SIXH.L Regulatory News (SIXH)

30 September 2022

The 600 Group PLC

("600 Group" or the "Group") 

Results for the year ended 31 March 2022

Transformative year with streamlined operations refocused on the high-growth Industrial Laser Systems market

The 600 Group PLC (AIM: SIXH), the Industrial Laser Systems Business, today announces its results for the year ended 31 March 2022.

Financial Highlights

· Revenue from continuing operations up 50% to $32.0m (2021: $21.3m)

· Underlying operating profit from continuing operations of $1.8m (2021: loss $0.2m)

· Operating profit after adjusting items from continuing operations $1.2m (2021: loss $1.0m)

· Laser Division underlying operating margin increased to 12.9% (2021: 8.6%)

· Underlying profit before tax on continuing operations of $0.8m (2021: loss $1.3m)

· Profit before tax after adjusting items on continuing operations of $0.2m (2021: loss $2.8m)

· Group net debt at 31 March 2022 excluding lease liabilities was $17.0m (31 March 2021: $12.7m); all long-term borrowings redeemed post year end following sale of Machine Tool Division

· Year-end order book increased by 24% to record levels at 31 March 2022, with further 10% growth to the end of September 2022 as the Group sees heightened demand in FY23 

Underlying profits are before adjusting items which are unrelated to the normal trading activity of the group - see note 4.

Strategic & Operational Highlights

· Completed the Group's strategic refocus towards Industrial Laser Systems - a higher-margin, growth market - following the disposal of the Machine Tool Solutions division (completed in April 2022)

· Strong recovery post-pandemic with particularly high activity levels across the Industrial Laser Systems businesses and a record order book

o  50% revenue increase from Industrial Lasers division driven by strong organic growth in order intake

o  CMS led the order book growth, including a $4.3m order from Goe Goe for four pill driller machines

· Strengthened operations across Industrial Laser Systems businesses:

o  Integrated Group processes with CMS and TYKMA Electrox now being served by a combined sales operations and distribution network

o  Completed proprietary software upgrade for TYKMA Electrox, providing upgrade opportunities to customers as well as adding new functionality and compatibility with other systems and operations

· Redeemed all long-term debt following disposal of the Machine Tool Division for cash consideration of US$21m; significant credit facilities to support increased activity levels and finance growth. Current borrowings of $2.8m are supporting increased receivables, including the balance of the Goe Goe contract, which are due to be received over the next few months. 

· Strong pipeline of opportunities and record order book with the Group well positioned to take advantage of operational gearing as volumes continue to increase

Paul Dupee, Executive Chairman of the Group, commented:

"The 600 Group has been transformed into a streamlined business with the financial flexibility and operational platform to capture the growth potential of the industrial laser systems market.

"The global market for industrial lasers is valued in the region of $15-20 billion, with further growth projected as lasers are adopted in material processing across multiple industries, ranging from aerospace and transport to medical and pharmaceutical.

"We are proud to own two leading brands within this high-growth, future-facing market. The strength of our offering is reflected in the way we have rebounded strongly from the impact of the pandemic. Our businesses have seen a significant increase in activity levels across our operations, achieving record order books during the year and seeing growth since the year end, which underpins the Group's growth projections.

"As we enter the new financial year with all long-term debt repaid and 100% focused on the Laser Division, the Group is in a strong position to deliver further growth. We are focused on expanding our share of this highly fragmented industry, both through organic growth and consolidation opportunities. The Board looks to the future with confidence and will provide a trading update on H1 FY2023 performance in due course."

Enquiries:

Chairman's Statement

Fiscal 2022 was a truly transformative year for The 600 Group PLC. After more than 100 years of owning and operating various, often unrelated, businesses in a number of industries in various countries around the world, the group has simplified itself and is now engaged in only one line of business with current manufacturing and executive facilities in only one country, the United States. The group has transitioned from being a leveraged manufacturer of legacy products in mature industries to a business that was debt free at the date of the machine tool disposal and is now focused, flexible and embracing 21st century technology with inherent attractive growth rates and ample opportunities, both internal and external, to expand its existing capabilities.

The sale of our machine tool business, concluded in April, allowed us to redeem all long-term debt while we remain with significant credit facilities. This enables us to support the increased level of activity in our remaining division, Industrial Lasers, where revenues increased by 50% and year-end order book has grown by 24%.

During the pandemic, our divisional management has done an excellent job of balancing the challenges faced including adjusting to supply chain issues, managing personnel absentees and shortages, and taking advantage of government programs including PPP in the US and the furlough and loan schemes in the UK. This could not have been accomplished without the hard work and dedication of our superb work force whom the Board congratulate on a job well done under very trying circumstances.

Having fundamentally changed the business, we must now leverage our strengths including our enviable position in laser systems manufacturing, our strong distribution network, our proprietary intellectual property, our diversified, blue chip customer base, our strong financial position, our buoyant order book and our committed and talented employees. We must also take advantage of the large addressable market available to us and look for synergies within our technology base.

The last few years-- simplification of the business, the pandemic, the supply chain disruptions, the relocation of the head office--have created an opportunity for The 600 Group to thrive and prosper. It is now up to the board, the management and our employees to take advantage of that opportunity.

Paul Dupee

Chairman

30 September 2022

Strategic Report

Our business

The 600 Group PLC ("the Group") is a leading engineering group focused on the global industrial laser technology industry. Our market leading businesses have a diversified, blue-chip customer base to whom we design and supply industrial laser systems for applications in end-markets ranging from industrial and aerospace to medical and pharmaceuticals. The Group operates from locations in North America and sells 21% of its products and services worldwide. The Group has important relationships directly with customers and also with a number of distributors Worldwide.

Given the large number of customers and established distributors in many countries there are no major sales concentrations of customers or products. Sales are split evenly between direct customers and distributors and in the year ended 31 March 2022, the top 20 customers, of which 9 (2021: 10) were distributors, contributed 43% (2021: 23%) of revenues.

Revenues (Continuing activities)

Revenues are generated across many diverse geographical territories:

Macroeconomic and industry trends

Industrial laser systems

The use of industrial lasers for material processing continues to expand worldwide with laser systems now becoming a mainstream manufacturing process. Applications include laser machining, including cutting and drilling, marking, ablation and a host of other niche processes. One of the main drivers of this industry has been legislation and the continual increase in the requirement for traceability of products in all industries from aerospace and transport to medical and pharmaceutical.

The global industrial laser market is estimated to be in the region of $5.6bn but given this number relates just to the laser sources, the actual market for systems incorporating these lasers and associated equipment and software is estimated to be much larger in the region of $15-$20bn. The industry had seen mid-single digit increases until 2019 when a fall was recorded. Metal cutting is by far the largest application by value and the market is dominated by China which is the largest producer and consumer of industrial lasers. The fall in the overall market in 2019 was estimated to be in the region of 12% and largely driven by Chinese decline in cutting systems which mirrored the decline in machine tools, both of which are heavily influenced by Chinese demand. The effects of the COVID-19 pandemic led to significant reductions in volumes in the early part of 2020 but as China, in particular, opened up, volumes recovered and the overall market was estimated to be similar to that of 2019 as a result. The European and American markets however were slower to recover and took until Q1 of 2021 to show significant signs of a return to more normal levels of activity. Whilst there continues to be post pandemic global issues with increased inflation and the Ukraine war leading to energy price increases the laser processing markets have shown resilience in recent years to Global market changes.

The laser marking and micro-materials processing subset of the market (in which the Group competes) is smaller than the macro-materials processing subset and has seen low single digit growth in recent years. Growth is underpinned by enhanced performance in the speed, cost and quality of the systems being implemented compared to other techniques as well as by legislative changes driving a requirement for greater traceability of products and components. The industry subset occupied by the Group has however seen a proliferation of vendors and selling price pressure at the lower commodity end of the market thus whilst unit volumes have continued to increase, revenue has been held back. It is for this reason the Group took the decision to focus on the higher end custom products where its strengths in design and proprietary software provide greater opportunities to grow and enhance margin and where the acquisition of CMS in June 2019 significantly enhanced these capabilities.

Industry predictions for the laser industry expect the volumes to continue to increase at high single digit percentage levels going forward.

Our main markets

The main market we operate in is the USA. As with all Global markets demand reduced as a result of the COVID-19 global pandemic but saw a rapid increase as lockdowns ended. Supply chain issues have created delays in deliveries and inflationary pressures have resulted in cost increases. The Group has bought forward inventory and passed on cost increases where possible to mitigate these factors.

The possibility of disruption remains due to the ongoing effects of COVID-19 and possible new outbreaks and variants. Increased inflationary pressures from fuel costs and the risk of recession have more recently arisen and may create further demand issues in the Global markets.

Activity in the year

Industrial laser systems

Following a fall in activity of 10% during the pandemic both CMS and TYKMA Electrox experienced significant increased order activity leading to record levels of order book.

The existing TYKMA Electrox business continued to move more into the custom higher specification market as increased competition and price deflation continued in the lower end standard products sector and the higher end large projects undertaken by the CMS business returned. Both businesses continued to take advantage of the USA Paycheck Protection Program (PPP) scheme at the start of the year to keep teams and key skills together which allowed them to respond quickly to the significant increase in activity. This was the second round of benefits coming from this program. Both businesses have continued to recruit additional personnel throughout the year as activity continued to increase.

The completion of the upgraded proprietary software for TYKMA Electrox will provide upgrade opportunities to customers going forward as well as adding new functionality and compatibility with other systems and operations.

Results for Continuing activities of the Laser Division for the financial year were as follows:

Underlying operating profit is before adjusting items, which are explained in note 12 Alternative Performance Measures and set out in note 4.

Discontinued Activity - Machine tools division

Following the agreed sale of the Division in March 2022, this activity is treated as discontinued with the assets and liabilities shown as held for sale in current assets and current liabilities in the Consolidated Statement of Financial Position.

The revenue generated by this in the year ended 31 March 2022 was $37.0m and a profit of $0.8m after tax and adjusting items. The total of assets and liabilities held for sale, detailed in note 13, are $32m and $13.8m.

Group Results

Revenue from continuing operations represents the Laser Division and as a result of record order books increased by 50% to $32.0m (2021: $21.3m). Group profit before tax and adjusting items including the continuing central costs was $0.8m (2021: loss $1.3m). The profit before tax after adjusting items was $0.2m (2021: loss $2.8m).

Adjusting items

The directors have highlighted transactions which are material and unrelated to the normal trading activity of the Group.

In the opinion of the directors, the disclosure of these entries should be reported separately for a better understanding of the underlying trading performance of the Group. These underlying figures are used by the Board to monitor business performance, form the basis of bonus incentives and are used for the purposes of the bank covenants.

These non-GAAP measures are explained in note 12 alternative performance measures and set out in note 4. All adjusting items are taken into account in the GAAP figures in the Income Statement.

Costs incurred on the disposal of the Machine Tool Division up to 31 March 2022 were $0.4m.

Amortisation of the intangible assets acquired through the CMS deal of $0.3m (2021: $0.3m) are also included in adjusting items.

As a result of the extension of the repayment date of the loan notes in August 2021 the amortisation of the loan note discount and costs were required to be recalculated to take account of the additional period which resulted in a net credit of $0.03m (2021: $0.6m charge) and this is also included in adjusting items. The loan notes were repaid from the proceeds of the Machine Tool division sale in April 2022.

Taxation

The current year tax recorded in the P&L was a credit of $0.3m (2021: charge of $1.4m). The majority of this amount relates to deferred taxation movements with only $0.08m actually paid in State taxes. There was no Federal tax expense in the USA. There is no USA deferred tax recognised as management has made the determination that it is more likely than not that the net deferred tax assets will not be realized in the short to medium term and therefore have placed a valuation allowance against those deferred tax assets. There were no significant penalties or interest recognized during the year or accrued at year-end.

The UK holding company continues to benefit from previous tax losses with $1.6m of deferred tax asset not recorded on the balance sheet. No taxation is payable in the UK. There are substantial deferred tax assets in the USA of $2.5m that are not recorded on the balance sheet. The US businesses are subject to Federal taxation on their profits at the rate of 21% but also suffer State taxes which increases their overall composite rate to 25%.

Net profit and earnings per share

The total continuing amount attributable to equity holders of the parent for the current financial year amounted to $0.5m (2021: loss of $4.2m) with pre-adjusting items profit of $1.1m (2021: loss $3.0m).

Underlying basic earnings from continuing operations before adjusting items were 0.93 cents (equivalent to 0.68p) per share (2021: loss 2.53 cents, equivalent to 1.93p loss) and basic earnings per share from continuing operations were 0.41 cents (equivalent to 0.30p) (2021: 3.58 cents loss, equivalent to 2.73p loss) - see note 7 for details.

Financial position and utilisation of resources

Cash flow

Cash generated from operations before working capital movements was $3.4m (2021: $1.6m).

Working capital increased during the year in response to the increased revenues and supply chain constraints in particular inventories increasing by $3.8m. Receivables also increased $3.9m due to the sales growth in the year. 

Interest paid on borrowings was in line with the previous year at $1.1m with the largest component of this being the fixed interest on the £8.5m ($10.7m) 8% loan notes which were repaid in April 2022.

Capital expenditure was $0.8m, higher than prior year (2021: $0.5m) to support the strong sales growth across the organization.

Net borrowings

Group net debt at 31 March 2022 excluding lease liabilities was $17.0m (of which $0.7m was in discontinued entities held for sale) against $12.7m in the prior year.

In order to provide headroom through the COVID-19 pandemic, on 21 August 2020, the 600 UK Limited machine tools subsidiary drew down a £1.2m ($1.7m) 3-year term loan with a bullet repayment on 15 September 2023 and interest at 1.92% under the Government backed Coronavirus Large Business Interruption Loan Scheme (CLBILS). There are no covenants on the loan. The loan was repaid on completion of the Machine Tools Division sale in April 2022.

Net bank indebtedness of $6.3m at 31 March 2022 (2021: $4.8m) was all cleared in April 2022 following the receipt of the proceeds on the Machine Tool Division sale. The USA working capital credit line was increased to $10m to facilitate additional requirements to support the substantial order increases during the year and was reduced in April 2022 to $7.5m following the sale of Machine tools.

The extension of the repayment date of the loan notes to 14 August 2023 was agreed in August 2021 but the notes were repaid in April 2022 following completion of the Machine Tool Division sale. The associated warrants to subscribe for new ordinary shares at 20p were similarly extended to the same date and remain outstanding. The loan notes are shown net of unamortised discounting and costs and also amounts disclosed in equity reserve which amount to $0.2m in the current financial year (2021: $0.2m).

Working capital facilities totaling $13.9m were renewed with HSBC UK, Bank of America and Westpac Australia during the year and would have been due to be reviewed in the normal course in early 2023 however all but the $7.5m working capital line from Bank of America were repaid and extinguished in April 2022. All financial covenants in place were met during the year.

Retirement benefits

The US retiree health scheme and pension fund deficits decreased to $0.8m (2021: $1.0m) during the current year. These liabilities are included in liabilities held for sale as part of the Machine Tool Division disposal which was completed in April 2022 and the liabilities transferred as part of that process.

Key performance indicators (KPIs)

The Group monitors performance against key financial objectives that the Directors judge to be effective in measuring the delivery of strategic aims and managing and controlling the business. These focus at Group level on revenue and underlying operating profit.

At individual business unit level, KPIs also include working capital control, and customer related performance measures such as on-time delivery and minimisation of warranty concerns.

These key performance indicators are measured and reviewed against budget projections and prior year on a regular basis and this enables the business to set and communicate its performance targets and monitor its performance against these targets. Given the Global effects of the COVID-19 pandemic, comparison against prior periods has been difficult and relatively meaningless, and market estimates have been very volatile and unpredictable. Revenue targets are to outperform the market forecasts by 1% (5% is considered a normal ongoing level of growth) and to achieve over a 10% underlying operating margin target.

The Group's recent performance on these financial KPIs on continuing operations is set out as follows:

All figures are pre adjusting items on continuing operations

These KPIs are used to assess performance and manage the business and have been discussed in the strategic report and divisional commentary.

Principal risks

The Board of Directors has identified the main categories of business risk in relation to the implementation of the Group's strategic aims and objectives, and has considered reasonable steps to prevent, mitigate or manage these risks.

Macro-economic - the Group's businesses are active in markets which can be cyclical in nature as the overall level of market demand is dependent upon capital investment intentions. Economic or financial market conditions determine global demand and could adversely affect our customers, distributors, operations, suppliers, and other parties with whom we transact. The Directors seek to ensure that overall risk is mitigated by avoiding excessive concentration of exposure to any given industry segment or to any individual customer. Market conditions, lead indicators and industry forecasts are monitored for any early warning signs of changes in overall market demand, and measures to exploit opportunities or manage elevated risks are taken as appropriate. Key business risks are set out in the strategic review.

Production and supply chain - the continuity of the Group's business activities is dependent upon the cost-effective supply of products for sale from our own facilities, and those of our key vendors. Supply can be disrupted by a variety of factors including raw material shortages, labour disputes and unplanned machine down time. Delays in the shipment of goods can affect lead times and create some disruption. 

Laws and regulations - Group businesses may unknowingly fail to comply with all relevant laws and regulations in the countries in which they operate and contract business. There is a risk of breach of legal, safety, environmental or ethical standards which can be more difficult to identify, comprehend, or monitor in certain territories than others. The Directors believe that they have taken all reasonable steps to ensure that operations are conducted to high ethical, environmental and health and safety standards. Controls are in place to keep regulatory and other requirements under careful review and scrutinise any identified instances of elevated risk.

Information Technology ("IT") - Group IT systems and the information they contain are subject to security risks including the unexpected loss of continuity from virus or other issues, and the deliberate breach of security controls for commercial gain or mischief. Any such occurrences could have a significant detrimental effect on the Group's business activities. These risks are mitigated by the utilisation of physical and embedded security systems, regular back-ups and comprehensive disaster recovery plans.

Market risks

The Group's main exposure to market risk arises from increases in input costs in so far as it is unable to pass them on to customers through price increases. The Group seeks to mitigate increases in input costs through a combination of continuous improvement activities to minimise increases in input costs and passing cost increases on to customers, where this is commercially viable.

The Group is also aware of market risk in relation to the dependence upon key vendors in its supply chain. This risk could manifest in the event of a commercial or natural event leading to reduced or curtailed supply. The Group seeks to mitigate these risks by maintaining transparent and constructive relationships with key vendors, sharing long term plans and forecasts, and encouraging effective disaster recovery planning. Alternative sources of supply with different vendors and in different geographic regions have also been put in place.

Other risks and uncertainties

The remaining main risks faced by the Group are to its reputation as a consequence of a significant failure to comply with accepted standards of ethical and environmental behaviour and Global recessionary risk.

The Directors have taken steps to ensure that all of the Group's operations are conducted to the highest ethical and environmental standards. Regulatory requirements are kept under review, and key suppliers are vetted in order to minimise the risk of the Group being associated with a company that commits a significant breach of applicable regulations.

The Board of Directors has identified the main categories of business risk in relation to the implementation of the Group's strategic aims and objectives, and has considered reasonable steps to prevent, mitigate or manage these risks.

Paul Dupee

Chairman

30 September 2022

Chief Financial Officer Statement

The year ended 31 March 2022 was pivotal on the positioning of The 600 Group. The sale of the Machine Tool Division, signed in early March 2022 and closed on 11 April 2022, repositioned the Group as a pure laser machine manufacturer. It moreover allowed the Group considerably strengthening the Group's balance sheet. 2022 also marked a year of recovery from the impact of the COVID-19 restrictions which is reflected in the revenue growth (+29%) and order intake increase (+29%), including discontinued operations.

Current year review

The Laser Division delivered the strongest performance. Revenue increased 49.8% driven by strong organic order intake growth of 35.9%. While both companies (Tykma and CMS) grew its order intake, CMS led the group with an increase of 68.3% which was highly impacted by the order received from Goe Goe for four pill driller machines that totalled $4.3m. Profit in the Laser Division grew 123.1% which was the result of a strong customer demand, including the large contract mentioned before and its operational agility in spite of supply chain disruptions. However, there was a reduction in gross margin (-2.5%) as a result of product mix and increased costs of supplies.

The discontinued Machine Tool Division also saw some growth, with revenue increase of 14.9%. Growth was observed in the European affiliates (+25.5%) and Clausing (+8.3%) but not in Australia (-3.7%). Order intake was the main reason for this revenue increase with a total growth of 23.3%. Similarly, to the revenue, the order intake pattens were substantially increased in Europe (+48.1%) and Clausing (+14.7%), however the Australian affiliate saw its orders reduced by -11.1%. Despite the growth in revenue, profitability in the division declined -47.1% to $1.9m (2021: $2.8m). This profit decline was influenced by the decrease in margins (-1.1%), which reflects the general increase in raw materials, and increase overheads as a consequence of the ease on the pandemic.

The operating profit margin for the overall Group was 5.4% (2021: 4.9%). The Laser Division generated an operating profit of 12.9% that represents an increase of 4.2% vs previous year while the Machine Tool Division delivered an operating profit of 5.2% which is a decline of -2.2% vs prior year.

Statement of financial position

With the considerable growth of the Group's top line and the increased challenges with supply chain across the world, our working capital was increased $3.8m on inventories plus $3.9m on trade receivables. This increase was partially funded by the increase in trade creditors of $2.9m. The remaining part of it was financed by the increase in the short-term loans.

The sale of the Machine Tool Division, $21.0m price on a cash and debt free basis, closed on 11 April 2022 with the collection of funds. This amount (minus the escrow accounts of $0.4m, brokerage and legal fees) was used to pay the loan notes (£8.5m), HSBC CLBILS Covid loan in the UK (£1.2m), the Bank of America CMS remaining acquisition loan of $1.6m and the revolving line of credit with Bank of America of $4.2m.

Because the Machine Tool Division sale closed immediately after year end, the balance sheet included in the annual report does not reflect the above movements.

Next year outlook

Entering the new year with all long term paid off and the business focused 100% on the Laser Division, the Group is now in the unique position of being able to look for options to expand its portfolio within this line of business. The 2023 financial year has started strongly, with a record order book in place and the Group currently reviewing several potential business propositions.

Conclusion

The 600 Group delivered a solid financial performance, despite global challenges and international economic and political uncertainty including the COVID pandemic and, more recently, the conflict in Ukraine. Despite this, trading has remained encouraging thus far in the FY23 year.

Rui Lopes

Chief Financial Officer

30 September 2022

Consolidated income statement

For the Year ended 31 March 2022

As explained in note 4, the directors have highlighted adjusting items which are material or unrelated to the normal trading activity of the group. The "before adjusting items" column in the consolidated income statement shows non-GAAP measures. The "after adjusting items" column shows the GAAP measures.

The prior year figures have been restated for the effects of the discontinued operations- see note 13.

Consolidated statement of comprehensive income

For the period ended 31 March 2022

Attributable to continuing activities 2,416 (5,433)

Attributable to discontinued activities (487) 3,533

Consolidated statement of financial position

As at 31 March 2022

Consolidated statement of changes in equity

As at 31 March 2022

Consolidated cash flow statement includes all activity relating to continuing and discontinuing activity.

Cash and cash equivalents at the end of the period 1,291

Notes relating to the financial information

1. Basis of preparatioN

The consolidated financial statements of the Group have been prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.

The Financial information set out in this preliminary announcement does not constitute the company's Consolidated Financial Statements for the financial years ended 31 March 2022 or 31 March 2021 but is derived from those Financial Statements. Statutory Financial Statements for 2021 have been delivered to the Registrar of Companies and those for 2022 will be delivered following the company's adjourned AGM.

The Auditors, BDO LLP, have reported on those financial statements. Their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their reports and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

The Statutory accounts are available on the Company's website and will be posted to shareholders who have requested a copy and thereafter by request to the company's registered office.

2 Segment information

IFRS 8 - "Operating Segments" requires operating segments to be identified on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. The chief operating decision maker has been identified as the Board of Directors. The Board review the Group's internal reporting in order to assess performance and allocate resources.

The Board consider there to be one operating segment, being Industrial Laser Systems, with the Machine Tools and Precision Engineered Components Division being discontinued following the sale agreed in March 2022.

The Board assesses the performance of the operating segments based on a measure of underlying operating profit. This measurement basis excludes the effects of adjusting items from the operating segments. Head Office and unallocated represent central functions and costs.

The following is an analysis of the Group's revenue, results and net assets by reportable segment:

2.Segment information (CONTINUED)

Inter-segment pricing is determined on an arm's length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Disaggregation of revenue is shown by origin, destination and product group in the following two tables:

2. Segment information (CONTINUED)

Disaggregation of revenue by destination for continuing operations:

Disaggregation of revenue by product group for continuing operations:

There are no customers that represent 10% or more of the Group's revenues.

Assets and liabilities related to contracts with customers:

2. Segment information (CONTINUED)

The group has recognised the following assets and liabilities related to contracts with customers on continuing operations.

Remaining performance obligations

The vast majority of the group's contracts are for the delivery of goods within the next 12 months for which the practical expedient in paragraph 121(a) of IFRS 15 applies.

The following table shows how much of the revenue recognised in the current reporting year relates to brought forward contract liabilities:

3. NET operating expenses

.

4. adjusting ITEMS

The directors have highlighted transactions which are material or unrelated to the normal trading activity of the Group.

In the opinion of the directors the disclosure of these transactions should be reported separately for a better understanding of the underlying trading performance of the Group. These underlying figures are used by the Board to monitor business performance, form the basis of bonus incentives and are used for the purposes of the bank covenants.

These non-GAAP measures are explained in note12 alternative performance measures and set out below. All adjusting items are taken into account in the GAAP figures in the Income Statement.

The items below correspond to the table below:

a) Cost related to the sale of the Machine Tool Division incurred before 31 March 2022.

b) A charge of $0.3m (2021: $0.3m) arose as a result of amortisation of intangible assets acquired through the CMS Inc deal.

c) A credit of $0.03m resulted from the recalculation of the amortization of the loan notes and associated costs on the extension of the repayment date to 14 August 2023 in July 2021. Costs of amortization of $0.6m were incurred in the prior year

d) A credit resulted on the settlement of the prior year duty of $0.07m in the year.

5. Financial expense

6. Taxation

The rate for Federal tax in the USA is 21% and in addition businesses suffer State taxes estimated at 4%.

Tax reconciliation

The tax credit/charge assessed for the period is higher than (2021: higher than) the standard rate of corporation tax in the UK of 19% (2021: 19%). The differences are explained below:

7. Earnings per share

The calculation of the basic earnings per share for continuing operations of 0.41c (2021: loss 3.58c) is based on the earnings for the financial period attributable to the Parent Company's shareholders of a profit of $484,000 (2021: loss $4,202,000) and on the weighted average number of shares in issue during the period of 117,473,341 (2021: 117,473,341). At 31 March 2022, there were 3,790,000 (2021: 2,040,000) potentially dilutive shares (share options or warrants with an exercise price below the average share price for the year) with a weighted average effect of 2,496,578 (2021: 2,040,000) shares giving diluted earnings per share for continuing operations of 0.40c (2021: loss 3.58c). In accordance with IAS 33 - Earnings per Share, the Group shows no dilutive impact in respect of its share options and Deferred Share Plan for the year ended 31 March 2021 as their conversion to ordinary shares would decrease the loss per share from continuing operations.

8. Trade and other receivables

9. Trade and other payables

10. RECONCILIATION OF NET CASH FLOW TO NET DEBT