Samuel Heath & Sons : Published Accounts MARCH 2020

for the year ended 31st March 2020

Company Registration Number: 00031942

____________________________________ CONTENTS______________________________________

Directors and Officers 2

Chairman's Statement 3

Strategic Report 4

Directors' Report 8

Independent Auditor's Report 15

Consolidated Income Statement 19

Consolidated Statement of Comprehensive Income 19

Statements of Financial Position 20

Consolidated Statement of Changes in Equity 21

Statement of Changes in Equity (Parent Company) 21

Statements of Cashflows 22

Notes Forming Part of the Accounts 23

Notice of Meeting 44

_____________________________DIRECTORS AND OFFICERS_____________________________

Directors:

Samuel B. Heath(Chairman)

Anthony R. Buttanshaw(Non-executive Deputy Chairman)

David J. Pick

(Managing Director)

Martyn P. Whieldon(Deputy Managing Director)

Martin P. Green(Non-executive)

Ross M.H. Andrews(Non-Executive)

Simon G.P. Latham, FCCA(Financial Director)

Martin J. Harrison(Manufacturing Director)

Member of remuneration committee

Member of audit committee ______________________________________________________________________________________

Secretary:

Simon Latham

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Group Management Board:

Alan Cogzell Rolando Guselli

______________________________________________________________________________________

Registered Office:

Cobden Works Leopold Street Birmingham B12 OUJ

Registered No. 00031942

______________________________________________________________________________________

Registrar:

Link Asset Services 34 Beckenham Road Beckenham

Kent

BR3 4TU

______________________________________________________________________________________

Auditor:

RSM UK Audit LLP St Philips Point Temple Row Birmingham B2 5AF

______________________________________________________________________________________

Nominated Advisor and Nominated Broker:

Cairn Financial Advisers LLP 62-63 Cheapside

London

EC2V 6AX

______________________________CHAIRMAN'S STATEMENT_____________________________

This statement will be very much in two halves. The first part will deal with the very successful past year's trading, and the second, and probably much more important for the future of the Company, the prospects for the next financial twelve months, which has potentially been thrown into chaos by the Coronavirus pandemic Covid-19.

Revenue at £13.887m was very similar to last year (2019: £13.893m) and profit before tax was £1.368m (2019: £1.181m) before exceptional items (last year's Exceptional cost of GMP Equalisation of £0.299m). These results were affected very little until the end of March, because we had a healthy order book. Then came the closures of the majority of our customers throughout the world. We have never closed the factory, having taken all the necessary safety measures quite correctly required by Law. However, because of the consequent drop in sales, we did then move to working with a skeleton staff. The Government help, especially through its furlough scheme in looking after our people who have been unable to work, has been invaluable to us. The result of this sharp downturn in activity will unsurprisingly have a devastating effect on our profitability in the current year. However, it would have been so much worse if we had not continued working as we did. I would like to thank all the people from top to bottom, who were involved with this. We ended 2019-20 with a strong balance sheet, and good liquidity evidenced by our strong cash balance, which has put us in good stead in the current financial year.

It is very difficult to know how the world will change after these events. Some of these changes could very much affect an organisation such as ours which has historically built its reputation with face-to-face meetings with its customers throughout the world and by exhibiting at trade exhibitions globally as well.

Output to the end of June was 37.6% down on the same period last year. Clearly there will be a significant loss on this figure. Extensive work has been done on a wide range of forecast scenarios for the current financial year. There has been input from all the Board on these figures, which has been much welcomed. What they all show is a large negative effect on cash flow, not helped by us continuing to fund the large deficit in our Pension Scheme, which I have previously discussed. With this in mind the Board does not believe that this is the correct time to pay a final dividend, even though our balance sheet is strong. We will revisit this decision at the time of the Interim announcement.

Sam Heath

Chairman

9th July 2020

________________________________ STRATEGIC REPORT ________________________________

The directors present their annual strategic report for the year ended 31st March 2020.

Business Review and Key Performance Indicators

A review of the business of the Group and future developments is set out in the Chairman's Statement on page 3.

The Board consider that the key financial performance indicators are those that communicate the financial performance and strength of the Company:

Net Assetsat Group level increased to £5.66m (2019: £4.39m) as a result of an improvement in the pension scheme deficit due to an actuarial gain on financial assumptions, and an increase in profits.

Cash Positionhas remained strong, reducing by £0.14m to a balance of £3.02m. This was after paying out dividends for the year, as well as additional contributions to the pension scheme.

Inventoryhas grown to £4.23m (2019: £3.99m) as we ensure that we can meet customer demand quickly, and as the cost of production increases due to more but shorter production runs.

Pension Deficithas reduced this year, as contributions were increased by £267k to £783k which combined with recognition of a change in membership since the last valuation offset the reduced asset value which resulted from the fall in markets in March 2020. The latest balance, net of the related deferred tax asset, is £5.33m (2019: £6.16m).

Revenueshave been stable at £13.89m (2019: £13.89m). There was only a small effect of Covid-19 on sales in the latter part of March 2020.

Gross Profitfor the year has increased to 51%, from 49% last year, the small increase resulting from a reduction in raw material prices towards the end of the year.

Operating Profithas increased a little illustrating a small reduction in direct costs, with a margin of 11.0%, compared to 9.9% last year.

The Exceptional Itemof £299k recognised last year, relating to the recognition of Guaranteed Minimum Pension Equalisation, has not had to be reflected this year, any further changes will be recognised through the

Statement of Comprehensive Income together with any other pension valuation changes.

Investments during the Year

The business has taken advantage of profitability to reinvest some of the profit and cash generated during the year, into investments anticipated to give returns back to the business in future years.

The business invested £196k in research and development during the financial year (2019: £142k) and advantage is taken of the various tax incentives where appropriate. In addition, costs of £85k were capitalised in the year (2019: £24k).

These investments were funded from internally generated resources and not from third party sources, such as leasing.

Staffing

The number of staff employed within the business has remained stable during the year:

2020	2019
Number	Number
Production	104	102
Distribution	20	23
Administration	17	16
141	141
Total
The average staff costs were as follows:
Total average cost per head	£42,766	£40,560