Principal activities of the company

The principal activity of the company continued to be leather manufacturing.The final result for the year ended 30 June 2021 was an operating profit of£ I .OM (last year £2.6M). Profit before tax was £0.9M (last year £2.8M) and turnover was £60.0M (last year £76.6M). The annual results were, of course, heavily impacted by the disruption caused by Covid-19 and to a lesser extent by Brexit. Indeed, the company's finishing operations were completely closed for 3 weeks in the early part of the financial year although the Job Retention Scheme did allow the business to retain key employees, most of whom are now re-engaged fully in the business. The principal risks and uncertainties affecting the business include the following: - Covid-19: The company was severely impacted by Covid-19 in 2020-21 and the ongoing impacts remain a major risk moving into the next financial year. There are operational risks which to date have been managed by a suite of Covid Secure measures including social c!istancing, additional physical distancing measures, regular testing, wearing of face masks and working from home. There is, however, the risk either of a localised infection spread or a third wave of the virus which could further restrict operations. There is also a significant demand risk, particularly in aviation, where the timing and extent of recovery are very difficult to predict with any degree of accuracy.- The global shortage of semiconductor computer chips, brought on by the Covid-19 pandemic, is impacting car production around the globe and continues to disrupt the automotive supply chain. Semiconductors are in particularly high demand because of the pandemic-driven popularity of consumer electronic devices, including games consoles, laptops and tablets. This was compounded by an uptick in demand for new cars in the final three months of 2020. This meant manufacturers and suppliers were impacted by late-placed orders, and long lead times in chip production. This shortage of chip availability is likely to run on for some time and will impact automotive volumes in particular. As automotive leather sales represent a substantial amount of company turnover a prolonged reduction in demand would have a significant impact on financial returns.- Raw material costs: The main risk is hide prices which have risen very significantly in recent months largely due to growing demand from China. These movements in prices are, of course, not within the company's control. The disruption to global supply channels caused by Covid-19 is also putting pressure on other raw material prices, particularly chemicals which is exerting further pressure on margins.- Brexit: The impact of The EU-UK Trade and Cooperation Agreement has been less material to the company than the downside risk of a "Hard" Brexit. Nonetheless the company has been impacted by certain tariff increases as well as additional administrative and processing costs which will impact future profitability.- Given the global reductions in demand there continues to be considerable pressure on pricing as competitors seek to buy market share with very aggressive pricing. The company will continue to invest in people and equipment to maintain its competitive position as well as seeking further cost reductions, particularly in its fixed cost base.- Foreign currency exchange: the company monitors closely short, medium and long term exchange rates and in addition to utilising a natural hedge where available has a policy of hedging against currency fluctuations relating to forecast transactions for up to fifteen months ahead on a rolling basis in respect of major currency exposures.- Environmental performance: the company places considerable emphasis upon environmental compliance and not only seeks to ensure ongoing compliance with relevant legislation but also strives to ensure that environmental best practice is incorporated into its key processes.- Sustainability and climate change: There is a growing trend amongst certain customers, particularly in the automotive sector, to seek ways to reduce their carbon footprint. Some are considering eliminating leather from certain vehicle ranges over specified time periods. The company will need to continue to intensify its environmental leadership to preserve market share.

Political and charitable donations

Strategic Report The directors present their Strategic Report for the year ended 30 June 2021. Principal activity and business review The principal activity of the company continued to be leather manufacturing. OThe final result for the year ended 30 June 2021 was an operating profit of£ I .OM (last year £2.6M). Profit before tax was £0.9M (last year £2.8M) and turnover was £60.0M (last year £76.6M). The annual results were, of course, heavily impacted by the disruption caused by Covid-19 and to a lesser extent by Brexit. Indeed, the company's finishing operations were completely closed for 3 weeks in the early part of the financial year although the Job Retention Scheme did allow the business to retain key employees, most of whom are now re-engaged fully in the business. The principal risks and uncertainties affecting the business include the following: Covid-19: The company was severely impacted by Covid-19 in 2020-21 and the ongoing impacts remain a major risk moving into the next financial year. There are operational risks which to date have been managed by a suite of Covid Secure measures including social c!istancing, additional physical distancing measures, regular testing, wearing of face masks and working from home. There is, however, the risk either of a localised infection spread or a third wave of the virus which could further restrict operations. There is also a significant demand risk, particularly in aviation, where the timing and extent of recovery are very difficult to predict with any degree of accuracy. The global shortage of semiconductor computer chips, brought on by the Covid-19 pandemic, is impacting car production around the globe and continues to disrupt the automotive supply chain. Semiconductors are in particularly high demand because of the pandemic-driven popularity of consumer electronic devices, including games consoles, laptops and tablets. This was compounded by an uptick in demand for new cars in the final three months of 2020. This meant manufacturers and suppliers were impacted by late-placed orders, and long lead times in chip production. This shortage of chip availability is likely to run on for some time and will impact automotive volumes in particular. As automotive leather sales represent a substantial amount of company turnover a prolonged reduction in demand would have a significant impact on financial returns. Raw material costs: The main risk is hide prices which have risen very significantly in recent months largely due to growing demand from China. These movements in prices are, of course, not within the company's control. The disruption to global supply channels caused by Covid-19 is also putting pressure on other raw material prices, particularly chemicals which is exerting further pressure on margins. Brexit: The impact of The EU-UK Trade and Cooperation Agreement has been less material to the company than the downside risk of a "Hard" Brexit. Nonetheless the company has been impacted by certain tariff increases as well as additional administrative and processing costs which will impact future profitability. Given the global reductions in demand there continues to be considerable pressure on pricing as competitors seek to buy market share with very aggressive pricing. The company will continue to invest in people and equipment to maintain its competitive position as well as seeking further cost reductions, particularly in its fixed cost base. Foreign currency exchange: the company monitors closely short, medium and long term exchange rates and in addition to utilising a natural hedge where available has a policy of hedging against currency fluctuations relating to forecast transactions for up to fifteen months ahead on a rolling basis in respect of major currency exposures. Environmental performance: the company places considerable emphasis upon environmental compliance and not only seeks to ensure ongoing compliance with relevant legislation but also strives to ensure that environmental best practice is incorporated into its key processes. Sustainability and climate change: There is a growing trend amongst certain customers, particularly in the automotive sector, to seek ways to reduce their carbon footprint. Some are considering eliminating leather from certain vehicle ranges over specified time periods. The company will need to continue to intensify its environmental leadership to preserve market share.

Additional information

Directors' Report The directors present their report and audited financial statements for the year ended 31 March 2021. Directors The directors who held office during the year were as follows: D M Archibald N Muirhead (appointed 29 October 2020) S D Cook (resigned 29 October 2020) J W Davidson (resigned 29 October 2020) D MacTaggart M K S Marshall Graham Andrew (resigned 29 October 2020) IF Mcfadyen In compliance with their duties under Section 172 of the Companies Act 2006, the Directors have described how the business develops relationships with suppliers, customers and others, and the effect of that on principal decisions taken, in the Strategic Report. Dividend Dividends totalling to £1,046,715 were paid during the year (2020: £1,176,470). Disclosure of information to auditor The directors who held office at the date of approval of this directors' report confirm that, so far as they are each aware, there is no relevant audit information of which the company's auditor is unaware; and each director has taken all the steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the company's auditor is aware of that information. Auditor In accordance with Section 485 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as auditor of the company is to be proposed at the forthcoming Annual General Meeting. Financial instruments The company does not make use of complex financial instruments. However, as noted on page 1, the company has a policy of hedging against major currency exposures. This is achieved through a combination of forward currency contracts and where appropriate the creation of currency overdrafts in respect of certain forecast sales transactions. This policy is monitored regularly by the board. By order of the board

This report was approved by the board of directors on 24 December 2021
and signed on behalf of the board by:

Name: paul cambria
Status: Director