TIDMCEPS
RNS Number : 4980Y
CEPS PLC
05 May 2023
5 May 2023
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 2022.
CHAIRMAN'S STATEMENT
At the beginning of this year being reported on, we had hoped,
indeed expected, that for the first time in several years we would
be reporting on a 'normal' year. In the event, amongst other
things, our hopes were dashed by the Russian invasion of Ukraine in
February 2022.
It is encouraging to report that sales for the CEPS Group have
increased from GBP20.3m in 2021 to GBP26.5m in 2022. This has
resulted from an increase in the underlying businesses, the full
12-month impact of acquisitions made in 2021, along with the
partial year impact of an acquisition made in 2022.
In addition, there has been a change in accounting estimate in
the Hickton accounts to bring its treatment of deferred income into
line with others in the industry. This has had a positive impact to
the profit before tax of GBP681,000 in these accounts and this
change will be explained more below and in the notes to the
accounts.
It is my view that the major market dislocation which developed
following the economies of the world rapidly leaving behind
lockdowns and the consequent supply issues created because of the
Covid epidemic, was followed by new and deeper supply chain
problems created by this unexpected and totally unwarranted
invasion of Ukraine. In addition to these world issues, in the UK
we managed to create further uncertainty both politically and
economically, the political issues in the governing party causing
there to be three Prime Ministers in the space of just under two
months and creating turmoil in the markets in the Autumn around the
'Mini Budget'. Almost all the proposals in this radical budget were
subsequently cancelled once a new Chancellor was in place.
In the UK, we are living with inflation of some 10% and interest
rates at multi-year highs, having risen ten times since November
2021 from 0.10% to the current 4.25%. The Bank of England has been
forecasting for some time that the UK economy would move into
recession, which we are pleased to see has to date proven to be
inaccurate. Very recently the IMF has forecast that the UK will be
the worst performing economy in the G20 in 2023, with a small
decline in GDP during the next twelve months. However, it should
also be noted that of the last 28 predictions by the IMF, 25 were
too pessimistic.
We are experiencing an economy that has been stagnating, with
increased levels of industrial action and a shortage of available
labour. In addition, there have been significant rises in energy
prices and industry-wide increases in input prices and, as
mentioned above, supply chain issues. However, there has been
recent evidence that as time passes and the economies of the world
transition away from the Covid period, these issues are beginning
to ease.
More recently, further market volatility has been caused by the
collapse of the Silicon Valley Bank and the distressed emergency
takeover of Credit Suisse has caused further uncertainty. We are
reassured that the UK banking system is very strong following the
major rebuilding of balance sheets over the past 15 years.
Financial review
As stated in the introduction, total revenue increased to
GBP26.5m from GBP20.3m, an increase of 30.1%, gross profits
increased from GBP8.4m to GBP10.9m, an increase of 30.1%, and
operating profits rose from GBP1.6m to GBP2.1m, an increase of
31.0%.
Looking at the financial performance of the underlying companies
in more detail:
Aford Awards ("Aford")
The company has made strong progress over the past 12 months
with the acquisitions made in 2021 having been successfully
integrated into the core business based in Maidstone.
A further major strategic step was taken in April 2022 when the
business and assets of Impact Promotional Merchandise Limited
("Impact") were acquired for a total consideration of GBP1.008m.
GBP558,000 was paid at completion with a further GBP450,000 to be
paid in three tranches between March 2023 and March 2025. The first
milestone has passed and, in accordance with the agreed terms,
GBP210,000 was paid in March 2023. Impact is a pure internet sales
business and, therefore, significantly increases Aford's presence
in this market. The company has looked at other acquisitions during
the year and, now Impact has been fully integrated, the acquisition
programme will be revitalised.
Sales in 2022 were GBP3.1m as compared to GBP1.4m in 2021 and
GBP2.0m in 2019, the last year unaffected by Covid. The associated
EBITDAs were GBP546,000, GBP235,000 and GBP411,000
respectively.
Friedman's/Milano International
As we forecast, and expected, sales have continued to recover
strongly at Friedman's, the lycra printer. However, and like last
year, whilst sales have recovered in Milano International, the
manufacturer of leotards and gymnastic clothing, it remains
loss-making.
The two companies together had sales of GBP6.4m in 2022 as
compared to GBP4.8m in 2021 and GBP5.8m in 2019. The associated
EBITDAs were GBP 897,000, GBP809,000 and GBP1.2m respectively.
However, in 2022 this was made up of a much-increased EBITDA at
Friedman's with Milano having gone backwards.
In the latter part of 2022, pressures on supply and costs of raw
materials started to ease and in 2023 we expect to see further
progress in both companies.
Hickton Group
As was mentioned at the interim results stage, the Hickton group
of companies experienced problems in retaining staff, problems in
recruiting staff and strong wage inflation. It became clear in the
year that following recent significant growth the business needed
to 'pause' and restructure its operations. The marketplace became
very competitive and recruiting staff was a real problem. More
structure has been progressively put in place and it is believed
that this has now rectified matters.
In addition, it became obvious, as a number of its staff were
recruited from market competitors, that Hickton's accounting
estimate of deferred income was significantly different to its
competitors. Therefore, it was decided that it was appropriate to
change this deferred income calculation. 2022 has benefitted from
the revision to brought forward deferred revenue of GBP363,000 and
by GBP318,000 for the application of the estimate to 2022 which,
before tax, will make a difference in this year of GBP681,000, with
no impact on the prior year's results. Details of the estimate
change are shown in note 3(viii).
Sales were GBP16.9m in 2022 as compared to GBP14.2m in 2021 and
GBP4.7m in 2019, the last year unaffected by Covid, demonstrating
the recent significant growth, which has been, in part, driven by
acquisitions made over this period. The associated EBITDAs were
GBP1.8m, GBP1.5m, and GBP850,000 respectively. EBITDA for 2022
without the estimate change would have been GBP1.1m.
It is also pleasing to be able to report that the first three
months of the current year have produced record sales and are
currently well ahead of budget.
Vale Brothers
The company has struggled through the year as its bought-in
products from China and India cost a lot more than had been
expected and the associated freight charges were, as has been well
reported, much higher for most of 2022. In addition, for its UK
manufactured products, the company found it very difficult to
recruit skilled staff and had to pay significantly more. Whilst the
company raised its prices across the board by some 10%, in
hindsight it needed a price rise of 20%. Whilst prices have since
increased further, it will take time to recover its position.
Capital and debt structure
There was no share issuance in the current year and, therefore,
the issued share capital remains at 21,000,000 shares.
The debt in CEPS PLC, the parent Company, remains unchanged with
a GBP2.0m loan from a shareholding third party with a coupon of 7%
and due to be repaid by 30 June 2025. In addition, the loan from
Chelverton Asset Management Limited of GBP2.95m with a coupon of 5%
repayable with a notice period of 18 months and a loan of
GBP192,000 from myself remain outstanding.
Cash held by the Company at the financial year end was
GBP256,000 (2021: GBP468,000) and Group cash was GBP1.3m (2021:
GBP2.1m).
Pension
As we brought to shareholders' attention in June 2022, we expect
the surplus from the pension scheme, which was transferred to
Aviva, to be paid to the Company by the end of 2023 and these
proceeds will be used to partially repay debt and to increase
working capital. The amount the Trustees expect to be left over is
in the order of GBP700,000, although it may be more or less than
that. After deducting the required amount of tax, currently
expected to be 35%, this would make the net amount receivable
GBP455,000.
Outlook
As mentioned in my introduction, things are currently very
uncertain across the UK and Europe. Sadly, the war in Ukraine
continues and currently there appears to be no end in sight.
European countries have rebalanced their economies and have
achieved major savings in energy which it is to be hoped will
become embedded.
With the impact of the draconian lockdown in China and with the
'Ever Given' container vessel blocking the Suez Canal, it became
clear to European buyers that they had been underpricing the risk
of sourcing so many key products from China. Coupled with the
population issues in China, we believe there will be a rebalancing
of production, bringing it much closer to home.
It is my opinion that the UK economy is now expected to
flat-line in 2023, but to 'bounce back' to near long-term trend
growth in 2024. Inflation is expected to decline sharply by the end
of the year, and it might well be that interest rates have already
peaked. As the countries of Europe and the World return to 'normal'
there is expected to be steady growth in the UK economy.
Taken overall, the Group has in the first quarter of 2023
performed ahead of expectations but, as I note above, significant
uncertainties remain for 2023.
It is the Board's intention to continue to develop the
underlying companies and, where appropriate, to make judicious
acquisitions to accelerate this anticipated organic growth.
Improvements in productivity, quality, service and margins are the
universal targets.
David Horner
Chairman
4 May 2023
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).
The directors of the Company accept responsibility for the
content of this announcement.
Enquiries
CEPS PLC
Vivien Langford, Group Finance
Director +44 1225 483030
Cairn Financial Advisers LLP
James Caithie / Sandy Jamieson
/ Emily Staples +44 20 7213 0880
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identi ed by their use of terms and phrases such as "believe",
"could", "should" "envisage", "estimate", "intend", "may", "plan",
"potentially", "expect", "will" or the negative of those,
variations or comparable expressions, including references to
assumptions. These forward-looking statements are not based on
historical facts but rather on the Directors' current expectations
and assumptions regarding the Company's future growth, results of
operations, performance, future capital and other expenditures
(including the amount, nature and sources of funding thereof),
competitive advantages, business prospects and opportunities. Such
forward looking statements re ect the Directors' current beliefs
and assumptions and are based on information currently available to
the Directors .
CEPS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 DECEMBER 2022
Audited Audited
2022 2021
GBP'000 GBP'000
Revenue (note 4) 26,449 20,333
Cost of sales (15,538) (11,946)
--------- ---------
Gross profit 10,911 8,387
Other operating income 47 276
Administration expenses (8,835) (7,043)
Operating profit 2,123 1,620
Analysis of operating profit
--------- ---------
- Trading 2,523 2,002
- Group costs (400) (382)
--------- ---------
2,123 1,620
--------------------------------------------------- --------- ---------
Share of associate (loss)/profit (66) 66
Finance income 27 24
Finance costs (738) (714)
---------
Profit before tax 1,346 996
Taxation (note 5) (270) (204)
--------- ---------
Profit for the financial year 1,076 792
--------- ---------
Other comprehensive income:
Items that will not be reclassified to profit or
loss
Actuarial gain on defined benefit pension plans 54 73
--------- ---------
Other comprehensive income for the year, net of
tax 54 73
--------- ---------
Total comprehensive income for the financial year 1,130 865
--------- ---------
Income attributable to:
Owners of the parent 460 296
Non-controlling interests 616 496
--------- ---------
1,076 792
--------- ---------
Total comprehensive income attributable to:
Owners of the parent 514 369
Non-controlling interests 616 496
--------- ---------
1,130 865
--------- ---------
Earnings per share
- basic and diluted (pence) (note 6) 2.19p 1.64p
--------- ---------
All activity relates to continuing operations.
CEPS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
2022 2021
GBP'000 GBP'000
-------- --------
Assets
Non-current assets
Property, plant and equipment (note 7) 671 764
Right-of-use assets (note 8) 1,694 1,225
Intangible assets (note 10) 11,728 10,729
Investments - 66
-------- --------
14,093 12,784
-------- --------
Current assets
Inventories 2,138 1,612
Trade and other receivables 4,006 3,036
Cash and cash equivalents (excluding bank overdrafts) 1,284 2,081
-------- --------
7,428 6,729
-------- --------
Total assets 21,521 19,513
======== ========
Equity
Capital and reserves attributable to owners of
the parent
Called up share capital (note 11) 2,100 2,100
Share premium (note 11) 7,017 7,017
Retained earnings (7,526) (8,040)
-------- --------
1,591 1,077
Non-controlling interests in equity 2,924 2,465
-------- --------
Total equity 4,515 3,542
-------- --------
Liabilities
Non-current liabilities
Borrowings 8,367 8,436
Lease liabilities 1,522 1,096
Trade and other payables 208 45
Deferred tax liability 338 255
-------- --------
10,435 9,832
-------- --------
Current liabilities
Borrowings 1,487 1,759
Lease liabilities 313 258
Trade and other payables 3,325 3,141
Current tax liabilities 1,446 981
-------- --------
6,571 6,139
-------- --------
Total liabilities 17,006 15,971
-------- --------
Total equity and liabilities 21,521 19,513
======== ========
The comprehensive expense within the parent Company financial
statements for the year was a loss of GBP24,000 (2021: loss of
GBP245,000).
CEPS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARED 31 DECEMBER 2022
2022 2021
GBP'000 GBP'000
Cash flows from operating activities
Profit for the financial year 1,076 792
Adjustments for:
Depreciation and amortisation 719 564
Loss on disposal of fixed assets 6 6
Pension contributions less than administrative
charge 69 84
Share of associate loss/(profit) 66 (66)
Net finance costs 711 690
Taxation charge 270 204
Changes in working capital:
Movement in inventories (518) (171)
Movement in trade and other receivables (970) (261)
Movement in trade and other payables 301 (469)
Cash generated from operations 1,730 1,373
Corporation tax paid (61) (187)
Net cash generated from operations 1,669 1,186
-------- --------
Cash flows from investing activities
Interest received 12 13
Acquisition of businesses and subsidiaries, net
of cash acquired (611) (1,220)
Purchase of property, plant and equipment (120) (309)
Proceeds from sale of assets 3 35
Purchase of intangibles assets (75) (73)
Net cash used in investing activities (791) (1,554)
-------- --------
Cash flows from financing activities
Issue of share capital - 1,018
Proceeds from borrowings 396 3,330
Repayment of borrowings (773) (3,108)
Dividends paid to non-controlling interests (157) -
Proceeds from subsidiary share issue - 4
Interest paid (815) (791)
Lease liability payments (326) (336)
-------- --------
Net cash (used in)/ generated from financing activities (1,675) 117
-------- --------
Net decrease in cash and cash equivalents (797) (251)
Cash and cash equivalents at the beginning of the
year 2,081 2,332
-------- --------
Cash and cash equivalents at the end of the year 1,284 2,081
-------- --------
Major non-cash movements: there were GBP807,000 of non-cash
additions to right-of-use assets and lease liabilities in the year
(2021: 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).
CEPS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 DECEMBER 2022
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 2021 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 (note 11) 400 1,176 - 1,576 - 1,576
Changes in ownership
interest in subsidiaries - - (7) (7) 15 8
---------- ---------- ----------- ------------- ------------------ ---------
Total amounts recognised
directly in equity - - (7) 1,569 15 1,584
---------- ---------- ----------- ------------- ------------------ ---------
At 31 December 2021 2,100 7,017 (8,040) 1,077 2,465 3,542
---------- ---------- ----------- ------------- ------------------ ---------
Actuarial gain - - 54 54 - 54
Profit for the year - - 460 460 616 1,076
---------- ---------- ----------- ------------- ------------------ ---------
Total comprehensive
income for the financial
year - - 514 514 616 1,130
---------- ---------- ----------- ------------- ------------------ ---------
Dividends paid in
respect of a non-controlling
interest - - - - (157) (157)
---------- ---------- ----------- ------------- ------------------ ---------
At 31 December 2022 2,100 7,017 (7,526) 1,591 2,924 4,515
---------- ---------- ----------- ------------- ------------------ ---------
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
the current 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 admitted to trading on the AIM market of the
London Stock Exchange. The address of the registered office is11
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 and steadily growing entrepreneurial companies. 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 financial statements are to the year ended 31 December
2022.
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 2022 and
comprises the Company and its subsidiaries. The consolidated
financial statements were authorised for issuance on 4 May 2023.
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 31 December 2021
or 2022 within the meaning of Section 434 of the Companies Act
2006, but is derived from those accounts. Statutory accounts for
2021 have been delivered to the Registrar of Companies and those
for 2022 will be delivered following the Company's Annual General
Meeting. The auditor's reports on the statutory accounts for the
years ended 31 December 2021 and 31 December 2022 were unqualified
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 consolidated financial statements have been prepared on a
going concern basis and under the historical cost convention. The
Group's business activities and financial position likely to affect
its future development, performance and position are set out in the
front end of the report.
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.
The Company has taken advantage of the exemption under the
Companies Act 2006 not to present its own Statement of
Comprehensive Income.
Going concern
The Directors have considered the trading performance and
financial position of the Company and of the Group together with
detailed forecasts for the period to the end of 2024. The Aford
Awards Group Holdings, Signature Fabrics and Hickton Group
sub-groups service their bank and shareholder held debt from cash
generated in the trading subsidiaries which are trading profitably
and which have recovered from the impacts of the pandemic. The
Group is generating cash from operations with significant headroom
in the banking covenants and mitigating actions could be taken to
compensate for the current inflationary pressures and a degree of
fluctuation in the economy. The Company had cash balances at 31
December 2022 and is receiving interest and fees from the trading
subsidiary groups.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to operate and to meet liabilities for the foreseeable future.
Accordingly, the going concern basis of preparation continues to be
adopted in the financial statements.
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, in accordance with the
accounting policy. 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.
viii) Recognition of revenue in respect of services and change in accounting estimate
Revenue is recognised in the period in which the services are
provided in accordance with the stage of completion of the
contract. This requires a degree of estimation in respect of the
stage of completion and time required to complete the services but
is based on experience and data from completed services.
In the year, the directors recognised that the prior estimates
in a subsidiary were too prudent by reference to actual outcomes
and the specific tasks to be completed and have applied a revised
method with increased reference to experience and the expected
costs as services progress. This has been treated as a change in
accounting estimate and application of the new method has resulted
in a reduction in deferred income and increase in revenue of
GBP681,000 for the year ended 31 December 2022, of which GBP363,000
relates to income which would not have been deferred at 31 December
2021 under the new method and a further GBP318,000 recognised for
services that commenced in 2022. This change brings the company in
line with industry norms.
ix) Acquisitions
Fair values have been applied on the acquisition of businesses
which involve a degree of judgement and estimation, in particular
in the identification and evaluation of intangible assets including
customer relationships. The values recognised are derived from
discounted cash flow forecasts and assumptions based on experience
and estimated factors relevant to the nature of the business
activity.
Where contingent consideration arises in respect of
acquisitions, the best estimate of further payments to be made is
accrued. The actual trading results may result in different amounts
being payable and subsequent adjustments to the deferred
consideration.
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 Quality Control, BRCS, Cook
Brown, Morgan Lambert and Qualitas Compliance, providers of
services to the construction industry.
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.
The Board assesses the performance of each operating segment by
a measure of adjusted earnings before interest, tax, Group costs,
depreciation, amortisation and, when applicable, exceptional costs
(EBITDA). 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
2022 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3,086 6,423 16,940 26,449
-------- ----------- --------- ---------
Expenses (2,540) (5,526) (15,140) (23,206)
Segmental result (EBITDA) 546 897 1,800 3,243
-------- ----------- --------- ---------
Depreciation and amortisation
charge (115) (183) (117) (415)
IFRS 16 depreciation (75) (129) (100) (304)
Group costs (400)
Share of associate loss (66)
Net finance costs (including
IFRS 16) (712)
---------
Profit before taxation 1,346
Taxation (270)
---------
Profit for the year 1,076
---------
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
---------
ii) Assets and liabilities by segment as at 31 December
Segment net
Segment assets Segment liabilities assets/(liabilities)
2022 2021 2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ---------- ---------- ----------- -----------
Continuing operations
CEPS Group 286 543 (5,410) (5,251) (5,124) (4,708)
Aford Awards 4,014 1,974 (2,170) (789) 1,844 1,185
Friedman's 7,575 7,620 (2,244) (2,146) 5,331 5,474
Hickton Group 9,646 9,376 (7,182) (7,785) 2,464 1,591
Total - Group 21,521 19,513 (17,006) (15,971) 4,515 3,542
-------- -------- ---------- ---------- ----------- -----------
(iii) Revenue by geographical destination
2022 2021
GBP'000 GBP'000
UK 24,782 19,048
Europe 1,113 762
Rest of world 554 523
-------- --------
26,449 20,333
-------- --------
(iv) Nature of revenue
2022 2021
GBP'000 GBP'000
Products - recognised at
a point in time 9,509 6,147
Services - recognised over
time delivered 16,940 14,186
-------- --------
26,449 20,333
-------- --------
5. Taxation
2022 2021
GBP'000 GBP'000
-------- --------
Analysis of taxation in the year:
Current tax
Tax on profits of the year 295 153
Tax in respect of prior years (7) (9)
-------- --------
Total current tax 288 144
-------- --------
Deferred tax
Current year deferred tax movement (34) 8
Tax in respect of prior years 16 20
Change in tax rate - 32
Total deferred tax (18) 60
-------- --------
Total tax charge 270 204
-------- --------
The tax assessed for the year is higher (2021: higher) than the
standard rate of corporation tax in the UK (19%) (2021: 19%)
Factors affecting current tax:
Profit before taxation 1,346 996
------ -----
Profit multiplied by the standard rate of UK
tax of 19% (2021: 19%) 256 189
Effects of:
Expenses not deductible 39 27
Additional capital allowances (9) (15)
Additional research and development allowances - (20)
Adjustments to tax in prior periods 9 11
Adjustments to deferred tax rate (2) 32
Deferred tax not recognised (23) (20)
-----
Total tax charge 270 204
------ -----
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 2022 (2021: 25%).
There are tax losses carried forward in the Company of
approximately GBP1.55m (2021: GBP1.8m).
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
GBP460,000 (2021: GBP296,000) and on 21,000,000 (2021: 18,084,932)
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 2021 480 606 9 1,095
Assets acquired on purchase
of a subsidiary or a business - 43 - 43
Additions at cost 7 289 13 309
Disposals - (172) (1) (173)
-------------- ----------- ---------- --------
at 31 December 2021 487 766 21 1,274
Additions at cost - 120 - 120
Disposals - (13) - (13)
-------------- ----------- ---------- --------
at 31 December 2022 487 873 21 1,381
-------------- ----------- ---------- --------
Accumulated depreciation
at 1 January 2021 189 264 9 462
Charge for the year 45 135 - 180
Disposals - (131) (1) (132)
at 31 December 2021 234 268 8 510
Charge for the year 42 159 3 204
Disposals - (4) - (4)
at 31 December 2022 276 423 11 710
-------------- ----------- ---------- --------
Net book amount
at 31 December 2022 211 450 10 671
-------------- ----------- ---------- --------
at 31 December 2021 253 498 13 764
-------------- ----------- ---------- --------
8. Right-of-use assets
Leasehold Plant and Motor
property machinery vehicles Total
Group GBP'000 GBP'000 GBP'000 GBP'000
---------- ----------- ---------- --------
Cost
at 1 January 2021 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
Additions at cost 753 54 - 807
At 31 December 2022 2,367 251 - 2,618
---------- ----------- ---------- --------
Accumulated depreciation
At 1 January 2021 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
Charge for the year 282 56 - 338
At 31 December 2022 814 110 - 924
---------- ----------- ---------- --------
Net book amount
at 31 December 2022 1,553 141 - 1,694
---------- ----------- ---------- --------
at 31 December 2021 1,082 143 - 1,225
---------- ----------- ---------- --------
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 GBP97,000 (2021: GBP76,000).
The depreciation of GBP33,000 (2021: GBP29,000) in respect of
these has been charged to cost of sales in the Consolidated
Statement of Comprehensive Income.
9. Business combinations
i) Acquisition in 2022 of Impact Promotional Merchandise Limited
On 12 April 2022, a subsidiary, Aford Awards Limited, acquired
the trade and certain assets of Impact Promotional Merchandise
Limited. This supplies trophies, awards and medals together with
customised promotional merchandise including mugs and clothing.
The acquisition has been accounted for using the acquisition
method of accounting. Fair value adjustments were made in respect
of a website and customer relationships amounting to GBP420,000
together with a related deferred tax liability of GBP101,000.
Goodwill of GBP681,000 arose from the acquisition primarily in
respect of the ability to win further business including the
business synergies and opportunities from being integrated into the
company.
Acquisition fees of GBP16,000 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 420
Inventories 8
Deferred taxation (101)
----------------------
327
Goodwill 681
----------------------
1,008
----------------------
Consideration
Cash consideration paid at completion 558
Deferred consideration 450
----------------------
1,008
----------------------
The cash outflow at the date of acquisition was GBP558,000 with
deferred consideration of GBP210,000 payable on 14 March 2023;
GBP60,000 on 30 September 2023; GBP60,000 on 31 March 2024;
GBP60,000 on 30 September 2024 and GBP60,000 on 31 March 2025.
The business contributed GBP864,000 of revenue for the eight
months in the year after the acquisition date. It is integrated
into the overall Aford Awards business and generates similar
margins.
GBP53,000 of deferred consideration was also paid in the year in
respect of businesses acquired in 2021.
ii) 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
were 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 consideration (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.
iii) Acquisition in 2021 by Aford Awards Limited of trophy business 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.
10. Intangible assets
Customer
relationship
Goodwill assets Other Total
Group GBP'000 GBP'000 GBP'000 GBP'000
--------- -------------- -------- --------
Cost
at 1 January 2021 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
Additions at cost 681 230 265 1,176
Disposals (385) (578) - (963)
At 31 December 2022 10,942 981 622 12,545
--------- -------------- -------- --------
Accumulated amortisation
and impairment
at 1 January 2021 557 772 197 1,526
Amortisation charge - 50 27 77
at 31 December 2021 557 822 224 1,603
Amortisation charge - 112 65 177
Disposals (385) (578) - (963)
at 31 December 2022 172 356 289 817
--------- -------------- -------- --------
Net book amount
at 31 December 2022 10,770 625 333 11,728
--------- -------------- -------- --------
at 31 December 2021 10,089 507 133 10,729
--------- -------------- -------- --------
The net nil book value disposals relate to prior year business
disposals not removed from cost and accumulated amortisation at
that time.
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 expensed to cost of sales 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 relationships) annually for
impairment or more frequently if there are indications that
goodwill or customer relationship assets may be impaired.
For the purpose of impairment testing, goodwill and customer
assets 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 2021 1,157 3,167 4,913 9,237
Additions at cost - - 852 852
at 31 December 2021 1,157 3,167 5,765 10,089
Additions at cost 681 - - 681
at 31 December 2022 1,838 3,167 5,765 10,770
-------- ----------- -------- --------
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 1.9%. A discount rate of 12.8% (2021:
11.0%), representing the estimated pre-tax cost of capital, has
been applied to these projections.
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 Quality Control,
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 the business most impacted by the pandemic and is
the most susceptible to impairment if future projected growth is
not achieved.
11. Share capital and share premium
Ordinary
Number GBP0.10 Share
of shares shares premium Total
GBP'000 GBP'000 GBP'000
At 31 December 2021 and
2022 21,000,000 2,100 7,017 9,117
----------- --------- --------- --------
In the prior year, 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. Distribution of the Annual Report and Notice of AGM
A copy of the 2022 Annual Report, together with a notice of the
Company's Annual General Meeting ('AGM') to be held at 11:30am on
Monday 12 June 2023 at 11 Laura Place, Bath BA2 4BL , will be sent
to all shareholders on Friday 12 May 2023. 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 EAXSLESPDEFA
(END) Dow Jones Newswires
May 05, 2023 02:00 ET (06:00 GMT)
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