showing comparisons of actual results against budget and prior year results, are reviewed by the Board. Variances from budget are thoroughly investigated and discussed at bi-monthly Board meetings. Where lapses in internal control are detected, these are rectified: (c) The Company s cash flow is monitored monthly. (d) The Board authorises capital expenditure where this is significant and all capital expenditure is first authorised by the Executive Operating Board. The Board has continued to enhance its risk control programme; in particular, those elements which relate to ensuring that risk reviews are formally embedded in control systems rather than being the subject of formal annual reviews. Risks and uncertainties There are a number of potential risks and uncertainties that could have an impact on the Company s long term prospects. Competitive pressures Both our Digital Health and Wi-Fi businesses operate in a competitive environment. To mitigate these competitive pressures, the Company targets niche sectors of the Digital Health and Wi-Fi systems markets, and develops and refines its services to demonstrate a competitive edge to its existing and potential customers. Within the Voice markets, the Company differentiates itself by offering value added services such as mobile phone apps. 16 The Digital Health division s target market is at its formative stage and is primarily the NHS, which has recently seen major structural changes. Although there is a degree of uncertainty and resistance to change within the market, the Company feels that by putting together a strong management team including experienced personnel from within the sector, by conducting significant market research, and by performing successful trials with large NHS bodies, it has a strong proposition to offer the market. Both the Digital Health and Wi-Fi division s contract with agreed SLAs. Adherence by the Company to operating within such SLAs is crucial to maintaining customer satisfaction and renewal of a contract. Internal procedures ensure that SLAs are constantly monitored and resources allocated to maintain levels of service of at least a minimum of that contracted with customers. Staff costs As a services business, total staff costs are approximately 60 per cent of our total operating costs. The Company could be hindered by a shortage or inability to recruit and retain qualified and experienced staff. To mitigate this risk, the Company constantly seeks to structure its recruitment and retention strategies to attract and retain the right people.

17 Economy Any national economic downturn can detrimentally affect the Company s level of demand for its services. To mitigate this risk, the Company will contract for all services on two years or longer minimum terms in order to have contracted future revenues. Risk assessment The Board is made aware of all risks to the Company by the executive Directors who are members of the Executive Operating Board, which includes senior managers of the Company. The Executive Operating Board usually meets two times per month. The Executive Operating Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. Statement of Directors responsibilities The Directors are responsible for preparing the Directors Report and financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and Company financial statements in accordance with International Financial Reporting Standards ( IFRSs ) as adopted by the European Union. 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 these 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 applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 17 The Directors are responsible for the maintenance and integrity of the Company s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Statement of disclosure of information to auditors So far as the Directors are aware, there is no relevant audit information of which the Company s auditors are unaware. Each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company s auditors are aware of that information. By order of the Board Richard James Company Secretary 15 September 2014

18 REMUNERATION REPORT The Directors present their Remuneration report which covers the remuneration of both executive Directors and non-executive Directors. The report has been approved by the Board and signed on its behalf by the Chairman of the Remuneration Committee. The contents of this report are unaudited unless clearly identified as audited. The Remuneration Committee comprises the non-executive Directors: Charles Scott (Chairman) The Rt. Hon. Lord Parkinson Directors remuneration Remuneration of non-executive Directors The remuneration of the non-executive Directors is determined by the Board, with the assistance of independent advice concerning comparable organisations and appointments. The non-executive Directors do not take part in discussions on their remuneration. Neither the non-executive Chairman nor the other non-executive Director received any pension from the Group. Remuneration of executive Directors The main aim of the Company s executive pay policy is to secure the skills and experience needed to meet its strategic business objectives. Furthermore, the Company aims to align the interests of all employees as closely as possible with the interests of shareholders through share-based incentives. The Company s Remuneration Committee decides the remuneration policy that applies to executive Directors. In setting the policy it considers a number of factors including: (a) The basic salaries and benefits available to executive Directors of comparable companies. (b) The need to attract and retain Directors of an appropriate calibre. (c) The need to ensure executive Directors commitment to the continued success of the Group by means of incentive schemes. The Company s remuneration policy is to: (a) Have regard to the Directors experience and the nature and complexity of their work in order to pay a competitive salary that attracts and retains management of the highest quality. (b) Link individual remuneration packages to the Group s long term performance through the award of share options and incentive schemes. (c) Provide post retirement benefits through defined contribution pension schemes. (d) Provide employment related benefits including the provision of a company car (or car allowance), fuel, medical and life insurance and insurance relating to the Directors duties. 18

19 Salaries The Remuneration Committee meets at least once a year in order to consider and set the annual salaries for executive Directors, having regard to the needs of the Company, individual responsibilities, personal performance and independently compiled salary survey information. Pensions (audited) Certain executive Directors are members of defined contribution pension schemes, the assets of which are held independently of the Company. The amounts contributed by the Company for the year ended 31 March 2014 were 11,000 (2013: 10,000). The Company does not provide any other post-retirement benefits to the Directors. Contracts of service The executive Directors have contracts of service that can be terminated by the Company with the following notice periods: Peter Wilkinson 12 months Andrew Kaberry 6 months Richard James 12 months Bryn Sage 12 months With the exception of the contract with Richard James, if the Company terminates the contract by notice but other than on giving full notice, the contracts of service provide for the payment of a fixed amount equal to the salary and other contractual benefits for the unexpired portion of the appointment or entitlement to notice, as the case may be. Non-executive Directorships The Remuneration Committee believes that the Group can benefit from executive Directors accepting appointments as non-executive Directors of other companies. The Director concerned may retain any fees related to such employment. 19

20 REMUNERATION REPORT CONTINUED Directors emoluments (audited) The remuneration of the Directors of the Company was as follows: Executive Directors Salary Bonus Benefits in kind Pension contributions Total Total '000 '000 '000 '000 '000 '000 Peter Wilkinson Bryn Sage Andrew Kaberry Richard James Fees Bonus Benefits in kind Pension contributions Total Total '000 '000 '000 '000 '000 '000 Non-executive Directors The Rt. Hon. Lord Parkinson Charles Scott Total Benefits in kind include the provision of a company car (or car allowance), fuel, medical, life insurance and insurance relating to the Directors duties. 20

21 Directors interests Interests in shares The interests of the Directors in the shares issued and fully paid of the Company as at 31 March were: Number Percentage of shares held Number Percentage of shares held The Rt. Hon. Lord Parkinson 221, % 221, % Peter Wilkinson 78,403, % 78,403, % Richard James 800, % 800, % Andrew Kaberry 7,725, % 7,725, % Bryn Sage 1,491, % 1,491, % 88,643, % 88,643, % Apart from the interests disclosed above, none of the other Directors of the Company at 31 March 2014 held interests at any time in the year in the share capital of the Company or other Group companies. There have been no other changes in Directors shareholdings since 31 March Charles Scott Non-executive Director 15 September

22 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF INTECHNOLOGY PLC REPORT ON THE FINANCIAL STATEMENTS Our opinion In our opinion: the financial statements, defined below, give a true and fair view of the state of the group s and of the company s affairs as at 31 March 2014 and of the group s profit and the group s and the company s cash flows for the year then ended; the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; the company financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act This opinion is to be read in the context of what we say in the remainder of this report. What we have audited The group financial statements and company financial statements (the financial statements ), which are prepared by InTechnology plc, comprise: the Balance sheets as at 31 March 2014; the Consolidated statement of comprehensive income for the year then ended; the Cash flow statements for the year then ended; the Statement of changes in shareholders equity for the year then ended; and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union and, as regards the company financial statements, as applied in accordance with the provisions of the Companies Act In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group s and the company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and financial statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. 22

23 Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Other matters on which we are required to report by exception Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion: we have not received all the information and explanations we require for our audit; or adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or the company financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Directors remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors remuneration specified by law are not made. We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the Statement of directors responsibilities set out on pages 17 and 18, 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 ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the company s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Arif Ahmad (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Leeds 15 September

24 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH Restated Note '000 '000 Continuing operations Revenue Cost of sales (734) (365) Gross profit Net operating expenses before depreciation (5,754) (3,749) Depreciation of property, plant and equipment (110) (166) Net operating expenses 4 (5,864) (3,915) Other operating income 3, Operating loss (1,996) (3,232) Finance income Share of post tax loss of associates 13 (1,246) (1,430) Profit on revaluation of equity interest 2 (118) - Loss before taxation (3,217) (4,639) Taxation Loss for the year from continuing operations 3 (3,146) (4,595) Discontinued operations Profit for the year from discontinued operations 18 11,047 3,857 Profit /(loss) for the year 3 7,901 (738) Other comprehensive income: Currency translation differences 11 (7) Total comprehensive income /(loss) for the year 7,912 (745) Profit /(loss) attributable to: - Owners of the parent 7,976 (745) - Non-controlling interests (64) - 7,912 (745) Earnings /(loss) per share (pence) Basic (0.52) Diluted (0.52) The prior year consolidated Statement of comprehensive income has been restated for the discontinued operations. 24

25 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEAR ENDED 31 MARCH 2014 Share Share Capital Share Retained Total capital premium redemption reserve option reserve earnings '000 '000 '000 '000 '000 '000 Group As at 1 April ,409 54, ,492 65,600 Employee share options: - value of employee services (1) - (1) Issue of deferred payment shares Share of exchange loss of associate (7) (7) Net loss for the year (738) (738) As at 31 March ,412 54, ,747 64,878 Employee share options: - value of employee services Cancellation of deferred payment shares (3) (21) (24) Share options exercised Capital restructure - (54,040) (480) - 54,520 - Share of exchange gain of associate Net profit for the year ,976 7,976 As at 31 March , ,254 73,414 25

26 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEAR ENDED 31 MARCH 2014 CONTINUED Share Share Capital Share Retained Total capital premium redemption reserve option reserve earnings '000 '000 '000 '000 '000 '000 Company As at 1 April ,409 54, ,287 66,395 Employee share options: - value of employee services (1) - (1) Issue of deferred payment shares Net profit for the year As at 31 March ,412 54, ,262 67,393 Employee share options: - value of employee services Cancellation of deferred payment shares (3) (21) (24) Share options exercised Capital restructure - (54,040) (480) - 54,520 - Net profit for the year ,186 15,186 As at 31 March , ,968 83,128 26

27 BALANCE SHEETS AS AT 31 MARCH 2014 Group Company Note '000 '000 '000 '000 Assets Non-current assets Intangible assets ,997-35,747 Property, plant and equipment , ,390 Investment in subsidiary and associate undertakings 13 2,369-13,674 8,419 Deferred tax assets , Trade and other receivables ,445 6,873 2,830 52,526 21,484 63,800 Current assets Inventories Trade and other receivables 15 5,365 16,216 5,976 16,862 Current tax assets Cash and cash equivalents 65,584 7,991 65,521 7,972 71,452 24,923 71,961 25,550 Liabilities Current liabilities Trade and other payables 16 (1,009) (7,772) (876) (7,762) Borrowings 17 - (1,781) - (1,781) Current and deferred tax liabilities - (101) (22) (78) Net current assets 70,443 15,269 71,063 15,929 Non-current liabilities Trade and other payables (9,419) (9,419) Borrowings 17 - (2,917) - (2,917) Net assets 73,273 64,878 83,128 67,393 Shareholders' equity Share capital 19 1,443 1,412 1,443 1,412 Share premium , ,040 Capital redemption reserve Share option reserve Retained earnings 71,254 8,747 80,968 11,262 Equity attributable to owners of the Group 73,414 64,878 83,128 67,393 Non-controlling interests (141) Total equity 73,273 64,878 83,128 67,393 The financial statements on pages 24 to 55 were approved by the Board of Directors on 15 September 2014 and were signed on its behalf by: Andrew Kaberry, Finance Director, InTechnology plc. Registered number:

28 CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014 Group Company Note '000 '000 '000 '000 Cash flows from operating activities Cash generated from operations 20 (163) 3,906 (1,821) 3,887 Interest received Interest paid (86) (137) (10) (137) Interest element of finance lease payments (44) (42) (3) (42) Tax paid (303) (519) (97) (519) Net cash (used in) / generated from operating activities (475) 3,323 (1,810) 3,304 Cash flows from investing activities Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment (2,563) (4,303) (611) (4,303) Proceeds from sale of investments 64,249-64,093 - Cash transferred out on hive down - - (4,574) - Net cash generated from / (used in) investing activities 61,689 (4,259) 58,911 (4,259) Cash flows from financing activities Net proceeds from issue of ordinary share capital Decrease in borrowings (3,425) (725) (50) (725) Capital element of finance lease payments (758) (639) (64) (639) Net cash (outflow) / inflow from financing activities (3,613) (1,364) 456 (1,364) Net increase /(decrease) in cash and cash equivalents in the year 57,601 (2,300) 57,557 (2,319) Cash and cash equivalents at the beginning of the year 7,991 10,294 7,972 10,294 Exchange losses on cash and cash equivalents (8) (3) (8) (3) Cash and cash equivalents at the end of the year 65,584 7,991 65,521 7,972 Cash and cash equivalents at the end of the year 65,584 7,991 65,521 7,972 Borrowings - (4,698) - (4,698) Net Cash at the end of the year 65,584 3,293 65,521 3,274 28