REG - CEPS PLC - Half-year Report

CepsAnnouncement

30/09/2019 07:05

RNS Number : 0026O
CEPS PLC
30 September 2019
 


30 September 2019
 
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 (MAR).
 
CEPS PLC
(the "Group" or the "Company")
 
HALF-YEARLY REPORT
 
The Board is pleased to announce its unaudited half-yearly report for the six months ended 30 June 2019.
 
CHAIRMAN'S STATEMENT
 
Reading last year's interim statement again I was appalled to see that I had hoped that we were heading to some kind of "Brexit" resolution by March 2019.  As we all know this charade just goes on and on and there is no doubt that on the macro view it has begun to affect the "real economy".  
 
Last year I said, "Until the situation is clarified, and we return to "normal" politics and business analysis, every comment from Brussels and counter comment from the Government and the numerous interested parties will dominate the investment and business landscape".  Frankly, and sadly, I can't put it any better a year on.
 
In the meantime, the CEPS Group of companies are getting on trying to manage in these extraordinary times.
 
Review of the period   
 
The biggest corporate event of the first six months was the acquisition by CEM of a major competitor, Sampling International.  Considerable effort, time and no little expense has gone into the rationalisation of the two businesses, such that each site will become more specialised and, eventually, more efficient and profitable. However, as we reported on 20 August 2019, during the six months to 30 June 2019, CEM's losses increased significantly.
 
Besides this, several very interesting acquisition opportunities have been, and are being, pursued and we hope to be able to bring some interesting news on this front to shareholders in the next few months.
 
Financial review    
 
Revenue for the first six months of the year was £10.2m compared to revenue from continuing operations for the six months to 30 June 2018 of £9.1m.  The gross profit from continuing operations of £3.6m compares to £3.4m in 2018 and results in a slightly reduced margin of 35% (2018: 38%).  The reduction is predominantly due to the challenges experienced by CEM/Sampling International.  The exceptional cost of £115,000 also relates to CEM and the restructuring costs following the acquisition of Sampling International.
 
Pleasingly, all subsidiary companies, save for CEM/Sampling International, have improved their first half EBITDA performance, as shown in the segmental analysis.
 
The profit before tax from continuing operations of £150,000 compares to £346,000 for the same period last year.  As mentioned above, the reduction can be explained by the issues faced by CEM/Sampling International and we are working closely with the management team to address these issues. 
 
Operational review
 
Aford Awards
The company has continued its steady progress with further loan note reduction.  
 
The company has again reviewed several acquisition opportunities and remains keen to add to its business activities, at the right time and at the right price.
 
CEM/Sampling International
The merger of these two companies took place at the end of March 2019.  A significant cost saving has been implemented and the efficiency process is well underway and, whilst currently challenging, we believe it will start to bear fruit next year. 
 
The company has continued to make good progress on sales but is currently struggling to produce all the orders it has won during the year on time. 
 
Davies Odell
The company has performed below our expectation in the period but is beginning to make progress.  However, it is being hampered by the decline in the value of Sterling and the headwind of raw material cost increases from China.       
 
Friedman's
The company continues to do well, and its new product areas will hopefully start to move forward and contribute next year. 
 
Hickton
Hickton has performed well in the period. The company is operating in a very dynamic market place in which there has been considerable corporate interest.  Hickton is developing plans for the next phase of its development.
 
Dividend
 
The Board is very keen to recommence the payment of dividends after a very long time.  However, it is not appropriate at this time to reintroduce the payment of a dividend.
 
Prospects
 
Despite the Group enduring the losses of CEM/Sampling International, the Board is confident that the remaining Group companies will make progress over the next year.
 
 
 
David Horner
Chairman
30 September 2019
 
 
 
 
CEPS PLC
Consolidated Statement of Comprehensive Income
Six months ended 30 June 2019




 


Note


 


Continuing Operations


Discontinued Operations


 


Audited




 


 


Unaudited


Unaudited


Unaudited


Unaudited


12 months




 


 


6 months

to 30 June


6 months

to 30 June


6 months

to 30 June


6 months

to 30 June


to 31 December




 


 


2019


2018


2018


2018


2018




 


 


£'000


£'000


£'000


£'000


£'000




 


 


 


 


 


 


 




Revenue


4


10,174


9,056


3,118


12,174


21,592




Cost of sales


 


(6,593)


(5,619)


(3,172)


(8,791)


(15,641)




Gross profit/(loss)


 


3,581


3,437


(54)


3,383


5,951




Net operating expenses


 


(3,119)


(2,952)


(296)


(3,248)


(5,322)




Operating profit/(loss)
Exceptional item


 


462


485


(350)


135


629




 


(115)


-


20


20


(53)




Customer list impairment


 


-


-


-


-


(588)




Adjusted operating profit/(loss)


 


347


485


(330)


155


(12)




 


 


 


 


 


 


 




Analysis of adjusted operating profit/(loss)


 


 


 


 


 


 




Trading


 


636


650


(350)


300


1,015




Exceptional item


3


(115)


-


20


20


(53)




Customer list impairment


 


-


-


-


-


(588)




Group costs


4


(174)


(165)


-


(165)


(386)




 


 


347


485


(330)


155


(12)




 


 


(197)


(139)


21


(118)


(296)




Net finance costs/income


4




Profit/(loss) before tax


 


150


346


(309)


37


(308)




Taxation


4


(191)


(180)


-


(180)


(568)




(Loss)/profit for the period


 


(41)


166


(309)


(143)


(876)




 


 


 


 


 


 


 




Other comprehensive loss


 


 


 


 


 


 




Items that will not be reclassified to profit or loss


 


-


-


-


-


 
 
 
(88)




Actuarial loss on defined benefit pension plans


 




Items that may be subsequently reclassified to profit or loss


 


-


-


-


-


-




Other comprehensive loss for the period, net of tax


 


-


-


-


-


(88)




Total comprehensive (loss)/income for the period


 


(41)


166


(309)


(143)


(964)




 


 


 


 


 


 


 




(Loss)/profit attributable to:


 


 


 


 


 


 




Owners of the parent


 


(270)


(419)


(309)


(728)


(1,369)




Non-controlling interest


 


229


585


-


585


493




 


 


(41)


166


(309)


(143)


(876)




Total comprehensive (loss)/income attributable to:


 


 


 


 


 


 




Owners of the parent


 


(270)


(419)


(309)


(728)


(1,457)




Non-controlling interest


 


229


585


-


585


493




 


 


(41)


166


(309)


(143)


(964)




Earnings per share attributable to owners of the parent during the period


 


(1.59)p


 


 


 


 




basic and diluted


5


(3.17)p


(2.34)p


(5.51)p


(9.06)p




 
 
CEPS PLC Consolidated Statement of Financial Position
As at 30 June 2019




 


Note


Unaudited


Unaudited


Audited




 


 


as at


as at


as at




 


 


30 June


30 June


31 December




 


 


2019


2018


2018




 


 


£'000


£'000


£'000




Assets


 


 


 


 




Non-current assets


 


 


 


 




Property, plant and equipment


 


1,293


1,121


991




Right-of-use asset


10


1,478


-


-




Intangible assets


 


5,102


5,600


4,741




Deferred tax asset


 


-


5


-




 


 


7,873


6,726


5,732




Current assets


 


 


 


 




Inventories


 


2,728


2,287


1,815




Trade and other receivables


 


4,029


3,561


3,331




Cash and cash equivalents
(excluding bank overdrafts)


 


2,048


1,528


1,705




 


 


8,805


7,376


6,851




 


 


 


 


 




Total assets


4


16,678


14,102


12,583




 


 


 


 


 




Equity


 


 


 


 




Capital and reserves attributable to owners of the parent


 


 


 


 




Called up share capital


5, 7


1,700


1,700


1,700




Share premium


 


5,841


5,789


5,841




Retained earnings


 


(4,408)


(3,284)


(4,013)




 


 


3,133


4,205


3,528




Non-controlling interest in equity


 


2,082


1,932


1,932




Total equity


 


5,215


6,137


5,460




 


 


 


 


 




Liabilities


 


 


 


 




Non-current liabilities


 


 


 


 




Borrowings


 


4,667


1,284


1,128




Deferred tax liability


 


88


71


88




 


 


4,755


1,355


1,216




 


 


 


 


 




Current liabilities


 


 


 


 




Borrowings


 


1,082


2,320


2,734




Lease liability


 


1,639


-


-




Trade and other payables


 


3,805


4,253


2,925




Current tax liabilities


 


182


37


248




 


 


6,708


6,610


5,907




 


 


 


 


 




Total liabilities


 


11,463


7,965


7,123




 


 


 


 


 




Total equity and liabilities


 


16,678


14,102


12,583




 
CEPS PLC
Consolidated Statement of Cash Flows
Six months ended 30 June 2019




 


Unaudited


Unaudited


Audited




 


6 months to


6 months to


12 months to




 


30 June


30 June


31 December




 


2019


2018


2018




 


£'000


£'000


£'000




Cash flows from operating activities


 


 


 




Cash generated from operations


72


1,439


1,651




Income tax paid


-


-


(258)




Interest paid


(197)


(118)


(311)




Net cash (used in)/generated from operations


(125)


1,321


1,082




 


 


 


 




Cash flows used in investing activities


 


 


 




Acquisition of subsidiary net of cash acquired


28


-


-




Purchase of property, plant and equipment


(87)


(548)


(859)




Proceeds from sale of assets


-


-


1




Purchase of intangibles


-


-


(150)




Net cash used in investing activities


(59)


(548)


(1,008)




 


 


 


 




Cash flows from financing activities


 


 


 




Proceeds/(repayment) of borrowings


623


(1,157)


(267)




Proceeds from share issue (net of costs)


-


1,326


1,326




Dividend paid to non-controlling interests


-


-


(45)




Repayment of capital element of finance leases


(96)


(265)


(234)




Net cash generated from/(used in) financing activities


527


(96)


780




Net increase in cash and cash equivalents


343


677


854




Cash and cash equivalents at the beginning of the period


1,705


851


851




Cash and cash equivalents at the end of the period


2,048


1,528


1,705




Cash generated from/(used in) operations


 


 


 




Profit before income tax


150


37


(308)




Adjustments for:


 


 


 




Depreciation and amortisation


404


308


470




Profit on disposal of a subsidiary


-


-


(147)




Exceptional item


-


(20)


-




Customer list impairment


-


-


588




Loss on disposal of property, plant and equipment


-


-


29




Net finance costs


197


118


296




Operating profit before changes in working capital and provisions


751


443


928




Increase in inventories


(613)


(517)


(86)




Decrease/(increase) in trade and other receivables


237


349


(773)




(Decrease)/increase in trade and other payables


(303)


1,264


1,682




Decrease in provisions


-


(100)


(100)




Cash generated from operations


72


1,439


1,651




Cash and cash equivalents


 


 


 




Cash at bank and in hand


2,048


1,528


1,705




Bank overdrafts repayable on demand


-


-


-




 


2,048


1,528


1,705




 
 
 
CEPS PLC
Consolidated Statement of Changes in Equity
Six months ended 30 June 2019




 


Share capital


Share premium


Retained earnings


Attributable to owners of the parent


Non-controlling interest


Total equity




 


£'000


£'000


£'000


£'000


£'000


£'000




At 1 January 2018 (audited)


1,320


4,843


(2,556)


3,607


1,347


4,954




(Loss)/profit for the period


-


-


(728)


(728)


585


(143)




Total comprehensive (loss)/ income for the period


-


-


(728)


(728)


585


(143)




Proceeds from shares issued net of expenses


380


946


-


1,326


-


1,326




Total contributions by owners of the parent recognised in equity


380


946


-


1,326


-


1,326




At 30 June 2018 (unaudited)


1,700


5,789


(3,284)


4,205


1,932


6,137




Actuarial loss


-


-


(88)


(88)


-


(88)




Loss for the period


-


-


(641)


(641)


(92)


(733)




Total comprehensive loss for the period


-


-


(729)


(729)


(92)


(821)




Changes in ownership interest in a subsidiary


-


-


-


-


137


137




Dividend paid to non-controlling interest


-


-


-


-


(45)


(45)




Total distributions recognised directly in equity


-


-


-


-


92


92




Correction to opening position


-


52


-


52


-


52




At 31 December 2018
(audited)


1,700


5,841


(4,013)


3,528


1,932


5,460




(Loss)/profit for the period


-


-


(270)


(270)


229


(41)




Total comprehensive (loss)/income for the period


-


-


(270)


(270)


229


(41)




Acquisition of a subsidiary


-


-


-


-


(79)


(79)




Opening balance adjustment re IFRS16


-


-


(125)


(125)


-


(125)




At 30 June 2019 (unaudited)


1,700


5,841


(4,408)


3,133


2,082


5,215





 

Notes to the financial information
1.    General information
The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is 11 Laura Place, Bath BA2 4BL and the registered number of the company is 00507461.
The Company is listed on AIM.
This condensed consolidated half-yearly financial information was approved by the Directors for issue on 30 September 2019.
This condensed consolidated half-yearly financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2018 were approved by the Board of directors on 7 May 2019 and delivered to the Registrar of Companies.  The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
This condensed consolidated half-yearly financial information has not been reviewed or audited.
There is no seasonality or cyclicality in relation to the condensed consolidated half-yearly financial information.
Basis of preparation
This condensed consolidated half-yearly financial information for the six months ended 30 June 2019 has been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union.  The condensed consolidated half-yearly financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2018, which have been prepared in accordance with IFRSs as adopted by the European Union.
Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2018, as described in those annual financial statements.  The financial position and performance of the group was affected by the new leasing standard IFRS 16 Leases (see note 10) during the six months to 30 June 2019.  
2.    Acquisitions in the current period
Acquisition of Travelfast Limited trading as Sampling International
On 27 March 2019 the Group acquired 100% of the ordinary shares in Travelfast Limited for a maximum aggregate consideration of £1,200,009, payable in cash over three years based on performance. Travelfast Limited, trading as Sampling International, is one of the leading providers in designing and manufacturing sample books, shade cards and other display solutions. The acquisition of Travelfast Limited made the newly formed group one of the largest individual pattern book and shade card makers in the UK, with two production facilities. 
Effect of acquisition
The acquisition had the following provisional effect on the Group's assets and liabilities.




 


2019
£'000




Property, plant and equipment


380




Inventories


300




Trade and other receivables


936




Cash and cash equivalents


28




Trade and other payables


(2,038)




 


 




Net identifiable assets and liabilities


(394)




 


 




Fair value of assets acquired


(394)




Goodwill


394




 


 




Cash consideration transferred


-




Cash acquired


28




 


 




Cash outflow


-




 
The provisional fair values will be disclosed further in the year end accounts.
 
3.    Exceptional item
CEM
The exceptional item in the current year to date relates to the acquisition costs of Travelfast Limited and the subsequent restructuring costs of the CEM group.
Sunline
The exceptional item last year related to the liquidation of Sunline Direct Mail Limited on 26 June 2018.
4.    Segmental analysis
All activities, apart from those relating to Sunline, are classed as continuing.
The chief operating decision maker 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.
Operating segments and their principal activities are as follows:
-     Aford Awards, a sports trophy and engraving company;
-     CEM, a manufacturer of fabric and wallpaper pattern books, swatches and shade cards together with Travelfast, trading as Sampling International, a manufacturer of sample books and shade cards for the wallpaper and floorcovering industries;
-     Davies Odell, a manufacturer and distributor of protection equipment, matting and footwear components;
-     Friedman's, a convertor and distributor of specialist Lycra;
-     Hickton Consultants, a provider of services to the construction industry together with BRCS (Building Consultants), a leading provider of building control services nationally;
-     Sunline, a supplier of services to the direct mail market
 
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 of the Group.  The Group information provided below, therefore, also represents the geographical segmental analysis. Of the £10,174,000 

(2018: £12,174,000) revenue, £8,910,000 (2018: £10,790,000) is derived from UK customers.
The Board assesses the performance of each operating segment by a measure of adjusted earnings before interest, tax, depreciation and amortisation and Group costs.  Other information provided to the Board is measured in a manner consistent with that in the financial statements.
i)     Results by segment
Unaudited 6 months to 30 June 2019




 


Aford

Awards


 
CEM


Davies Odell


 
Friedman's


 
Hickton


 
Total

Group




 


£'000


£'000


£'000


£'000


£'000


£'000




Revenue


1,094


2,264


1,692


2,750


2,374


10,174




Segmental result (EBITDA) before exceptional costs


285


(355)


49


613


448


1,040




Exceptional item


-


(115)


-


-


-


(115)




Segmental result (EBITDA) after exceptional costs


285


(470)


49


613


448


925




Right of use depreciation charge


(42)


(67)


(19)


(47)


(7)


(182)




Depreciation and amortisation charge


(3)


(59)


(27)


(122)


(11)


(222)




Group costs


 


 


 


 


 


(174)




Net finance costs


 


 


 


 


 


(197)




Profit before taxation


 


 


 


 


 


150




Taxation


 


 


 


 


 


(191)




Loss for the period


 


 


 


 


 


(41)




 
Unaudited 6 months to 30 June 2018




 


Aford Awards


 
CEM


Davies Odell


 
Friedman's


 
Hickton


Continuing operations


Discon-tinued
Sunline


 
Total

Group




 


£'000


£'000


£'000


£'000


£'000


£'000


£'000


£'000




Revenue


1,065


1,245


1,956


2,792


1,998


9,056


3,118


12,174




Segmental result (EBITDA) before exceptional costs


231


(48)


(16)


358


285


810


(202)


608




Exceptional costs


-


-


-


-


-


 


20


20




Segmental result (EBITDA) after exceptional costs


231


(48)


(16)


358


285


810


(182)


628




Depreciation and amortisation charge


(4)


(35)


(11)


(60)


(50)


(160)


(148)


(308)




Group costs


 


 


 


 


 


(165)


-


(165)




Net finance costs


 


 


 


 


 


(139)


21


(118)




Profit/(loss) before taxation


 


 


 


 


 


346


(309)


37




Taxation


 


 


 


 


 


(180)


-


(180)




Profit/(loss) for the period


 


 


 


 


 


166


(309)


(143)




 
 
Audited Year to 31 December 2018

 




 


Aford  Awards


 
 
CEM


Davies Odell


 
Friedman's


 
Hickton


Continuing operations


Discon-tinued
Sunline


 
Total

Group




 


£'000


£'000


£'000


£'000


£'000


£'000


£'000


£'000




Revenue


1,902


2,824


3,919


5,345


4,484


18,474


3,118


21,592




Expenses


(1,564)


(3,251)


(4,026)


(4,173)


(3,771)


(16,785)


(3,322)


(20,107)




Segmental result (EBITDA) before exceptional costs


338
-


(427)
-


(107)
-


1,172
-


713
-


1,689


(204)


1,485




Exceptional costs


-


(53)


(53)




Segmental result (EBITDA) after exceptional costs


338


(427)


(107)


1,172


713


1,689


(257)


1,432




Depreciation and amortisation charge


(13)


(68)


(58)


(179)


(6)


(324)


(146)


(470)




Customer list impairment


 


 


 


 


 


(588)


-


(588)




Group costs


 


 


 


 


 


(386)


-


(386)




Net finance costs


 


 


 


 


 


(254)


(42)


(296)




Profit/(loss) before taxation


 


 


 


 


 


137


(445)


(308)




Taxation


 


 


 


 


 


(568)


-


(568)




Loss for the year


 


 


 


 


 


(431)


(445)


(876)




 
ii)     Assets and liabilities by segment
Unaudited as at 30 June




 


Segment assets


Segment liabilities


Segment net assets/(liabilities)




 


2019


2018


2019


2018


2019


2018




 


£'000


£'000


£'000


£'000


£'000


£'000




CEPS Group


299


627


(2,371)


(755)


(2,072)


(128)




Aford Awards


1,815


1,796


(439)


(424)


1,376


1,372




CEM


3,457


1,928


(4,208)


(2,286)


(751)


(358)




Davies Odell


1,567


1,993


(1,174)


(1,921)


393


72




Friedman's


6,030


4,284


(1,892)


(999)


4,138


3,285




Hickton


3,510


3,474


(1,379)


(1,580)


2,131


1,894




Total - Group


16,678


14,102


(11,463)


(7,965)


5,215


6,137




Audited as at 31 December 2018




 


Segment assets


Segment liabilities


 Segment net assets/(liabilities)




 


£'000


£'000


£'000




CEPS Group


59


(1,623)


(1,564)




Aford Awards


1,762


(494)


1,268




CEM


1,090


(1,410)


(320)




Davies Odell


1,426


(966)


460




Friedman's


4,759


(1,017)


3,742




Hickton


3,487


(1,613)


1,874




Total - Group


12,583


(7,123)


5,460




 
5.    Earnings per share
 
Basic earnings per share is calculated on the loss after taxation for the period attributable to owners of the Company of £270,000 (2018: loss of £728,000) and on 17,000,000 (2018: 13,199,940) ordinary shares, being the weighted number in issue during the period. 
 
No adjustment is required for dilution in either period as there are no items that would have a dilutive impact on earnings per share. 
 
6.    Net debt and gearing
Gearing ratios at 30 June 2019, 30 June 2018 and 31 December 2018 are as follows:
 




 


Group
unaudited
 30 June 2019


Group
unaudited
 30 June 2018


Group audited
31 December 2018




 


£'000


£'000


£'000




 


 


 


 




Total borrowings


4,906


2,376


3,057




Less: cash and cash equivalents


(2,048)


(1,528)


(1,705)




Net debt


2,858


848


1,352




Total equity


5,215


6,137


5,460




Gearing ratio


55%


14%


25%




 
In order to provide a more meaningful gearing ratio, total borrowings are the sum of bank borrowings and third-party debt, excluding loan notes used to finance the Group's acquisitions.
 
7.       Share capital and premium




 


Number of shares


Share capital

£'000


Share premium

£'000


Total

£'000




 


 


 


 


 




At 1 January 2019 and 30 June 2019


17,000,000


1,700


5,841


7,541




 
8.       Related-party transactions
The Group has no material transactions with related parties which might reasonably be expected to influence decisions made by users of these financial statements.
During the period the Company entered into the following transactions with its subsidiaries:




 


 
Aford Awards (Holdings) Limited
£'000


 
 
CEM Teal Limited
£' 000


 
 
Davies Odell Limited
£'000


 
 
Signature Fabrics Limited
£'000


 
 
Hickton Holdings Limited
£'000


Sunline Direct Mail (Holdings) Limited
£' 000




Receipt of equity share dividend


 


 


 


 


 


 




- 2019


-


-


-


-


-


-




- 2018


-


-


-


-


-


-




- For the year to 31     December 2018 (audited)


-


-


-


55


-


-




Receipt/(write-back) of preference share dividend


 


 


 


 


 


 




- 2019


-


-


-


-


-


-




- 2018


-


-


-


-


-


(52)




- For the year to 31 December 2018 (audited)


-


-


-


-


-


-




Receipt/(write-back) of loan interest


 


 


 


 


 


 




- 2019


19


86


12


-


24


-




- 2018


27


48


3


-


24


(125)




- For the year to 31 December 2018 (audited)


51


111


12


-


49


-




Receipt/(write-back) of management charge income


 


 


 


 


 


 




- 2019


10


-


8


18


6


-




- 2018


10


-


8


18


6


1




- For the year to 31 December 2018 (audited)


20


-


15


35


13


1




Amount owed to the Company


 


 


 


 


 


 




-     30 June 2019


405


1,325


486


-


623


-




-     30 June 2018


618


1,872


194


-


623


-




-     For the year to 31 December 2018 (audited)


537


-


534


-


623


-




Loans and investments written-off or impaired


 


 


 


 


 


 




- 2019


-


2,719


-


-


-


-




- 2018


-


-


-


-


-


-




-     For the year to 31
December 2018
       (audited)   


-


2,719


-


-


-


2,702




 
9.       AIM Compliance Committee
CEPS PLC is quoted on AIM and, as such, under AIM Rule 31 the Company is required to:
 
1.       have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules;
2.       seek advice from its nominated advisor ("Nomad") regarding its compliance with the AIM Rules whenever appropriate and take that advice into account;
3.       provide the Company's Nomad with any information it requests in order for the Nomad to carry out its responsibilities under the AIM Rules for Companies and the AIM Rules for Nominated Advisers
4.       ensure that each of the Company's directors accepts full responsibility, collectively and individually, for compliance with the AIM Rules; and
5.       ensure that each director discloses without delay all information which the Company needs in order to comply with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the director or could with reasonable diligence be ascertained by the director.
 
In order to ensure that these obligations are being discharged the Board has established a committee of the Board (the "AIM Compliance Committee"), chaired by Vivien Langford, an executive director of the Company.
 
Having reviewed relevant Board papers and met with the Company's Executive Board and the Nomad to ensure that such is the case, the AIM Compliance Committee is satisfied that the Company's obligations under AIM Rule 31 have been satisfied during the period under review.
 
10.     Changes in accounting policies
This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements and discloses the new accounting policies that have been applied from 1 January 2019.
The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.
The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the date of initial application of IFRS 16, being 1 January 2019. At this date, the Group has also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transition.
All of the lease agreements CEPS reported as operating leases in 2018 were converted as lease agreements and recognised on the Consolidated Statement of Financial Position on the adoption of IFRS 16.
On transition to IFRS 16, the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 8%.
Reconciliation of total operating lease commitments




 


Total
£'000




Total operating lease commitments disclosed at 31 December 2018


2,387




Property - changes of lease length to break date


(665)




Vehicles - change of recognition to IFRS 16 present value


(6)




Total lease liabilities recognised under IFRS 16 at 1 January 2019


1,716




 
The impact of adopting IFRS 16 for the six months to 30 June 2019 compared to prior years accounting standards is shown below:




 


Total

£'000




Increase in depreciation


182




Increase in interest expense


72




Decrease in lease expense


(219)




Decrease in underlying profit


35




Statement of directors' responsibility
The directors confirm that, to the best of their knowledge, these condensed consolidated half‑yearly financial statements have been prepared in accordance with IAS 34 as adopted by the European Union.  The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
 
·           an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and
 
·           material related-party transactions in the first six months of the financial year and any material changes in the related-party transactions described in the last Annual Report.
 
A list of current directors is maintained on the CEPS PLC Group website: www.cepsplc.com




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END
 
 
IR LLFIVASIDFIA