Armour Group plc Annual Report and Accounts · PDF filedisposed of on 4 August 2014 to Q Acoustics Limited ... Wilson, who was previously ... 2 Armour Group plc Annual Report and Accounts

Armour Group plc Annual Report and Accounts 2014

Business Review1 Chairman’s Statement 2 Strategic Report

Governance5 Directors and Advisers 6 Directors’ Report8 Corporate Governance Statement 10 Remuneration Report

Financial Statements12 Independent Auditors’ Report to the Shareholders

of Armour Group plc13 Consolidated Statement of Comprehensive Income14 Consolidated Statement of Financial Position15 Consolidated Statement of Changes in Shareholders’ Equity15 Consolidated Statement of Cash Flows16 Notes to the Consolidated Financial Statements35 Company Balance Sheet36 Notes to the Company Financial Statements

Annual General Meeting39 Notice of Annual General Meeting

Contents

Chairman’s Statement

www.armourgroup.uk.com 1

The year to 31 August 2014 has been transformational, with the Group disposing of its trading divisions, becoming debt free and finishing the year with net cash of £4.1 million.

The Group has made significant progress over the past three years as highlighted in last year’s Annual Report. However, despite the progress made and the improving economic outlook, the Group continued to carry a substantial level of debt, which held back the development of the Group. The net debt at 31 August 2013 was £7.6 million.

The core UK retail markets for both the automotive and home divisions remained patchy in terms of demand, with sales of our key brands to our major retail customers performing well, but sales into the independent retail channel within the UK continuing to decline. In export markets, the Group’s sales in both divisions had delivered year on year growth, with existing customers expanding their business and new markets being opened up. Market conditions remained challenging and growth limited.

The Board undertook a strategic review and as a result Armour Automotive was sold for an excellent price on 31 March 2014, the consideration of £11.2 million which generated a profit on disposal of £2.9 million, leaving the Group with net cash of £3.0 million. At the time of the disposal, Armour Automotive had sales of £8.9 million, a 12% increase on the comparative period in the prior year. Operating profit was £0.9 million, 16% up on the same period in the prior year.

Armour Home, however, continued to consume cash, with no guarantee of an early return to profitability and was accordingly disposed of on 4 August 2014 to Q Acoustics Limited (formerly AHE 100 Limited), a management buyout company owned by George Dexter (former Group CEO), Nicky Spence and Chris Emerson, both directors of Armour Home Electronics Limited. The consideration was 250 ordinary shares in AHE 100 Limited, representing 25% of the total share capital. The Group also made a loan of £1.0 million to Armour Home Electronics Limited. At the time of the disposal sales were £15.0 million, marginally up on the previous year, and the operating loss was £0.2 million, compared with £0.1 million operating profit in the previous year. Armour Asia was also sold as part of the Armour Home disposal, achieved sales of £1.2 million, 6% up on the prior year and the operating loss was £0.2 million compared with £0.1 million last year, both compared with the comparative period in the prior year. Problems with its distributor in China, along with the political issues in Thailand and Indonesia, hampered the growth expected from Armour Asia this year. The disposal of Armour Home produced a significant loss on disposal of £13.6 million.

There were numerous Board changes in the year. John Harris, the Group Finance Director, resigned on 30 May 2014, following the successful sale of the Armour Automotive division, which resulted in a significant reduction in the size of the Group. Mark Wilson, who was previously the Group Financial Controller, was promoted to the Board as Group Finance Director and Company Secretary on 1 June 2014. George Dexter, the Group Chief Executive Officer, resigned from the Board on 4 August 2014 on the disposal of Armour Home Electronics Limited. Steve Bodger, non-executive Director, resigned from the Board following the year end on 10 September 2014. I would like to take this opportunity to thank George Dexter, John Harris and Steve Bodger for their contributions to the Group throughout their periods in office.

Following these disposals, the Group is closing the Head Office, substantially reducing its operating costs and become an investing company. The Company’s policy will be to seek opportunities in the technology and other sectors. The Company’s objective is to generate an attractive rate of return for shareholders by taking advantage of opportunities. The Company is seeking a transformational investment opportunity that offers the potential for enhancing future shareholder capital growth and income.

Bob Morton Chairman 10 November 2014

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Strategic Report

2 Armour Group plc Annual Report and Accounts 2014

Financial results Reviews of the trading results for the year are set out in the Chairman’s Statement.

Group sales for the year were £25.1 million (31 August 2013: £32.1 million), representing a 22% decrease on last year’s comparative period. However, Armour Automotive was disposed of on 31 March 2014 and Armour Home and Armour Asia on 4 August 2014. At the time of disposal all subsidiaries showed an increase in sales when compared with the same period in the prior year: Armour Automotive +12%, Armour Home +1% and Armour Asia +6%.

Exceptional items of £0.2 million relates to redundancy costs at Head Office following the disposal of Armour Automotive.

Loss from discontinued operations of £10.1 million, is as a result of the disposal of Armour Automotive on 31 March 2014 (profit £3.5 million) and the disposal of Armour Home and Armour Hong Kong on 4 August 2014 (loss £13.6 million); the loss included the write off of goodwill of £10.0 million. Armour Home and Armour Hong Kong were sold to Q Acoustics Limited, a company in which Armour Automotive Group Limited has 25% of the share capital; this is now classed as an associate undertaking.

(Loss)/earnings per share and dividend The current year’s loss per ordinary share was (11.96)p and included exceptional items and discontinued operations. The prior year basic earnings per ordinary share was 0.04p.

The current year’s underlying loss per ordinary share was also (0.97)p, after adjusting for exceptional items and discontinued operations; the prior year comparative was earnings per ordinary share of 0.04p. Details of both basic and underlying earnings per ordinary share are set out in Note 11 to the Consolidated Financial Statements.

The Board did not propose a dividend for the year ended 31 August 2013 and has not recommended a final dividend for the year ended 31 August 2014.

Share capital and equity At 31 August 2014, the Group’s equity was £5.6 million (31 August 2013: £16.9 million) reflecting the total Comprehensive Loss for the year of £11.3 million (31 August 2013: Comprehensive Profit of £46,000). This is set out in the Consolidated Statement of Changes in Shareholders’ Equity on page 15.

Funding and banking facilities At the start of the year the Group had an asset-based lending agreement with GE Commercial Finance Limited, under which the Group’s UK-based subsidiary undertakings could borrow funds based on the value of unpaid sales invoices and stock held in their UK warehouses. Amounts borrowed were secured by way of a cross guarantee and debenture over the assets of the Group companies based in the UK. This funding was variable depending upon the value of the assets on which it is based. The maximum borrowing capacity was, however, capped at £10 million for unpaid sales invoices and £6 million in regard to stock.

The agreement was based upon an initial period of three years to 23 December 2013, after which it continued but could be terminated by either party giving a minimum of six months’ notice. All borrowings relating to Armour Automotive were repaid as part of the disposal, Q Acoustics Limited (formerly AHE 100 Limited) assumed responsibility for the outstanding borrowings relating to Armour Home. The Group has been removed from any liability under this agreement.

In July 2013, the Group entered into a £2.0 million loan from Hawk Investment Holdings Limited. This loan reflected the status of the UK’s general liquidity and economy and was required to address the costs of restructuring incurred in prior periods and to assist with working capital requirements. This loan was repaid in full as part of the disposal of Armour Automotive on 31 March 2014. The loan is a related party transaction, details of which are disclosed in Note 29 to the Consolidated Financial Statements.

The Group discharges its day-to-day UK banking arrangements through Lloyds Bank plc.

Sales

2014£000

2013 £000

Variance£000

Variance%

Armour Automotive 8,915 14,499 (5,584) –39%Armour Home 14,987 16,127 (1,140) –7%Armour Asia 1,154 1,468 (314) –21%Group 25,056 32,094 (7,038) –22%

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Cash flow and net cash/debt The Group’s Consolidated Statement of Cash Flows is on page 15.

The Group’s cash inflow from operations was £0.4 million (31 August 2013: £1.4 million). Small taxation payments have been made, relating to the Group’s profitable overseas subsidiaries, together with refunds relating to research and development tax credits. These payments are made on account and are subject to annual correction.

Net cash/debt is defined in Note 32 on page 34 of the Consolidated Financial Statements and at 31 August 2014 net cash was £4.1 million (31 August 2013: net debt £7.6 million). The Group’s borrowings are shown in Note 23 on page 30 of the Consolidated Financial Statements and, at 31 August 2014, the Group did not have any undrawn facilities (31 August 2013: £1.3 million).

Principal risks and uncertainties Risk is an inherent part of doing business. The Board’s approach to risk management is balanced with encouragement of entrepreneurial flair and recognition that some necessary activities carry an inherent risk over which the Group may at best have only limited control. The Corporate Governance Statement on pages 8 and 9 describes the systems and processes through which the Directors manage, and aim to mitigate, risk. The Board considers that the principal commercial and financial risks are identified below. However, the Board also recognises that the nature and scope of risks can change, particularly in a period of economic uncertainty.

Business model A review of the business model is set out in the Chairman’s statement. The Group sought to perpetuate professional and profitable practices throughout all aspects of its business activities, with specific reference within its business model to:

• Offering a quality product portfolio to customers through a structured programme of product development and innovation;

• Owning and developing strong brands highly regarded in their markets; and

• Maintaining and growing the Group’s distribution platform whilst focusing on delivering business efficiency and a first class service.

Pursuit of this business model introduced new risks to the Group through, for example, the adoption of new technologies and interaction with new customers and territories. Conversely, the strategy allowed the Group to diversify its interests whilst utilising areas of expertise across divisions. At a strategic level, this was considered to increase resilience and reduce overall risk by avoiding reliance on a single brand, restricted product portfolio or confined business areas. This had particular relevance in periods of sharp economic downturn, customer uncertainty and depressed market conditions.

As part of the disposal of Armour Home the Group received 25% of the share capital of Q Acoustics Limited, a company which wholly owns Armour Home Electronics Limited and Armour Hong Kong Limited. The Company has now become an investing company and will seek opportunities that will offer good value and the potential for capital growth and income.

Economic and market conditions The UK’s economy has been in a period of uncertainty since mid-2008, and throughout this period there have been differing opinions and forecasts as to its length and depth before sustained recovery sets in. This macro environment, which includes other issues such as cost inflation, job security and wage increases, availability of credit and advisability of incurring debt, interest rates and taxation, all impact on consumer confidence and spending which is of particular relevance to the markets in which the Group has operated in the period.

The economic variability is not restricted to the UK. Other territories continue to experience difficulties, sometimes political given the potential effects on domestic populations, implementing measures considered necessary given the economic conditions.

The current outlook in the UK is one of underlying improvement tempered with the acceptance that there is still much work to do before the benefit is felt across the nation. As reported in previous Annual Reports, the outlook in other territories varies and remains unclear as to full recovery timeframe and degree of market volatility yet to be experienced.

During the year, forecasting remained challenging. Nevertheless, as best as practicably possible, the Group took into account external opinions in regard to the economic outlook and the potential effect these may have had on the Group’s markets. The Group has undertaken significant reorganisation activities in response to the changed environment, always with the objective of sizing the Group’s operations commensurate with the markets served whilst not closing the door on future growth.

Senior management Following the disposal of the Armour Automotive and Armour Home, the Group has reduced its senior management and will review this as part of any new acquisition.

The Remuneration Report on pages 10 and 11 details the procedures that were in place to attract, motivate and retain high calibre senior management personnel in the year and that will be maintained going forward once the Group has identified new investment opportunities.

Internal controls The Group has a system of internal controls, which are included within the Corporate Governance Statement on page 9 as part of the Group’s consideration and application of Corporate Governance as a whole. The Group continues to review its internal controls but recognises that any such procedures can provide only reasonable, not absolute, assurance.

Treasury management and banking arrangements Use of the Group’s day-to-day asset-based funding facilities was performed by the operating subsidiary undertakings, but this was within the overall control set by the Group’s central treasury function with the objective of securing funding availability and flexibility to meet the Group’s ongoing requirements. Following the disposal of Armour Automotive and Armour Home and the amendments to the GE Finance arrangements (as detailed in Note 23 to the Consolidated Financial Statements on page 30), all treasury functions are performed at Group level.

Strategic Report continued


Other financial risks Details of credit risk, interest rate risk, currency risk, liquidity risk and capital management are given in Note 3 to the Consolidated Financial Statements on pages 19 to 22.

Performance indicators With the trading entities in the financial year, the Group has measured its performance through a number of performance indicators. The Group sales, EBITDA and basic underlying earnings per ordinary share performance indicators used by the Group are shown below. However, going forward the KPIs will be amended to take account of the change in the Group’s circumstances and depending on new investment opportunities. Whilst KPIs are important, they should not be viewed in isolation but in the context of the Chairman’s Statement and other matters raised in regard to the Group’s operations and strategies throughout the Annual Report.

Group sales

The Group’s sales since 2010 have been adversely affected by declining consumer confidence, which was initially adversely affected by the 2008 financial crisis and further depressed by the implementation of austerity measures after the May 2010 UK general election. However, whilst annual sales values are KPIs, they should be viewed in the context of the counter measures taken by the Group as discussed in the Chairman’s Statement and within the Financial Results section of this report.

EBITDA EBITDA is defined as the (loss)/earnings before interest, taxation, depreciation, amortisation (of both goodwill and other intangible assets) and, if incurred, share-based payments. It provides a useful indicator of both profitability and cash generation.

The Group’s underlying EBITDA for the last five years is shown in the table below:

Basic underlying (loss)/earnings per ordinary share The calculation of basic underlying (loss)/earnings per ordinary share for the current year, and the 2013 comparative, is shown in Note 11 to the Consolidated Financial Statements on page 27. The measure adjusts for share-based payments, discontinued operations and exceptional items. The table below shows the basic underlying earnings per ordinary share for five years.

Summary Following the disposal of the Group’s trading subsidiaries, the Group is now an investing Company. The Group’s objective is to generate an attractive rate of return for shareholders by taking advantage of opportunities.

Mark Wilson Finance Director 10 November 2014

2010£000

2011£000

2012 £000

2013£000

2014£000

Group sales 56,591 42,311 34,375 32,094 25,056

2010£000

2011£000

2012 £000

2013£000

2014£000

Profit/(loss) from operations 1,172 (1,665) (1,201) 646 (939)Depreciation 596 550 433 301 1Amortisation and impairment 977 1,110 851 579 –Share-based payments 32 18 – – –EBITDA 2,777 13 83 1,526 (938)

2010£000

2011£000

2012 £000

2013£000

2014£000

Profit/(loss) after taxation 879 (2,954) (12,159) 40 (11,199)Loss/(profit)/loss from discontinued operations – 485 – (1,128) 10,071Exceptional items – 1,045 10,694 – 214Share-based payments 32 18 – – –

Underlying profit/(loss) after taxation 911 (1,406) (1,465) (1,088) (914)Weighted shares (000s) 65,056 79,851 93,627 93,627 93,627Basic underlying earnings/(loss) per ordinary share 1.40p (1.76)p (1.56)p (1.16)p (0.97)p

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Directors and Advisers


Directors Bob Morton (72) FCA* Chairman Appointed as a non-executive Director and Chairman in January 2002. He is also Chairman of Porta Communications Plc, Servoca Plc and St. Peter Port Capital Ltd and holds directorships in a wide range of private companies. He was a member of the Audit, Remuneration and Nominations Committees.

Mark Wilson (47) FCCA Appointed Finance Director and Company Secretary in June 2014. He was previously Group Financial Controller at Armour Group plc since 2009.

*Non-executive Director

Registered office Suite 25 6-8 Revenge Road Lordswood Chatham Kent ME5 8UD

Telephone: 01634 673172

Registered Number: 00803572

www.armourgroup.uk.com

Advisers Auditors BDO LLP 2 City Place Beehive Ring Road Gatwick West Sussex RH6 0PA

Bankers Lloyds Bank plc 2 City Place Beehive Ring Road Gatwick West Sussex RH6 0PA

Nominated adviser and stockbrokers FinnCap 60 New Broad Street London EC2M 1JJ

Registrars Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU

Telephone: 0871 664 0300 Facsimile: 020 8639 2342

Solicitors Arnold & Porter (UK) LLP Tower 42 25 Old Broad Street London EC2N 1HQ

Directors’ Report


The Directors present their report and the audited financial statements for the year ended 31 August 2014.

Principal activities Armour Group plc is a public limited company incorporated in Great Britain, registered number 00803572, which is listed on the Alternative Investment Market (“AIM”) of the London Stock Exchange. Its principal activity is that of a holding and investing company.

At the start of the year Armour Group plc was the ultimate parent company of a group, the principal activity of which was the design, manufacture, distribution and sale of consumer electronics, entertainment and furniture products focused on the home entertainment and in-vehicle communications and entertainment markets. Following the disposal of the trading subsidiaries Armour Group plc has become an investing company.

Review of business The Chairman’s Statement on page 1, and the Strategic Report pages 2 to 4 provide a review of the business, the Group’s trading for the year ended 31 August 2014, key performance indicators and an indication of future developments and risks.

Result and dividend The Group has reported its Consolidated Financial Statements in accordance with International Financial Reporting Standards as adopted by the European Union. The Group’s results for the year are set out in the Consolidated Statement of Comprehensive Income on page 13. The Company Financial Statements continue to be reported under UK GAAP.

The Group’s loss before interest, taxation, discontinued operations and exceptional items amounted to £0.7 million (31 August 2013: £1.0 million. Exceptional items in the current year were £0.2 million (31 August 2013: £nil), discontinued operations in the current year were a loss of £10.1 million (31 August 2013: Profit £1.1 million). The Group’s loss for the year was £11.2 million (31 August 2013: Profit of £0.04 million).

The Directors did not recommend a dividend for the year ended 31 August 2013 and have not recommended a final dividend for the year ended 31 August 2014.

Directors The following persons were Directors during the year ended 31 August 2014 and up to the date of this report:

Bob Morton

George Dexter (resigned 4 August 2014)

John Harris (resigned 30 May 2014)

Steve Bodger (resigned 10 September 2014)

Mark Wilson (appointed 1 June 2014)

The names of the Directors and Company Secretary, along with their brief biographical details, are given on page 5.

Directors’ interests The Directors’ interests in the Company’s shares and options over ordinary shares are shown in the Remuneration Report on pages 10 and 11.

The Company has taken out insurance to indemnify Directors and Officers of the Group against third party claims.

No Director has any beneficial interest in the share capital of any subsidiary or associate undertaking.

At the start of the year, the Company had a £2.0 million loan agreement with Hawk Investment Holdings Limited, a company in which Bob Morton has a beneficial interest. On 31 March 2014, the loan was fully repaid. This related party transaction is disclosed in Note 29 to the Consolidated Financial Statements. Other than this loan agreement, no Director had any material interest at any time during the year in any contract with the Company or any of its subsidiary or associate undertakings, other than his service contract and indemnity agreements.

Corporate governance The Financial Reporting Council issues and updates the UK Corporate Governance Code. The Company has incorporated those aspects which are considered relevant, given its size and changing strategy. This also includes the Statement of Directors’ Responsibilities in preparing the Annual Report and financial statements on page 9. The Corporate Governance Statement forms part of this Directors’ Report.

Disclosure of information to auditors As far as the Directors are aware, there is no relevant audit information (that is, information needed by the Group’s Auditors in connection with preparing their Report) of which the Group’s Auditors are unaware, and each Director has taken all reasonable steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Group’s Auditors are aware of that information.

Donations The Group made no charitable and no political donations in either the current or preceding year.

Financial instruments The financial risk management objectives of the Group, including credit risk, interest rate risk and currency risk, are provided in Note 3 to the Consolidated Financial Statements on pages 19 to 22.

Creditor payment policy The Group does not follow any formal code or standard on payment practice. However, its policy is for subsidiary undertakings to agree terms and conditions for their business transactions with suppliers. Payment is normally made on these terms, subject to the terms and conditions being met by the suppliers. The Company had no trade creditors at the year end. The number of trade creditor days of the Group outstanding at the year-end was nil (31 August 2013: 59) days.

Research and development The Company and its subsidiary undertakings were committed to ongoing research and development to meet the changing needs of the markets that they served. Research and development expenditure totalled £1.3 million for the year, of which £0.5 million was expensed to the Consolidated Statement of Comprehensive Income and £0.8 million was capitalised as intangible assets during the year.

Employees The Group’s policy is to encourage effective communication and consultation between employees and management. Subsidiary undertakings develop their own consultative and communication procedures as part of their operating practices.

The Group gives full consideration to applications for employment made by disabled people, having regard to their aptitudes and abilities. Should employees become disabled during their employment, they are considered for any necessary retraining and available work within their capabilities. For the purposes of training, career development and promotion, disabled employees are treated in the same way as other employees.

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Environmental policy The Group consults professional experts on environmental matters as part of pre-acquisition enquiries for new businesses and takes appropriate action on the advice received. The Group is committed to maintaining a responsible attitude to environmental management in all areas of its business.

Share capital structure At 31 August 2014, the Company’s authorised share capital was £15,000,000 divided into 883,679,397 ordinary shares of 1p each and 68,480,067 deferred shares of 9p each.

At 31 August 2014, the Company’s issued share capital was £7,133,721 divided into 97,051,496 ordinary shares of 1p each and 68,480,067 deferred shares of 9p each.

Save for shares held by the Armour Employees’ Share Trust, holders of ordinary shares are entitled to one vote per share at the meetings of the Company. The holders of the deferred shares have restricted rights including no entitlement to receive any dividend or other distribution nor to receive notice or speak or vote at general meetings of the Company. No application has been or will be made for the deferred shares to be admitted to trading on AIM or any other stock exchange and consequently the deferred shares are not freely transferable.

Further detail of the Company’s share capital is given in Note 26 to the Consolidated Financial Statements.

Armour Employees’ Share Trust The Armour Employees’ Share Trust is a discretionary settlement, controlled and managed by an independent trustee company. It is empowered to purchase the Company’s ordinary shares (up to a maximum of 5% of the issued ordinary share capital) and subsequently make them available to employees, principally through the grant and exercise of rights under certain share option schemes operated by the Company. At 31 August 2014, the Armour Employees’ Share Trust held 3,424,000 ordinary shares but these have not been allocated to any specific beneficiaries under any scheme. The trustee is required to waive both voting rights and dividends payable on any ordinary share in the Company in excess of 0.001p, unless otherwise directed by the Company.

Substantial interests The Company has been notified that, as at 10 November 2014, the following shareholders are interested in 3% or more of the ordinary shares in issue:

The Directors have not been advised of any other substantial interest in the share capital of the Company.

Share option schemes Details of employee share schemes are set out in Note 28 to the Consolidated Financial Statements.

No grant of options was made in either the current or prior year under any of the Company’s employee share schemes.

No options were granted to the executive Directors.

No options were exercised in either the current or prior year.

Going concern After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Auditors BDO LLP has expressed its willingness to continue in office as Auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

Annual General Meeting The Annual General Meeting will be held on 8 December 2014.

The ordinary business comprises receipt of the Directors’ Report and audited financial statements for the year ended 31 August 2014, the reappointment of BDO LLP as Auditors and authorisation of the Directors to determine the Auditors’ remuneration, the reappointment of Bob Morton as a Director, the appointment of Mark Wilson as a Director and authorisation of the Directors to allot shares. Resolutions 1 to 5 deal with these matters.

The special business comprises the authorisation to cancel the share premium account, to cancel the deferred shares, the disapplication of Section 561 of the Companies Act 2006 and the authority for the Company to purchase its own ordinary shares. Resolutions 6 to 9 deal with these matters. The background and reasons for the proposed cancellation of the share premium account and the deferred shares are set out in the appendix to the notice of Annual General Meeting.

The Notice of Annual General Meeting and the ordinary and special resolutions to be put to the meeting are included at the end of this Annual Report and financial statements.

Mark Wilson Company Secretary 10 November 2014

%

Hawk Investment Holdings Limited 29.9Mr Robert Atherton 5.3Seraffina Holdings Limited 3.8Armour Employees’ Share Trust 3.5Maven Capital Partners Limited 3.4

Corporate Governance Statement


Corporate governance statement The Company is committed to good standards of corporate governance. The Financial Reporting Council issues and updates the UK Corporate Governance Code (the “Code”), which fully listed companies are expected to adopt or explain any particular circumstances where the Code’s provisions are not adopted. The Company is listed on the Alternative Investment Market, and therefore not required to comply with the Code. It has incorporated those aspects which are considered relevant, given its size and changing strategy. However, this is now restricted given the current number of Directors. The latest edition of the Code was published in September 2012 for adoption in reporting periods starting from 1 October 2012.

The Board At the start of the year the Board comprised two non-executive Directors and two executive Directors. Bob Morton is the non-executive Chairman and Steve Bodger was the non-executive Senior Independent Director. The position of Chief Executive was separate from that of Chairman and was held by George Dexter. Biographical details of current Board members are shown on page 5.

The Board is the link in the chain of authority between the shareholders and the executive management and, as such, plays a key role in the corporate governance process

However, the Board reserved to itself the making of strategic (including budget approval) and broad policy decisions.

As part of the disposal of Armour Home Electronics Limited the Board was reduced to three members and following the year end this has been further reduced to two members. The Board believes that this is appropriate, whilst the Group assesses new investment opportunities; the Board membership will be reviewed and increased when acquisitions are made.

The Board met twelve times during the year with all the Directors present at all meetings.

Board independence In selecting Directors, the Company looks for individuals who provide business experience, strong personal skills and independence of thought and perspective.

The Code sets out circumstances that may be relevant to the Board’s determination of whether a non-executive Director is independent. Bob Morton has declared to the Board his beneficial and non-beneficial interests in the Company’s shares and related party transactions and these interests are taken into account at all meetings of the Board and any decisions made by the Board as appropriate.

Board committees The terms of reference for the Nominations, Remuneration and Audit Committees have been approved by the Board and are on the Group’s website: www.armourgroup.uk.com. All committees have now been suspended until future acquisitions are made and new Directors are appointed to the Board; all decisions are now made by the full Board. The terms of the committees once they are fully constituted and their activities during the year are set out in the following section.

The Nominations Committee The Nominations Committee meets as and when required to consider candidates for appointment as Directors. All Directors are required to submit themselves for re-election on the third anniversary of their last appointment.

The Remuneration Committee The Remuneration Committee is responsible for ensuring that the remuneration packages of the executive Directors and senior managers are appropriate to attract, motivate and retain high calibre individuals. The Remuneration Report on pages 10 and 11 contains more detailed information on the Committee’s role and the Directors’ remuneration and fees.

The Audit Committee The Audit Committee monitors the effectiveness of the internal controls and reviews the interim and annual financial statements before submission to the Board. It also advises the Board on the appointment of Auditors, reviews their fees and discusses the nature, scope and results of the audit with the Auditors.

The Audit Committee met five times during the year and all members were present on each occasion. The executive Directors were invited to attend these meetings. The Company’s Auditors may also be invited to attend meetings, particularly to discuss the results of the annual audit, and are available to the Audit Committee throughout the year as and when required.

The Audit Committee monitors the objectivity and independence of the Company’s Auditors. Generally, the Auditors’ non-audit services are restricted to taxation advice and compliance. Any proposed additional work is considered on an individual basis.

Performance and evaluation The performance of the Board and its Committees has been evaluated during the year in light of the size of the Group and resources available. The conclusions of this review were that:

• There was the potential to increase the number of non-executive Directors, but that this was not necessary given the size of the Group;

• The number of Board meetings and information presented at those meetings allowed continual monitoring of progress and informed decision making throughout the year; and

• The Committees operated satisfactorily throughout the year and were able to attend to Group issues in a timely manner.

Relations with shareholders The Company maintains communication with institutional shareholders through individual meetings with senior management and through reports published by the Company’s stockbrokers. Private shareholders are encouraged to attend the Annual General Meeting at which the Company’s activities are considered and questions answered. General information about the Company and its businesses is also available on the Company’s website: www.armourgroup.uk.com.

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Internal controls The Board has overall responsibility for the Group’s system of internal control. It should be recognised that any such system of internal control can provide only reasonable, but not absolute, assurance against material misstatement or loss. The Board confirms that it has carried out a review of the effectiveness of the Group’s internal controls as operated during the year and revised these following the disposal of its trading subsidiaries.

Processes to assess and manage the risks to success faced by the business are reviewed and improved as necessary. The objective is to enable the business to achieve its objectives without being hindered by circumstances that could have been reasonably foreseen whilst, at the same time, not adversely constricting the business with unnecessary bureaucracy. The principal elements of the system, which are designed to recognise the specific requirements of the Group, include:

• An organisational structure with defined levels of responsibility and delegation of authority, which is subject to the overall Group control procedures;

• Review of the risks faced by the businesses;

• Comprehensive budgeting system producing detailed profit and loss account, balance sheet and cash flows, which are approved by the Board;

• Monthly reporting of results that are compared to budget and revised forecasts; and

• Central control over key areas such as capital expenditure authorisation, insurance and banking facilities.

The Group continues to review its system of internal control to ensure compliance with best practice, whilst also having regard to its size and the resources available. In this context, the Board has concluded that the introduction of an internal audit function is not appropriate at this juncture. The internal controls will be reviewed following any acquisition.

Statement of Directors’ responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group’s Consolidated Financial Statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union, and the Company Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

In preparing these financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently;

• Make judgements and accounting estimates that are reasonable and prudent;

• State whether they have been prepared in accordance with applicable accounting standards, subject to any material departures disclosed and explained in the financial statements; and

• 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 adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication The Directors are responsible for ensuring the Directors’ Report and financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.

Remuneration Report


Scope of Report The Remuneration Report sets out the Company’s remuneration policy and, particularly, its approach for Directors. It also explains how the Company applies the principles of good corporate governance in relation to remuneration. This report has been prepared and approved by the Board.

Composition and role The Remuneration Committee’s members were Steve Bodger, who was the Chairman, and Bob Morton. The Committee was responsible for reviewing all senior executive appointments and determining the Group’s policy in respect of the terms of employment, including remuneration packages of executive Directors and for monitoring senior management development programmes. The operation of the Committee was in compliance with the principles, which are incorporated in Schedule A of the UK Corporate Governance Code (the “Code”). The Committee has given full consideration to the best practice provisions set out in the Code in determining the remuneration packages for executive Directors. Following the changes to the Board during the year, Bob Morton is responsible for determining the Directors’ remuneration. The Remuneration Committee will be reformed following any acquisition.

Remuneration policy The objective of the Group’s remuneration policy is to attract, motivate and retain high quality individuals who will contribute fully to the success of the Group. To achieve this objective, the Group provides competitive salaries and benefits to all employees. Packages are established having regard to current market practice.

Executive Directors’ remuneration is set to create an appropriate balance between both fixed and performance-related elements. Performance-related elements are intended to comprise a significant part of potential remuneration. Remuneration is reviewed each year in light of the Group’s business objectives. It is the Remuneration Committee’s intention that remuneration should reward achievement of objectives and that these are aligned with shareholders’ interests over the medium term.

Remuneration consists of the following elements:

• Basic salary;

• Performance-related annual bonus;

• Benefits;

• Defined contribution pension payments; and

• Share options.

Bonuses and benefits The executive Directors’ bonus scheme is linked to the Group’s year on year profit performance and working capital management.

Divisional performance-related bonus schemes are considered on the basis that bonuses may be payable to senior executives provided their divisional results reach pre-set profit and cash generation targets.

Senior executives’ benefits typically, but not necessarily, include a car (or cash alternative) and insurance for life, disability and health care.

Share options The Company has a number of share option schemes, details of which are in Note 28 to the Consolidated Financial Statements. Under these schemes, share options can be granted to the executive Directors and senior executives within the Group.

The grant of share options is a recognised mechanism, practised by the Company, to encourage continual improvement and align the interests and objectives of the senior management team with those of shareholders over the medium term.

In its review of share options, the Remuneration Committee is mindful of recommended practice, which is taken into account with other factors that include:

• The available headroom under the schemes for new grants;

• The price of previously granted options and whether these continue to act as the intended incentive; and

• Share price movements as compared to the Group’s performance.

Pension arrangements During the year, the majority of senior executives were members of a defined contribution pension plan operated by the Group or, alternatively, have their own personal pension arrangements to which the Group contributed between 5% and 11% of pensionable salary.

Executive Directors’ service contracts The executive Directors serving during the year had service contracts with the Company, which were not of fixed duration and are terminable by either party giving twelve months’ written notice.

Non-executive Directors There are service contracts with the Company for the provision of non-executive Directors’ services, which may be terminated by either party giving three months’ written notice. The fees payable for the services of the non-executive Directors are set by the Board.

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Directors’ remuneration The following table summarises the total gross remuneration, excluding gains on the exercise of options, of the Directors who served during the year ended 31 August 2014:

The above figures represent remuneration earned as Directors during the relevant year. Benefits relate to the assessable taxation benefits arising from a company car allowance and insurance for life, disability and health care. The figures for pensions shown above are the contributions paid by the Company. Neither George Dexter nor John Harris exercised any options during the current or prior year.

Fees for Bob Morton’s services, inclusive of all expenses, are payable to Hawk Consulting Limited, a company in which he has an interest.

Directors’ shareholdings The Directors, who served during the year ended 31 August 2014 and who held an interest in the ordinary shares of the Company, were as follows:

At 31 August 2014, in addition to his beneficial interest in the share capital of the Company, Bob Morton had a non-beneficial interest in 7,758,185 ordinary shares of 1p each (representing 8% of the ordinary shares in issue) and 6,120,000 deferred shares of 9p each (representing 8.9% of the deferred shares in issue). There have been no changes in the Directors’ share interest from 1 September 2014 to 10 November 2014.

Share options The non-executive Directors are not entitled to participate in the Company’s share option schemes. There were no share options held by the executive Directors at 31 August 2014.

The details of the share option schemes are set out in Note 28 to the Consolidated Financial Statements. The high–low market price of ordinary shares in the Company during the year was 6.25p – 4.00p and the market price of the ordinary shares at 31 August 2014 was 5.125p (31 August 2013: 6.00p).

By order of the Board


Total remuneration excluding pensions Pension contributions

Fees £000

Basic salary £000

Bonus £000

Compensation for loss of office

£000Benefits

£000

31 August 2014£000

31 August 2013 £000

31 August 2014£000

31 August 2013£000

Executive George Dexter – 197 173 – 14 384 195 17 18John Harris – 146 127 168 11 452 133 10 13Mark Wilson – 19 – – 2 21 – 1 –Non-executive Bob Morton 30 – – – – 30 – – –Steve Bodger 30 – – – – 30 30 – –Total 2014 60 362 300 168 27 917 – 28 –Total 2013 30 300 – – 28 – 358 – 31

At 31 August 2014 At 31 August 2013

Ordinary

shares of 1p each

Deferred shares

of 9p each

Options on ordinary

shares

Ordinary shares

of 1p each

Deferred shares

of 9p each

Options on ordinary

shares

Bob Morton 30,228,397 14,225,152 – 30,228,397 14,225,152 –George Dexter 1,854,736 1,354,736 – 1,854,736 1,354,736 –John Harris 247,969 176,541 – 247,969 176,541 –Steve Bodger 242,857 100,000 – 242,857 100,000 –Mark Wilson – – – – – –

Independent Auditors’ Report to Shareholders of Armour Group plc


We have audited the financial statements of Armour Group plc for the year ended 31 August 2014 which comprise the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and Company Balance Sheet, Consolidated Statement of Changes in Shareholders' Equity, Consolidated Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in the preparation of the Group’s Financial Statements is applicable law and International Financial Reporting Standards (“IFRS”) as adopted by the European Union. The financial reporting framework that has been applied in preparation of the Company Financial Statements is applicable law and United Kingdom Accounting Standards ("United Kingdom Generally Accepted Accounting Practice").

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditors As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s Ethical Standards for Auditors.

Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements In our opinion:

• The financial statements give a true and fair view of the state of the Group’s and the Company’s affairs as at 31 August 2014 and of the Group’s loss for the year then ended;

• The Group’s Financial Statements have been properly prepared in accordance with IFRS as adopted by the European Union;

• The Company’s Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• The financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ Report and Strategic Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• Adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

• The Company Financial Statements are not in agreement with the accounting records and returns; or

• Certain disclosures of Directors’ remuneration specified by law are not made; or

• We have not received all the information and explanations we require for our audit.

John Everingham (Senior statutory auditor) For and on behalf of BDO LLP, statutory auditor Gatwick, United Kingdom

11 November 2014

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

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Consolidated Statement of Comprehensive Income For the year ended 31 August 2014


The Notes on pages 16 to 34 form part of the Consolidated Financial Statements.

Note

31 August 2014£000

31 August 2013£000

Restated

Revenue 4 – –

Changes in inventory of finished goods and work in progress – –Raw materials and consumables – –

Employee benefits costs 8 (759) (652)

Depreciation and amortisation expense (1) (2)

Other expenses (179) (326)

Total expenses (939) (980)

Loss from continuing operations before exceptional items (725) (980)

Exceptional Items 5 (214) –

Total loss from continuing operations 4,7 (939) (980)

Finance expense 9 (150) (273)

Finance income 9 20 –

Share of post-tax losses of equity accounted associate 16 (70) –

Loss before taxation (1,139) (1,253)

Taxation credit 10 11 165

Loss from continuing operations (1,128) (1,088)

(Loss)/profit on discontinued operations, net of tax 6 (10,071) 1,128

(Loss)/profit for the year (11,199) 40

Other Comprehensive Income Exchange (losses)/gains on translation of foreign operations (144) 6

Total Other Comprehensive (Expense)/Income (144) 6

Total Comprehensive (Loss)/profit for the year (11,343) 46

(Loss)/earnings per ordinary share from continuing and discontinued operations 11 Basic (11.96)p 0.04p

Diluted (11.96)p 0.04p

Continuing operations Basic (1.20)p (1.16)p

Diluted (1.20)p (1.16)p

Consolidated Statement of Financial Position At 31 August 2014


These financial statements were approved by the Board and authorised for issue on 10 November 2014.

Bob Morton Mark Wilson Director Director


Note

31 August2014 £000

31 August 2013£000

Non-current assets Goodwill 13 – 12,084Other intangible assets 14 – 2,602Property, plant and equipment 15 1 709Investment in associate 16 859 –Loan 18 1,000 –Deferred taxation asset 25 6 714Total non-current assets 1,866 16,109Current assets Inventories 19 – 7,957Trade and other receivables 20 60 6,703Corporation taxation – 205Cash and cash equivalents 21 4,070 302Total current assets 4,130 15,167Total assets 5,996 31,276Current liabilities Bank overdrafts and borrowings 23 – (7,951)Trade and other payables 22 (415) (6,179)Corporation taxation liability – (27)Provisions 24 – (48)Total current liabilities (415) (14,205)Non-current liabilities Provisions 24 – (76)Deferred taxation liability 25 – (71)Total non-current liabilities – (147)Total liabilities (415) (14,352)Total net assets 5,581 16,924 Equity Share capital 26 7,134 7,134Share premium 27 10,084 10,084Other reserves 27 – 871Retained earnings 27 (11,065) (737)Translation reserve 27 – 144Share trust reserve 27 (572) (572)Total equity 5,581 16,924

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Consolidated Statement of Changes in Shareholders’ Equity



Consolidated Statement of Cash Flows For the year ended 31 August 2014


Share capital

£000

Share premium

£000

Other reserves

£000

Retained earnings

£000

Translation reserve

£000

Share trust reserve

£000

Total equity

£000

At 1 September 2012 7,134 10,084 871 (777) 138 (572) 16,878Profit for the year – – – 40 – – 40Other Comprehensive Income – – – – 6 – 6 At 31 August 2013 7,134 10,084 871 (737) 144 (572) 16,924 Loss for the year – – – (11,199) – – (11,199)Other Comprehensive Expense – – – – (144) – (144)Discontinued operations – – (871) 871 – – – At 31 August 2014 7,134 10,084 – (11,065) – (572) 5,581

Note

31 August 2014 £000

31 August 2013£000

Cash flow from operating activities Cash generated from operations 31 87 1,390Income taxes recovered/(paid) by discontinued operations 272 (11)Net cash inflow from operating activities 359 1,379Investing activities Purchase of property, plant and equipment (206) (166)Sale of property, plant and equipment 9 –New loans issued (1,000) –Proceeds on disposal of discontinued operations 11,226 –Costs of disposal of discontinued operations (822) –Expenditure on intangible assets (797) (695)Interest received 17 2Net cash generated from/(used in) investing activities 8,427 (859)Financing activities New loans taken out – 2,000Repayment of loans (4,499) (2,234)Interest paid (348) (479)Net cash used in financing activities (4,847) (713)Net increase/(decrease) in cash, cash equivalents and bank overdrafts 32 3,939 (193)Currency variations on cash, cash equivalents and bank overdrafts – 6Cash, cash equivalents and bank overdrafts at the start of the year 131 318Cash, cash equivalents and bank overdrafts at the end of the year 21 4,070 131

Notes to the Consolidated Financial Statements


1 Accounting policies Basis of preparation The Group’s Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards (IAS) and Interpretations (collectively “IFRS”) issued by the International Accounting Standards Board as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies preparing their financial statements under IFRS. They have been prepared on the historical cost basis.

The principal accounting policies adopted in the preparation of the Group’s Consolidated Financial Statements are set out below. The policies have been consistently applied to all of the years presented, unless otherwise stated.

The Consolidated Financial Statements are prepared in pounds sterling and rounded to the nearest thousand.

Changes in accounting policies New standards, interpretations and amendments effective from 1 September 2013.

The following new standards, interpretations and amendments effective for the first time from 1 September 2013 have not had a material effect on the financial statements:

• IFRS 7 (Amendment): Disclosures – Offsetting Financial Assets and Financial Liabilities (from 1 January 2013);

• IFRS 13: Fair Value Measurement (from 1 January 2013); and

• IAS 19: Employee Benefits (from 1 January 2013).

Basis of consolidation These Consolidated Financial Statements present the results of the Company and its subsidiary undertakings (the “Group”) as if they form a single entity. Subsidiary undertakings are entities over which the Company has control in terms of the power to govern the financial and operating policies of an acquired entity so as to obtain benefits from its activities. Intercompany transactions and balances between entities within the Group are therefore eliminated in full. The investment in associate is accounted for using the equity method.

Business combinations These Consolidated Financial Statements incorporate the results of business combinations using the purchase method. In the Consolidated Statement of Financial Position, the acquired identified assets, liabilities and contingent liabilities are initially recognised at their fair values at the date of acquisition. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained.

Goodwill Goodwill arising on the acquisition of a business represents any excess of the fair value of the consideration over the fair value of the identifiable assets and liabilities acquired. The identifiable assets and liabilities acquired are incorporated into the Consolidated Financial Statements at their fair value to the Group.

Goodwill is not amortised but tested for impairment annually. Any impairment is recognised immediately in the Consolidated Statement of Comprehensive Income and is not subsequently reversed. On disposal of a business, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Intangible assets (excluding goodwill) Intangible assets (excluding goodwill) include the following:

(a) Development costs Both internal and external development costs, associated with the production of saleable products, are capitalised as an intangible asset in accordance with the criteria of IAS 38 which include that the asset created can be identified, the cost can be measured reliably and it is probable that the asset will generate future economic benefits. The asset is then amortised on a straight-line basis over the expected sales period for the product, on a product type by product type basis, which is usually between three and ten years.

Where no intangible asset can be identified, development costs are recognised as an expense in the financial period in which they are incurred.

(b) Other intangible assets Other intangible assets include investments, recorded at cost, in software (which is separately identifiable from the hardware on which it runs) and acquired brands. The assets so created are amortised on a straight-line basis over their expected useful lives as follows:

Software between three and five years and brands twenty years.

Where the software is not separately identifiable from the hardware, it is included with the hardware in property, plant and equipment.

Impairment of non-financial assets Impairment tests on goodwill and other intangible assets with indefinite useful lives are undertaken annually for the reporting year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset is judged to exceed its recoverable amount (i.e. the higher of value in use or the fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash-generating unit (i.e. the lowest group of assets, in which the asset belongs, for which there are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill.

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Impairment charges, and the reversal of previous impairment charges, are expensed/credited to the Consolidated Statement of Comprehensive Income.

Property, plant and equipment Property, plant and equipment are stated at cost less the accumulated depreciation and, where appropriate, provision for impairment in value or estimated loss on disposal. Property, plant and equipment are depreciated over their estimated useful lives on a straight-line basis as follows:

Leasehold improvements over the term of the lease Plant and equipment and fixtures and fittings 10% – 33% Motor vehicles 20% – 25%

Foreign currencies The results of overseas subsidiary undertakings are translated into sterling at the actual rates of exchange during the financial period and their balance sheets at the rates ruling at the financial period end. Gains or losses arising on the translation of the opening net assets and results of overseas subsidiary undertakings are recognised in Other Comprehensive Income and taken to the Group’s translation reserve.

Transactions denominated in foreign currencies are translated into sterling at the exchange rate in operation on the date of the transaction. Monetary assets and liabilities originally denominated in foreign currencies are translated into sterling at the exchange rate in operation at the date of the financial period end. Exchange gains and losses are reported as part of the Consolidated Statement of Comprehensive Income.

Financial instruments (a) Derivative financial instruments The Group uses foreign exchange forward contracts to hedge financial risks to changes in foreign currency exchange rates. These financial instruments are included in the Consolidated Statement of Financial Position as assets or liabilities at their fair values. The Group does not use derivative financial instruments for speculative purposes but its financial instruments do not qualify for hedge accounting under IFRS and consequently changes in their fair values are recognised in the Consolidated Statement of Comprehensive Income as they arise.

(b) Bank borrowings Bank borrowings are initially recognised at fair value. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Consolidated Statement of Financial Position. The interest expense includes initial transaction costs and premiums payable on redemption, as well as any interest coupon payable while the liability is outstanding.

(c) Trade receivables and trade payables Trade receivables and trade payables are non-derivative assets and liabilities of fixed or determinable amounts that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables) or the purchase of goods and services (trade payables and accruals). They are initially recognised at fair value and subsequently carried at amortised cost and in the case of trade receivables less any provision for impairment.

Inventories Inventories have been valued at the lower of cost and net realisable value. Cost includes all direct expenditure to bring items to their condition and location at the accounting date, together with, in the case of goods manufactured by the Group, an appropriate proportion of production overhead expenditure attributable thereto.

Cash and cash equivalents Cash and cash equivalents comprise cash in hand, at bank and deposits where the amounts are not part of the Group’s set-off arrangements and, in the case of deposits, where they are repayable within three months and are subject to an insignificant risk of a change in value. Bank overdrafts are shown within current liabilities in the Consolidated Statement of Financial Position but are included within cash and cash equivalents in respect of the Consolidated Statement of Cash Flows.

Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The provision is recorded at the present value of the expenditures expected to be required to settle the obligation using a discount rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.

Deferred taxation Deferred taxation is the taxation expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding taxation bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred taxation liabilities are generally recognised for all taxable temporary differences except goodwill. Deferred taxation assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised.

Deferred taxation is calculated at the taxation rate that is expected to apply in the financial period when the liability is settled or the asset is realised.

Notes to the Consolidated Financial Statements continued


1 Accounting policies continued Leases Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a “finance lease”), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the Consolidated Statement of Comprehensive Income over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an “operating lease”), the total rental payable under the lease is charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term.

Revenue Revenue represents the invoiced value of goods sold and the value of services provided to third party customers, excluding value added tax. Revenue is recognised when the risks and rewards of owning the goods have passed to the customer, which is generally on delivery or when services have been provided.

Share-based payments Where share options are awarded to employees, the fair value of the option at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where share options are cancelled, their remaining unamortised fair value is fully written off through the Consolidated Statement of Comprehensive Income.

Pension costs The Group operates defined contribution arrangements. The pension costs payable by the Group in the financial period are charged to the Consolidated Statement of Comprehensive Income.

Dividends Equity dividends are recognised when they become legally payable, which is when they are approved by the shareholders at the Annual General Meeting. They are charged directly to equity.

Armour Employees’ Share Trust As the Company is deemed to have control of the Armour Employees’ Share Trust, it is treated as a subsidiary undertaking. The assets (other than investments in the Company’s ordinary shares), liabilities, income and expenses are included on a line-by-line basis in the Consolidated Financial Statements. The investment in the Company’s ordinary shares is shown in the share trust reserve and is treated as a deduction from equity in the Consolidated Statement of Financial Position.

Standards, amendments and interpretations to existing standards not yet effective The following standard has been published but is not effective for the periods presented, has not been endorsed by the European Union and the Group has chosen not to early adopt:

IFRS 9: Financial Instruments (effective for accounting periods beginning on or after 1 January 2018). It is envisaged that this standard will replace IAS 39: Financial Instruments: Recognition and Measurement in its entirety. The Group is currently assessing the impact of the new standard on its Consolidated Financial Statements.

At the date of authorisation of these financial statements, the following standards, amendments or revisions to standards and interpretations of existing standards were in issue, but were not yet effective and/or had not been endorsed by the European Union. They have not been applied to the Consolidated Financial Statements.

Applicable to the Group from 1 September 2014:

• IFRS 10: Consolidated Financial Statements (from 1 January 2014);

• IFRS 12: Disclosure of Interests in Other Entities (from 1 January 2014);

• IAS 27: Separate Financial Statements (from 1 January 2014); and

• IAS 28: Investments in Associates and Joint Ventures (from 1 January 2014).

Applicable to the Group subsequent to 31 August 2014:

• IFRS 11 (amendment): Joint Arrangements (from 1 January 2016).

The Group is currently assessing the impact of these amendments, revisions and interpretations on its Consolidated Financial Statements but, at this stage, does not consider that they will have a significant material effect save for any additional disclosure requirements.

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2 Accounting estimates and judgements (a) Impairment of goodwill and other intangible assets The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. Other intangible assets are tested for impairment when indication of impairment exists. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary. More information on goodwill impairment testing including the carrying value is included in Note 13.

(b) Useful lives of intangible assets and property, plant and equipment Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the Consolidated Statement of Comprehensive Income in specific periods. More details including the carrying values are included in Notes 14 and 15.

(c) Fair value of financial instruments The Group determines the fair value of financial instruments that are not quoted using valuation techniques. Those techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. In that regard, the derived fair value estimates cannot always be substituted by comparison with independent markets and, in many cases, may not be capable of being realised immediately.

More details on financial instruments are given in Note 3.

(d) Inventories The companies within the Group that carry inventory review the net realisable value of, and demand for, their inventory on a regular basis and particularly at the year-end to provide assurance that it is stated at the lower of cost and net realisable value. Factors that could impact estimated demand and selling prices include the timing and success of future technological innovations, competitor activities, supplier prices and economic trends.

(e) Share-based payments The fair value of share option share-based payments is estimated, using the Black-Scholes valuation model, as at the date of grant and using certain assumptions.

(f) Provisions The Group recognises provisions in accordance with its accounting policy described on page 17. In arriving at estimates for provisions, estimates and judgements are made, in particular with regard to timing and amount. Calculations are based on anticipated future cash flows relating to the relevant event, which are estimated by management and where appropriate supported by the use of external advisers.

(g) Taxation The Group was subject to taxation in several jurisdictions and judgement was required in determining the provision for income and deferred taxation. The Group recognises taxation assets and liabilities based upon estimates and assessments of many factors, including past experience, advice received on the relevant taxation legislation and judgements about the outcome of future events. To the extent that the final outcome of these matters is different from the amounts recorded, such differences will impact on the taxation charge made in the Consolidated Statement of Comprehensive Income in the period in which such determination is made.

3 Financial instruments and risk management The principal financial instruments used by the Group from which financial instrument risk arises are as follows:

• Trade receivables;

• Cash at bank;

• Bank overdrafts;

• Trade and other payables;

• Fixed and floating rate loans; and

• Forward currency contracts.

The following tables show financial instruments by category:

31 August 2014 31 August 2013

Loans and receivables

£000

Derivative financial

instruments £000

Total £000

Loans and receivables

£000


instruments £000

Total £000

Assets Trade and other receivables – – – 5,685 – 5,685Cash and cash equivalents 4,070 – 4,070 302 – 302 4,070 – 4,070 5,987 – 5,987



3 Financial instruments and risk management continued

Valuation hierarchy The adoption of the amendment to IFRS 7 requires enhanced disclosures about fair value measurements of financial instruments through the use of a three-level fair value hierarchy that prioritises the valuation techniques used in fair value calculations.

The levels can be broadly described as follows:

• Level 1 – use of unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 – use of observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities in active markets; and

• Level 3 – use of inputs not based on observable market data but reflecting management’s own assumptions about pricing the asset or liability.

The Group’s financial instruments measured at fair value are categorised as follows:

The Group encounters, through its operations, the following financial risks:

• Credit risk;

• Market risk, being;

(a) Interest rate risk;

(b) Currency risk;

• Liquidity risk; and

• Capital management.

In common with all other businesses, the Group encounters risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Additional information in respect of these risks is included throughout the Consolidated Financial Statements.



instruments £000

Other financial liabilities

£000 Total £000


instruments £000

Other financial liabilities

£000 Total £000

Liabilities Borrowings – – – – 7,951 7,951Trade and other payables – 415 415 5 6,174 6,179 – 415 415 5 14,125 14,130

Level 1£000

Level 2 £000

Level 3£000

Total£000

At 31 August 2014 Assets Derivative assets – – – –Total assets – – – –Liabilities Derivative liabilities – – – –Total liabilities – – – –

Level 1£000

Level 2 £000

Level 3£000

Total£000

At 31 August 2013 Assets Derivative assets – – – –Total assets – – – –Liabilities Derivative liabilities – 5 – 5Total liabilities – 5 – 5

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Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group was mainly exposed to credit risk from credit sales. It was the Group’s policy, implemented in the operating subsidiary undertakings, to assess the credit worthiness of customers prior to opening new accounts. This assessment includes an internal assessment of the acceptable risk corroborated where available with an external rating from an acceptable credit rating agency. Purchase limits are established for customers, which represent the maximum open amount. Authorisation to allow sales that would cause this limit to be exceeded is required from the operating subsidiary undertaking senior management team. If this authorisation is not given, no further sales are made to that customer until payment has been received. This policy will be reviewed when any acquisitions are made.

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. The Group’s main day-to-day banking arrangements are with Lloyds Bank plc. Amounts were held by overseas operations with foreign banks but were kept to a minimum.

The Group does not enter into derivatives to manage credit risk, although, in certain cases, may take steps to mitigate such risks if it is sufficiently concentrated.

Quantitative disclosure of the credit risk exposure in relation to trade and other receivables is given in Note 20.

Market risk Market risk arose from the Group’s interest bearing, tradable and foreign currency financial instruments. It was the risk that the fair value, or future cash flows, of a financial instrument will fluctuate because of changes in the interest rates (interest rate risk) or foreign exchange rates (currency risk).

(a) Interest rate risk The Group was exposed to cash flow interest rate risk from its overdraft and loan facilities, which carried interest at variable rates. The Group’s policy was to balance exposure to interest rate risk with the cost and flexibility of funding. This policy was managed centrally and subsidiary undertakings were generally not permitted to borrow from external sources and not without central approval.

The requirement for interest rate hedging is reviewed periodically, being a mechanism available to manage interest rate risk. These reviews acknowledge that interest rate hedges will not necessarily protect the Group from the risk of paying rates in excess of current market rates nor eliminate cash flow risk associated with the variability in interest payments. Judgements are therefore exercised in the context of the market and the materiality of the potential risk compared to the cost. At 31 August 2014, none (31 August 2013: none) of the Group’s borrowings were hedged against interest rate movements.

The Group currently has net cash and is therefore not subject to interest rate risk on borrowings.

Based upon the average of the Group’s net debt/cash during the year, it is estimated that a rise/fall of one percentage point in the principal interest rates to which the Group is exposed would decrease/increase profit before taxation by approximately £78,000 (31 August 2013: £75,000).

(b) Currency risk Currency risk arose because the Group had operations located in various parts of the world whose functional currencies are different from that of the Group.

The Company is currently not exposed to currency risk and will review this policy when appropriate.

Financial instruments within individual Group companies that are not denominated in the functional currency of the company concerned at 31 August 2014 were as follows:

Liquidity risk Liquidity risk arose from the Group’s management of working capital and the finance charges and principal repayments on its debt instruments. It was the risk that the Group would encounter difficulty in meeting its financial obligations as they fall due.

The Group financed its operations through a mix of equity and borrowings. The Group’s objective was to provide funding for future growth and achieve a balance between continuity and flexibility through its borrowing arrangements. During the year the Group was able to draw on funds based upon the value, within its UK trading subsidiary undertakings, of unpaid sales invoices and stock held. At 31 August 2013, the Group had undrawn facilities of £1.3 million; these facilities were no longer available following the disposal of Armour Home. Further details of the Group’s facilities, and changes thereto over the year, are given in the Strategic Report on pages 2 to 4 and in Note 23.

When the Group has surplus funds, interest income is earned on a daily basis.

Net foreign currency monetary assets/(Iiabilities)

Functional currency of Group operation Euro£000

US dollar £000

Other£000

Total£000

At 31 August 2014 Sterling – – – –At 31 August 2013 Sterling 56 (1,222) (53) (1,219)



3 Financial instruments and risk management continued Capital management The Group manages its capital structure in order to safeguard the going concern of the Group and provide returns for shareholders and benefits for other stakeholders. The capital structure of the Group consists of debt, which includes borrowings disclosed in Note 23, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings.

The Group may maintain or adjust its capital structure by adjusting the amount of dividend paid to shareholders, returning capital to shareholders, issuing new shares or selling assets to reduce debt.

4 Segment information During the year the Group operated in the following main business segments; the results of these business segments up to the date of their disposal are included below:

These segments were considered on the basis of different products and services. The accounting policies of the operating segments are the same as those described in the accounting policies in Note 1. The revenue and profit/(loss) from operations of the trading segments have been included in (loss)/profit on discontinued operations, net of tax in the Consolidated Statement of Comprehensive Income.

Armour Automotive The design, manufacture and supply of products for the in-vehicle communications and entertainment market;

Armour Home The design, manufacture and supply of products into the hi-fi, home theatre, home entertainment and office furniture markets;

Armour Asia The sale of Armour Automotive and Armour Home products into Asian markets and provision of supplier support services, including quality control, to the UK businesses; and

Central operations The provision of Group-wide support services including finance and future product concepts to the other business segments within the Group.

Continuing operations year ended 31 August 2014

Armour Automotive

£000

ArmourHome

£000

Armour Asia

£000

Central operations

£000 Total £000

Revenue – – – – –Loss from operations – – – (939) (939)Balance sheet Assets – – – 5,996 5,996Liabilities – – – (415) (415)Net assets – – – 5,581 5,581Other Finance expense – – – (150) (150)Taxation credit – – – 11 11

Continuing operations year ended 31 August 2013

Armour Automotive

£000

ArmourHome £000

Armour Asia

£000

Central operations

£000 Total £000

Loss from continuing operations – – – (980) (980)Other Finance expense – – – (273) (273)Taxation credit – – – 165 165

Discontinued operations year ended 31 August 2014

Armour Automotive

£000

ArmourHome

£000

Armour Asia

£000

Central operations

£000 Total £000

Revenue 8,915 14,987 1,154 – 25,056Profit/(loss) from discontinued operations, net of tax 3,524 (13,550) (45) – (10,071)

Discontinued operations year ended 31 August 2013

Armour Automotive

£000

ArmourHome £000

Armour Asia

£000

Central operations

£000 Total £000

Revenue 14,499 16,127 1,468 – 32,094Profit/(loss) from discontinued operations, net of tax 1,193 (32) (33) – 1,128

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Geographical information

5 Exceptional items Exceptional items relate to the redundancy costs at Head Office following the sale of the Armour Automotive division. The exceptional costs incurred are shown below:

6 Discontinued operations During the year the Group disposed of both of its trading divisions: Armour Automotive was sold on 31 March 2014 and Armour Home on 4 August 2014. The post-tax gain/(loss) of discontinued operations was determined as follows:

Year ended 31 August 2013

Armour Automotive

£000

ArmourHome £000

Armour Asia

£000

Central operations

£000 Total £000

Balance sheet Assets 7,402 10,906 770 12,198 31,276Liabilities (4,606) (6,958) (313) (2,475) (14,352)Net assets 2,796 3,948 457 9,723 16,924

Revenue by location of customers

Total non-current assets by location

2014£000

2013 £000

2014£000

2013£000

United Kingdom 15,668 20,507 1,866 16,080Sweden 1,491 1,982 – 3France 1,111 1,509 – –Denmark 233 838 – –Italy 763 829 – –Hong Kong 53 95 – 15Other countries 5,737 6,334 – 11 25,056 32,094 1,866 16,109

31 August 2014£000

31 August2013£000

Redundancy costs 214 –Total exceptional items 214 –

Armour Automotive

£000

ArmourHome

£000 Total £000

Revenue 8,915 16,141 25,056Expenses other than finance costs (8,095) (16,604) (24,699)Finance costs (79) (153) (232)Tax (expense)/credit (166) 58 (108)Net asset value of associate – 929 929Gain/(loss) from selling discontinued operations after tax 2,949 (13,966) (11,017)Profit/(loss) from discontinued operations 3,524 (13,595) (10,071)

Loss per share from discontinued operations

31 August 2014

pence

31 August2013

pence

Basic loss per share (10.76) (1.20)Diluted loss per share (10.76) (1.20)



6 Discontinued operations continued The consolidated statement of cash flows includes the following amounts relating to discontinued operations:

The consideration received in respect of the disposal of Armour Automotive was £11.2 million and there was nil cash consideration received in respect of Armour Home.

*Includes Armour Hong Kong Limited.

7 Profit/(loss) from operations

31 August 2014 £000

31 August 2013£000

Restated

Profit/(loss) from operations is stated after charging/(crediting): Continuing operations Depreciation of property, plant and equipment 1 1Operating lease rentals – other 38 38Discontinuing operations Depreciation of property, plant and equipment 230 300Amortisation and impairment of intangible fixed assets (Note 14) 531 579Loss on disposal of property, plant and equipment and intangible fixed assets – 19Research and development expenditure 508 515Operating lease rentals: Hire of plant and machinery 108 147 Other 736 876Gain on financial instruments (68) (208)Foreign exchange loss 288 4

31 August 2014£000

31 August2013£000

Operating activities 1,374 1,615Investing activities 9,410 (859)Financing activities (2,697) (456)Net cash generated from discontinued operations 8,087 300

Net assets disposed

Armour Automotive

£000

ArmourHome*

£000 Total £000

Property, plant and equipment 119 560 679Goodwill 2,088 9,996 12,084Intangibles 3,360 1,710 5,070Trade and other receivables 3,822 3,207 7,029Other financial assets 2,815 6,083 8,898Cash, cash equivalents and loans (2,890) (2,720) (5,610)Trade and other payables (2,500) (4,126) (6,626) 6,814 14,710 21,524

31 August 2014£000

31 August 2013£000

Services provided by the Company’s Auditors and its associates: Audit services: Fees payable to the Company’s Auditors for the audit of the Company and Consolidated Financial Statements 30 13Fees payable to the Company’s Auditors and its associates for other services: Audit of the Company’s subsidiary undertakings pursuant to legislation – 40Taxation services 17 13 47 66

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8 Staff and key management The aggregate amounts payable to people employed by the Group (including Directors) during the year was as follows:

The average number of people employed by the Group during the year was:

Directors’ remuneration was:

No options were exercised by the Directors and no gains were made in either the current or prior year. Three Directors accrued pension benefits.

The remuneration of the highest paid Director amounted to £451,831 (31 August 2013: £195,190) and Company contributions to the defined contribution pension scheme amounted to £10,200 (31 August 2013: £18,020).

Further information in regard to the Directors’ remuneration, interests in ordinary shares and interests in share options is included in the Remuneration Report on pages 10 and 11.

Key management remuneration was:

The amounts shown above for key management comprise amounts in respect of the Directors of Armour Group plc (as shown in the Remuneration Report on page 11), the Managing Director of Armour Automotive and the Finance Directors of Armour Automotive and Armour Home, up to the point of their disposal during the current year.

31 August 2014 £000

31 August 2013£000

Restated

Wages and salaries 4,948 6,013Social security costs 553 707Pension costs 181 204Total employment costs 5,682 6,924Amount capitalised as development (381) (352)Discontinued operations (4,542) (5,920) 759 652

31 August

2014 31 August

2013

Armour Automotive 36 73Armour Home 84 94Armour Asia 7 7Central operations 5 6 132 180

31 August 2014 £000

31 August 2013£000

Emoluments 689 328Fees paid for Directors’ services 60 30Contributions to money purchase pension schemes 28 31Compensation for loss of office 168 – 945 389

31 August 2014 £000

31 August 2013£000

Emoluments 954 683Fees paid for Directors’ services 60 30Contributions to money purchase pension schemes 47 60Compensation for loss of office 168 – 1,229 773



9 Finance income and expense

10 Taxation

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to the result for the year are as follows:

31 August 2014 £000

31 August 2013£000

Restated

Finance income Interest received on bank deposits 21 2Discontinued operations (1) (2) 20 –Finance expense Loans and overdrafts (348) (495)Bank loan arrangement costs expensed (35) (100)Discontinued operations 233 322 (150) (273)

31 August 2014 £000

31 August 2013£000

Current taxation credit UK corporation tax on result for the year – –Adjustment in respect of prior years 17 205Discontinued operations – (2)Income taxation of overseas operations – (38)Total current taxation credit 17 165 Deferred taxation credit UK operations (5) (176)Adjustment in respect of prior years (1) (6)Discontinued operations – 180Overseas operations – 2Total deferred taxation charge (6) –Total taxation credit 11 165

31 August 2014 £000

31 August 2013£000

Loss before taxation (1,139) (1,253) Loss multiplied by the rate of UK corporation tax of 22.16% (2013: 23.58%) 252 296Effects of: Expenses not deductible for taxation purposes (1) (28)Taxation credits – 132Differences arising from overseas taxation rates and foreign currency – (1)Differences arising from variation of UK taxation rates – (103)Carried forward losses not recognised (229) (200)Associate (4) –Discontinued operations (23) (130)Adjustments in respect of prior years 16 199Total taxation credit 11 165

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11 (Loss)/earnings per ordinary share Basic (loss)/earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the financial year of 93,627,496 (31 August 2013: 93,627,496). Diluted earnings/(loss) per ordinary share are calculated with reference to 93,627,496 (31 August 2013: 93,627,496) ordinary shares. The effect of the exercise of options on the weighted average number of ordinary shares in issue is nil (31 August 2013: nil).

At 31 August 2014, the Armour Employees’ Share Trust held 3,424,000 (31 August 2013: 3,424,000) ordinary shares. The weighted average number of ordinary shares held by the Armour Employees’ Share Trust during the year of 3,424,000 (31 August 2013: 3,424,000) is not included in either the weighted average, or diluted weighted average, ordinary shares in issue during the financial year.

Underlying (loss)/earnings per ordinary share are also shown calculated by reference to earnings before exceptional items. The Directors consider that this gives a useful additional indication of underlying performance. It should be noted that the term “underlying” is not defined under IFRS and may not therefore be comparable with similarly titled profit measures reported by other entities.

12 Dividend The Board did not recommend a dividend for the year ended 31 August 2013 and has not recommended a final dividend for the year ended 31 August 2014.

13 Goodwill and impairment Goodwill acquired in business combinations and carried in the Consolidated Statement of Financial Position is allocated to the cash-generating units (“CGUs”) that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:

Goodwill is not amortised but tested annually for impairment, the recoverable amounts of the CGUs being determined from value in use calculations. The key assumptions for the value in use calculations are those regarding discount rates, growth rates, expected sales prices and costs during the period. Management estimates discount rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates, selling prices and direct costs are based on past experience and expectations of future changes in the market.

14 Other intangible assets

31 August 2014

31 August 2013

Restated

£000 Basicpence

Dilutedpence £000

Basicpence

Dilutedpence

(Loss)/profit for the year (11,199) (11.96) (11.96) 40 0.04 0.04Discontinued operations, net of tax 10,071 10.76 10.76 (1,128) (1.20) (1.20)Continuing operations (1,128) (1.20) (1.20) (1,088) (1.16) (1.16)Exceptional items, net of tax 214 0.23 0.23 – – –Underlying loss (914) (0.97) (0.97) (1,088) (1.16) (1.16)


ArmourAutomotive

£000

ArmourHome

£000

Total

£000

Armour Automotive

£000

ArmourHome£000

Total

£000

At the start of the year 2,088 9,996 12,084 2,088 9,996 12,084Disposal (2,088) (9,996) (12,084) – – –At the end of the year – – – 2,088 9,996 12,084


Computersoftware

£000 Brands

£000

Development costs £000

Total £000

Computersoftware

£000 Brands

£000

Developmentcosts £000

Total £000

Cost At the start of the year 665 500 8,132 9,297 674 500 7,441 8,615Additions 11 153 633 797 4 – 691 695Disposals (676) (653) (8,765) (10,094) (13) – – (13)At the end of the year – – – – 665 500 8,132 9,297Amortisation At the start of the year 610 96 5,989 6,695 568 72 5,489 6,129Charge for the year 46 35 435 516 55 24 480 559Impairment charge – – 15 15 – – 20 20Disposals (656) (131) (6,439) (7,226) (13) – – (13)At the end of the year – – – – 610 96 5,989 6,695Net book value At the start of the year 55 404 2,143 2,602 106 428 1,952 2,486At the end of the year – – – – 55 404 2,143 2,602



15 Property, plant and equipment

At 31 August 2014 and 31 August 2013, there were no assets held under finance leases.

16 Investment in associate On 4 August 2014, the Company received 25% of the shareholding of Q Acoustics Limited in consideration for the disposal of the Armour Home division. This included Armour Home Electronics Limited, Armour Hong Kong Limited and a number of dormant subsidiaries. This investment has been treated as an associate, as it has been considered that the Company does not have significant influence over the business of Q Acoustics Limited. The net assets of Q Acoustics Limited at 31 August 2014 were £3.4 million.

Leasehold improvements

£000

Motor vehicles

£000

Plant and equipment

£000

Fixtures and fittings

£000 Total £000

Cost At 1 September 2013 395 37 2,347 1,150 3,929Additions – – 197 9 206Disposals (382) (37) (2,515) (1,155) (4,089)Foreign exchange movement – – (1) (4) (5)At 31 August 2014 13 – 28 – 41Depreciation At 1 September 2013 285 25 1,922 988 3,220Charge for the year 20 3 178 30 231Disposals (292) (28) (2,072) (1,015) (3,407)Foreign exchange movement – – (1) (3) (4)At 31 August 2014 13 – 27 – 40Net book value At 1 September 2013 110 12 425 162 709At 31 August 2014 – – 1 – 1

Leasehold improvements

£000

Motor vehicles

£000

Plant and equipment

£000

Fixtures and fittings

£000 Total £000

Cost At 1 September 2012 389 38 2,450 1,193 4,070Additions 6 – 130 30 166Disposals – (1) (234) (73) (308)Foreign exchange movement – – 1 – 1At 31 August 2013 395 37 2,347 1,150 3,929Depreciation At 1 September 2012 252 19 1,936 1,001 3,208Charge for the year 33 7 201 60 301Disposals – (1) (215) (73) (289)Foreign exchange movement – – – – –At 31 August 2013 285 25 1,922 988 3,220Net book value At 1 September 2012 137 19 514 192 862At 31 August 2013 110 12 425 162 709

31 August 2014£000

31 August 2013£000

Investment in associate at the start of the year –25% of the fair value of Armour Home Electronics Limited at disposal 855 –25% of the fair value of Armour Hong Kong Limited at disposal 74 – 929 –Share of post-tax losses (70)Investment in associate at the end of the year 859 –

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17 Subsidiary undertakings The principal subsidiary undertakings of Armour Group plc, all of which have been included in these Consolidated Financial Statements, are as follows:

Note 4 on page 22 describes the nature of the businesses contained within each business segment.

18 Loan On 17 July 2014, the Company entered into a £1.0 million loan agreement with Armour Home Electronics Limited, a wholly owned subsidiary of Q Acoustics Limited. The loan is for five years and carries interest of 10% per annum, with no capital repayments in the first two years. The loan is secured by debentures over Q Acoustics Limited and its subsidiaries.

19 Inventories

20 Trade and other receivables

There is no material difference between the net book amount and the fair value of current trade and other receivables due to their short-term nature.

There was no particular concentration of credit risk to the Group’s trade receivables. The provision for impairment is analysed as follows:

The creation and release of the provision for impaired receivables has been included in the Consolidated Statement of Comprehensive Income under other expenses.

Proportion of ownership at 31 August

Country of incorporation

2014%

2013%

Armour Automotive Group Limited Great Britain 100 100Armour Automotive Armour Automotive Limited Great Britain – 100Armour Nordic AB Sweden – 100Armour Nordic AS Norway – 100Armour Home Armour Home Electronics Limited Great Britain – 100Armour Hong Kong Limited Hong Kong – 100Alphason Designs Limited Great Britain – 100

31 August 2014£000

31 August 2013£000

Raw materials and consumables – 1,224Finished goods and goods for resale – 6,733Total inventories – 7,957

31 August 2014 £000

31 August2013£000

Trade receivables – 5,931Less: Provision for impairment of trade receivables – (304)Net trade receivables – 5,627Other receivables – 58Prepayments 60 1,018Derivative financial instruments – –Total trade and other receivables 60 6,703

31 August 2014 £000

31 August2013£000

At 1 September (304) (227)Consolidated Statement of Comprehensive Income charge – (95)Discontinued operations 304 –Written off as uncollectable – 18At 31 August – (304)



20 Trade and other receivables continued Trade and other receivables that have not been received within the payment terms agreed are classified as overdue. The ageing of overdue amounts at 31 August is as follows:

21 Cash and cash equivalents

22 Trade and other payables – current

There is no material difference between the net book amount and fair value of trade and other payables due to their short-term nature.

23 Borrowings

The Group had an asset-based lending agreement with GE Commercial Finance Limited, under which the Group’s subsidiary undertakings could borrow funds based on the value of unpaid sales invoices (capped at £10 million) and stock held (capped at £6 million). Amounts borrowed were secured by way of a cross guarantee and debenture over the assets of the Group companies based in the UK. At 31 August 2013, the amount borrowed under this arrangement was £5.82 million. Amounts borrowed were subject to a floating rate of interest being three month LIBOR plus margin. At 31 August 2013 the interest rate applicable to the amount borrowed was 2.5%.

The agreement with GE Commercial Finance Limited was terminated following the disposal of Armour Home, the Group has no further commitments under this agreement.

In addition, the Group had a loan facility from Hawk Investment Holdings Limited, which at 31 August 2013 was for £2.0 million. On 31 March 2014, this was fully repaid.


Impaired £000

Not impaired £000

Impaired £000

Not impaired£000

Past due 0–3 months – – 92 666Past due 4–6 months – – 57 –Past due 7–12 months – – 12 –Past due over 12 months – – 143 – – – 304 666

31 August 2014 £000

31 August2013£000

Cash at bank and in hand, being cash and cash equivalents in the Consolidated Statement of Financial Position 4,070 302Less: Overdrafts (Note 23) – (171)Cash, cash equivalents and bank overdrafts in the Consolidated Statement of Cash Flows 4,070 131

31 August 2014 £000

31 August2013£000

Trade payables 185 3,713Other taxation and social security 5 353Other payables – 650Accruals 225 1,458Derivative financial instruments – 5Total trade and other payables 415 6,179


Fair value £000

Carrying amount

£000 Fair value

£000

Carrying amount

£000

Current: Other secured loans – – 7,780 7,780Secured overdraft (Note 21) – – 171 171Total borrowings – – 7,951 7,951

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24 Provisions

The provisions have been analysed between current and non-current as follows:

The provision at 31 August 2013 of £0.1 million relates to onerous rental costs and termination payments relating to these leases.

25 Deferred taxation Deferred taxation is calculated in full on temporary differences under the liability method using the taxation rate of 20% (2013: 20%). The movement on the deferred taxation account is shown below:

Deferred taxation assets have been recognised in respect of taxation losses and other temporary differences giving rise to deferred taxation assets where the Directors believe that it is probable that these assets will be recovered. The deferred taxation asset has been recognised based on forecast revenues.

£000

At 1 September 2012 221Amounts utilised (97)At 1 September 2013 124Released (124)At 31 August 2014 –

31 August 2014 £000

31 August2013£000

Current – 48Non-current – 76 – 124

31 August 2014£000

31 August2013£000

At 1 September 643 821Exchange – 2Discontinued operations (632) –Consolidated Statement of Comprehensive Income charge (5) (180)At 31 August 6 643


Asset/(liability)

£000Exchange

£000

(Charge)/creditto income

£000

Asset/ (liability)

£000 Exchange

£000

(Charge)/creditto income

£000

Accelerated capital allowances 6 – – (17) – (40)Short-term temporary differences – – – 49 2 (44)Taxation losses – – – 611 – (96) 6 – – 643 2 (180)



26 Share capital

The holders of ordinary shares of 1p each are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All the ordinary shares of 1p each rank equally with regard to the Company’s residual assets.

The deferred shares of 9p each have restricted and minimal rights, whereby:

• Holders are not entitled to receive any dividend, or other distribution or to receive notice or speak or vote at general meetings of the Company;

• On a return of assets on a winding up, holders are only entitled to amounts paid up on such shares after the repayment of £10 million per ordinary share;

• The deferred shares are not freely transferable;

• The creation and issue of further shares which rank equally or in priority to the deferred shares or the passing of a resolution of the Company to cancel the deferred shares or to effect a reduction of the capital shall not constitute a modification or abrogation of their rights;

• The Company has the right at any time to purchase all of the deferred shares for an aggregate consideration of £1.00;

• No application has or will be made for the deferred shares to be admitted to trading on AIM or any other stock exchange; and

• No share certificates have or will be issued for any of the deferred shares.

27 Reserves The nature of the reserves shown in the Consolidated Statement of Financial Position and Consolidated Statement of Changes in Shareholders’ Equity is as follows:

28 Share-based payments During the year, the Company and Group operated four equity-settled share-based schemes, being the:

• 1999 Unapproved Executive Share Option Scheme;

• 1999 Approved Executive Share Option Scheme;

• Enterprise Management Incentive Share Option Plan; and

• Armour 2012 Company Share Option Plan.

Options granted under the 1999 Unapproved Executive Share Option Scheme, 1999 Approved Executive Share Option Scheme and Enterprise Management Incentive Share Option Plan are subject to performance criteria relating to the growth in earnings per ordinary share or growth in the average ordinary share price. These criteria were approved by the shareholders at the Annual General Meeting held on 3 December 2002. In addition, the options lapse if the employee leaves within the service period required following the date of grant.

At the Company’s Annual General Meeting held on 31 January 2012, the Armour 2012 Company Share Option Plan for approved and unapproved options (the “Option Plan”) was approved and established subject to subsequent approval by HMRC in regard to the grant of approved options. The Directors were authorised to make such amendments to the Option Plan as required by HMRC to obtain approval. The Option Plan has been approved by HMRC and formally adopted by the Company.

No options were granted or exercised during either the current or prior year.

Nominal value Number

Ordinary shares of 1p each

£000

Deferred shares of 9p each

£000Total£000


£000


£000Total£000

Authorised: At 1 September 2013 and 31 August 2014 8,837 6,163 15,000 883,679 68,480 952,159 Allotted, called up and fully paid: At 1 September 2013 and 31 August 2014 971 6,163 7,134 97,051 68,480 165,531

Share premium Amount subscribed for share capital in excess of nominal value.

Other reserves The premium on shares issued as consideration shares for acquisitions, being the difference between the nominal value and fair value of these shares. In accordance with Sections 612 and 615 of the Companies Act 2006, the acquiring company has taken no account of this premium and the cost of investment includes only the nominal value of the consideration shares. On consolidation, the premium has been credited to this reserve.

Retained earnings Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Income.

Translation reserve Gains and losses arising on retranslating the net assets of overseas operations into sterling.

Share trust reserve Cost of Company’s shares held by the Armour Employees’ Share Trust.

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The exercise price of options outstanding at the end of the year was 45.5p (31 August 2013: 17.5p – 56.5p) and the weighted average contractual life was 2.3 years (31 August 2013: 4.0 years).

Of the total number of options outstanding at the end of the year, 60,000 (31 August 2013: 1,760,000) had vested and were exercisable. The Group did not recognise an expense in respect of equity-settled share-based payments during either the current or prior year.

At 31 August 2014, the following options were outstanding in respect of the ordinary shares:

1999 Approved Executive Share Option Scheme

29 Related party transactions Transactions between the Company and its subsidiary undertakings, up to the date of their disposal, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. Amounts owed by and to related parties are included in trade receivables, trade payables or borrowings as appropriate. At 31 August 2013, the Company had a £2.0 million loan with Hawk Investment Holdings Limited, a company in which Bob Morton has a beneficial interest. On 31 March 2014, the loan was fully repaid. On 17 July 2014, the Company entered into a £1.0 million loan agreement with Armour Home Electronics Limited, a wholly owned subsidiary of Q Acoustics Limited (reference Note 16). The loan is for five years and carries interest of 10% per annum, with no capital repayments in the first two years.

30 Leases Total commitments under operating leases with expiry dates are as follows:

Following the year end contracts have been exchanged to surrender the property lease in December 2014; there will be no further lease commitments relating to land and buildings.

Weighted average

exercise price pence

2014Number

2014

Weighted average

exercise pricepence 2013

Number2013

Outstanding at the start of the year 30.6 1,760,000 27.3 3,995,000Lapsed during the year 30.1 1,700,000 24.7 2,235,000Outstanding at the year end 45.5 60,000 30.6 1,760,000

Date of grant Number Exercise price (p) Exercise period

12 December 2006 60,000 45.5 12 December 2009 –11 December 2016

Interest

Charge/(credit) Amounts owed by

related parties Amounts owed to

related parties

2014£000

2013£000

2014£000

2013 £000

2014£000

2013£000

Bridging loan payable – 9 – – – –Short-term loan payable 139 235 – – – 2,000Long-term loan receivable (8) – 1,000 – – –


Land and buildings

£000Other £000

Land and buildings

£000Other£000

Within one year – – 196 66Two to five years inclusive – 2 2,333 223Over five years 162 – 962 – 162 2 3,491 289



31 Net cash flow from operations

*EBITDA is defined as the (loss)/profit before interest, taxation, depreciation, amortisation and share-based payments.

32 Reconciliation of net cash flow to movement in net cash/(debt) Net debt incorporates the Group’s borrowings and bank overdrafts, less cash and cash equivalents. A reconciliation of the movement in the net debt from the beginning to the end of the year is shown below:

Of the non-cash movements, £3.3 million related to the transfer of the liability outstanding under the GE Finance Facility to Armour Home Electronics Limited as part of the disposal of this subsidiary.

33 Guarantees, contingent liabilities and capital commitments The Company and its UK trading subsidiary undertakings had cross guarantees in regard to the amounts drawn under the Group’s funding facilities. The Group was released from these cross guarantees as part of the disposal of Armour Home. At 31 August 2014, the Group’s subsidiary undertakings had no contingent liabilities in regard to outstanding documentary credits (31 August 2013: none).

The Group’s UK trading subsidiaries had duty deferment arrangements with HMRC; amounts outstanding were backed by bank guarantees. At 31 August 2014, the Group’s outstanding liability was £nil (31 August 2013: £77,000).

The Group had no capital commitments at 31 August 2014 and 31 August 2013.

31 August 2014 £000

31 August2013£000

(Loss)/profit for the year (11,199) 40Depreciation of property, plant and equipment 1 301Amortisation and impairment of intangible assets – 579Depreciation, amortisation, finance expense and tax relating to discontinued operations 1,102 –Loss on disposal of subsidiary undertakings 10,071 –Share of post-tax losses of associate 70 –Finance income (20) (2)Finance expense 150 595Income tax (credit)/charge (11) 13EBITDA* 164 1,526Loss on sale of property, plant and equipment and intangible fixed assets – 19Decrease in inventories – 572Increase in trade and other receivables (25) (64)Decrease in trade, other payables and provisions (52) (663) (77) (136)Cash generated from operations 87 1,390

31 August 2014 £000

31 August2013£000

Net increase/(decrease) in cash and cash equivalents and bank overdrafts 3,939 (193)New loans – (2,000)Repayment of loans 4,499 2,234Other non-cash movements 3,281 (93)Decrease/(increase) in net cash/(debt) 11,719 (52)Opening net debt (7,649) (7,597)Closing net cash/(debt) 4,070 (7,649)

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Company Balance Sheet


Registered Number 00803572 At 31 August 2014

These financial statements were approved by the Board and authorised for issue on 10 November 2014.

Bob Morton Mark Wilson Director Director

The Notes on pages 36 to 38 form part of these Company Financial Statements.

Note

31 August 2014 £000

31 August2013£000

Fixed assets Investment in subsidiary undertakings 4 – –Tangible assets 5 1 2Total fixed assets 1 2Current assets Loan, more than one year receivable 6 1,000 –Amounts owed by subsidiary undertakings – 20,775Prepayments 60 35Deferred taxation 7 5 14Cash and cash equivalents 4,070 74 5,135 20,898Creditors: amounts falling due within one year Bank overdrafts and borrowings – (2,000)Amounts owed to subsidiary undertakings – (63)Other taxes and social security (5) (41)Other creditors and accruals (401) (426) (406) (2,530)Net current assets 4,729 18,368Net assets 4,730 18,370 Capital and reserves Share capital 8 7,134 7,134Share premium account 9 10,084 10,084Profit and loss account 9 (11,916) 1,724Share trust reserve 9 (572) (572)Shareholders’ funds 4,730 18,370

Notes to the Company Financial Statements


1 Basis of preparation The Company Financial Statements have been prepared on the basis of accounting policies set out in Note 2 below, they have been prepared using the historical cost convention, using applicable accounting standards generally accepted in the United Kingdom (UK GAAP). As permitted by Section 408 of the Companies Act 2006, the profit and loss account is not presented. The loss for the year amounted to £13.6 million (31 August 2013: £0.4 million). Details of the Auditors’ remuneration payable by the Company are disclosed in Note 7 to the Consolidated Financial Statements on page 24.

2 Principal accounting policies The principal accounting policies set out below have been consistently applied to all the periods presented.

Foreign currencies Foreign currency transactions are translated using the exchange rate at the date of transaction. Foreign exchange gains and losses arising from the settlement of transactions and from the translation at the year end exchange rates of monetary assets and liabilities are recognised in the profit and loss account.

Investments in subsidiary undertakings Investments in subsidiary undertakings are included at cost less provision for impairment in value.

Deferred taxation Deferred taxation is provided on the incremental liability approach in respect of timing differences giving rise to an asset or liability. Deferred taxation assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred taxation assets and liabilities are not discounted.

Share-based payments The Company operates equity-settled share-based option plans. The fair value of the employee services received in exchange for the participation in the plan is recognised as an expense in the profit and loss account. In accordance with UITF 44: Group and Treasury Transactions, the Company has accounted for options granted to the employees of subsidiary undertakings as capital contributions, which have been recharged to the intermediate company holding the investment. The corresponding credit has been recognised in the profit and loss account reserve.

The fair value of the employee service is based on the fair value of the equity instrument granted. This expense is spread over the vesting period of the instrument. The corresponding entry is credited to equity. The liability for social security costs arising in relation to the awards is measured at each reporting date based upon the share price at the reporting date and the elapsed portion of the relevant vesting periods to the extent that it is considered that a liability will arise.

Dividends Dividend distributions to the Company’s shareholders are recognised in the period when paid or, if earlier, in which the dividend is approved by the Company’s shareholders.

3 Staff costs The aggregate payroll costs (including those of Directors) during the year was as follows:

The average number of employees, including Directors during the year was 5 (2013: 6).

4 Investment in subsidiary undertakings

31 August 2014£000

31 August2013£000

Wages and salaries 1,135 562Social security costs 148 70Pension costs 38 42 1,321 675Capitalised as development (43) (22)Recharge to group subsidiaries (519) – 759 652

31 August 2014£000

31 August2013£000

Cost At start and end of the year 1,743 1,743Provisions At start and end of the year (1,743) (1,743)Net book value At start and end of the year – –

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5 Fixed assets The Company’s tangible fixed assets comprise computer equipment, plant and fixtures and fittings.

Depreciation is charged over each asset’s expected useful life on a straight-line basis. The annual depreciation rates used are:

• Computer equipment 20%–33%

• Plant and fixtures and fittings 10%–20%

6 Loan On 17 July 2014, the Company entered into a loan agreement to lend £1.0 million to Armour Home Electronics Limited, a company which is a wholly owned subsidiary of Q Acoustics Limited (reference Note 16). The loan is for five years and carries interest of 10% per annum, with no capital repayments in the first two years.

7 Deferred taxation

8 Share capital

The holders of ordinary shares of 1p each are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All the ordinary shares of 1p each rank equally with regard to the Company’s residual assets.

The deferred shares of 9p each have restricted and minimal rights, whereby:

• Holders are not entitled to receive any dividend, or other distribution or to receive notice or speak or vote at general meetings of the Company;

• On a return of assets on a winding up, holders are only entitled to amounts paid up on such shares after the repayment of £10 million per ordinary share;

• The deferred shares are not freely transferable;

• The creation and issue of further shares which rank equally or in priority to the deferred shares or the passing of a resolution of the Company to cancel the deferred shares or to effect a reduction of the capital shall not constitute a modification or abrogation of their rights;

• The Company has the right at any time to purchase all of the deferred shares for an aggregate consideration of £1.00;

• No application has or will be made for the deferred shares to be admitted to trading on AIM or any other stock exchange; and

• No share certificates have or will be issued for any of the deferred shares.

Details of outstanding share options are given in Note 28 to the Consolidated Financial Statements on pages 32 and 33.

£000

Cost At 1 September 2013 85Disposals (44)At 31 August 2014 41Depreciation At 1 September 2013 83Charge for the year 1Disposals (44)At 31 August 2014 40Net book value At 1 September 2013 2At 31 August 2014 1

31 August 2014£000

31 August2013£000

Accelerated capital allowances 5 6Short-term timing differences – 8 5 14At 1 September 14 16Movement in the year (9) (2)At 31 August 5 14

Nominal value Number


£000


£000

Total

£000


£000


£000Total£000

Authorised: At 1 September 2013 and 31 August 2014 8,837 6,163 15,000 883,679 68,480 952,159 Allotted, called up and fully paid: At 1 September 2013 and 31 August 2014 971 6,163 7,134 97,051 68,480 165,531

Notes to the Company Financial Statements continued


9 Reserves

The Company’s reconciliation of movements in shareholders’ funds is shown below:

10 Share-based payments Share-based payment arrangements for the executive Directors are set out in the Remuneration Report on pages 10 and 11. No new share-based payment arrangements were put in place for the Directors in either the current or prior year.

Details of the share options in existence are shown in Note 28 to the Consolidated Financial Statements.

11 Related party transactions At 31 August 2013, the Company had a £2.0 million loan agreement with Hawk Investment Holdings Limited, a company in which Bob Morton has a beneficial interest. On 31 March 2014, the loan was fully repaid. On 17 July 2014, the Company entered into a loan agreement to lend £1.0 million to Armour Home Electronics Limited, a wholly owned subsidiary of Q Acoustics Limited (reference Note 16). The loan is for five years and carries interest of 10% per annum, with no capital repayments in the first two years.

Details of transactions between the Company and its subsidiary undertakings, up to the date of their disposal, which are related parties of the Company and the related party loan, are shown below:

12 Guarantees, contingent liabilities and capital commitments The Company had guaranteed certain borrowings and credit facilities of its subsidiary undertakings; these were part of the Group pooled facilities with Lloyds Bank plc, which were removed on the disposal of the subsidiaries. At 31 August 2014, the Company had contingent liabilities under these guarantees of £nil (31 August 2013: £6.0 million).

Sharepremium

£000

Profit and loss account

£000

Share trustreserve

£000Total£000

At 1 September 2012 10,084 2,095 (572) 11,607Loss for the year – (371) – (371)At 31 August 2013 10,084 1,724 (572) 11,236Loss for the year – (13,640) – (13,640)At 31 August 2014 10,084 (11,916) (572) (2,404)

31 August2014£000

31 August2013£000

Opening shareholders’ funds 18,370 18,741Loss for the year (13,640) (371)Closing shareholders’ funds 4,730 18,370

(Interest charge)/credit/

management fees Amounts owed by

related parties Amounts owed to

related parties

2014£000

2013 £000

2014£000

2013 £000

2014£000

2013£000

Bridging loan payable – (9) – – – –Short-term loan payable (139) (235) – – – 2,000Long-term loan receivable 8 – 1,000 – –Subsidiary undertakings 143 363 – 20,775 – 63

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Notice of Annual General Meeting


Notice is hereby given that the Annual General Meeting of Armour Group plc will be held at the offices Arnold & Porter (UK) LLP, Tower 42, 25 Old Broad Street, London EC2N 1HQ on Monday 8 December at 12.00 noon for the purposes of considering and, if thought fit, passing the following resolutions (the “Resolutions”) which, in the cases of Resolutions 1,2,3,4 and 5 are ordinary resolutions and in the cases of Resolutions 6,7,8 and 9 are special resolutions.

Ordinary business 1. To receive and consider the Annual Report and audited financial statements for the year ended 31 August 2014, the Directors’ Report

and the Auditors’ Report on those financial statements.

2. To reappoint BDO LLP as Auditors to hold office from the conclusion of this Meeting until the conclusion of the next general meeting of the Company at which financial statements are laid and to authorise the Directors to determine their remuneration.

3. To reappoint Mr ALR Morton as a Director.

4. To appoint Mr MJ Wilson as a Director.

5. That, in accordance with Section 551 of the Companies Act 2006 (the “Act”) and in substitution for all previous authorities conferred on the Directors, the Directors be generally and unconditionally authorised to allot ordinary shares in the Company up to an aggregate nominal amount of £600,000 provided that this authority shall, unless renewed, varied or revoked by the Company, expire on 24 February 2019 save that the Company may, before such expiry, make an offer or agreement which would or might require shares to be allotted and the Directors may allot shares in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired.

Special business 6. That, subject to confirmation of the court, the share premium account of the Company be immediately reduced from £10,083,608 to nil, by

cancelling and extinguishing the entire share premium account of the company, and the amount by which the share premium account is so reduced be credited to the reserve.

7. That, subject to the confirmation of the court, the issued share capital of the Company be immediately reduced from £7,133,721 to £970,515 by cancelling and extinguishing the issued deferred shares of 9 pence each in the Company, each of which is fully paid up, and the amount by which the share capital is reduced be credited to the reserve.

8. To consider the following resolution, which will be proposed as a Special Resolution:

That in substitution for all existing authorities, the Directors be and are hereby empowered pursuant to Section 570 of the Act to allot equity securities (within the meaning of Section 560 of the Act) wholly for cash pursuant to the authority conferred by Resolution 5 above, as if Section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities:

(a) In connection with an offer of such securities by way of rights issue or other offering in favour of the holders of ordinary shares in proportion (as nearly as may be practicable) to their holdings of such shares, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or any legal or practical problems under the laws of any territory, or the requirements of any regulatory body or stock exchange; and

(b) Otherwise than pursuant to paragraph (a) above up to an aggregate nominal amount of £200,000 representing 20.61% of the issued ordinary share capital of the Company;

and shall expire 15 months after the date of the passing of this Resolution or at the conclusion of the next Annual General Meeting of the Company following the passing of this Resolution, whichever first occurs, save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this Resolution has expired.

9. To consider the following resolution, which will be proposed as a Special Resolution:

That:

(a) In accordance with Article 52 of its Articles of Association and Chapter IV of the Act and subject to paragraph (b) of this Resolution, the Company be and hereby is granted general and unconditional authority (pursuant to Section 701 of the Act) to make market purchases (as defined in Section 693(4) of the Act) of its own ordinary shares on such terms and in such manner as the Directors may from time to time determine; and

(b) The authority conferred by paragraph (a) of this Resolution shall:

(i) Expire on the date of the next Annual General Meeting of the Company;

(ii) Be limited to the purchase of a maximum 14,557,724 ordinary shares representing 15% of the issued ordinary share capital of the Company;

(iii) Not permit the payment per ordinary share of more than 5% above the average market value for an ordinary share for the five business days immediately preceding the day on which any purchase by the Company of ordinary shares is made or less than 1p exclusive of any applicable corporation tax payable by the Company;

(iv) Before expiry entitle the Company to enter into any contract for the purchase of ordinary shares which might be executed and completed wholly or partly after its expiry; and

(v) Only be capable of variation, revocation or renewal by the Company in general meeting.

By order of the Board


Notice of Annual General Meeting continued


Notes

1. A shareholder entitled to attend and vote at the Meeting is also entitled to appoint one or more proxies to attend and, on a poll, vote instead of him/her. The proxy need not be a shareholder of the Company.

2. To be effective, the instrument appointing a proxy and any authority under which it is executed (or a notarially certified copy of such authority) must be deposited at the offices of Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, not less than two days before the time for holding the Meeting. Completion and return of the Form of Proxy will not preclude shareholders from attending and voting in person at the Meeting.

3. A corporation’s Form of Proxy must be executed pursuant to the terms of Section 44 of the Companies Act 2006 or under the hand of a duly authorised officer or attorney. Any corporation which is a member of the Company may authorise a person (who need not be a member of the Company) to act as its representative to attend, speak and vote (on a show of hands or a poll) on its behalf. A corporate representative may exercise on behalf of a member corporation all of its powers as a member provided that they do not do so in relation to the same shares.

4. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the time by which a person must be entered on the Register of Members in order to have the right to attend and vote at the Meeting is close of business on 4 December 2014 or, if the Meeting is adjourned, such time being not more than 48 hours prior to the time fixed for the adjourned meeting. Changes to entries on the Register of Members after that time will be disregarded in determining the right of any person to attend or vote at the Meeting.

5. The register of interests of the Directors and their families in the issued share capital of the Company and copies of all Directors’ service contracts will be available for inspection at the registered office of the Company during usual business hours (Saturdays, Sundays and public holidays excepted) from the date of this Notice until the conclusion of the Meeting.

6. As at 5.00 pm on the date immediately prior to the date of posting of this Notice, the Company’s issued share capital comprised of:

(i) 97,051,496 ordinary shares of 1p each and each ordinary share carries the right to one vote at a general meeting of the Company; and

(ii) 68,480,067 deferred shares of 9p each, the holders of which are not entitled to receive notice or speak or vote at a general meeting of the Company.

7. The notes to the Form of Proxy include instructions on how to appoint a proxy using the CREST proxy appointment service. You may not use any electronic address provided either in this Notice of Annual General Meeting or in any related documents (including the Form of Proxy) to communicate with the Company for any purposes other than those expressly stated.

Appendix to Notice of Annual General Meeting


Introduction You will find set out at page 39 of this document notice of the Annual General Meeting of the Company to be held at 12.00 noon on 8 December 2014 at the offices of Arnold & Porter (UK) LLP, Tower 42, 25 Old Broad Street, London EC2N 1HQ. It is the intention of the Directors to resume a dividend policy in due course. Shareholders will be aware that in order for a company to pay dividends it must first have available sufficient distributable reserves. At the Annual General Meeting shareholders will be asked to approve the restructuring of the balance sheet of the Company by means of the (i) cancellation of the share premium account of the Company and (ii) cancellation of the issued deferred shares of 9p each in the capital of the Company, (the “Cancellation”), as at 8 December 2014. The purpose of the Cancellation is to reduce the current deficit of the Company’s profit and loss account and to facilitate the payment of dividends by the Company in due course.

You should read this entire document which contains important information in relation to the Cancellation, and explains why your Board is recommending that you vote in favour of the Resolutions.

Background The disposal of Armour Home Limited in August 2014 gave rise to an exceptional write off of goodwill and other intangible assets of £13.6 million and a loss shown in the Group’s distributable reserves of £11.1 million.

Until the deficit to the distributable reserves has been eliminated the Company is precluded by the Companies Act 2006 from paying dividends to shareholders. Although, the Cancellation will not eliminate the deficit, the Cancellation will make it easier for the Group to pay dividends in the future.

The deferred shares are for practical purposes, valueless, and as such it is the Board’s opinion that such shares should be cancelled.

Capital cancellation Under English law, a company may reduce or cancel its share capital (including its share premium account) and apply the reserve arising on the reduction in order to write off an accumulated deficit on its profit and loss account provided that it obtains the approval of shareholders in a general meeting and the confirmation of the High Court.

Accordingly, subject to the approval of shareholders at the Annual General Meeting and the confirmation of the High Court, it is intended that the Company (i) cancel the amount standing to the credit of the share premium account, which at the date of this document is £10.084 million, and the amount by which the share capital is so reduced be credited to the reserve; and (ii) cancel the issued deferred shares of 9 pence each in the capital of the Company, and the amount by which the share capital is so reduced be credited to the reserve.

As a condition to approving the Cancellation, the High Court will need to be satisfied that the interests of the Company’s creditors are not adversely affected, i.e. that there is no material likelihood of creditors not being paid. The Company is satisfied that it will be able to demonstrate this to the High Court but, if necessary, the Company will put into place such form of creditor protection as it may be advised is appropriate.

The Directors reserve the right to abandon or discontinue any application to the High Court if they believe that the terms required to obtain confirmation are unsatisfactory to the Company.

Once the Cancellation has been completed and any creditor protection requirements imposed by the High Court have been satisfied, the Company, once it has an accumulated surplus on its profit and loss account, would then be in a position to pay dividends thereafter.

Annual General Meeting To effect the Cancellation, shareholders must approve the (i) cancellation of the share premium account by way of a special resolution and (ii) the cancellation of the deferred shares of 9 pence each in the capital of the Company, by way of a special resolution, at the Annual General Meeting. Notice convening the Annual General Meeting is set out in this document. Subject to shareholders passing the necessary resolutions, approval of the High Court will be sought as soon as reasonably practicable after the Annual General Meeting and it is anticipated that the process shall be completed before the end of February 2015.

Action to be taken Shareholders will find enclosed a Form of Proxy for use in connection with the Annual General Meeting. Whether or not shareholders intend to be present at the Annual General Meeting, they are requested to complete the Form of Proxy in accordance with the instructions printed thereon and return it so as to be received by the Company’s registrar Capita Registrars at PXS, 34 Beckenham Road, Beckenham, BR3 4TU, as soon as possible but in any event, in order to be valid, no later than 10.00 am on 4 December 2014. Completion and return of the Form of Proxy will not preclude a shareholder from attending, speaking and voting in person at the meeting, should the shareholder so wish.

Recommendation Your Directors considered the passing of the Resolutions and the proposed Cancellation to be fair and reasonable and in the best interests of the shareholders and the Company as a whole. Accordingly, your Directors recommend that all shareholders vote in favour of the Resolutions to be proposed at the Annual General Meeting.

Armour Group plc Suite 25 6-8 Revenge Road Lordswood Chatham Kent ME5 8UD United Kingdom

Tel: 01634 673172

www.armourgroup.uk.com

Documents

Armour Group plc Annual Report and Accounts · PDF filedisposed of on 4 August 2014 to Q Acoustics Limited ... Wilson, who was previously ... 2 Armour Group plc Annual Report and Accounts