Manganese Bronze Holdings
Annual Report 2007
Manganese Bronze Holdings PLC Annual Report 2007
Manganese Bronze Holdings PLC
Holyhead Road
Coventry
CV5 8JJ
United Kingdom
Telephone +44 (0) 2476 572000
Fax +44 (0) 2476 572001
www.manganese.com Overview
01 Highlights
02 Financial highlights
03 Chairman’s statement
Performance review
05 Chief Executive’s statement
07 Business review
10 Sustainable development report
Management and governance
13 Board of directors
14 Advisers
15 Directors’ report
18 Corporate governance
23 Statement of directors’ responsibilities
24 Directors’ remuneration report
Financial statements
30 Independent auditors’ report
32 Consolidated income statement
32 Consolidated statement of recognised income and expense
33 Consolidated balance sheet
34 Consolidated cash flow statement
35 Notes to the consolidated financial statements
64 Company income statement
64 Company statement of recognised income and expense
65 Company balance sheet
66 Company cash flow statement
67 Notes to the Company financial statements
72 Consolidated five-year statistics
Additional information
73 Group contacts
Additional information
73
Manganese Bronze Holdings PLC
Group contacts
Manganese Bronze Holdings PLC
Holyhead Road
Coventry
CV5 8JJ
United Kingdom
Tel +44 (0) 2476 572000
Fax +44 (0) 2476 572001
London Taxis International
Manufacture of the London taxi
Peter Shillcock +44(0) 2476 572000
London Taxis International – Export
Export sales of the London taxi
Mathew Cheyne +44(0) 2476 572000
London Taxis North America Holdings Inc
US taxi services and advertising
Larry Lewandowski +1 773 663 4223
Shanghai LTI
Assembly of the London taxi
Paul Stowe 00 86 13761064845
Mann & Overton London
Taxi sales
Peter Rigden +44(0) 20 7700 0888
Mann & Overton Birmingham
Taxi sales
John Loakes +44(0) 121 322 0700
Mann & Overton Leeds
Taxi sales
Andrew Shaw +44(0) 113 388 8600
Mann & Overton Manchester
Taxi sales
Andrew Shaw +44(0) 161 831 3434
London Taxi Finance
Finance for taxi purchase
Customer services +44(0) 870 850 5007
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01
Manganese Bronze Holdings PLC
Highlights
MANGANESE BRONZE HOLDINGS PLC IS COMMITTED TO MAKING
THE LONDON TAXI A GLOBAL BRAND AND SELLING A BROAD RANGE
OF HIGH-QUALITY VEHICLES.
• Operating profit before exceptional items of £5.6 million (12 months ended
31 July 2006: £3.2 million).
• Chinese joint venture finalised, all significant milestones met, on plan to start
prototype production in mid 2008.
• New TX4 model successfully launched, excellent market acceptance, significant
growth in sales and profits.
• On course to meet aggressive component cost reduction targets for Chinese
produced parts for UK production.
• International market development team in place and sales orders advancing
well to plan.
• Strong performance of service activities – retail, finance and parts.
• Significant increase in cash generated from operating activities.
• Increased dividend.
Commenting on the results John Russell, Group Chief Executive, said:
“We are delighted with the improving profitability and significant increase in
operating cash flow resulting from the success of the TX4 and the substantial
progress we have made with our joint venture in Shanghai during this extended
financial period.
Our focus in 2008 is on maintaining and increasing the momentum of the TX4
in the UK whilst investing in primarily environmentally led product initiatives;
putting the TX4 into production in Shanghai and achieving the challenging cost,
quality, and timing objectives that we have set; creating the sales and marketing
infrastructure to realise the international sales opportunities for TX4 and realising
our vision to make the London taxi a successful global icon. The successful
implementation of these actions will generate a marked improvement in our
future profitability.” Overview
02
Manganese Bronze Holdings PLC
Financial highlights
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Vehicle sales volumes
UK 4,147 2,388
Overseas 52 92
Total 4,199 2,480
£000 £000
From continuing and discontinued operations:
Revenue 144,494 83,824
Operating profit before exceptional items 5,575 3,236
Exceptional items – 790
Operating profit 5,575 4,026
Finance costs – net (648) (356)
Profit before tax 4,927 3,670
Net assets 37,530 21,477
Pence Pence
Basic earnings per ordinary share 15.89 15.02
Interim dividend per ordinary share 2.25 2.00
Second interim dividend per ordinary share 3.50 –
Final dividend per ordinary share 1.50 3.00
Special dividend per ordinary share – 1.00
Price range of ordinary shares
1 August 2006-31 December 2007 (2006: 1 August-31 July) 241-950 153-233
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Weighted average number of ordinary shares in issue 21,328,415 19,035,649
Market capitalisation at 1 February (2006: 1 September) £133.55m £59.01m
Net assets per ordinary share 150.3p 112.8p Overview
03
Manganese Bronze Holdings PLC
Chairman’s statement
I am pleased to report that Manganese Bronze has had a very successful 17 months
to 31 December 2007, the highlights including the finalisation of our joint venture
in China (Shanghai LTI), the successful launch of the TX4 taxi and an increase in
profitability and operating cash generation.
Results for the year
The rather unusual reporting period is caused by our
decision to align the Company’s year end with that of our
Chinese joint venture, Shanghai LTI, and our joint venture
partner, Geely.
In the 17-month period under review, just under 4,200
vehicles were sold which together with ongoing financing,
servicing and parts supply, has generated sales of
£144.5 million and an operating profit of £5.6 million.
Cash generation, despite significant investment in the TX4
and in our new retail premises in London, has been strong,
with operating cash flow of £8.4 million generated during
the period leaving the Group with net cash balances of
£10.3 million at 31 December 2007.
The Group’s net assets have increased significantly
from £21.5 million at 31 July 2006 to £37.5 million
at 31 December 2007. This is due primarily to the cost
of the Group’s share of Shanghai LTI. The Group’s pension
deficit has reduced from £4.7 million to £4.1 million
notwithstanding increased longevity assumptions.
The Group’s funding facilities are all of a long-standing
nature and the Group has very little reliance on bank
borrowings with net cash of £10.3 million at the year end.
Reflecting the Group’s financial performance over the
period, its strong balance sheet and prospects, the Board
is recommending the payment of a final dividend of 1.50p
per share.
Progress on China and international sales
Our joint venture in China, Shanghai LTI, offers the best
potential to secure the long-term profitable future for our
Company. I am therefore very pleased to report excellent
progress. Heads of agreement were signed with Geely
in October 2006 and much effort has been successfully
applied by both companies. The various regulatory and
shareholder approvals were attained by June 2007 and
we have now put in place the organisation and resources
to achieve our targets of first prototype in mid 2008 and
production for sales at the end of 2008. The joint venture
will in one step allow us to solve our strategic issues in
relation to significantly reducing our cost base and enabling
substantial international sales. The construction of the joint
venture with Geely, through their wholly-owned subsidiary
Linkstate Overseas Ltd (which has an interest in 22.83%
of the issued ordinary share capital of Manganese Bronze)
aligns Geely’s interests with the success of our strategy.
Very encouraging progress is also being made with the
development of our international sales and marketing
capability. The market studies to identify and prioritise our
target markets and customers were completed in 2007,
a significantly strengthened team has been put in place
and active prospecting in the identified target markets has
commenced. Consequently considerable interest is being
shown by a wide variety of customers in international
markets. We have already signed memoranda of
understanding for a total of 500 units with delivery starting
in early 2009, clearly demonstrating the attractiveness of
the Shanghai built product.
Dividend
The Board is recommending the payment of a final dividend
of 1.50p which follows an interim dividend of 2.25p and
a second interim dividend of 3.5p. The total dividend for
the 17-month period is 7.25p (12 months ended 31 July
2006: 6.0p, including a special dividend of 1.0p). The final
dividend will be paid on 6 June 2008 to those shareholders
on the register at the close of business on 2 May 2008. Overview
04
Manganese Bronze Holdings PLC
Chairman’s statement continued
Board/people
We were delighted to announce the appointment of John
Russell as Chief Executive in March 2007. His depth of
automotive and international business experience and,
in particular, his sales and marketing expertise will be
invaluable as we progress our controlled expansion into
international markets.
Mark Devin was appointed Company Secretary in June
2007 on a part-time basis which, in turn, allowed Mark
Fryer, Group Finance and Business Development Director
more time to focus on his responsibilities as Deputy
Chairman of Shanghai LTI and to support John Russell
in developing the international market infrastructure to
support our sales plans.
Sheng Yue Gui, Chief Executive Officer of Geely, and
Siu Lun Lawrence Ang, Executive Director of Geely, were
appointed as non-executive directors of Manganese Bronze
in July 2007. They both have a wealth of international
business experience.
A new Long-Term Incentive Plan was approved by
shareholders in November 2007. The scheme is an
important component in incentivising the directors and
senior managers across the Group and is linked to
challenging profitability growth targets that have been
set to exploit the potential for international growth that our
joint venture SLTI enables. I am confident that the scheme
will motivate the management to deliver significant value for
all our shareholders.
This is a vital stage in the development of our Company and
I would like to pay tribute to all our employees for their skill
and resourcefulness in helping to continue the Company’s
success as it broadens into international production and sales.
Current trading and prospects
Our new TX4 taxi has received an excellent market
response and a strong endorsement from our customer
base. Passenger demand for taxis remains healthy despite
uncertainty in London’s financial markets. Sales in the
first quarter are below last year due to this uncertainty and
also in comparison with one of our best first quarter sales
performances in the history of the Group following the
launch of TX4.
We believe that the underlying appeal of the TX4 will
continue to be strong in 2008. We are confident of
delivering a profit performance at least in line with
expectations for the current financial year with any market
uncertainty being more than offset by the benefit of lower
than expected start-up losses in Shanghai LTI.
Shanghai LTI remains on plan to deliver a step change
in the Group’s prospects and financial performance.
Tim Melville-Ross
Chairman
15 April 2008 Performance review
05
Manganese Bronze Holdings PLC
Chief Executive’s statement
UK market
Sales in calendar year 2007 were up 23.2% on our sales
in calendar year 2006 and total vehicle sales in the
17-month financial period to 31 December 2007 totalled
4,147. This excellent result was mainly due to the
contribution from the new TX4 model, which was
successfully launched in October 2006, and, in part, due
to the successful run out of the previous TXII model. At the
heart of the TX4 is a new Euro IV powertrain supplied by
VM Motori of Italy. This delivers significant improvements
over previous models in terms of performance, refinement,
emissions and fuel economy. In addition, the TX4 features
a new braking system with ABS, improved suspension and
a host of detailed improvements to benefit both the driver
and passengers. The vehicle was subjected to over one
million kilometres of rigorous testing prior to launch, the
most extensive programme in the Company’s history, to
ensure it would meet the exacting quality, reliability and
durability expectations of the taxi drivers and operators.
The success of the TX4 demonstrates the benefit of
investment in market led product development. We will
continue to invest in features and improvements to the
vehicle that deliver tangible benefits to the drivers and
passengers. In particular, the need to invest in further fuel
economy and emissions improvements continues to be a
key priority. Taxis currently play and will continue to play
an integral role in the transport system of all cities. We will
continue to work with all industry stakeholders to develop
and implement practical, tangible solutions to the challenge
of improving total environmental performance.
The success of the TX4 has contributed to a strong
performance in our finance, parts and retail operations,
a performance which we expect to continue in the future.
Shanghai LTI
The joint venture with Geely Automotive to produce the
TX4, a limousine vehicle derived from the TX4, and two all
new executive saloon cars in Shanghai, has passed a series
of significant milestones.
Heads of terms were entered into in October 2006 and
the process of undertaking all necessary due diligence and
obtaining the required regulatory and shareholder approvals
was successfully completed by June 2007, slightly later than
originally anticipated. In February 2007, Geely successfully
placed 600 million new shares, which generated net
proceeds of HK$609 million (£41.6 million) primarily
to fund Shanghai LTI, of which the Group owns 48%.
In June 2007 Manganese Bronze PLC issued 5.7 million
ordinary shares of 25p (representing 22.83% of the issued
ordinary share capital of the Company) to Linkstate
Overseas Ltd, a wholly-owned subsidiary of Geely in
consideration for their investment in Shanghai LTI.
To ensure the earliest possible start up of Shanghai LTI,
we commenced the transfer of key intellectual property
rights in early 2007. Engineering and purchasing staff from
Geely and Manganese Bronze began work on the project
at the same time. By mid 2007, the project team was in
place to deliver the first phase of the joint venture. The joint
venture team includes a number of Manganese Bronze
appointed executives in key positions who supplement the
skills and experience of the Geely team and ensure that our
quality targets are met.
The pace of the joint venture’s activity has increased as
we progress to prototype production in mid 2008, and
the key deliverables of the project continue to be on plan.
In particular, the appointment of suppliers in China, which
is critical for both Chinese production and for the delivery
of cost savings for production in Coventry, is meeting our
expectations in terms of both quality and cost. Testing and
validation of components has taken place through 2007
and into 2008 and the performance to date indicates that
we can meet our aggressive targets for cost reduction which
are required to achieve the significant growth in profitability
that is expected for 2009.
International market development
Studies were completed in 2007 to identify and prioritise
the international market opportunities for the Shanghai
LTI built TX4. These showed that the market opportunity
is significant and comprises three business models. Firstly,
the sale of taxis to existing taxi drivers and operators to
displace a competitive vehicle. Secondly, the development
of new taxi regulations that will accommodate our vehicle
with city and national authorities that want to create a
better taxi service. Thirdly, operators and entrepreneurs
that want to create a branded, high-quality taxi service to
compete with limousine and private hire operators. In all
cases, the appeal of our market offering is the combination
of the capabilities and reputation of the TX4 vehicle and
the international image and reputation of the taxi service
provided in London.
A new team is now in place and focused on developing
the infrastructure to market and sell the Shanghai LTI built
TX4 in international markets. Active market prospecting
commenced in late 2007 with the aim of putting in place
distribution and sales contracts to pre sell the commercial
production, which is due to start at the end of 2008. The
early success of our team has seen them already signed
memoranda of understanding for a total of 500 vehicles
with delivery starting in early 2009, clearly demonstrating
the attractiveness of the Shanghai built product. We are,
in addition, in discussions with around 20 international
customers who have a significant annual demand. These
discussions are advancing well and further updates will be
provided with our interim management statement in May
and half year results in July.
The international market development team is currently
being strengthened with external recruits and in addition,
the team is working closely with their counterparts in the
Geely organisation to ensure that any efficiency opportunities
are exploited and that the sales and marketing strategies
of the two companies are co-ordinated effectively. Performance review
06
Manganese Bronze Holdings PLC
Chief Executive’s statement continued
Mann & Overton
Our wholly-owned Mann & Overton retail operation in
London moved to new larger premises in Brewery Road,
Kings Cross in December 2006 to meet the anticipated
demand for the TX4 and to improve the service provided
to the drivers and operators in London. The facility is three
times the size of our previous facility in Holloway Road.
The demand for and success of the new facility were
demonstrated by the lack of availability of qualified technicians
to keep pace with the growth in service and repair demand.
This issue was addressed by the international recruitment
of highly qualified technicians from Eastern Europe.
Results of the Birmingham Mann & Overton operation
have been disappointing in recent years because of the
age of the local taxi fleet and the lack of enforcement
of regulations. A turnround initiative was implemented
in 2007 and subsequently new management, process
structures and operating methodologies were put in place.
These actions, coupled with improved regulatory
enforcement by the local authorities, have led to a marked
improvement in performance by the Birmingham operation.
London Taxis North America (“LTNA”)
Much effort was applied by the new management team
to address the underlying performance issues in North
America, exploit the advertising and event marketing
opportunity in the USA more effectively and prepare and
plan for the future launch of the Shanghai LTI product.
The exit from the low margin and difficult to control taxi
media business was managed through 2007 and a new
focus on event marketing programmes was put into place.
Event marketing programmes involve LTNA providing fleets
to blue chip marketing organisations and quality managing
the operation of the vehicles. Active promotion of this
improved service commenced in the second half of 2007
and a strong order book for 2008 indicates that we are on
track to improve our financial performance for LTNA in 2008.
Production
We maintained an average production rate of 65 vehicles per
week during the 17-month financial period. We were able
to take advantage of our inherent manufacturing flexibility
and adjust our build rate to balance good availability
of product in the market place with optimised inventory
levels and also to reduce the effect of market seasonality.
We continue to seek out opportunities for efficiency
improvements and cost reductions in Coventry and a
significant investment project was approved to improve
the operation of the press shop. A total of £0.4 million
is to be invested in a new press and associated process
improvements which will come on stream in mid 2008.
The investment will improve productivity, bring pressings that
are currently difficult to source externally back in-house and
provide significant quality and working environment benefits.
The health and safety performance in all areas of the
business continues to be a key focus of the organisation
and is of particular importance in the production operations.
Our record is good, but there is no room for complacency and
we continue to look for ways of improving the processes,
policies, management and operating environment for the
benefit of all associated with our business.
Warranty
The benefit deriving from the focus on quality, reliability and
durability in the development of the TX4 is already evident
in the warranty data. We will fully evaluate TX4 performance
through the three-year warranty period and expect that our
customers will enjoy a quality ownership experience and
that we will be able to reduce our warranty provisions per
vehicle sold in the future.
Summary
We are delighted with the improving profitability and
significant increase in operating cash flow resulting from
the success of the TX4 and the substantial progress we
have made with our joint venture in Shanghai during this
extended financial period.
Our focus in 2008 is on maintaining and increasing the
momentum of the TX4 in the UK whilst investing in
primarily environmentally led product initiatives; putting
the TX4 into production in Shanghai and achieving the
challenging cost, quality, and timing objectives that we have
set; creating the sales and marketing infrastructure to realise
the international sales opportunities for TX4 and realising
our vision to make the London taxi a successful global
icon. The successful implementation of these actions will
generate a marked improvement in our future profitability.
John Russell
Group Chief Executive
15 April 2008 Performance review
07
Manganese Bronze Holdings PLC
Business review
This review covers the 17-month period to 31 December 2007. It details our
strategy, Group activities, key financial performance measures and the principal
risks and uncertainties the Group faces.
Group activities
Manganese Bronze is the leading manufacturer of the
distinctive London taxi, employing just under 500 people
predominantly in the UK. Over two thirds of our staff are
employed in our main manufacturing site in Coventry with
the majority of the remaining staff in our wholly-owned
dealer group sites, Mann & Overton around the UK.
The Group has a 98% shareholding in London Taxis North
America (“LTNA”), the distributor of the London taxi in
North America, based in Chicago, USA and a 48%
shareholding in Shanghai LTI Ltd our joint venture to
produce London taxis, and other vehicles, in Shanghai,
China. The Group provides retail and service through Mann
& Overton as well as through a number of independently
owned dealerships throughout the UK. The Group also
provides finance to taxi operators and owners through its
partnership with Lloyds Bank plc which provides finance
under the brand Black Horse Taxi Finance. Additionally,
the Group also supplies parts to taxi operators and owners
through its partnership with Unipart.
Statement of accounting policies
The Group’s consolidated financial statements have
been prepared in accordance with International Financial
Reporting Standards (IFRS) in issue and effective for periods
commencing on or after 1 August 2006. The Group’s
accounting policies are set out in note 2 of the notes to
the consolidated financial statements.
Review of performance for the period
The table below sets out the key financial performance
indicators (KPI’s) which are closely monitored by the
directors and management throughout the year and
which are measured against preset targets. These show
performance for the 17-month period to 31 December and
the 12-month periods to 31 July 2007, 31 July 2006 and
31 July 2005.
Unaudited
17 months to 12 months to 12 months to 12 months to
31 Dec 31 Jul 31 Jul 31 Jul
2007 2007 2006 2005
Vehicle sales volumes
– UK 4,147 3,120 2,388 2,412
– Overseas 52 33 92 109
– Total 4,199 3,153 2,480 2,521
Revenue £m 144.5 106.9 83.8 87.6
Operating profit before exceptional items £m 5.6 4.6 3.2 2.5
Profit before tax £m 4.9 4.0 3.7 2.0
Net assets £m 37.5 38.7 21.5 19.7
Basic earnings per share p 15.89 15.40 15.02 10.97
Operating cash flow £m 8.4 12.2 1.1 9.5
Net cash £m 10.3 13.1 12.9 9.1
Net funds £m 3.2 9.1 2.6 3.3
Revenue
For the 17-month period to 31 December 2007 total revenue
was £144.5 million which included £106.9 million for the
12 months to 31 July 2007 (2006: £83.8 million) and
£37.6 million for the five-month period to 31 December
2007. Sales volume growth has been driven by the launch
of the TX4 in late 2006, new Mann & Overton premises in
London and favourable economic conditions.
Operating profit
Operating profit before exceptional items increased by
72.3% to £5.6 million (12 months ended 31 July 2006:
£3.2 million) with £4.6 million generated in the year to
31 July 2007 and £1.0 million in the following five-month
period. For the first time, the Group’s results include a 48%
share of Shanghai LTI start up losses. These are lower than
expectation due to the nature of start up operation and high
interest received on the cash balances within Shanghai LTI. Performance review
08
Manganese Bronze Holdings PLC
Business review continued
Finance expense
The net finance expense has increased by £0.2 million
to £0.6 million as a result of the extended financial period
and higher average discount rates increasing the net interest
charge on the pension liability. Net finance expense was
covered 8.6 times by operating profit.
Earnings per share
Earnings increased by 22.8% to £3.4 million for the
17-month period (12 months ended 31 July 2006:
£2.8 million). With a significant increase in the number
of shares in issue, due to the share issue to Geely, basic
earnings per share has increased from 15.02p to 15.89p.
Net assets
Group net assets have increased by £16.0 million to
£37.5 million at 31 December 2007, due to the Group’s
investment in SLTI represented by 5.7 million shares issued
at a fair value of £2.50 per share.
Due to a small number of shareholders owning the majority
of the shares, average daily share dealings being less than
0.04% of the total number of shares, restrictions placed
on Geely trading the shares, and an independent valuation
of the Group’s investment in SLTI, £2.50 per share was
considered by the directors to be a better indicator of fair
value than the market value as at the date of issue.
Net cash at 31 December 2007 was £10.3 million
(31 July 2006: £12.9 million) with net funds of £3.2 million
(31 July 2006: £2.6 million).
Operating cash flow
Net cash from operating activities increased significantly
to £8.4 million (12 months ended 31 July 2006:
£1.1 million) due to improved profitability and improved
working capital levels.
Dividends
The Board is recommending a final dividend of 1.50p
which follows an interim dividend of 2.25p and a second
interim dividend of 3.5p. The total dividend for the
17-month period is 7.25p. In 2006 the interim dividend
was 2.0p followed by a final dividend of 3.0p. In addition
a special dividend of 1p was paid in December 2006. The
final dividend will be paid on 6 June 2008 to shareholders
on the register at 2 May 2008.
Pensions
The Group’s pension deficit, for an old closed scheme,
reduced by £0.6 million to £4.1 million. Contributions
of £1.7 million during the period and strong equity returns
have been almost offset through use of increased longevity
assumptions. These assumptions are disclosed in note 35
of the notes to the consolidated financial statements.
Financing
The Group funds its operations through a mixture of retained
earnings and asset finance facilities with very little reliance
on bank borrowings. Funding operations and liquidity
management are handled centrally by a small head office
finance function with funds lent to subsidiaries as required.
The Group’s net cash resources are £10.3 million at
31 December 2007 (31 July 2006: £12.9 million) and
comprise money market deposits with interest received
at the prevailing market rate.
The Group’s asset finance facilities comprise a stocking
loan facility of £13.4 million (31 July 2006: £13.4 million)
which is provided by Lloyds TSB Group PLC and attracts
interest linked to the Finance House Base Rate. This facility
was utilised by £7.0 million at 31 December 2007
(31 July 2006: £9.2 million) and is secured on the
stock of finished vehicles.
The Group’s overdraft facility of £2.5 million (31 July
2006: £2.5 million) is provided by HSBC Bank plc and
has not been utilised during the 17-month period.
Risk
The Group is exposed to a variety of risks in the conduct
of its business operations. Each year the Group conducts
a formal review of those risks and reports these to the Board
of Manganese Bronze Holdings PLC. Mitigation action and
strategies to reduce the likely impact are agreed and put
in place wherever possible.
The Group centrally maintains a wide range of insurance
to cover major identified insurable risks, including (but
not limited to) those relating to product liability, business
interruption, damage to property and equipment, motor
trading, fleet operation and employment.
Whilst it is not possible to either completely record or to
quantify every individual risk the Group faces, below is
a summary of the risks the directors believe are most
significant to the Group’s business and future performance.
Regulatory
Taxis operating in London must currently comply with the
Conditions of Fitness laid down by Transport for London’s
Public Carriage Office. Outside of London the regulation of
taxis in the UK is controlled by local authorities, some of
whom have voluntarily adopted the Conditions of Fitness
requirements. If new requirements are imposed on the way
in which taxis are regulated, or amendments are made to
the existing Conditions of Fitness, this could have a material
impact. The Group mitigates this risk through investment in
our vehicle, lobbying for the benefits of our vehicle and through
maintaining our relationship with key regulatory bodies.
Markets
The demand for taxis is affected by the general prevailing
economic sentiments and conditions, particularly those
in London. This risk cannot be fully mitigated although a
combination of high-quality vehicle offering and increased
export sales can go some way to reducing this risk. Performance review
09
Manganese Bronze Holdings PLC
Competition
In markets not impacted by the Conditions of Fitness the
Group competes with a variety of alternative vehicles.
In these markets the Group has successfully won back
market share since the launch of the TX4 in October 2006.
The performance of the Group will continue to be very closely
linked to the success of the TX4 until such time as the Group
is selling the new vehicles produced by Shanghai LTI.
Technical change
In order to remain competitive and meet regulatory
hurdles the Group must commit regular investment in
internal and external research and development. This will
increasingly become relevant as the Group seeks to produce
more environmentally friendly derivatives of existing and
new products.
Product quality and liability
The Group is exposed to certain product liability risks which
could give rise to financial liability in the event of failure.
The Group seeks to mitigate this risk through selection of
the highest-quality suppliers, maintenance of demanding
quality systems in our assembly and service operations
and through quality accreditation. The Group maintains
insurance for public and product liability and self insures
against the risk of product warranty.
Reliance on suppliers
The Group relies on suppliers for all key components for
the TX4 other than the vehicle chassis, fuel tank and body
panels which we manufacture in Coventry. The Group is
often reliant on a single supplier for its requirement for a
particular component placing the Group at risk of product
delays. The Group has insurance against loss of supply
from key suppliers due to natural disasters/events and
seeks to mitigate the remaining risks by seeking alternative
supply from China.
Raw material/utility prices
The nature of the Group’s business means that fluctuations
in raw material prices, particularly steel and energy, can
have significant impacts on profitability. The Group seeks
to mitigate this fluctuation through competitive tender and
through seeking longer term supply.
Disruption to production
The Group could be impacted through loss of production in
our main facility in Coventry through equipment malfunction,
theft of key equipment, strike or natural events such as fire,
flooding and wind. The Group has controls in place to
mitigate these risks, however, in the event of failure, the
Group’s insurance provides cover for business interruption.
Relationship with Geely
The Group will become increasingly exposed to the
operation of SLTI and its partner Geely. Geely is itself
controlled by Mr. Li Shufu, the Chairman and executive
director of Geely. The ongoing success of SLTI will be reliant
on the Group’s continued good relations with Geely and
Mr. Li Shufu in particular.
China
SLTI is based in Shanghai, China. The Group, therefore,
will increase its exposure to new business practices and
methods of working and will need to adapt accordingly.
SLTI will also require the commitment of key staff which
is being managed through appointment of key staff both
internally and externally who are either Chinese Nationals
or who are experienced working in China. The Group
remains exposed to the extent to which the People’s
Republic of China’s government regulates the automobile
industry and the pace of economic liberalisation.
Chinese vehicle/component supply
The Group will become increasingly reliant on components
imported from China and these will need to meet the Group’s
exacting standards. In addition the Group’s international
sales will be increasingly dependent on the quality of
product exported from China. The Group is seeking to
manage this through significant investment in facilities,
high-quality personnel and tooling as well as through
appointing high-quality suppliers. The Group is also seeking
to utilise its U.K. quality systems in the Shanghai facility.
Foreign exchange risk
Whenever possible, foreign exchange risk of a transactional
nature is hedged using forward foreign exchange contracts.
This is a particular exposure for LTI, where the single
highest cost, other than payroll, is the cost of engines
which are charged in euros.
Translational risk arising from the consequence of applying
different exchange rates to net assets denominated in
currencies other than sterling and not being an exposure
that results in actual cash flow, is not hedged. This is a
particular exposure for SLTI, which has cash deposits in
US dollars.
Funding risk
The Group relies on the continued availability of its existing
bank borrowing facilities and asset financing facilities.
In addition, SLTI will require additional funding, over and
above the initial equity investment, to fund future vehicle
development and working capital. Geely and the Group will
seek to fund this in China with security over the business or
assets of SLTI.
Pension plans
The interaction of, among other things, increased life
expectancy, equity market performance and reduced interest
rates have had the continued impact of increasing the
funding requirement for the Group’s closed defined benefit
pension scheme. In conjunction with the scheme actuaries
and trustees of the scheme, the Group has an agreed
funding structure in place. The increase in funding
contributions could have an adverse impact on the Group’s
financial condition. Performance review
10
Manganese Bronze Holdings PLC
Sustainable development report
Our philosophy and approach
As a speciality automotive products and services group,
the Board takes seriously its responsibilities to the
environment and the communities in which the Group
operates. We believe that these responsibilities can have a
positive impact on profitability and therefore on shareholder
returns as well as on our reputation and growth prospects.
We further believe that neither business growth nor
efficiency need be compromised by striving to achieve
high standards of social and environmental responsibility.
This report sets out details of our sustainability activities
during the period ended 31 December 2007 (“the period”)
during which the Group began the work of developing
systems and processes for gathering and analysing
performance data which will enable us to measure
more effectively the cost benefits of addressing our
regulatory obligations.
In preparing this report, consideration has been given to
the Association of British Insurers’ disclosure guidelines
on socially responsible investment. These guidelines were
developed to help provide a basic benchmark for companies
wishing to develop best practice in this area.
The activities of Shanghai LTI and London Taxis North
America Inc are not covered by this report on the grounds
of materiality. This will be periodically reviewed.
Governance, leadership and accountability
At a corporate level, the various aspects of sustainability
are assigned to different layers of management. The Board
of Manganese Bronze Holdings PLC takes account of
significant environmental, social and governance risks within
the context of the whole range of risks and opportunities
facing the Group, and formulates and approves Group
policies accordingly. These include policies in relation to
the environment, equal opportunities, discrimination and
diversity, training and development and the supply chain,
and a code of business ethics. These policies are reviewed
within the normal business planning cycle and, as and
when necessary, updated to reflect changes to legislation,
emerging best practice and the needs of the business.
The Executive Committee, chaired by John Russell, Chief
Executive Officer, comprises senior managers at operational
level. It is responsible for the implementation of these
policies, their communication across the business units
and compliance with the policies and supporting principles,
delegating as appropriate to designated individuals in
their part of the business. The corporate governance
report on pages 18 to 22 provides further details about
the responsibilities and activities of the Board and the
Executive Committee.
Implementation of the policies is effected at each
facility in order to ensure that the overall activities
of each site are compatible with, and conform to,
the policies and international standards as these apply
to individual businesses.
All our employees have a responsibility to be aware of, and
to comply with, the Group’s policies and processes, which
have been developed for their guidance and in order to
regulate the conduct of the day-to-day operations of the
business. Employees are encouraged to make suggestions
to improve these policies and procedures.
Process for identifying and assessing risks
The Group is committed to achieving compliance with
ISO14001 during 2008. ISO14001 specifies the actual
requirements for an Environmental Management System
(“EMS”) and applies to those environmental aspects over
which the organisation has control and can be expected
to have an influence.
The cornerstone of the EMS is a process by which each
operating unit will identify the associated risks in respect
of each stage of every process and allocate a severity rating
depending upon the significance of each risk in terms of its
impact on the business. The allocation of a severity rating
will be the starting point in determining how best to address
each risk in turn.
Our people
Employee consultation
The Group places considerable value on keeping employees
informed on matters affecting them and on the various
factors affecting the performance of the Group. This is
achieved through formal and informal meetings and a
company newsletter. Employee representatives are
consulted regularly on a wide range of matters affecting
their current and future interests. The Group is committed
to providing equal opportunities and opposes all forms of
unfair or unlawful discrimination. Employees will not be
discriminated against because of race, colour, nationality,
ethnic origin, disability, sex or sexual orientation, marital
status or age.
The employee bonus scheme is open to all salaried staff
and encourages employees to contribute towards the
achievement of individual and Group-defined objectives.
The recognition of extraordinary effort is further rewarded
through the Group’s Reward and Recognition Scheme.
During 2007, the Company’s Investors in People
accreditation was successfully renewed for a further
three years.
All employees are encouraged to raise genuine concerns
about possible improprieties in the conduct of our
business, whether in matters of financial reporting
or other malpractices, at the earliest opportunity and
in an appropriate way.
Employee turnover has increased during the period as a
result of the business reorganising around its new strategy
of international development and growth and the consequent
requirement for new skills and experience. Also, following
a successful period of people development and training,
we have seen a targeted approach from a number of local
companies for our highly skilled workforce. Performance review
11
Manganese Bronze Holdings PLC
Disabled persons
Applications for employment by disabled persons are
always fully considered, bearing in mind the aptitudes of
the applicant concerned. In the event of members of staff
becoming disabled, every effort is made to ensure that their
employment with the Group continues and that appropriate
training is arranged. It is the policy of the Group that the
training, career development and promotion of disabled
persons should, as far as possible, be identical to that of
other employees.
Training and development
Training for directors of Manganese Bronze Holdings PLC
is delivered through a system of regular Board reporting
supplemented by Board presentations on relevant corporate
responsibility issues.
Our business is increasingly knowledge-based. Employing
the right people and encouraging the continuous
development of the skills of our employees is key to
developing a successful business. Accordingly, the
development of individuals at all levels is encouraged
with the objective of maximising the overall performance
of the business. This is achieved through a combination
of work-based learning, together with the provision of
development opportunities and external training, supported
by a formal programme of coaching and mentoring.
Health and safety
The Board is committed to ensuring that Manganese’s
activities do not result in injury or illness to any employee,
contractor or member of the public and strives hard to
prevent work-related incidents, illnesses and injuries.
All Manganese operating units must comply with our health
and safety policies, in addition to meeting requirements
specific to their businesses, for example, the Control of
Substances Hazardous to Health (“COSHH”), as well as
customers’ expectations. The Board is committed to ensuring
that these principles are articulated to all employees and
that they are effectively implemented.
The Group’s insurers, QBE, review existing systems and
audit the health and safety performance, making
recommendations accordingly.
Each of our businesses maintains accident reporting systems.
These systems are used to identify trends, with a view to
developing strategies for reducing the number of reportable
as well as non-reportable accidents and near-misses.
Environment
The Group’s operations strive to achieve continuous
improvements in environmental performance and seek to
prevent, mitigate, reduce or offset the environmental impact
of our activities.
The Executive Committee monitors a range of non-financial
key performance indicators in relation to the environment.
These are reported by the Chief Operating Officer at the
Board’s regular meetings, in order to monitor performance
over time. By raising awareness of energy usage among
the management cadre, the Group aims to develop and
maintain an effective energy management strategy in order
to achieve reductions in the levels of energy consumed and
cost savings.
Community
The Group recognises the importance of engaging with
the communities in which we operate. It encourages
operating units to develop their own corporate social
involvement plans in consultation with stakeholders,
in order to identify programmes with tangible and
sustainable community benefits in line with our corporate
social involvement policy. During the period, the Group,
including amounts raised and donated by employees,
made financial contributions to charities and local
community causes totaling £36,661 (12 month’s ended
31 July 2006: £20,356). Performance review
12
Manganese Bronze Holdings PLC
Sustainable development report continued
Key performance indicators
Our people
Employee consultation
17 months to Year to Year to
31 Dec 2007 31 Jul 2007 31 Jul 2006
Staff Turnover (Annualised %) 8.81 8.82 5.95
Note: Turnover figures refer to factory operations only.
Training and development
Total for 17 months to Total for year to Total for year to
31 Dec 2007 31 Jul 2007 31 Jul 2006
Training days Total 1,809 1,312 1,340
Average training days Per employee 5.4 3.9 4.0
Note: Figures refer to factory operations only.
Health and safety
Total for 17 months to Total for year to Total for year to
31 Dec 2007 31 Jul 2007 31 Jul 2006
Accidents per 100,000 hours worked 1.10 1.30 0.88
Total reportable accidents 13 10 5
Note: Figures include both factory and retail operations.
Environment
% improvement
Total for 17 months to Total for year to Total for year to Dec 2007
Units 31 Dec 2007 31 Jul 2007 31 Jul 2006 vs Jul 2006
Gas KWh 2,368 2,314 3,666 35%
Water M3 1.13 1.23 1.31 14%
Electricity KWh 1,245 1,273 1,603 22%
Note: Figures are for energy consumption per vehicle produced for the factory operations only. Management and governance
13
Manganese Bronze Holdings PLC
Board of Directors
Tim Melville-Ross
†
Non-executive Chairman
Tim Melville-Ross (63) was appointed as a non-executive
director of Manganese in March 2000 and Chairman in
January 2003. He was previously Chief Executive of the
Nationwide Building Society (1985-94) and Director
General of the Institute of Directors (1994-1999). He is
currently Chairman of Bovis Homes PLC, DTZ Holdings plc,
Royal London Mutual Insurance and the Higher Education
Funding Council for England.
John Russell
Group Chief Executive
John Russell (58), who was previously Vice President of
Harley Davidson Motor Company and Managing Director of
Harley Davidson Europe, joined the Board in March 2007
as Group Chief Executive.
Mr Russell began his career in the automotive industry at
Unipart in 1972 before moving to Peugeot Talbot Motor Co
in 1980. He spent six years at Peugeot, initially as UK Parts
Marketing Director, and then as UK Marketing Director.
This was followed by ten years at the Rover Group where he
progressed from Marketing Director for Land Rover to Rover
Group Board Director responsible for Sales, Marketing and
Overseas Manufacturing. Prior to joining Harley Davidson,
he was Director General of the Walpole Committee, an
organisation that promotes British luxury brands, and
Interim CEO of Bombay Dyeing, a Mumbai, India, based
textile manufacturer. John is currently a non-executive
director of Atmaana, a Management Consultancy business.
Mark Fryer
Group Finance Director
Mark Fryer (41) was appointed Group Finance Director
in January 2002. A chartered accountant, he joined the
Group from GKN plc where he had been Finance Director
of the Industrial Services Division and latterly Chief
Financial Officer of a GKN subsidiary in the United States.
Peter Shillcock
Chief Operating Officer
Peter Shillcock (46) was appointed Chief Operating
Officer in March 2005 having been Managing Director
of LTI Limited, the Company’s principal subsidiary,
since December 2000. A chartered engineer, he has over
25 years’ automotive engineering experience having
previously held a number of senior positions within BMW
and the Rover Group.
Christopher Ross FREng*
†
Deputy Chairman and Senior Independent Director
Christopher Ross (63) was appointed as a non-executive
director in June 1995 and Deputy Chairman in March
2003. He has had a long career in manufacturing and
professional service companies. Previously Chief Executive
of Molins PLC, Ricardo PLC and Wagon Automotive, he is
currently Chairman of Antonov PLC, Carclo PLC, Network
Group Holdings PLC, Sonas Investments Limited and a
non-executive director of Lander Holdings Limited. He is a
Fellow of the Royal Academy of Engineering.
Andrew Walker*
†
Non-executive director
Andrew Walker (56) was appointed as a non-executive
director in August 2003. Formerly he was Group Chief
Executive of McKechnie plc (1997 to 2001) and of South
Wales Electricity plc (1993 to 1996) having previously
spent 14 years with Dowty Group PLC. He is currently
a non-executive director of Ultra Electronics Holdings plc,
Delta plc, fountains plc, Plastics Capital plc, Brintons
Limited, Porvair plc and API Group plc and Chairman
of Bioganix plc.
Siu Lun Lawrence Ang*
Non-executive director
Mr Ang Siu Lun, Lawrence (47) was appointed a
non-executive director in September 2007. Mr Ang is the
executive director of Geely Automobile Holdings Limited and
is mainly responsible for international business development,
capital markets and investor relations for Geely. He holds
a Bachelor of Science degree in Physics and Computer
Science and a Master of Business Administration degree
from the Chinese University of Hong Kong. Prior to joining
Geely, he worked in a number of major international
investment banks for seventeen years and has extensive
experience in equity research, investment banking and
financial analysis, focusing on China’s equity market,
automobile industry and investment banking business.
Sheng Yue Gui
†
Non-executive director
Mr Gui (44) was appointed as a non-executive director
in September 2007. Mr Gui is the Chief Executive Officer
of Geely Automobile Holdings Limited and is responsible
for the administration of the company. Mr Gui has over
20 years’ experience in administration and project
management. He has also worked with China Resources
(Holdings) Company Limited. Mr Gui holds a Bachelor
of Science degree in mechanical engineering from Xian
Jiaotong University and a Masters degree in business
administration from the University of San Francisco.
* Member of the Audit Committee
† Member of the Remuneration and Nominations Committee Management and governance
14
Manganese Bronze Holdings PLC
Advisers
Company Secretary
Mark Devin FCIS
Registered office
Holyhead Road
Coventry CV5 8JJ
Telephone +44 (0) 247 657 2041
Fax +44 (0) 247 659 4363
Company number
61050
Website
www.manganese.com
News service
Reuters MNGS.L
Auditors
Deloitte & Touche LLP
Bankers
HSBC Bank plc
Lloyds TSB Group PLC
Merchant bankers
N M Rothschild & Sons Limited
Stockbrokers
Collins Stewart Limited
Kaupthing Singer & Friedlander Capital Markets Limited
Financial PR consultants
Financial Dynamics
Telephone +44 (0) 207 831 3113
Fax +44 (0) 207 831 7961
Solicitors
Wragge & Co
Simmons & Simmons
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone 0871 664 0300
#
+44 208 639 3399
# Calls cost 10p per minute plus network extras
Investor calendar
Financial year end
Event to which event relates Date
First interim management statement 31 December 2008 19 May 2008
109th Annual General Meeting 31 December 2007 3 June 2008
Payment of final dividend 31 December 2007 6 June 2008
Preference share dividend payable 31 December 2008 30 June 2008
Half-year results announcement 31 December 2008 31 July 2008
Payment of half year dividend 31 December 2008 1 September 2008
Second interim management statement 31 December 2008 21 October 2008
Preference share dividend payable 31 December 2008 31 December 2008 Management and governance
15
Manganese Bronze Holdings PLC
Directors’ report
The directors present the annual report on the affairs of the Group, together with
the financial statements and auditors’ report, for the 17-month period ended
31 December 2007 (the “period”).
1 Principal activities
Manganese Bronze Holdings PLC is a UK-based speciality
automotive and taxi services group.
The subsidiary and associated undertakings principally
affecting the profits or net assets of the Group in the period
are listed in note 45 to the Company financial statements.
2 Business review
The Company is required by the Companies Act to include
a business review in this report. The information that fulfils
the requirements of the business review, including principal
risks and uncertainties, can be found within the business
review on pages 7 to 9 and the sustainable development
report on pages 10 to 12, which are incorporated in this
report by reference. The business review also includes
details of the main trends and factors likely to affect the
future development, performance and position of the
Company’s business, an indication of its activities in
the field of research and development, details of the
key performance indicators that management uses and
information about persons with whom the Company has
contractual or other arrangements that are essential to the
business of the Company.
Information about the use of financial instruments by the
Company and its subsidiaries is given in note 25 to the
consolidated financial statements.
Details of significant events since the balance sheet date are
contained in note 36 to the financial statements.
3 Dividends
The Board is recommending a final dividend of 1.50p per
ordinary share to be paid on 6 June 2008 to shareholders
on the register on 2 May 2008 which, together with the
first and second interim dividends paid on 30 March and
2 November 2007 totaling 5.75p, makes a total of 7.25p
for the period (year ended 31 July 2006: 6.0p, including
a special dividend of 1.0p).
4 Capital structure
The following description summarises certain provisions
in the Company’s Articles of Association (the “Articles”)
and applicable English law concerning companies
(the Companies Act 1985 and the Companies Act 2006,
together the “Companies Acts”). This is a summary only
and the relevant provisions of the Companies Acts or the
Articles should be consulted if further information is
required. Certain amendments will be proposed to the
Articles of Association at the Annual General Meeting on
3 June 2008, details of which are set out in the notice
of meeting. Copies of the Company’s current Articles,
together with copies marked up to show the proposed
amendments are available for inspection at the Company’s
registered office.
Details of the authorised and issued share capital, together
with details of movements in the Company’s issued share
capital during the year are shown in notes 29 and 30 to the
consolidated financial statements.
The Company has one class of ordinary share which carries
no right to fixed income. Each share carries the right to one
vote at general meetings of the Company. The cumulative
preference shares carry 8¼% interest but do not carry voting
rights. The percentage of the issued nominal value of the
ordinary shares is 90.69% of the total issued nominal value
of all share capital.
There are no specific restrictions on the size of a holding
nor on the transfer of shares, which are both governed by
the general provisions of the Articles of Association and
prevailing legislation. The directors are not aware of any
agreements between the holders of the Company’s shares
that may result in restrictions on the transfer of securities or
on voting rights. No person has any special rights of control
over the Company’s share capital and all issued shares are
fully paid.
Details of share schemes are set out in note 34 to the
consolidated financial statements.
Details of significant direct and indirect holdings in the
Company are given in section 10 of this report.
With regard to the appointment and replacement of directors,
the Company is governed by its Articles, the Combined Code,
the Companies Acts and related legislation. The Articles
themselves may be amended by special resolution of the
shareholders. The powers of the directors are described
in the corporate governance statement on pages 18 to 22.
Under the Articles, the Company has authority to allot the
unissued shares of the Company. Such authority would be
exercised having regard for the guidelines of the Investor
Protection Committees.
Under the agreement governing the Company’s joint
venture agreement with Geely Automobile Holdings Limited,
if a competitor directly or indirectly takes control of the
Company, Geely may require the Company to sell its shares
in the JV to them. There are also a number of other
agreements that take effect, alter or terminate upon a
change of control of the Company such as commercial
contracts, bank loan agreements, property lease Management and governance
16
Manganese Bronze Holdings PLC
Directors’ report continued
arrangements and employee share plans. None of these
are considered to be significant in terms of their likely
impact on the business of the Group as a whole.
Furthermore, the directors are not aware of any agreements
between the Company and its directors or employees that
provide for compensation for loss of office or employment
that occurs because of a takeover bid.
5 Directors
The directors, who served throughout the year except
as noted, were as follows:
Tim Melville-Ross* Chairman
John Russell Chief Executive Officer
(appointed 1 March 2007)
Mark Fryer Group Finance and Business
Development Director
Peter Shillcock Chief Operating Officer
Christopher Ross
#
*
†
Deputy Chairman and Senior
Independent non-executive director
Andrew Walker
#
*
†
Sheng Gui* (appointed 25 September 2007)
Lawrence Ang
#
(appointed 25 September 2007)
# Member of the Audit Committee
* Member of the Remuneration and Nomination Committee
† Independent director as defined by Combined Code
Biographies of the directors at the date of this report are set
out on page 13.
Christopher Ross, having served almost 13 years as a
non-executive director of the Company, offers himself for
re-election as required by the Combined Code on Corporate
Governance. This year, Tim Melville-Ross and Peter
Shillcock retire by rotation and, being eligible, offer
themselves for re-election.
6 Directors’ interests
The directors who held office at 31 December 2007
had the following interests in the ordinary share capital
of the Company:
Name of director 31 Dec 2007 31 Jul 2006
Tim Melville-Ross 8,000 8,000
John Russell – –
Mark Fryer – 30,350
Peter Shillcock – 18,823
Christopher Ross – 7,500
Andrew Walker – –
Sheng Gui – –
Lawrence Ang – –
No director had any interest in the preference share capital
of the Company or in the shares of any other Company in
the Group.
There have been no changes in the interests of any of the
directors between 31 December 2007 and the date of
this report.
No director had any interest in any contract of significance
with the Company during the 17-month period ended
31 December 2007, other than his service contract, details
of which are given in the directors’ remuneration report set
out on pages 24 to 29.
7 Directors’ indemnities
The Company has made no qualifying third party indemnity
provisions for the benefit of its directors.
8 Supplier payment policy
The Group’s policy is to settle terms of payment with
suppliers when agreeing the terms of each transaction,
ensure that suppliers are made aware of the terms
of payment and abide by the terms of payment.
The Company is a holding company and had no trade
creditors at 31 December 2007 (31 July 2006: £nil).
9 Charitable and political donations
During the period under review, the Group made
charitable donations of £13,092 (12 months ended
31 July 2006: £5,442), principally to local charities
serving the communities in which the Group operates.
No political donations were made (12 months ended
31 July 2006: £nil).
10 Substantial shareholdings
As at 15 April 2008, the Company had been notified,
in accordance with Chapter 5 of the Disclosure and
Transparency Rules, of the following voting rights as
a shareholder of the Company.
% of voting rights No of
and issued ordinary Nature of
share capital shares holding
Toscafield Limited 25.115 6,269,133 Direct
Linkstate
Overseas Limited
(Geely Automobile
Holdings) 22.835 5,700,000 Direct
BT Pension Scheme
and subsidiaries
(including Hermes
UK Small Companies
Focus Fund) 12.035 3,004,138 Indirect
Lehman Brothers
International
(Europe) 7.752 1,935,074 Direct
Lansdowne
Partners 7.309 1,824,500 Indirect Management and governance
17
Manganese Bronze Holdings PLC
11 Acquisition of the Company’s own shares
At the end of the period, the directors had authority,
under a shareholders’ resolution dated 27 November 2007,
to purchase through the market:
1. 2,496,192 of the Company’s ordinary shares at prices
ranging between 25p and an amount equal to the
higher of:
i) 105% of the average of the middle market
quotations for the ordinary shares of the Company
as derived from the Daily Official List of London
Stock Exchange plc for the five business days
immediately preceding the day on which such
share is contracted to be purchased; and
ii) that stipulated by Article 5(1) of the EU
Buyback and Stabilisation Regulation 2003
(No. 2273/2003); and
2. 640,959 of the Company’s 8.25% cumulative
preference shares of £1 each in the capital of the
Company at prices ranging between 10p and £1.50.
The authority expires at the conclusion of the Annual
General Meeting of the Company on 3 June 2008.
12 Annual General Meeting
This year’s Annual General Meeting will be held on 3 June
2008. The notice of meeting together with details of the
business to be conducted and form of proxy are set out in
the separate booklet enclosed with this report.
13 Auditors
Each person who is a director at the date of approval
of this annual report confirms that:
1. So far as the director is aware, there is no relevant
audit information of which the Company’s auditors
are unaware; and
2. The director has taken all the steps that he ought to
have taken as a director to make himself aware of any
relevant audit information and to establish that the
company’s auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 234ZA of the
Companies Act 1985.
Deloitte & Touche LLP have expressed their willingness
to continue in office as auditors and a resolution proposing
their re-appointment will be proposed at the forthcoming
Annual General Meeting.
By order of the Board
Mark Devin
Company Secretary
Manganese Bronze Holdings PLC
Holyhead Road
Coventry CV5 8JJ
15 April 2008 Management and governance
18
Manganese Bronze Holdings PLC
Corporate governance
Introduction
The Board continues to review the governance requirements
in the context of the size, organisational structure and
commercial strengths of the Group.
During this review process, the purpose of good governance
has remained paramount, namely to provide the framework
of business principles, structures and controls within the
Group, which enable the directors, management and
shareholders to ensure:
• accountability;
• transparency of responsibility;
• the appropriate management of conflicts of interest; and
• effective relationships between the Board, its committees
and shareholders.
All of the above support the overall objective of creating
shareholder value through the delivery of the Group’s
strategy, the reduction of risks and the protection of the
long-term interests of shareholders.
Statement of compliance with
Combined Code provisions
The Board considers that the Company has complied with
the principles set out in the Financial Reporting Council’s
Combined Code on Corporate Governance issued in 2003
(the “Code”).
The Board
1. Structure and composition
As at 31 December 2007, the Board comprised three
executive and five non-executive directors:
Tim Melville-Ross Non-executive Appointed
(Chairman) 1 March 2000
John Russell Group Chief Appointed
Executive 1 March 2007
Mark Fryer Group Finance Appointed
and Business 2 January 2002
Development
Director
Peter Shillcock Chief Operating Appointed
Officer 18 March 2005
Christopher Ross Non-executive Appointed
(Deputy Chairman 22 June 1995
and Senior
Independent Director)
Andrew Walker Non-executive Appointed
1 August 2003
Lawrence Ang Non-executive Appointed
25 September 2007
Sheng Gui Non-executive Appointed
25 September 2007
The non-executive directors bring a broad range of business,
financial and global experience to the Board. Biographical
details of all the directors are set out on page 13.
The roles of Chairman and Chief Executive are separate and
clearly defined so that no individual has unfettered powers
of decision.The Chairman is responsible for the leadership
and governance of the Board as a whole and the Group
Chief Executive for the management of the Group and the
implementation of Board strategy and policy on the Board’s
behalf. In discharging his responsibilities, the Group Chief
Executive is advised and assisted by the Executive
Committee comprising senior managers.
Christopher Ross is the Senior Independent Director to
whom concerns may be conveyed by shareholders if they
are unable to resolve them through existing mechanisms
for investor communications or where such channels are
inappropriate. During the period, Mr Ross met several major
shareholders and shareholder bodies to listen to their views
on the Group and to discuss any issues they raised.
The Chairman meets, at least annually, with the
non-executive directors without the executive directors
being present.
The Company Secretary is responsible for assisting the
Chairman in all matters relating to Corporate Governance.
Details of the terms of appointment of both the executive
and non-executive directors are set out in the directors’
remuneration report, which refers to executive service
contracts and non-executive letters of appointment, copies
of which are available for inspection at the Company’s
registered office and will be available for inspection
at the forthcoming Annual General Meeting to be held
on 3 June 2008.
2. Board process
The directors ensure the effectiveness of the Board through
regular Board meetings and by having open lines of
communication between Board members. Details of
attendance at Board and Board committee meetings during
the period are as follows:
Audit Remuneration
Board Committee & Nominations
meetings meetings Committee meetings
Number Attended Number Attended Number Attended
Tim Melville-Ross
†
19 19 88
John Russell 77
Mark Fryer 19 18
Peter Shillcock 19 17
Christopher Ross* 19 18 3388
Andrew Walker* 19 15 3387
Lawrence Ang
#†
2111
Sheng Gui
#†
20 20
Notes:
# Appointed 25 September 2007
* Considered to be independent for Combined Code purposes
† Considered not to be independent for Combined Code purposes Management and governance
19
Manganese Bronze Holdings PLC
Non-attendance at meetings was due to prior business
or personal commitments and illness. Directors unable to
attend Board or Committee meetings reviewed the relevant
papers and provided comments to the Chairman or
Committee Chairman.
The Board sets the strategic objectives of the Group, agrees
on performance criteria and delegates to management the
detailed planning and implementation of those objectives
and policies in accordance with appropriate risk parameters.
The Board monitors compliance with policies and
achievements against objectives by holding management
accountable for its activity through regular reporting and
budget updates. The schedule of matters reserved to
the Board includes the approval of financial statements;
the Group’s business strategy; capital expenditure plans
and major capital projects; major changes to the Group’s
management and control structure; risk management
strategy and social and environmental policy.
The Board is supplied in a timely manner with the
appropriate information to enable it to discharge its duties,
including providing constructive challenge to, and scrutiny
of, management. Further information is obtained by the
Board from the executive directors and other relevant senior
executives as the Board, particularly its non-executive
members, considers appropriate. Procedures are in place
for directors to take independent professional advice,
when necessary, at the Company’s expense. In this regard,
Ian Pickering, the former Chief Executive who resigned
on 31 July 2006, sought legal advice in relation to his
termination package, the costs of which were borne by
the Company.
The Board is supported by the Company Secretary who,
under the direction of the Chairman, ensures good
communication and information flows within the Board,
including between executive and non-executive directors
and between the Board and its Committees.
Where directors have concerns that cannot be resolved
about the running of the Company or a proposed action,
they are encouraged to make their views known and these
are recorded in the Board minutes.
Board balance and independence
The Code requires smaller companies to have at least two
non-executive directors determined by the Board to be
independent (Code Provision A.3.2) and to establish
remuneration and audit committees comprising at least two
independent non-executive directors (Code Provisions B.2.1
and C.3.1 respectively).
Independence is considered at least annually and is based
on the factors set out in the Code but importantly examines
whether each director is independent in character,
judgement and behaviour, with the Board believing that
strength of character and independence of judgement and
opinion are more important than absolute numbers on the
Board. Accordingly, the Board is satisfied that no individual
or group has unfettered powers of decision or unequal
access to information. Furthermore, non-executive directors
do not participate in the Company’s cash bonus scheme,
share option plans, long-term incentive plan or pension
scheme and are not dependent upon the fees received from
the Company as their primary source of income.
The Board has assessed the five non-executive directors
against the criteria set out in the Code, and considers
Andrew Walker to be independent of management and free
from any business or other relationship that would materially
interfere with the exercise of his independent judgement.
Since Christopher Ross has served on the Board for
almost 13 years, in terms of the Code he can be regarded
as independent only if the Board deems him to be so.
The Board has concluded that Mr Ross remains independent
in character and judgement, that his performance continues
to be effective and that he demonstrates continued
commitment to the role.
Lawrence Ang and Sheng Gui, directors of Geely Automobile
Holdings Limited, were appointed as non-executive directors
on 25 September 2007. Geely Automobile Holdings
Limited is the Group’s joint venture partner in Shanghai
and principal shareholder. The Board considers it
appropriate for Geely to be represented on the Board.
Re-election of directors
In accordance with the Company’s Articles of Association,
not more than one-third of the directors are required to be
re-elected at each annual general meeting of the Company,
the directors doing so being those who have been longest
in office since their last appointment or re-election. Every
director must, in any event, be re-elected at least every
three years.
Tim Melville-Ross and Peter Shillcock are the directors
retiring by rotation at the forthcoming Annual General
Meeting of the Company and, being eligible, offer
themselves for re-election. As well as recognising the
importance of an individual’s contribution, the Board
is also mindful of the value of an appropriate level
of continuity on Board and Committee memberships.
Following the evaluation of the Board referred to below,
the Board was satisfied that each director’s performance
continues to be effective and that each continues to
demonstrate commitment to the role and accordingly
recommends the re-election of both directors.
As recommended by the Code, non-executive directors who
have been in office for more than nine years will stand for
re-election at the next Annual General Meeting. On this
basis, Christopher Ross will be seeking re-election at the
Annual General Meeting.
Board development and performance evaluation
The Board believes that the benefit of its collective
experience is a valuable asset but recognises that directors
need to keep their professional knowledge up to date. Management and governance
20
Manganese Bronze Holdings PLC
Corporate governance continued
On joining the Board, new directors are given background
information describing the Company and its activities
and site visits to the major business units and meetings
with principal shareholders and some of our advisers
are arranged.
During the period under review, the performance of the
Board, its main committees and the individual directors
was formally and rigorously evaluated under the leadership
and direction of the Chairman. A questionnaire was
circulated to directors concerning the performance of the
Board as a whole and its main committees. The responses
were collated and summarised, open and frank Board
discussions held concerning the results and all specific
issues raised were addressed.
The evaluation process concluded that the Board as a
whole and its main committees had functioned effectively
during the period and that the individuals had also
performed well, with each making a significant contribution
to the Company. The mix of skills and experience on the
Board was felt to be appropriate.
Board committees
The Board has three committees, as follows:
1. Audit Committee
The Audit Committee consists of three non-executive
directors and is chaired by Andrew Walker, who is deemed
to have recent and relevant financial experience.
Meetings are attended by the Chief Executive, the Group
Finance Director and representatives of the auditors as
required. The Committee assists the Board in the discharge
of its duties concerning the announcement of results, the
preparation of the annual report and financial statements
and the maintenance of proper internal controls. It reviews
the scope and planning of the audit and the auditors’
findings, and considers Group accounting policies and the
compliance of those policies with applicable legal and
accounting standards.
The objectives of the Audit Committee have been confirmed
in the terms of reference as:
• ensuring the integrity of the financial statements
of the Company;
• reviewing and monitoring the Group’s internal
control systems;
• overseeing the Group’s relationship with its
external auditors;
• periodically reviewing the need to establish an internal
audit function; and
• ensuring that Group reporting complies in all respects
with relevant statutory and required financial reporting
standards, including corporate governance disclosures.
A copy of the terms of reference is available on the
Company’s website (www.manganese.com).
A procedure setting out responsibilities for the preparation
of the Group’s financial statements and their review by
the external auditor and the Audit Committee has been
documented. This also sets out the basis on which the
Board make its statement on “Going Concern”. The Audit
Committee reviewed the preliminary and interim statements
prior to their approval by the Board. The Committee has
also considered the external auditor’s management letter
and the assumptions underlying the financial statements
prior to recommending their approval to the Board.
2. Remuneration and Nominations Committee
The Remuneration and Nominations Committee comprises
four non-executive directors and is chaired by Christopher
Ross. John Russell is invited to attend meetings as necessary.
Under its terms of reference, the Remuneration and
Nominations Committee is responsible for:
• ensuring that the Company’s executive directors
and certain other agreed senior executives are fairly
rewarded for their individual contributions to the
Company’s overall performance;
• demonstrating to shareholders and other interested
parties that the remuneration (including all benefits
and terms of employment) of the executive directors
is set by a committee of Board members who have
no personal interest in the outcome of their decisions
and who will give due regard to the interests of the
shareholders and to the financial and commercial
health of the Company;
• assessing how the Company should comply with
established best practice in directors’ remuneration;
• ensuring that the size and composition of the Board
is appropriate to the needs of the Group;
• selecting the most suitable candidate or candidates
for appointment to the Board; and
• overseeing succession planning for the Board.
A copy of the terms of reference is available on the
Company’s website (www.manganese.com).
Full details of the role, policies and activities of the
Remuneration and Nominations Committee are set out
in the directors’ remuneration report on pages 24 to 29.
The Remuneration and Nominations Committee will, during
the financial year ended 31 December 2008, review its
processes for making Board appointments, including a
decision on whether external assistance would be appropriate.
The Board will also approve a standard letter for future
non-executive appointments to the Board (including
expected time commitments) and will this year introduce
a standard programme for the induction of new directors. Management and governance
21
Manganese Bronze Holdings PLC
3. Executive Committee
The Board’s role is to set the Company’s values and
standards, determine its strategic objectives and monitor
operational performance. The Executive Committee, chaired
by the Chief Executive Officer, supports the Board in fulfilling
this role and is essentially responsible for the operational
running of the business of the Company, including:
• implementing and delivering the strategic plans
formulated by the Board;
• monitoring operational and financial performance;
• assessing and controlling risk;
• prioritising and allocating resources; and
• developing and reviewing objectives and budgets with
subsidiary company boards to ensure that these fall
within agreed targets and parameters set by the Board.
In discharging its duties, the Committee considers issues for
submission to the Board to ensure that all relevant factors
have been considered, in particular the following:
• long-term consequences;
• employees;
• business relationships with suppliers, customers
and others;
• community and the environment;
• reputational risk;
• the Company’s members;
• internal control considerations;
• legal and regulatory issues; and
• risk assessments.
The Chief Executive Officer or his nominated replacement
reports on the proceedings of the Executive Committee
to the next meeting of the Board, making whatever
recommendations to the Board the Committee deems
appropriate on any area within its remit where action
or improvement is needed.
Internal controls
The Board confirms that it has maintained a sound system
of internal control to provide reasonable assurance that
all information used within the business and for external
publication is adequate, including financial, operational,
compliance control and risk management information.
This ensures that assets are safeguarded and shareholders’
investments protected.
The Board acknowledges its overall responsibility for the
Group’s system of internal control and for reviewing its
effectiveness.Through the Audit Committee, the Board
continues to keep the internal control systems under
review and has in place ongoing processes for identifying,
evaluating and managing the significant risks faced by the
Group. In addition, it carries out an annual assessment
of its risk management systems. The Board confirms that
the actions it considers necessary have been or are being
taken to rectify such failings and weaknesses as it
considers to be significant from its review of the system
of internal control.
It should be noted that, while they are subject to regular
review and update, the Group’s systems can provide only
reasonable, not absolute, assurance against material
misstatement or loss.
The key procedures that the directors have established and
which are designed to provide effective internal control for
the Group are:
• regular Board meetings to consider a schedule of
matters reserved for the directors’ consideration;
• the Audit Committee of the Board considers significant
financial control matters as appropriate;
• monitoring of the financial performance of operating
companies and divisions through analysis of regular
financial and management reports, together with
continuous direct contact with operating company
and divisional management. Consolidated reports and
independent commentaries are prepared and submitted
to the Board for review at scheduled Board meetings;
• maintenance of local operating boards and divisional
management teams, enabling the Board to delegate
appropriate levels of authority to a small number
of subsidiary company directors and managers,
all of whom are accountable to the Board;
• application of a rigorous annual budgeting process.
All budgets are subject to approval at Group Board level;
• review and comparison of detailed monthly
management reports, received from each business unit,
against budgets and forecasts;
• adoption of a Group risk management framework
that identifies responsibilities at both Group and
subsidiary level for the ongoing management of risk
across the business;
• programming internal reviews to take account
of the risk assessment results and processes; and
• the use of external professional advisers to carry out
due diligence for potential acquisitions.
The Board is satisfied with the effectiveness of the Group’s
current system of internal control.
The Board has considered the need for an internal audit
function and concluded that the size of the Group does
not currently justify establishing an internal audit capability.
At present, internal reviews are programmed according
to results of risk assessments and processes and carried
out under the direction of the Group Financial Controller,
whose findings are reported to the Executive Committee, Management and governance
22
Manganese Bronze Holdings PLC
Corporate governance continued
part of whose role is to support the Board by assessing
and controlling risk.
Audit independence
The Audit Committee and the Board place great emphasis
on the objectivity of the Group’s auditor, Deloitte & Touche
LLP (“Deloitte”), in their reporting to shareholders.
The audit partner and senior manager are present at Audit
Committee meetings to ensure full communication of
matters relating to the audit. The overall performance of
the auditor is reviewed annually by the Audit Committee,
taking into account the views of management, and feedback
is provided to senior members of Deloitte unrelated to the
audit. This activity also forms part of Deloitte’s own system
of quality control. The Audit Committee also has discussions
with the auditor, without management being present, on the
adequacy of controls and on any judgemental areas. These
discussions have proved satisfactory to date. The scope
of the forthcoming year’s audit is discussed in advance by
the Audit Committee. Audit fees are reviewed by the Audit
Committee after discussions between the businesses and
Deloitte and are then referred to the Board for approval.
Rotation of the audit partner’s responsibilities within
Deloitte is required by their profession’s ethical standards.
The current audit partner is in his last year of signing
the audit report prior to his retirement at the forthcoming
Annual General Meeting. There is also rotation of key
members within the audit team.
Assignments of non-audit work have been and are subject
to controls by management that have been agreed by the
Audit Committee so that audit independence is not
compromised. In summary, these procedures are as follows:
1. Audit related services: as auditor, this is the main area
of work of Deloitte and its associates. If any additional
accounting support is required, this is considered
competitively.
2. Tax consulting: in cases where they are best suited, the
Group engages Deloitte and its associates but the
Group also uses other tax consultancies. Significant
pieces of tax work are evaluated competitively.
3. General and systems consulting: all significant
consulting projects are subject to competitive tender.
Other than audit, the Group Finance Director is required
to give prior approval of work carried out by Deloitte and
its associates in excess of a predetermined threshold.
Part of this review is to determine that other potential
providers of the services have been adequately considered.
These controls provide the Audit Committee with confidence
in the independence of Deloitte in their reporting on the
audit of the Group.
Group treasury management
The Group’s financial instruments comprise borrowing,
cash and liquid resources and various items such as trade
receivables and trade payables that arise directly from,
and finance, operations.
It is, and has been throughout the period under review and
up to the date of approval of this report, the Group’s policy
that no speculative trading in financial instruments shall
be undertaken.
Relations with shareholders
Dialogue
The Board is committed to maintaining good
communications with shareholders. Other than during
close periods, the Group Chief Executive and Group Finance
Director maintain a regular dialogue with institutional
shareholders throughout the year. The Group Chief
Executive and Group Finance Director give presentations to
institutional shareholders and analysts immediately after the
announcement of the Group’s half year and full year results.
The Group also encourages communications with private
shareholders throughout the year and welcomes their
participation at shareholder meetings.
The Company issues interim management statements to
provide an indication of trading and prospects in line with
current applicable regulations. The Group’s annual and
half year reports, trading statements and press releases
are available on its website (www.manganese.com) as
are all regulatory announcements relating to the Group.
Constructive use of the AGM
The Board wishes to encourage the constructive use of
the Company’s AGM for shareholder communication.
The chairmen of the Audit, Remuneration and Nominations
Committees will be available to answer questions at the
forthcoming AGM, which will be convened on at least
20 working days’ notice.
As with previous practice, resolutions will be proposed on
each substantially separate issue and the level of proxies
cast for each resolution will be communicated following
approval of each resolution at the forthcoming AGM.
Going concern
The directors have a reasonable expectation that the
Company and the Group will have adequate resources to
continue in operational existence for the foreseeable future,
and accordingly, the going concern basis continues to be
adopted in preparing the accounts. In forming this view,
the directors have reviewed the Company’s and the Group’s
budgets for the current year together with outline plans for
future periods, including capital expenditure plans and cash
flow forecasts. Management and governance
23
Manganese Bronze Holdings PLC
Statement of directors’ responsibilities
The directors are responsible for preparing the annual report, the directors’
remuneration 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. The directors are
required by the IAS Regulation to prepare the Group
financial statements under IFRSs (IFRSs) as adopted by the
European Union, and have elected to prepare the parent
company financial statements in accordance with IFRSs as
adopted by the European Union. The financial statements
are also required by law to be properly prepared in
accordance with the Companies Act 1985 and Article 4
of the IAS Regulation.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the
company’s financial position, financial performance and
cash flows. This requires the faithful representation of the
effects of transactions, other events and conditions in
accordance with the definitions and recognition criteria
for assets, liabilities, income and expenses set out in the
International Accounting Standards Board’s “Framework
for the preparation and presentation of financial statements”.
In virtually all circumstances, a fair presentation will be
achieved by compliance with all applicable IFRSs. However,
directors are also required to:
• properly select and apply accounting policies;
• present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information; and
• provide additional disclosures when compliance with
the specific requirements in IFRSs is insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the entity’s
financial position and financial performance.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time
the financial position of the Company and that enable them
to ensure that the financial statements comply with the
Companies Act 1985. They are also responsible for
safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in
other jurisdictions. Management and governance
24
Manganese Bronze Holdings PLC
Directors’ remuneration report
The directors’ remuneration report covers all directors, both executive and non-
executive. The report has been approved by the Board and signed on its behalf by the
Chairman of the Remuneration Committee. A resolution to approve this report will
be proposed at the Company’s Annual General Meeting to be held on 3 June 2008.
This report has been prepared in accordance with the
Directors’ Remuneration Report Regulations 2002 (“DRRR”),
which set out statutory requirements for the disclosure of
directors’ remuneration. DRRR requires the auditor to report
to the Company’s shareholders on the auditable parts of the
Remuneration Committee report and to state whether, in
their opinion, those parts of the report have been properly
prepared in accordance with the Companies Acts.
Information not subject to audit
Remuneration Committee and advisers
The Remuneration Committee (“the Committee”) determines
on behalf of the Board the Company’s policy on the
remuneration and terms of engagement of the executive
directors and senior executives.
The Committee comprises the non-executive directors of the
Company. The members of the Remuneration Committee
during the year were:
Christopher Ross (Chairman)
Tim Melville-Ross
Andrew Walker
Sheng Yue Gui (from 25 September 2007)
The Committee members have no personal financial
interest, other than as shareholders, in the matters to be
decided. They have no conflicts of interest arising from
cross-directorships with the executive directors nor from
being involved in the day-to-day business of the Company.
They do not participate in any bonus, share option or
pension arrangements.
The Committee operates under clear written terms of
reference, confirms that its constitution and operation
comply with the principles set out in the Combined Code
on Corporate Governance, and has applied the principles
in section 1 of the Code throughout the year.
The Committee used the services of New Bridge Street
Consultants as its principal external adviser during the
period under review on matters of executive directors’
remuneration. The Committee will also, as necessary,
consult with the Chief Executive.
Remuneration policy
Main principles
The Manganese Bronze Holdings PLC Group of companies
(the Group) operates in a highly competitive environment.
For the Group to continue to compete successfully, it is
essential that the level of remuneration and benefits offered
achieve the objectives of attracting, retaining, motivating
and rewarding the necessary high calibre of individuals
at all levels across the Group.
The Group therefore sets out to provide competitive
remuneration to all its employees, appropriate to the
business environment in the market in which it operates.
To achieve this, the remuneration package is based upon
the following principles:
• total rewards should be set to provide a fair and
attractive remuneration package;
• appropriate elements of the remuneration package
should be designed to reinforce the link between
performance and reward;
• executive directors’ incentives should be aligned with
the interests of shareholders.
The remuneration strategy is designed to be in line with the
Company’s fundamental values of fairness, competitiveness
and equity, and also to support the Group’s corporate
strategy. A cohesive reward structure, consistently applied
and with links to corporate performance, is seen as critical
in ensuring attainment of the Company’s strategic goals.
The Group also seeks to align the interests of shareholders
with those of executive directors and senior employees by
giving the latter opportunities and encouragement to build
up a shareholding interest in the Company through the
2004 and 2007 Long-Term Incentive Plans. Management and governance
25
Manganese Bronze Holdings PLC
Remuneration of executive directors
Elements of remuneration
The executive directors’ total remuneration currently
consists of:
• fixed elements, comprising basic salary, benefits and
pensions; and
• performance-related elements comprising performance-
related bonus and long-term performance arrangements
satisfied by share options.
Each of the above elements of remuneration is
explained below.
Basic salary
Basic annual salaries for executive directors and key senior
executives are reviewed annually on 1 August or when a
material change of responsibility occurs. The level of salary
is determined with reference to individual performance
and is benchmarked against data from selected quoted
companies of a similar size primarily from the engineering
sector. Due account is also taken of the responsibilities,
skills and experience required to fulfil the executive’s role
within the Company.
Benefits in kind
These principally comprise car benefits, income
replacement, life assurance and membership of the Group’s
healthcare insurance scheme. These benefits do not form
part of pensionable earnings.
Performance-related cash bonuses
The Committee awards an annual discretionary bonus to
the executive directors based on their performance and that
of the Group in achieving financial and non-financial targets
established by the Committee. The maximum bonus
payable under these arrangements is 50% of the director’s
basic salary. Bonus payments are non-pensionable.
Share options and long-term incentive plans
The Remuneration Committee believes that it is appropriate
to operate share incentive schemes to encourage executive
directors and senior employees to meet the Group’s long-
term strategic and financial objectives set by the Board.
1. Unapproved share option scheme
For the unapproved share option scheme, which was
approved by shareholders in 1997, the performance period
is three financial years of the Company starting with the
financial year in which the option is granted or any
subsequent financial period.
It is a condition of the exercise of options granted under
the share option scheme that the growth in the Group’s
earnings per share (“EPS”) must exceed by 10% the
increase in the Retail Price Index (“RPI”) over any period
of three consecutive years.
In relation to options granted in May 2003, the following
additional performance criteria were applied:
• achievement of an average share price over a six-month
period, measured on or after the third anniversary of
the grant as follows:
Share price
(£) 1.40 1.60 1.80 2.00 2.20 2.40
% of options
exercisable 50 60 70 80 90 100
• options cannot be exercised unless the growth in EPS
for the Group, expressed as a percentage in any
consecutive period of three financial years commencing
with the financial period in which the option is granted
or any subsequent financial period, shall have
exceeded the growth expressed as a percentage in the
RPI in the same period (commencing with the figure
published for the month in which the first of such
financial periods commenced) by 10% (“target EPS”)
or higher. Provided that the target EPS shall be subject
to such adjustment (if any) as the auditors (as defined
in the Scheme Rules) shall confirm in writing to the
Company to be, in their opinion, fair and reasonable
to take account of any sub-division, consolidation,
capitalisation, rights issue (other than an issue
pursuant to the exercise of an option given to
shareholders to receive shares in lieu of dividend)
or reduction of the share capital of the Company or
change in accounting reference date of the Company.
Given that EPS was negative at the time of grant,
an absolute target of 8p was set as the base position
for calculating the growth hurdle.
Options granted in November 2003 and October 2004
were subject to the second of these criteria.
2. Long-Term Incentive Plan (LTIP) 2004
Under the 2004 LTIP , the Remuneration Committee may
make annual grants of conditional awards over shares
worth up to 100% of basic salary to participants. It is the
Committee’s current policy that participation in the LTIP
will be limited to executive directors.
LTIP awards will only vest if a challenging performance
condition is met. The current performance condition
requires the Company’s total shareholder return (“TSR”)
to outperform that of its peers in the FTSE Fledgling index.
If the Company’s TSR is at the 95th percentile when
compared to the TSRs of the comparator group, 100% of
the award will vest. If at the 50th percentile, 25% of the
award shall vest. A sliding scale applies for performance
between these targets. Management and governance
26
Manganese Bronze Holdings PLC
Directors’ remuneration report continued
The Committee believes that this performance condition
is appropriate, as it provides a genuine incentive to the
executive directors to maximise shareholder returns. The
extent to which the performance condition is met for each
award will be confirmed by the Committee in consultation
with external advisers.
3. Long-Term Incentive Plan (LTIP) 2007
During the period, the Remuneration Committee, with the
assistance of New Bridge Street Consultants, conducted a
review of all aspects of director remuneration, with particular
focus on long-term incentive provision. This work was
carried out in light of the joint venture agreement with Geely
Automobile Holdings Limited as well as the recruitment of
a new Chief Executive Officer.
After detailed consideration, taking into account both the
preferences of investors and competitive market practice,
the Company sought shareholder approval for the new
Manganese Bronze Long-Term Incentive Plan 2007
(the “Plan”) under which share-based incentive awards
can be granted.
In order to maximise the incentive impact of the Plan for
management and with regard to the fact that the major
benefits of the joint venture arrangement will flow through
in approximately five years time, the Remuneration
Committee has decided that, rather than granting smaller
annual awards, a single larger award should be granted
to incentivise management over this five-year period
(i.e. the period to December 2012). Awards will normally
vest on the fifth anniversary of the date of grant to the
extent that challenging performance conditions have been
met and provided that the participant is still employed in
the Company’s group.
Following approval of the Plan at the AGM held on
27 November 2007, awards over shares worth no more
than 800% and 500% of base salary were granted
(respectively) to the Chief Executive and the executive
directors. A lower base salary percentage limit was applied
to other individuals. The performance conditions will be
based on the Company’s Profit Before Tax (“PBT”) over a
period of between four and six years and TSR performance
over a fixed period of five years. The weighting between
the PBT and TSR elements of the performance conditions
is 75/25 in favour of PBT, as PBT is felt to be the key
measure of the extent to which the Company’s strategy
is a success.
The PBT condition will provide that awards begin to vest
when PBT reaches £15 million, and that part of the award
subject to the PBT condition will vest in full when PBT
reaches or exceeds £50 million. For these purposes, PBT
will be defined to include profits generated in China through
the joint venture, provided that at least 80% of the net
profits generated in China are, or will be, remittable. These
are considered by the Remuneration Committee to represent
stretching PBT targets over a six year horizon (particularly
as the last published PBT was only £3.7 million so the
threshold together represents a four-fold increase and the
stretch gives a thirteen-fold increase). The Remuneration
Committee is generally opposed to the concept of re-testing
but, in the circumstances, considers it to be in the interests
of shareholders to provide an incentive (through the early
release of shares) to capitalise on the benefits of the joint
venture earlier and, therefore, will allow early release of the
shares vesting under the PBT element only to the extent
that the six-year targets can be achieved earlier (but not
prior to the fourth anniversary of the award).
The TSR condition will measure the Company’s TSR
performance against the TSR performance of those
companies comprised in a comparator group consisting
of the constituents (as at the date of grant) of the FTSE
Small Cap Index (excluding investment trusts) over a
five-year performance period. The TSR condition will
provide that awards begin to vest if the Company’s TSR is
ranked at the median compared to the comparator group
(top 50%) and the entire award will vest at upper decile
(top 10%). However, the TSR condition will not be deemed
to be satisfied at all unless and until the Company achieves
real growth in earnings per share over the five-year
performance period.
Directors’ pension provision
Mark Fryer and Peter Shillcock participate in the
Manganese Bronze Account Plus Pension Scheme, a
defined contribution arrangement, which provides pensions
and other benefits within limits prescribed by HMRC.
The Company contributes 14% of basic salary. There are
no pension arrangements in place for other directors and
no change took place in Mark Fryer’s or Peter Shillcock’s
pension arrangements during the year. The Company
contributes 14% of basic salary to John Russell’s personal
pension plan.
Remuneration policy for
non-executive directors
The remuneration of the Chairman is determined by the
Board after recommendations made by the Remuneration
Committee. The remuneration of the four other non-executive
directors is determined by the Board within the parameters
set by the articles of association. The non-executives do
not participate in any bonus, share option or pension
arrangements, neither do they receive any benefits in kind.
Service agreements
The three executive directors have service agreements
with the Company, each of which contains provisions for
compensation for loss of office. The agreements provide
for twelve months’ notice on either side, save in the case
of Peter Shillcock who may terminate his service agreement
with the Company by giving three months’ notice. In the
event that the Company serves notice to terminate the
contract of any executive director, the Company may make
a payment in lieu of notice. Management and governance
27
Manganese Bronze Holdings PLC
The dates of the contracts are as follows:
John Russell 4 September 2007
Mark Fryer 15 October 2002
Peter Shillcock 18 September 2002
Non-executive appointments
Non-executive directors are appointed for a specified term,
being an initial period to the next annual general meeting
after appointment and, subject to reappointment at that
meeting, for a further period ending with the annual general
meeting no more than three years thereafter. Subsequent
appointment will be subject to endorsement by the Board
and the approval of shareholders. On termination, no
compensation is payable other than the outstanding six
months of fees.
The following are the non-executive directors and the dates
they joined the Board:
Tim Melville-Ross 1 March 2000
Christopher Ross 22 June 1995
Andrew Walker 1 August 2003
Lawrence Ang 25 September 2007
Sheng Gui 25 September 2007
Total shareholder return (TSR)
Under Statutory Instrument 2002 Number 1986, we are
required to show the TSR over five years in graphical form
against a broad equity index. Below is a graph showing
the TSR on an annual basis over the five year period to
31 December 2007. The comparable indices selected
are the FTSE Industrial Engineering Index, which is a
broadly-based index of shareholder return.
The graph shows that the Company has consistently
outperformed the comparator indices.
1,500
1,200
900
600
300
0
100
31-Jul-02 31-Jul-03 31-Jul-04 31-Jul-05 31-Jul-06 31-Dec-07 31-Dec-06
Total shareholder return Source: Datastream
This graph shows the value, by 31 December 2007, of £100 invested in Manganese Bronze on 31 July 2002 compared with the value of £100 invested in
the FTSE Industrial Engineering Index. The other points plotted are the values at intervening financial year ends and a middle value at 31 December 2006.
Total shareholder return is calculated on a monthly basis.
Manganese Bronze Holdings plc
FTSE Industrial Engineering Index Management and governance
28
Manganese Bronze Holdings PLC
Directors’ remuneration report continued
Information subject to audit
Directors’ remuneration
Total for
Value of 17 months to 31 Total for
Basic benefits Bonuses Dec 2007 five months to 31 Total for year to Total for year to
Salary/Fees (Note 1) (Note 2) (Note 3) December 2007 31 Jul 2007 31 Jul 2006
£ ££ £ £ ££
Executive
John Russell 233,334 1,003 116,666 351,003 175,558 175,445 -
Mark Fryer 229,167 12,208 114,583 355,958 122,337 233,621 233,563
Peter Shillcock 224,167 12,935 184,583 421,685 122,552 299,133 201,389
Ian Pickering (Note 4) –––– – – 267,211
Non-executive
Tim Melville-Ross 98,333 –– 98,333 33,333 65,000 65,000
Christopher Ross 68,292 –– 68,292 16,667 51,625 35,000
Andrew Walker 44,583 –– 44,583 14,583 30,000 30,000
Lawrence Ang 6,661 –– 6,661 6,661 ––
Sheng Gui 6,661 –– 6,661 6,661 ––
Total 911,198 26,146 415,832 1,353,176 498,352 854,824 832,163
Notes:
1 Benefits represent amounts assessable to income tax in respect of the benefits provided
2 Bonuses are performance-related. Payments to Mr Shillcock include a retention bonus of £72,500 (50% of base salary) paid in recognition of his continued
loyalty to the Company during a period of restructuring between 2004 and 2006.
3 Totals exclude pension contributions made by the Company
4 Mr Pickering left the Company on 31 July 2006 and subsequently received £81,803 as compensation for loss of office and £14,080 for outstanding holiday
entitlement, together with payments of £28,500 for legal advice in relation to his termination package and £30,000 for outplacement fees. These amounts were
included as a provision in the accounts for the year ended 31 July 2006. Management and governance
29
Manganese Bronze Holdings PLC
Directors’ share options
Options outstanding
Market Aggregate
Option Movements during price at gain on
Option price the period Earliest/latest Date award exercise exercise
granted £ 1/8/06 Grants Exercised Forfeited 31/12/07 exercise date exercised ££
John Russell 12/12/07
†
Nil cost – 384,764 –– 384,764 27/11/12
(appointed option
1 March 2007)
Mark Fryer 7/5/03
#
0.735 38,608 – 38,608 –– 10/11/06 6.465 221,224
5/11/03
#
1.345 23,792 – 23,792 –– 10/11/06 6.465 121,815
11/10/04
#
1.68 19,047 – 19,047 –– 27/11/07 6.02 82,664
22/11/05* Nil cost 89,447 ––– 89,447 31/7/08
option
31/1/07* Nil cost – 23,466 –– 23,466 31/7/09
option
12/12/07
†
Nil cost – 163,181 –– 163,181 27/11/12
option
Peter Shillcock 7/5/03
#
0.735 28,481 – 28,481 –– 10/11/06 6.465 163,196
5/11/03
#
1.345 18,587 – 18,587 –– 10/11/06 6.465 95,165
11/10/04
#
1.68 14,880 – 14,880 –– 3/12/07 5.687 59,630
22/11/05* Nil cost 76,441 ––– 76,441 31/7/08
option
31/1/07* Nil cost – 22,684 –– 22,684 31/7/09
option
12/12/07
†
Nil cost – 163,181 –– 163,181 27/11/12
option
Ian Pickering 23/9/99
#
2.29 100,000 – 100,000 –– 14/12/06 7.10 481,000
(resigned
31 July 2006)
22/11/05* Nil cost 128,834 –– 128,834 – 31/7/08
option
7/5/03
#
0.735 53,215 – 53,215 –– 10/11/06 6.465 304,922
5/11/03
#
1.345 35,316 – 35,316 –– 10/11/06 6.465 180,818
11/10/04
#
1.68 28,273 – 28,273 –– 11/12/06 7.10 153,240
# Unapproved Share Option Plan
* 2004 Long-Term Incentive Plan
† 2007 Long-Term Incentive Plan
At 31 December 2007 the closing mid-market price of the Company’s shares was 558p. During the period under review,
the Company’s closing mid-market share price ranged between a low of 241p and a high of 950p.
Pensions
The following table shows details of the pension contributions paid on behalf of the directors by the Company. With the
exception of John Russell, whose pension contributions were paid into a personal pension plan, all contributions were paid
into the Group’s Inland Revenue approved occupational defined contribution pension scheme. No pension contributions were
made to other directors.
Total for 17 months to Total for 5 months to Total for year to Total for year to
31 Dec 2007 31 December 2007 31 July 2007 31 July 2006
£ ££ £
John Russell 32,667 16,333 16,334 –
Mark Fryer 29,358 8,750 20,608 20,244
Peter Shillcock 26,854 8,458 18,396 17,295
Ian Pickering – –– 28,159
Total 88,879 33,541 55,338 65,698
Christopher Ross
Chairman Remuneration Committee
15 April 2008 We have audited the Group and parent company financial statements (the “financial statements”) of Manganese Bronze
Holdings PLC for the 17-month period ended 31 December 2007 which comprise the Group and parent company income
statements, the Group and parent company statements of recognised income and expense, the Group and parent company
balance sheets, the Group and parent company cash flow statements, and the related notes 1 to 51. These financial
statements have been prepared under the accounting policies set out therein. We have also audited the information in the
directors’ remuneration report that is described as having been audited.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985.
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
The directors’ responsibilities for preparing the Annual Report, the directors’ remuneration report and the financial statements
in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union
are set out in the statement of directors’ responsibilities.
Our responsibility is to audit the financial statements and the part of the directors’ remuneration report to be audited
in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial
statements and the part of the directors’ remuneration report to be audited have been properly prepared in accordance
with the Companies Act 1985 and, as regards the Group financial statements, Article 4 of the IAS Regulation. We also
report to you whether in our opinion the information given in the directors’ report is consistent with the financial statements.
The information given in the directors’ report includes that specific information presented in the operating and financial
review and sustainable development report that is cross referred from the business review section of the directors’ report.
In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit, or if information specified by law regarding directors’
remuneration and other transactions is not disclosed.
We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the
2003 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does
not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form
an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures.
We read the other information contained in the Annual Report as described in the contents section and consider whether
it is consistent with the audited financial statements. The other information comprises only the Chairman’s statement,
the Chief Executive’s statement, the operating and financial review, sustainability development report, directors’ report,
the corporate governance statement and the unaudited part of the directors’ remuneration report. We consider the implications
for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements.
Our responsibilities do not extend to any further information outside the Annual Report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements and the part of the directors’ remuneration report to be audited. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of
the directors’ remuneration report to be audited are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in
the financial statements and the part of the directors’ remuneration report to be audited.
Financial statements
30
Manganese Bronze Holdings PLC
Independent auditors’ report to the members
of Manganese Bronze Holdings PLC Financial statements
31
Manganese Bronze Holdings PLC
Opinion
In our opinion:
• the financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union,
of the state of the Group’s and the parent company’s affairs as at 31 December 2007 and of the Group’s and the
parent company’s profit for the 17-month period then ended;
• the financial statements and the part of the directors’ remuneration report to be audited have been properly
prepared in accordance with the Companies Act 1985 and, as regards the Group financial statements, Article 4
of the IAS Regulation; and
• the information given in the directors’ report is consistent with the financial statements.
As explained in Note 2 to the Group financial statements, the Group in addition to complying with its legal obligations
to comply with IFRS as adopted by the European Union, has also complied with the IFRS as issued by the International
Accounting Standards Board.
In our opinion the Group financial statements give a true and fair view, in accordance with IFRS, of the state of the Group’s
and the parent company’s affairs as at 31 December 2007 and of the Group’s and the parent company’s profit for the
17-month period then ended.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Birmingham
15 April 2008 Consolidated statement of recognised income
and expense
for the 17 months ended 31 December 2007
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Notes £000 £000
Profit for the period 3,376 2,750
Gains/(losses) on cash flow hedges 44 (44)
Exchange differences on translation of foreign operations (269) (72)
Actuarial (loss)/gain on defined benefit pension scheme 35 (706) 526
Tax on items taken direct to equity 198 (159)
Total recognised income and expense for the period 2,643 3,001
Attributable to:
Equity holders of the parent 2,651 3,087
Minority interests (8) (86)
2,643 3,001
Financial statements
32
Manganese Bronze Holdings PLC
Consolidated income statement
for the 17 months ended 31 December 2007
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Notes £000 £000
Continuing operations
Revenue 5 144,494 83,824
Cost of sales (123,940) (71,711)
Gross profit 20,554 12,113
Distribution costs (5,543) (2,974)
Administrative expenses – including exceptional net income of nil
(12 months ended 31 July 2006: £796,000) 6 (9,398) (5,027)
Share of results of joint ventures (38) –
Operating profit 5,575 4,112
Investment revenues 10 428 304
Finance costs 11 (1,076) (660)
Profit before tax 4,927 3,756
Tax 12 (1,551) (920)
Profit for the period from continuing operations 3,376 2,836
Loss for the period from discontinued operations 13 – (86)
Profit for the period 7 3,376 2,750
Attributable to:
Equity holders of the parent 3,384 2,836
Minority interests (8) (86)
3,376 2,750
Earnings per share
Pence Pence
From continuing operations
Basic 15 15.89 15.48
Diluted 15 15.86 15.39
From continuing and discontinued operations
Basic 15 15.89 15.02
Diluted 15 15.86 14.94
The accompanying notes form an integral part of these financial statements. Financial statements
33
Manganese Bronze Holdings PLC
Consolidated balance sheet
as at 31 December 2007
As at As at
31 Dec 2007 31 Jul 2006
Notes £000 £000
Non-current assets
Goodwill 16 1,678 1,396
Other intangible assets 17 1,941 448
Property, plant and equipment 18 17,001 19,608
Investment in joint ventures 19 15,996 –
Deferred tax asset 20 1,297 1,745
Total non-current assets 37,913 23,197
Current assets
Inventories 21 16,299 17,578
Trade and other receivables 22 5,199 7,921
Cash and cash equivalents 23 10,330 12,927
Total current assets 31,828 38,426
Total assets 69,741 61,623
Current liabilities
Trade and other payables 27 15,281 19,868
Current tax liabilities 575 458
Obligations under finance leases 26 123 244
Bank overdrafts and loans 24 7,042 9,671
Derivative financial instruments 25 – 44
Total current liabilities 23,021 30,285
Non-current liabilities
Other payables 27 – 49
Retirement benefit obligations 35 4,096 4,674
Obligations under finance leases 26 – 431
Provisions 28 4,453 4,065
Preference shares 29 641 642
Total non-current liabilities 9,190 9,861
Total liabilities 32,211 40,146
Net assets 37,530 21,477
Equity
Share capital 30 6,241 4,759
Share premium account 31 17,903 4,919
Capital redemption reserve 31 916 916
Employee Share Ownership Plan (ESOP) reserve 31 (108) (332)
Hedging and translation reserves 31 (230) 39
Retained earnings 31 12,808 11,168
Equity attributable to equity holders of the parent 37,530 21,469
Minority interests 31 – 8
Total equity 37,530 21,477
Approved by the Board
Tim Melville-Ross Mark Fryer
Chairman Director
15 April 2008
The accompanying notes form an integral part of this consolidated balance sheet. Financial statements
34
Manganese Bronze Holdings PLC
Consolidated cash flow statement
for the 17 months ended 31 December 2007
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Notes £000 £000
Operating activities
Operating profit from continuing operations 5,575 4,112
Operating loss from discontinued operations – (86)
Adjustments for:
Share of losses of joint ventures 38 –
Gain on derivatives – (12)
Depreciation of property, plant and equipment 4,839 2,664
Amortisation of intangible assets 621 176
Gain on disposal of property, plant and equipment (43) (1,170)
Charge for share-based payments 149 70
Increase/(decrease) in provisions 388 (204)
Operating cash flows before movement in working capital 11,567 5,550
Decrease/(increase) in inventories 1,262 (2,313)
Decrease/(increase) in receivables 2,708 (1,378)
(Decrease)/increase in payables (4,847) 861
Contribution to defined benefit pension scheme 35 (1,700) (1,200)
Cash generated by operations 8,990 1,520
Income taxes received/(paid) 41 (17)
Interest paid (660) (435)
Net cash from operating activities 8,371 1,068
Investing activities
Interest received 428 304
Proceeds on disposal of property, plant and equipment 544 707
Proceeds on disposal of assets held for sale – 4,849
Purchases of intangible assets (1,096) (47)
Purchases of property, plant and equipment (3,636) (6,154)
Acquisition of investment in joint ventures 19 (1,395) –
Investment in subsidiary (533) (99)
Net cash used in investing activities (5,688) (440)
Financing activities
Dividends paid (2,059) (947)
Repayments of obligations under finance leases (832) (231)
Purchase of own shares (395) (431)
Proceeds on issue of shares 636 107
(Decrease)/increase in bank overdrafts (521) 521
(Decrease)/increase in stocking loan (2,108) 3,518
Net cash (used in)/from financing activities (5,279) 2,537
Net (decrease)/increase in cash and cash equivalents (2,596) 3,165
Cash and cash equivalents at beginning of period 12,927 9,642
Effect of foreign exchange rates (1) 120
Cash and cash equivalents at end of period 10,330 12,927
The accompanying notes form an integral part of this consolidated cash flow statement. Financial statements
35
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements
1 General information
Manganese Bronze Holdings PLC is a company incorporated in the UK under the Companies Act 1985. The address of the
registered office is given on page 14. The nature of the Group’s operations and its principal activities are set out in note 5 and
in the business review on pages 7 to 9.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment
in which the Group operates. Foreign operations are included in accordance with the policies set out in note 2.
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been
applied in these financial statements were in issue but not yet effective:
IFRS 7 Financial Instruments: Disclosures; and the related amendment to IAS 1 on capital disclosures
IFRS 8 Operating segments
IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies
IFRIC 8 Scope of IFRS 2
IFRIC 9 Reassessment of Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment
IFRIC 11 IFRS 2 – Group and Treasury Share Transactions
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programmes
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements, and their Interaction
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact
on the financial statements of the Group except for additional disclosures on capital and financial instruments when IFRS 7
comes into effect for periods commencing on or after 1 January 2008, and additional segment disclosures when IFRS 8
comes into effect for periods commencing on or after 1 January 2009.
2 Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs).
The financial statements have also been prepared in accordance with IFRSs adopted by the European Union and therefore
the Group financial statements comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historic cost basis, except for the revaluation of certain properties and
financial instruments. The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) made up to 31 December for the current 17-month period, and to 31 July for the previous year.
Control is achieved where the Company has the power to govern the strategic direction, the assets, and the financial and
operating policies of an investee entity so as to obtain benefits from its activities.
Minority interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein.
Minority interests consist of the amount of those interests at the date of the original business combination (see below)
and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess
of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that
the minority has a binding obligation and is able to make an additional investment to cover the losses.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from
the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into
line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation. Financial statements
36
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
2 Significant accounting policies continued
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.
The acquiree’s identifiable assets, liabilities and contingent liabilities are recognised at their fair value at the acquisition date,
except for non-current assets (or disposal groups) that are classified as held for resale in accordance with IFRS 5 “Non-Current
Assets Held for Sale and Discontinued Operations”, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of
the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately
in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value
of the assets, liabilities and contingent liabilities recognised.
Investment in joint ventures
Joint ventures are those enterprises over whose activities the Group has joint control, established by contractual agreement.
The consolidated financial statements include the Group’s share of total recognised income and expense of joint ventures on
an equity accounted basis, from the date of acquisition of an investment until the date of disposal of such investment.
Investments in joint ventures are carried in the balance sheet at cost as adjusted by post-investment changes in the Group’s
share of the net assets of the joint venture. Losses of joint ventures in excess of the Group’s interest in those joint ventures are
not recognised.
Non-current assets held for sale
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair
value less costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale
transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and
the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the
sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value
of the identifiable assets and liabilities of a subsidiary, associate or jointly-controlled entity at the date of acquisition. Goodwill
is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.
Goodwill which is recognised as an asset is reviewed for impairment annually. Any impairment is recognised immediately
in profit or loss and is not subsequently reversed.
On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset to that asset’s net carrying amount. Financial statements
37
Manganese Bronze Holdings PLC
2 Significant accounting policies continued
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
The Group as Lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.
The Group as Lessee
Assets held under finance leases are recognised as assets of the Group in accordance with the Group’s accounting policy
for the appropriate asset category, or, if lower, at the present value of the minimum lease payments, each determined at the
inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Foreign currencies
For the purpose of the consolidated financial statements, the results and financial position of each Group company are
expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the
consolidated financial statements.
In preparing the financial statement of the individual companies, transactions in currencies other than the entity’s functional
currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date.
In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts and options
(see below for details of the Group’s accounting policies in respect of such derivative financial instruments).
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations
are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange
rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the
Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the
operation is disposed of.
Goodwill and fair value adjustments arising on the acquisitions of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Borrowing costs
Borrowing costs are recognised in profit or loss in the period in which they are incurred.
Operating profit
Operating profit is stated after charging restructuring costs and after the share of results of associates but before investment
income and finance costs.
Retirement benefit costs
For defined contribution retirement benefit schemes the amount charged as an expense in respect of pension costs and other
post-retirement benefits is the contributions payable in the period. They are included as part of staff costs. Differences
between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments.
Defined benefit schemes are funded, with the assets of the scheme held separately from those of the Group, in trustee-
administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using
the Projected Unit Credit Method and discounted at a rate equivalent to the current rate of return on a high-quality corporate
bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and
are updated at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur.
They are recognised outside profit or loss and presented in the statement of recognised income and expense. Financial statements
38
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
2 Significant accounting policies continued
Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised
on a straight-line basis over the average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation
as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from
this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions
to the scheme.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further
excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset
is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated
in the balance sheet at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
For land and buildings acquired prior to 31 July 2003, the Group has elected to use the revaluation at that date as deemed
cost on transition to IFRSs.
Plant and equipment are stated at cost less accumulated depreciation and any subsequent accumulated impairment losses.
Depreciation is charged so as to write off the cost of assets, other than land, over their estimated useful lives, using the
straight-line method. The estimated useful lives, which are periodically reviewed by the directors, are:
1) Freehold buildings – 20 to 50 years as advised by members of the Royal Institution of Chartered Surveyors;
2) Long leasehold buildings – the lower of 50 years as advised by members of the Royal Institution of Chartered Surveyors
or the period of the lease;
3) Short leasehold buildings – the lower of the period of the lease, or five to ten years; and
4) Plant and equipment, including motor vehicles – three to fifteen years. Financial statements
39
Manganese Bronze Holdings PLC
2 Significant accounting policies continued
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or,
where shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in income.
Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at its fair value at the
balance sheet date, or at cost if purchased during the period. Gains or losses arising from changes in the fair value of
investment property are included in profit or loss for the period in which they arise.
Internally-generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from the Group’s product development is recognised only if all of the following
conditions are met:
1) An asset is created that can be identified;
2) It is probable that the asset created will generate future economic benefits; and
3) The development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis over their useful lives. Where no internally-
generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which
it is incurred.
Other intangible assets
Other intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. The cost of
intangible assets acquired in a business combination is the fair value at acquisition date. The cost of separately acquired
intangible assets, including the cost of licensing vehicles for use as taxis and computer software costs, comprises the purchase
price and any directly attributable costs of preparing the asset for use. Amortisation begins when as asset is available for use
and is calculated on a straight line basis to allocate the cost over the estimated useful life, normally five to ten years.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable
amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an
expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated
as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior
periods. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a
revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Financial statements
40
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
2 Significant accounting policies continued
Inventories
Inventories are stated at the lower of cost and net realisable value on a first-in-first-out basis. Cost comprises direct materials
and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Included within inventories, are finished vehicles held by Group and also non-Group dealers,
which are financed through a stocking loan facility. The related stocking loan liability is included within bank borrowings.
Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred
in marketing, selling and distribution.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss
when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate
computed at initial recognition.
Investments
Investments are measured at cost, including transaction costs, less any impairment loss recognised to reflect irrecoverable
amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and
is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows
discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods
when an increase in the investment’s recoverable amount can be related objectively to an event occurring after the impairment
was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed
shall not exceed what the amortised cost would have been had the impairment not been recognised.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments
that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of
its liabilities.
Bank borrowings
Interest-bearing bank loans, stocking loans and overdrafts are recorded at the proceeds received, net of direct issue costs.
Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an
accrual basis in profit or loss using the effective interest rate method and are added to the carrying amount of the instrument
to the extent that they are not settled in the period in which they arise.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective
interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Derivative financial instruments and hedge accounting
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
The Group uses foreign exchange forward contracts to hedge its foreign currency exposure. The Group does not use derivative
financial instruments for speculative purposes. For a forward foreign exchange contract to be treated as a hedge the instrument
must be related to actual foreign currency assets or liabilities or to a probable commitment. It must involve the same currency or
similar currencies as the hedged item and must also reduce the risk of foreign exchange movements on the Group’s operations. Financial statements
41
Manganese Bronze Holdings PLC
2 Significant accounting policies continued
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows
are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. If the cash
flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time
the asset is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are
included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or
liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item
affects net profit or loss.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the
income statement as they arise.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer
qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity
is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in equity is transferred to net profit or loss for the period.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value,
with gains or losses reported in the income statement.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure
required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
Share-based payments
The Group has applied the requirements of IFRS 2 “Share-based Payment”. In accordance with the transitional provisions,
IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.
The Group issues equity-settled and cash-settled share-based payments to certain employees. Equity-settled share-based
payments are measured at fair value (excluding the effect of the non-market-based vesting conditions) at the date of grant.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of
non-market-based vesting conditions.
Fair value is measured by the use of stochastic modelling techniques. The expected life used in the model has been adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
A liability equal to the portion of the goods or services received is recognised at the current fair value determined at each
balance sheet date for cash-settled, share-based payments.
3 Critical accounting judgements and key sources of estimated uncertainty
Critical judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, which are described in note 2, management has made the
following judgements which have the most significant effect on the amounts recognised in the financial statements (apart from
those involving estimations, which are dealt with below).
Warranty provision
In quantifying the outstanding liability as at the balance sheet date for future vehicle warranty costs, and amounts that may
be recoverable from suppliers under supplier warranty agreements, management has made a judgement that historical trends
in warranty costs over the three-year warranty life cycle will continue, and that amounts recoverable from suppliers as a
percentage of total warranty costs will remain in line with that experienced during the twelve months to 31 December 2007. Financial statements
42
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
3 Critical accounting judgements and key sources of estimated uncertainty continued
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial period, are discussed below.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which
the goodwill has been allocated. The value in use calculation requires the entity to estimate future cash flows expected to
arise from the cash-generating unit and a suitable discount rate in order to calculate present values. The carrying amount
of goodwill at the balance sheet date was £1,678,000 (31 July 2006: £1,396,000). No impairment arose in the period.
Details of the impairment calculation are provided in note 16.
Defined benefit pension scheme
The assets and liabilities of the Group’s defined benefit pension scheme, in which members have ceased to accrue additional
pensionable service but benefits continue to be linked to salary or Limited Price Indexation, are valued by independent
actuaries. The actuarial valuation involves making assumptions about discount rates, expected rates of return, future salary
increases, inflation, and mortality rates. Due to the long-term nature of the scheme, such estimates are subject to significant
uncertainty. The net pension liability at 31 December 2007 is £4,096,000 (31 July 2006: £4,674,000). Further details are
given in note 35.
4 Revenue
An analysis of the Group’s revenue is as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Notes £000 £000
Continuing operations
Sale of goods 140,666 79,964
Rendering of services 3,828 3,463
Property rental income 397
144,494 83,824
Investment income 10 428 304
Total revenue from continuing operations 144,922 84,128
Total revenue 144,922 84,128
5 Business and geographical segments
Business segments
For management purposes, the Group is currently organised into four operating divisions – vehicle sales, vehicle services,
Shanghai LTI, and property. These divisions are the basis on which the Group reports its primary segment information.
Principal activities are as follows:
The vehicle sales segment includes the design, development, manufacture, and retailing of new purpose-built taxis,
along with the sale of used vehicles taken in part exchange, parts, and vehicle maintenance.
The vehicle services segment comprises taxi finance and the US-based taxi servicing and advertising business.
The Shanghai LTI (SLTI) segment is the joint venture based in Shanghai, China, which assembles the London Taxi under
licence from the Group and plans to manufacture three other passenger vehicles in China (see note 19).
The property segment comprises rental income received and costs associated with the Group’s property portfolio, which
includes a freehold property in Manchester and leased properties in London, Coventry, Birmingham and Leeds. As the two
former investment properties were disposed of during the year ended 31 July 2006, all the property transactions are Group
related and are, therefore, eliminated on consolidation. Financial statements
43
Manganese Bronze Holdings PLC
5 Business and geographical segments continued
Segmental information about these businesses is presented below:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Revenue
Vehicle sales 142,200 81,127
Vehicle services 2,294 2,300
Property – 397
Continuing operations 144,494 83,824
Total Group 144,494 83,824
Result
Vehicle sales 5,062 2,788
Vehicle services 551 386
SLTI (38) –
Property – 938
Total operating profit from continuing operations 5,575 4,112
Investment revenues 428 304
Finance costs (1,076) (660)
Profit before tax 4,927 3,756
Tax (1,551) (920)
Loss from discontinued operations – (86)
Profit after tax and discontinued operations 3,376 2,750
Head office costs have been allocated to segments based on operating profit.
Other information
Capital additions – Capital additions –
property, plant and equipment other intangibles Depreciation and amortisation
17 months to 12 months to 17 months to 12 months to 17 months to 12 months to
31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006
£000 £000 £000 £000 £000 £000
Vehicle sales 3,827 5,990 1,096 – 4,973 2,263
Vehicle services 91 51 – 47 449 210
SLTI – – – – – –
Property – 344 – – – 139
Corporate – – – – 38 52
Total Group 3,918 6,385 1,096 47 5,460 2,664
All the above relate to continuing operations. Financial statements
44
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
5 Business and geographical segments continued
Balance sheet
Total assets Total liabilities Net assets/(liabilities)
As at As at As at As at As at As at
31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006
£000 £000 £000 £000 £000 £000
Vehicle sales 38,090 42,307 18,607 22,671 19,483 19,636
Vehicle services 4,069 4,660 466 441 3,603 4,219
SLTI 15,988 – – – 15,988 –
Property – 72 – 441 – (369)
Total segment 58,147 47,039 19,073 23,553 39,074 23,486
Unallocated corporate 1,264 1,657 5,973 6,247 (4,709) (4,590)
Net funds 10,330 12,927 7,165 10,346 3,165 2,581
Total Group 69,741 61,623 32,211 40,146 37,530 21,477
All the above relate to continuing operations.
Geographical segments
The Group’s operations are located in England, the United States of America, and China.
The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the
goods/services:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
United Kingdom 143,081 81,531
Rest of Europe 462 186
North America 382 562
Asia 371 –
Rest of world 198 1,545
144,494 83,824
All the above relate to continuing operations.
The following is an analysis of the carrying amount of segment net assets, and additions to property, plant and equipment
and intangible assets, analysed by the geographic area in which the assets are located:
Additions to property, plant and equipment
Carrying amount of segment net assets and other intangible assets
As at As at 17 months to 12 months to
31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006
£000 £000 £000 £000
United Kingdom 19,426 19,574 4,923 6,344
North America 3,660 3,912 91 98
China 15,988 – – –
39,074 23,486 5,014 6,442 Financial statements
45
Manganese Bronze Holdings PLC
6 Exceptional items
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Note £000 £000
Profit on disposal of investment properties a) – 1,149
Redundancy and severance pay – (353)
Continuing operations – 796
Redundancy and severance pay – (6)
Discontinued operations – (6)
– 790
a) The profit on disposal of investment properties in the year ended 31 July 2006 related to the sale of properties in
Ipswich, on 31 March 2006, and Birmingham, on 5 August 2005, for net receipts of £4,049,000 and £800,000
respectively. The properties had combined net book values of £3,700,000.
7 Profit for the period
Profit for the period has been arrived at after charging (crediting):
Continuing operations Discontinued operations Total
17 months to 12 months to 17 months to 12 months to 17 months to 12 months to
31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006
£000 £000 £000 £000 £000 £000
Net foreign exchange losses 113 96 – – 113 96
Research and development costs 916 897 – – 916 897
Depreciation of property, plant
and equipment 4,839 2,664 – – 4,839 2,664
Amortisation of intangible assets 621 176 – – 621 176
Cost of inventories recognised as expense 86,016 51,350 – – 86,016 51,350
Write down of inventories recognised as
expense/(income) 49 (69) – – 49 (69)
Staff costs (see note 9) 24,699 16,108 – 38 24,699 16,146 Financial statements
46
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
8 Auditors’ remuneration
The analysis of auditors’ remuneration is as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Fees payable to the Company’s auditors for the audit of:
The Company’s annual accounts 25 11
The Company’s subsidiaries pursuant to legislation 76 71
Total audit fees 101 82
Fees payable to the Company’s auditors for other services to the Group:
Tax services 74 75
Recruitment and remuneration services 6 6
Corporate financial services (i) 80 –
Total non-audit fees 160 81
261 163
(i) These fees relate to working capital and other public and private reporting associated with the Chinese joint venture,
and are included in the balance sheet as part of the cost of investment in joint ventures (note 19).
Fees payable to Deloitte & Touche LLP for non-audit services to the company are not required to be disclosed because the
consolidated financial statements are required to disclose such fees on a consolidated basis.
9 Staff costs
The average number of employees (including executive directors) was:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Number Number
Administration and staff 202 209
Production 274 270
476 479
Their aggregate remuneration comprised:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Wages and salaries 21,602 14,221
Social security costs 2,501 1,502
Other pension costs (note 35) 596 423
24,699 16,146
10 Investment revenues
Investment revenues comprise entirely of interest on bank deposits of continuing operations. Financial statements
47
Manganese Bronze Holdings PLC
11 Finance costs
Continuing operations
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Notes £000 £000
Interest payable on:
Bank overdrafts and loans 7 7
Finance contracts 42 12
Stocking loan 532 363
Preference share dividends 79 53
Net interest payable on pension liability 35 416 225
1,076 660
12 Tax
Continuing operations
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Current tax:
UK corporation tax 579 229
Adjustments relating to prior periods (502) 266
US tax – 17
Deferred tax (note 20)
Origination and reversal of timing differences 1,533 455
Adjustments relating to prior periods (59) (47)
Total tax charge 1,551 920
UK corporation tax is calculated at 30% (12 months ended 31 July 2006: 30%) of the estimated assessable profit for the
period. Based on Government legislation enacted during the period, corporation tax will be calculated at 28% of taxable profits
from 1 April 2008. Taxation for other jurisdictions is calculated at the rate prevailing in the respective jurisdictions.
The charge for the period can be reconciled to the profit per the income statement as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Profit/(loss) before tax
Continuing operations 4,927 3,756
Discontinued operations – (86)
4,927 3,670
Tax at the UK corporation tax rate of 30% (12 months ended 31 July 2006: 30%) 1,478 1,101
Adjustment in respect of prior periods (561) 245
Tax effect of expenses that are not deductible in determining taxable profit 190 52
Tax effect of non-taxable gains on disposal of property – (359)
Tax effect of utilisation of tax losses not previously recognised – (118)
Tax effect of deferred asset previously not recognised – (197)
Tax effect of deferred tax rate differences 60 –
Tax effect of losses on overseas subsidiary and joint venture not recognised as deferred asset 384 196
Tax charge for current period 1,551 920
In addition to the amount charged to the income statement, deferred tax relating to share-based payments amounting
to £829,000 (12 months ended 31 July 2006: nil) and to actuarial gains/losses on the defined benefit pension scheme
amounting to £198,000 (12 months ended 31 July 2006: £159,000 charge) has been credited directly to equity. Financial statements
48
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
13 Discontinued operations
Discontinued operations comprise the Zingo mobile phone taxi hailing service, whose assets and London operation were
transferred to Computer Cab Plc (ComCab) on 13 December 2004 as part of a licence agreement.
The results of the discontinued operations which have been included in the consolidated income statement were as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Revenue – –
Expenses – (86)
Loss before tax – (86)
14 Dividends
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 July 2006 of 3p (2005: 3p) per share (566) (571)
Special dividend for the year ended 31 July 2006 of 1p (2005: nil) per share (189) –
Interim dividend for the period ended 31 December 2007 of 2.25p
(12 months ended 31 July 2006: 2p) per share (432) (376)
Second interim dividend for the period ended 31 December 2007 of 3.50p
(12 months ended 31 July 2006: nil) (872) –
(2,059) (947)
Proposed final divided for the period ended 31 December 2007 of 1.50p
(12 months ended 31 July 2006: 3p) per share (375) (571)
Proposed special dividend for the period ended 31 December 2007 of nil
(12 months ended 31 July 2006: 1p) per share – (190)
The proposed final dividend is subject to approval by shareholders at the annual general meeting and has not been included
as a liability in these financial statements
15 Earnings/(loss) per ordinary share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Earnings for the purposes of basic and diluted earnings per share being net profit
attributed to equity holders of the parent 3,384 2,836
Number of shares
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Number Number
Weighted average number of ordinary shares for the purposes of basic earnings per share 21,297,135 18,880,453
Effect of dilutive potential ordinary shares:
Share options 36,309 106,728
Weighted average number of ordinary shares for the purposes of diluted earnings per share 21,333,444 18,987,181
The denominators used in the calculation of earnings/(loss) per share are the same as above for both basic and diluted
earnings per share from continuing and discontinued operations. Financial statements
49
Manganese Bronze Holdings PLC
15 Earnings/(loss) per ordinary share continued
From continuing operations
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Net profit attributable to equity holders of the parent 3,384 2,836
Adjustments to exclude loss for the period from discontinued operations – 86
Earnings from continuing operations for the purpose of basic and diluted earnings
per share excluding discontinued operations 3,384 2,922
Pence Pence
Basic 15.89 15.48
Diluted 15.86 15.39
From discontinued operations
Basic and diluted – (0.46)
As discontinued operations were loss-making, diluted loss per share equals basic loss per share.
Total Group
Basic 15.89 15.02
Diluted 15.86 14.94
16 Goodwill
Cost
£000
At 1 August 2005 1,478
Exchange differences (82)
At 1 August 2006 1,396
Additions 373
Exchange differences (91)
At 31 December 2007 1,678
The Group’s goodwill arose on the acquisition of 86% of the issued share capital of London Taxis North America Holdings
Incorporated (LTNAH).
In August 2007, the Group increased its investment in LTNAH to 98% at a cost of £373,000.
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected
to benefit from that business combination. The carrying amount of goodwill has been allocated to the cash generating unit of
LTNAH, within the vehicle services segment.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGU are determined from value in use calculations, based on a discounted cash flow forecast
incorporating the most recent approved financial budgets extrapolated to 2016. The rate used to discount the forecast cash
flow is the Group’s weighted average cost of capital of 7.44%.
As the value in use of the CGU is in excess of the goodwill carrying value, no impairment arose in the 17-month period. Financial statements
50
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
17 Other intangible assets
Development costs Licences
(notes (i), (ii) & (iii)) (note (iv)) Total
£000 £000 £000
Cost:
At 1 August 2005 1,088 – 1,088
Additions – 47 47
Exchange differences (24) (1) (25)
At 1 August 2006 1,064 46 1,110
Additions 1,006 90 1,096
Transfers in from tangible assets 1,044 – 1,044
Exchange differences (26) (3) (29)
At 31 December 2007 3,088 133 3,221
Amortisation:
At 1 August 2005 488 – 488
Charge for the year 174 2 176
Exchange differences (2) – (2)
At 1 August 2006 660 2 662
Charge for the period 585 36 621
Exchange differences (3) – (3)
At 31 December 2007 1,242 38 1,280
Carrying amount:
At 1 August 2005 600 – 600
At 1 August 2006 404 44 448
At 31 December 2007 1,846 95 1,941
(i) Development costs are amortised over the expected life of the product to which they relate, normally between five and
ten years. The additions of £1,006,000 (12 months ended 31 July 2006: nil) relate to development costs of the new
TX4 model introduced in October 2006.
(ii) The transfers in from tangible assets of £1,044,000 relate to TX4 test and development vehicles, which were held within
plant and equipment at 31 July 2006 when they were assets under construction.
(iii) The net book value of development costs comprises of TX4 £1,572,000 (31 July 2006: nil), TXII nil (31 July 2006:
£54,000) and the vehicle for the US market £274,000 (31 July 2006: £350,000).
(iv) Licences are amortised over the remaining life of the asset to which they relate, normally between five and ten years.
The additions of £90,000 (12 months ended 31 July 2006: nil) relate to a licence to sell the TX4 in China. Financial statements
51
Manganese Bronze Holdings PLC
18 Property, plant and equipment
Freehold Long Short Plant and
land and leasehold leasehold equipment
buildings buildings buildings (notes (i)&(ii)) Total
£000 £000 £000 £000 £000
Cost:
At 1 August 2005 550 4,850 298 39,028 44,726
Additions – – – 6,385 6,385
Disposals – – – (991) (991)
Exchange differences – – – (142) (142)
At 1 August 2006 550 4,850 298 44,280 49,978
Additions – – – 3,918 3,918
Disposals – – – (3,534) (3,534)
Transfers out to intangible assets – – – (1,044) (1,044)
Exchange differences – – – (156) (156)
At 31 December 2007 550 4,850 298 43,464 49,162
Depreciation:
At 1 August 2005 36 138 119 27,726 28,019
Charge for the year 18 97 24 2,525 2,664
Disposals – – – (305) (305)
Exchange differences – – – (8) (8)
At 1 August 2006 54 235 143 29,938 30,370
Charge for the period 26 137 33 4,643 4,839
Disposals – – – (3,033) (3,033)
Exchange differences – – – (15) (15)
At 31 December 2007 80 372 176 31,533 32,161
Carrying amount:
At 1 August 2005 514 4,712 179 11,302 16,707
At 1 August 2006 496 4,615 155 14,342 19,608
At 31 December 2007 470 4,478 122 11,931 17,001
(i) During the period the Group spent £1,354,000 on tooling and manufacturing plant for the new TX4 model,
£908,000 refurbishing the new London dealership, and £1,656,000 on other plant and equipment.
The Group also disposed of certain of its plant and equipment with carrying amounts of £501,000 for proceeds
of £544,000.
(ii) The transfers out to intangible assets of £1,044,000 relate to TX4 test and development vehicles, which have been
classified as intangible assets on completion of the test and development programme.
(iii) At 31 December 2007, the Group had entered into contractual commitments for the acquisition of property,
plant and equipment amounting to £397,000 (31 July 2006: £1,771,000). Financial statements
52
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
19 Investment in joint ventures
£000
At 1 August 2005 and 2006 –
Cost 16,034
Share of loss (38)
At 31 December 2007 15,996
During the period, the Group finalised the establishment of a joint venture with Chinese car manufacturer Geely Automobile
Holdings Limited (“Geely”) and Shanghai Maple Automobile Company Limited (“Maple”), to produce the London taxi,
a limousine and two large saloon cars in Shanghai. The joint venture company, Shanghai LTI Automobile Company Limited
(SLTI), was incorporated in the People’s Republic of China on 15 June 2007.
The parties to the joint venture are the Group, holding 48% of the share capital of SLTI, and Geely and Maple, who hold
51% and 1% respectively.
In consideration for its investment in SLTI, on 22 June 2007 the Group issued 5.7 million new ordinary shares of 25p
per share to Linkstate Overseas Limited, a wholly owned subsidiary of Geely, with a fair value of £2.50 per share.
Due to a small number of shareholders owning the majority of the shares, average daily share dealings being less than
0.04% of the total number of shares, restrictions placed on Geely trading the shares, and an independent valuation of the
Group’s investment in SLTI, £2.50 per share was considered by the directors to be a better indicator of fair value than the
market value as at the date of issue.
The Group is accounting for its investment on an equity basis, with the total cost of £16,034,000 comprising shares
of £14,250,000, cash transaction costs of £1,395,000 and deferred committed transaction costs of £389,000.
20 Deferred tax
The elements of deferred tax assets included in non-current assets are as follows:
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Accelerated tax depreciation (145) 215
Other short-term timing differences 15 16
Retirement benefit obligations 1,147 1,402
Share-based payments 280 21
Tax losses – 91
1,297 1,745
At the balance sheet date the Group has no unused tax losses (31 July 2006: £303,000) available for offset against
future profits.
No deferred tax asset has been recognised in respect of the Group’s US subsidiary losses due to the unpredictability of future
profit streams. Financial statements
53
Manganese Bronze Holdings PLC
21 Inventories
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Raw materials 3,329 2,167
Work in progress 1,914 1,248
Finished goods 11,056 14,163
16,299 17,578
Finished goods with a carrying amount of £6,398,000 (31 July 2006: £7,679,000) are pledged as security for the Group’s
stocking loan facility.
22 Trade and other receivables
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Trade receivables 2,900 6,321
Other debtors 1,149 924
Prepayments 1,150 676
5,199 7,921
The average credit period taken on sale of goods is nine days. Trade and other receivables are non-interest bearing.
An allowance has been made for estimated irrecoverable amounts from the sale of goods, at the balance sheet date,
of £105,000 (31 July 2006: £177,000). This allowance has been determined by reference to past default experience
and knowledge of specific customers’ financial circumstances.
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
23 Cash and cash equivalents
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Cash at banks and in hand 1,570 7
Short-term deposits 8,760 12,920
10,330 12,927
Cash at banks and in hand do not attract interest.
Short-term deposits are money market deposits with an average maturity of one day (12 months ended 31 July 2006:
three days). Interest is received at the prevailing market rate.
The fair value of cash and cash equivalents is not materially different from their book value.
Credit risk
The Group’s principal financial assets are bank deposits and trade receivables. The credit risk on trade receivables is limited
as the majority of revenue transactions are settled immediately and are, therefore, not on a credit basis. Financial statements
54
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
24 Bank overdrafts and loans
As at As at
31 Dec 2007 31 Jul 2006
Currency £000 £000
Bank overdrafts Sterling – 521
Stocking loan Sterling 7,042 9,150
7,042 9,671
All borrowings are repayable on demand or within one year. The stocking loan is secured on the vehicles within finished goods.
The weighted average interest rates paid were as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
% %
Bank overdrafts 6.19 5.50
Stocking loans 6.51 5.50
The directors consider that the carrying amount of borrowings approximate to their fair value.
Other principal features of the Group’s borrowings are as follows:
i) The Group’s overdraft facility of £2.5m (31 July 2006: £2.5m) is provided by HSBC Bank plc and attracts interest at a
rate of 1% above the bank’s base rate.
ii) The Group’s stocking loan facility of £13.4m (31 July 2006: £13.4m) is provided by Lloyds TSB Group PLC and attracts
interest linked to the Finance House Base Rate.
At 31 December 2007 the Group had available £8.9m (31 July 2006: £6.1m) of undrawn committed borrowing facilities.
25 Financial risk management and derivative financial instruments
Policy
Treasury policy seeks to reduce the risks arising from the currency and maturity of the Group’s financial instruments. The main
risks arising from the Group’s financial instruments are interest rate risk, currency risk and liquidity risk. Speculation, including
the use of complex financial derivative products, is not part of the Group’s treasury activities. Financial instruments are sterling
denominated where possible. Material foreign currency commitments are hedged for up to 12 months ahead using forward
contracts. Borrowings and, where they arise, deposits are fixed for periods of up to one year. The functional currency of the
Group is sterling.
Interest rate risk
The Group seeks to minimise interest rate risk by maximising interest received on cash at bank by placing deposits on the
money market at the prevailing market rate, for periods up to one month.
Currency risk
The Group utilises currency derivatives to hedge significant future transactions and cash flows. The Group’s main currency
exposure is to the euro, a consequence of the purchase of taxi components. Forward contracts are used to hedge this
exposure. At the balance sheet date, the total notional amount of outstanding forward foreign exchange contracts that the
Group has committed are as follows:
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Forward foreign exchange contracts: Euro – 11,870 Financial statements
55
Manganese Bronze Holdings PLC
25 Financial risk management and derivative financial instruments continued
At the balance sheet date, the fair value of the Group’s currency derivatives is estimated to be approximately nil (31 July 2006:
£44,000). The fair value of currency derivatives that are designated and effective as cash flow hedges amounting to nil
(31 July 2006: £44,000) has been deferred in equity.
Changes in the fair value of non-hedging currency derivatives amounting to nil have been credited to income in the period
(12 months ended 31 July 2006: £12,000).
Liquidity risk
The Group’s policy throughout the period regarding liquidity has been to maximise the return on funds placed on deposit
but to minimise the associated risk by placing funds in low-risk cash deposits.
26 Obligations under finance leases
Minimum lease payments Present value of minimum lease payments
As at As at As at As at
31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006
£000 £000 £000 £000
Sterling denominated leases
Amounts payable under finance leases:
Within one year 129 95 123 79
In the second to fifth years inclusive – 144 – 142
129 239 123 221
Less future finance charges 6 18
Present value of lease obligations 123 221
Less amount due for settlement within 12 months
(shown under current liabilities) 123 79
Amount due for settlement after 12 months – 142
US dollar denominated leases
Amounts payable under finance leases:
Within one year – 184 – 165
In the second to fifth years inclusive – 323 – 289
– 507 – 454
Less future finance charges – 53
Present value of lease obligations – 454
Less amount due for settlement within 12 months
(shown under current liabilities) – 165
Amount due for settlement after 12 months – 289
Total finance leases
Amounts payable under finance leases:
Within one year 129 279 123 244
In the second to fifth years inclusive – 467 – 431
129 746 123 675
Less future finance charges 6 71
Present value of lease obligations 123 675
Less amount due for settlement within 12 months
(shown under current liabilities) 123 244
Amount due for settlement after 12 months – 431 Financial statements
56
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
26 Obligations under finance leases continued
It is the Group’s policy to lease certain of its vehicles under finance leases.
The sterling denominated finance contracts are fixed at an average rate of 9.3% (31 July 2006: 9.0%), with the average
calculated over the life of the contract, normally 18 months.
The US dollar denominated finance contracts were settled with a one-off payment of £452,000 on 1 August 2006.
The directors consider that the carrying amount of finance lease obligations approximates to their fair value.
The Group’s obligations under finance leases are secured by the lessors’ rights over the leased assets.
27 Trade and other payables
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Trade creditors 11,233 15,099
Social security, payroll and other taxes 718 724
Deferred/contingent consideration 45 214
Other creditors 862 1,474
Accruals 2,423 2,406
15,281 19,917
Less amounts due for settlement after 12 months (shown within non-current liabilities):
Deferred/contingent consideration – 49
Amounts due for settlement within 12 months (shown within current liabilities) 15,281 19,868
Trade creditors principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period
taken for trade purchases is 51 days.
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
28 Provisions
Warranty
£000
At 1 August 2006 4,065
Charge to profit and loss account 5,856
Exchange adjustment (1)
Utilised in the period (5,467)
At 31 December 2007 4,453
The warranty provision represents management’s best estimate of the Group’s liability under three-year or 100,000 mile
(whichever occurs sooner) warranties granted on new vehicles sold, based on past experience and known product improvements.
It is expected that the majority of this expenditure will be incurred in the next two years and that all will be incurred within
three years of the balance sheet date. Financial statements
57
Manganese Bronze Holdings PLC
29 Preference shares
Number £000
8.25% cumulative preference shares of £1 each
Authorised 684,165 684
Issued and fully paid:
At 31 July 2006 641,459 642
Preference shares repurchased 500 1
At 31 December 2007 640,959 641
Preference shares are irredeemable and carry no voting rights.
30 Share capital
Number £000
Ordinary shares of 25p each
Authorised 26,256,692 6,564
Allotted, called up and fully paid:
At 31 July 2006 19,035,649 4,759
Issued during the period 5,926,272 1,482
At 31 December 2007 24,961,921 6,241
5,700,000 ordinary shares with a nominal value of 25p were allotted during the period, with a fair value of £2.50 per share,
in consideration for the Group’s investment in Shanghai LTI Automobile Company Limited (see note 19).
An additional 226,272 ordinary shares with a nominal value of 25p were allotted during the period, with an average value
of £1.0625 per share, to satisfy executive share options.
31 Reconciliation of movements in equity
Attributable to equity holders of the parent
Issued Other
share Retained reserves Minority
capital earnings (see below) interests Total
£000 £000 £000 £000 £000
At 1 August 2005 4,759 9,088 5,735 95 19,677
Recognised income and
expense for the year – 3,159 (72) (86) 3,001
Dividends paid – (947) – – (947)
Purchase of own shares – – (431) – (431)
Share options exercised – – 107 – 107
Credit to equity for
share-based payments – 70 – – 70
Transfer to retained earnings – (202) 203 (1) –
At 1 August 2006 4,759 11,168 5,542 8 21,477
Recognised income and
expense for the period – 2,920 (269) (8) 2,643
Dividends paid – (2,059) – – (2,059)
Purchase of own shares – – (395) – (395)
Shares issued 1,482 – 12,984 – 14,466
Share options exercised – – 420 – 420
Credit to equity for
share-based payments – 149 – – 149
Tax on items taken direct to equity – 829 –– 829
Transfer to retained earnings – (199) 199 – –
At 31 December 2007 6,241 12,808 18,481 – 37,530 Financial statements
58
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
31 Reconciliation of movements in equity continued
Other reserves
Share Capital Hedging and Total
premium redemption ESOP translation other
account reserve reserve reserves reserves
£000 £000 £000 £000 £000
At 1 August 2005 4,919 916 (210) 110 5,735
Currency translation
differences – – – (72) (72)
Purchase of own shares – – (431) – (431)
Share options exercised – – 107 – 107
Transfer to retained earnings – – 202 1 203
At 1 August 2006 4,919 916 (332) 39 5,542
Currency translation
differences – – – (269) (269)
Purchase of own shares – – (395) – (395)
Shares issued 12,984 – – – 12,984
Share options exercised – – 420 – 420
Transfer to retained earnings – – 199 – 199
At 31 December 2007 17,903 916 (108) (230) 18,481
Nature and purpose of other reserves
Share premium account
This reserve records the consideration premium for shares issued at a value that exceeds their nominal value.
Capital redemption reserve
This reserve represents the nominal value of the Company’s own shares repurchased for cancellation.
ESOP reserve
This reserve represents the cost of shares in Manganese Bronze Holdings PLC purchased in the market and held by
the Manganese Bronze Holdings PLC Employee Benefit Trust to satisfy options under the Group’s share option schemes
(see note 34).
32 Contingent liabilities
a) The Company has given a guarantee to HSBC in respect of any amounts outstanding on the Group’s borrowing facilities.
At 31 December 2007 the relevant Group net borrowings amounted to nil (31 July 2006: £521,000).
b) Certain subsidiaries provide warranties and sometimes extended warranties in respect of their products. The directors
review the position regularly and consider that appropriate provisions have been made to cover known and expected costs
likely to arise under these warranties. Financial statements
59
Manganese Bronze Holdings PLC
33 Operating lease arrangements
The Group as lessee
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Minimum lease payments under operating leases recognised as an expense in the period 1,415 1,233
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under
non-cancellable operating leases which fall due as follows:
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Within one year 897 977
In the second to fifth years inclusive 1,337 1,409
After five years 5,170 5,299
7,404 7,685
The Group has entered into commercial leases on certain land and buildings, motor vehicles and items of plant and
equipment. Land and building leases are generally subject to periodic rent reviews. Some leases have renewal options.
These are at the option of the Group, sometimes subject to a minimum notice period. In some cases rent escalations are
set out in the lease contract. There are no material contingent rents payable. No significant restrictions are placed on the
Group by entering into these leases.
The Group as lessor
No (12 months ended 31 July 2006: £397,000) property rental income was earned during the period as the Group disposed
of all of its properties held for rental purposes during the year ended 31 July 2006.
34 Share-based payments
Share option scheme
The Company has a share option scheme for executive directors and senior managers. Options are exercisable at a price equal
to the market price of the Company’s shares on the date of the grant. The vesting period is three years. If the options remain
unexercised after a period of ten years from the date of the grant, the options expire. Options are forfeited if the employee
leaves the Group before the options vest, although options may be exercisable for a certain period of time in defined good
leaver cases or with the consent of the Remuneration Committee. The performance requirements associated with share
options are disclosed in the directors’ remuneration report on page 25.
Details of the share options outstanding during the period are as follows:
17 months to 31 Dec 2007 12 months to 31 Jul 2006
Number of Weighted average Number of Weighted average
share options exercise price (p) share options exercise price (p)
Outstanding at the beginning of the period 480,700 166.2 652,499 187.3
Granted during the period 15,728 639.2 56,501 197.3
Exercised during the period 419,965 157.4 128,300 83.2
Expired during the period 11,000 360.5 100,000 428.0
Outstanding at the end of the period 65,463 303.5 480,700 166.2
The weighted average share price at the date of exercise for share options exercised during the period was 645.2p.
The options outstanding at the end of the period had a weighted average exercise price of 303.5p, and a weighted average
remaining contractual life of 9.4 years. During the period ended 31 December 2007, options were granted on 31 January
2007 with an aggregate estimated fair value of £46,000. During the year ended 31 July 2006, options were granted on
5 April 2006 with an aggregate estimated fair value of £42,000. Financial statements
60
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
34 Share-based payments continued
The inputs into the Black-Scholes model are as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Weighted average share price 639.2p 197.3p
Weighted average exercise price 639.2p 197.3p
Expected volatility 51.0% 50.0%
Expected life 5 years 5 years
Risk free rate 5.24% 4.50%
Expected dividends 1.25% 2.50%
Expected volatility was determined by calculating the historic volatility of the Group’s share price over the last five years.
As there is a three-year period before share options vest and the options have a maximum life of ten years, the expected
life used in the model is five years, being managements best estimate taking into account the effects of non-transferability,
exercise restrictions, and behavioural considerations.
The Group recognised total expenses of £34,000 (12 months ended 31 July 2006: £37,000) related to share option
equity-settled share-based payment transactions during the period.
Long-Term Incentive Plan (LTIP)
The Company has a long-term incentive plan for executive directors under which awards are granted at no cost. Details of this
LTIP are disclosed in the directors’ remuneration report on pages 25 and 26.
Details of the LTIPs outstanding during the period are as follows:
17 months to 31 Dec 2007 12 months to 31 Jul 2006
Number of Weighted average Number of Weighted average
share options exercise price (p) share options exercise price (p)
Outstanding at the beginning of the period 294,722 163.0 ––
Granted during the period 1,164,149 584.4 294,722 163.0
Forfeited during the period 128,834 163.0 ––
Outstanding at the end of the period 1,330,037 531.9 294,722 163.0
The Group recognised total expenses of £115,000 (12 months ended 31 July 2006: £33,000) related to LTIP equity-settled
share-based payment transactions during the period.
35 Retirement benefit schemes
The Group operates a defined contribution pension plan (Account Plus) which is open to employees of Group companies,
and a defined benefit scheme (Manganese Bronze Group Pension Scheme) in which members have ceased to accrue
additional pensionable service but benefits continue to be linked to salary or Limited Price Indexation (LPI). Under the
projected unit method the current service cost will increase as members approach retirement.
Defined contribution scheme (Account Plus)
The assets of the scheme are held separately from those of the Group under the control of the trustees.
The total cost charged to income for Account Plus for the period was £596,000 (12 months ended 31 July 2006:
£423,000). As at 31 December 2007, contributions of £55,000 (31 July 2006: £52,000) due in respect of the current
reporting period had not been paid over to the scheme.
Defined benefit scheme (Manganese Bronze Group Pension Scheme)
The valuation position of the Group’s defined benefit pension scheme (Manganese Bronze Group Pension Scheme), which
was closed in 1995, was assessed at 31 December 2007 by a qualified independent actuary using a set of assumptions
which are commensurate with the guidance given under IAS19. Although the scheme primarily provides defined benefits,
it also has a small defined contribution section. Financial statements
61
Manganese Bronze Holdings PLC
35 Retirement benefit schemes continued
Contributions of £1.7m (12 months ended 31 July 2006: £1.2m) were paid into the scheme during the period.
No contributions were paid into the defined contribution section of the scheme. Contributions to the scheme for the year
to 31 December 2008 are likely to be in the region of £1.2m.
Valuation at
31 Dec 2007 31 Jul 2006
Key assumptions used:
Discount rate 5.6% 5.0%
Expected return on scheme assets 5.7% 5.6%
Salary increases 4.0% 3.5%
Inflation 3.5% 3.0%
Mortality rates:
Pre-retirement PA92 C2006 PA92 C2005
with medium
cohort
adjustment
Post-retirement: Deferreds PA92 C2015 PA92 C2020
with medium
cohort
adjustment
Pensioners PA92 C2006 PA92 C2005
with medium
cohort
adjustment
The rates of increase of pensions in payment were allowed for at the rates set out in the scheme rules, which range between
nil and 5%.
Amounts recognised in income in respect of the defined benefit scheme are as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Current service cost – –
Interest cost (2,380) (1,620)
Expected return on scheme assets 1,964 1,395
Past service costs – –
Net charge to income (416) (225)
The total net charge for the period has been included within finance costs in the consolidated income statement.
Actuarial losses of £706,000 (12 months ended 31 July 2006: £526,000 gains) have been reported in the statement of
recognised income and expense. Financial statements
62
Manganese Bronze Holdings PLC
Notes to the consolidated financial statements continued
35 Retirement benefit schemes continued
The amount included in the balance sheet arising from the Group’s obligations in respect of the defined benefit scheme
is as follows:
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Present value of defined benefit obligations (34,074) (33,474)
Fair value of scheme assets 29,978 28,800
Deficit in scheme recognised as a liability in the balance sheet (4,096) (4,674)
Movements in the present value of defined benefit obligations were as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
At the beginning of the period 33,474 33,073
Interest cost 2,380 1,620
Actuarial losses 709 153
Benefits paid (2,489) (1,372)
At the end of the period 34,074 33,474
Movements in the fair value of the scheme assets were as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
At the beginning of the period 28,800 26,898
Expected return on assets 1,964 1,395
Actuarial gains 3 679
Employer contributions 1,700 1,200
Benefits paid (2,489) (1,372)
At the end of the period 29,978 28,800
The analysis of the scheme assets and the expected rate of return at the balance sheet date was as follows:
Expected return Fair value of assets
As at As at As at As at
31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006
% % £000 £000
Equities 7.9 7.5 9,767 10,093
Gilts 4.6 4.5 19,487 18,392
Cash 4.6 4.5 724 315
29,978 28,800
The expected rate of return on each asset class has been determined on the basis of market expectations for the rate of return
on each asset class over the life of the related obligation, at the balance sheet date. Financial statements
63
Manganese Bronze Holdings PLC
35 Retirement benefit schemes continued
The five-year history of experience adjustments is as follows:
2007 2006 2005 2004 2003
£000 £000 £000 £000 £000
Present value of defined
benefit obligations (34,074) (33,474) (33,073) (29,831) (34,887)
Fair value of scheme assets 29,978 28,800 26,898 23,461 24,857
Deficit in the scheme (4,096) (4,674) (6,175) (6,370) (10,030)
Experience adjustments
on scheme liabilities
Amount (£000) 34 (34) 790 972 (413)
Percentage of scheme
liabilities (%) 0.1 (0.1) 2.4 3.3 (1.2)
Experience adjustments
on scheme assets
Amount (£000) 3 745 2,215 111 (1,198)
Percentage of scheme
assets (%) 0.0 2.6 8.2 0.5 (4.8)
The directors are of the opinion that the deficit cannot be split between the Group companies due to the deficit associated
with former employees of other entities. As such, the full deficit has been recorded in the parent company, Manganese Bronze
Holdings PLC.
36 Events after the balance sheet date
There are no non-adjusting events after the balance sheet date.
37 Related party transactions
Trading transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note. Transactions between the Group and related parties who are not members of the Group
are as follows:
Income from profit share and management fees Amounts owed by related parties
17 months to 12 months to As at As at
31 Dec 2007 31 Jul 2006 31 Dec 2007 31 Jul 2006
£000 £000 £000 £000
London Taxi Finance Limited – 1,738 – 115
London Taxi Finance Ltd, a wholly-owned subsidiary of Lloyds TSB Group PLC, is no longer a related party of the Group as
Group employees resigned as directors of this company during the year ended 31 July 2006. As these resignations took place
during the year the income for the full year to 31 July 2006 has been disclosed.
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Group, is set out below in aggregate for
each of the categories specified in IAS 24 “Related Party Disclosures”. Further information about the remuneration of
individual directors is provided in the audited part of the directors’ remuneration report on pages 28 and 29.
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Short-term employee benefits 1,353 832
Post-employment benefits 89 66
1,442 898 Company statement of recognised income and expense
for the 17 months ended 31 December 2007
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Net profit for the period 1,399 917
Actuarial (loss)/gain on defined benefit pension scheme (706) 526
Tax on items taken direct to equity 198 (158)
Recognised income and expense for the period 891 1,285
Financial statements
64
Manganese Bronze Holdings PLC
Company income statement
for the 17 months ended 31 December 2007
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Notes £000 £000
Continuing operations
Operating income
Management charges 5,250 2,900
Administrative expenses (3,000) (1,935)
Operating profit 39 2,250 965
Investment revenues 41 989 861
Finance costs 42 (979) (600)
Profit before tax 2,260 1,226
Tax 43 (861) (309)
Net profit attributable to ordinary shareholders of parent 1,399 917
The accompanying notes form an integral part of this Company income statement. Financial statements
65
Manganese Bronze Holdings PLC
Company balance sheet
as at 31 December 2007
As at As at
31 Dec 2007 31 Jul 2006
Notes £000 £000
Non-current assets
Property, plant and equipment 44 – 38
Investment in subsidiaries 45 4,705 4,705
Investment in joint ventures 19 16,034 –
Deferred tax asset 46 1,474 1,456
Total non-current assets 22,213 6,199
Current assets
Trade and other receivables 47 14,695 11,065
Cash and cash equivalents 48 9,014 12,920
Total current assets 23,709 23,985
Total assets 45,922 30,184
Current liabilities
Trade and other payables 50 3,180 2,595
Current tax liabilities – 61
Bank overdrafts and loans 49 7,884 6,263
Total current liabilities 11,064 8,919
Non-current liabilities
Retirement benefit obligation 4,096 4,674
Preference shares 641 642
Total non-current liabilities 4,737 5,316
Total liabilities 15,801 14,235
Net assets 30,121 15,949
Equity
Share capital 30 6,241 4,759
Share premium account 51 17,903 4,919
Capital redemption reserve 51 916 916
ESOP reserve 51 (108) (332)
Hedging and translation reserves 51 (129) –
Retained earnings 51 5,298 5,687
Equity attributable to equity holders of the parent 30,121 15,949
Approved by the Board.
Tim Melville-Ross Mark Fryer
Chairman Director
15 April 2008
The accompanying notes form an integral part of this Company balance sheet. Financial statements
66
Manganese Bronze Holdings PLC
Company cash flow statement
for the 17 months ended 31 December 2007
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Notes £000 £000
Operating activities
Operating profit from continuing operations 2,250 965
Adjustments for:
Gain on derivatives – (12)
Depreciation of property, plant and equipment 38 52
Charge for share-based payments 149 70
Decrease in provisions (1) –
Operating cash flows before movement in working capital 2,436 1,075
Increase in receivables (3,672) (1,961)
Increase/(decrease) in payables 196 (154)
Contribution to defined benefit pension scheme 35 (1,700) (1,200)
Cash used by operations (2,740) (2,240)
Interest paid (563) (375)
Net cash used in operating activities (3,303) (2,615)
Investing activities
Interest received 989 861
Acquisition of investment in joint ventures 19 (1,395) –
Net cash (used in)/from investing activities (406) 861
Financing activities
Dividends paid (2,059) (947)
Purchase of own shares (395) (431)
Proceeds on issue of shares 636 107
Increase in bank overdrafts 1,621 6,263
Net cash (used in)/from financing activities (197) 4,992
Net (decrease)/increase in cash and cash equivalents (3,906) 3,238
Cash and cash equivalents at beginning of period 12,920 9,682
Cash and cash equivalents at end of period 9,014 12,920
The accompanying notes form an integral part of this Company cash flow statement. Financial statements
67
Manganese Bronze Holdings PLC
Notes to the Company financial statements
38 Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 1985. As permitted by
that Act, the separate financial statements have been prepared in accordance with International Financial Reporting Standards.
The financial statements have been prepared on the historic cost basis. The principal accounting policies adopted are the
same as those set out in note 2 to the consolidated financial statements.
The disclosures required by IFRS 2 “Share-based payments” and IAS 19 “Employee benefits”, relating to retirement benefit
schemes, can be found in notes 34 and 35 to the consolidated financial statements respectively.
39 Operating profit
Operating profit for the period has been arrived at after charging:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Net foreign exchange losses – 86
Depreciation of property, plant and equipment 38 52
Staff costs (see note 40) 1,131 728
The auditors’ remuneration for audit and other services is disclosed in note 8 to the consolidated financial statements.
40 Staff costs
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Number Number
Average number of employees (including executive directors) 2 5
Their aggregate remuneration comprised:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Wages and salaries 758 564
Social security costs 307 111
Other pension costs (note 35) 66 53
1,131 728
Further information about the remuneration of individual directors is provided in the audited part of the directors’ remuneration
report on pages 28 and 29.
41 Investment revenues
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Interest on bank deposits 423 244
Inter-Group interest received 566 617
989 861 Financial statements
68
Manganese Bronze Holdings PLC
Notes to the Company financial statements continued
42 Finance costs
17 months to 12 months to
31 Dec 2007 31 Jul 2006
Notes £000 £000
Interest payable on:
Bank overdrafts and loans 8 5
Inter-Group loans 476 317
Preference share dividends 79 53
Net interest on pension liability 35 416 225
979 600
43 Tax
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Current tax:
UK corporation tax (169) 61
Adjustments relating to prior periods 1,037 9
Deferred tax (note 46)
Origination and reversal of timing differences 21 269
Adjustments relating to prior periods (28) (30)
Total tax charge 861 309
UK corporation tax is calculated at 30% (12 months ended 31 July 2006: 30%) of the estimated assessable profit for
the period. Based on government legislation enacted during the period, corporation tax will be calculated at 28% of taxable
profits from 1 April 2008.
The charge for the period can be reconciled to the profit per the income statement as follows:
17 months to 12 months to
31 Dec 2007 31 Jul 2006
£000 £000
Profit before tax 2,260 1,226
Corporation tax thereon at 30% (12 months ended 31 July 2006: 30%) 678 368
Adjustment in respect of prior periods (7) 6
Tax effect of expenses that are not deductible in determining taxable profits 119 (38)
Tax effect of deferred asset previously not recognised – (27)
Tax effect of deferred tax rate differences 71 –
Tax charge for current period 861 309
In addition to the amount charged to the income statement, deferred tax relating to share based payments amounting
to £829,000 (12 months ended 31 July 2006: nil) and to actuarial gains/losses on the defined benefit pension scheme
amounting to £198,000 (12 months ended 31 July 2006: £158,000 charge) has been credited directly to equity. Financial statements
69
Manganese Bronze Holdings PLC
44 Property, plant and equipment
£000
Cost:
At 1 August 2005 and 2006 245
Disposals (64)
At 31 December 2007 181
Depreciation:
At 1 August 2005 155
Charge for the year 52
At 1 August 2006 207
Charge for the period 38
Disposals (64)
At 31 December 2007 181
Carrying amount:
At 1 August 2005 90
At 1 August 2006 38
At 31 December 2007 –
45 Investment in subsidiaries
£000
Cost:
At 31 December 2007, 31 July 2006 and 31 July 2005 8,501
Cumulative impairment:
At 31 December 2007, 31 July 2006 and 31 July 2005 3,796
Carrying amount:
At 31 December 2007, 31 July 2006 and 31 July 2005 4,705
Details of the Company’s principal subsidiaries at 31 December 2007 are as follows:
Company Country of incorporation Holding %
LTI Limited England 100%
Manganese Bronze Services Limited England 100%
Manganese Bronze Property Services Limited England 100%
London Taxis North America Holdings Incorporated United States of America 98%
Investments are valued at cost less cumulative impairment. Financial statements
70
Manganese Bronze Holdings PLC
Notes to the Company financial statements continued
46 Deferred tax
The elements of deferred tax assets included in non-current assets are as follows:
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Accelerated tax depreciation 43 29
Other short-term timing differences 4 4
Retirement benefit obligations 1,147 1,402
Share-based payments 280 21
1,474 1,456
47 Trade and other receivables
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Trade receivables – 81
Amounts owed by subsidiary undertakings 14,449 10,906
Corporation tax recoverable 169 –
Other debtors 17 24
Prepayments 60 54
14,695 11,065
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
48 Cash and cash equivalents
These consist of cash held by the Company and short-term bank deposits. The fair value of cash and cash equivalents
is not materially different from their book value.
49 Bank overdrafts and loans
This consists of a bank overdraft that forms part of the Group’s overdraft facility which is provided by HSBC Bank PLC
(see note 24).
50 Trade and other payables
As at As at
31 Dec 2007 31 Jul 2006
£000 £000
Amounts owed to subsidiary undertakings 1,425 1,425
Social security, payroll and other taxes 424 228
Other creditors 665 592
Accruals 666 350
3,180 2,595
The directors consider that the carrying amount of trade and other payables approximates to their fair value. Financial statements
71
Manganese Bronze Holdings PLC
51 Reconciliation of movements in equity
Issued Share Capital Hedging and
share premium redemption ESOP translation Retained
capital account reserve reserve reserves earnings Total
£000 £000 £000 £000 £000 £000 £000
At 1 August 2005 4,759 4,919 916 (210) – 5,481 15,865
Recognised income and
expense for the year – – – – – 1,285 1,285
Dividends paid – – – – – (947) (947)
Purchase of own shares – – – (431) – – (431)
Share options exercised – – – 107 – – 107
Credit to equity for
share-based payments – – – – – 70 70
Transfer to retained earnings – – – 202 – (202) –
At 1 August 2006 4,759 4,919 916 (332) – 5,687 15,949
Recognised income and
expense for the period – – – – – 891 891
Dividends paid – – – – – (2,059) (2,059)
Currency translation differences – – – – (129) – (129)
Purchase of own shares – – – (395) – – (395)
Shares issued 1,482 12,984 – – – – 14,466
Share options exercised – – – 420 – – 420
Credit to equity for
share-based payments – – – – – 149 149
Tax on items taken direct to equity––– –– 829 829
Transfer to retained earnings – – – 199 – (199) –
At 31 December 2007 6,241 17,903 916 (108) (129) 5,298 30,121 Financial statements
72
Manganese Bronze Holdings PLC
Consolidated five-year statistics
UK GAAP IFRS IFRS IFRS IFRS
12 months to 12 months to 12 months to 12 months to 17 months to
31 Jul 2003 31 Jul 2004 31 Jul 2005 31 Jul 2006 31 Dec 2007
£000 £000 £000 £000 £000
Revenue 113,259 86,712 87,598 83,824 144,494
Operating profit/(loss) before exceptional items (2,555) (1,275) 2,532 3,236 5,575
Pension contributions to closed scheme (i) (2,375) – – – –
Exceptional items (4,711) 3,882 (105) 790 –
Profit/(loss) on ordinary activities before finance charge (9,641) 2,607 2,427 4,026 5,575
Finance charge – net (516) (1,006) (473) (356) (648)
Profit/(loss) on ordinary activities before tax (10,157) 1,601 1,954 3,670 4,927
Tax (charge)/credit 2,033 (233) 94 (920) (1,551)
Profit/(loss) after tax before minority interest (8,124) 1,368 2,048 2,750 3,376
Minority interests – – 22 86 8
Profit/(loss) for the period (8,124) 1,368 2,070 2,836 3,384
Capital expenditure on tangible assets 4,918 7,815 3,023 6,385 3,918
Net assets 22,558 18,352 19,677 21,477 37,530
Net funds/(debt) 1,694 (1,734) 3,307 2,581 3,165
% % % % %
Gearing – 9.4 – – –
Pence Pence Pence Pence Pence
Earnings/(loss) per ordinary share Basic (45.92) 7.42 10.97 15.02 15.89
Diluted (45.92) 7.34 10.87 14.94 15.86
Dividends per ordinary share Interim – 1.00 1.00 2.00 2.25
2nd interim – – – – 3.50
Final 2.00 2.00 3.00 3.00 1.50
Special 25.00 – – 1.00 –
Total 27.00 3.00 4.00 6.00 7.25
Units Units Units Units Units
Vehicle sales UK 2,253 2,271 2,412 2,388 4,147
Export 67 223 109 92 52
Total 2,320 2,494 2,521 2,480 4,199
The amounts disclosed for 2003 are stated on the basis of UK GAAP because it is not practicable to restate amounts for the
periods prior to the date of transition to IFRS.
(i) Under UK GAAP employer pension contributions to the defined benefit scheme were charged to the income statement.
Under IFRS the defined benefit pension scheme deficit is shown as a liability within the balance sheet, with contributions
reducing this liability. Annual employer contributions are as follows:
12 months to 12 months to 12 months to 12 months to 17 months to
31 Jul 2003 31 Jul 2004 31 Jul 2005 31 Jul 2006 31 Dec 2007
£000 £000 £000 £000 £000
Defined benefit pension scheme contributions 2,375 1,325 1,222 1,200 1,700 Overview
01 Highlights
02 Financial highlights
03 Chairman’s statement
Performance review
05 Chief Executive’s statement
07 Business review
10 Sustainable development report
Management and governance
13 Board of directors
14 Advisers
15 Directors’ report
18 Corporate governance
23 Statement of directors’ responsibilities
24 Directors’ remuneration report
Financial statements
30 Independent auditors’ report
32 Consolidated income statement
32 Consolidated statement of recognised income and expense
33 Consolidated balance sheet
34 Consolidated cash flow statement
35 Notes to the consolidated financial statements
64 Company income statement
64 Company statement of recognised income and expense
65 Company balance sheet
66 Company cash flow statement
67 Notes to the Company financial statements
72 Consolidated five-year statistics
Additional information
73 Group contacts
Additional information
73
Manganese Bronze Holdings PLC
Group contacts
Manganese Bronze Holdings PLC
Holyhead Road
Coventry
CV5 8JJ
United Kingdom
Tel +44 (0) 2476 572000
Fax +44 (0) 2476 572001
London Taxis International
Manufacture of the London taxi
Peter Shillcock +44(0) 2476 572000
London Taxis International – Export
Export sales of the London taxi
Mathew Cheyne +44(0) 2476 572000
London Taxis North America Holdings Inc
US taxi services and advertising
Larry Lewandowski +1 773 663 4223
Shanghai LTI
Assembly of the London taxi
Paul Stowe 00 86 13761064845
Mann & Overton London
Taxi sales
Peter Rigden +44(0) 20 7700 0888
Mann & Overton Birmingham
Taxi sales
John Loakes +44(0) 121 322 0700
Mann & Overton Leeds
Taxi sales
Andrew Shaw +44(0) 113 388 8600
Mann & Overton Manchester
Taxi sales
Andrew Shaw +44(0) 161 831 3434
London Taxi Finance
Finance for taxi purchase
Customer services +44(0) 870 850 5007
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Annual Report 2007
Manganese Bronze Holdings PLC Annual Report 2007
Manganese Bronze Holdings PLC
Holyhead Road
Coventry
CV5 8JJ
United Kingdom
Telephone +44 (0) 2476 572000
Fax +44 (0) 2476 572001
www.manganese.com