Exhibit 99.1
Directors' responsibilities
Directors' responsibilities for the preparation of the financial statements
The directors are required by the Companies Act 1985 to prepare financial
statements which give a true and fair view of the state of affairs of the group
and the company at the end of each financial year and of its profit and cash
flows for the year. In preparing those financial statements, the directors are
required to:
. select suitable accounting policies and then apply them consistently;
. make judgments and estimates that are reasonable and prudent;
. state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
. prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the company will continue in
business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
group and the company and to enable them to ensure that the financial statements
comply with the Companies Act 1985. 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.
The directors confirm that the financial statements comply with the above
requirements.
G S Papworth Company Secretary
26 August 1998
13
Report of the Independent Chartered Accountants
To the Board of Directors and Shareholders of Rubicon Group Plc
In our opinion, the accompanying consolidated balance sheet, consolidated profit
and loss account and consolidated cash flow statement present fairly, in all
material respects, the financial position of Rubicon Group Plc and its
subsidiaries at 31 May 1998 and the results of its operations and cash flows for
the year then ended in conformity with generally accepted accounting principles
in the United Kingdom. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards in the
United Kingdom which are substantially consistent to those followed in the
United States. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material mis-statement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion expressed above.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Independent Chartered Accountants
As of 26 August 1998
Birmingham, England
14
Rubicon Group plc Report and accounts 1998
Consolidated profit and loss account
for the year ended 31 May 1998
Continuing Discontinued Total
operations operations 1998
Notes (Pounds)000 (Pounds)000 (Pounds)000
---------------------------------------------------------
Turnover 2 & 3 146,159 94,924 241,083
Cost of sales 3 (120,682) (76,568) (197,250)
---------------------------------------------------------
Gross profit 25,477 18,356 43,833
Other operating income and expenses 3 (10,173) (12,989) (23,162)
---------------------------------------------------------
Operating profit 2 & 3 15,304 5,367 20,671
Share of loss in associated undertaking (76) - (76)
Loss on disposal of discontinued operations 6 - (37,315) (37,315)
---------------------------------------------------------
Profit/(loss) on ordinary activities before interest 15,228 (31,948) (16,720)
Interest payable and similar charges 7 (2,149)
------------------
Loss on ordinary activities before taxation 8 (18,869)
Tax on loss on ordinary activities 9 (3,628)
------------------
Loss on ordinary activities after taxation (22,497)
Minority interests (55)
------------------
Loss for the year (22,552)
Dividends 10 (6,680)
Retained loss 22 (29,232)
------------------
Dividend per share 10 7.6p
------------------
Earnings per share 11 (25.7)p
Adjustment for loss on sale or termination of discontinued
operations after taxation 42.5p
------------------
Adjusted earnings per share 11 16.8p
------------------
There is no material difference between the profit on ordinary activities before
taxation and the retained profit for the year stated above, and their historical
cost equivalents.
15
Rubicon Group plc Report and accounts 1998
Consolidated balance sheet
at 31 May 1998
1998
Notes (Pounds)000
---------------
Fixed assets
Tangible assets 12 20,092
Investments 13 152
---------------
20,244
Current assets
Stocks 14 13,206
Debtors: amounts falling due within one year 15 25,024
Debtors: amounts falling due after more than one year 15 11,528
Cash at bank and in hand 20,931
---------------
70,689
---------------
Creditors: amounts falling due within one year 16 (53,409)
---------------
Net current assets 17,280
---------------
Total assets less current liabilities 37,524
---------------
Creditors: amounts falling due after more than one year 17 (7,537)
Provisions for liabilities and charges 19 (1,421)
---------------
(8,958)
---------------
Net assets 28,566
---------------
Capital and reserves
Called-up share capital including non-equity shares 21 8,845
Share premium account 22 21,387
Merger reserve 22 18,760
Retained profits 31,004
Goodwill written off in respect of businesses sold 22 (51,485)
---------------
Profit and loss account 22 (20,481)
---------------
Shareholders' funds 23 28,511
Minority interests 55
---------------
28,566
---------------
16
Rubicon Group plc Report and accounts 1998
Company balance sheet
at 31 May 1998
1998
Notes (Pounds)000
-----------
Fixed assets
Tangible assets 12 1,470
Investments 13 159,825
-------
161,295
Current assets
Debtors: amounts falling due within one year 15 3,047
Debtors: amounts falling due after more than one year 15 11,518
Cash at bank and in hand 13,629
-------
28,194
-------
Creditors: amounts falling due within one year 16 (54,663)
-------
Net current liabilities (26,469)
-------
Total assets less current liabilities 134,826
-------
Creditors: amounts falling due after more than one year 17 (5,048)
Provisions for liabilities and charges 19 (496)
-------
(5,544)
-------
Net assets 129,282
-------
Capital and reserves
Called-up share capital including non-equity shares 21 8,845
Share premium account 22 21,387
Merger reserve 22 96,377
Profit and loss account 22 2,673
-------
Shareholders' funds 129,282
-------
17
Rubicon Group plc Report and accounts 1998
Consolidated cash flow statement
for the year ended 31 May 1998
1998
Notes (Pounds)000
------------------------
Net cash inflow from operating activities 25 13,968
Returns on investments and servicing of finance 25 (2,425)
Taxation (3,017)
Capital expenditure and financial investment 25 (11,634)
Acquisitions and disposals 25 36,685
Equity dividends paid (5,968)
-------
Cash inflow before financing 27,609
Financing 25
Issue of ordinary shares 274
Decrease in debt (11,967)
-------
(11,693)
-------
Increase in cash in the period 15,916
-------
Reconciliation of net cash flow to movement in net cash
Increase in cash in the period 15,916
Cash outflow on bank term loans 9,779
Cash outflow on finance leases 2,188
-------
Change in net cash arising from cash flows 27,883
Finance leases disposed of with subsidiaries 152
Translation differences 317
-------
Increase in net cash in period 28,352
Net borrowings at 1 June (13,003)
-------
Net cash at 31 May 18 15,349
-------
Statement of recognised gains and losses
for the year ended 31 May 1998
1998
(Pounds)000
-----------
Loss on ordinary activities after taxation (22,497)
Dividends (6,680)
-----------
Retained loss for the year (29,177)
Exchange gain on foreign currency borrowings 756
Exchange loss on foreign currency net assets (758)
UK taxation on unrealised exchange gains (1,001)
-----------
Total net recognised losses (30,180)
-----------
18
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
1 Principal accounting policies
The financial statements have been prepared in accordance with applicable
Accounting Standards in the United Kingdom. A summary of the more important
group accounting policies, which have been applied consistently, is set out
below.
Basis of accounting The financial statements have been prepared under the
historical cost convention, modified by the revaluation of certain fixed assets.
As permitted by Section 230 of the Companies Act 1985, the holding company's
profit and loss account has not been included in these financial statements.
Basis of consolidation The consolidated financial statements include the
company and its subsidiary undertakings. The results of subsidiaries acquired or
disposed of during the year are included in the consolidated profit and loss
account from the date of acquisition or to the date of disposal. Intra-group
sales and profits are eliminated fully on consolidation.
Goodwill Goodwill arising on consolidation represents the excess of the
consideration paid over the fair value of the identifiable net assets acquired.
Goodwill arising on the acquisition of subsidiaries is written off immediately
against reserves. Fixed asset investments are stated at cost or directors'
valuation. To the extent that the directors consider that the amount
recoverable in respect of the investments is less than the value at which they
are included in the balance sheet, a provision is made.
Research and development Expenditure on research is charged against the profit
and loss account in the period in which it is incurred. Development expenditure
relating to specific start-up projects is carried forward where the ultimate
viability has been assessed with reasonable certainty. Such expenditure is
amortised over the period expected to benefit.
Tangible fixed assets The cost of fixed assets is their purchase cost, together
with any incidental costs of acquisition.
Freehold and short leasehold land and buildings are stated at cost or valuation.
Periodically, full valuations are made by independent professionally qualified
valuers and in intervening years these valuations are updated by the directors
with the assistance of independent professional advice as required. Valuations
are made at open market value on an existing use basis.
Depreciation is calculated so as to write off the cost, or valuation, of
tangible fixed assets, less their estimated residual values, on a straight line
basis over the expected useful economic lives of the assets concerned. The
principal annual rates used for this purpose are:
- - Freehold buildings - over 50 years
- - Leasehold property - over the term of the lease
- - Plant and machinery - at rates between 4% and 25%
- - Fixture and fittings - at rates between 10% and 33%
The estimated useful lives of certain individual items of plant and machinery
have been extended during the year ended 31 May 1998. This does not represent a
change in accounting policy as the revised estimated useful lives of the assets
concerned remain consistent with the depreciation rates noted above. The impact
of this change is not material to the results for the year.
Operating leases Costs in respect of operating leases are charged on a straight
line basis over the lease term.
19
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
Finance leases Leasing agreements, which transfer to the group substantially
all the benefits and risks of ownership of an asset, are treated as if the asset
had been purchased outright. The assets are included in fixed assets and the
capital element of the leasing commitments is shown as obligations under finance
leases. The lease rentals are treated as consisting of capital and interest
elements. The capital element is applied to reduce the outstanding obligations
and the interest element is charged against profit in proportion to the reducing
capital element outstanding. Assets held under finance leases are depreciated
over the shorter of their estimated useful lives or their lease terms.
Stocks and work in progress Stocks and work in progress are valued at the lower
of cost and net realisable value. Finished goods and work in progress are
valued at works cost which includes an appropriate proportion of overhead
expenses.
Grants Grants that relate to specific capital expenditure or specific projects
are credited to the profit and loss account over the related asset's useful life
or duration of the project. Other grants are credited to the profit and loss
account when received.
Foreign exchange Profit and loss accounts of overseas companies are translated
at average exchange rates for the year. Assets and liabilities denominated in
foreign currencies are translated into sterling at the exchange rate ruling at
the balance sheet date. Differences arising from the translation, at closing
rates, of the net investment in overseas subsidiaries, less the applicable
foreign currency borrowings raised to finance such investments, are taken to
reserves. Exchange differences arising in the ordinary course of business are
included in the trading profit for the year.
Turnover Turnover, which excludes value added tax, represents the invoiced
value of goods and services supplied to customers outside the group.
Deferred tax Provision is made for deferred taxation, using the liability
method, on all material timing differences to the extent that it is probable
that a liability or asset will crystallise.
Pension costs The group operates a number of defined contribution schemes and
operated a defined benefit pension scheme until the divestment of the Lead
Products and Specialist Castings division on 31 March 1998. Pension costs for
the defined benefit scheme were accounted for on the basis of charging the
expected cost of providing pensions over the period during which the group
benefits from the employee's services. The effects of variations from regular
cost were spread over the expected average remaining service lives of members of
the schemes. Contributions to defined contribution schemes are charged to the
profit and loss account as they fall due.
20
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
2 Segmental analysis
a) By division
1998
Turnover Profit Net assets
(Pounds)000 (Pounds)000 (Pounds)000
--------------------------------------------------
Continuing operations
Electronic Manufacturing Services 132,013 14,154 19,164
Magnetics 14,146 2,516 2,585
--------------------------------------------------
Continuing operations 146,159 16,670 21,749
Discontinued operations 94,924 5,367 -
Holding companies - continuing - (1,366) (8,674)
---------------------------------
241,083
--------------
Operating profit 20,671
Associated undertaking (76) 142
Loss on sale or termination of discontinued operations (37,315)
Net interest payable (2,149)
-------------------
Group loss before taxation (18,869)
-------------------
Capital employed 13,217
Net cash 15,349
-----------------
Net assets 28,566
-----------------
Group financing is undertaken centrally and group interest is not attributed to
classes of business. Capital employed has been calculated on net assets
excluding net borrowings.
b) Geographically
1998
Operating
Turnover profit Net assets
(Pounds)000 (Pounds)000 (Pounds)000
-------------------------------------------------
United Kingdom:
Continuing operations including acquisitions 100,295 7,814 (21,569)
Discontinued operations 59,842 2,441 -
Other Europe and rest of world:
Continuing operations including acquisitions 45,864 7,490 34,786
Discontinued operations 35,082 2,926 -
-------------------------------------------------
241,083 20,671 13,217
---------------------------------
Net cash 15,349
-----------
28,566
-----------
c) Turnover by geographic market 1998
(Pounds)000
-----------
Continuing
United Kingdom 93,345
Other Europe 45,563
USA 6,869
Rest of World 382
-----------
146,159
-----------
Discontinued operations 94,924
-----------
241,083
-----------
21
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
3 Analysis of operations
Continuing Discontinued 1998
operations operations Total
(Pounds)000 (Pounds)000 (Pounds)000
---------------------------------------------------
Turnover 146,159 94,924 241,083
Cost of sales (120,682) (76,568) (197,250)
---------------------------------------------------
Gross profit 25,477 18,356 43,833
Distribution costs (1,154) (3,909) (5,063)
Administrative expenses (9,378) (8,084) (17,462)
Other operating income/(expenses) 359 (996) (637)
---------------------------------------------------
(10,173) (12,989) (23,162)
---------------------------------------------------
Operating profit 15,304 5,367 20,671
---------------------------------------------------
4 Employee information
The average monthly number of persons (including executive directors) employed
by the group during the year was:
1998
Number
------
Management and administration 437
Production and sales 2,358
------
2,795
------
1998
Staff costs (for the above persons) (Pounds)000
-----------
Wages and salaries 39,227
Social security costs 4,492
Other pension costs (see note 20) 1,999
-----------
45,718
-----------
5 Directors' emoluments
1998
(Pounds)000
-----------
Aggregate emoluments 1,055
Pension contributions to defined contribution schemes 44
-----
1,099
-----
No emoluments have been waived by any of the directors in the year.
At 31 May 1998, two directors were members of defined benefit pension schemes
and one director contributed to a money purchase scheme. Accrued entitlements
and transfer values in respect of the defined benefit schemes are given below.
22
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
5 Directors' emoluments continued
Additional Pension
pension entitlement
earned in Accrued transfer value
the year entitlement for the year
(Pounds) (Pounds) (Pounds)
----------------------------------------------------
A S Thompson 2,928 12,167 41,900
T R Wightman 2,924 7,300 42,600
1 The pension entitlement shown is that which would be paid annually on
retirement based on service to the end of the year.
2 The increase in accrued pension during the year excludes any increase for
inflation.
3 The transfer value has been calculated on the basis of actuarial advice in
accordance with Actuarial Guidance Note GN11.
4 Members of the scheme have the option to pay Additional Voluntary
Contributions; neither the contributions nor the resulting benefits are included
in the above table.
1998
The following amount were paid to the highest paid director: (Pounds)000
-----------
Aggregate emoluments and benefits under long-term executive schemes 313
-----------
Accrued pension at year end 7
6 Loss on termination of discontinued operations
1998
(Pounds)000
-----------
Loss on sale of businesses (37,315)
-----------
The (Pounds)37.3m loss on disposal relates to the sale of the Lead Products and
Specialist Castings divisions and includes goodwill previously written off to
reserves of (Pounds)51.5m. There was no tax attributable to this transaction.
7 Interest payable and similar charges
1998
(Pounds)000
-----------
Bank and other interest on loans and overdrafts 2,189
Finance leases and hire purchase 182
Other interest 60
-----------
2,431
Interest receivable (282)
-----------
2,149
-----------
23
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
8 Loss on ordinary activities before taxation
1998
(Pounds)000
-----------
Loss on ordinary activities before taxation is stated after crediting:
Grant income 406
And after charging:
Depreciation charge for the year:
Tangible owned fixed assets 3,968
Tangible fixed assets held under finance leases 717
Research, development and design expenditure 118
Auditors' remuneration (company (Pounds)39,000) 133
Fees to auditors for other services 396
Operating leases - plant and machinery 238
- other 568
-----------
9 Tax on loss on ordinary activities
1998
(Pounds)000
-----------
United Kingdom corporation tax at 31%:
Current 2,084
Deferred 16
Irrecoverable ACT 822
Overseas corporation tax:
Current 1,939
Over provision in respect of previous years:
United Kingdom corporation tax (1,224)
Overseas (9)
-----------
3,628
-----------
10 Dividends
1998
(Pounds)000
-----------
Declared interim 2.7p per share 2,369
Proposed final 4.9p per share 4,309
4.2% cumulative preference (non-equity shares) 2
-----------
6,680
-----------
pence
-----------
Total dividend per ordinary share 7.6
-----------
Dividend per preference share 2.1
-----------
24
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
11 Earnings per share
a) The calculation of the earnings per ordinary share on the net basis is based
on the profit on ordinary activities after taxation, minority interests, and
preference dividends divided by the weighted average number of ordinary
shares in issue during the year of 87,749,343.
b) The adjusted earnings per share has been recalculated to eliminate the net
loss after taxation on sale or termination of discontinued operations. The
adjusted earnings per share figures have been provided in addition to the
disclosures required by SSAP 3 and FRS 3 since, in the opinion of the
directors, this will allow shareholders to consider the results of the
trading operations of the business.
c) There is no material difference between earnings per share and fully diluted
earnings per share in the year ended 31 May 1998. The deferred and
contingent consideration in respect of acquisitions will be fully satisfied
by cash payments rather than the issue of ordinary shares, and consequently
no disclosure of comparative fully diluted earnings per share information
has been made as the assumptions on which the calculation was based are no
longer applicable.
12 Tangible fixed assets
Fixtures Capital
-------------Land and buildings----------- Plant and and work in
Freehold Long lease Short lease machinery fittings progress Total
Group (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
------------------------------------------------------------------------------------------------------
Cost
At start of year 17,439 1,470 282 68,377 2,830 921 91,319
Disposal of subsidiaries (14,153) - - (44,909) (698) (441) (60,201)
Exchange adjustments (632) (71) - (822) (17) (15) (1,557)
Additions 725 55 3 10,235 271 1,288 12,577
Disposals (192) (339) (41) (5,420) (128) (18) (6,138)
Reclassification - - - 238 (15) (223) -
------------------------------------------------------------------------------------------------------
At end of year 3,187 1,115 244 27,699 2,243 1,512 36,000
------------------------------------------------------------------------------------------------------
Depreciation
At start of year (2,772) (390) (36) (38,809) (2,010) - (44,017)
Disposal of subsidiaries 2,323 - - 24,112 577 - 27,012
Exchange adjustments 257 14 - 575 8 - 854
Charge for the year (95) (32) (16) (4,240) (302) - (4,685)
Disposals 162 181 24 4,485 76 - 4,928
------------------------------------------------------------------------------------------------------
At end of year (125) (227) (28) (13,877) (1,651) - (15,908)
------------------------------------------------------------------------------------------------------
Net book value
At 31 May 1998 3,062 888 216 13,822 592 1,512 20,092
------------------------------------------------------------------------------------------------------
25
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
12 Tangible fixed assets continued
Land and buildings Plant and Fixtures
Freehold Short lease machinery and fittings Total
Company (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
--------------------------------------------------------------------
Cost
At start of year 799 37 17 211 1,064
Additions 571 - - 37 608
Disposals - - - (3) (3)
--------------------------------------------------------------------
At end of year 1,370 37 17 245 1,669
--------------------------------------------------------------------
Depreciation
At start of year - - (9) (133) (142)
Charge for the year - - (6) (51) (57)
--------------------------------------------------------------------
At end of year - - (15) (184) (199)
--------------------------------------------------------------------
Net book value
At 31 May 1998 1,370 37 2 61 1,470
--------------------------------------------------------------------
Certain of the freehold land and buildings have been valued by the directors on
acquisition and the valuation represents the cost to the group and the company.
The net book value of tangible fixed assets includes an amount of
(Pounds)4,399,000 in respect of assets held under finance leases.
13 Fixed assets: investments
Interest in
associated
undertaking Other Total
Group (Pounds)000 (Pounds)000 (Pounds)000
-----------------------------------------------------------
At start of year 217 10 227
Exchange adjustments 1 - 1
Share of loss for the year (76) - (76)
-----------------------------------------------------------
At end of year 142 10 152
-----------------------------------------------------------
Interest in
associated Investment in
undertaking subsidiaries Total
Company (Pounds)000 (Pounds)000 (Pounds)000
-----------------------------------------------------------
Cost or valuation
At start of year 51 158,279 158,330
Acquisitions - 17,000 17,000
Disposals - (17,000) (17,000)
Deferred consideration adjustments - 1,520 1,520
Amortisation of set up costs (25) - (25)
-----------------------------------------------------------
At end of year 26 159,779 159,825
-----------------------------------------------------------
26
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
13 Fixed assets: investments continued
The company indirectly holds all the ordinary allotted share capital of the
following principal subsidiaries:
Country of
incorporation Principal activities
--------------------------------------------------------------
Rubicon HSP Limited England Electronic Manufacturing Services
J Higgins Engineering (Galway) Limited Ireland Electronic Manufacturing Services
Higgins Manufacturing Inc Canada Electronic Manufacturing Services
Arelec SA France Magnetics
Magnet Applications Limited England Magnetics
Magnet Applications Inc USA Magnetics
Rubicon Netherlands BV Netherlands International holding company
The group holds 50% of the issued share capital of an associated undertaking,
Airspeed LLC, which is incorporated in North Carolina, USA, and which is engaged
in design and project management.
14 Stocks
Group
1998
(Pounds)000
-------------------
Raw materials and consumables 5,940
Work in progress 2,814
Finished goods and goods for resale 4,452
-------------------
13,206
-------------------
At the year end the directors were not aware of any significant difference
between book value and the replacement cost of stocks.
15 Debtors
Group Company
1998 1998
(Pounds)000 (Pounds)000
----------------------------------
Amounts falling due within one year
Trade debtors 18,994 2
Amounts owed by group undertakings - 96
Other debtors 2,749 1,761
Prepayments and accrued income 1,681 42
Corporation tax recoverable 820 59
Advance corporation tax recoverable 780 1,087
----------------------------------
25,024 3,047
Amounts falling due after one year
Other debtors 528 518
Deferred consideration 11,000 11,000
----------------------------------
11,528 11,518
----------------------------------
36,552 14,565
----------------------------------
27
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
15 Debtors continued
Debtors falling due after more than one year include (Pounds)11m of secured loan
notes receivable no later than 2005 in respect of the disposal of the Lead
Products and Specialist Castings divisions.
Intercompany debtors included in the holding company's balance sheet at 31 May
1997 have been restated by (Pounds)420,000 to (Pounds)16,872,000 as a result of
an adjustment to intragroup dividends. A prior year adjustment has been made in
this respect to the profit and loss account (see note 22).
16 Creditors: amounts falling due within one year
Group Company
1998 1998
(Pounds)000 (Pounds)000
-------------------------------
Bank loans and overdrafts 1,736 1,736
Obligations under finance leases 720 3
ECSC loans 156 -
Deferred consideration 11,222 11,222
Trade creditors 23,122 551
Amounts owed to subsidiary undertakings - 34,651
Corporation tax 3,672 -
ACT payable 1,669 1,077
Other taxation and social security 1,515 53
Other creditors 903 145
Accruals and deferred income 4,385 916
Dividends payable 4,309 4,309
-------------------------------
53,409 54,663
-------------------------------
The bank loans and overdrafts are subject to a cross guarantee between the
parent company and certain of its subsidiaries.
17 Creditors: amounts falling due after one year
Group Company
1998 1998
(Pounds)000 (Pounds)000
-------------------------------
Bank loans and overdrafts 1,736 1,736
Obligations under finance leases 984 -
ECSC loans 250 -
Deferred consideration 3,312 3,312
Corporation tax 682 -
Accruals and deferred income 573 -
-------------------------------
7,537 5,048
-------------------------------
28
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
18 Net (cash)/borrowings
Group Company
1998 1998
(Pounds)000 (Pounds)000
----------------------------------------
Due within one year
Bank term loans 1,736 1,736
Obligations under finance leases 720 3
ECSC loans 156 -
Due within one to two years
Bank term loans 1,736 1,736
Obligations under finance leases 510 -
ECSC loans 125 -
Due within two to five years
Obligations under finance leases 474 -
ECSC loans 125 -
----------------------------------------
Total borrowings 5,582 3,475
Cash at bank and in hand (20,931) (13,629)
----------------------------------------
Net (cash)/borrowings (15,349) (10,154)
----------------------------------------
Bank term loans comprise foreign currency borrowings from Barclays Bank PLC, all
of which are repayable in fixed instalments falling due over the next two years.
The interest rate on these loans is the London interbank offer rate for deposits
in the respective currencies plus 0.75%.
ECSC loans represent borrowings from UK clearing banks, the funding cost of
which is supported by the European Coal and Steel Community. The loans are
fully secured by a charge over one of the group's freehold properties. The
interest rates on the ECSC loans range from 5.34% to 10.00%.
19 Provisions for liabilities and charges
Vacant Reorganisation
Post leasehold and
retirement Deferred property rationalisation 1998
benefits taxation provisions provisions Total
Group (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
--------------------------------------------------------------------------
At start of year 2,843 1,059 663 1,034 5,599
Disposal of subsidiary undertakings (2,708) (359) (127) (200) (3,394)
Charged to profit and loss account 126 16 (160) (584) (602)
Utilised in the year (82) - (56) - (138)
Exchange movement (19) (25) - - (44)
--------------------------------------------------------------------------
At end of year 160 691 320 250 1,421
--------------------------------------------------------------------------
Vacant Reorganisation
leasehold and
property rationalisation 1998
provisions provisions Total
Company (Pounds)000 (Pounds)000 (Pounds)000
-----------------------------------------------
At start of year 311 - 311
Charged to profit and loss account (14) 250 236
Utilised in the year (51) - (51)
At end of year 246 250 496
-----------------------------------------------
29
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
19 Provisions for liabilities and charges continued
The vacant leasehold property provisions have been assessed by the directors in
consultation with their property advisers and reflect anticipated future costs
to be incurred, discounted to their present value.
Group
Amount Full potential
provided liability
1998 1998
Deferred taxation (Pounds)000 (Pounds)000
---------------------------------------
Accelerated capital allowances 1,818 1,846
Other short-term timing differences 71 71
Losses available for relief (186) (186)
---------------------------------------
1,703 1,731
Advance corporation tax recoverable (1,012) (1,012)
---------------------------------------
691 719
---------------------------------------
There is no potential net liability for deferred tax in the holding company and
none has been provided.
20 Pension and similar obligations
The group operates a number of defined contribution pension schemes and operated
a defined benefit scheme until the divestment of the Lead Products and
Specialist Castings divisions on 31 March 1998. The assets of funded schemes
are held separately from the group in the name of the trustees. Certain
overseas schemes are unfunded. Contributions to all schemes are paid monthly and
at 31 May 1998 there were outstanding contributions of (Pounds)83,000. Employer
contributions during the period to 31 May 1998 were (Pounds)1,999,000.
Calder Group Pension Scheme The pension contributions paid by the group for the
defined benefit scheme (Calder Group Pension Scheme) were at the rate of 10.6%
of pensionable payroll. This rate was determined by a professionally qualified
actuary and was determined at the Scheme's valuation at 31 March 1997 which was
consistent with the funding method known as the projected unit method. The
assumptions that have the most significant effect on the valuations are return
on assets and those relating to the rates of increases in salaries. These may be
summarised as follows:
Calder Group
Pension Scheme
-----------------------
Administrators Scottish Amicable
Date of actuarial review 31 March 1997
Basis of valuation:
Return on assets 9.5%
Salary growth 7.5%
Value of investments - (Pounds)000 (Pounds)20,610
Value of accrued liabilities - (Pounds)000 (Pounds)20,150
-----------------------
Surplus - (Pounds)000 (Pounds)460
-----------------------
Level of funding 102%
Employers' contributions during the period were (Pounds)1,189,000.
Defined contribution schemes The group operates defined contribution pension
schemes in the UK covering certain of its employees. Contributions to these
schemes are charged to the profit and loss account in the period as they fall
due. The group's total contributions to these funds for the year ending 31 May
1998 were (Pounds)412,000.
30
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
20 Pension and similar obligations continued
Overseas schemes Certain overseas subsidiaries operate defined benefit pension
schemes. An actuarial assessment has been made of the funding position of these
schemes and full provisions have been made. Contributions to overseas defined
benefit schemes and defined contribution schemes were (Pounds)398,000.
Dormant schemes There are several schemes which are in the process of being
wound up. These are:
- - Beeley Wood Holdings Limited Pension Scheme
- - Frederick Sage & Co Limited Retirement Benefits Scheme
- - Rubicon Group Directors Pension Plan
- - Strathclyde Fabricators Retirement Benefits Scheme
At 31 May 1998 the above schemes are all fully funded.
21 Called-up share capital
1998
Group and company (Pounds)000
-----------------
Authorised
100,000 4.2% cumulative preference shares of 50p each 50
114,339,548 ordinary shares of 10p each 11,434
-----------------
11,484
-----------------
Allotted, called-up and fully paid
At start of year - 87,724,038 ordinary shares of 10p each 8,772
Options exercised in the year - 224,147 ordinary shares of 10p 23
-----------------
At end of year - 87,948,185 ordinary shares of 10p each 8,795
100,000 4.2% cumulative preference shares of 50p each 50
-----------------
8,845
-----------------
The cumulative preference shares are non-voting and have a preferential right to
return of capital on a winding up. The amount of shareholders' funds
attributable to these non-equity interest is (Pounds)50,000.
Options to subscribe for ordinary shares of 10p each have been granted to
certain directors and executives under the executive share option schemes.
Details of options granted to the directors are given in the Directors' report.
At 31 May 1998 other executives held options to subscribe for 704,929 ordinary
shares of 10p each, under this scheme. These options may be exercised at the
price and, during the periods, identified below.
Option Number
- -----------Dates of exercise------------- price of
Earliest Latest (pence) options
- ----------------------------------------- --------------------------------
11 August 1998 10 August 2005 182.00 46,500
21 August 1999 20 August 2006 175.00 34,284
5 August 2000 5 August 2007 103.50 493,000
27 November 2000 25 November 2007 109.50 39,145
25 March 2001 25 March 2008 195.50 92,000
----------------
704,929
----------------
31
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
21 Called-up share capital continued
In addition to the options granted under the share option agreement and
disclosed in the Directors' report, other options over 224,147 ordinary shares
were exercised during the year under the terms of agreement.
Since 31 May 1998, no share options have been granted under the revenue approved
Rubicon Group plc Executive Share Option Scheme or under the unapproved Rubicon
Group plc 1996 Executive Share Option Scheme.
Shares to be issued At 31 May 1997 future consideration in respect of entities
acquired during the year to 31 May 1996 could, at the company's option, be
satisfied by means of the issue of ordinary shares of 10p each. The amount of
the future consideration payable was dependent on the trading results of the
entities acquired and the number of shares to be issued was estimated based on
the expectations of those future results.
Following the disposal of the Lead Products and Specialist Castings divisions in
the year ended 31 May 1998, it is now the intention of the directors that future
consideration will be settled by way of cash payments. It is therefore not
envisaged that shares will be issued in future periods and the liability for
future consideration is included within creditors in the balance sheet at 31 May
1998.
22 Reserves
Share Profit and
premium Merger loss
account reserve account
Group (Pounds)000 (Pounds)000 (Pounds)000
----------------------------------------------------
At start of year 21,136 (30,965) 9,754
Premium arising on the issue of additional shares 251 - -
Goodwill realised on disposal of businesses - 51,485 -
Goodwill adjustment arising from re-evaluation of deferred consideration - (1,519) -
Goodwill on acquisitions - (241) -
Exchange adjustments - - (1,003)
Retained profit for the year - - (29,232)
----------------------------------------------------
At end of year 21,387 18,760 (20,481)
----------------------------------------------------
Company
At start of year 21,136 96,377 4,025
Prior year adjustment/intragroup dividends - - (420)
---------------------------------------------------
At start of year as restated 21,136 96,377 3,605
Premium arising on the issue of additional shares 251 - -
Retained profit for the year - - (5,044)
Exchange adjustment - - 4,112
---------------------------------------------------
At end of year 21,387 96,377 2,673
---------------------------------------------------
The amount of the consolidated loss after tax which is dealt with in the
financial statements of Rubicon Group plc was (Pounds)1,636,000 profit.
At 31 May 1998 the group reserves are stated after writing off goodwill of
(Pounds)82.5m.
32
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
23 Reconciliation of movements in shareholders' funds
1998
(Pounds)000
-------------------
Loss for the financial year (22,552)
Dividends (6,680)
Exchange rate adjustment (1,003)
-------------------
Movement in profit and loss reserves (30,235)
New share capital subscribed less expenses 274
Goodwill arising on acquisitions (241)
Other goodwill adjustments (1,519)
Goodwill crystallised on disposal of businesses 51,485
Adjustment to shares to be issued (20,371)
-------------------
Net reduction to shareholders' funds (607)
Opening shareholders' funds 29,118
-------------------
Closing shareholders' funds 28,511
-------------------
24 Acquisition of subsidiary undertakings
On 28 January 1998, the group acquired Aspen Motion Technologies Inc. The net
assets at acquisition were (Pounds)63,000 and no provisions were necessary to
restate the assets to their fair values. Goodwill of (Pounds)241,000 arose at
acquisition. Additional future consideration of up to $17.7 million may become
payable if the business were to achieve $266 million operating profits. Further
details of this contingent liability are given in note 27.
The results of Aspen Motion Technologies Inc for the period to 31 May 1998 are
not material to the group's performance.
25 Cash flow statement
1998
a) Reconciliation of operating profit to operating cash flows (Pounds)000
-------------------
Operating profit before exceptional items 20,671
Depreciation charges 4,685
Amortisation of government grants (406)
Other non-cash items 22
Increase in stocks (4,642)
Increase in debtors (8,798)
Increase in creditors 3,506
-------------------
Net cash inflow from operating activities before exceptional items 15,038
Cash paid in respect of exceptional items and property provisions (1,070)
-------------------
Net cash inflow from operating activities 13,968
-------------------
33
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
25 Cash flow statement continued
1998
b) Analysis of cash flows netted in the cash flow statement (Pounds)000
-----------
Returns on investments and servicing of finance
Interest paid (2,617)
Interest received 192
-----------
Net cash outflow for returns on investments and servicing of finance (2,425)
===========
Capital expenditure and financial investment
Fixed asset additions (12,577)
Fixed asset sale proceeds 757
Government grants received 186
-----------
Net cash outflow for capital expenditure and financial investment (11,634)
===========
Acquisitions and disposals
Purchase of subsidiary undertakings (241)
Deferred consideration paid for acquisitions (7,356)
Disposal of subsidiary undertakings 44,282
-----------
Net cash inflow for acquisitions and disposals 36,685
===========
Financing
Issue of ordinary share capital 274
Repayment of principal under term loans (9,779)
Net increase of principal under finance leases (2,188)
-----------
Decrease in borrowings (11,967)
-----------
Net cash outflow from financing (11,693)
===========
Purchases Disposals
1998 1998
c) Purchase and disposal of subsidiary undertakings (Pounds)000 (Pounds)000
----------------------------
Net assets (acquired)/sold (63) 43,009
Goodwill including costs (241) 51,485
----------------------------
(304) 94,494
Loss on disposal - (37,315)
Bank overdrafts less cash 63 (288)
Deferred consideration (7,356) (12,609)
----------------------------
Net cash (outflow)/inflow (7,597) 44,282
============================
Group treasury is undertaken centrally and the treasury functions of
acquisitions during the year have been absorbed into the group arrangements. As
a result it is impracticable to isolate the cash flows of acquisitions and
disposals in a manner which is meaningful.
34
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
25 Cash flow statement continued
Beginning Exchange End of
of year Cash flow differences year
d) Analysis of borrowings (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
-------------------------------------------------------------------------------
Cash at bank and in hand 6,860 14,510 (439) 20,931
Overdrafts (1,406) 1,406 - -
-------------------------------------------------------------------------------
5,454 15,916 (439) 20,931
Borrowings due within one year (3,827) 1,399 536 (1,892)
Borrowings due after one year (10,586) 8,380 220 (1,986)
Finance leases - continuing (4,044) 2,188 - (1,704)
- disposed of with subsidiaries - 152 - -
-------------------------------------------------------------------------------
(13,003) 28,035 317 15,349
-------------------------------------------------------------------------------
26 Capital commitments
Group
1998
(Pounds)000
-------------------
Capital expenditure that has been contracted for but has not been provided for in the accounts 5,574
-------------------
There is no capital expenditure contracted for but not provided in the holding
company.
27 Contingent liabilities
On 28 January 1998, Rubicon Group plc entered into an agreement for the
acquisition of the whole of the issued share capital of Aspen Motion
Technologies Inc. The initial consideration for this acquisition was $496,000.
Additional consideration will become payable over the period to 31 May 2008.
The amount of the additional consideration is dependent on the achievement of
specified rates of return on the group's investment and on the operating profit
achieved by Aspen Motion Technologies Inc over the period to 31 May 2008.
Aspen Motion Technologies Inc was originally established to exploit
technological developments in processes for the production of injection moulded
magnets. The company is in the later stages of the development of its products
and the extent of their success in the market place is currently difficult to
assess. Consequently, it is not possible for the directors to determine with
any certainty the future trading performance of Aspen Motion Technologies Inc
and, therefore, the level of the additional payments of consideration, if any,
that will become due under the terms of the share purchase agreement. As a
result, a specific provision for this liability has not been included in the
balance sheet of the group at 31 May 1998. However, the directors do not expect
the total liability for future consideration in respect of Aspen Motion
Technologies Inc to exceed $17.7m which would be self funding and would be
payable only if the business were to achieve operating profits of $266m.
The group's bankers have guaranteed certain of its obligations in respect of
deferred consideration for acquisitions amounting to (Pounds)8.7m and have
recourse to the company in the event that those guarantees crystallise.
The group has obtained certain grant assistance and is liable to repay amounts
received if it fails to comply with the terms of the grant assistance for a
period of 18 months from completion of the relevant project.
The company has provided irrevocable guarantees covering the payment of all the
liabilities of its subsidiary companies in Ireland in accordance with Section 17
Companies (Amendment) Act 1986 (Ireland).
35
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
27 Contingent liabilities continued
Under a group VAT registration, the company is jointly and severally liable for
the VAT liabilities of its UK subsidiaries. The contingent liability at the year
end was (Pounds)837,000.
28 Financial commitments
1998
Land and
buildings Other
(Pounds)000 (Pounds)000
-------------------------------
On leases expiring:
Within one year 47 25
Between two and five years inclusive 414 369
After five years 567 -
-------------------------------
1,028 394
-------------------------------
36