REG - CEPS PLC - Final Results
10/05/2022 07:00
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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
£11.9m, being the continuing activities in 2020, to £20.3m 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
£20.3m from £11.9m, an increase of 70%. In addition, gross profits from
continuing operations have increased from £4.4m in 2020 to £8.4m, an
increase of 93% and operating profits from continuing operations have
significantly improved from a loss of £ 252,000 to a profit of £1.6m.
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 £525,000.
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 £558,000 and deferred consideration
of an additional £450,000 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 £1.4m as compared to £844,000 in 2020, against and of great
relevance £2.0m in 2019, the last year unaffected by Covid. The associated
EBITDAs were £235,000, £111,000 (after significant government support) and
£411,000 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 £4.8m as compared to £3.9m in 2020 and £5.8m in 2019. The
associated EBITDAs were £809,000, £124,000 (after significant government
support) and £1.2m 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 £7.1m
to £14.2m. For completeness, and to demonstrate the growth in the business,
sales were £4.7m in 2019. EBITDA in 2021 was £1.5m, up from £929,000 in
2020 and £850,000 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 £433,800
and CEPS invested £143,640 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 £66,000 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 £1.6m of gross funds or £1.58m 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 £2.0m
to replace the existing £2.0m 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 £5.0m 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 £2,950,000 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 £192,000 at 31 December 2021.
Cash held by the Company at the financial year end was £468,000 (2020:
£31,000) and Group cash was £2.1m (2020: £2.3m).
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
YEAR ENDED 31 DECEMBER 2021
Continuing Operations Discontinued Operations Total
Audited Audited Audited Audited
2021 2020 2020 2020
£'000 £'000 £'000 £'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
£'000 £'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 £245,000 (2020: profit of £1,343,000).
CEPS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 DECEMBER 2021
2021 2020
£'000 £'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: £558,000 of new share capital was settled against a
loan liability and there were £555,000
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
YEAR ENDED 31 DECEMBER 2021
Attributable to owners of the parent
Non-controlling interest
Share capital Share premium Retained earnings Total
equity
£'000 £'000 £'000 £'000 £'000 £'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 (£), the
currency of the primary economic environment in which the Group's activities
are operated and are reported in £'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 £4,234,000 (2020: £2,674,000) 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 Friedman's Hickton Total
Awards
Group
Group
2021 2021 2021 2021
£'000 £'000 £'000 £'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 Friedman's Hickton Group Continuing operations Discontinued operations Total
Awards
Group
2020 2020 2020 2020 2020 2020
£'000 £'000 £'000 £'000 £'000 £'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 (7) (209) (40) (256) (63) (319)
amortisation charge
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 assets Segment liabilities Segment net assets/(liabilities)
2021 2020 2021 2020 2021 2020
£'000 £'000 £'000 £'000 £'000 £'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
£'000 £'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
£'000 £'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
£'000 £'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 £1.8m
and in the subsidiary companies of £30,000 (2020: £1.3m and £195,000).
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 £277,000 (2020: loss of
£624,000) 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 £296,000
(2020: loss of £939,000) 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 £nil (2020:
profit of £315,000) 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 property improvements Plant and machinery Motor Total
vehicles
Group £'000 £'000 £'000 £'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 property improvements Plant and machinery Motor Total
vehicles
Group £'000 £'000 £'000 £'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 £76,000
(2020: £46,000).
The depreciation of £29,000 (2020: £23,000) 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 £750,000
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 £700,000 together with deferred and
contingent amounts of £400,000 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 £248,000.
Goodwill of £852,000 arose from the acquisition primarily in respect of the
overall workforce skills and their ability to generate income. Acquisition
fees of £45,500 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
£'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 £4,490,000 of revenue and £221,000 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 £5,318,000
and the profit before tax would have been £284,000.
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 £30,000 and the trade, including customer relationships valued
at £207,000, of three trophy businesses on 2 September 2021 for cash
consideration of £176,000 paid in 2021 and £131,000 of estimated contingent
consideration payable. After providing for £48,000 of deferred tax,
£117,000 of goodwill arises in respect of the businesses.
The businesses contributed £69,000 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 £296,000.
Goodwill of £3,234,000 arose from the acquisition primarily in respect of the
overall workforce skills and their ability to generate income. Acquisition
fees of £101,000 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
£'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 £2,834,000 of revenue
and £437,000 of profit before tax. If the combination had taken place at
the beginning of the year, the revenue would have been £3,408,000 and the
profit before tax would have been £517,000.
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:
CEM companies Davies Odell
£'000 £'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
£'000 £'000
Operating cash flows - 58
Investing cash flows - (5)
Financing cash flows - (164)
10. Intangible assets
Goodwill Customer relationship assets Other Total
Group £'000 £'000 £'000 £'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 Friedman's Hickton Total
Awards
Group
£'000 £'000 £'000 £'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 £354,000 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
Number of shares Ordinary £0.10 shares Share premium Total
£'000 £'000 £'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 £0.10 ordinary shares were issued at 40 pence
each resulting in a £400,000 increase in nominal share capital and a
£1,176,000 increase in the share premium account after deducting share issue
expenses of £24,000.
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 £1,008,000, £558,000 being paid on completion with a
deferred consideration of £450,000 to be paid post completion in the
following amounts and on the following dates: £210,000 on 14 March 2023;
£60,000 on 30 September 2023; £60,000 on 31 March 2024 and £60,000 on 31
March 2025. The initial consideration was funded as to £8,000 from AAL's
existing cash resources, a loan of £450,000 from CEPS, a loan of £50,000
from Paul Wood, the Managing Director of AAL, and £50,000 of a total loan of
£90,000 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 £2,950,000, 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 (http://www.cepsplc.com) .
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