TIDMCEPS
RNS Number : 8515K
CEPS PLC
10 May 2022
10 May 2022
CEPS PLC
('CEPS' OR THE 'COMPANY' OR THE 'GROUP')
FINAL RESULTS
The Board of CEPS is pleased to announce its final results for
the year ended 31 December 2021.
CHAIRMAN'S STATEMENT
I am pleased to present the results for CEPS plc for the year
ended 31 December 2021. As I have been saying for several years I
have been looking forward to the occasion when the published
accounts would be simpler to read and understand. Whilst the
comparatives for 2020 remain complex due to the accounting
treatment of discontinued operations, I am pleased that the results
we are reporting on for 2021 are hopefully clear and readily
understandable.
It already seems like a long time ago, but it is important to
remember that the first six months of this reporting period were
subject to lockdown regulations and of course, and for those of us
whose Christmas celebrations were put on hold, the very rapid rise
of the Covid Omicron variant towards the end of 2021, had, for a
briefer period, a major impact on the economy.
So, it is encouraging to report that sales for the Group have
risen from GBP11.9m, being the continuing activities in 2020, to
GBP20.3m in 2021. This represents a 70% increase. Because of the
impact of Covid restrictions this comparison is between "apples and
pears" and, were we to compare this with sales in the financial
year to 31 December 2019, the last year unaffected by Covid, this
would be a 62% increase. However, as shareholders are aware,
several acquisitions have been made in 2021 meaning the comparison
takes into account acquisitive as well as organic growth.
We are delighted that the strategic steps taken over the past
few years are now finally being evidenced in the results with this
being the first year, for some 10 years, that all the subsidiary
segments and the associate have been profitable. This is a major
positive step forward and as the old saying goes "you make money by
not losing money"!
In common with every enterprise in the United Kingdom, and
indeed Europe, our companies are of course facing issues with
recruitment and retention of their workforces. As readers of my
statements, with respect to this Company and other businesses with
which I am involved, will know this has been a concern and a theme
I have written about for many years. The problem of finding people
to do "the job" as I have said before is, in my view, only going to
get worse in the future. I am not going to enter a Leave/Remain
debate here as it is not relevant as this is a European-wide
problem. However, in the short term, with the number of vacancies
in the UK leading inexorably to significant wage rises and with the
modest strengthening of Sterling against the Euro, a number of
registered European workers who have left the UK will return.
The answer in the longer term is the use of more automation,
robotisation, artificial intelligence, smarter working and, dare I
say it, harder working for much more reward. The management teams
of the businesses are doing their jobs which involves working to
manage around these issues and to put in place plans to mitigate
these issues in the future.
It is interesting to observe that with constant social media and
rolling 24-hour news on a year-round basis these issues are
discussed, dissected, and agonised over by all and sundry. The UK
has had a driver, and in particular HGV driver, shortage for many,
many decades. Indeed, I recall as a 20-year-old considering
qualifying as a driver as the option looked like a ready source of
part- time work and, therefore, funding as a university student. If
one believed the rhetoric six months ago the whole country was
going to grind to a halt as nothing would ever be moved by road
again! Whilst I am fully aware that there are far more serious and
tragic events unfolding in Eastern Europe, I cannot recall when I
last read about the "driver crisis".
Whilst in no way belittling the issues facing people across the
country caused by steeply rising prices, history has shown these
events are short-lived and will pass. Indeed, with one of my "other
hats on", it appears to me that a number of public companies are
already starting to talk about distribution issues beginning to
ease and of course, largely unreported, gas prices have declined
over the past month, having reached a recent peak. If this trend
continues it will, in my view, mean that inflation, as driven by
gas prices will decline from May onwards!
Financial review
As already mentioned, total revenue from continuing operations
increased to GBP20.3m from GBP11.9m, an increase of 70%. In
addition, gross profits from continuing operations have increased
from GBP4.4m in 2020 to GBP8.4m, an increase of 93% and operating
profits from continuing operations have significantly improved from
a loss of GBP 252,000 to a profit of GBP1.6m.
Looking at the underlying companies in some more detail.
Aford Awards
As shareholders will recall, we effected a change of the
management team on the 30 September 2020. This new team has made
rapid progress over the past 18 months. As a result of the
transaction, CEPS' shareholding increased from 70% to 75% and the
amount of loan stock held by CEPS increased by GBP525,000. I am
aware that a few market participants struggle with the idea that
superficially little appears to have changed in the corporate
structure and yet somehow the extra loan stock has been created!
This is a very important part of the CEPS strategy and shareholders
should be aware that, periodically, these sorts of reconstructions
will take place.
The new team took the opportunity afforded by the significant
reduction of business in the first six months of 2021 caused by the
lockdown to completely restructure and reposition the operation.
This meant that the company was fully set up to action the next
part of the plan, which was to acquire, relocate and integrate very
small lifestyle type businesses in its market. To that end, three
small operations were acquired in September 2021.
As a result of these small transactions being announced, an
owner of another business in the sector, Impact Promotional
Merchandise Limited, got in touch and the business and assets of
that operation were acquired very recently on 12 April 2022 for an
initial payment of GBP558,000 and deferred consideration of an
additional GBP450,000 to be paid post completion on pre-determined
dates. I have personally guaranteed the deferred consideration
should Aford Awards not be able to fund it.
Sales were GBP1.4m as compared to GBP844,000 in 2020, against
and of great relevance GBP2.0m in 2019, the last year unaffected by
Covid. The associated EBITDAs were GBP235,000, GBP111,000 (after
significant government support) and GBP411,000 respectively. I am
pleased to say that the company has just had a record first quarter
in 2022 as business starts to return to normal post-Covid.
Friedman's
During 2021 there has been a strong recovery in the Friedman's
business, the lycra printer, and a much slower recovery in Milano
International, the manufacturer of leotards and gymnastic clothing.
Whilst gym clubs remained closed throughout the last two years
there was effectively no demand for the products. More recently, as
clubs have reopened and competitions have recommenced following
easing of lockdown restrictions in the first quarter of 2022, sales
have rebounded.
Friedman's is currently struggling to acquire plain lycra and is
facing significant rises in prices when it can be obtained. In
addition, in the Milano business, there is a shortage of people to
manufacture the products and this will for a period act as a
constraint on the company.
Sales were GBP4.8m as compared to GBP3.9m in 2020 and GBP5.8m in
2019. The associated EBITDAs were GBP809,000, GBP124,000 (after
significant government support) and GBP1.2m respectively.
Hickton Group
With the inclusion of the Cook Brown businesses for a full 12
months (they were acquired in March 2020), and the inclusion for
almost ten months of the Millington Lord group of businesses (which
includes Millington Lord Limited ("MLL") as a holding company with
three wholly owned subsidiaries: Morgan Lambert Limited ("ML"),
Qualitas Compliance Limited ("QC") and Morgan Lambert Electrical
Limited ("MLE")), revenues have increased dramatically from GBP7.1m
to GBP14.2m. For completeness, and to demonstrate the growth in the
business, sales were GBP4.7m in 2019. EBITDA in 2021 was GBP1.5m,
up from GBP929,000 in 2020 and GBP850,000 in 2019.
In order to retain its working capital headroom while having
sufficient funding to pay the deferred and earnout consideration in
relation to the acquisition of MLL, Hickton Group carried out a
modest fundraise of GBP433,800 and CEPS invested GBP143,640 in a
mix of ordinary equity and 8% loan stock. As the management team
was keen to commit more funds CEPS was content to let its holding
moderately decrease from 54.7% to 52.4%.
MLL is a gas and electrical safety consultancy, providing
auditing, consulting and training services. ML is the group's
principal operating subsidiary and services clients in the social
housing market, whereas QC provides the same services to private
sector clients. This addition has complemented the existing
building services and the companies have integrated well within the
Hickton Group. We have an ambitious management team with their own
equity incentive to continue growing these businesses, looking to
add more quality building compliance services and income.
Vale Brothers
Following the sale of Davies Odell Limited to a new holding
company called Vale Brothers Group Limited and the effective merger
of the business with Vale Brothers in December 2020, it is pleasing
to report that the company contributed GBP66,000 of profit in 2021,
accounted for as an associate as CEPS' shareholding is only
33%.
It is worth noting that as an 85% subsidiary of CEPS in prior
years, Davies Odell had lost money in seven of the previous eight
years.
In common with the other companies in the CEPS Group, Vale
Brothers is struggling to recruit skilled workers and is
experiencing high input cost inflation. Whilst the company is
passing these on by increasing prices there will be an inevitable
lag in timing.
Capital and debt structure
In order to provide funds for the modest "bolt-on" acquisitions
mentioned above, a placing of 4,000,000 new shares was made at 40p
per share in September raising GBP1.6m of gross funds or GBP1.58m
net of expenses. This takes the total issued share capital to
21,000,000 shares. Details of the major shareholders in CEPS are
set out in the Directors' Report.
In May 2021, a new loan was entered into with a third party to
provide GBP2.0m to replace the existing GBP2.0m from another third
party. This loan is due to be repaid on 30 June 2025. This,
therefore, allows three years to ensure adequate repayment of
sufficient of the current GBP5.0m of loan stock due to CEPS from
Group companies.
In addition, the term of the loan from Chelverton Asset
Management Limited (which as at 31 December 2021 stood at
GBP2,950,000 with all interest having been paid up to the year-end)
has been extended such that it is now on a rolling 18-month notice
basis.
I continue to personally guarantee both these loans. In
addition, my loan to the Company stands at GBP192,000 at 31
December 2021.
Cash held by the Company at the financial year end was
GBP468,000 (2020: GBP31,000) and Group cash was GBP2.1m (2020:
GBP2.3m).
Pension
The Company's defined benefit pension scheme has reported a
surplus in recent years which has allowed the Trustees to enter
into a buy-in contract with Aviva. This will secure the benefits
for the members of the scheme and remove future funding risks for
pensioners and the Company. The current expectation is that the
contract will convert to a full buy-out policy in due course
without the need for any additional funding and whilst I would not,
as yet, anticipate any significant surplus at that time, if one
does arise there would be some cash returning into CEPS. We are,
therefore, now considerably down the road to removing both the
risks and the administrative costs that have previously arisen from
the scheme.
Outlook
We are much encouraged by the results produced here as they
confirm that the strategy being followed over the past four years
is now beginning to show good progress. As the vestiges of the
Covid crisis are put behind us and the issues directly and
indirectly resulting from the various lockdowns are overcome, we
are confident that the CEPS group of companies will make good
progress in the coming year.
David Horner
Chairman
9 May 2022
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 (which forms part of
domestic UK law pursuant to the European Union (Withdrawal) Act
2018).
David Horner, Chairman, CEPS PLC
Tel: 01225 483030
James Caithie, Sandy Jamieson, Cairn Financial Advisers LLP
Nominated Adviser
Tel: 020 7213 0880
CEPS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 DECEMBER 2021
Continuing Discontinued
Operations Operations Total
Audited Audited Audited Audited
2021 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
Revenue (note 4) 20,333 11,861 2,091 13,952
Cost of sales (11,946) (7,511) (1,817) (9,328)
Gross profit 8,387 4,350 274 4,624
Other operating income 276 690 171 861
Administration expenses before
exceptional items (7,043) (4,811) (662) (5,473)
Adjusted operating profit/(loss) 1,620 229 (217) 12
Exceptional items - (127) (64) (191)
Impairment of intangible assets
(note 10) - (354) - (354)
Operating profit/(loss) 1,620 (252) (281) (533)
Analysis of operating profit/(loss)
- Trading 2,002 659 (217) 442
- Exceptional items - (127) (64) (191)
- Impairment of intangible
assets - (354) - (354)
- Group costs (382) (430) - (430)
1,620 (252) (281) (533)
Profit on disposal of discontinued
operation - - 626 626
Share of associate 66 - - -
Finance income 24 24 - 24
Finance costs (714) (732) (30) (762)
Profit/(loss) before tax 996 (960) 315 (645)
Taxation (note 5) (204) (20) - (20)
Profit/(loss) for the financial
year 792 (980) 315 (665)
Other comprehensive income/(loss):
Items that will not be reclassified
to profit or loss
Actuarial gain/(loss) on defined
benefit pension plans 73 (13) - (13)
Other comprehensive income/(loss)
for the year, net of tax 73 (13) - (13)
Total comprehensive income/(loss)
for the financial year 865 (993) 315 (678)
Income/(loss) attributable
to:
Owners of the parent 296 (939) 315 (624)
Non-controlling interests 496 (41) - (41)
792 (980) 315 (665)
Total comprehensive income/(loss)
attributable to:
Owners of the parent 369 (952) 315 (637)
Non-controlling interests 496 (41) - (41)
865 (993) 315 (678)
Earnings per share
- basic and diluted (note 6) 1.64p (5.52p) 1.85p (3.67p)
CEPS PLC
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
2021 2020
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment (note 7) 764 633
Right-of-use assets (note 8) 1,225 976
Intangible assets (note 10) 10,729 9,208
Investments 66 -
12,784 10,817
Current assets
Inventories 1,612 1,441
Trade and other receivables 3,036 1,883
Cash and cash equivalents (excluding bank overdrafts) 2,081 2,332
6,729 5,656
Total assets 19,513 16,473
Equity
Capital and reserves attributable to owners of
the parent
Called up share capital (note 11) 2,100 1,700
Share premium (note 11) 7,017 5,841
Retained earnings (8,040) (8,402)
1,077 (861)
Non-controlling interests in equity 2,465 1,954
Total equity 3,542 1,093
Liabilities
Non-current liabilities
Borrowings 8,436 6,415
Lease liabilities 1,096 887
Trade and other payables 45 -
Deferred tax liability 255 51
9,832 7,353
Current liabilities
Borrowings 1,759 3,861
Lease liabilities 258 248
Trade and other payables 3,141 2,909
Current tax liabilities 981 1,009
6,139 8,027
Total liabilities 15,971 15,380
Total equity and liabilities 19,513 16,473
The comprehensive expense within the parent company financial
statements for the year was a loss of GBP245,000 (2020: profit of
GBP1,343,000).
CEPS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARED 31 DECEMBER 2021
2021 2020
GBP'000 GBP'000
Cash flows from operating activities
Profit/(loss) for the financial year 792 (665)
Adjustments for:
Depreciation and amortisation 564 601
Loss on disposal of fixed assets 6 -
Profit on disposal of subsidiaries - (626)
Customer list impairment - 182
Impairment of goodwill - 172
Pension contributions less than administrative
charge 84 9
Share of associate profit (66) -
Net finance costs 690 738
Taxation charge 204 20
Changes in working capital:
Movement in inventories (171) 375
Movement in trade and other receivables (261) 325
Movement in trade and other payables (469) 377
Cash generated from operations 1,373 1,508
Corporation tax paid (187) (241)
Net cash generated from operations 1,186 1,267
Cash flows from investing activities
Interest received 13 2
Acquisition of subsidiaries, net of cash acquired (1,220) (866)
Acquisition in minority shareholdings in subsidiaries - (1,366)
Disposal of subsidiaries, net of cash - (4)
Purchase of property, plant and equipment (309) (95)
Proceeds from sale of assets 35 1
Purchase of intangibles assets (73) (24)
Net cash used in investing activities (1,554) (2,352)
Cash flows from financing activities
Issue of share capital 1,018 -
Proceeds from borrowings 3,330 3,174
Repayment of borrowings (3,108) (904)
Loan issue costs paid - (86)
Proceeds from subsidiary share issue 4 26
Interest paid (791) (432)
Lease liability payments (336) (319)
Net cash generated from financing activities 117 1,459
Net (decrease)/increase in cash and cash equivalents (251) 374
Cash and cash equivalents at the beginning
of the year 2,332 1,958
Cash and cash equivalents at the end of the
year 2,081 2,332
Major non-cash movements: GBP558,000 of new share capital was
settled against a loan liability and there were GBP555,000
of non-cash additions to right-of-use assets and lease
liabilities in the year (no major non-cash movements in 2020).
CEPS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 DECEMBER 2021
Attributable
to owners Non-controlling
Share Share Retained of the interest Total
capital premium earnings parent equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 1,700 5,841 (6,808) 733 2,018 2,751
Actuarial loss - - (13) (13) - (13)
Loss for the year - - (624) (624) (41) (665)
Total comprehensive
loss for the year - - (637) (637) (41) (678)
Changes in ownership
interest in subsidiaries - - (957) (957) (23) (980)
Total distributions
recognised directly
in equity - - (957) (957) (23) (980)
At 31 December 2020 1,700 5,841 (8,402) (861) 1,954 1,093
Actuarial gain - - 73 73 - 73
Profit for the year - - 296 296 496 792
Total comprehensive
income for the financial
year - - 369 369 496 865
Shares issued in
the year 400 1,176 - 1,576 - 1,576
Changes in ownership
interest in subsidiaries - - (7) (7) 15 8
Total contributions
and distributions
recognised directly
in equity 400 1,176 (7) 1,569 15 1,584
At 31 December 2021 2,100 7,017 (8,040) 1,077 2,465 3,542
Share capital comprises the nominal value of shares subscribed
for.
Share premium represents the amount above nominal value received
for shares issued, less transaction costs.
Retained earnings comprise accumulated comprehensive income for
one year and prior periods attributable to the parent, less
dividends paid.
Non-controlling interest represents the element of retained
earnings which is not attributable to the owners of the parent.
Notes to the financial information
1. General information
CEPS PLC (the 'Company') is a company incorporated and domiciled
in England and Wales. The Company is a public company limited by
shares, which is listed on the AIM market of the London Stock
Exchange. The address of the registered office is 11 Laura Place,
Bath BA2 4BL.
The principal activities of the Company are that of a holding
company for service and manufacturing companies, acquiring stakes
in stable, profitable and steadily growing entrepreneurial
companies. The activities of the Company's trading subsidiaries are
described in note 4. Segmental analysis is given in note 4.
The financial statements are presented in British Pounds
Sterling (GBP), the currency of the primary economic environment in
which the Group's activities are operated and are reported in
GBP'000. The Group comprises CEPS PLC and its subsidiary companies
as set out in note 4. The financial statements are to the year
ended 31 December 2021.
The registered number of the Company is 00507461.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied throughout the year, unless
otherwise stated.
2. Basis of preparation and going concern
This announcement is an extract from the consolidated financial
statements of the Company for the year ended 31 December 2021 and
comprises the Company and its subsidiaries. The consolidated
financial statements were authorised for issuance on 9 May 2022.
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 December 2020
or 2021 within the meaning of Section 434 of the Companies Act
2006, but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies and those
for 2021 will be delivered following the Company's Annual General
Meeting. The auditor's reports on the statutory accounts for the
years ended 31 December 2020 and 31 December 2021 were unqualified
with reference in 2020 only to a material uncertainty in respect of
going concern due to the global Coronavirus pandemic, and do not
contain statements under s498(2) or (3) Companies Act 2006.
These financial statements have been prepared on a going concern
basis under the historical cost convention in accordance with UK
adopted International Financial Reporting Standards ('IFRS'), IFRIC
interpretations and the Companies Act 2006 as applicable to
companies reporting under IFRS.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 3.
Certain statements in this announcement constitute
forward-looking statements. Any statement in this announcement that
is not a statement of historical fact including, without
limitation, those regarding the Company's future expectations,
operations, financial performance, financial condition and business
is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially. These risks and uncertainties include, amongst
other factors, changing economic, financial, business or other
market conditions. These and other factors could adversely affect
the outcome and financial effects of the plans and events described
in this announcement and the Company undertakes no obligation to
update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this
announcement should be construed as a profit forecast.
The financial information set out in this announcement was
approved by the Board on 9 May 2022.
3. Critical accounting assumptions, judgements and estimates
The directors make estimates and assumptions concerning the
future. They are also required to exercise judgement in the process
of applying the Company's accounting policies. Estimates and
judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are assessed below:
i) Impairment of intangible assets (including goodwill)
The Group tests annually whether intangible assets (including
goodwill) have suffered any impairment. The recoverable amounts of
the cash-generating units have been determined based on
value-in-use calculations. The calculations require the use of
estimates (note 10).
ii) Impairment of non-current assets
The Company assesses the impairment of tangible fixed assets
subject to depreciation whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Factors
considered important that could trigger an impairment review
include the following:
-- significant underperformance relative to historical or projected future operating results;
-- significant changes in the manner of the use of the acquired
assets or the strategy for the overall business; and
-- significant negative industry or economic trends.
iii) Depreciation and residual values
The directors have reviewed the asset lives and associated
residual values of all fixed asset classes and have concluded that
asset lives and residual values are appropriate.
The actual lives of the assets and residual values are assessed
annually and may vary depending on a number of factors. In
re-assessing asset lives, factors such as technological innovation,
product life cycles and maintenance programmes are taken into
account. Residual value assessments consider issues such as future
market conditions, the remaining life of the asset and projects'
disposal values.
iv) Carrying value of stocks
Management reviews the market value of and demand for its stocks
on a periodic basis to ensure stock is recorded in the financial
statements at the lower of cost and net realisable value. Any
provision for impairment is recorded against the carrying value of
stocks. Management uses its knowledge of market conditions,
historical experiences and estimates of future events to assess
future demand for the Company's products and achievable selling
prices.
v) Recoverability of trade debtors
Trade and other debtors are recognised to the extent that they
are judged recoverable. Management reviews are performed to
estimate the level of reserves required for irrecoverable debt.
Provisions are made specifically against invoices where
recoverability is uncertain.
Management makes allowance for doubtful debts based on an
assessment of the recoverability of debtors. Allowances are applied
to debtors where events or changes in circumstances indicate that
the carrying amounts may not be recoverable. Management
specifically analyses historical bad debts, customer
creditworthiness, current economic trends and changes in customer
payment terms when making a judgement to evaluate the adequacy of
the provision for doubtful debts. Where the expectation is
different from the original estimate, such difference will impact
the carrying value of debtors and the charge in the Consolidated
Statement of Comprehensive Income.
vi) Leases
Management utilise judgement in respect of any option clauses in
leases and whether such an option to extend would be reasonably
certain to be exercised. Management consider all facts and
circumstances including past practice, costs of alternatives and
future forecasts to determine the lease term. Management also apply
judgement and estimation in assessing the discount rate, which is
based on the incremental borrowing rate. These judgements impact on
the lease term and associated lease liabilities.
vii) Retirement benefit liabilities
The Group operates a defined benefits pension scheme. The scheme
is subject to triennial actuarial valuation and the Group
commissions an independent qualified actuary to update to each
financial year end the previous triennial result. The results of
this update are included in the financial statements. In reaching
the annually updated results management makes assumptions and
estimates. These assumptions and estimates are made advisedly, but
are not any guarantee of the performance of the scheme or of the
outcome of each triennial review.
4. Segmental analysis
The Chief Operating Decision-Maker ('CODM') of the Group is its
Board. Each operating segment regularly reports its performance to
the Board which, based on those reports, allocates resources to and
assesses the performance of those operating segments.
The operating segments set out below are the only level for
which discrete information is available or utilised by the
CODM.
Operating segments and their principal activities are as
follows:
-- Aford Awards, a sports trophy and engraving company;
-- Friedman's, a convertor and distributor of specialist lycra,
including Milano International (trading as Milano Pro-Sport), a
designer and manufacturer of leotards;
-- Hickton Group, comprising Hickton Consultants, BRCS, Cook
Brown, Morgan Lambert and Qualitas Compliance providers of services
to the construction industry.
Discontinued operations represent the activities of Davies
Odell, a manufacturer and distributor of protection equipment,
matting and footwear components, until disposal in December
2020.
Group costs, costs incurred at Head Office level to support the
activities of the Group.
The United Kingdom is the main country of operation from which
the Group derives its revenue and operating profit and is the
principal location of the assets and liabilities of the Group.
Group revenue is recognised at a point in time, other than
GBP4,234,000 (2020: GBP2,674,000) in respect of Cook Brown Building
Control which is recognised over a period in time as the services
are performed, in line with the requirements of IFRS 15.
The Board assesses the performance of each operating segment by
a measure of adjusted earnings before interest, tax, Group costs,
depreciation and amortisation (EBITDA) before exceptional costs.
Other information provided to the Board is measured in a manner
consistent with that in the financial statements.
i) Results by segment
Aford Hickton Total
Awards Friedman's Group Group
2021 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,385 4,762 14,186 20,333
Expenses (1,150) (3,953) (12,665) (17,768)
Segmental result (EBITDA) 235 809 1,521 2,565
Depreciation and amortisation
charge (22) (135) (100) (257)
IFRS 16 depreciation (45) (168) (93) (306)
Group costs (382)
Share of associate profit 66
Net finance costs (including
IFRS 16) (690)
Profit before taxation 996
Taxation (204)
Profit for the year 792
Aford Hickton Continuing Discontinued Total
Awards Friedman's Group operations operations Group
2020 2020 2020 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 844 3,878 7,139 11,861 2,091 13,952
Expenses (733) (3,754) (6,210) (10,697) (2,211) (12,908)
Segmental result
(EBITDA) before
exceptional costs 111 124 929 1,164 (120) 1,044
Depreciation and
amortisation charge (7) (209) (40) (256) (63) (319)
IFRS 16 depreciation (47) (139) (63) (249) (34) (283)
Exceptional costs - - (481) (481) (64) (545)
Profit on disposal
of discontinued
operations - 626 626
Group costs (430) - (430)
Net finance costs
(including IFRS
16) (708) (30) (738)
(Loss)/profit before
taxation (960) 315 (645)
Taxation (20) - (20)
(Loss)/profit for
the year (980) 315 (665)
ii) Assets and liabilities by segment
As at 31 December
Segment net
Segment assets Segment liabilities assets/(liabilities)
2021 2020 2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Continuing operations
CEPS Group 543 57 (5,251) (5,995) (4,708) (5,938)
Aford Awards 1,974 1,661 (789) (601) 1,185 1,060
Friedman's 7,620 7,363 (2,146) (2,227) 5,474 5,136
Hickton Group 9,376 7,393 (7,785) (6,558) 1,591 835
Total - Group 19,513 16,474 (15,971) (15,381) 3,542 1,093
(iii) Revenue by geographical destination
2021 2020
GBP'000 GBP'000
UK 19,048 11,939
Europe 762 1,091
Rest of world 523 922
20,333 13,952
(iv) Nature of revenue
2021 2020
GBP'000 GBP'000
Products -
recognised
at a point
in time 6,147 6,813
Services -
recognised
over time
delivered 14,186 7,139
20,333 13,952
5. Taxation
2021 2020
GBP'000 GBP'000
Analysis of taxation in the year:
Current tax
Tax on profits of the year 153 41
Tax in respect of prior years (9) (14)
Total current tax 144 27
Deferred tax
Current year deferred tax movement 8 (13)
Tax in respect of prior years 20 6
Change in tax rate 32 -
Total deferred tax 60 (7)
Total tax charge 204 20
The tax assessed for the year is higher (2020: higher) than the
standard rate of corporation tax in the UK (19%) (2020: 19%)
Factors affecting current tax:
Profit/(loss) before taxation 996 (645)
Profit/(loss) multiplied by the standard rate
of UK tax of 19% (2020: 19%) 189 (123)
Effects of:
Expenses not deductible 27 46
Expenses not deductible goodwill impairment - 67
Additional capital allowances (15) -
Additional research and development allowances (20) -
Adjustments to tax in prior periods 11 (14)
Other timing differences - (2)
Gain on disposal not taxed - (119)
Adjustments to deferred tax rate 32 6
Deferred tax not recognised (20) 159
Total tax charge 204 20
The rate from 1 April 2020 remained at 19% rather than the
previously enacted reduction to 17%. In May 2021 a change in rate
to 25% from April 2023 was substantively enacted. The rate of 25%
is accordingly applied to UK deferred taxation balances at 31
December 2021 (2020: 19%).
There are tax losses carried forward in the Company of
approximately GBP1.8m and in the subsidiary companies of GBP30,000
(2020: GBP1.3m and GBP195,000).
6. Earnings per share
Basic earnings per share is calculated on the profit for the
year after taxation attributable to the owners of the parent of
GBP277,000 (2020: loss of GBP624,000) and on 18,084,932 (2020:
17,000,000) ordinary shares, being the weighted number in issue
during the year.
Basic earnings per share for continuing operations is calculated
on the profit for the year after taxation attributable to owners of
the parent of GBP296,000 (2020: loss of GBP939,000) and on
18,084,932 (2020: 17,000,000) ordinary shares, being the weighted
number in issue during the year. Basic earnings per share from
discontinued operations is calculated on the profit for the year
after taxation attributable to owners of the parent of GBPnil
(2020: profit of GBP315,000) and on 18,084,932 (2020: 17,000,000)
ordinary shares, being the weighted number in issue during the
year.
There are no potentially dilutive shares in the Group.
7. Property, plant and equipment
Leasehold Plant and Motor Total
property machinery vehicles
improvements
Group GBP'000 GBP'000 GBP'000 GBP'000
Cost
at 1 January 2020 677 4,049 46 4,772
Assets acquired on purchase
of a subsidiary 34 77 - 111
Additions at cost 22 74 - 96
Disposals on sale or administration
of subsidiaries (253) (3,559) (37) (3,849)
Disposals - (35) - (35)
at 31 December 2020 480 606 9 1,095
Assets acquired on purchase
of a subsidiary or business - 43 - 43
Additions at cost 7 289 13 309
Disposals - (172) (1) (173)
at 31 December 2021 487 766 21 1,274
Accumulated depreciation
at 1 January 2020 340 3,298 35 3,673
Accumulated depreciation
acquired on purchase of a
subsidiary 24 51 - 75
Charge for the year 50 202 1 253
Disposals on sale or administration
of subsidiaries (225) (3,253) (27) (3,505)
Disposals - (34) - (34)
at 31 December 2020 189 264 9 462
Charge for the year 45 135 - 180
Disposals - (131) (1) (132)
at 31 December 2021 234 268 8 510
Net book amount
at 31 December 2021 253 498 13 764
at 31 December 2020 291 342 - 633
8. Right-of-use assets
Leasehold Plant and
property machinery Motor
improvements vehicles Total
Group GBP'000 GBP'000 GBP'000 GBP'000
Cost
at 1 January 2020 1,321 - 149 1,470
Assets acquired on purchase
of a subsidiary 30 11 14 55
Additions at cost 162 5 - 167
Reclassification 39 - (39) -
Disposals on sale of a subsidiary (52) - (48) (100)
Disposals at the end of the
lease term (98) - (64) (162)
At 31 December 2020 1,402 16 12 1,430
Assets acquired on purchase
of a subsidiary 20 - - 20
Additions at cost 354 181 - 535
Disposals at the end of the
lease term (162) - (12) (174)
At 31 December 2021 1,614 197 - 1,811
Accumulated depreciation
At 1 January 2020 320 - 78 398
Charge for the year 246 5 32 283
Disposals on the sale of
a subsidiary (26) - (39) (65)
Disposals at the end of the
lease term (98) - (64) (162)
at 31 December 2020 442 5 7 454
Charge for the year 252 49 5 306
Disposals at the end of the
lease term (162) - (12) (174)
At 31 December 2021 532 54 - 586
Net book amount
at 31 December 2021 1,082 143 - 1,225
at 31 December 2020 960 11 5 976
At the year end, assets held under hire purchase contracts and
capitalised as plant and machinery right-of-use assets have a net
book value of GBP76,000 (2020: GBP46,000).
The depreciation of GBP29,000 (2020: GBP23,000) in respect of
these has been charged to cost of sales in the Consolidated
Statement of Comprehensive Income.
On 29 December 2021, a subsidiary entered into new property
leases to replace those ending on its existing premises on 1
January 2022. The leases are for a term of up to 10 years and the
estimated right-of-use asset of GBP750,000 will be accounted for
from 1 January 2022.
9. Business combinations and disposals
i) Acquisition in 2021 of Millington Lord Limited
On 15 March 2021 a subsidiary, Hickton Group Limited, acquired
100 per cent. of the issued share capital of Millington Lord
Limited with its two trading subsidiaries Morgan Lambert Limited
and Qualitas Compliance Limited. There was initial cash
consideration of GBP700,000 together with deferred and contingent
amounts of GBP400,000 which were subsequently paid in the year.
The acquisition has been accounted for using the acquisition
method of accounting. After including the fair value of customer
intangible assets and related deferred tax, the fair value of net
assets acquired was GBP248,000.
Goodwill of GBP852,000 arose from the acquisition primarily in
respect of the overall workforce skills and their ability to
generate income. Acquisition fees of GBP45,500 were incurred which
have been expensed as an administrative cost in the year.
The following table shows the fair value of assets and
liabilities included in the consolidated statements at the date of
acquisition:
Fair value
GBP'000
Identifiable assets and liabilities
Intangible assets 350
Property, plant and equipment 33
Trade and other receivables 892
Cash and cash equivalents 55
Trade and other payables (726)
Lease liabilities (20)
Borrowings (223)
Corporation tax payable (17)
Deferred taxation (96)
248
Goodwill 852
1,100
Consideration
Cash consideration 1,100
Analysis of cash flows on acquisition
Cash paid 1,100
Less: net cash acquired with
the subsidiary (55)
Net cash outflow on acquisition 1,045
From the date of acquisition, Morgan Lambert Limited and
Qualitas Compliance Limited contributed GBP4,490,000 of revenue and
GBP221,000 of profit before tax (excluding amortisation of
intangible assets). If the combination had taken place at the
beginning of the year, the revenue would have been GBP5,318,000 and
the profit before tax would have been GBP284,000.
ii) Acquisition in 2021 by Aford Awards Limited of trophy businesses' trade and assets
A subsidiary, Aford Awards Limited, purchased tangible fixed
assets with a fair value of GBP30,000 and the trade, including
customer relationships valued at GBP207,000, of three trophy
businesses on 2 September 2021 for cash consideration of GBP176,000
paid in 2021 and GBP131,000 of estimated contingent consideration
payable. After providing for GBP48,000 of deferred tax, GBP117,000
of goodwill arises in respect of the businesses.
The businesses contributed GBP69,000 of revenue for the four
months in the year after the acquisition date. They are integrated
into the overall Aford Awards business and generate similar
margins.
iii) Acquisition in 2020 of Cook Brown Building Control Limited and Cook Brown Energy Limited
On 11 March 2020 a newly incorporated subsidiary, Hickton Group
Limited, acquired 100 per cent of the issued share capital of Cook
Brown Building Control Limited ('CBBC') and Cook Brown Energy
Limited ('CBE').
The acquisition has been accounted for using the acquisition
method of accounting. After the alignment of accounting policies
and other adjustments to the valuation of assets and liabilities to
reflect their fair value at acquisition, the fair value of net
assets acquired was GBP296,000.
Goodwill of GBP3,234,000 arose from the acquisition primarily in
respect of the overall workforce skills and their ability to
generate income. Acquisition fees of GBP101,000 were incurred which
have been expensed as an exceptional administrative cost in the
year.
The following table shows the fair value of assets and
liabilities included in the consolidated statements at the date of
acquisition:
Fair value
GBP'000
Identifiable assets and liabilities
Intangible assets 9
Property, plant and equipment 91
Trade and other receivables 643
Cash and cash equivalents 734
Trade and other payables (1,021)
Lease liabilities (55)
Corporation tax payable (103)
Deferred taxation (2)
296
Goodwill 3,234
3,530
Consideration
Cash consideration 1,600
Existing loans offset against
consideration 270
Shares issued 25
Loan notes issued 1,635
3,530
Analysis of cash flows on acquisition
Cash paid 1,600
Less: net cash acquired with
the subsidiary (734)
Net cash outflow on acquisition 866
From the date of acquisition CBBC and CBE contributed
GBP2,834,000 of revenue and GBP437,000 of profit before tax. If the
combination had taken place at the beginning of the year, the
revenue would have been GBP3,408,000 and the profit before tax
would have been GBP517,000.
iv) Disposals in 2020 of CEM Press and the related subsidiaries and Davies Odell Limited
An administration process commenced in January 2020 in respect
of CEM Press and the related subsidiaries and they have been
treated as disposals from 1 January 2020.
On 20 December 2020, the Group acquired the minority interest of
15% in Davies Odell Limited and transferred the shares to a new
company, Vale Brothers Group Limited, in return for a 33%
shareholding. This ceased to be a subsidiary and is now treated as
an associate.
The trading from Davies Odell Limited and the profit on disposal
of all subsidiaries is presented in discontinued operations in the
Consolidated Statement of Comprehensive Income.
The assets and liabilities disposed of were as follows:
Davies
CEM companies Odell
GBP'000 GBP'000
Property, plant and equipment 239 139
Inventories 9 429
Trade and other receivables 1,135 396
Cash and cash equivalents 4 -
Borrowings (1,147) (303)
Trade and other payables (1,839) (404)
Lease liabilities (97) (58)
Corporation tax payable (103) -
Deferred taxation (53) -
(1,852) 199
Non-controlling interest released 1,027 -
(Profit)/loss on disposal (825) 199
The cash flows from the discontinued operations were as
follows:
2021 2020
GBP'000 GBP'000
Operating cash flows - 58
Investing cash flows - (5)
Financing cash flows - (164)
10. Intangible assets
Customer
relationship
Goodwill assets Other Total
Group GBP'000 GBP'000 GBP'000 GBP'000
Cost
at 1 January 2020 7,684 772 251 8,707
Additions at cost 3,234 - 34 3,268
Disposals (1,241) - - (1,241)
At 31 December 2020 9,677 772 285 10,734
Additions at cost 969 557 72 1,598
At 31 December 2021 10,646 1,329 357 12,332
Accumulated amortisation
and impairment
at 1 January 2020 1,626 590 131 2,347
Amortisation charge - - 66 66
Impairment 172 182 - 354
Disposals (1,241) - - (1,241)
at 31 December 2020 557 772 197 1,526
Amortisation charge - 50 27 77
at 31 December 2021 557 822 224 1,603
Net book amount
at 31 December 2021 10,089 507 133 10,729
at 31 December 2020 9,120 - 88 9,208
Goodwill is not amortised under IFRS, but is subject to
impairment testing either annually or on the occurrence of a
triggering event. Impairment charges are included in administration
expenses and disclosed as an exceptional cost.
Customer relationship related assets and other intangibles in
respect of computer software, website costs and licences are
amortised over their estimated economic lives. The annual
amortisation charge is included in administrative expenses in the
Consolidated Statement of Comprehensive Income.
Impairment tests for goodwill and intangible assets
The Group tests goodwill and intangible assets arising on the
acquisition of a subsidiary (customer lists) annually for
impairment or more frequently if there are indications that
goodwill or customer lists may be impaired.
For the purpose of impairment testing, goodwill and customer
lists are allocated to the Group's cash generating units (CGUs) on
a business segment basis:
Aford Hickton
Awards Friedman's Group Total
GBP'000 GBP'000 GBP'000 GBP'000
Goodwill
at 1 January 2020 1,040 3,167 2,033 6,240
Additions at cost - - 3,234 3,234
Impairment - - (354) (354)
at 31 December 2020 1,040 3,167 4,913 9,120
Additions at cost 117 - 852 969
at 31 December 2021 1,157 3,167 5,765 10,089
The recoverable amount of a CGU is based on value-in-use
calculations. These calculations use cash flow projections based on
financial budgets approved by management covering a five-year
period. Cash flows beyond five years are assumed to increase only
by a long-term growth rate of 1%. A discount rate of 11.0% (2020:
10.0%), representing the estimated pre-tax cost of capital, has
been applied to these projections.
A key assumption used in the value-in-use calculations is that
trading will return to pre-pandemic revenue levels in the
Friedman's and Aford Awards businesses. The Hickton Group
businesses have not been affected to any major degree and forecasts
reflect a continuation of 2021 trading results and underlying
growth trends.
Management has determined the budgeted revenue growth and gross
margins based on past performance and their expectations of market
developments in the future. Long-term growth rates are based on the
lower of the UK long-term
growth rate and management's general expectations for the
relevant CGU.
In respect of Aford Awards, Friedman's, Hickton Consultants,
Cook Brown and Morgan Lambert within the Hickton Group the
value-in-use calculation gives rise to sufficient headroom such
that reasonable changes in the key assumptions do not eliminate the
headroom. The Milano International business within the Friedman's
segment has been impacted by the pandemic, but a return to the
level of trading profits achieved prior to this supports the
goodwill in respect of this business.
At 31 December 2020 impairment charges of GBP354,000 were taken
against the BRCS business goodwill and customer list assets (within
Hickton Group) as this business incurred a loss in both 2019 and
2020. Actions have been taken to improve margins, but the business
had not recovered in 2021.
11. Share capital and share premium
Ordinary
Number GBP0.10 Share
of shares shares premium Total
GBP'000 GBP'000 GBP'000
At 1 January 2020 and 31
December 2020 17,000,000 1,700 5,841 7,541
Shares issued in the year 4,000,000 400 1,176 1,576
At 31 December 2021 21,000,000 2,100 7,017 9,117
On 24 September 2021, 4,000,000 GBP0.10 ordinary shares were
issued at 40 pence each resulting in a GBP400,000 increase in
nominal share capital and a GBP1,176,000 increase in the share
premium account after deducting share issue expenses of
GBP24,000.
12. Post balance sheet events
On 12 April 2022 Aford Awards Limited ('AAL') purchased the
business and related assets of Impact Promotional Merchandise
Limited. The consideration for the purchase was GBP1,008,000,
GBP558,000 being paid on completion with a deferred consideration
of GBP450,000 to be paid post completion in the following amounts
and on the following dates: GBP210,000 on 14 March 2023; GBP60,000
on 30 September 2023; GBP60,000 on 31 March 2024 and GBP60,000 on
31 March 2025. The initial consideration was funded as to GBP8,000
from AAL's existing cash resources, a loan of GBP450,000 from CEPS,
a loan of GBP50,000 from Paul Wood, the Managing Director of AAL,
and GBP50, 000 of a total loan of GBP90,000 from Rob Ferguson, the
Sales Director of AAL. All the loans have a coupon of 5% per annum.
There are no fixed repayment dates for the loans. The deferred
consideration payments, to the extent that they cannot be met by
AAL, have been guaranteed by D A Horner.
On 29 April 2022 the repayment date of the loan from Chelverton
Asset Management Limited to the Company, which stands at
GBP2,950,000, was changed from 31 March 2023 to being on a rolling
18-month basis. The Company's obligations in respect of this loan
have been guaranteed by D A Horner.
13. Distribution of the Annual Report and Notice of AGM
A copy of the 2021 Annual Report, together with a notice of the
Company's Annual General Meeting ('AGM') to be held at 11:30am on
Monday 13 June 2022 at 11 Laura Place, Bath BA2 4BL , will be sent
to all shareholders on Monday 16 May 2022. Further copies will be
available to the public from the Company Secretary at the Company's
registered address at 11 Laura Place, Bath BA2 4BL and from the
Group website, www.cepsplc.com .
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END
FR UKRBRUAUVRAR
(END) Dow Jones Newswires
May 10, 2022 03:40 ET (07:40 GMT)
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