REG - Facilities by ADF - Full Year Results
26/04/2024 07:00
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RNS Number : 1185M Facilities by ADF plc 26 April 2024
26 April 2024
Facilities by ADF plc
("Facilities by ADF", "ADF", the "Company" or the "Group")
Full year results for the year ended 31 December 2023
Facilities by ADF, the leading provider of premium serviced production
facilities to the UK film and high-end television industry ("HETV") announces
its audited final results for the year ended 31 December 2023 ("FY23").
Financial highlights
£M 31 Dec 2023 31 Dec 2022 31 Dec 2021
Group revenue 34.8 31.4 27.8
*Adjusted EBITDA 7.3 8.0 7.7
*Adjusted EBITDA % 21.0% 25% 28%
Profit/(loss) before tax 0.6 4.6 2.8
Earnings per share 0.99p 6.1p 3.2p
Operational highlights
· Robust financial performance with revenue of £34.8m and adjusted EBITDA of
£7.3m, reflecting a record first half of the year, working on larger and
longer productions.
· In the second half of FY23, several large productions that ADF was working on
stopped filming due to the Hollywood writers and actors strike (the
"Strikes"), immediately impacting revenue levels for the remainder of the
year.
· The Group took several mitigating actions in response to the Strikes to
maximise profitability in H2-FY23, including securing shorter duration
domestic productions, and cutting the use of more expensive agency drivers.
· ADF supported 84 high-profile productions in FY23 with an average revenue per
production of £385k.
· Notable productions worked on include The Crown season 6, Slow Horses, Star
Wars Andor, The Gentleman, Rivals and The Diplomat.
· Officially opened ADF's new flagship central hub at Longcross, Surrey,
highlighting the Company's commitment to its growth strategy.
· Added 108 units to the fleet in H1-FY23, bringing the total to 700 units,
fully leveraging the current enhanced super-deduction capital allowance
regime.
· Location One, acquired in November 2022, opened new branches at Longcross,
Bridgend, and Glasgow, alongside ADF.
Outlook
· Following the end of the Strikes in November 2023, and the continued growth in
demand for ADF's services as evidenced by the current order book, the Company
expects the financial performance of H1-FY24 to be significantly ahead of the
H2-FY23.
· Although the impact of the Strikes on the film and HETV industry has carried
on into the first few months of 2024 with producers having to reorganise the
schedules of all relevant parties, ADF expects the situation will continue to
normalise as the first half of the year progresses before returning to a full
second half, more in line with pre-Strike levels.
· Underlying market drivers still provide high confidence that the demand for
ADF's services will continue to expand over the medium to long
term.
· The Group remains committed to growth and will continue to review acquisition
opportunities in line with its strategy.
Commenting, Marsden Proctor, CEO, said:
"Our FY23 performance showcased the Group's resilience, marked by a robust
first half tempered by the unprecedented joint Strike by Hollywood actors and
writers, the first of its kind in over six decades. As previously announced,
the impact of these Strikes has carried into the first half of the year,
however, we are committed to prudently managing our cost structure during this
period. Despite these challenges, the long-term market outlook remains highly
favourable for ADF, buoyed by sustained high levels of investment in the UK
HETV industry. The Board maintains confidence in the long-term prospects of
the Group as market conditions stabilise."
*Adjusted EBITDA is the adjusted profit before tax, prior to the addition of
finance income and deduction of depreciation, amortisation, and finance
expenses. The adjusted EBITDA measurement removes non-recurring, irregular and
one-time items that may distort EBITDA. Adjusted EBITDA provides a more
normalised metric to make comparisons more meaningful across the Group and
other companies in the same industry.
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company take responsibility
for this announcement.
For further enquiries:
Facilities by ADF plc via Alma
Marsden Proctor, Chief Executive Officer
Neil Evans, Chief Financial Officer
John Richards, Chairman
Cavendish Securities (Nominated Adviser and Broker) Tel: +44 (0)20 7220 0500
Ben Jeynes / George Lawson - Corporate Finance
Michael Johnson / Sunila de Silva / George Budd - Sales / ECM
Alma Strategic Communications Tel: +44 (0)20 3405 0205
Josh Royston facilitiesbyadf@almastrategic.com (mailto:facilitiesbyadf@almastrategic.com)
Hannah Campbell
Robyn Fisher
OVERVIEW OF FACILITIES BY ADF PLC
Facilities by ADF plc is the leading provider of premium serviced production
facilities to the UK film and high-end television industry ("HETV"). Its
production fleet is made up of 700 premium mobile make-up, costume and artiste
trailers, production offices, mobile bathrooms, diners, school rooms and
technical vehicles.
In November 2022, ADF acquired Location One Ltd, the UK's largest integrated
TV and film location service and equipment hire company, bringing highly
complementary services and providing cross selling opportunities to the
enlarged Group, as well as delivering efficiencies through central services.
The Group serves customers in an industry that has experienced significant
growth in recent years, with additional demand driven by a material rise in
the consumption of film and HETV content via streaming platforms such as
Netflix, Disney+, Apple TV+ and Amazon Prime. The UK film and TV industry has
directly benefited during this growth due to the quality of its production
facilities and studios, highly skilled domestic workforce, geography,
accessibility to Europe, English language environment and strong governmental
support. Major US streaming companies have now set up permanent bases in the
UK, with the UK now the film and TV industry's second largest operation after
North America.
Chairman's statement
Overview
Facilities by ADF PLC (''ADF'') delivered a robust financial performance in
FY23, despite the challenging operating environment across the film and TV
industry starting in the second half of the year. These results demonstrate
the Group's resilience and strong position in a market that was overshadowed,
during the period, by the first joint Strike of Hollywood actors and writers
in over 60 years.
The Group delivered a record first half, working on larger, longer productions
compared to the prior year, following strong demand for its services from
global streaming providers. The Group had the full financial benefit in
H1-FY23 of Location One, acquired in November 2022, alongside a significant
increase in sales withing the core ADF business. However, with the onset of
the Strikes in May 2023, several large productions that ADF was working on
stopped filming immediately impacting revenue levels in H2-FY23, as documented
in the Group's interim results.
In response to the Strikes, the Group took several mitigating actions to
maximise profitability in H2-FY23, including securing shorter duration
domestic productions, and also cutting the use of more expensive agency
drivers which enabled the Group to respond quickly to more price sensitive
market conditions and win a larger share of available business.
As a result, revenue and margins were lower in H2-FY23 than the first half.
However, the Group delivered revenue of £34.8m and adjusted EBITDA of £7.3m
for FY23.
Despite the significant period of market disruption, experienced during the
year, we did experience continued demand for our services from global
streaming brands including Netflix, Amazon, Apple and Disney and supported 84
high-profile productions across FY23, reinforcing the Group's position as the
UK's leading facilities provider.
Whilst the Strikes ended after six months in November 2023, the impact on the
film and high end TV (''HETV'') industry has continued and carried on into
H1-FY24. Actor availability and the securing of studio space have created
scheduling difficulty for film and TV producers, who are seeking to both
complete pre-Strike productions as well as start new productions. Presently,
we anticipate the financial performance in H1-FY24 to be significantly ahead
of the second half of FY23 based on the Group order book, with the market
situation continuing to normalise in the first half of the year. The cost and
cash management measures implemented in H2-FY23 have remained in place into
the new financial year.
Despite the Strikes impact, momentum remains strong, and the underlying market
drivers alongside the Group's leading industry position, continue to provide
the Board with confidence that demand for ADF's services will accelerate as
production levels normalise.
Impact of the Strikes
The Strikes, from May to November 2023, impacted productions around the globe
and several large productions that ADF was working on stopped filming
immediately. Furthermore, all the 'US' led productions that ADF had in the
pipeline for the second half of the financial year were also suspended,
creating capacity for the Group to win alternative business. ADF also
implemented cost saving measures to ensure the business was well positioned
for when market conditions returned to normal. Mitigating actions included
working with clients and partners to understand the available pipeline and
opportunities for ADF for the remainder of the year and, implement appropriate
measures including a reduction in headcount, predominantly across the Group's
base production teams, and the introduction on a freeze on all non-essential
consultant services in H2-FY23.
Strategy
The Group remains committed to growth with an ambition to increase our revenue
to over £100 million and intends do this through organic means by both
investing in revenue generating fleet equipment, as well as through
appropriate acquisitions.
In FY23, ADF officially opened its flagship central hub at Longcross, Surrey,
highlighting the Group's commitment to its growth strategy and added 133 units
to its fleet, predominantly in the first half of the year, bringing the total
to 703 units by the end of the financial year.
Location One, acquired by ADF in November 2022, opened new branches at
Longcross, Bridgend, and Glasgow during the year. The enlarged Group is now
cross-selling to an increasing number of HETV and film companies in the UK,
delivering services in a more efficient way, and moving the Group closer to
its goal of becoming a one stop shop for film and HETV production. The success
of this acquisition indicates that we have the right set of parameters when
seeking to invest and confirms the benefits we can bring to businesses looking
to scale in the industry. We will continue to review opportunities for
complementary additions as they arise and are in discussion with several
parties presently.
People
We have continued to invest in the expansion of our senior leadership team,
including the appointment of a Chief Operating Officer, to ensure we have the
depth and breadth of management to deliver our growth strategy and have been
encouraged by the immediate positive contribution that the new team members
have made.
In November 2023, Jo Goodson was appointed as an independent Non-Executive
Director to the Company, bringing over 25 years' experience working with high
growth businesses across both the public and private sectors. She has held
several senior roles across the entertainment and technology industries and is
already proving to be a valuable additional voice to the Board as we work
together to deliver on our growth ambitions and capitalise on our strong
market position.
ESG
As a Board and a business, ADF is committed to high standards within all areas
of ESG. In FY23 we launched our ESG strategy, focusing on sustainability,
innovation, knowledge and being a 'great place to work'.
This includes developing initiatives that have a positive impact on society
and our employees, as well as supporting our staff with accessibility,
inclusion, and diversity, and reducing our environmental impact through
collaborating with stakeholders towards a low carbon production industry.
In support of this strategy, we commissioned a third-party specialist agency
(Creative Zero) to carry out an operational and supply chain emissions audit
for ADF for 2022. The output of this audit identified the total operational
carbon footprint for the business, with the majority of emissions generated
coming from the use of the vehicles we hire out, followed by staff commuting.
We aim to decarbonise our operation by tackling our emissions at source and
only offset what we are not able to remove. We intend to do this by
transitioning to green energy, focusing on energy reduction and increasing
efficiency and positive behavioural change These opportunities will be
maximised moving forward and the carbon footprint and carbon reduction plan
exercise that is underway will provide the data required for the SECR
submission to be prepared in respect of the 2024 financial year.
As an example of these initiatives to transition towards greener and more
efficient energy usage, last year ADF launched its new EcoBase offering in
conjunction with Location One. This innovative solution is set to redefine
unit base operations by offering a sustainable infrastructure that minimises
environmental impact, maximises production efficiency, and sets a new standard
for eco-friendly practices. EcoBase is designed to provide production teams
with an eco-friendly unit base that embraces resource conservation, waste
reduction, renewable power integration, and sustainable water supply and
wastewater treatments. A key feature of the EcoBase is its site wide power
monitoring and hybrid power solution, combining battery and HVO fuel generated
power to lower production emissions. Results from one of our production case
studies in 2023 have shown that this innovative power solution was able to
silent-run for as much as 70% of the time, reduce overall fuel usage by 30%,
and the use of HVO fuel instead of diesel enabled the reduction in overall
fuel emissions by as much as 90%. By prioritising sustainability, we aim to
reduce the industry's environmental footprint and spark positive change.
In terms of our people practices, due to the challenges caused by the Strikes,
in H2-FY23 we focused on protecting the employment status of our teams as best
as possible during this turbulent period.
We also continued to move forward with low-cost initiatives that promoted a
greater awareness of the key company objectives to the wider business as this
was an area that was highlighted in the 2023 Employee Survey results. We
launched the quarterly Company Update Call in December 2023 where all the
teams were invited, and we gave an overall update along with a "spotlight"
focus on a specific department. These calls will continue in 2024 to further
strengthen the internal communications processes.
We delivered "Displaying Positive Behaviours" training to the management team
and have started cascading those messages to the other teams to ensure that we
promote a positive working environment and company culture.
Post-period end, our second Employee Satisfaction survey launched in February
2024 to measure the results against the previous year and identify where we
should focus our next areas. Highlights were an improved focus on management
training and coaching, more positive feedback on line management and
team-working and increased scores relating to understanding goals and
objectives. Areas to focus on included opportunities for development and pay,
and benefits was once more highlighted as a key issue.
In addition to wellbeing, the health & safety (H&S) of our staff as
well as our customers and contractors, is a key focus for ADF. We have an
established H&S framework and resources in place to ensure that the
conduct of the business ensures the lowest level of risk, supported by an
external specialist, Safety Forward. The Group has a full-time H&S
Coordinator, reporting to the CFO, who in turn reports H&S matters to the
Board. Detailed accident reporting is maintained, all incidents are
investigated, and procedures changed where necessary. Training continued
across the year for managers and supervisors in accident reporting and
accident management, and a hazard spotting campaign began in Q4 FY23.
As a Board, we are dedicated to maintaining our strong corporate governance
framework. Following our IPO, we have chosen to adopt the QCA Corporate
Governance Code, which will help to inform the evolution of our governance
approach in future. The appointments we have made to the Board to date are a
clear demonstration of this commitment and we will continue to ensure this
remains as we grow as a listed business.
Outlook
While market challenges stemming from the Strikes impacted our performance in
H2-FY23 and have continued to impact the first few months of FY24, we remain
poised to capitalise on the significant opportunities awaiting us as the Film
and HETV industry returns to its regular trajectory.
Our financial results and operational advancements throughout FY23 underscore
our resilience and capability. The underlying market dynamics, coupled with
our expanding partner network and proven offerings, including the successful
integration of Location One, reinforce the Board's confidence in our ability
to achieve sustainable growth over the medium to long term.
The Group expects that the market situation will continue to normalise as the
first half of the year progresses, and order visibility for H2-FY24 and beyond
is expected to be in line with pre-Strike levels.
John Richards
Chairman of the Board
CEO review
Overview
Our performance in FY23 demonstrates the resilience and commitment of the ADF
team and I am incredibly proud of how each employee operated against a
backdrop of the Strike. I would like to thank all ADF employees for their
commitment and hard work that has enabled the Group to strengthen its position
and to capitalise on the opportunities in the market as previous productions
level return.
Financial performance
The Group delivered an outstanding first half, with high levels of fleet
utilisation. We achieved revenue growth of 73% and adjusted EBITDA growth of
117% compared to H1-FY22, evidencing the ongoing high level of demand for our
products and services, before the Strikes ensued. The growth in the first half
was the result of the a combination of the inclusion of Location One
performance within the Group, and also significant organic growth achieved
within the core business. ADF worked on larger, longer productions in H1-FY23
compared to H1-FY22, which were more geographically centred around the main
London studios making them more efficient from a transport and mobilisation
perspective. A sustained effort was also made in H1-FY23 to increase the
number of 'employed' HGV drivers, as opposed to relying on more costly agency
HGV drivers. Consequently, overall gross margins rose from 33.0% in H1-FY22 to
38.8% in H1-FY23. In H2-FY23, the reduced levels of revenue due to the Strike
led to lower margins which averaged 29.7%. Whilst margins were lower in
H2-FY23, the Group delivered revenue of £34.8m and adjusted EBITDA of £7.3m
for FY23, in line with revised market expectations.
Notwithstanding the Strikes, the Group supported 84 high-profile productions
across FY23 (FY22: 76) with an average revenue per production for FY23 of
£385K (FY22: £388K).
The market opportunity
The UK's film and HETV production spend reached £4.23bn in 2023, 32% down on
a record breaking 2022, with UK production heavily impacted by the Strike.
This was still the third highest annual spend since the tax reliefs were
introduced in 2013, reflecting the varying dynamics at play across our sector
and whilst a level of disruption occurred, the industry continues to
contribute billions and support a high number of jobs across the UK.
Demand for film and TV studio space remains very strong. A CBRE survey in May
2023 across 450 major business involved in the industry, reported a 30%
increased in the requirement for studio space to meet demand. This is backed
up by the many large scale studio developments in progress across 2023
including:
· Shinfield Studio, Reading- 13 stages built with a further 5 planned
in 2024 making it one of the largest studios in the UK once complete with a
total of 1 million square feet.
· Pinewood - the iconic West London studio, announced plans for a
£800 million development of 21 stages, making it, once complete, the largest
studio in the world.
· Crown Works Studio, Sunderland - announced a £450 million
development.
In February 2024, FilmLA issued its sixth Sound Stage Study, updating its
ongoing survey of Los Angeles area studio developments, and releasing new
stage occupancy and use data for calendar year 2022. Since FilmLA's last sound
stage update in March 2023, both the UK and Georgia State, USA have added more
than one million square feet of stage inventory to their existing supply. Now
comparable to Los Angeles, the UK currently has around 6.6 million square feet
of stage space, with plans to add dozens of new facilities.
We are confident that as production returns to previous levels to meet the
pent-up demand for film and HETV productions, ADF is well placed to benefit
given its market leading position.
Competitive strength
We remain the provider of choice for many in the UK for large scale and
quality productions. This has allowed us to benefit from high valued
productions and customers, which was particularly crucial during the Strike.
This market position has taken many years to establish, enabling high barriers
to entry, and we have the right infrastructure in place to support continued
successful customer delivery and further expansion.
To deliver such a high quality of service to our customers and successfully
compete at this level, the quality, and more importantly compliance of a
supplier's vehicle fleet needs to be incredibly high. ADF prides itself upon
the strength of its vehicle fleet and excellent customer service, which allows
ADF to have positive and pro-active dialogue with its customers which include
some of the world's largest traditional and on-demand production companies and
positions us well to capture a growing proportion of the expanding market.
We supported 84 high-profile productions across FY23 including The Crown
season 6, Slow Horses, Star Wars Andor, The Gentleman, Rivals, The Diplomat,
Industry, Paris Has Fallen, The Famous Five, Back to Black and Sex Education.
The strength of our reputation and the professional integrity we exhibit in
all we do was particularly important during the Strikes as we worked with our
customers and suppliers to review our remaining available pipeline and how to
protect the business until normal production levels resumed.
We report our Net Promotor Score (''NPS''), an internationally recognised
customer service measurement, throughout the year which did not drop below 82,
a figure which Bain & Company, the creators for NPS, has described as
'world class'. We continue to perform extremely well, reflecting the skills,
knowledge and expertise of our staff that enables us to remain the market
leader.
Delivering against growth strategy
The Group has ambitions to grow organically through further investment into
its revenue-generating vehicle fleet, and also through appropriate
acquisitions.
During FY23, the Group successfully executed on our organic growth strategy,
adding 133 units to the fleet, predominantly in the first half, bringing the
total to 703 units at the end of the year. We also officially opened our new
flagship central hub at Longcross, Surrey. A key focus in FY23 was to ensure
we improved our planning, sales and financial systems. This included
developing a bespoke planning system (BMS) with our external IT partner ITCS,
streamlining our booking system, and helping to ensure we can provide our
customers with the very best level of customer service.
At IPO, we emphasised our intention to also grow through acquisitions which we
approach with a robust set of criteria. The acquisition of Location One met
all the criteria such as having an experienced, well regarded management team,
leaders in their sector, excellent record regarding health and safety and
employee practises and common customers to ADF. The Location One team is now
fully integrated into the Group. During FY23, Location One opened branches at
the Group's new operational base in Longcross, Surrey, and also depots in
Bridgend, South Wales and Pioneer Studios, Glasgow. The enlarged Group is now
cross-selling to an increasing number of HETV companies in the UK, delivering
services in a more efficient way, strengthening the enlarged Group's position
across the UK, moving the Group closer to becoming a one stop shop for film
and HETV production.
People
We will always maintain that our employees are the most essential asset of ADF
and are key to the Group's long-term success. In August 2023, we welcomed
James Long to the business as Chief Operating Officer, to strengthen the
Executive team. James has over 20 years' leadership experience in senior
commercial roles, including Managing Director at Radio Times, and Commercial
Director at Bounty. The Group is already benefiting from his operational
expertise and highly collaborative approach.
In November 2023, Jo Goodson joined the Board as an independent Non-Executive
Director, bringing over 25 years' experience working with high growth
businesses across both the public and private sectors. She has held several
senior roles across the entertainment and technology industries we look
forward to her guidance as we continue on our journey as a listed business.
Outlook
I am incredibly proud of what the ADF team has achieved against the
challenging market backdrop in FY23. The effects of the Strike will continue
to be felt through the first half of the current year, but we will carefully
manage our cost base during this time and the long-term market dynamics remain
very much in ADF's favour with continued high levels of investment in the UK
HETV industry and continued, and recently enhanced government support in terms
of grants and tax credits. The Board is confident that we will return to
pre-Strike order levels and beyond as market conditions normalise.
Marsden Proctor
Chief Executive Officer
CFO Review
Summary
The financial results for the 12 months ended 31 December 2023 reflect a
challenging year for the business, and the film and HETV industry in general
with the onset of the Strike in May 23, which continued until November 23.
This had the effect of arresting the great start the business had in the first
6 months of the year as outlined below.
Group P&L H1-FY23 H2-FY23 FY23 H1-FY22 H2-FY22* FY22
CAD Services £16.6 £9.8 £26.4 £12.6 £18.1 £30.7
Location One £5.2 £3.2 £8.4 £0.0 £0.7 £0.7
Total Sales £21.8 £13.0 £34.8 £12.6 £18.8 £31.4
Cost of Sales £13.4 £9.1 £22.5 £8.4 £11.3 £19.7
Gross Margin £8.4 £3.9 £12.3 £4.2 £7.5 £11.7
% 39% 30% 35% 33% 40% 37%
Overheads £2.6 £2.3 £4.9 £1.5 £2.2 £3.7
Adjusted EBITDA £5.8 £1.6 £7.4 £2.7 £5.3 £8.0
% 27% 12% 21% 21% 28% 25%
Non recurring expenses £0.0 £0.3 £0.3 £0.0 £0.1 £0.1
Share based payments £0.0 £0.1 £0.1 £0.0 £0.1 £0.1
EBITDA £5.8 £1.2 £7.0 £2.7 £5.1 £7.8
Depreciation & amortisation £2.4 £2.6 £5.0 £1.1 £1.4 £2.5
EBIT £3.4 (£1.4) £2.0 £1.6 £3.7 £5.3
Finance expenses £0.6 £0.8 £1.4 £0.3 £0.4 £0.7
Profit before tax £2.8 (£2.2) £0.6 £1.3 £3.3 £4.6
Taxation charge / (credit) £0.2 (£0.4) (£0.2) £0.1 (£0.1) £0.0
Profit after tax £2.6 (£1.8) £0.8 £1.2 £3.4 £4.6
Dividends - £000's £1,130,004 £349,600
Undiluted EPS - pence £1.40 £0.44
*NB Location One acquired Dec-22
H1- FY23
The first half of FY23 shows record levels of revenue at £21.8 million, which
was 73% ahead of the same period in FY22 (£12.6 million), and ahead of the
Board's expectations. The increase in sales is partly due to the addition of
Location One to the Group (+41%) and also to organic growth in the core
business (+32%).
Profit margins also improved in H1-FY23. The productions ADF worked on in the
period were more geographically centred around the main London studios and
other studios close to our operational hubs in Wales, Manchester and Glasgow
which therefore made them more efficient from a transport and mobilisation
perspective.
Furthermore, a sustained effort was made over H1-FY23 to increase the number
of employed HGV drivers as opposed to relying on agency HGV drivers. This is
reflected in agency driver costs reducing to 9.6% of revenue in H1-FY23
compared to 16.0% in H1-FY22.
There was some upwards pressure on pay rates at the start of the 2023, and
some (below inflation) pay awards were made at that time for a number of
employee groups including HGV drivers, mechanics and trailer manufacturing
staff.
H2-FY23
Prior to the onset of the Strike, the order book for H2 FY23 was very strong,
however the Strikes significantly reduced the Groups existing work programme
and pipeline for the remainder of the year, with the majority of the larger
productions planned for H2 being put on hold, or in some cases cancelled.
With the immediate and ongoing reduction in film and TV productions, the focus
for the business was therefore to:
· establish which of the active and planned productions were being
effected by the Strikes;
· secure as much of the work available in the market - this meant
some discounting and undertaking work on smaller & shorter productions;
· reduce operating costs and overheads;
· defer any major capital spend until the Strikes were resolved to
preserve cash and working capital;
· all non-essential costs such as training, travel, overtime,
weekend working etc was put on hold. It also meant many of the production base
staff, that are predominantly on flexible working contracts, had larger breaks
between productions; and
· suspended the block-hiring of agency HGV drivers.
EBITDA
The Group measures performance based on EBITDA and Adjusted EBITDA. EBITDA is
a common measure used by investors and analysts to evaluate the operating
financial performance of companies. We consider EBITDA and Adjusted EBITDA to
be useful measures of operating performance, EBITDA approximates the
underlying operating cash flow by eliminating depreciation and amortisation.
Adjusted EBITDA adds back any non-recurring or exceptional costs.
EBITDA and Adjusted EBITDA are not direct measures of our liquidity, which is
shown by our cash flow statement, and need to be considered in the context of
our financial commitments. Adjusted EBITDA for FY23 was £7.3M (21.0%)
compared to FY22 at £8.0M (25.4%)
A reconciliation of Adjusted EBITDA is shown below:
Adjusted EBITDA £000's FY23 FY22
Revenue 34,796 31,414
Profit before tax 615 4,615
Add back:
Finance expenses 1,396 702
Depreciation 4,978 2,510
Amortisation 18 3
Non-recurring expenses 258 78
Share based payments 59 59
Adjusted EBITDA 7,324 7,967
Adjusted EBITDA % 21.0% 25.4%
The tax charge/(credit) for FY23 is £(179,000), and is deferred tax only as
the group currently has excess capital allowances and tax losses to cover its
taxable profits, hence profit after tax was £0.8M (FY22: £4.6M).
ADF greatly accelerated its capex plans during H1-FY23 to take advantage of
the final months of the Capital Allowance Super-Deduction regime (''CASD'')
which was due to end in March 2023 but was extended by Jermey Hunt, in a new
format, in the Spring Budget. Overall, the CASD programme has led to a very
large tax loss carried forward which will mitigate ADF's tax charges for a
number of years.
Revenue
The table below shows the revenue between the two main facilities hire
categories, being main packages (pre-agreed before filming) and additional
sales (during the course of filming), plus other miscellaneous sales. Revenue
for Location One is shown separately.
Turnover £M's H1-FY23 H2-FY23 FY23 FY22
Facilities - Main packages £10.1 £6.4 £16.5 £18.5
Facilities - Additional sales £6.4 £3.3 £9.7 £11.9
Facilities - Other income £0.1 £0.1 £0.2 £0.3
Facilities - Total £16.6 £9.8 £26.4 £30.7
Location Equipment hire (Location One) £5.2 £3.2 £8.4 £0.7
Total Revenue £21.8 £13.0 £34.8 £31.4
Uplift on main packages % 64% 54% 60% 66%
Uplift is an important metric being the increase in total facilities sales
from the initial main packages. This reduced in H2-FY23 due to the Strike and
smaller scale productions ADF was working on.
Revenue Mix
ADF worked on 46 productions in H1-FY23, the same number as in H1-FY22. In the
second half of FY23, ADF worked on a further 38 productions (H2-FY22: 30)
taking the total for the year to 84 (FY22: 76). However, there was a small
reduction in the average revenue per production from £388K in FY22 to £385K
in FY23. This was due to the impact of the Strikes and having to take
production with less equipment and of shorter duration than normal. Netflix
remained the Group's single largest customer in FY23, however the level of
diversification across broadcasters increased during the year, with ITV and
Disney in particular significantly increasing their share of the Group's
overall revenue.
FY-23 FY-22
Broadcaster Total £M's % Total £M's %
Amazon £1.22 3.5% £2.93 9.3%
Apple £2.70 7.8% £2.20 7.0%
BBC £5.93 17.0% £4.67 14.9%
C4 £0.73 2.1% £0.00 0.0%
Disney £4.55 13.1% £2.36 7.5%
HBO £0.78 2.2% £0.00 0.0%
Hulu £0.39 1.1% £0.87 2.8%
ITV £4.92 14.1% £3.00 9.5%
NBC Universal £0.23 0.7% £1.45 4.6%
Netflix £5.27 15.2% £7.34 23.4%
Paramount £1.45 4.2% £2.37 7.6%
Sky £1.95 5.6% £2.31 7.4%
Independent £1.01 2.9% £0.00 0.0%
Studiocanal £1.26 3.6% £0.00 0.0%
Other / Cross Hire / Misc £2.41 6.9% £1.91 6.1%
£34.80 100.0% £31.41 100.0%
Split
ADF £26.42 75.9% £30.70 97.7%
Location One £8.37 24.1% £0.72 2.3%
£34.79 100.0% £31.41 100.0%
ADF main productions 84 76
ADF average per production £385 £388
The split of productions across the revenue bands is shown below:
Production value FY23 FY22
£0 - £500k 72 54
£500k - £1.0m 7 16
£1.0m - £1.5m 3 4
£1.5m - £2.0m 1 1
£2.0m - £2.5m 1 0
£2.5m - £3.0m 0 1
84 76
Share Based Payments & Non-Recurring Expenses
The share-based payments relate to certain options granted to the two current
Executive Directors. The non-recurring expenses relate to adjustments to the
carrying value of goodwill and provisions for deferred consideration payments
relating to the acquisition of Location One.
Dividend & EPS
The Company paid a final dividend of 0.90 pence per share in June 2023 in
relation to the year ended 31(st) December 2022. This took the total dividend
for that year to 1.36 pence per share, with the interim dividend of 0.46 pence
per share in October 2022. The Company also paid an interim dividend in
October 2023 of 0.50 pence per share in relation to the year ended 31(st)
December 2023. The dividend policy is progressive with growth in earnings.
Basic earnings per share for FY23 was 0.99 pence per share, (FY22: 6.1 pence
per share).
Capex
During FY23, ADF acquired new equipment with a cost of £11.9 million (£4.4
million included as property, plant, and equipment, and the remaining relating
to leased assets of £7.5m). The majority of this spend (£9.0 million)
occurred in H1-FY23 to ensure maximum claims under the super-deduction capital
allowance regime. 133 assets were added across the year (FY22: 106 units)
taking the total to 703 units at the end of the year. The average cost of
assets purchased in FY23 was £72K (FY22: £67K).
Group Capex - £000's Units Capex Per Unit
2 way trailer 28 £2,298 £82
3 way trailer 22 £2,005 £91
Costume 5 £268 £54
Diners 8 £262 £33
Generator 4 £337 £84
Honey wagon 7 £183 £26
Make up 4 £418 £104
Production office 9 £1,084 £120
School room 3 £54 £18
Single artist trailer 11 £973 £88
Tech truck 6 £548 £91
Tractor unit 25 £1,139 £46
Van 1 £43 £43
133 £9,611 £72
Movement in assets under construction (£315)
Other - P&M, software etc £709
£10,005
Location One Capex £1,889
Total Capex £11,894
Cash Flow, Funding & Net Debt
During FY23, ADF financed capex of £7.3 million by hire purchase, and the
balance of £4.6 million was paid for out of cash. The majority of the funding
was with 2 providers, PACCAR Finance, the in-house finance company for DAF
vehicles, and HSBC.
Interest rates have increased in line with the Bank of England base rate and
averaged 7.5% across FY23 (FY22: 5.0%). Total hire purchase repayments
including interest were £4.8 million. In addition, new property leases with
an inception value of £1.1 million were capitalised under IFRS 16, being the
renewal of the lease at the factory unit in Brynmenyn, Wales, additional space
at the corporate Head Office in Bridgend, and additional capacity at Location
One's main operational base in Barking.
Net debt, excluding IFRS 16 leases, at the end of FY23 was £12.8 million
(FY22: £3.4 million) with hire purchase liabilities increasing from £12.9
million at the end of FY22 to £16.3 million at the end of FY23, and cash
reducing from £9.5 million to £3.5 million.
During the year a dividend of £1.1 million was paid, being the only other
significant cash flow item.
Financial Reporting Council (FRC) Review
The FRC raised a number of queries in November 2023 in relation to the
accounting of the acquisition of Location One in the FY22 accounts. We
acknowledge that the review was conducted by staff of the FRC who have an
understanding of the relevant legal and accounting framework based on our
annual report and accounts but not with detailed knowledge of our business or
an understanding of the underlying transactions entered into. However, we
worked closely with the FRC so that their queries were satisfactorily
addressed, and their findings are reported on the FRC website. We appreciate
the very thorough review of our financial statements, and the observations and
recommendations provided.
Neil Evans FCA
Chief Financial Officer
Consolidated statement of comprehensive income
All amounts relate to continuing operations.
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Note
Revenue 3 34,796 31,414
Cost of sales (22,399) (19,742)
Gross profit 12,397 11,672
Administrative expenses (10,069) (6,218)
Non-recurring expenses 5 (258) (78)
Share based payment expense 23 (59) (59)
Operating profit 2,011 5,317
Finance expense 9 (1,396) (702)
Profit before taxation 615 4,615
Taxation 10 179 (3)
Profit for the year 794 4,612
Other comprehensive income
Other comprehensive income for the year - -
Total other comprehensive income 794 4,612
Earnings per share for profit attributable to the owners
Basic earnings per share (Pence) 12 0.99 6.1
Diluted earnings per share (Pence) 12 0.93 5.4
Consolidated statement of financial position
Note As at As at
31 December 2023 31 December 2022
£'000 £'000
Assets
Current assets
Inventories 13 576 417
Trade and other receivables 18 1,710 3,045
Cash and cash equivalents 19 3,533 9,518
Total current assets 5,819 12,980
Non-current assets
Property, plant and equipment 15 12,638 10,680
Right-of-use assets 16 31,527 25,901
Intangible assets 14 6,262 7,289
Total non-current assets 50,427 43,870
Total assets 56,246 56,850
Liabilities
Current liabilities
Trade and other payables 20 2,941 6,322
Lease liabilities 16 5,624 3,705
Total current liabilities 8,565 10,027
Non-current liabilities
Other provisions 17 40 38
Lease liabilities 16 19,584 17,524
Contingent consideration 21 60 878
Deferred tax liabilities 10 3,030 2,966
Total non-current liabilities 22,714 21,406
Total liabilities 31,279 31,433
Net Assets 24,967 25,417
Equity
Called up share capital 23 809 794
Share premium 24 15,547 15,492
Share based payment reserve 24 1,459 1,652
Merger reserve 24 (400) (400)
Retained earnings 24 7,552 7,879
Total equity 24,967 25,417
The financial statements were approved and authorised for issue by the Board
on 25 April 2024 and signed on its behalf by:
Neil Evans
Director
Company statement of financial position
Note As at As at
31 December 2023 31 December 2022
£'000 £'000
Assets
Current assets
Trade and other receivables 18 307 307
Amounts due from subsidiaries 18 11,588 12,959
Total current assets 11,895 13,266
Non-current assets
Investment in subsidiary 22 14,799 15,534
Deferred tax assets 10 861 752
Total non-current assets 15,660 16,286
Total assets 27,555 29,552
Liabilities
Current liabilities
Trade and other payables 20 65 1,161
Total current liabilities 65 1,161
Non-current liabilities
Contingent consideration 21 60 878
Total non-current liabilities 60 878
Total liabilities 125 2,039
Net Assets 27,430 27,513
Equity
Called up share capital 23 809 794
Share premium 24 15,547 15,492
Share based payment reserve 24 1,459 1,652
Merger relief reserve 24 7,947 7,947
Retained earnings 1,668 1,628
Total equity 27,430 27,513
The Company has elected to take exemption under section 408 of the Companies
Act 2006 from presenting the Company statement of comprehensive income. The
profit for the Company for the year ended 31 December 2023 was £1,161,162.
The financial statements were approved and authorised for issue by the Board
on 25 April 2024 and signed on its behalf by:
Neil
Evans
Director
Consolidated statement of changes in equity
Share Based Payment Reserve
£'000
Share Capital Share Premium Merger Reserve Retained Earnings Total Equity
£'000 £'000 £'000 £'000 £'000
Note
Balance at 01 January 2022 455 787 1,332 (400) 3,322 5,496
Comprehensive Income
Profit for the year - - - - 4,612 4,612
Transactions with owners
Issue of shares on AIM listing 23 300 14,700 - - - 15,000
Costs of issue of shares on AIM listing - (1,457) - - - (1,457)
Exercise of options 23 5 - - - - 5
Share based payment charge on AIM listing - (261) 261 - - -
Share based payment charge on long term incentive program - - 59 - - 59
Deferred tax adjustment 10 - - - - 295 295
Business acquisition 34 1,846 - - - 1,880
Costs of issue of shares - (123) - - - (123)
Dividends 23 - - - - (350) (350)
Balance at 31 December 2022 794 15,492 1,652 (400) 7,879 25,417
Balance at 01 January 2023 794 15,492 1,652 (400) 7,879 25,417
Comprehensive Income
Profit for the year - - - - 794 794
Transactions with owners
Exercise of options 23 15 55 (252) - 252 70
Share based payment charge on long term incentive program - - 59 - - 59
Deferred tax on share options 10 - - - - (243) (243)
Dividends 23 - - - - (1,130) (1,130)
Balance at 31 December 2023 809 15,547 1,459 (400) 7,552 24,967
Company statement of changes in equity
Share Based Payment Reserve
£'000 Merger Relief Reserve
Share Capital Share Premium £'000 Retained Earnings Total Equity
£'000 £'000 £'000 £'000
Note
Balance at 01 January 2022 455 787 1,332 7,947 (2,655) 7,866
Comprehensive Income
Profit for the year - - - - 4,338 4,338
Transactions with owners
Issue of shares on AIM listing 23 300 14,700 - - - 15,000
Costs of issue of shares on AIM listing - (1,457) - - - (1,457)
Exercise of options 23 5 - - - - 5
Share based payment charge on AIM listing - (261) 261 - - -
Share based payment charge on long term incentive program - - 59 - - 59
Deferred tax adjustment 10 - - - - 295 295
Business acquisition 34 1,846 - - - 1,880
Costs of issue of shares - (123) - - - (123)
Dividends 11 - - - - (350) (350)
Balance at 31 December 2022 794 15,492 1,652 7,947 1,628 27,513
Balance at 01 January 2023 794 15,492 1,652 7,947 1,628 27,513
Comprehensive Income
Profit for the year - - - - 1,161 1,161
Transactions with owners
Exercise of options 23 15 55 (252) - 252 70
Share based payment charge on long term incentive program - - 59 - - 59
Deferred tax on share options 10 - - - - (243) (243)
Dividends 11 - - - - (1,130) (1,130)
Balance at 31 December 2023 809 15,547 1,459 7,947 1,668 27,430
Consolidated statement of cashflows
Note Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Cash flows from operating activities
Profit before taxation from continuing activities 615 4,615
Adjustments for non-cash/non-operating items:
Depreciation of property, plant and equipment 15 1,751 611
Amortisation of right-of-use assets 16 3,227 1,899
Amortisation of intangible assets 14 18 3
Impairment of goodwill 14 1,019 -
(Profit)/ loss on disposal of property, plant and equipment 15 (84) 52
Loss on disposal of right of use assets 16 75 -
Share based payment charge 23 59 59
Fair value gain on deferred consideration 21 (818) -
Finance expense 9 1,396 702
7,258 7,941
Increase in inventories 13 (159) (417)
Decrease in trade and other receivables 1,335 259
Decrease in trade and other payables (3,381) (3,517)
Net cash generated from operating activities 5,053 4,266
Cash flows from investing activities
Purchase of property, plant and equipment 15 (4,437) (4,056)
Purchase of intangible assets 14 (10) (81)
Purchase of right-of-use assets(1) (90) (964)
Proceeds from sale of property, plant and equipment 434 -
Increase in amounts due from directors - (180)
Cost of business acquisition - (3,595)
Net cash used in investing activities (4,103) (8,876)
Cash flows from financing activities
Proceeds from ordinary share issue 23 70 15,005
Cost of share issue - (1,580)
Repayment of borrowings 29 - (342)
Payments on lease liabilities 16 (4,479) (2,890)
Interest paid on lease liabilities 9, 16 (1,335) (695)
Interest on deferred consideration 9 (57) -
Other interest paid 9 (4) (7)
Dividends paid 11 (1,130) (350)
Net cash used in financing activities (6,935) 9,141
Net (decrease)/ increase in cash and cash equivalents 19 (5,985) 4,531
Cash and cash equivalents at beginning of year 19 9,518 4,987
Cash and cash equivalents at end of year 19 3,533 9,518
1The purchase of right-of-use assets relates to cash additions made to improve
assets held on hire purchase, included in right -of-use assets as detailed in
note 16.
Company statement of cashflows
Note Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Cash flows from operating activities
Profit before taxation from continuing activities 808 3,881
Adjustments for non-cash/non-operating items:
Impairment of investment 735 -
Fair value gain on deferred consideration 21 (818) -
Share based payment charge 23 59 59
784 3,940
Decrease in trade and other receivables 18 - 508
(Decrease)/ increase in trade and other payables 20 (1,096) 998
Cash from operations (312) 5,446
Net cash generated from operating activities (312) 5,446
Cash flows from investing activities
Acquisition of investment in subsidiary - (4,430)
Receipts from/ (funds advanced to) subsidiary 18 1,372 (13,911)
Increase in amounts due from directors - (180)
Net cash used in investing activities 1,372 (18,521)
Cash flows from financing activities
Proceeds from ordinary share issue 23 70 15,005
Cost of share issue - (1,580)
Dividends paid 11 (1,130) (350)
Net cash used in financing activities (1,060) 13,075
Net movement in cash and cash equivalents - -
Cash and cash equivalents at incorporation - -
Cash and cash equivalents at end of period - -
Facilities by ADF Plc does not hold its own bank account, the cash flow has
been presented as if the Group bank account had a protected Company cell in
order to present meaningful cash flow information.
Notes to the financial statements
1 Accounting policies
1.1 Basis of preparation
Facilities by ADF PLC (the "Company'') and its subsidiaries (together, the
"Group'') is a public company limited by shares, incorporated, domiciled and
registered in England and Wales in the UK. The registered number is 13761460
and the registered address is Ground Floor 31 Oldfield Road, Bocam Park,
Pencoed, Bridgend, United Kingdom, CF35 5LJ.
The consolidated and Company financial statements are for the year ended 31
December 2023. They have been prepared in accordance with UK-adopted
international accounting standards in conformity with the requirements of the
UK Companies Act 2006.
The financial statements have been prepared in accordance with International
Financial Reporting Standards (''IFRS'') under the historical cost convention,
as modified by the use of fair value for financial instruments measured at
fair value. The financial statements are presented in thousands of pounds
sterling ("£'000") except where otherwise indicated.
The principal accounting policies adopted in the preparation of the financial
statements are set out below. These policies have been consistently applied to
both the Company and the Group where applicable. The policies have been
consistently applied to all the periods presented, unless otherwise stated.
For the year ending 31 December 2023 the following subsidiaries of the parent
company are entitled to take exemptions from audit under Section 479A of the
Companies Act 2006 relating to subsidiary companies.
Subsidiary Company registered number
CAD Services Limited 04533535
Location 1 Group Limited 11786214
Location One Limited 05949293
The Company has provided a guarantee for all outstanding debts and liabilities
to which the subsidiary companies listed above are subject at the end of the
financial year, in accordance with Section 479C of the Companies Act 2006.
1.2 Going concern
The Group has continued to invest in growth throughout the financial year,
with the Group continuing to trade throughout in a net asset position.
The Directors are pleased with the progress of trading to date, and in
particular, the progress made relative to the challenges of the film and
television industry, whereby the USA Writers (Writers Guild of America (WGA))
and Actors (Screen Actors Guild - American Federation of Television and Radio
Artists (SAG-AFTRA)) Strikes impacted productions around the globe, from July
2023 through to late Autumn 2023. The Strikes caused film and TV productions
in the UK, on which ADF were engaged, to stop or delay productions that were
scheduled to start filming in autumn 2023 and pushing these to early 2024. The
Directors note that the Strikes were a short-term impact on the business and
are confident the Group is in a robust position to capitalise on the
opportunity ahead once previous production levels resume, underpinning
confidence in the long-term success of the Group.
The Directors are continuing to identify acquisitions as well as focussing on
the continuation of the organic growth experienced in recent years. The
Company acquired a new a business in the previous financial period and
significant synergies are expected to continue to be achieved over the coming
12 months from this.
The financial statements have been prepared on the going concern basis which
the Directors believe to be appropriate for the following reasons. The
Directors have prepared cash flow forecasts for a 12-month period from
the date of approval of these financial statements. They have applied a range
of sensitivities to these forecasts and such forecasts and analysis have
indicated that sufficient funds should be available to enable the Group to
continue in operational existence for the foreseeable future by meeting its
liabilities as they fall due for payment.
1.3 New standards, amendments, and interpretations
The following amendments to standards have become effective for the first time
for annual reporting periods commencing on 1 January 2023 and have been
adopted in preparing these financial statements:
- Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure
of Accounting Policies;
- Amendments to IAS 8 - Definition of Accounting Estimates; and
- Amendments to IAS 12 - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction.
The adoption of these amendments had no material impact on the financial
statements.
At the date of approval of these financial statements, the following
amendments to IFRS which have not been applied in these financial statements
were in issue, but not yet effective, until annual periods beginning on 1
January 2024:
- Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7);
- Non-current Liabilities with Covenants (Amendments to IAS 1);
- Amendments to IFSR 16 - Lease liability in sale and leaseback;
- Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current; and
- Amendments to IAS 21 Lack of Exchangeability*.
*Subject to endorsement by the UK
The adoption of these amendments is not expected to have a material impact on
the consolidated and Company financial statements.
1.4 Basis of consolidation
The consolidated financial statements incorporate the results of the Company
and all of its subsidiary undertakings. The Group applies the acquisition
method in accounting for business combinations. The consideration transferred
by the Group to obtain control of a subsidiary is calculated as the sum of the
acquisition-date fair values of assets transferred, liabilities incurred, and
the equity interests issued by the Group, which includes the fair value of any
asset or liability arising from a contingent consideration arrangement.
Acquisition costs are expensed as incurred. Assets acquired and liabilities
assumed are generally measured at their acquisition-date fair value.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used in line with those used by
other members of the Group.
Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group until the date that control ceases.
Transactions eliminated on consolidation
Intra-group balances, and any gains and losses or income and expenses arising
from intra-group transactions, are eliminated in preparing the financial
information. Losses are eliminated in the same way as gains, but only to the
extent that there is no evidence of impairment.
1.5 Revenue recognition
IFRS 15 "Revenue from Contracts with Customers" is a principle-based model of
recognising revenue from contracts with customers. It has a five-step model
that requires revenue to be recognised when control over goods and services
are transferred to the customer.
Revenue includes facilities rental incomes, fees from the provision of
services incidental to facilities and fuel. Revenue is measured at the fair
value of consideration received or receivable, net of discounts, VAT, and
sales taxes.
Revenue from all other services rendered is recognised proportionally over the
period in which the facilities are rented out based on the terms of the
contract. The stage of completion is assessed on the basis of the actual
service provided (number of days of rental in the accounting period).
Fuel income was recognised at the point of time of delivery. Revenue from sale
of fuel cards ceased in the period ending 31 December 2022.
1.6 Employee benefits: Pension obligations
The Group operates a defined contribution plan for its employees. A defined
contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. Once the contributions have been paid
the Group has no further payment obligations.
The contributions are recognised as an expense in the Statement of
Comprehensive Income when they fall due. Amounts not paid are shown in
accruals as a liability in the Statement of Financial Position. The assets of
the plan are held separately from the Group in independently administered
funds.
1.7 Net finance costs
Finance expense
Finance expense comprises of interest payable and lease interest which are
expensed in the period in which they are incurred and reported in finance
costs. Debt issue costs are capitalised and amortised over the life of the
associated facility.
Finance income
Finance income relates to interest on bank deposits.
1.8 Foreign currency translation
Transactions in foreign currencies are translated to Sterling (the currency of
the primary economic environment in which the Group operates) at the foreign
exchange rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the statement of financial
position date are retranslated to the functional currency at the foreign
exchange rate ruling at that date. Non-monetary assets and liabilities that
are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction. Foreign exchange
differences arising on translation are recognised in the Statement of
Comprehensive Income, within interest receivable and interest payable.
The consolidated and Company financial statements are presented in GBP, which
is the Group's and Company's presentational currency. The functional currency
of the Company is GBP.
1.9 Current and deferred taxation
The tax expense for the period comprises current and deferred tax. Tax is
recognised in the consolidated statement of comprehensive income, except that
a charge attributable to an item of income or expense recognised as other
comprehensive income or to an item recognised directly in equity is also
recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of tax rates and laws
that have been enacted or substantively enacted by the reporting date in the
UK where the Group and Company operates and generate taxable income.
Deferred tax balances are recognised in respect of all temporary differences
that have originated but not reversed by the balance sheet date, except:
- The recognition of deferred tax assets is limited to the extent
that it is probable that they will be recovered against the reversal of
deferred tax liabilities or other future taxable profits;
- Any deferred tax balances are reversed if and when all
conditions for retaining associated tax allowances have been met; and
- Where timing differences relate to interests in subsidiaries,
associates, branches and joint ventures and the Group and Company can control
their reversal and such reversal is not considered probable in the foreseeable
future.
Deferred tax balances are not recognised in respect of permanent differences
except in respect of business combinations, when deferred tax is recognised on
the differences between the fair values of assets acquired and the future tax
deductions available for them and the differences between the fair values of
liabilities acquired and the amount that will be assessed for tax. Deferred
income tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date.
1.10 Property plant and equipment
Property, plant and equipment is stated at historical cost less accumulated
depreciation and any accumulated impairment losses. Historical cost includes
expenditure that is directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the
manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their
residual value over their estimated useful lives, using the reducing balance
and straight-line methods.
Depreciation is provided on the following basis:
Plant and machinery 25% reducing balance and 1 - 10 years straight-line
Motor vehicles 10% reducing balance and 5 years straight-line
Computer equipment 25% reducing balance
Hire fleet 10% reducing balance
Leasehold improvements 25% reducing balance
The assets' residual values, useful lives and depreciation methods are
reviewed, and adjusted prospectively if appropriate, or if there is an
indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised in the Statement of Comprehensive
Income.
Assets under construction are those that are being built or developed with the
intention of being used in the business operations of the Group. These assets
are not depreciated until they are completed and ready to be used. Once an
asset is completed, it is transferred to a separate class of asset in
property, plant and equipment or right-of-use assets and is then subject to
depreciation. This transfer is made at the point of time the asset is
completed and is ready for use.
The cost of the asset under construction includes all costs directly
attributable to bringing the asset to the condition necessary for it to be
used for its intended purpose. These costs may include direct labour, direct
materials, and other expenses incurred during the construction period.
1.11 Impairment of assets
Assets that are subject to depreciation or amortisation are assessed at each
reporting date to determine whether there is any indication that the assets
are impaired. Where there is any indication that an asset may be impaired, the
carrying value of the asset (or cash‑generating unit to which the asset has
been allocated) is tested for impairment. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's (or CGU's) fair
value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (CGUs). Non‑financial assets that have
been previously impaired are reviewed at each reporting date to assess whether
there is any indication that the impairment losses recognised in prior periods
may no longer exist or may have decreased.
1.12 Leased assets
The Group assesses whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration at
inception of a contract.
To assess whether a contract conveys the right to control the use of an
identified asset, the Group assesses whether: an identified physically
distinct asset can be identified; and the Group has the right to obtain
substantially all of the economic benefits from the asset throughout the
period of use and has the ability to direct the use of the asset over the
lease term being able to restrict the usage of third parties as applicable.
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
- Leases of low value assets; and
- Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the
case) this is not readily determinable, in which case the Group's incremental
borrowing rate on commencement of the lease is used.
On initial recognition, the carrying value of the lease liability also
includes:
- amounts expected to be payable under any residual value
guarantee;
- the exercise price of any purchase option granted in favour of
the Group if it is reasonably certain to access that option; and
- any penalties payable for terminating the lease, if the term of
the lease has been estimated on the basis of the termination option being
exercised.
Right of use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
- lease payments made at or before commencement of the lease;
- initial direct costs incurred; and
- the amount of any provision recognised where the Group is
contractually required to dismantle, remove, or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if, rarely, this is judged to be shorter than the lease term.
1.13 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short term
highly liquid deposits which are subject to an insignificant risk of changes
in value. Bank overdrafts that are repayable on demand and form an integral
part of cash management are included as a component of cash and cash
equivalents for the purpose only of the cash flow statement.
1.14 Financial Instruments
Financial instruments are all financial assets and financial liabilities that
comprise a contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity and are detailed in
notes to the accounts.
Financial assets and financial liabilities are recognised when the Group
becomes party to the contractual provisions of the instrument. Financial
assets and financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable (other than financial assets
or liabilities at fair value through profit or loss) are added to or deducted
from the fair value as appropriate, on initial recognition.
Financial assets and financial liabilities are offset, and the net amount
reported in the consolidated statement of financial position if, and only if,
there is a currently enforceable legal right to offset the recognised amounts
and there is an intention to settle on a net basis, or to realise the assets
and settle the liabilities simultaneously.
Financial assets
The Group and Company's financial assets held at amortised cost comprise trade
and other receivables and cash and cash equivalents in the consolidated
statement of financial position.
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally
through the provision of goods and services to customers (e.g., trade
receivables), but also incorporate other types of financial assets where the
objective is to hold their assets in order to collect contractual cash flows
and the contractual cash flows are solely payments of the principal and
interest.
They are initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue and are subsequently
carried at amortised cost using the effective interest rate method, less
provision for impairment.
Impairment of financial assets
Impairment provisions for trade receivables are recognised based on the
simplified approach within IFRS 9 using the lifetime expected credit losses.
During this process the probability of the non-payment of the trade
receivables is assessed. This probability is then multiplied by the amount of
the expected loss arising from default to determine the lifetime expected
credit loss for the trade receivables.
Impairment provisions for other receivables are recognised based on the
general impairment model within IFRS 9. In doing so, the Group follows the
3-stage approach to expected credit losses. Step 1 is to estimate the
probability that the debtor will default over the next 12 months. Step 2
considers if the credit risk has increased significantly since initial
recognition of the debtor. Finally, Step 3 considers if the debtor is credit
impaired, following the criteria under IFRS 9.
The Group's financial liabilities held at amortised cost comprise trade
payables and other short-dated monetary liabilities, and other borrowings in
the consolidated statement of financial position.
Trade payables and other short-dated monetary liabilities are initially
recognised at fair value and subsequently carried at amortised cost using the
effective interest rate method.
Other borrowings are initially recognised at fair value net of any transaction
costs directly attributable to the issue of the instrument. Such
interest-bearing liabilities are subsequently measured at amortised cost using
the effective
interest rate method, which ensures that any interest expense over the period
to repayment is at a constant rate on the balance of the liability carried in
the consolidated statement of financial position.
For the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as well as
any interest or coupon payable while the liability is outstanding.
Unless otherwise indicated, the carrying values of the Group's and Company
financial liabilities measured at amortised cost represents a reasonable
approximation of their fair values.
Financial liabilities
The Group and Company measures its financial liabilities at amortised
cost. All financial liabilities are recognised in the statement of financial
position when the Group and Company becomes a party to the contractual
provision of the instrument.
1.15 Share based payments
The Group issues equity-settled share-based incentives to certain employees in
the form of share options. Equity-settled share-based payments are measured at
fair value at the date of grant. The fair value determined at the grant date
is expensed in the Group's financial statements on a straight-line basis over
the estimated vesting period, based on the estimate of shares that will
eventually vest.
Employee share scheme
Share options that have been issued by the Group have been reviewed under the
Black Scholes model to evaluate any provision that may be required to set
against the reserves of the Group. The share-based payment expense has been
calculated and detailed per the notes to the financial statements.
Equity-settled share-based payments to employees are measured at the fair
value of the equity instrument at the grant date. The fair value determined at
grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. At each reporting date, the
Group revises its estimate of the number of equity instruments expected to
vest as a result of the effect of non-market based vesting conditions. The
impact of the revision of the original estimates, if any, is recognised in the
profit or loss such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to equity reserves.
Long-term incentive plan
The Group has a long-term incentive plan.
Long term incentive options that have been issued by the Group have been
reviewed under the Monte Carlo model to evaluate any provision that may be
required to set against the reserves of the Group. The share-based payment
expense has been calculated and detailed per the notes to the financial
statements. There are conditions associated with the long-term incentive
options issued which requires the fair value charge associated with the
options to be allocated over the minimum vesting period.
1.16 Provision
Provisions are charged as an expense to the Statement of Comprehensive Income
in the year that the Group becomes aware of the obligation and are measured at
the best estimate at the Statement of Financial Position date of the
expenditure required to settle the obligation, taking into account relevant
risks and uncertainties. When payments are eventually made, they are charged
to the provision carried in the Statement of Financial Position.
Provisions are made where an event has taken place that gives the Group a
legal or constructive obligation that probably requires settlement by a
transfer of economic benefit, and a reliable estimate can be made of the
amount of the obligation.
1.17 Dividends
Equity dividends are recognised when they become legally payable. Interim
equity dividends are recognised when paid. Final equity dividends are
recognised when approved by the shareholders at an annual general meeting.
1.18 Operating segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker ('CODM'). The CODM,
who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Board of Directors of the
Group. The Group had two reporting segments, being the hire of facilities, and
Location One (which represents all revenues and cost of sales generated from
Location 1 Group Limited and Location One Limited) during the year ending 31
December 2023. The Group previously report fuel cards by ADF as a separate
operating segment, during the prior year ending 31 December 2022 the Group
ceased trading of fuel cards.
1.19 Investments
Investments are stated at their cost less impairment losses.
1.20 Inventories
Inventories are stated at the lower of cost or net realisable value. Net
realisable value is the amount that can be realised from the sale of the
inventory in the normal course of business after allowing for the costs of
realisation. An allowance is recorded for obsolescence and slow-moving items.
Inventories held consist of stored goods to be used in the support of
production vehicles and maintenance.
1.21 Intangible assets
Goodwill is recorded as an intangible asset and is the surplus of the cost of
acquisition over the fair value of identifiable net assets acquired. Goodwill
is reviewed annually for impairment. Any impairment identified as a result of
the review is charged in the statement of profit or loss and other
comprehensive income.
Intangible assets, including software, acquired separately from a business are
capitalised at cost. They are subsequently accounted for at cost less
depreciation and impairment. The useful life of software is estimated to be 10
years.
Intangible assets acquired on business combinations are capitalised separately
from goodwill at fair value on initial recognition. Intangible assets are
amortised on a straight-line basis over their useful lives.
The estimated useful lives, residual values, and depreciation method are
reviewed at the end of each period.
2 Critical accounting judgements and estimates
The preparation of the financial information in compliance with IFRS requires
the use of certain critical accounting estimates. It also requires the Group
management to exercise judgement and use assumptions in applying the Group's
accounting policies. The resulting accounting estimates calculated using these
judgements and assumptions will, by definition, seldom equal the related
actual results but are based on historical experience and expectations of
future events. Management believe that the estimates utilised in preparing the
financial information are reasonable and prudent critical accounting
judgements and estimates.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The judgements and
key sources of estimation uncertainty that have a significant effect on the
amounts recognised in the financial information is discussed below:
Key accounting estimates and judgements
The following are the areas requiring the use of estimates and judgements that
may significantly impact the financial information.
Judgements
Hire of equipment revenues constitute leases
Any arrangement that is dependent on the use of a specific asset or assets
should be accounted for as a lease under IFRS 16. The Directors have concluded
that none of the Group contracts with customers include the use of an asset as
substantive substitution rights exist throughout the period of use, whereby
substitution would be economically beneficial to the Group. All revenues
therefore are classified within the scope of IFRS 15.
Estimates
Discount rates
IFRS 16 states that the lease payments shall be discounted using the lessee's
incremental borrowing rate where the rate implicit in the lease cannot be
readily determined. Accordingly, all lease payments have been discounted using
the incremental borrowing rate (IBR). The IBR has been determined by
management using a range of data including current economic and market
conditions, review of current debt and capital within the Group, lease length
and comparisons against seasoned corporate bond rates and other relevant data
points. Significant changes in IBR would cause changes to both the value of
the right-of-use assets and corresponding lease liabilities. Sensitivity
analysis has been performed on IBR rates in note 16 of these financial
statements.
Impairment of intangible assets
Following the assessment of the recoverable amount of goodwill allocated to
Location 1 Group Limited to which goodwill of £7,211,397 was allocated on
completion of the acquisition in the year ended 31 December 2022, the
Directors consider the recoverable amount of goodwill allocated Location 1
Group Limited to be most sensitive to the achievement of the Group's long-term
budget and projected forecasts. Budgets comprise forecasts of costs, and
capital expenditure based on current and anticipated market conditions that
have been considered and approved by the Board. Approved budgets cover the
next thirty-six months, whilst the forecasted period extends to five years.
The recoverable amount of the Location 1 Group Limited (a singular
cash-generating unit) is determined based on a value in use calculation which
uses cash flow projections based on the financial budgets and forecasted
five-year period, using a pre-tax discount rate of 18 per cent per annum.
Whilst the Group is able to manage most of the costs, the revenue projections
are uncertain, in the short term, due to the current challenges which the film
and television industry in the year ended 31 December 2023. The WGA and
SAG-AFTRA Strikes impacted productions around the globe, from July 2023
through to late Autumn 2023. The Strikes caused film and TV productions in the
UK, on which ADF were engaged, to stop or delay productions that were
scheduled to start filming in autumn 2023 and pushing these to early 2024. The
Directors note that the Strikes were a short-term impact on the business and
are confident the Group is in a robust position to capitalise on the
opportunity ahead once previous production levels resume, underpinning
confidence in the long-term success of the Group. Due to the timing of any
rescheduled productions, it is possible that further differences between
forecast and actual results may differ into early 2024.
The sensitivity analysis in respect of the recoverable amount of Location 1
Group Limited goodwill is presented in note 14. The Group recorded an
impairment charge of £1,019,080 recorded in the current year ended 31
December 2023.
Deferred consideration
On completion of the acquisition of 100% of the share capital of Location 1
Group Ltd the payment of contingent consideration was valued at £60,474
(2022: £877,892). The contingent consideration value was estimated by
management using a range of probabilities to determine the potential payment
of earn out over the consideration period and the expected results of Location
1 Group Limited. The maximum value of contingent consideration payable, based
on meeting all the earn out criteria, would be a liability due of £2,657,788
(2022: £4,059,788). Further if none of the criteria is met then no payment of
consideration would be due, giving no liability to the Company. No payments
were made in respect of deferred consideration in the year (2022: £Nil). The
reduction in valuation in the year resulted as the deferred consideration is
based on a cumulative earn out target, whereby due to the WGA and SAG-AFTRA
strikes impacting productions, from July 2023 through to late Autumn 2023,
management have estimated it is unlikely that the earn out will be met.
3 Revenue from contracts with customers
All of the Group's revenue was generated from the provision of services in the
UK, apart from Hire of Facilities revenues totalling £314,323 (2022:
£557,911) which were generated in the European Union. 4 platform customers
make up 10% or more of revenue in the year ending 31 December 2023 (2022: 2).
During the year management considered revenue derived from one business stream
(2022: Two), being the 'hire of facilities'. As at 31 December 2022 the Group
had ceased trading of fuel cards. Fuel cards by ADF was still identified as a
separate reporting segment up until this date.
Revenue from customers(1)
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Hire of facilities
Customer 1 5,929 7,338
Customer 2 5,273 -
Customer 3 2,704 4,674
Customer 4 4,917 -
Customer 5 4,547 -
All other customers 11,426 19,224
Fuel by ADF - 178
34,796 31,414
Timing of transfer of goods or services
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Services transferred over time 34,796 31,236
At a point in time - 178
34,796 31,414
The following table provides information about contract liabilities with
customers, there were no contract assets as at 31 December 2023 (2022: None):
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Deferred income 33 576
Revenue recognised in the year that was deferred from the previous year was
£575,697 (2022: £518,555). The contract liabilities relate to the deferred
income in respect of facilities rented. Revenue is being recognised across the
actual service provided (number of days of rental in the accounting period).
(1) Revenue has been disaggregated by platform commissioned productions,
rather than at a invoiced special purpose vehicle company level, for the
purpose of alignment with the Director's reporting in the Strategic Report.
4 Segmental reporting
The Group has two reporting segments, being the hire of facilities and
Location One (which represents all revenues and cost of sales generated from
Location 1 Group Limited and Location One Limited). No non-GAAP reporting
measures are monitored. Total assets and liabilities are not provided to the
CODM in the Group's internal management reporting by segment and therefore are
not presented below, information on segments is reported at a gross profit
level only. Information about geographical revenue is disclosed in note 3. All
non-current assets are located in the UK.
As at 31 December 2022 the Group had ceased trading of fuel cards. Fuel cards
by ADF was still identified as a separate reporting segment up until this
date, as fuel cards were sold in the year to 31 December 2022.
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Revenue
Hire of facilities 26,425 30,518
Location One 8,371 718
Fuel by ADF - 178
34,796 31,414
Cost of sales profit
Hire of facilities 17,146 19,144
Location One 5,253 433
Fuel by ADF - 165
22,399 19,742
Gross Profit 12,397 11,672
5 Expenses by nature
Operating profit is stated after charging:
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Depreciation of property, plant and equipment 1,751 611
(Profit)/ loss on disposal of property, plant and equipment (84) 52
Amortisation of right-of-use assets 3,227 1,899
Loss on disposal of right-of-use assets 75 -
Non-recurring expenses:
Impairment of goodwill 1,019 -
Gain on deferred consideration (818) -
Social security costs in respect of options exercised 57 -
Expenses in respect of acquisitions - 78
Non-recurring expenses relate to one off fee expenses charged to the statement
of comprehensive income.
6 Auditor remuneration
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Fee payable for the audit of the Group's financial statements 68 71
Fees relating to tax services 3 -
Fees relating to other services 11 57
82 109
£11,000 of other services relating to auditor remuneration has been recognised in the year ended 31 December 2023, in respect of due diligence fees. Fees incurred in the year ended 31 December 2022 of £57,000, were in respect of business acquisition due diligence.
7 Employee benefit expenses
For the Group employee benefit expenses (including directors) comprise:
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Wages and salaries 12,730 9,591
Social security contributions and similar taxes 1,222 1,118
Share based payment expense 59 59
Pension costs 235 170
14,246 10,938
Average number of people (including directors) employed by activity for the Group are:
Year ended Year ended
31 December 2023 31 December 2022
Drivers and transport 107 35
Head office and senior management 46 40
Workshop, yard, and base staff 172 128
325 203
The Group's subsidiary CAD Services Limited bears all the employee benefit
expenses on behalf of Facilities by ADF PLC, apart from the share-based
payment charges which are born by Facilities by ADF PLC. There were 6 (2022:
5) Directors employed by the Company as at 31 December 2023.
8 Director emoluments
Director emoluments comprise:
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Remuneration for qualifying services 619 858
Share based payment expense 59 59
Pension costs 3 3
681 920
Directors participating in money purchase pension schemes as at the period end
2023 was 2 (2022: 2).
Key management personnel include all Directors of the Company and the
Directors of CAD Services Limited, the Group's principal trading subsidiary,
who together have authority and responsibility for planning, directing, and
controlling the activities of the Group's business. There are no key
management personnel other than the Directors.
Remuneration disclosed above include the following amounts paid to the highest
paid Director:
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Wages and salaries 250 379
Share based payment expense 33 33
Pension costs 1 1
284 413
9 Finance expense
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Interest on bank loans & overdrafts 4 7
Interest on lease liabilities 1,335 695
Interest on deferred consideration 57 -
1,396 702
10 Taxation
Analysis of expense in year Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Current tax on profits for the year - -
Adjustments in respect of previous years - -
Total current tax - -
Deferred tax
Origination and reversal of temporary differences (62) 683
Adjustments in respect of change in deferred tax rate (117) (680)
Total deferred tax (179) 3
Tax expense per statement of comprehensive income (179) 3
The tax credits for the periods presented differ from the standard rate of
corporate tax in the UK. The differences are explained below:
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Profit on ordinary activities before tax 615 4,612
Tax using the Group's domestic tax rates 145 876
Effects of:
Expenses not deductible for tax purposes 29 34
Deductions in respect of share options (157) -
Changes in contingent consideration not taxable (205) -
Effect of changes in tax rates (4) 165
Adjustments in respect of change in deferred tax rate (117) (680)
Additional deductions for capital allowances 189 (392)
Share based payment adjustment (59) -
Total tax charge (179) 3
Corporation tax for the year ended 31 December 2023 was calculated using a
marginal tax rate of 23.5 per cent. (2022: 19%). The UK corporation tax was
set at the main rate of 25% from 1 April 2023.
Current tax assets and liabilities
As at As at
31 December 2023 31 December 2022
£'000 £'000
Income tax payable - -
- -
The following is the analysis of the deferred tax balances for financial
reporting purposes:
Group As at As at
31 December 2023 31 December 2022
£'000 £'000
Accelerated capital allowances and other temporary differences 2,966 5,222
Losses (179) (1,659)
Share based payments 243 (597)
Deferred tax liability 3,030 2,966
Deferred tax liabilities of £3,029,677 consists of losses totalling
£3,384,284 and share based payments totalling £(354,607).
Company As at As at
31 December 2023 31 December 2022
£'000 £'000
Accelerated capital allowances and other temporary differences (752) (155)
Losses (352) -
Share based payments 243 (597)
Deferred tax asset (861) (752)
Movement in the year
Group £'000
Liability at 1 January 2022 2,714
Charge to profit and loss 683
Charge to equity (295)
Arising on business acquisitions 544
Adjustments in respect of change in deferred tax rate (680)
Liability at 31 December 2022 2,966
Liability at 1 January 2023 2,966
Charge to profit and loss (62)
Charge to equity 243
Adjustments in respect of change in deferred tax rate (117)
Liability at 31 December 2023 3,030
Company £'000
Asset at 1 January 2022 -
Charge to profit and loss (124)
Charge to equity (295)
Adjustments in respect of prior years (333)
Asset at 31 December 2022 (752)
Liability at 1 January 2023 (752)
Charge to profit and loss (352)
Charge to equity 243
Asset at 31 December 2023 (861)
11 Dividends
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Dividends paid on ordinary shares 1,130 350
1,130 350
The Company declared a final dividend of 0.90 pence per share in June 2023 in
relation to the year ended 31st December 2022. This took the total dividend
for that year to 1.36 pence per share, with the interim dividend of 0.46 pence
per share in October 2022.
It was decided that an interim dividend of 0.50 pence per ordinary share was
to be paid to shareholders for the year ended 31 December 2023.
During the year the Company discovered that the interim dividends paid during
the year ended 31 December 2022 were made otherwise than in accordance with
the Companies Act 2006. This occurred as the Company's latest set of filed
accounts, at the time of the dividend payment, did not show relevant
distributable reserves to make such payment. This principally resulted from
the failure to identify the requirement to post interim financial statements
of the Company showing the required distributable reserves prior to such
payment. Prior to payment of the dividend the Company did have distributable
reserves of £1.5m available to pay the dividend of £0.35m. Prior to payment
of the dividend, additional dividends were paid by the subsidiaries totalling
£4.5m to the parent Company.
As a result, the Company could have had claims against shareholders who
received the relevant dividends and the Directors of the Company. The Company
did not purse any such claim. Instead, the Company proposed certain
resolutions to shareholders at its AGM held on 26 June 2023 to rectify the
technical breaches of the Companies Act 2006 in this regard through the entry
of deeds of release in favour of all shareholders who received such dividends
for any and all claims the Company may have in respect of the payment of the
relevant dividend (the "Shareholders' Deed of Release") and a dead of release
in favour of persons who were Directors of the Company at the time of the
relevant dividend pursuant to which the Company waived any rights to make
claims against such Directors (the "Directors' Deed of Release and together
with the "Shareholders' Deed of Release" the "Deeds of Release"). The Company
also released interim financial statements as at 30 September 2022 showing
distributable reserves prior to payment.
As set out in the notice convening the Company's AGM posted to shareholders on
16 May 2023, the entry by the Company into the Deeds of Release following
approval by the Company's shareholders at the 26 June 2023 AGM constituted
related party transactions (as defined in the AIM Rules for Companies).
Accordingly, and as all of the Company's Directors were beneficiaries of the
Directors' Deed of Release and/or the Shareholders' Deed of Release, Cenkos
Securities plc, then the Company's nominated adviser and acting in that
capacity, confirmed that it considered the terms of such related party
transactions are fair and reasonable insofar as the Shareholders are
concerned.
12 Earnings per share
The calculation of the basic earnings per share (EPS) is based on the results
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year. Diluted EPS includes the impact of
outstanding share options.
Year ended Year ended
31 December 2023 31 December 2022
Basic
Profit attributable to owners of the parent (£) 793,528 4,611,797
Weighted average shares in issue 80,228,514 75,714,054
Basic profit per ordinary share (pence) 0.99 6.1
Diluted
Profit attributable to owners of the parent (£) 793,528 4,611,797
Shares in issue 80,907,418 79,407,418
Shares options outstanding 4,590,000 6,090,000
Value of number of shares that could be repurchased (£) 238,774 344,440
Diluted weighted average number of shares 85,258,644 85,152,978
Diluted profit per ordinary share (pence) 0.93 5.4
13 Inventories
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Stored goods held 576 417
576 417
Inventories held consist of stored goods to be used in the support of
production vehicles and maintenance.
14 Intangible assets
Group Goodwill Total
Software £'000 £'000 £'000
Cost
At 1 January 2022 - - -
Additions through business acquisitions - 7,211 7,211
Additions 81 - 81
At 31 December 2022 81 7,211 7,292
Amortisation
At 1 January 2022 - - -
Charge for the year 3 - 3
At 31 December 2022 3 - 3
Cost
At 1 January 2023 81 7,211 7,292
Additions 10 - 10
At 31 December 2023 91 7,211 7,302
Amortisation
At 1 January 2023 3 - 3
Charge for the year 18 - 18
Impairment - 1,019 1,019
At 31 December 2023 21 1,019 1,040
Net book amount
At 31 December 2023 70 6,192 6,262
At 31 December 2022 78 7,211 7,289
Software incorporates the cost and build of the Group's timesheet system. The
initial cost of the system plus any additional capital expenditure is to be
amortised over a ten-year period.
On 30 November 2022, the Group completed the acquisition of 100% of the share
capital of Location 1 Group Limited, creating £7,211,397 of Goodwill.
In accordance with the Group's accounting policies, an annual impairment test
is applied to the carrying value of other intangible assets with indefinite
useful economic life. Impairment recognised for the year totalled £1,019,080
(2022: £Nil). The impairment loss has been included in the Statement of
Comprehensive Income within non-recurring expenses.
Location 1 Group Limited is considered a separate operating segment as per
note 4 (Location One), as it generates cash inflows (revenues and cost of
sales) that are largely independent of the cash inflows from Facilities by
ADF's Hire of Facilities, and as such has been measured as its own individual
cash generating unit (''CGU'') by management, being the Location One CGU.
The recoverable amount of the Location One CGU is determined based on a value
in use calculation which uses cash flow projections based on Group's long-term
budget and projected forecasts covering a five-year period, and a pre-tax
discount rate of 18 per cent per annum. The key assumptions used by management
in setting the financial budgets for the initial five-year period were as
follows:
Revenue growth rates
Revenue growth rates are based on past experience adjusted for changes in the
Company's long term order book, and industry wide implications such as the WGA
and SA-AFTR Strikes, and its future impact on revenue. These rates do not
exceed the long-term average growth rate of the Group's industry, for year's
four and five of the cash flow model which are projected beyond the Group's
long-term budget. A growth rate of 2% has been used for these periods. Years
one to three growth rates (16.1%, 17.7%, and 17.7%, respectively) are taken
from management reviewed budgets, based on known order book data and
estimates, along with short term expectation changes in the industry, Group
strategy, and comparisons to prior year budgets and analysis. Prior year
budgets and assessment of change year on year were reviewed based on adjusted
outcomes due to the FY23 Strikes.
Capital expenditure
Capital expenditure projections are based on expected estimated requirements
and readily available assets for investment. Capital expenditure projections
are extrapolated based on expected demand and turnover of historic assets,
increasing at a steady rate year on year. Years one to three of the cash flow
forecast, conclude capital expenditure rates based on management budgets (16%,
16%, and 13% of sales revenue, respectively) which are based on known contract
expenditure, and estimates, along with short term expectation changes in the
industry, Group strategy, and comparisons to prior year budgets and analysis.
Years four and five are forecast at capital expenditure of 13% of revenue year
on year. Prior year budget and assessment of change has been adjusted for the
FY23 Strikes.
The Group has conducted an analysis of the sensitivity of the impairment test
to changes in the key assumptions used to determine the recoverable amount of
the CGU to which goodwill is allocated. As part of the review, management
conducted different sensitivity analysis to stress test the impairment review.
The assumed sensitivities included decreasing the revenue growth by 7% after
year 3 and increasing the capital expenditures growth by an average of 31%
from year 3. The Directors believe that any reasonable possible change in the
key assumptions of the sensitivity analysis, on which the recoverable amount
could be calculated, would have a material impact on the balance of Goodwill.
Therefore, whilst the Group is still able to manage most of the costs, the
revenue projections are uncertain, in the short term. The WGA and SAG-AFTRA
Strikes impacted productions around the globe, from July 2023 through to late
Autumn 2023. The Strikes caused film and TV productions in the UK, on which
ADF were engaged, to stop or delay productions that were scheduled to start
filming in autumn 2023 and pushing these to early 2024. The Directors note
that the Strikes were a short-term impact on the business and are confident
the Group is in a robust position to capitalise on the opportunity ahead once
previous production levels resume, underpinning confidence in the long-term
success of the Group. Due to the timing of any rescheduled productions, it is
possible that further differences between forecast and actual results may
differ into early 2024.
15 Property, plant and equipment
Depreciation is charged to administrative expenses within the statement of
comprehensive income.
Plant and machinery Motor vehicles Leasehold improvement Total
£'000 £'000 £'000 £'000
Computer equipment Assets under construction
Hire Fleet £'000 £'000
£'000
Cost
At 1 January 2022 -126 5,569 492 11 - - 6,198
Additions 33 1,984 221 - - 1,818 4,056
Additions on acquisition - 2,524 560 - - 69 3,153
Transfers - 677 401 - - (1,078) -
Disposals - (91) (58) - - - (149)
At 31 December 2022 159 10,663 1,616 11 - 809 13,258
Depreciation
At 1 January 2022 58 1,951 48 4 - - 2,061
Charge for the year 19 516 74 2 - - 611
Disposals - (63) (31) - - - (94)
At 31 December 2022 77 2,404 91 6 - - 2,578
Cost
At 1 January 2023 159 10,663 1,616 11 - 809 13,258
Additions 75 875 419 223 509 2,336 4,437
Transfers 1 (#_ftn1) - 2,293 124 - - (2,796) (379)
Disposals - (858) (452) - - - (1,310)
At 31 December 2023 234 12,973 1,707 234 509 349 16,006
Depreciation
At 1 January 2023 77 2,404 91 6 - - 2,578
Charge for the year 33 1,370 274 11 63 - 1,751
Disposals - (670) (291) - - - (961)
At 31 December 2023 110 3,104 74 17 63 - 3,368
Net book amount
At 31 December 2023 124 9,869 1,633 217 446 349 12,638
At 31 December 2022 82 8,259 1,525 5 - 809 10,680
Leasehold improvements in the year to 31 December 2023, are in respect of
improvements made to Kitsmead, Kitsmead Lane, Longcross KT16 0EF.
16 Leases
The Group leases a number of assets, all assets are leased from the UK, which
is the main jurisdiction the Group operates in. All lease payments,
in-substance, are fixed over the lease term. All expected future cash out
flows are reflected within the measurement of the lease liabilities at each
year end.
Nature of leasing activities
As at As at
31 December 2023 31 December 2022
Number of active leases 132 115
The Group leases include leasehold properties for commercial and head office
use, motor vehicles and equipment. The leases range in length from 4 to 15
years and vary in length depending on lease type. Leasehold properties holding
the longest-term length of up to 15 years, motor leases up to 4 years, hire
fleet up to 7 years, and equipment of up to 5 years. All leases are held with
the Group's subsidiaries.
Extension, termination, and break options
The Group sometimes negotiates extension, termination, or break clauses in its
leases. In determining the lease term, management considers all facts and
circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods
after termination options) are only included in the lease term if the lease is
reasonably certain to be extended (or not terminated).
On a case-by-case basis, the Group will consider whether the absence of a
break clause would expose the Group to excessive risk. Typically, factors
considered in deciding to negotiate a break clause include:
- The length of the lease term;
- The economic stability of the environment in which the property
is located; and
- Whether the location represents a new area of operations for the
Group.
Incremental borrowing rate
The Group has adopted a rate with a range of 3.1% - 4.65% as its incremental
borrowing rate, being the rate that the individual lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value to the
right-of-use asset in a similar economic environment with similar terms,
security and conditions. This rate is used to reflect the risk premium over
the borrowing cost of the Group measured by reference to the Group's
facilities.
The Group performed a sensitivity analysis where incremental borrowing rates
have been used and identified if the incremental borrowing rate was 5% for all
assets there would be a decrease in the carrying amount of the right-of-use
asset at 31 December 2023 of £199,977 (2022: Decrease £88,483); there would
be a subsequent decrease in the lease liability of £30,022 (2022: Decrease
£62,047). If the incremental borrowing rate decreased to 1% for all assets
there would be an increase in the carrying amount of the right-of-use asset at
31 December 2023 of £2,229,752 (2022: £203,628) and there would be a
consequent increase in the lease liability of 2,382,156 (2022: £276,897).
Sensitivity analysis is not performed on hire purchase leases as interest is
inherent within these lease agreements.
Right-of-use assets
Leasehold Property Hire Fleet and Motor Vehicles Assets under construction Total
£'000 £'000 £'000 £'000
Motor Leasehold
£'000 Equipment
£'000
Cost
At 1 January 2022 1,397 137 16,313 22 - 17,869
Additions 6,863 - 3,108 - 1,812 11,783
Business acquisitions 808 24 - 87 - 919
Transfers - - 1,085 - (1,082) 3
At 31 December 2022 9,068 161 20,506 109 730 30,574
Depreciation
At 1 January 2022 840 57 1,871 6 - 2,774
Charge for the period 251 38 1,602 8 - 1,899
At 1 January 2022 1,091 95 3,473 14 - 4,673
Cost
At 1 January 2023 9,068 161 20,506 109 730 30,574
Additions 1,081 - 1,572 118 5,778 8,549
Transfers - - 6,012 - (5,633) 379
Disposals (17) - (24) (80) - (121)
At 31 December 2023 10,132 161 28,066 147 875 39,381
Depreciation
At 1 January 2023 1,091 95 3,473 14 - 4,673
Charge for the period 896 53 2,237 41 - 3,227
Disposals (17) - (3) (26) - (46)
At 31 December 2023 1,970 148 5,707 29 - 7,854
Net book amount
At 31 December 2023 8,162 13 22,359 118 875 31,527
At 31 December 2022 7,977 66 17,033 95 730 25,901
Lease liabilities
Leasehold Property Hire Fleet and Motor Vehicles Total
£'000 Motor Leasehold £'000 £'000
£'000 Equipment
£'000
At 1 January 2022 583 91 11,574 17 12,265
Additions 6,770 - 4,165 - 10,935
Business acquisitions 808 24 - 87 919
Interest expense 106 3 585 1 695
Lease payments (including interest) (172) (28) (3,376) (9) (3,585)
At 31 December 2022 8,095 90 12,948 96 21,229
At 1 January 2023 8,095 90 12,948 96 21,229
Additions 1,080 - 7,312 66 8,458
Interest expense 458 2 872 3 1,335
Lease payments (including interest) (896) (62) (4,807) (49) (5,814)
At 31 December 2023 8,737 30 16,325 116 25,208
Reconciliation of minimum lease payments and present value
As at As at
31 December 2023 31 December 2022
£'000 £'000
Within 1 year 6,453 4,542
Later than 1 year and less than 5 years 16,473 12,506
After 5 years 7,393 8,759
Total including interest cash flows 30,319 25,807
Less: interest cash flows (5,111) (4,578)
Total principal cash flows 25,208 21,229
Reconciliation of current and non-current lease liabilities
As at As at
31 December 2023 31 December 2022
£'000 £'000
Current 5,624 3,705
Non-current 19,584 17,524
Total 25,208 21,229
Short term or low value lease expense
As at As at
31 December 2023 31 December 2022
£'000 £'000
Total short term or low value lease expense 137 28
137 28
17 Other provisions
As at As at
31 December 2023 31 December 2022
£'000 £'000
Amounts falling after one year:
Lease dilapidations liability 40 38
40 38
Lease dilapidations liability Leasehold Property
£'000
At 1 January 2022 37
Interest expense 1
At 31 December 2022 38
At 1 January 2023 38
Interest expense 2
At 31 December 2023 40
As part of the Group's property leasing arrangements there is an obligation to
repair damage which occurs during the life of the lease, such as wear and
tear. These costs have been shown separately to the lease obligation
liability. The provisions are expected to be utilised by 2029 as the leases
terminate. The dilapidations provision is considered a source of estimation.
The provision has been calculated using historical experience of actual
expenditure incurred on dilapidations and estimated lease termination dates.
18 Trade and other receivables
Group As at As at
31 December 2023 31 December 2022
£'000 £'000
Amounts falling due within one year:
Trade receivables 895 1,761
Director's loan accounts 307 307
Other receivables and prepayments 508 977
1,710 3,045
Company As at As at
31 December 2023 31 December 2022
£'000 £'000
Amounts falling due within one year:
Director's loan accounts 307 307
Amounts due from subsidiaries 11,588 12,959
11,895 13,266
Trade receivables are amounts due from customers for services performed in the
ordinary course of business. They are generally due for settlement within 30
days and therefore are all classified as current. Trade receivables are
non-interest bearing. The carrying amount of trade and other receivables
approximates fair value.
Analysis of trade receivables based on age of invoices:
< 30 31 - 60 61 -90 > 90 Total Gross ECL Total Net
£'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December 2022 1,724 12 (1) 26 1,761 - 1,761
31 December 2023 583 169 93 50 895 - 895
The Group applies the IFRS 9 general approach to measuring expected credit
losses (ECL) which uses a lifetime expected loss allowance for all trade
receivables. Historically there have been no material default levels giving
rise to a specific provision. In determining the recoverability of accounts
receivable, the Group considers any changes in the credit quality of the
accounts receivable from the date credit was initially granted up to the
reporting date. The accounts receivables that are neither past due nor
impaired relate to customers that the Group has assessed to be creditworthy
based on the credit evaluation process performed by management, which
considers both customers' overall credit profile and its payment history with
the Group. Having considered the impact of IFRS 9 the Directors concluded that
the ECL balance has been determined as £7,201 (2022: £Nil) based on
historical data available to management in addition to forward looking
information utilising management knowledge. The aging of trade receivables
over 30 days as at 31 December related to 35% (2022: 2%) of the total trade
debtor balance, the nature in change from 31 December 2022 is due to the
impact of the Strikes.
The Company makes assumptions when implementing the forward-looking ECL model.
This model is used to assess intercompany loans for impairment. As at the 31
December 2023 the Company is due £11,586,833 (2022: £12,958,823) from
subsidiaries.
Estimates are made regarding the credit risk and the underlying probability of
default in credit loss scenarios. The Directors make judgements on the
expected likelihood and outcome of scenarios, and these expected values are
applied to the loan balances. Receivables due from Group undertakings are net
of cumulative ECLs of £Nil (2022: £Nil).
19 Cash and cash equivalents
As at As at
31 December 2023 31 December 2022
£'000 £'000
Cash at bank available on demand 3,533 9,518
3,533 9,518
20 Trade and other payables
Group As at As at
31 December 2023 31 December 2022
£'000 £'000
Amounts falling due within one year:
Trade payables 877 1,932
Other payables 18 1,055
Taxation and social security 1,127 1,298
Accrued expenses 886 1,461
Deferred income 33 576
2,941 6,322
Company As at As at
31 December 2023 31 December 2022
£'000 £'000
Amounts falling due within one year:
Other payables - 849
Taxation and social security - 33
Accrued expenses 65 279
65 1,161
The Directors consider that the carrying value of trade and other payables
approximates to their fair value. Trade payables are non-interest bearing and
are normally settled monthly.
Revenue recognised in the year that was deferred from the previous year was
£575,697 (2022: £518,555).
Included in other payables in the Company and Group as at 31 December 2023 is
amounts payable of £Nil (2022: £848,582) in respect of employer social
security costs due on M Proctor share options exercised in 2021 and
additionally in respect of the Group, alone, a pension payable liability of
£Nil (2022: £202,699).
21 Contingent Consideration
Group As at As at
31 December 2023 31 December 2022
£'000 £'000
Contingent Consideration 60 878
Company As at As at
31 December 2023 31 December 2022
£'000 £'000
Contingent Consideration 60 878
Contingent consideration is payable up to maximum value of £2,657,788 (2022:
£4,059,788) payable in cash, over a two-year period (2022: three), based on
set performance criteria. Performance criteria is set against adjusted EBITDA
targets of Location 1 Group Limited, each period. The contingent consideration
is payable on a scaling basis based on the level of Adjusted EBITDA gained.
The minimum payment of contingent consideration is £Nil. The fair value of
the contingent consideration has been discounted to present value and adjusted
based on management expectation of probability of outcome of reaching Adjusted
EBITDA targets.
The payment of contingent consideration was valued at £60,474 (2022:
£877,892) as at 31 December 2023. The reduction in valuation in the year
resulted as the deferred consideration is based on a cumulative earn out
target, whereby due to the WGA and SAG-AFTRA Strikes impacting productions,
from July 2023 through to late Autumn 2023, management have estimated it is
unlikely that the probability of an earn out payment will be met.
22 Investments
Subsidiary undertakings
The Company owns directly or indirectly the whole of the issued and fully paid
ordinary share capital of its subsidiary undertakings.
Country of
Subsidiaries Principal activity incorporation Registered address Ordinary shares held
CAD Services Limited Supply of mobile facilities for television and film productions UK Ground Floor 31 Oldfield Road, Bocam Park, Pencoed, Wales, CF35 5LJ 100% (2022: 100%)
Location 1 Group Limited Intermediate holding company. UK Ground Floor 31 Oldfield Road, Bocam Park, Pencoed, Wales, CF35 5LJ 100% (2022: 100% from 30 November 2022)
Location One Limited Supply of key location facilities for television and film productions UK Ground Floor 31 Oldfield Road, Bocam Park, Pencoed, Wales, CF35 5LJ 100% (2022: 100% from 30 November 2022)
The subsidiary undertakings of the Company are presented below:
Shares in group undertakings
£'000
Cost
At 01 January 2022 8,347
Additions through business combinations 7,187
At 31 December 2022 15,534
At 01 January 2023 15,534
Impairment (735)
At 31 December 2023 14,799
CAD Services Limited and Location 1 Group Limited are direct investments of
the Company. Location One Limited is held indirectly.
Location 1 Group Limited and its 100% owned subsidiary Location One Limited
were acquired by the Company on 30 November 2022.
In accordance with the Company's accounting policies, an annual impairment
test is applied to the carrying value of investments. Impairment recognised
for the year totalled £734,935 (2022: £Nil). The impairment loss has been
included in the Statement of Comprehensive Income within non-recurring
expenses, and details of this impairment are detailed in note 14.
23 Share capital
Ordinary Shares of 1p each £'000
Allotted, called up and fully paid
At 01 January 2022 455
30 million issued Ordinary Shares of 1p in respect of AIM listing 300
0.5 million issued Ordinary Shares of 1p in respect of exercised options 5
3.407 million issued Ordinary Shares of 1p in respect of business acquisition 34
At 31 December 2022 794
At 01 January 2023 794
1.5 million issued Ordinary Shares of 1p in respect of exercised options 15
At 31 December 2023 809
All classes of shares have full voting, dividends and capital distribution
rights.
On 5 January 2022 the shares of the Company were admitted to the London
Stock Exchange trading on the UK AIM market. Admission and dealings of the
ordinary shares of Facilities by ADF PLC became effective on this date. As
part of the listing, and on this date, 30,000,000 new ordinary shares were
placed at a price of 50p.
On 30 November 2022, the Group completed the acquisition of 100% of the share
capital of Location 1 Group Ltd for consideration of an initial cash payment
of £4,429,646 and £1,879,575 consideration paid in shares, through
Facilities by ADF PLC. The shares were issued at the share price on the day of
the transaction being £0.55p, resulting in an issue of 3,407,400 Ordinary
Shares of 1p.
On 9 June 2023, 1,200,000 new ordinary shares were issued in respect of
options exercised. The options exercised were outstanding prior to the
Company's January 2022 initial public offering ("IPO"), as detailed in the
Company's Admission Document, with the majority having been issued in 2020 as
part of the Company's Enterprise Management Incentive ("EMI") scheme.
On 5 July 2023, 300,000 new ordinary shares were issued in respect of options
exercised. The options exercised were outstanding prior to the Company's
January 2022 IPO, as detailed in the Company's Admission Document, with the
majority having been issued in 2020 as part of the Company's EMI scheme.
Share options
The Group has two separate share option schemes in place, those being the
Long-Term Incentive Plan ("LTIP"), and an Enterprise Management Incentive
Share Scheme.
CAD Services Ltd operated two equity-settled share-based remuneration schemes
for employees, under Enterprise Management Incentive Share Schemes. These
options were to lapse if the individual leaves within 10 years from the date
of grant if all vesting conditions had not been met earlier. These options
were superseded, and all options were rolled over into new options held by
Facilities by ADF PLC as part of the acquisition transaction that took place 3
December 2021. The exercisable options held were rolled over to equivalent
options.
The Group has additionally put in place a LTIP, to ensure alignment between
Shareholders, and those responsible for delivering the Group's strategy and
attract and retain the best executive management talent. The LTIP will only
reward the participants if shareholder value is created. This ensures
alignment of the interests of management
directly with those of Shareholders. On 5 January 2022, the Company issued
500,000 and 390,000 new ordinary share options to M Proctor and N Evans,
respectively. The options hold an exercise price of 1p and will vest after 3
years subject to specific performance measurement criteria.
The Group has put in place a Long-Term Incentive Plan ("LTIP"), to ensure
alignment between Shareholders, and those responsible for delivering the
Group's strategy and attract and retain the best executive management talent.
The LTIP will only reward the participants if shareholder value is created.
This ensures alignment of the interests of management directly with those of
Shareholders. On 5 January 2022, the Company issued 500,000 and 390,000 new
ordinary share options to M Proctor and N Evans, respectively. The options
hold an exercise price of 1p and will vest after 3 years subject to specific
performance measurement criteria.
The terms and conditions of the grants outstanding as at the 31 December 2023
are detailed below:
Date of grant No. of options Vesting conditions Contractual life of options
Exercise price £
3 December 2021 500,000 0.01 Immediately 10 years (Rollover)
3 December 2021 2,000,000 0.06 Immediately 10 years (Rollover)
5 January 2022 1,200,000 0.50 Immediately 3 years
5 January 2022 890,000 0.01 LTIP 10 years
4,590,000
Details of the number of share options granted, exercised, lapsed and
outstanding at the end of each period as well as the weighted average exercise
prices in £ ("WAEP") are as follows:
As at 31 December 2022 As at 31 December 2023
WAEP WAEP
Outstanding at beginning of period 4,500,000 0.05 6,090,000 0.14
Granted during the period 2,090,000 0.29 - -
Forfeited/lapsed during the period - - - -
Exercised during the period (500,000) (0.01) (1,500,000) (0.05)
Outstanding at year end 6,090,000 0.14 4,590,000 0.16
Employee schemes
As of December 31, 2020, all options with the same exercise conditions based
on an exit criterion were considered valid. No expenses were recorded in the
statement of comprehensive income for outstanding options because the
Directors of the Group believed it was not highly probable that the exit
criteria for the share option awards would be met in the foreseeable future.
However, following the share for share exchange and the crystallisation of the
rollover shares, new vesting conditions meant that the options could vest
immediately. Consequently, the Directors believed that the exercise of options
was highly probable, leading to the recognition of a charge for share-based
payments in the statement of comprehensive income for options outstanding as
of December 31, 2021.
The fair value of options granted was determined using the Black-Scholes
option pricing model, deemed appropriate due to the short contractual lives of
the options and the requirement to exercise them shortly after the employee
becomes entitled to the shares. Management adjusted the expected life used in
the model for non-transferability, exercise restrictions, and behavioural
considerations. The fair value of the option at the grant date
also took into account non-vesting conditions and market conditions, with
adjustments made for service conditions and non-market performance conditions
at each reporting date. No additional employee options have been granted since
this date.
LTIP
Grant date
The grant date of the Options is the date of issue.
Exercise
Unless otherwise determined and subject to the redemption conditions having
been met, the Company and the holders of the Options have the right to
exchange each Option for Ordinary Shares in the Company, which will be
dilutive to the interests of the holders of Ordinary Shares. It is currently
expected that in the ordinary course options will be exchanged for Ordinary
Shares.
Vesting Conditions and Vesting Period
The Options will vest and become exercisable following the end of the
Performance Period, being the 1 January 2022 and ending on 31 December 2024.
The Options are subject to certain vesting Performance Conditions, the
conditions are as follows:
i. 50% of the Options will be subject to EBITDA target over
the Performance Period; and
ii. 50% of the Options will be subject to an absolute total
shareholder return performance condition over the Performance Period.
If the Performance Conditions (or any element of it) is not satisfied in full
at the end of the Performance Period any part of the Option that has not
Vested as a consequence of the Performance Condition (or any element of it)
not being satisfied in full shall lapse immediately on the Board's
determination that the Performance Condition (or the applicable element of it)
has not been satisfied in full.
Holding of Options
M Proctor and N Evans hold Options.
The following shares were in issue on 31 December 2023:
Issue date Name Share designation at balance sheet date Nominal Price Issue price per share Number of Ordinary shares IFRS 2 Fair value
£'s £'s
5 January 2022 M Proctor Ordinary Shares £0.01 0.55 500,000 98,917
5 January 2022 N Evans Ordinary Shares £0.01 0.55 390,000 77,156
Valuation of Options
Valuations were performed by Pegasus Capital using a Monte Carlo model to
ascertain the fair value at grant date. Details of the valuation methodology
and estimates and judgements used in determining the fair value are noted
herewith and were in accordance with IFRS 2 at grant date.
There are significant estimates and assumptions used in the valuation of the
Options. Management has considered at the grant date, the potential range of
value for the Options, based on the circumstances on the grant date.
The fair value of the Options granted under the scheme was calculated using a
Monte Carlo model with the following material inputs:
Issue date Name Share designation at balance sheet date Volatility Risk-free rate Expected term (years)
EBITDA target return probability Total shareholder return target probability
5 January 2022 M Proctor Ordinary Shares 50% 40.19% 33.73% 1.0175% 3
5 January 2022 N Evans Ordinary Shares 50% 40.19% 33.73% 1.0175% 3
The Options are subject to the Performance Conditions being achieved, which
are market and non-market performance conditions, and as such has been taken
into consideration in determining their fair value. The model incorporates a
range of probabilities for the likelihood of EBITDA and total shareholder
return.
Expense related to Options
An expense of £58,691 (2022: £58,691) has been recognised in the Statement
of Comprehensive Income in respect of the Options issued during the year.
There is a condition associated with the Options issued which requires the
fair value charge associated with the Options to be allocated over the minimum
vesting period. This vesting period is estimated to be 3 years from the date
of grant.
24 Reserves
Called up share capital
Called up share capital represents the nominal value of shares that have been
issued.
Share Premium
The premium on issue of equity shares, net of any issue costs.
Share based payment reserve
The cumulative amount recognised in relation to the equity-settled share-based
payment schemes in place.
Merger reserve
The difference between the nominal value of shares issued in the share
exchange and the book value of the shares obtained, in line with merger
accounting principles.
Retained earnings
Retained earnings relate to cumulative net gains and losses less distributions
made.
Merger relief reserve
Merger relief reserve represents the difference between the nominal value of
the shares issued as part of the share exchange and the net assets acquired.
25 Retirement benefit scheme
As at As at
31 December 2023 31 December 2022
£'000 £'000
Defined contribution schemes:
Charge to income statement 235 170
A defined contribution pension scheme is operated for all qualifying
employees. The assets of the scheme are held separately from those of the
Group in independently administered funds.
Outstanding pension contributions at the year ended 31 December 2023, included
within other creditors of the Group amounted to £50,448 (2022: £53,799).
26 Capital and financial commitments
The Group commits to lease agreements in respect of hire facilities over 6
months in advance, this is due to the nature of the facilities leased.
The Group has committed to new fleet capital expenditure orders of
approximately £5,683,935 for 2024.
The Group held no other additional capital, financial and or other commitments
at 31 December 2023.
27 Financial Instruments
Financial assets
Financial assets are not measured at fair value and due to their short-term
nature, the carrying value approximates their fair value. They comprise trade
receivables, other receivables, and cash. It does not include prepayments.
Group As at As at
31 December 2023 31 December 2022
£'000 £'000
Trade receivables 895 1,761
Other receivables 333 909
Cash at bank 3,533 9,518
4,761 12,188
Company As at As at
31 December 2023 31 December 2022
£'000 £'000
Other receivables 308 307
Amounts due from subsidiaries 11,587 12,959
11,895 13,266
Financial liabilities
Financial liabilities measured at amortised cost comprise trade payables,
lease liabilities and accruals. It does not include other taxation and social
security and deferred income.
Group As at As at
31 December 2023 31 December 2022
£'000 £'000
Trade payables 877 1,932
Other payables 18 1,055
Accrued expenses 886 1,461
1,781 4,448
Company As at As at
31 December 2023 31 December 2022
£'000 £'000
Other payables - 849
Accrued expenses 65 279
65 1,128
Financial risk management
The Group is exposed through its operation to the following financial risks:
credit risk, interest rate risk, foreign exchange risk and liquidity risk.
Risk management is carried out by the Directors of the Group. The Group uses
financial instruments to provide flexibility regarding its working capital
requirements and to enable it to manage specific financial risks to which it
is exposed.
The Group finances its operations through a mixture of debt finance, cash and
liquid resources and various items such as trade debtors and trade payables
which arise directly from the Group's operations.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. In order to minimise the risk, the Group endeavours only to deal
with companies which are demonstrably creditworthy and this, together with the
aggregate financial exposure, is continuously monitored. The maximum exposure
to credit risk is the carrying value of its financial receivables, trade and
other receivables and cash and cash equivalents as disclosed in the notes to
the financial information.
The receivables' age analysis is evaluated on a regular basis for potential
doubtful debts, considering historic, current and forward-looking information.
No material impairments to trade receivables, have been made to date. Further
disclosures regarding trade and other receivables are provided within the
notes to financial information.
Credit risk also arises on cash and cash equivalents and deposits with banks
and financial institutions. For banks and financial institutions, only
independently rated parties with minimum rating "AA-" are accepted. Currently
all financial institutions whereby the Group holds significant levels of cash
are rated from AA- to A+.
Interest rate risk
As at 31 December 2023, the Group had no current borrowings and used no
finance facilities or debt structures to coordinate business. Therefore,
interest rate risk exposure for the Group is minimal. The Group's policy aims
to manage the interest cost of the Group within the constraints of its
financial borrowings.
The Group have entered into significant leases for various assets, namely hire
facilities, under fixed interest rate terms. This means that the interest rate
charged on these leases is fixed for the entire term of the lease, regardless
of changes in market interest rates.
If market interest rates rise, the Group's fixed-rate leases will become less
attractive to potential lessors, as they would be able to obtain better rates
elsewhere. On renewal of these leases this could result in the Group having to
renew or renegotiate these leases at higher rates, which would increase its
operating costs and potentially reduce its profitability.
The Group look to mitigate this risk by committing to lease agreements in
respect of hire facilities over 6 months in advance, ensuring management can
manage and plan for interest rate change.
Foreign exchange risk
Foreign exchange risk arises when the Group enters into transactions in a
currency other than their functional currency. The Group's policy is, where
possible, to settle liabilities denominated in a currency other than its
functional currency with cash already denominated in that currency.
The Group operates primarily in the UK and as such transactions are
substantially denominated in Sterling (GBP). As such the Group is exposed to
minimal transaction foreign exchange risk. The mix of currencies and terms of
trade with its suppliers are such that the Directors believe that the Group's
exposure is minimal and consequently they have not, to date, specifically
sought to materially hedge that exposure. Most of the Group's funds are in GBP
with only sufficient funds held in foreign currencies to meet local costs.
Liquidity risk
The Group seeks to maintain sufficient cash balances. Management reviews cash
flow forecasts on a regular basis to determine whether the Group has
sufficient cash reserves to meet future working capital requirements and to
take advantage of business opportunities.
A maturity analysis of the Group's trade and other payables is shown below:
As at As at
31 December 2023 31 December 2022
£'000 £'000
Less than 1 year:
Lease liabilities 6,453 4,542
Trade and other payables 897 2,987
Accrued expenses 886 1,461
8,236 8,990
Between 1-5 years:
Lease liabilities 16,473 12,506
16,473 12,506
More than 5 years:
Lease liabilities 7,393 8,759
7,393 8,759
Total including interest cash flows 32,102 30,255
Less interest cash flow:
Lease liabilities (5,111) (4,578)
Total principal cash flows 26,991 25,677
Capital Disclosures
The capital structure of the business consists of debt and equity. Equity
comprises share capital, share premium, share based payment reserve, and
accumulated reserves and is equal to the amount shown as 'Equity' in the
balance sheet. Debt comprises various items which are set out in further
detail above and in the notes to the accounts.
The Group's current objectives when maintaining capital are to:
- Safeguard the Group's ability as a going concern so that it can
continue to pursue its growth plans;
- Provide a reasonable expectation of future returns to
shareholders; and
- Maintain adequate financial flexibility to preserve its ability
to meet financial obligations, both current and long term.
The Group sets the amount of capital it requires in proportion to risk. The
Group manages its capital structure and adjusts it in the light of changes in
economic conditions and the risk characteristics of underlying assets. In
order to maintain or adjust the capital structure, the Group may issue new
shares or sell assets to reduce debt. During the period covered the Group's
business strategy remained unchanged.
28 Related party transactions
The CAD Services Pension Scheme owns properties leased by CAD Services Ltd. In
total CAD Services Ltd paid the CAD Services Pension Scheme as at 31 December
2023 £30,000 (2022: £30,000) in lease payments.
Dividends were paid to M Proctor, a director of the Company, during the year
ended 31 December 2023 of £19,600 (2022: £6,440). Dividends were paid to J
Richards, a director of the Company, during the year ended 31 December 2023 of
£33,600 (2022: £11,040). Dividends were paid to K James, a director of the
Company, during the year ended 31 December 2023 of £3,500 (2022: £1,380).
Included in other payables as at 31 December 2023 is amounts payable of £Nil
(2022: £848,582) in respect of employer social security costs due on M
Proctor share options exercised in 2021.
On 3 December 2021 J Richards was granted 2,000,000 Ordinary Shares. An amount
payable was due to the Company in respect of this transaction of £20,000
(2022: £20,000), residing in other receivables as at the 31 December 2023.
Additionally, a further amount was payable by J Richards in respect of the
PAYE balance due on the Ordinary Shares granted, paid by the Company, amounts
due at 31 December 2023 were £286,684 (2022: £286,684). The amounts due from
J Richards are interest free and repayable on the earliest of 5 years or the
sale of their shares owned in Facilities by ADF PLC.
29 Changes in liabilities from financing activities
At 1 January 2022 Financing cash flows At 31 December 2022
£'000 £'000 New borrowings non - cash New borrowings business acquisition £'000
Interest £'000 £'000
£'000
Lease liabilities 12,265 (3,585) 695 10,935 919 21,229
Other financing activities and borrowings 342 (349) 7 - - -
Total liabilities from financing activities 12,607 (3,934) 702 10,935 919 21,229
At 1 January 2023 Financing cash flows At 31 December 2023
£'000 £'000 New borrowings non - cash £'000
Interest £'000 New borrowings business acquisition
£'000 £'000
Lease liabilities 21,229 (5,814) 1,335 8,458 - 25,208
Total liabilities from financing activities 21,229 (5,814) 1,335 8,458 - 25,208
30 Ultimate controlling party
The Directors do not consider there to be one ultimate controlling party.
31 Post balance sheet events
On 4 March 2024, the Company awarded 1,001,225 options under its LTIP Awards
to Directors M Proctor (571,429 options) and N Evans (429,796 options). The
awards are over ordinary shares of £0.01 in the form of options to acquire
ordinary shares at nominal value.
The LTIP Awards will vest not earlier than the third anniversary of grant
subject to meeting the performance conditions applied to the awards measured
over the three-year period ending 31 December 2026. 50% of the award is
subject to an EBITDA growth performance target and 50% is subject to a total
shareholder return growth target with vesting commencing at 6% CAGR rising on
a straight line to full vesting at 10% CAGR. The LTIP Awards are subject to a
two-year post-vesting holding period.
Awards of a further 566,329 options were made to other senior employees on
similar terms.
There are no other post balance sheet events to disclose.
(#_ftnref1) 2 Transfers are made between Property, Plant, and Equipment, and
Right-of-Use-Assets whereby the amounts transferred between asset type are
identical.
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