Company Registration No. 01333367 (England and Wales) TRAIDCRAFT PLC REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017
COMPANY INFORMATION
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STRATEGIC REPORT Gateshead PLC (trading) Support & Admin, 11.2 Sales & Cust Service, 23.5 Prod. Dev't & Brand, 12.8 87.6 12.8 Fundraising, 0.8 Operations, 36.2 Sourcing, 3.0 Gateshead TX (charity) Dev't Programmes, 1.0 Fundraising, 7.3 Operations, 0.0 Sales & Cust Service, 0.8 Support & Admin, 3.8 Dev't Programmes OS India, 4.0 Total FTE headcount 129.9 8.5 London TX (Charity) Policy, 5.9 Support & Admin, 1.6 Fundraising, 1.0 Dev't Programmes OS Kenya, 4.0 Dev't Programmes OS Bangladesh, 13.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 PLC FTE Headcount 89.7 81.7 83.8 84.4 86.1 90.7 97.2 104.5105.0 95.0 88.1 91.8 87.6 46.0 45.0 44.0 43.0 42.0 41.0 40.0 39.0 38.0 37.0 36.0 TX FTE Headcount 44.5 44.8 44.3 43.7 43.6 43.3 42.4 41.2 41.6 41.6 40.3 39.2 East Africa & South Asia TX (Charity) Agency, 6.3 Type of contract Permanent, 79.4 Fixed, 15.5 Consulta nt, 0.3 Male 52% Gender 21.0 Female 48% 10
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DIRECTORS' REPORT The directors present their annual report and financial statements for the year ended 31 March 2017. Principal activities The principal activity of the company continued to be that of a fair trade company selling a wide range of grocery, crafts and clothing products. Directors The directors who held office during the year and up to the date of signature of the financial statements were as follows: R Gidoomal J Borden L Cotton M Edmundson S Hughes D Neale M Sentamu R Roth (appointed 1 October 2016) A Biggs L Bush (resigned 31 December 2016) J Osman T Bees (resigned 30 November 2016) Results and dividends The results for the year are set out on page 19. No ordinary dividends were paid. The directors do not recommend payment of a final dividend. Qualifying third party indemnity provisions The company has made qualifying third-party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the reporting date. Auditor Since the last annual report, the external audit has been retendered and a new auditor firm selected. In accordance with the company's articles, a resolution proposing that UNW LLP be appointed as auditor of the company will be put at a General Meeting. Statement of disclosure to auditor So far as the directors are aware, there is no relevant audit information of which the company's auditors are unaware. Additionally, the directors have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company's auditors are aware of that information. By order of the board A Biggs Secretary July 2017 16
DIRECTORS' RESPONSIBILITIES STATEMENT The directors are responsible for preparing the Strategic Report and the Directors' Report and the 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 elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 company and of the profit or loss of the company 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 UK Accounting Standards 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 enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 17
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF TRAIDCRAFT PLC Opinion on financial statements We have audited the financial statements on pages 19 to 41. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. In our opinion the financial statements: give a true and fair view of the state of the company s affairs as at 31 March 2017 and of its loss for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006. Scope of the audit of the financial statements A 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 other matter 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 [and, based on the work undertaken in the course of our audit, the Strategic report and the Directors Report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors report. We 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, or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit;[or] Respective responsibilities of directors and auditor As more fully explained in the Directors Responsibilities Statement set out on page 17, 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. 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. IAIN CORNER FCA (Senior Statutory Auditor) For and on behalf of RSM UK Audit LLP, Statutory Auditor Chartered Accountants 1 St James Gate Newcastle Upon Tyne NE1 4AD 18
STATEMENT OF COMPREHENSIVE INCOME Note Turnover 3 10,542 11,302 Cost of sales (6,065) (6,630) Gross profit 4,477 4,672 Distribution costs (601) (610) Administration expenses (4,607) (4,272) Other operating income 4 187 214 Operating (loss)/profit before interest 5 (544) 4 Fair value loss on foreign exchange contracts (113) (131) Interest receivable and similar income 6 6 1201 111 Interest payable and similar charges 7 (9) (151) Loss on ordinary activities before taxation (546) (277) Taxation 8 (50) (6) Loss for the financial year (596) (283) Other comprehensive income Actuarial losses on defined benefit pension (243) (24) Total comprehensive income for the year (839) (307) 19
Company Registration No. 01333367 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017 Note Fixed assets Intangible assets 11 134 27 Tangible assets 12 333 279 Investment property 13 870 870 Investments 14 1-1,338 1,176 Current assets Stocks 15 1,747 1,406 Debtors due within one year 16 1,177 1,507 Cash at bank and in hand 256 979 3,180 3,892 Current liabilities Loans and overdrafts 17 (113) (13) Creditors due within one year 18 (1,269) (1,089) (1,382) (1,102) Net current assets 1,798 2,790 Net assets excluding pension liability 3,136 3,966 Defined benefit pension liability 20 - - Net assets including pension liability 3,136 3,966 Capital and reserves Called up share capital 21 489 489 Share premium account 22 2,730 2,730 Capital redemption reserve 22 1,477 1,477 Investment revaluation reserve 22 158 158 Profit and loss account (1,718) (888) Total equity 3,136 3,966 The financial statements on pages 19-41 were approved by the Board of Directors and authorised for issue on 24 July 2017 and are signed on its behalf by: Ram Gidoomal, Chair 20
STATEMENT OF CHANGES IN EQUITY Share Share Capital Investment Profit Capital Premium Redemption Revaluation & loss Total Note Balance at 1 April 2015 489 2,730 1,477 158 (589) 4,265 Year ended 31 March 2016: Loss for the year - - - - (283) (283) Actuarial losses on defined benefit scheme 20 - - - - (24) (24) Transactions with owners: Unclaimed dividends - - - - 8 8 Balance at 31 March 2016 489 2,730 1,477 158 (888) 3,966 Year ended 31 March 2017: Loss for the year (596) (596) Actuarial losses on defined benefit scheme 20 - - - - (243) (243) Transactions with owners: Unclaimed dividends - - - - 9 9 Balance at 31 March 2017 489 2,730 1,477 158 (1,718) 3,136 21
STATEMENT OF CASH FLOWS Note Operating activities Cash (absorbed by)/generated from operations 23 (568) 323 Interest paid (9) (7) Net cash (used in)/from operating activities (577) 316 Investing activities Interest received 1 1 Purchase of intangible assets (122) (27) Purchase of tangible fixed assets (125) (58) Purchase of investment (1) - Sale of tangible fixed assets 1 - Net cash used in investing activities (246) (84) Financing activities Repayments of borrowings (7) (23) Net (decrease)/increase in cash (830) 209 Cash and cash equivalents at start of year 979 770 Cash and cash equivalents at end of year 149 979 22
NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies Company information Traidcraft Plc is a limited company domiciled and incorporated in England. The registered office is Kingsway, Gateshead, NE11 0NE. The company's principal activities are disclosed in the Directors' Report. Accounting convention These financial statements have been prepared in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland ( FRS 102 ) and the requirements of the Companies Act 2006. The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest '000. The financial statements have been prepared on the historical cost convention, modified to include the deemed cost of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below. Going concern The company has reported an operating loss in each of the four preceding years but has made a small operating profit this financial year. The directors have considered the present outlook for the business and the challenges it faces. Cashflow projections have been prepared for the year ahead which show we will be operating well within our facility limits. Therefore after making enquiries and considering the uncertainties mentioned above, the Board of Directors has a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements. Refer to the Strategic Report for further details. 23
NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies (Continued) Turnover Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Commission receivable on licensed products, disclosed under operating income, is the total amount of royalty earned by the company from the sale of Traidcraft branded products. Intangible assets Intangible assets represent major commercial software development costs and are amortised on a straightline basis over a period of five years beginning when they are brought into active business use. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases: Long Leasehold and leasehold improvements 2.5-10% Straight line Plant and Machinery 10% Straight line Office and computer equipment 10-25% Straight line Subsequent costs, including replacement parts and major inspections, are capitalised only when it is probable that such costs will generate future economic benefits. Any replaced parts or remaining carrying amounts of previous inspections are then derecognised. All other costs of repairs and maintenance are charged to profit and loss as incurred. The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss. Land and buildings are accounted for separately even when acquired together. 24
NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies (Continued) Investment properties Investment property, which is property held to earn rentals, is measured using the fair value model and stated at its fair value as at the reporting end date. The surplus or deficit on revaluation is recognised in the profit and loss account. The Companies Act 2006 requires all properties to be depreciated. However, this requirement conflicts with the generally accepted accounting principle set out in FRS 102. The directors consider that, because investment properties are not held for consumption, but for their investment potential, to depreciate them would not give a true and fair view. If this departure from the Companies Act 2006 had not been made in order to give a true and fair view, the profit for the financial year would have been reduced by depreciation. However, the amount of depreciation cannot be reasonably quantified, because depreciation is only one of many factors reflected in the annual valuation and the amount relating to the depreciation of the property cannot be separately identified. Impairment of fixed assets At each reporting end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Stocks Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition. At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss. Financial instruments The company has elected to apply the provisions of Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues of FRS 102 to all of its financial instruments. Financial instruments are recognised when the company becomes party to the contractual provisions of the instrument. Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously. Basic financial assets Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the financial asset is measured at the present value of the future receipts discounted at a market rate of interest. 25
NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies (Continued) Other financial assets Other financial assets, including trade investments, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment. Impairment of financial assets Financial assets, other than those held at fair value through profit or loss, are assessed for indicators of impairment at each reporting end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset s original effective interest rate. The impairment loss is recognised in profit or loss. De-recognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party. Classification of financial liabilities Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Basic financial liabilities Basic financial liabilities, including trade and other payables, bank loans, and loans from fellow group companies that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method. Other financial liabilities Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge. De-recognition of financial liabilities Financial liabilities are derecognised when, and only when, the company s contractual obligations are discharged, cancelled, or they expire. Derivatives The company enters into foreign exchange forward contracts in order to manage its exposure to foreign exchange risk. 26
NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies (Continued) Taxation The tax expense represents the sum of the current tax expense and deferred tax expense. Current tax assets are recognised when tax paid exceeds the tax payable. Current and deferred tax is charged or credited to the profit or loss, except when it relates to items charged or credited to other comprehensive income or equity, when the tax follows the transaction or event it relates to and is also charged or credited to other comprehensive income, or equity. Current tax assets and current tax liabilities and deferred tax assets and deferred tax liabilities are offset, if and only if, there is a legally enforceable right to set off the amounts and the entity intends either to settle on the net basis or to realise the asset and settle the liability simultaneously. Current tax is based on taxable profit for the year. Taxable profit differs from total comprehensive income because it excludes items of income or expense that are taxable or deductible in other periods. Current tax assets and liabilities are measured using tax rates that have been enacted or substantively enacted by the reporting period. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based on tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is not discounted. Deferred tax liabilities are recognised in respect of all timing differences that exist at the reporting date. Timing differences are differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in different periods from their recognition in the financial statements. Deferred tax assets are recognised only to the extent that it is probable that they will be recovered by the reversal of deferred tax liabilities or other future taxable profits. 27
NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies (Continued) Employee benefits The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets. The cost of any unused holiday entitlement is recognised in the period in which the employee s services are received. Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits. Retirement benefits For defined contribution schemes the amount charged to profit and loss is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments. The cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method, and is based on actuarial advice. The change in the net defined benefit liability arising from employee service during the year is recognised as an employee cost. The cost of plan introductions, benefit changes, settlements and curtailments are recognised as an expense in measuring profit or loss in the period in which they arise. The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost. Re-measurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods. The defined net benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme. 28
NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies (Continued) Leases Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term. Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed. Foreign exchange Transactions in currencies other than the functional currency (foreign currency) are initially recorded at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies are translated at the rate ruling at the date of the transaction, or, if the asset or liability is measured at fair value, the rate when that fair value was determined. All translation differences are taken to profit or loss, except to the extent that they relate to gains or losses on non-monetary items recognised in other comprehensive income, when the related translation gain or loss is also recognised in other comprehensive income. 2 Judgements and key sources of estimation uncertainty In the application of the company s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods. Critical judgements The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements: Saleable value of stock Stock impairment calculations are made based upon the judgement of whether any individual stock item can be sold at a price which exceeds its carrying value. Some handicrafts lines move slowly but remain in a saleable condition and are sold over several seasons. Bulk food products and ingredients have a shorter storage life and future utilisation volume and sale price has to be judged before potential impairment can be determined. Key sources of estimation uncertainty Apart from retirement benefits, there are no estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities. 29
NOTES TO THE FINANCIAL STATEMENTS 3 Turnover Turnover analysed by category: Food 4,660 5,075 Beverages 1,719 1,889 Crafts, clothing and hand-made paper 2,843 2,940 Non-food consumables 174 223 Cards and calendars 825 844 Recycled paper products 305 307 Sundry 16 24 10,542 11,302 Turnover analysed by geographical market UK 10,284 10,909 Other EU 188 321 Rest of the world 69 72 10,541 11,302 4 Other Operating Income Rent and service charges receivable from Traidcraft Exchange 23 29 Rent of investment property 74 74 Commission receivable on licensed products 81 102 Other 9 9 187 214 30
NOTES TO THE FINANCIAL STATEMENTS 5 (Loss)/Profit on Ordinary Activities Before Taxation (Loss)/profit on ordinary activities before taxation is stated after (charging)/crediting: Cost of stocks recognised as an expense (6,065) (6,630) Depreciation of owned tangible fixed assets (71) (72) Loss on disposal of intangible fixed assets (14) - Foreign exchange (losses)/gains on assets (12) 87 Auditors remuneration (21) (21) Operating lease charges (3) (16) Reconciliation of EBITDA trading (loss)/profit to operating (loss)/profit: Underlying EBITDA trading (loss)/profit (302) 83 Depreciation of owned tangible fixed assets (71) (72) Loss on disposal of intangible fixed assets (14) - Rent of investment property (note 4) 74 74 Redundancy costs (136) - Costs relating to closed defined benefit pension scheme (note 20) (95) (81) Operating (loss)/profit (544) 4 6 Interest Receivable and Similar Income Interest receivable 1 1 Interest on net defined benefit asset 119-120 1 7 Interest Payable and Similar Charges Interest on overdrafts and loans (9) (7) Interest on net defined benefit asset - (144) (9) (151) 31
NOTES TO THE FINANCIAL STATEMENTS 8 Taxation UK corporation tax on income for the period at 17% / 20% - - Deferred tax relating to defined benefit pension scheme (50) (6) (50) (6) The charge for the year can be reconciled to the (loss) per the Statement of Comprehensive Income as follows: Loss on ordinary activities before tax (546) (277) Expected tax charge based on corporation tax rate 17% / 20% 93 55 Losses not utilised (152) (38) Permanent capital allowances in excess of depreciation 12 6 Other permanent differences (2) (30) General provisions (1) 1 Tax expense for the year (50) (6) The company has an unprovided deferred tax asset of 441,000 at 31 March 2016 (2016-354,000) available to be utilised against future profits as they arise. As it is not known with certainty what the pattern of future profitability will be, the losses have not been recognised as a deferred tax asset in the financial statements, but this will be reassessed on an annual basis. 9 Employees The average number of employees (including executive directors) during the year and their payroll costs were: Full time 67 65 Part time 19 21 86 86 Wages and salaries 1,942 1,943 National Insurance 167 168 Pension costs 244 230 Redundancy costs 136-2,489 2,341 32
NOTES TO THE FINANCIAL STATEMENTS 10 Directors Remuneration in respect of directors was as follows: Salary National Insurance Expenses Compensation Total Total Pensions 2017 2017 2017 2017 Executive: Andy Biggs 60,000 7,161 - - 67,161 64,814 4,500 4,125 Larry Bush 40,999 6,348 175 27,822 75,344 57,769 3,075 3,881 Simon Grant - - - - - 56,346-3,649 Joe Osman 47,940 5,496 - - 53,436 53,436 3,596 3,596 Robin Roth 33,752 9,425 5,585-48,762 - - - Non-executive: Jenny Borden 2,925 - - - 2,925 2,925 - - Liz Cotton 2,925 - - - 2,925 2,925 - - Matt Edmundson 2,925 - - - 2,925 22,021 - - Ram Gidoomal 6,750 - - - 6,750 6,750 - - Sarah Hughes 2,925 - - - 2,925 2,925 - - David Neale 2,925 - - - 2,925 2,925 - - Margaret Sentamu 2,925 - - - 2,925 2,925 - - Staff Director: Tessa Bees 14,643 1,259 - - 15,903 23,689 1,057 1,586 221,634 29,689 5,760 27,822 284,905 299,450 12,228 16,837 The number of directors for whom retirement benefits accrued under defined contribution schemes was four (2016 five). The number of directors for whom retirement benefits are accruing under defined benefit schemes was one (2016 - one). Robin Roth has waived his entitlement to company pension contributions. 11 Intangible Fixed Assets Cost Development 000 At 1 April 2016 27 Additions 122 Disposals (15) At 31 March 2017 134 Intangible assets represent development costs incurred as part of a two-year project to develop a new online web store. As the asset is under construction and not yet in use, no amortisation charge has been made in the period. 33
NOTES TO THE FINANCIAL STATEMENTS 12 Tangible Fixed Assets Long Leasehold Plant and Machinery Office & Computer Equipment Cost At 1 April 2016 942 352 684 1,978 Additions 22 16 87 125 Disposals - (21) (189) (210) At 31 March 2017 964 347 582 1,893 Depreciation At 1 April 2016 798 305 596 1,699 Provided in the year 17 9 45 71 Eliminated on disposals - (21) (189) (210) At 31 March 2017 815 293 452 1,560 Carrying amount Net book value at 31 March 2017 149 54 130 333 Net book value at 31 March 2016 144 47 88 279 Total If revalued assets were stated on an historical cost basis rather than a fair value basis the amounts included would have been: Cost 802 780 Accumulated depreciation (706) (693) Carrying value 96 87 13 Investment Property Fair value 870 870 The investment property comprises a warehouse located at Queensway, Gateshead, which is leased to a third party. The fair value of the investment property has been arrived at on the basis of a valuation carried out by Sanderson Weatherall, who are not connected to the company. The valuation was made on an open market basis at 31 March 2017 by reference to market evidence of transaction prices for similar properties. 34
NOTES TO THE FINANCIAL STATEMENTS 14 Fixed Asset Investments Traidcraft Germany 1 - Paper Dove - - 1 - Traidcraft plc holds 10% (10 B shares) of the share capital of Paper Dove Company Limited, a company registered in England. The nominal value and cost of the shareholding is 10. Dividend income of nil (2016 - nil) has been recognised 15 Stocks Goods for resale 1,737 1,397 Packing materials 10 9 1,747 1,406 16 Debtors Due Within One Year Trade debtors 708 836 Advance payments to producers* 208 358 Other debtors 80 159 Prepayments and accrued income 149 130 Amounts owed by Traidcraft Exchange 32 24 1,177 1,507 * In common with other Fair Trade organisations, Traidcraft makes advance payments to a number of its overseas producers to finance working capital requirements whilst orders are in production. During the year 21 overseas producers (2016 20 producers) received such advances. 35
NOTES TO THE FINANCIAL STATEMENTS 17 Loans and Overdrafts Bank overdraft 107 - Bank loans payable within one year 6 13 113 13 The company bankers, HSBC, retain a fixed and floating charge over the assets of the company which can be used in the future as security for any borrowing facility. HSBC have a right of set off between the bank accounts operated by the company. The bank loan represents a purchase credit facility provided by Shared Interest Society Limited to finance purchase orders placed by Traidcraft with producers. 18 Creditors Due Within One Year Trade creditors 799 669 Other creditors 43 26 Accrued expenses and deferred income 305 259 Taxation 117 111 Amounts owed to Traidcraft Exchange 5 24 1,269 1,089 19 Financial Instruments Debt instruments measured at cost 1,245 2,255 Forward exchange contracts measured at fair value 39 101 Carrying amounts of financial assets 1,284 2,356 Financial liabilities measured at cost 1,247 973 Traidcraft imports most of its stock from around the world and therefore conducts much of its business in foreign currencies. As a result the company uses forward contracts to manage foreign exchange risk. At the financial year end the contracts are valued on available market data. Hedge accounting is not adopted on forward contracts and, consequently, fair value gains and losses are recognised in profit or loss. 36
NOTES TO THE FINANCIAL STATEMENTS 19 Financial Instruments (continued) Carrying amount of outstanding forward exchange contracts at the year end: 000s 000s Euro contracts 50 100 GBP value 43 79 US dollar contracts $1,450 $2,000 GBP value 1,157 1,392 20 Pensions Defined contribution scheme At 31 March 2001 Traidcraft closed entry to the defined benefit scheme (below) and closed accrual of future benefit within that scheme. On 1 April 2001 Traidcraft introduced a Group Personal Pension Scheme, for all qualifying employees, which now has an employer s contribution rate of 7.5% (2016-7.5%). The assets of the scheme are held separately from those of the company in an independently administered fund. The charge to profit or loss in respect of the scheme was 140,000 (2016-140,000). Defined benefit scheme (closed) Until 31 March 2001 Traidcraft operated a defined benefit funded pension scheme covering the pension arrangements of employees of Traidcraft plc and Traidcraft Exchange, providing a pension linked to final salary. This scheme is now closed but not wound-up and Traidcraft plc and Traidcraft Exchange continue to make contributions to it, working with the scheme trustees to agree appropriate contribution levels. The triennial actuarial valuation prepared as at 1 April 2016 indicated that the scheme is approximately 90.7% funded against technical provisions with a deficit of 690,000. The agreed ongoing funding to be paid by the employer is 220,000 per annum which is intended to bring the scheme up to a fully-funded position by 31 March 2020. The total charge for the year paid by Traidcraft relating to this scheme, shown below, is divided between Traidcraft plc and Traidcraft Exchange according to the prevailing advice about the split of liabilities in the scheme. 2017 Traidcraft PLC 2017 Traidcraft Exchange 2017 Total 2016 Traidcraft PLC 2016 Traidcraft Exchange 2016 Total Pension Contributions 174 46 220 174 46 220 Other costs 95 8 103 81 9 90 269 54 323 255 55 310 Traidcraft plc expects to contribute 173,800 to its defined benefit pension plan in the year to 31 March 2018, but this total is to include taking account of administration costs borne by Traidcraft PLC to the value of approximately 42,000. It should be noted that the deficit calculated in the triennial valuation and the surplus or deficit calculated under FRS102 differ as the two methods require different assumptions to be used. 37
NOTES TO THE FINANCIAL STATEMENTS 20 Pensions (continued) The Financial Reporting Standard 102 Section 28 requires that the following further disclosure is made about the closed defined benefit pension scheme. The actuarial valuation has been updated by the qualified scheme actuary to 31 March 2017. Key assumptions: Rate of increase of pensions accrued post 5 April 1997 2.30% 1.95% Rate of revaluation of deferred pensions 2.30% 1.95% Discount rate 2.50% 3.40% Expected rate of salary increases 2.30% 1.95% Mortality assumptions: The assumed life expectations on retirement at age 65 are: Retiring today Males 21.9 21.9 Females 23.7 23.8 Retiring in 20 years Males 22.9 23.2 Females 24.9 25.3 Amounts recognised in the profit and loss account: Net interest on defined benefit asset 119 (144) Amounts taken to other comprehensive income: Actual return on scheme assets 873 (218) Actual changes related to obligations (875) 215 Amounts included in the balance sheet arising from the company s obligations in respect of defined benefit plans: Present value of defined benefit obligations (6,047) (5,129) Fair value of plan assets 6,047 5,129 Deficit in the scheme - - 38
NOTES TO THE FINANCIAL STATEMENTS 20 Pensions (continued) In the year ended 31 March 2017 the actuarial valuation for accounting purposes showed a surplus of assets over liabilities at that date of 63,000 (2016 173,000). In accordance with FRS102 a pension scheme asset is recognised on the balance sheet only to the extent that the surplus may be recovered by reduced future contributions or to the extent that pension scheme trustees have agreed a refund from the scheme at the balance sheet date. Neither condition was met at the balance sheet date and therefore the surplus was not recognised. Movements in the present value of the defined benefit obligation: Opening defined benefit obligation (5,129) (5,328) Interest cost (172) (171) Actuarial (losses)/gains (875) 215 Benefits paid 129 155 Closing defined benefit obligation (6,047) (5,129) Movements in the fair value of scheme assets: Opening fair value of scheme assets 5,129 5,328 Interest income 181 174 Interest income limited under FRS102 110 (147) Return on plan assets excluding interest 582 (245) Contributions by employer 174 174 Benefits paid (129) (155) Closing fair value of scheme assets 6,047 5,129 Analysis of the scheme assets at the reporting date: Equities 4,212 3,547 Bonds 907 708 Other 991 1,047 Value recognised limited under FRS102 (63) (173) Total market value 6,047 5,129 Return on plan assets: The actual return on the plan was 763,000 (2016-71,000). 39
NOTES TO THE FINANCIAL STATEMENTS 21 Share Capital Ordinary share capital issued and fully paid: 4,891,620 ordinary shares of 10p each 489 489 1 guardian share of 1 - - 489 489 The Guardian Share has special rights and these are described in the governance section of the strategic report. 22 Reserves Share premium reserve Consideration received for shares issued in 2003, above the nominal value of the shares. Capital redemption reserve The nominal value of shares repurchased as part of the share issue in 2003. Investment revaluation reserve The element of the profit and loss reserve relating to the increase in fair value of the Queensway leasehold property in 2014 on conversion to investment property, being the non-distributable element 23 Cash Generated From Operations Loss for the year (596) (283) Adjustments for: Corporation tax 50 6 Interest charge in respect of closed defined benefit pension scheme (120) (1) Finance costs 9 151 Depreciation charges 71 72 Loss on disposal of assets 14 - Contributions to closed defined benefit pension scheme (174) (174) Movements in working capital: (Increase)/decrease in stocks (341) 525 Decrease in debtors 330 204 Increase/(decrease) in creditors 189 (177) Cash (absorbed by)/generated from operations (568) 323 40
NOTES TO THE FINANCIAL STATEMENTS 24 Financial Commitments and Contingent Liabilities At the year-end contingent liabilities existed in respect of indemnities given by HSBC on behalf of Traidcraft plc to HM Revenue and Customs to the value of 50,000 (2016-50,000), and to the Rural Payments Agency of 5,000 (2016-5,000). 25 Operating Lease Commitments Total future minimum lease payments under non-cancellable leases: Due within one year - 16 Due between one and five years - - - 16 Future minimum lease payments receivable from tenants under non-cancellable operating leases: Due within one year 74 74 Due between one and five years 74 148 26 Related Party Transactions Traidcraft Exchange 148 222 Traidcraft Exchange, a registered charity, is a subsidiary of the Traidcraft Foundation, a charitable Trust which controls the Guardian Share in Traidcraft plc. Transactions with Traidcraft Exchange during the year were as follows: Purchases from Traidcraft Exchange 5,340 4,497 Rent charge 23,460 28,942 Sales to Traidcraft Exchange 142,617 141,890 Net balances owing to Traidcraft plc at 31 March (22,055) 752 Key Management Personnel The directors and non-executive directors are the key management personnel of the business. Information on remuneration is given in note 10. 27 Ultimate Controlling Party The Traidcraft Foundation controls the Guardian Share in Traidcraft plc and also holds 1,000 ordinary shares. The Guardian Share gives protective rights and does not confer control over the Company. Therefore the directors are of the opinion that there is no controlling party. 41