Exhibit 99.1
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Contents
Independent auditor’s report | 1 | |||
Combined profit and loss account | 2 | |||
Combined balance sheet | 3 | |||
Combined cash flow statement | 4 | |||
Notes | 5 |
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Independent auditor’s report
We have audited the accompanying combined financial statements of the Combined Flamstead Group which comprise the combined balance sheets as of December 31, 2014, and December 31, 2013, and the related combined statements of profit and loss and cash flows for each of the years in the three-year period ended December 31, 2014 and the related notes to the combined financial statements, which, as described in Note 1 to the combined financial statements, have been prepared on the basis of generally accepted accounting practice in the United Kingdom.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with U.K. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Combined Flamstead Group as of December 31, 2014, and December 31, 2013, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2014, in accordance with generally accepted accounting principles in the United Kingdom.
Emphasis of matter
As discussed in Note 1 to the combined financial statements, the Combined Flamstead Group prepared its combined financial statements in accordance with generally accepted accounting practice in the United Kingdom which differs from U.S. generally accepted accounting principles. Our opinion is not modified with respect to this matter.
Nottingham, United Kingdom | (signed) KPMG LLP | |
August 21, 2015 |
1
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Combined profit and loss account
for the years ended 31 December 2012, 2013 and 2014
Note | 2012 | 2013 | 2014 | |||||||||||||
£ | £ | £ | ||||||||||||||
Group turnover | 2 | 43,068,562 | 50,870,572 | 61,555,823 | ||||||||||||
Changes in stocks of finished goods and work in progress | 1,099,181 | (358,974 | ) | 775,380 | ||||||||||||
Own work capitalised | 354,881 | 216,143 | 202,305 | |||||||||||||
Raw materials and consumables | (23,502,810 | ) | (26,053,395 | ) | (32,461,927 | ) | ||||||||||
Staff costs | 4 | (9,306,445 | ) | (11,259,576 | ) | (12,825,816 | ) | |||||||||
Depreciation and amortisation | 8,9 | (2,150,417 | ) | (2,565,666 | ) | (2,801,025 | ) | |||||||||
Other operating charges | (6,420,451 | ) | (6,559,195 | ) | (6,908,164 | ) | ||||||||||
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Operating profit | 3 | 3,142,501 | 4,289,909 | 7,536,576 | ||||||||||||
Interest receivable | 5 | 15,673 | — | 325 | ||||||||||||
Interest payable and similar charges | 6 | (917,062 | ) | (954,885 | ) | (871,028 | ) | |||||||||
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Profit on ordinary activities before taxation | 2,241,112 | 3,335,024 | 6,665,873 | |||||||||||||
Tax on profit on ordinary activities | 7 | (507,897 | ) | (448,739 | ) | (1,353,482 | ) | |||||||||
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Profit for the period | 1,733,215 | 2,886,285 | 5,312,391 | |||||||||||||
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There were no recognised gains and losses other than those disclosed in the profit and loss account, and therefore no separate statement of total recognised gains and losses has been presented.
There were no discontinued activities in any of the years.
2
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Combined balance sheet
as at 31 December 2013 and 2014
Note | 2013 | 2014 | ||||||||||
£ | £ | |||||||||||
Fixed assets | ||||||||||||
Intangible assets | 8 | 291,684 | 537,052 | |||||||||
Tangible assets | 9 | 22,468,569 | 24,787,381 | |||||||||
Investment property | 10 | — | 238,492 | |||||||||
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22,760,253 | 25,562,925 | |||||||||||
Current assets | ||||||||||||
Stocks | 11 | 4,828,226 | 5,989,966 | |||||||||
Debtors: amounts falling due within one year | 12 | 6,791,239 | 8,004,237 | |||||||||
Debtors: amounts falling due after more one year | 12 | — | 191,135 | |||||||||
Cash at bank and in hand | 110,519 | 2,808,201 | ||||||||||
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11,729,984 | 16,993,539 | |||||||||||
Creditors: amounts falling due within one year | 13 | (13,406,114 | ) | (16,210,648 | ) | |||||||
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Net current assets / (liabilities) | (1,676,130 | ) | 782,891 | |||||||||
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Total assets less current assets | 21,084,123 | 26,345,816 | ||||||||||
Creditors: amounts falling due after more than one year | 14 | (8,657,836 | ) | (8,588,221 | ) | |||||||
Provisions for liabilities | 15 | (673,668 | ) | (917,912 | ) | |||||||
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Net assets and invested equity | 16 | 11,752,619 | 16,839,683 | |||||||||
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3
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Combined cash flow statement
for the year ended 31 December 2012, 2013 and 2014
Note | 2012 | 2013 | 2014 | |||||||||||||
£ | £ | £ | ||||||||||||||
Net cash flow from operating activities | 17 | 4,634,075 | 6,585,095 | 8,816,812 | ||||||||||||
Return on investments and servicing of finance | 18 | (901,389 | ) | (954,885 | ) | (1,096,030 | ) | |||||||||
Taxation | (6,410 | ) | (83,736 | ) | (241,352 | ) | ||||||||||
Capital expenditure and financial investment | 18 | (2,802,951 | ) | (2,955,759 | ) | (3,001,281 | ) | |||||||||
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Cash inflow before financing | 923,325 | 2,590,715 | 4,478,149 | |||||||||||||
Financing | 18 | 228,579 | (2,893,050 | ) | (1,780,467 | ) | ||||||||||
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Increase/(decrease) in cash in the period | 1,151,904 | (302,335 | ) | 2,697,682 | ||||||||||||
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Reconciliation of net cash flow to movement in net debt
for the year ended 31 December 2012, 2013 and 2014
Note | 2012 | 2013 | 2014 | |||||||||||||
£ | £ | £ | ||||||||||||||
Increase/(decrease) in cash in the year | 1,151,904 | (302,335 | ) | 2,697,682 | ||||||||||||
Cash outflow from decrease in debt and lease financing | (222,180 | ) | 2,893,050 | 1,780,467 | ||||||||||||
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Change in net debt resulting from cash flows | 929,724 | 2,590,715 | 4,478,149 | |||||||||||||
New finance lease | (1,535,983 | ) | (1,941,902 | ) | (2,636,719 | ) | ||||||||||
Debt to equity conversion | 750,000 | 122,370 | — | |||||||||||||
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Movement in net debt in the year | 143,741 | 771,183 | 1,841,430 | |||||||||||||
Net debt at start of year | 19 | (14,972,702 | ) | (14,828,961 | ) | (14,057,778 | ) | |||||||||
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Net debt at end of year | 19 | (14,828,961 | ) | (14,057,778 | ) | (12,216,348 | ) | |||||||||
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4
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes
(forming part of the financial statements)
1 | Accounting policies |
Basis of preparation
These combined financial statements have been prepared for the purpose of meeting the requirements of Rule 3-05 of Regulation S-X of the Securities Act of 1933, as amended, in connection with the filing of a Form 8-K/A by Quanex Building Products Corporation (‘Quanex’).
Throughout the periods presented, the Combined Flamstead Group did not exist as a legally constituted group. The combined financial statements have therefore been derived from the combination of the financial statements of the following entities:
• | Flamstead Holdings limited |
• | H L Plastics Limited |
• | Vintage Windows Limited |
• | Wegoma Machinery Sales Limited |
• | Liniar Limited |
• | Tarpey Harris Limited |
• | Flamstead Investments Limited |
• | H L Ravenscroft Limited, |
and presented in accordance with Generally Accepted Accounting Practice in the United Kingdom (‘UK GAAP’), to represent the financial position of the Combined Flamstead Group as though it were a single economic entity.
UK GAAP varies in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 26 to the Combined financial statements.
The directors of Flamstead Holdings Limited determined that this presentation represents the Combined Flamstead Group most appropriately based on several factors including that (1) Quanex acquired substantially all of the pre-acquisition business of the Combined Flamstead Group, and (2) the entities forming Flamstead, with the exception of Wegoma Machinery Sales Limited, which has been included from the acquisition date (see Note 24), have been under common control and management throughout the period covered by the financial statements.
The combined financial statements comprise an aggregation of the earnings, financial position and cash flows of the above mentioned entities after eliminating outstanding balances, investments, transactions and cash flows between such entities.
On August 21, 2015, the Board of Directors of Flamstead Holdings Limited approved the combined financial statements of the Combined Flamstead Group and authorised their issue.
5
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
1 | Accounting policies (continued) |
Subsidiary undertakings
A subsidiary undertaking is an undertaking where the Company holds, either directly or indirectly, a controlling interest. These interests are included using the acquisition method of accounting. Under this method the results of subsidiary undertakings acquired or sold during the period are included in the combined profit and loss account from the date of acquisition or up to the date of disposal.
Joint venture undertakings
A joint venture undertaking is an undertaking where the Company does not hold a controlling interest but is one in which the Company has a long-term interest and where it can exercise joint control. In these instances the Group’s share of the profits or losses of joint ventures is included in the combined profit and loss account and its interest in the net assets is included under investments in the combined balance sheet.
Turnover
Turnover comprises revenue recognised by the company in respect of services supplied, exclusive of Value Added Tax and trade discounts. Turnover is recognised upon the transfer of risks and rewards to the customer. Additionally equipment is sold to certain profile customers on hire purchase terms and as the substantial risks and rewards of ownership have passed to the customer upon delivery, turnover and an associated hire purchase debtor are recognised in respect of these sales.
Intangible assets and goodwill
Purchased goodwill and development costs are stated at cost less amortisation. Amortisation is calculated so as to write off the cost of an asset over the useful economic life of that asset as follows:
Goodwill | - | 5% - 20% on cost | ||
Development costs | - | 10% - 33% on cost | ||
Customer lists | - | 33% on cost |
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:
Leasehold improvements | - | over the term of the lease | ||
Freehold buildings | - | 2.5% on cost | ||
Plant and machinery | - | 8%-25% on cost | ||
Fixtures and fittings | - | 7%-33% on cost |
Freehold land is not depreciated.
6
Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
1 | Accounting policies (continued) |
Investment property
Investment properties are interests in land and buildings held for their investment potential with income to the company arising from the rental of such properties and capital appreciation.
Investment properties are included in the balance sheet at their open market value and are not subject to depreciation.
Formal valuations by an independent qualified surveyor are carried out every 5 years or when the directors consider that a significant change in valuation could reasonably have arisen. At intervening period ends the valuation is determined by the directors.
Changes in the valuation of investment properties are taken to the statement of total recognised gains and losses and recognised in an investment revaluation reserve within capital and reserves on the balance sheet.
Hire purchase
Assets acquired under finance leases are capitalised and the outstanding future lease obligations are shown in creditors net of the finance charge allocated to future periods.
Operating lease rentals are charged to the profit and loss account on a straight line basis over the period of the lease.
Stocks
Stocks are stated at the lower of cost and net realisable value after making due allowance for obsolete and slow moving stocks on the following basis:
Raw materials, consumables and goods for resale are valued on a first in, first out basis.
For work in progress and finished goods, cost is taken as production cost, which includes an appropriate proportion of attributable overheads.
Deferred taxation
Full provision is made for deferred tax assets and liabilities arising from all timing differences between the recognition of gains and losses in the financial statements and recognition in the tax computation.
A net deferred tax asset is recognised when it is more likely than not that there will be future taxable profits.
Provision is made at the tax rates expected to apply at the time the liabilities crystallise.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into sterling at the rate ruling on the date of the transaction.
Pension contributions
The company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The amount charged to the profit and loss account represents the contributions payable to the scheme in respect of the accounting period.
7
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
2 | Turnover |
The geographical analysis of turnover is as follows:
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
United Kingdom | 40,564,819 | 47,697,362 | 58,382,364 | |||||||||
Other European Union | 2,082,536 | 2,930,657 | 3,014,273 | |||||||||
Rest of World | 421,207 | 242,553 | 159,186 | |||||||||
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43,068,562 | 50,870,572 | 61,555,823 | ||||||||||
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3 | Operating profit |
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
Operating profit is stated after charging/(crediting) | ||||||||||||
Amortisation of intangible assets | 216,636 | 278,596 | 173,208 | |||||||||
Depreciation of tangible assets: | ||||||||||||
Owned by the group | 1,475,122 | 1,588,369 | 1,944,160 | |||||||||
Held under finance leases | 458,659 | 698,701 | 683,657 | |||||||||
Loss / (profit) on sale of fixed assets | (1,667 | ) | (42,601 | ) | 18,188 | |||||||
Foreign exchange losses/(gains) | (6,695 | ) | 62,374 | (59,353 | ) | |||||||
Operating lease rentals: | ||||||||||||
Plant and machinery | 100,907 | 195,572 | 207,642 | |||||||||
Other | 213,750 | 375,000 | 331,050 | |||||||||
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4 | Staff costs |
Group staff costs, including directors’ remuneration, were as follows:
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
Wages and salaries | 8,334,865 | 9,834,420 | 11,499,081 | |||||||||
Social security costs | 825,667 | 963,988 | 1,085,978 | |||||||||
Other pension costs | 145,913 | 461,168 | 240,757 | |||||||||
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9,306,445 | 11,259,576 | 12,825,816 | ||||||||||
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The average number of employees, including directors, during the year was as follows:
2012 | 2013 | 2014 | ||||||||||
Number | Number | Number | ||||||||||
Management | 3 | 3 | 5 | |||||||||
Administration | 27 | 27 | 35 | |||||||||
Selling and distribution | 31 | 38 | 42 | |||||||||
Production (including management) | 277 | 332 | 393 | |||||||||
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338 | 400 | 475 | ||||||||||
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8
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
5 | Interest receivable |
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
Other interest receivable | 15,673 | — | 325 | |||||||||
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6 | Interest payable and similar charges |
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
On bank loans and overdrafts | 558,555 | 558,225 | 454,242 | |||||||||
On other loans | 553 | — | 15,228 | |||||||||
On hire purchase contracts | 182,362 | 212,437 | 240,996 | |||||||||
Other interest (see note 14) | 175,592 | 184,223 | 160,562 | |||||||||
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917,062 | 954,885 | 871,028 | ||||||||||
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7 | Taxation |
Analysis of tax charge in the year
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
UK corporation tax | ||||||||||||
Current tax on income for the year | 85,839 | 242,936 | 1,119,397 | |||||||||
Adjustments in respect of prior years | 30,585 | (2,103 | ) | (6,159 | ) | |||||||
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Total current tax | 116,424 | 240,833 | 1,113,238 | |||||||||
Deferred tax charge | ||||||||||||
Origination/reversal of timing differences | 391,482 | 213,375 | 152,018 | |||||||||
Adjustments in respect of prior years | (9 | ) | (5,469 | ) | 88,226 | |||||||
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Tax on profit on ordinary activities | 507,897 | 448,739 | 1,353,482 | |||||||||
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9
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
7 | Taxation(continued) |
Factors affecting tax charge for the year
The tax assessed for the year is lower(2013: lower; 2012: lower) than the standard rate of corporation tax in the UK of 21.45%(2013: 23.25%; 2012: 24.5%). The differences are explained below:
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
Profit on ordinary activities before tax | 2,241,112 | 3,335,024 | 6,665,873 | |||||||||
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Current tax at 21.49%(2013: 23.25%, 2012: 24.5%) | 548,712 | 774,237 | 1,431,697 | |||||||||
Effects of: | ||||||||||||
Expenses not deductible for tax purposes | 59,226 | 48,828 | 40,801 | |||||||||
Capital allowances in excess of depreciation | (39,018 | ) | (105,155 | ) | (25,525 | ) | ||||||
Other timing differences | 25,740 | 57,037 | (9,773 | ) | ||||||||
Research and development tax credits | (118,130 | ) | (201,157 | ) | (99,818 | ) | ||||||
Deduction for profits attributable to patented products | — | (55,792 | ) | (204,840 | ) | |||||||
Losses utilised | (381,959 | ) | (288,953 | ) | (10,449 | ) | ||||||
Fixed asset differences | — | 17,483 | — | |||||||||
Benefit of small companies rate band | — | (3,592 | ) | (2,696 | ) | |||||||
Marginal relief | (8,732 | ) | — | — | ||||||||
Adjustments in respect of prior years | 30,585 | (2,103 | ) | (6,159 | ) | |||||||
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Current tax charge for the period | 116,424 | 240,833 | 1,113,238 | |||||||||
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Factors that may affect future tax charges
The group has no further trading losses to carry forward(2013: £462,000; 2012: £1,766,000).
The Budget on 20 March 2013 announced that the UK corporation tax rate will reduce to 20% by 2015.
Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. This will reduce the company’s future tax rate accordingly. The deferred tax liability as at 31 December 2014 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.
10
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
8 | Intangible fixed assets |
Customer | Development | |||||||||||||||
lists | Goodwill | costs | Total | |||||||||||||
£ | £ | £ | £ | |||||||||||||
Cost | ||||||||||||||||
At 1 January 2013 | 81,642 | 241,317 | 684,038 | 1,006,997 | ||||||||||||
Additions | — | — | 8,280 | 8,280 | ||||||||||||
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At 31 December 2013 | 81,642 | 241,317 | 692,318 | 1,015,277 | ||||||||||||
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At 1 January 2014 | 81,642 | 241,317 | 692,318 | 1,015,277 | ||||||||||||
Additions | — | 150,000 | 268,576 | 418,576 | ||||||||||||
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At 31 December 2014 | 81,642 | 391,317 | 960,894 | 1,433,853 | ||||||||||||
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Accumulated amortisation | ||||||||||||||||
At 1 January 2013 | 34,057 | 90,640 | 320,300 | 444,997 | ||||||||||||
Charge for the year | 15,328 | 12,090 | 251,178 | 278,596 | ||||||||||||
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At 31 December 2013 | 49,385 | 102,730 | 571,478 | 723,593 | ||||||||||||
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At 1 January 2014 | 49,385 | 102,730 | 571,478 | 723,593 | ||||||||||||
Charge for the year | 15,329 | 17,090 | 140,789 | 173,208 | ||||||||||||
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At 31 December 2014 | 64,714 | 119,820 | 712,267 | 896,801 | ||||||||||||
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Net book value | ||||||||||||||||
At 31 December 2013 | 32,257 | 138,587 | 120,840 | 291,684 | ||||||||||||
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At 31 December 2014 | 16,928 | 271,497 | 248,627 | 537,052 | ||||||||||||
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11
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
9 | Tangible fixed assets |
Land and | Plant and | Fixtures | Assets under | |||||||||||||||||
buildings | equipment | and fittings | construction | Total | ||||||||||||||||
£ | £ | £ | £ | £ | ||||||||||||||||
Cost | ||||||||||||||||||||
At 1 January 2013 | 7,982,006 | 17,743,930 | 3,386,032 | 300,991 | 29,412,959 | |||||||||||||||
Additions | 581,752 | 4,068,658 | 196,417 | 173,415 | 5,020,242 | |||||||||||||||
Commissioned | — | 335,685 | — | (335,685 | ) | — | ||||||||||||||
Disposals | (57,999 | ) | (725,537 | ) | (227,124 | ) | (33,360 | ) | (1,044,020 | ) | ||||||||||
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At 31 December 2013 | 8,505,759 | 21,422,736 | 3,355,325 | 105,361 | 33,389,181 | |||||||||||||||
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At 1 January 2014 | 8,505,759 | 21,422,736 | 3,355,325 | 105,361 | 33,389,181 | |||||||||||||||
Acquisitions | — | 11,575 | — | — | 11,575 | |||||||||||||||
Additions | 95,461 | 4,330,131 | 635,139 | 25,000 | 5,085,731 | |||||||||||||||
Commissioned | — | 91,564 | — | (91,564 | ) | — | ||||||||||||||
Disposals | — | (613,019 | ) | — | (13,797 | ) | (626,816 | ) | ||||||||||||
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At 31 December 2014 | 8,601,220 | 25,242,987 | 3,990,464 | 25,000 | 37,859,671 | |||||||||||||||
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| |||||||||||
Accumulated depreciation | ||||||||||||||||||||
At 1 January 2013 | 656,905 | 7,312,669 | 1,619,728 | — | 9,589,302 | |||||||||||||||
Charge for the year | 194,731 | 1,684,717 | 407,622 | — | 2,287,070 | |||||||||||||||
Disposals | (53,366 | ) | (688,859 | ) | (213,535 | ) | — | (955,760 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
At 31 December 2013 | 798,270 | 8,308,527 | 1,813,815 | — | 10,920,612 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
At 1 January 2014 | 798,270 | 8,308,527 | 1,813,815 | — | 10,920,612 | |||||||||||||||
Charge for the year | 209,975 | 1,986,242 | 431,600 | — | 2,627,817 | |||||||||||||||
Disposals | — | (476,139 | ) | — | — | (476,139 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
At 31 December 2014 | 1,008,245 | 9,818,630 | 2,245,415 | — | 13,072,290 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
12
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
9 | Tangible fixed assets(continued) |
Land and | Plant and | Fixtures | Assets under | |||||||||||||||||
buildings | equipment | and fittings | construction | Total | ||||||||||||||||
£ | £ | £ | £ | £ | ||||||||||||||||
Net book value | ||||||||||||||||||||
At 31 December 2013 | 7,707,489 | 13,114,209 | 1,541,510 | 105,361 | 22,468,569 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
At 31 December 2014 | 7,592,975 | 15,424,357 | 1,745,049 | 25,000 | 24,787,381 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Included above are assets held under finance leases or hire purchase contracts as follows:
2013 | 2014 | |||||||
£ | £ | |||||||
Plant and machinery: | ||||||||
Net book values | 5,720,226 | 5,777,366 | ||||||
|
|
|
|
10 | Investment property |
Valuation | ||||
£ | ||||
Cost | ||||
At 1 January 2014 | — | |||
Additions | 238,492 | |||
|
| |||
At 31 December 2014 | 238,492 | |||
|
|
The property was purchased during the year and as such the directors consider that there is no change in valuation between date of purchase and the year end.
11 | Stocks and work in progress |
2013 | 2014 | |||||||
£ | £ | |||||||
Group | ||||||||
Raw materials and consumables | 1,052,292 | 1,443,166 | ||||||
Work in progress | 254,761 | 253,880 | ||||||
Finished goods and goods for resale | 3,521,173 | 4,292,920 | ||||||
|
|
|
| |||||
4,828,226 | 5,989,966 | |||||||
|
|
|
|
13
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
12 | Debtors |
2013 | 2014 | |||||||
£ | £ | |||||||
Due within one year: | ||||||||
Trade debtors | 5,352,809 | 6,114,055 | ||||||
Hire purchase debtors | 321,303 | 140,792 | ||||||
Owed by associated undertakings | 219,535 | 112,000 | ||||||
Other debtors | 407,524 | 1,197,687 | ||||||
Prepayments and accrued income | 490,068 | 439,703 | ||||||
|
|
|
| |||||
6,791,239 | 8,004,237 | |||||||
Due after more than one year: | ||||||||
Hire purchase debtors | — | 191,135 | ||||||
|
|
|
| |||||
6,791,239 | 8,195,372 | |||||||
|
|
|
|
Certain of the Group’s trade debtors are secured under an invoice discounting facility.
13 | Creditors:amounts falling due within one year |
2013 | 2014 | |||||||
£ | £ | |||||||
Shareholder loans | 120,000 | 120,000 | ||||||
Finance leases | 1,038,216 | 1,313,402 | ||||||
Bank loan | 456,594 | 683,906 | ||||||
Trade finance facility | 4,051,816 | 4,419,020 | ||||||
Trade creditors | 4,474,223 | 4,993,551 | ||||||
Owed to associated undertakings | 29,800 | — | ||||||
Corporation tax | 242,936 | 1,114,822 | ||||||
Social security and other taxes | 1,649,060 | 1,812,694 | ||||||
Other creditors | 183,913 | 156,085 | ||||||
Accruals and deferred income | 1,159,556 | 1,597,168 | ||||||
|
|
|
| |||||
13,406,114 | 16,210,648 | |||||||
|
|
|
|
The finance leases and other loans are secured on the fixed assets to which they relate.
14 | Creditors:amounts falling due after more than one year |
2013 | 2014 | |||||||
£ | £ | |||||||
Shareholder loans | 2,216,015 | 1,945,602 | ||||||
Bank loans | 3,163,060 | 2,629,086 | ||||||
Finance leases | 1,754,626 | 2,913,533 | ||||||
Other loans and related party loans | 1,367,970 | 1,000,000 | ||||||
Other creditors | 156,165 | 100,000 | ||||||
|
|
|
| |||||
8,657,836 | 8,588,221 | |||||||
|
|
|
|
14
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
14 | Creditors:amounts falling due after more than one year(continued) |
Included within the above are amounts falling due as follows:
2013 £ | 2014 £ | |||||||
Between one and two years: | ||||||||
Bank loans | 456,594 | 383,813 | ||||||
Shareholder loans | 120,000 | 120,000 | ||||||
Other creditors | 156,165 | 30,000 | ||||||
Other loans | 367,970 | — | ||||||
|
|
|
| |||||
Between two and five years | ||||||||
Bank loans | 1,265,082 | 1,240,890 | ||||||
Shareholder loans | 360,000 | 360,000 | ||||||
Other creditors | — | 70,000 | ||||||
|
|
|
| |||||
Over five years: | ||||||||
Bank loans | 1,441,384 | 1,004,383 | ||||||
Shareholder loans | 1,736,015 | 1,465,602 | ||||||
Related party loans | 1,000,000 | 1,000,000 | ||||||
|
|
|
|
Net obligations under hire purchase contracts are secured on the fixed assets to which they relate and are all due within five years.
The shareholder loans falling due after one year represent £0.6 million (2013: £0.5 million) and £1.4 million (2013: £1.6 million) due to Mr M Bosworth and Mr R L Hartshorn, respectively. The related party loan represents £0.5 million due to each of Mr Bosworth’s sons. The shareholder and the related party charged interest of £160,649 on their outstanding loans(2013: £175,643; 2012: £175,592)
15 | Provisions for liabilities |
2013 £ | 2014 £ | |||||||
Deferred taxation liability | 673,668 | 913,912 | ||||||
Property related provisions | — | 4,000 | ||||||
|
|
|
| |||||
673,668 | 917,912 | |||||||
|
|
|
|
Provision for deferred taxation
Provision £ | ||||
At 31 December 2012 | 465,762 | |||
Charge to the profit and loss account | 207,906 | |||
|
| |||
At 31 December 2013 | 673,668 | |||
Charge to the profit and loss account | 240,244 | |||
|
| |||
At 31 December 2014 | 913,912 | |||
|
|
15
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
15 | Provisions for liabilities(continued) |
The provision is made up as follows:
2013 | 2014 | |||||||
£ | £ | |||||||
Accelerated capital allowances | 881,474 | 974,798 | ||||||
Tax losses | (138,141 | ) | — | |||||
Other short term timing differences | (69,665 | ) | (60,886 | ) | ||||
|
|
|
| |||||
673,668 | 913,912 | |||||||
|
|
|
|
16 | Reconciliation of movement in invested equity |
2013 | 2014 | |||||||
£ | £ | |||||||
Profit for the period | 2,886,285 | 5,312,391 | ||||||
Contributions from/(distributions to) investors | 122,370 | (225,327 | ) | |||||
|
|
|
| |||||
Net movement in invested equity | 3,008,655 | 5,087,064 | ||||||
Opening invested equity | 8,743,964 | 11,752,619 | ||||||
|
|
|
| |||||
Closing invested equity | 11,752,619 | 16,839,683 | ||||||
|
|
|
|
17 | Net cash flow from operating activities |
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
Operating profit | 3,142,501 | 4,289,909 | 7,536,576 | |||||||||
Amortisation of intangible fixed assets | 216,636 | 278,596 | 173,208 | |||||||||
Depreciation of tangible fixed assets | 1,933,781 | 2,287,070 | 2,627,817 | |||||||||
Loss/(profit) on disposal of tangible fixed assets | (1,667 | ) | (42,601 | ) | 18,188 | |||||||
(Increase)/decrease in stocks | (1,124,325 | ) | 430,449 | (1,015,625 | ) | |||||||
(Increase)/decrease in debtors | (1,719,085 | ) | 57,585 | (1,404,133 | ) | |||||||
Increase/(decrease) in creditors | 2,186,234 | (715,913 | ) | 880,781 | ||||||||
|
|
|
|
|
| |||||||
Net cash inflow from operating activities | 4,634,075 | 6,585,095 | 8,816,812 | |||||||||
|
|
|
|
|
|
16
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
18 | Analysis of cash flows for headings netted in cash flow statement |
2012 | 2013 | 2014 | ||||||||||
£ | £ | £ | ||||||||||
Returns on investments and servicing of finance | ||||||||||||
Interest received | 15,673 | — | 325 | |||||||||
Interest paid | (917,062 | ) | (954,885 | ) | (871,028 | ) | ||||||
Dividend paid | — | — | (225,327 | ) | ||||||||
|
|
|
|
|
| |||||||
(901,389 | ) | (954,885 | ) | (1,096,030 | ) | |||||||
|
|
|
|
|
| |||||||
Capital expenditure and financial investment | ||||||||||||
Acquisition of business | — | — | (177,690 | ) | ||||||||
Purchase of intangible fixed assets | (68,200 | ) | (8,280 | ) | (268,576 | ) | ||||||
Purchase of tangible fixed assets | (2,859,418 | ) | (3,078,340 | ) | (2,687,504 | ) | ||||||
Sale of tangible fixed assets | 124,667 | 130,861 | 132,489 | |||||||||
|
|
|
|
|
| |||||||
(2,802,951 | ) | (2,955,759 | ) | (3,001,281 | ) | |||||||
|
|
|
|
|
| |||||||
Financing | ||||||||||||
New secured loans | 523,500 | — | 152,750 | |||||||||
Repayment of bank loans | (328,137 | ) | (445,211 | ) | (459,412 | ) | ||||||
Repayment of other loans | (332,686 | ) | (513,181 | ) | (637,021 | ) | ||||||
New other loans (movement on asset-based borrowings) | 1,374,603 | (639,441 | ) | 365,842 | ||||||||
Repayment of finance lease | (1,008,701 | ) | (1,295,217 | ) | (1,202,626 | ) | ||||||
|
|
|
|
|
| |||||||
228,579 | (2,893,050 | ) | (1,780,467 | ) | ||||||||
|
|
|
|
|
|
19 | Analysis of change in net debt |
1 January £ | Cash flow £ | Other changes £ | 31 December £ | |||||||||||||
Cash at bank and in hand | 52,942 | 542,576 | — | 595,518 | ||||||||||||
Bank overdraft | (791,992 | ) | 609,328 | — | (182,664 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(739,050 | ) | 1,151,904 | — | 412,854 | ||||||||||||
Debt | ||||||||||||||||
Finance leases | (1,618,875 | ) | 1,008,701 | (1,535,983 | ) | (2,146,157 | ) | |||||||||
Debts due: | ||||||||||||||||
Within one year | (4,935,268 | ) | (319,634 | ) | — | (5,254,902 | ) | |||||||||
After more than one year | (7,679,509 | ) | (911,247 | ) | 750,000 | (7,840,756 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
(14,972,702 | ) | 929,724 | (785,983 | ) | (14,828,961 | ) | ||||||||||
|
|
|
|
|
|
|
|
17
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
19 | Analysis of change in net debt (continued) |
1 January £ | Cash flow £ | Other changes £ | 31 December £ | |||||||||||||
Cash at bank and in hand | 595,518 | (484,999 | ) | — | 110,519 | |||||||||||
Bank overdraft | (182,664 | ) | 182,664 | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
412,854 | (302,335 | ) | — | 110,519 | ||||||||||||
Debt | ||||||||||||||||
Finance leases | (2,146,157 | ) | 1,295,217 | (1,941,902 | ) | (2,792,842 | ) | |||||||||
Debts due: | ||||||||||||||||
Within one year | (5,254,902 | ) | 626,492 | — | (4,628,410 | ) | ||||||||||
After more than one year | (7,840,756 | ) | 971,341 | 122,370 | (6,747,045 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(14,828,961 | ) | 2,590,715 | (1,819,532 | ) | (14,057,778 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
1 January £ | Cash flow £ | Other changes £ | 31 December £ | |||||||||||||
Cash at bank and in hand | 110,519 | 2,697,682 | — | 2,808,201 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
110,519 | 2,697,682 | — | 2,808,201 | |||||||||||||
Debt | ||||||||||||||||
Finance leases | (2,792,842 | ) | 1,202,626 | (2,636,719 | ) | (4,226,935 | ) | |||||||||
Debts due: | ||||||||||||||||
Within one year | (4,628,410 | ) | (594,516 | ) | — | (5,222,926 | ) | |||||||||
After more than one year | (6,747,045 | ) | 1,172,357 | — | (5,574,688 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(14,057,778 | ) | 4,478,149 | (2,636,719 | ) | (12,216,348 | ) | ||||||||||
|
|
|
|
|
|
|
|
Net debt includes £3.1 million of shareholder/related party loans(2013: £3.3 million 2012: £3.6 million).
20 | Capital commitments |
At 31 December, the Group had capital commitments as follows:
2012 £ | 2013 £ | 2014 £ | ||||||||||
Contracted for but not provided for in these financial statements | 1,329,416 | 667,216 | 928,421 | |||||||||
|
|
|
|
|
|
21 | Pensions |
The Group operates a defined contribution scheme. The assets of the scheme are held separately from those of the company in an independently administered fund.
2012 £ | 2013 £ | 2014 £ | ||||||||||
Pension costs | 145,913 | 461,168 | 240,757 | |||||||||
|
|
|
|
|
|
18
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
22 | Operating lease commitments |
At 31 December, the Group was committed to making the following payments under non-cancellable operating leases in the following year:
Land and buildings | Equipment hire | |||||||||||||||||||||||
2012 £ | 2013 £ | 2014 £ | 2012 £ | 2013 £ | 2014 £ | |||||||||||||||||||
Expiring: | ||||||||||||||||||||||||
Within one year | 96,250 | — | — | 5,505 | 41,170 | 41,116 | ||||||||||||||||||
Within two to five years | 120,000 | 120,000 | 148,000 | 89,754 | 124,637 | 36,863 | ||||||||||||||||||
Over five years | 255,000 | 255,000 | 255,000 | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
471,250 | 375,000 | 403,000 | 95,259 | 165,807 | 77,979 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
23 | Related party transactions |
Advantage has been taken of the exemption provided by FRS 8 not to disclose transactions with fellow group companies.
Warehouse and land rental payments of £141,500 were made to Garner Investments LLP (a company owned by Mr & Mrs R Hartshorn) in full settlement in respect of the year ended 31 December 2014(2013: £255,000; 2012: £63,750).
Warehouse and land rental payments of £141,500 were made to Garner Properties Limited (a company owned by Mr & Mrs R Hartshorn) in full settlement in respect of the year ended 31 December 2014(2013: £nil, 2012: £nil).
Premises rental payments of £120,000 were made to Marlborough House Properties (a company owned by Mr R Hartshorn and Mr M Bosworth) in full settlement in respect of the year ended 31 December 2014(2013: £120,000; 2012: £54,176).
The group traded with Mr L A and Mrs S Hartshorn, a business controlled by Mr R Hartshorn’s father and mother.
The transactions during the period, which were on an arm’s length basis, are as follows:
2012 £ | 2013 £ | 2014 £ | ||||||||||
Purchases | 5,476 | 10,227 | 5,242 | |||||||||
Creditor at 31 December | 981 | 820 | ||||||||||
|
|
|
|
|
|
In 2012 a portion of land on the Denby site was sold at cost for £116,667 to Garner Investments LLP, a company owned by Mr & Mrs Hartshorn. This debt was transferred to Garner Properties Limited on 30 June 2014. The amount of £112,000 (including VAT at 20%) remains outstanding as at 31 December 2014.
Goods were purchased in the year from Mr Gary Cooke, who is the brother of Mr Alan Cooke (a Director of Vintage Windows) to the value of £1,000(2013: £nil; 2012: £nil). The balance outstanding at the year end, and included within trade creditors, is £1,000(2013: £nil).
19
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
24 | Acquisitions |
On 1 May 2014 Wegoma Machinery Sales Limited acquired 51% of the trade and assets of Wegoma GB Limited. The resulting goodwill of £150,000 was capitalised and will be written off over 20 years. The reasons for selecting that period are that the directors expect the benefits arising from the acquisition to continue for an extended period.
Book value £000 | Fair value £000 | |||||||
Fixed assets | ||||||||
Tangible | 11,575 | 11,575 | ||||||
Current assets | ||||||||
Stock | 146,115 | 146,115 | ||||||
|
|
|
| |||||
Total assets | 157,690 | 157,690 | ||||||
|
| |||||||
Goodwill | 150,000 | |||||||
|
| |||||||
307,690 | ||||||||
|
| |||||||
Purchase consideration and costs of acquisition | ||||||||
Cash on completion | 157,690 | |||||||
Deferred cash consideration | 150,000 | |||||||
|
| |||||||
307,690 | ||||||||
|
|
No fair value adjustments arose. Deferred consideration is payable in equal annual instalments of £30,000.
25 | Post balance sheet events |
On 15 June 2015, Quanex Building Products Corporation, a Delaware corporation, acquired, following a pre-sale reorganization, substantially all of the Combined Flamstead Group for a consideration of £95 million. The results of the acquired entities forming substantially all of the Combined Flamstead Group from 15 June 2015 are consolidated within the financial statements of Quanex Building Products Corporation.
20
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
26 | Summary of significant differences between accounting practice generally accepted in the United Kingdom (UK GAAP) and accounting principles generally accepted in the United States of America (US GAAP) |
The accompanying combined financial statements of the Flamstead Group have been prepared in accordance with UK GAAP as described in Note 1. UK GAAP differs in certain respects from the requirements of US GAAP. The effects of the application of US GAAP to the combined Flamstead results and invested equity and cash flow as determined under UK GAAP are set out below:
Profit and loss | ||||||||
Year ended 31 December | ||||||||
2013 | 2014 | |||||||
£ | £ | |||||||
UK GAAP | ||||||||
Profit after taxation for the year | 2,886,285 | 5,312,391 | ||||||
US GAAP adjustments | ||||||||
1. Goodwill | 12,090 | 17,090 | ||||||
2. Research and development | 1,634 | 5,226 | ||||||
3. Finance leases | (565 | ) | (227 | ) | ||||
4. Derivatives | — | (19,997 | ) | |||||
5. Provisions | 8,517 | 12,834 | ||||||
|
|
|
| |||||
Total US GAAP adjustments | 21,676 | 14,926 | ||||||
|
|
|
| |||||
Results under US GAAP | 2,907,961 | 5,327,317 | ||||||
|
|
|
| |||||
Invested equity | ||||||||
Year ended 31 December | ||||||||
2013 | 2014 | |||||||
£ | £ | |||||||
UK GAAP | ||||||||
Invested equity | 11,752,619 | 16,839,683 | ||||||
US GAAP adjustments | ||||||||
1. Goodwill | 102,730 | 119,820 | ||||||
2. Research and development | (8,870 | ) | (3,644 | ) | ||||
3. Finance leases | (10,051 | ) | (10,278 | ) | ||||
4. Derivatives | — | (19,997 | ) | |||||
5. Provisions | 8,517 | 21,351 | ||||||
|
|
|
| |||||
Total US GAAP adjustments | 92,326 | 107,252 | ||||||
|
|
|
| |||||
Invested equity under US GAAP | 11,844,945 | 16,946,935 | ||||||
|
|
|
|
Cash flow Year ended 31 December | ||||||||||||||||||||||||
2013 | 2014 | |||||||||||||||||||||||
Operating | Investing | Financing | Operating | Investing | Financing | |||||||||||||||||||
activities | activities | activities | activities | activities | activities | |||||||||||||||||||
£ | £ | £ | £ | £ | £ | |||||||||||||||||||
UK GAAP | 6,585,095 | (2,955,759 | ) | (2,893,050 | ) | 8,816,812 | (3,001,281 | ) | (1,780,467 | ) | ||||||||||||||
US GAAP adjustments Reclassifications | ||||||||||||||||||||||||
Dividends paid | — | — | — | — | — | (225,327 | ) | |||||||||||||||||
Interest received | — | — | — | 325 | — | — | ||||||||||||||||||
Interest paid | (954,885 | ) | — | — | (871,028 | ) | — | — | ||||||||||||||||
Tax paid | (83,736 | ) | — | — | (241,352 | ) | — | — | ||||||||||||||||
2 Research and development | (3,304 | ) | 3,304 | — | — | — | — | |||||||||||||||||
3 Finance leases | 74,575 | (1,500 | ) | (73,075 | ) | 85,158 | — | (85,158 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total US GAAP adjustments | (967,350 | ) | 1,804 | (73,075 | ) | (1,026,897 | ) | — | (310,485 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows under US GAAP | 5,617,745 | (2,953,955 | ) | (2,966,125 | ) | 7,789,915 | (3,001,281 | ) | (2,090,952 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
21
Combined Flamstead Group
Combined financial statements
3 years ended 31 December 2014
Notes(continued)
26 | Summary of significant differences between accounting practice generally accepted in the United Kingdom and accounting principles generally accepted in the United States of America(continued) |
1. Goodwill
Under UK GAAP, goodwill is amortised over its estimated economic life, not to exceed 20 years.
Under US GAAP, goodwill is not amortised but instead tested at least annually for impairment or more frequently if impairment indicators exist. The adjustment reverses the goodwill previously amortised.
2. Research and development
Under UK GAAP it is permissible to capitalise research and development expenditure if certain criteria are met with the capitalised expenditure then amortised over the period to which economic benefit is expected to be derived.
Under US GAAP expenditure on research and development is typically expensed. The adjustment removes the previously capitalised expenditure and reverses the amortisation that was charged.
3. Finance leases
Under UK GAAP leases are classified as either operating or finance leases based on the guidance in SSAP21 Accounting for leases and hire purchase contracts.
Under US GAAP leases are classified in accordance with ASC 840-10-25. This sets out particular criteria and bright line tests that indicate the existence of a finance lease. Utilising the criteria in ASC 840-10-25 a number of leases have been reclassified from operating leases to finance leases resulting in an increase in recorded liabilities and an additional charge to the profit and loss account.
4. Derivatives
Under UK GAAP derivatives are not required to be carried at fair value.
Under US GAAP derivatives must be measured and recorded at their fair value. The adjustment represents the fair value of foreign currency derivatives held at 31 December.
5. Provisions
Under UK GAAP the provision for credit notes is based on historic credit note rates and is not specific to individual sales.
Under US GAAP provisions must be specific in nature and the adjustment removes these provisions.
6. Taxation
No adjustments have been included for tax, as given the value of these GAAP differences, the amounts involved are not considered material.
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