REG - Kitwave Group PLC - Final Results
28/02/2022 07:00
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RNS Number : 9458C Kitwave Group PLC 28 February 2022
28 February 2022
Kitwave Group plc
("Kitwave", the "Group" or the "Company")
Final Results for the twelve months ended 31 October 2021
Kitwave Group plc (AIM: KITW), the delivered wholesale business, is pleased to
announce its final results for the twelve months ended 31 October 2021.
During the twelve months being reported, the Group traded in line with the
Board's expectations. The results were impacted by COVID-19 lockdown
restrictions and closures within the leisure and hospitality sectors. Since
April 2021, trading has returned close to pre-pandemic levels and the
Directors are pleased to confirm the Group is currently trading slightly ahead
of market expectations.
Investors should note that the below comparative prior period was for the 18
months to 31 October 2020.
Financial summary
· Revenues of £380.7 million (FP20: £592.02 million)
· Gross profit margin maintained at 18% during the year (FP20: 18%)
· Adjusted operating profit of £7.1 million (FP20: £16.5 million)
· Profit before tax increased by 63% to £2.1 million (FP20: £1.3
million)
· £7.9 million net cash generated from operations (FP20: £35.9
million)*
· Pre-tax operational cash conversion of 85% (FP20: 151%)*
* For more information on alternative performance measures please see the
glossary at the end of the announcement.
The Board has declared that it is recommending a final dividend of 4.5 pence
per ordinary share, subject to approval at the Annual General Meeting to be
held on 25 March 2022, which will, if approved, result in a total dividend for
the year of 6.75 pence per ordinary share.
Admission to AIM
· Significantly over-subscribed Placing and Admission to AIM on 24 May
2021, raising gross proceeds of £64.0 million for the Company and £17.6
million for the Selling Shareholders.
· Gross proceeds for the Company to be used to support the Group's
successful buy-and-build strategy, enhance the profile of the Group and its
brands, improve Kitwave's position with key suppliers, strengthen the Group's
balance sheet, and provide the Group with greater ability to incentivise and
retain key employees going forward.
· On Admission, Stephen ("Steve") Smith, Independent Non-Executive
Chairman, and Gerard Murray, Independent Non-Executive Director, were
appointed to the Board.
Operational highlights
· The Group opened a new 70,000 sq. ft distribution centre in Luton as
a replacement for the previous site at Luton airport. The centre was delivered
on time and on budget and specifically commissioned to cater for Frozen &
Chilled product operations. The ability to store in excess of 5,000 pallets in
highly efficient cold store conditions will ensure that the Group is well
placed to meet future growth expectations and peak summer demands of Kitwave's
independent customers. This upgraded facility replaced the previous Luton
distribution centre.
· Work is progressing on a new foodservice warehouse in Wakefield,
expected to be opened in March 2022. This will replace the existing inherited
site in Wakefield that is no longer fit for purpose.
Post-period end
· Appointment of Ben Maxted, Group Operations Director and Head of the
Frozen & Chilled division, to the Board as Chief Operating Officer.
· Acquisition of the entire issued share capital of M.J. Baker
Foodservice Limited, the South West's leading independent foodservice
supplier, for a gross consideration of £24.5 million paid in cash, funded
from the existing banking facilities available to the Group.
Paul Young, Chief Executive Officer of Kitwave, commented:
"It gives me great pleasure reporting on the first 12-month period since the
Company's listing on AIM in May 2021.
"While this year has been particularly challenging for our independent
customers, who have been forced to close or operate in a reduced capacity for
sustained periods of time as a result of COVID-19 restrictions, it is clear
that we are nearing a return to some form of normality. The majority of our
customers have successfully guided themselves through the perils that the
pandemic brought upon us and, as a result, trading, which was heavily impacted
in the first six months of the year, has returned to pre-pandemic levels over
recent months.
"The division least impacted by COVID-19 restrictions was our Frozen &
Chilled division which remained extremely resilient and operated close to
pre-pandemic levels throughout the period. Each of the Group's Ambient, Frozen
& Chilled and Foodservice divisions, however, experienced some degree of
disruption during the period.
"I would like to take this opportunity to thank all our colleagues, as it is
due to their exceptional commitment and dedication that we have been able to
continue operating and providing a service to our customers throughout the
year.
"In line with our buy-and-build strategy, we were delighted to announce the
acquisition of M.J. Baker post-period end. The Board believes that the
acquisition represents an excellent opportunity to further develop the Group's
reach into South West England and Kitwave's foodservice offering.
"With the worst of the adverse effects brought about by COVID-19 now behind
us, and barring any further lockdowns, the outlook for Kitwave is a positive
one. The Board continues to focus on capitalising upon the UK's fragmented
grocery and foodservice wholesale market and generating value for the Group
and its shareholders through operational efficiencies, organic growth and
further acquisitions. The current year has started well and we look forward to
providing further updates on our progress in due course."
- Ends -
For further information please contact:
Kitwave Group plc Tel: +44 (0) 191 259 2277
Paul Young, Chief Executive Officer
David Brind, Chief Financial Officer
www.kitwave.co.uk (http://www.kitwave.co.uk/)
Canaccord Genuity Limited Tel: +44 (0) 20 7523 8150
(Nominated Adviser and Sole Broker)
Bobbie Hilliam / Georgina McCooke
Alex Aylen - Sales
Yellow Jersey PR Tel: +44 (0) 20 3004 9512
(Financial media and PR)
Sarah Hollins / Henry Wilkinson / James Lingfield
This announcement contains inside information for the purposes of article 7 of
the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the
Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication
of this announcement, this information is now considered to be in the public
domain.
Company Overview
Founded in 1987, following the acquisition of a single-site confectionery
wholesale business based in North Shields, United Kingdom, Kitwave is a
delivered wholesale business, specialising in selling and delivering impulse
products, frozen and chilled foods, alcohol, groceries and tobacco to
approximately 39,000, mainly independent, customers.
With a network of 27 depots, Kitwave is able to support delivery throughout
the UK to a diverse customer base, which includes independent convenience
retailers, leisure outlets, vending machine operators, foodservice providers
and other wholesalers, as well as leading national retailers.
The Group's growth to date has been achieved both organically and through a
strategy of acquiring smaller, predominantly family-owned, complementary
businesses in the fragmented UK grocery and foodservice wholesale market.
Kitwave Group plc (AIM: KITW) was admitted to trading on AIM of the London
Stock Exchange on 24 May 2021.
For further information, please visit www.kitwave.co.uk
(http://www.kitwave.co.uk/) .
Chairman's statement
Overview
In this maiden Annual Report since the Company's Admission to AIM in May 2021,
it is a pleasure to welcome all our new shareholders and to report on an
excellent performance for Kitwave. While the year brought a number of
challenges as a result of restrictions put in place by the Government in
response to the COVID-19 pandemic, these have been navigated successfully and
we remain well positioned to capitalise on any growth opportunities that may
arise.
Results summary
The business has demonstrated great resilience in both revenue and operating
profit during the year, with revenue of £380.7 million and adjusted operating
profit of £7.1 million, compared to £592.0 million and £16.5 million
respectively in FP20 (an 18-month period).
Each of our divisions was disrupted to some degree by the pandemic with many
of our independent customers, particularly in the hospitality and leisure
sectors, forced either to close or to operate at a reduced capacity. In
contrast, our Frozen & Chilled division was less impacted and operated
close to pre-COVID-19 levels throughout the year.
Since Kitwave was founded in 1987, the convenience and foodservice customers
that we serve have demonstrated their resilience in the face of adversity.
While many felt the effects of the pandemic, most continue to show that they
are capable of getting through this difficult period and returning to normal
trading levels. This should only help to improve our future trading.
Dividend
We intend to implement a progressive dividend policy to reflect the cash flow
and earnings potential of the business. Assuming sufficient distributable
reserves are available, and subject to executing on our growth strategy, the
intention is to divide the total annual dividend between the interim and final
dividends in the approximate proportions one third and two third,
respectively. As a result, we declared an interim dividend of 2.25 pence per
ordinary share, paid on 27 August 2021 to shareholders on the register at the
close of business on 6 August 2021.
We are recommending a final dividend of 4.5 pence per ordinary share, subject
to approval at the AGM.
Admission
Kitwave's Admission to AIM on 24 May 2021 represented a momentous landmark for
the Company and its stakeholders.
Through a significantly over-subscribed Placing, supported by high quality
institutional investors, gross proceeds of £64.0 million were raised for the
Company and £17.6 million for the Selling Shareholders, giving the Company a
market capitalisation of approximately £105.0 million at Admission.
The gross proceeds received by the Company were used to reduce existing debt
and to pay expenses in connection with the Placing.
We believe that our status as a publicly-traded entity will support our
successful buy-and-build strategy, enhance our profile and our brands, improve
our position with key suppliers, improve our financial strength, and provide
us with greater ability to incentivise and retain key colleagues going
forward.
Environmental, Social and Governance (ESG)
We are committed to ensuring the highest standards of ESG practices across our
business and recognise that we have social and environmental responsibilities
arising from our operations. We continue to develop this framework and the
associated measures that will need to be considered.
Board
Central to our success has been the highly skilled and committed management
team. The team has a great understanding of the sectors and customers we serve
as well as the energy and leadership to continue to grow the business.
On Admission of the Company to AIM the Board was strengthened with the
appointment of Gerard Murray as a Non-Executive Director. On 25 November 2021
Ben Maxted was appointed to the Board as Chief Operating Officer. We look
forward to their continued contribution in the years ahead.
Our people
I would like to take this opportunity to thank all our colleagues at this
time, as they have responded to these unprecedented challenges with
exceptional commitment. It is due to their dedication that we have been able
to continue operating and providing a service to our customers throughout the
year.
Outlook
Since I joined Kitwave as Chairman in 2016, the Group has delivered
exceptional growth both organically and by acquisition with turnover
increasing by over 40% in the three financial years prior to the pandemic.
While the impact of COVID-19 in the last 18 months has temporarily halted this
development, we are well positioned to recommence our strategy for growth with
a strong balance sheet and a capable management team.
In this regard, we continue to review opportunities for acquisition that fit
with our criteria. Post year end the Group completed the acquisition of the
entire issued share capital of M.J. Baker Foodservice Limited. The acquisition
is in line with that criteria and will be an excellent addition to our
Foodservice division, expanding the Group's nationwide reach into the South
West. M.J. Baker is renowned for providing a quality delivered solution to its
customers, a key part of the Kitwave Group ethos.
FY22 has started positively and, subject to no further major disruptions to
the sectors we serve, trading is expected to return to pre-pandemic levels.
Combined with the initiatives implemented to drive organic growth, this should
deliver value to our shareholders.
Steve Smith
Chairman
25 February 2022
Chief Executive Officer's review
Overview
Having founded Kitwave in 1987, it gives me great pleasure in reporting on the
first period since the Company's listing on AIM in May 2021. The Group was
founded following the acquisition of a single-site confectionery wholesale
business based in North Shields and has grown to become a leading delivered
wholesaler operating across the UK. From a team of 20 in 1987, we now have
over 1,150 employees, 27 depots and a fleet of 430 vehicles servicing
approximately 39,000 customers.
While this year has been particularly challenging for our independent
customers, who have been forced to close or to operate in a reduced capacity
for sustained periods of time, it appears that we are nearing a return to some
form of normality and the majority of our customers have successfully guided
themselves through the perils that the pandemic brought upon us.
With significant corporate and wholesale expertise and experience across the
Board and senior management team, the Group is now looking to capitalise upon
the fragmented grocery and foodservice wholesale market in the UK, to drive
growth and provide value to its shareholders.
Divisional summary
Many of the Group's independent retailers and foodservice provider customers
were closed from November 2020 to March 2021 as a result of COVID-19 lockdown
restrictions. As such, the Group's Ambient, Frozen & Chilled and
Foodservices divisions all experienced some degree of disruption. The least
impacted was our Frozen & Chilled division which was extremely resilient
and operated close to pre-pandemic levels throughout the period.
Ambient division
COVID-19 impacted revenue normally generated through the sale of impulse
products to vending machines so, as expected, trading for the Ambient business
was down versus the comparable period, but in line with expectations.
FY21 FP20
£000 (12 months) (18 months)
Revenue 155,712 249,080
Gross profit 19,280 30,374
Gross margin % 12% 12%
Frozen & Chilled division
The Frozen & Chilled division has now successfully integrated the
acquisition of Central Supplies, acquired in 2019, and the division traded
well throughout the period, despite some customers being affected by COVID-19
and the restrictions on footfall in the main leisure sites across the country.
The division maintains its strong presence in the market and looks set to
capitalise upon further opportunities, both through acquisitions and growing
its customer base, due to its strong nationwide infrastructure and
capabilities.
FY21 FP20
£000 (12 months) (18 months)
Revenue 163,895 230,546
Gross profit 34,923 52,468
Gross margin % 21% 23%
Foodservice division
The biggest impact from COVID-19 was experienced in our Foodservice division,
particularly during the Christmas 2020 period, which is usually our busiest
season. The prior year comparable numbers include trading from December 2019;
a pre-COVID trading period. To mitigate this lost revenue, the division's
distribution expenses were reduced by 44% to £4.1 million after accounting
for the benefit of Coronavirus Job Retention Scheme (CJRS) furlough grants
presented as other income.
FY21 FP20
£000 (12 months) (18 months)
Revenue 61,087 112,390
Gross profit 14,382 24,332
Gross margin % 24% 22%
Facilities
In February 2021, the Group was pleased to open its new 70,000 sq. ft
distribution centre in Luton. The centre was delivered on time and on budget
and was commissioned to cater for Frozen & Chilled product operations.
With the ability to store over 5,000 pallets in highly efficient cold store
conditions, the facility ensures that the Group is well placed to meet future
growth expectations and peak summer demands of independent customers. This
upgraded facility replaced the previous Luton distribution centre.
Work is continuing on the Group's new Foodservice warehouse in Wakefield which
is due to open in March 2022. This facility replaces our current site in
Wakefield and allows for the integration of the Leeds depot.
Utilising the Group's own in-house established fleet of delivery vehicles and
drivers ensures we are not reliant on third party logistics providers.
Strategy
The Group's strategy remains focused on capitalising upon the fragmented UK
grocery and foodservice wholesale market both through the acquisition of
smaller regional players and by driving organic growth. This strategy has
proven highly successful, with 11 wholesale distributors acquired and
integrated into the Group since 2011.
The Board strongly believes that the Group's Admission to AIM will support
this strategy, as well as enhancing the Kitwave brand in order to remain one
of the leading delivered wholesale providers in the UK.
Having operated for over three decades, the Group has a strong brand presence
and the platform from which to grow. With in excess of 100 years of combined
industry knowledge and expertise, we believe that the Board and senior
management team is more than capable of delivering this strategy and
generating value for the Group and its shareholders.
Colleagues
We would like to take this opportunity to thank all our colleagues for their
hard work over this challenging period, which has undoubtedly put the Group in
the strong position it finds itself in today. Similarly, we would like to
thank all our new shareholders for their support.
The Board holds its work colleagues in the highest regard. Their dedication
and loyalty have enabled us to weather the storm of COVID-19. In return, the
Group has, where possible, introduced apprentice schemes and training courses
which have enabled colleagues to enhance their skills and qualifications. The
Board firmly believes that an investment in people is paramount to its future
success.
Summary and outlook
Having overcome what is expected to be the worst of the COVID-19 pandemic, the
outlook for the Group's customer base is much more positive. As we have seen
time and time again, our independent customers have proven their resilience
through adapting their business models where necessary and are now looking to
return trading back to pre-pandemic levels.
Following a strong second half of the year, as is usual for our business, we
look to 2022 with optimism. Barring any further lockdown restrictions, we
expect the Group to operate in the current year at efficiency and volume
levels similar to those prior to the pandemic. The Group has at its disposal a
pipeline of exciting opportunities and is well placed to accelerate both
organic revenue and profit growth through its buy-and-build strategy. We
look forward to capitalising upon these opportunities in the year ahead.
In line with this strategy post year end the Group completed the acquisition
of the entire ordinary share capital of M.J. Baker Foodservice Limited. The
acquisition of M.J. Baker is an excellent addition to our Foodservice division
and expands the Group's nationwide reach into the South West. M.J. Baker is
renowned for providing a quality delivered solution to its customers, a key
part of the Kitwave Group ethos.
Paul Young
Chief Executive Officer
25 February 2022
Chief Financial Officer's review
Overview
Group revenue was £380.7 million, compared to £592.0 million in the 18-month
period to October 2021. The Group's Ambient, Frozen & Chilled and
Foodservice divisions have all experienced some level of impact from the
COVID-19 restrictions and as a result the year covers two contrasting periods
of trading.
The main adverse impact of COVID-19 restrictions was seen in the first six
months of the year with revenue levels across the business returning to close
to pre pandemic levels during the last few months of the year. This compared
to the prior 18-month period with normal trading in the first 12 months being
followed by significant reductions in trade from the start of the pandemic in
April 2020 through to October 2020.
Gross profit margin has been maintained at 18% during the year. Divisional
margins are generally in line with expectations, although the lockdown
restrictions impacted the higher margin Foodservice division more than the
other divisions.
In total the Group received £2.3 million (FP20: £3.0 million) of Government
support which has been shown as other income and relates to CJRS claims made
during the period.
In the 12 months ended October 2021 profit before tax increased by 63% to
£2.1 million (FP20: £1.3 million) despite the challenges faced due to the
COVID-19 restrictions in the first six months of the year, demonstrating the
resilience of the business model.
Net finance costs of £4.3 million relate mainly to the costs associated with
the debt structure in place prior to the IPO and the unwind of these
facilities. Also included within finance costs is interest relating to IFRS16
accounting of £1.1 million.
The statutory basic and diluted earnings per share for FY21 is £0.02.
The Board is recommending a final dividend of 4.5 pence per ordinary share,
subject to approval at the AGM, which, if approved, will result in a total
dividend for the year of 6.75 pence per share.
The Board intends to continue its progressive dividend policy with the interim
dividend generally being payable in August and the final dividend normally
being paid in April, in the approximate proportions of one third and two
thirds respectively. This intention is subject to sufficient distributable
reserves being available and the Group being in a position to continue to
execute its growth plans.
Capital expenditure
The Group has continued to invest in its operations over the financial period
with £2.9 million invested in new assets and £10.9 million of right-of-use
assets. There was an investment of £2.0 million in the new warehouse facility
at Butterfield, Luton that was funded from the proceeds received from the CPO
on the previous Luton site.
Investment in the vehicle fleet also continued with £0.3 million of new
vehicles acquired and £1.2 million invested through right-of-use vehicle
replacement.
New leases were signed for the Butterfield site and three other leases that
created an additional £9.4 million of right-of-use leasehold assets.
Cashflow
The net cashflow inflow from operating activities for the year was £7.9
million after net investment in working capital of £2.4 million. Payments of
£2.9 million were made in the year to acquire a further 20.5% shareholding in
Central Supplies (Brierley Hill) Ltd. The Group now owns 95.5% of the ordinary
shares in this company. After tax payments of £2.4 million this resulted in
operating cash conversion of 50%. Over the financial periods FP20 and FY21
pre-tax operational cash conversion* is 126%.
As a result of the IPO in May 2021, £61.9 million was raised net of £2.1
million of costs. This was utilised to repay £51.3 million of debt and
accrued interest and a further £1.0 million of costs associated with the IPO.
The balance of £9.6 million was brought into the Group to reduce drawings on
the existing working capital facilities.
The Group paid an interim dividend in August 2021 of 2.25 pence per ordinary
share.
The net cash increase in the year was £4.6 million.
Financial position
At 31 October 2021, cash and cash equivalents totalled £5.0 million (FP20:
£0.3 million).
The Group had £39.2 million of interest-bearing debt facilities including
£21.6 million of IFRS 16 lease liabilities.
The Group renewed its CID facility in May 2021 at the time of the IPO for a
further two years to April 2023. The facility has one covenant requiring net
debt not to exceed three times EBITDA. As at 31 October 2022 this covenant was
met.
There were undrawn facilities available to the Group of £28.4 million at the
year end.
Taxation
The tax charge for the period was £1.0 million (FP20: £1.8 million) at an
effective rate of 48% (FP20: 138%). The effective rate is higher than the
standard UK rate of corporation tax of 19% (FP20: 19%) mainly due the
non-deductible element of interest charges and fair value adjustments to debt
instruments under the pre Admission debt structure. A full reconciliation of
the tax charge is shown in note 9 of the financial statements.
Share based payments
In the period there was an expense of £0.2 million (FP20: £nil) for
share-based payments.
This relates to a new Management Incentive Plan (MIP) that commenced in July
2021 post the completion of the IPO in May 2021. Under the MIP, which intends
to retain and incentivise key management personnel, the Company has issued
Growth Shares in its subsidiary, Kitwave Limited, to David Brind (Chief
Financial Officer) and Ben Maxted (Chief Operating Officer).
David Brind
Chief Financial Officer
25 February 2022
Consolidated statement of profit and loss and other comprehensive income
Note Year ended 18 months ended 31 October 2020
31 October 2021
£000 £000
Revenue 3 380,694 592,016
Cost of sales (312,109) (484,842)
Gross profit 68,585 107,174
Other operating income 4 4,771 3,020
Distribution expenses (31,203) (44,014)
Administrative expenses (35,755) (54,156)
Operating profit 6,398 12,024
Analysed as:
Adjusted EBITDA 15,053 27,634
Amortisation of intangible assets 11 (150) (144)
Depreciation 12,13 (7,817) (11,013)
CPO income 4 2,255 -
Restructuring costs 5 (1,257) (1,467)
Acquisition expenses 5 (181) (628)
Compensation for post combination services 5 (1,278) (2,358)
Share based payment expense 5 (227) -
Total operating profit 6,398 12,024
Finance expenses 8 (4,274) (10,719)
Analysed as:
Interest payable on bank loans and bank facilities 8 (1,327) (2,805)
Interest and finance charges payable on loan notes and
debenture loans 8 (7,078) (7,788)
Finance charges on leases 8 (1,239) (1,579)
Fair value movement on financial liabilities 8 5,410 1,453
Other interest 8 (40) -
Financial expenses (4,274) (10,719)
Profit before tax 2,124 1,305
Tax on profit on ordinary activities 9 (1,028) (1,805)
Profit/(loss) for the financial period 1,096 (500)
Other comprehensive income - -
Total comprehensive income / (loss) for the period 1,096 (500)
Basic earnings per share 10 0.02 (0.02)
Diluted earnings per share 10 0.02 (0.02)
Non-GAAP measures
Basic underlying earnings per share 10 0.08 0.37
Diluted underlying earnings per share 10 0.08 0.37
Consolidated balance sheet as at 31 October
Note 2021 2020
£000 £000
Non-current assets
Goodwill 11 31,249 31,249
Intangible assets 11 431 412
Tangible assets 12 10,104 9,310
Right-of-use assets 13 23,188 20,600
Investments 14 20 20
Investment property 15 - 175
64,992 61,766
Current assets
Inventories 17 26,043 23,198
Trade and other receivables 18 52,814 44,558
Cash and cash equivalents 19 4,968 342
83,825 68,098
Total assets 148,817 129,864
Current liabilities
Other interest bearing loans and borrowings 21 (14,620) (17,681)
Lease liabilities 21 (4,719) (5,202)
Trade and other payables 20 (47,332) (40,307)
Tax payable (370) (1,984)
(67,041) (65,174)
Non-current liabilities
Other interest bearing loans and borrowings 21 - (43,079)
Lease liabilities 21 (19,917) (16,200)
Other financial liabilities 16 - (5,410)
Deferred tax liabilities 22 (275) (54)
(20,192) (64,743)
Total liabilities (87,233) (129,917)
Net assets/(liabilities) 61,584 (53)
Equity attributable to equity holders of the
Parent Company
Called up share capital 25 700 1
Share premium account 25 64,183 12,993
Consolidation reserve 25 (33,098) (33,098)
Share based payment reserve 24 227 -
Retained earnings 29,572 20,051
Equity/(accumulated deficit) 61,584 (53)
Company balance sheet as at 31 October
Note 2021 2020
£000 £000
Non-current assets
Investments 14 12,993 12,993
12,993 12,993
Current assets
Trade and other receivables 18 63,081 7,752
Cash and cash equivalents 19 3,371 -
66,452 7,752
Total assets 79,445 20,745
Current liabilities
Trade and other payables 20 (227) (590)
(227) (590)
Non-current liabilities
Other financial liabilities 16 - (5,410)
Deferred tax assets 22 57 -
57 (5,410)
Total liabilities (170) (6,000)
Net assets 79,275 14,745
Equity attributable to equity holders of the
Parent Company
Called up share capital 25 700 1
Share premium account 25 64,183 12,993
Share based payment reserve 24 227 -
Retained earnings* 14,165 1,751
Equity 79,275 14,745
*The Company's profit for the year was £3,989,000 (FP20: £622,000)
Consolidated statement of change in equity
Called up Share Share based payment reserve Profit
share premium Consolidation and loss Total
capital account reserve account equity
£000 £000 £000 £000 £000 £000
Balance at 1 May 2019 1 12,993 (33,098) - 20,551 447
Total comprehensive income
for the period
Loss - - - - (500) (500)
Other comprehensive income - - - - - -
Total comprehensive loss for
the period - - - - (500) (500)
Balance at 31 October 2020 1 12,993 (33,098) - 20,051 (53)
Total comprehensive income
for the year
Profit - - - - 1,096 1,096
Other comprehensive income - - - - - -
Total comprehensive income for - - - - 1,096 1,096
the year
Transaction with owners, recorded
directly in equity
Share capital reduction - (10,000) - - 10,000 -
New share issuance 699 63,300 - - - 63,999
Costs directly attributable to new share issuance - (2,110) - - - (2,110)
Transaction with owners recorded directly in equity dividends - - - - (1,575) (1,575)
Share based payment expense - - - 227 - 227
Total contribution by and transactions with the owners
699 51,190 - 227 8,425 60,541
Balance at 31 October 2021 700 64,183 (33,098) 227 29,572 61,584
Company statement of change in equity
Called up Share Share based payment reserve Profit
share premium and loss Total
capital account account equity
£000 £000 £000 £000 £000
Balance at 1 May 2019 1 12,993 - 1,129 14,123
Total comprehensive income for the period
Profit - - - 622 622
Other comprehensive income - - - - -
Total comprehensive income for
the period - - - 622 622
Balance at 31 October 2020 1 12,993 - 1,751 14,745
Total comprehensive income for the year
Profit - - - 3,989 3,989
Other comprehensive income - - - - -
Total comprehensive income for - - - 3,989 3,989
the year
Transaction with owners, recorded directly in equity
Share capital reduction - (10,000) - 10,000 -
New share issuance 699 63,300 - - 63,999
Costs directly attributable to new share issuance - (2,110) - - (2,110)
Transaction with owners recorded directly in equity - dividends - - - (1,575) (1,575)
Share based payment expense - - 227 - 227
Total contribution by and transactions with the owners
699 51,190 227 8,425 60,541
Balance at 31 October 2021 700 64,183 227 14,165 79,275
Consolidated cash flow statement
Note Year ended 18 months ended 31 October 2020
31 October 2021
£000 £000
Cash flow from operating activities
Profit/(loss) for the period 1,096 (500)
Adjustments for:
Depreciation and amortisation 11,12,13 7,967 11,157
Financial expense 8 4,274 10,719
Profit on sale of property, plant and equipment 4 (55) (5)
Net gain on remeasurement of right-of-use assets and lease liabilities 4 (124) -
Compensation for post combination services 5 1,278 2,358
Equity settled share based payment expense 5 227 -
Taxation 9 1,028 1,805
15,691 25,534
(Increase)/decrease in trade and other receivables (8,244) 19,425
(Increase)/decrease in inventories (2,845) 11,456
Increase/(decrease) in trade and other payables 8,671 (17,867)
13,273 38,548
Payments in respect of compensation for post combination services 2 (2,925) -
Tax paid (2,432) (2,693)
Net cash inflow from operating activities 7,916 35,855
Cash flows from investing activities
Acquisition of property, plant and equipment (2,961) (3,125)
Proceeds from sale of property, plant and equipment 248 358
Acquisition of subsidiary undertakings (including
overdrafts and cash acquired) 2 - (13,535)
Net cash outflow from investing activities (2,713) (16,302)
Cash flows from financing activities
IPO fund raise (net of expenses) 61,889 -
Proceeds from new loan 21 5,500 5,000
Net movement in invoice discounting 21 4,559 (6,941)
Interest paid 8,21 (5,093) (5,969)
Net movement in bank trade loans 21 (4,750) (2,270)
Repayment of bank term loans 21 (21,863) (3,063)
Repayment of investor loans 21 (34,176) -
Payment of lease liabilities 21 (5,068) (7,173)
Dividends paid (1,575) -
Net cash outflow from financing activities (577) (20,416)
Net increase/(decrease) in cash and cash equivalents 4,626 (863)
Opening cash and cash equivalents 342 1,205
Cash and cash equivalents at period end 19 4,968 342
Notes
1 Accounting policies
Kitwave Group plc (the "Company") is a public company limited by shares and
incorporated, domiciled and registered in England in the UK. The registered
number is 9892174 and the registered address is Unit S3, Narvik Way, Tyne
Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group"). The parent Company
financial statements present information about the Company as a separate
entity.
The Group financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting Standards
("IFRS") in conformity with the requirements of the Companies Act 2006.
The Company financial statements were prepared in accordance with the
Companies Act 2006 as applicable to companies using Financial Reporting
Standard 101 'Reduced Disclosure Framework' ("FRS 101"). The Company applies
the recognition, measurement and disclosure requirements of IFRS, but makes
amendments where necessary in order to comply with Companies Act 2006.
The financial information set out above does not constitute the Group or the
Company's statutory accounts for the year ended 31 October 2021 or the
financial period ended 31 October 2020. Statutory accounts for the period
ended 31 October 2020 have been delivered to the registrar of companies, and
those for the year ended 31 October 2021 will be delivered in due course. The
auditor has reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under s498 (2) or (3) of the Companies Act 2006.
In publishing the Company financial statements together with the Group
financial statements, the Company is taking advantage of the exemption in s408
of the Companies Act 2006 not to present its individual statement of profit
and loss and related notes that form a part of these approved financial
statements.
The Company has applied the following exemptions in the preparation of its
financial statements:
· A cash flow statement and related notes have not been presented;
· Disclosures in respect of new standards and interpretations that
have been issued but which are not yet effective have not been provided;
· Disclosures in respect of transactions with wholly-owned
subsidiaries have not been made; and
· Certain disclosures required by IFRS 13 Fair Value Measurement
and the disclosures required by IFRS 7 Financial Instruments have not been
provided.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to both periods presented in these consolidated financial
statements.
The consolidated financial statements include the results of all subsidiaries
owned by the Company per note 14. Certain of these subsidiaries have taken
exemption from an audit for the year ended 31 October 2021 by virtue of s479A
Companies Act 2006. To allow these subsidiaries to take the audit exemption,
the Company has given a statutory guarantee of all the outstanding liabilities
as at 31 October 2021. The subsidiaries which have taken this exemption from
audit are:
· Alpine Fine Foods Limited;
· TG Foods Limited;
· Anderson (Wholesale) Limited;
· Angelbell Limited;
· Phoenix Fine Foods Limited; and
· Supplytech Limited
1.1 Critical accounting estimates and judgements
The preparation of financial statements requires the Directors to make
judgements, estimates and assumptions concerning the future performance and
activities of the Group. There are no significant judgements applied in the
preparation of these financial statements. Estimates and assumptions are based
on the historical experience and acquired knowledge of the Directors, the
result of which forms the basis of the judgements made about the carrying
value of assets and liabilities that are not clear from external sources. In
concluding that there are no significant risks of material adjustment from
accounting estimates and judgements, the Directors have reviewed the
following:
Impairment of goodwill
In accordance with IAS 36 "Impairment of Assets", the Board identifies
appropriate Cash-Generating Units ("CGU's") and the allocation of goodwill to
these units. Where an indication of impairment is identified the assessment of
recoverable value requires estimation of the recoverable value of the cash
generating units (CGUs). This requires estimation of the future cash flows
from the CGUs and also the selection of appropriate discount rates in order to
calculate the net present value of those cash flows. There has been no
impairment in the period.
Each of the CGU's has significant headroom under the annual impairment review
and the Directors believe that no reasonable change in any of the above key
assumptions would cause the carrying value of the unit to materially exceed
its recoverable amount.
Impairment of trade receivables
IFRS 9, Financial Instruments, requires that provisioning for financial assets
needs to be made on a forward-looking expected credit loss model. This
requires management to consider historic, current and forward-looking
information to determine the level of provisioning required.
Management has assessed the ageing of the trade receivables, their knowledge
of the Group's customer base, and other economic factors as indicators of
potential impairment. Further information is considered in note 27 of these
financial statements.
Following review of the above accounting estimates and judgements the
Directors have concluded that there is no significant risk of material
adjustment to the carrying amount of assets and liabilities within the next
financial year.
1.2 Measurement convention
The financial statements are prepared on the historical cost basis except that
the following assets and liabilities are stated at their fair value: financial
instruments classified at fair value through the statement of profit and loss,
unlisted investments and investment property.
1.3 Going concern
The financial information has been prepared on a going concern basis which the
Directors consider to be appropriate for the following reasons.
As part of the food supply industry, the Group continued to be affected by
COVID-19 due to the lockdown restrictions that impacted the Group's customer
base during the first six months of the financial year. Revenue amongst
foodservice and vending customers was adversely impacted by continued
Government led lockdowns in the 'out of home' sector covering cafes,
restaurants, bars and hotels.
During the period, the Group continued to make use of the Coronavirus Job
Retention Scheme in divisions affected by lockdown restrictions. Overall the
Group's financial performance has been robust and its position in the market
has enabled a prompt return to pre COVID-19 trading levels following the
easing of trading restrictions in April 2021.
The Group is cash generative and generated £13,273,000 of cash from operating
activities (before tax payments) in FY21, illustrating the strong underlying
operating model of the Group.
On 24 May 2021, the Company announced a significantly over-subscribed Placing
and its admission to the AIM, raising gross proceeds of £64,000,000 and
achieving a market capitalisation of £105,000,000. The Group has used the
gross proceeds to de-gear the balance sheet, fully repaying the investors
subordinated loan notes, investors mezzanine loan notes, the Bank Senior A and
Bank Senior B tranche and reducing the Group's advance under its invoice
discounting facility.
The de-gearing of the Group's balance sheet has significantly reduced the
interest liability to be serviced annually and has provided a material
improvement in the headroom on its remaining working capital facilities.
Post year end, Kitwave Limited completed the acquisition of the entire share
capital of M.J. Baker Foodservice Limited ("M.J. Baker"). The acquisition was
funded through the Group's existing facilities. and the acquisition will be
incorporated into the Group's existing Foodservice division.
The Group has prepared financial forecasts and projections for a period of 12
months from the date of approval of this financial information (the "going
concern assessment period"), which take into account the acquired balance
sheet and trading forecast of M.J.Baker, possible downsides including any
further impact of COVID-19 on the operations.
These forecasts show that the Group will have sufficient levels of financial
resources available both to meet its liabilities as they fall due for that
period and comply with remaining covenant requirements on its working capital
facilities.
Consequently, the Directors are confident that the Group and Company will have
sufficient funds to continue to meet its liabilities as they fall due for at
least 12 months from the date of approval of this financial information and
therefore have prepared the financial statements on a going concern basis.
1.4 Basis of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiary undertakings made up to 31 October 2021. A
subsidiary undertaking is an entity that is controlled by the Company. The
results of subsidiary undertakings are included in the consolidated statement
of profit and loss account from the date that control commences until the date
that control ceases. Control is established when the Company is exposed to, or
has rights to, variable returns from its involvement with an entity and has
the ability to affect those returns through its power over the entity. In
assessing control, the Group takes into consideration potential voting rights
that are currently exercisable.
In respect of the legal acquisition of Kitwave One Limited by the Company in
the year ended 30 April 2017, the principles of reverse acquisition have been
applied under IFRS 3. The Company, via its 100% owned subsidiary Kitwave
Investments Limited, is the legal acquirer of Kitwave One Limited but Kitwave
One Limited was identified as the accounting acquirer of the Company. The
assets and liabilities of the Company and the assets and liabilities of
Kitwave One Limited continued to be measured at book value. By applying the
principles of reverse acquisition accounting the Group is presented as if the
Company has always owned Kitwave One Limited. The comparative consolidated
reserves of the Group were adjusted to reflect the statutory share capital and
share premium of the Company as if it had always existed, adjusted for
movements in the underlying Kitwave One Limited's share capital and reserves
until the date of the acquisition. A consolidation reserve was created which
reflects the difference between the capital structure of the Company and
Kitwave One Limited at the date of acquisition less any cash and deferred cash
consideration for the transaction.
1.5 Foreign Currency
Transactions in foreign currencies are translated to the Group companies'
functional currency at the foreign exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
at the balance sheet 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.
Non-monetary assets and liabilities denominated in foreign currencies that are
stated at fair value are retranslated to the functional currency at foreign
exchange rates ruling at the dates the fair value was determined. Foreign
exchange differences arising on translation are recognised in the statement of
profit and loss.
1.6 Classification of financial instruments
Financial assets
Financial assets are classified at initial recognition, and subsequently
measured at amortised cost, Fair Value through Other Comprehensive Income
("FVOCI") or Fair Value through the statement of Profit and Loss ("FVTPL").
The classification of financial assets under IFRS 9 is based on two criteria:
· the Group's business model for managing the assets; and
· whether the instruments' contractual cash flows represent 'Solely
Payments of Principal and Interest' on the principal amount outstanding (the
"SPPI criterion").
A summary of the Group's financial assets is as follows:
Trade and other receivables*
Amortised cost
- hold to collect business model and SPPI met
Cash and short-term deposits
Amortised cost
Financial liabilities
Financial instruments issued by the Group are treated as equity only to the
extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Group
to deliver cash or other financial assets or to exchange financial assets or
financial liabilities with another party under conditions that are potentially
unfavourable to the Group; and
(b) where the instrument will or may be settled in the
Company's own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company's own equity
instruments or is a derivative that will be settled by the Company's
exchanging a fixed amount of cash or other financial assets for a fixed number
of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are
classified as a financial liability. Where the instrument so classified
takes the legal form of the Company's own shares, the amounts presented in
these financial statements for called up share capital and share premium
account exclude amounts in relation to those shares.
A summary of the Group's financial liabilities is as follows:
Compensation for post combination services Fair
value through the statement of profit and loss
Bank loans and overdrafts
Amortised cost
Trade and other
payables*
Amortised cost
*Prepayments, other receivables, other taxation and social security payables
and other payables do not meet the definition of financial instruments.
Further information is included in note 27.
1.7 Non derivative financial instruments
Trade and other receivables
Trade and other receivables are recognised initially at fair value.
Subsequent to initial recognition they are measured at amortised cost using
the effective interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent
to initial recognition they are measured at amortised cost using the effective
interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the
Group's cash management are included as a component of cash and cash
equivalents for the purpose only of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost using the effective
interest method.
Invoice discounting
The Group is party to an invoice discounting arrangement which provides
additional working capital up to the value of a set proportion of its trade
receivables balances. The advances are secured against trade receivables
(note 18). These are repayable within 90 days of the invoice and carry
interest at a margin of 2.25%. This is a committed facility expires in 2023.
The net movement of the balance is disclosed in the cash flow statement.
Equity investments
Equity investments are instruments that meet the definition of equity from the
issuer's perspective: that is they do not contain an obligation to pay and
provide a residual interest in the assets of the issuer. Equity investments
are held at fair value through the statement of profit and loss.
Investment property
Investment properties are properties which are held either to earn rental
income or for capital appreciation or for both. Investment properties are
stated at fair value. Any gain or loss arising from a change in fair value is
recognised in the statement of profit and loss.
1.8 Other financial instruments
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or
loss on remeasurement to fair value is recognised immediately in the statement
of profit and loss. No hedge accounting has been applied.
1.9 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Depreciation is charged to the statement of profit and loss on a straight-line
basis over the estimated useful lives of each part of an item of property,
plant and equipment. Land is not depreciated. The estimated useful lives are
as follows:
· Leasehold improvements straight line over the
term of the lease
· Freehold property 2%
straight line
· Plant and machinery 10-25%
reducing balance and straight line
· Fixtures and fittings
15-20% reducing balance and straight line
· Motor
vehicles 15-25%
reducing balance and straight line
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
1.10 Business combinations
Business combinations are accounted for by applying the acquisition method.
Business combinations are accounted for using the acquisition method as at the
acquisition date, which is the date on which control is transferred to the
Group.
At the acquisition date, the Group measures goodwill at the acquisition date
as:
· the fair value of the consideration (excluding contingent
consideration) transferred; plus
· estimated amount of the contingent consideration (see below): plus
· the fair value of the existing equity interest in the acquiree; less
· the net recognised amount (generally fair value) of the identifiable
assets acquired and liabilities and contingent liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately
in the statement of profit and loss.
Any contingent consideration payable is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent
consideration are recognised in the statement of profit and loss.
Acquisitions prior to the date of transition to IFRSs
IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs
in the transition period. The Group and Company elected not to restate
business combinations that took place prior to transition date of 1 May 2015.
In respect of acquisitions prior to 30 April 2015, goodwill is included at
transition date on the basis of its deemed cost, which represents the amount
recorded under UK GAAP which was broadly comparable save that goodwill was
amortised. On transition, amortisation of goodwill ceased as required by IFRS
1.
1.11 Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units ("CGUs") and is not amortised but is
tested annually for impairment.
Intangible assets
Intangible assets are stated at costs less accumulated amortisation. They
relate to capitalised software and development costs and are being amortised
on a straight line basis over 4-5 years.
1.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the weighted average principle.
The Group participates in rebate schemes with their suppliers. Rebates are
principally earned from suppliers on purchase of inventory and are recognised
at point of delivery to the Group. Where the rebate earned relates to
inventories which are held by the Group at the period end, the rebates are
deducted from the cost of those inventories. Any rebates based on a volume of
purchases over a period are only recognised when the volume target has been
achieved.
1.13 Impairment excluding inventories and deferred tax assets
Non derivative financial assets - trade receivables
The Group recognises loss allowance for Expected Credit Losses ("ECLs") on trade receivables measured at amortised cost.
The Group measures loss allowances at an amount equal to lifetime ECLs as the
term of the asset is considered short.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Group
considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Group's historical
experience and informed credit assessment including forward looking
information.
The Group utilises the practical expediency for short term receivables by
adopting the simplified 'matrix' approach to calculate expected credit losses.
The provision matrix is based on an entity's historical default rates over the
expected life of the trade receivables as adjusted for forward looking
estimates.
The Group assumes that the credit risk on a financial asset has increased if
it is aged more than 90 days since delivery. This is not relevant in all cases
and management use its historical experience and knowledge of the customer
base to assess whether this is an indicator of increased risk on a customer by
customer basis.
The Group considers the financial asset to be in default when the borrower is
unlikely to pay its obligations or has entered a formal insolvency process or
other financial reorganisation.
Loss allowances for financial assets measured at amortised costs are deducted
from the gross carrying amount of the assets.
Non-financial assets
The carrying amounts of the Group's non-financial assets, other than
inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. For
goodwill, and intangible assets that have indefinite useful lives or that are
not yet available for use, the recoverable amount is estimated each year at
the same time.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the "cash-generating unit" or "CGU"). The goodwill
acquired in a business combination, for the purpose of impairment testing, is
allocated to CGUs. Subject to an operating segment ceiling test, for the
purposes of goodwill impairment testing, CGUs to which goodwill has been
allocated are aggregated so that the level at which impairment is tested
reflects the lowest level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business combination is allocated
to groups of CGUs that are expected to benefit from the synergies of the
combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognised in
the statement of profit and loss. Impairment losses recognised in respect of
CGUs are allocated first to reduce the carrying amount of any goodwill
allocated to the units, and then to reduce the carrying amounts of the other
assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
1.14 Employee benefits
Defined contribution plans and other long term employee benefits
A defined contribution plan is a post-employment benefit plan under which the
Group pays fixed contributions into a separate entity and will have no legal
or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution pension plans are recognised as an
expense in the statement of profit and loss in the periods during which
services are rendered by employees.
Share-based payment transactions
Share-based payment arrangements in which the Company receives goods or
services as consideration for its own equity instruments are accounted for as
equity-settled share-based payment transactions, regardless of how the equity
instruments are obtained by the Company.
The Group operates a Management Incentive Plan for certain employees that
incorporates a put option on the Company's ordinary shares. The fair value at
the grant date of the options is recognised as an employee expense with a
corresponding increase in equity, over the period in which the employee
becomes unconditionally entitled to the awards.
The fair value of the awards granted is measured using an option valuation
model, taking into account the terms and conditions upon which the awards were
granted. The Monte Carlo option valuation model was adopted for share based
payment arrangements entered into in the period ended 31 October 2021.
The amount recognised as an expense is adjusted to reflect the actual number
of awards for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that do meet the related service and
non-market performance conditions at the vesting date. For share-based payment
awards with non-vesting conditions, the grant date fair value of the
share-based payment is measured to reflect such conditions and there is no
true-up for differences between expected and actual outcomes.
Under IFRS 3 the contingent payment which has been agreed for the remaining 5%
of the share in Central Supplies (Brierley Hill) Ltd is classified as
remuneration for post-combination services, as consideration for the shares is
linked to an employment condition.
1.15 Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, that can be
reliably measured, and it is probable that an outflow of economic benefits
will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
risks specific to the liability.
1.16 Revenue
IFRS 15 "revenue from contracts with customers" has been adopted. The
standard establishes a principles-based approach for revenue recognition and
is based on the concept of recognising revenue for performance obligations
only where they are satisfied, and the control of goods or service is
transferred. In doing so, the standard applies a five-step approach to the
timing of revenue recognition and applies to all contracts with customers,
except those in the scope of other standards. It replaces the separate
models for goods, services and construction contracts under the previous
accounting standards. Following an assessment of the impact of IFRS 15 and
based on the straight forward nature of the Group's revenue streams with the
recognition of revenue at the point of sale and the absence of significant
judgement required in determining the timing of transfer of control, the
adoption of IFRS 15 has not had a material impact on the timing or nature of
the Group's revenue recognition.
The principal performance obligation is discharged on delivery/collection of
the products by the customer at which point control of the goods has
transferred. Customer discounts and rebates comprise variable consideration
and are accounted for as a reduction in the transaction price, based on the
most likely outcome basis.
The most likely outcome model is used due to the simple nature of rebate
agreements and the limited number of possible outcomes - principally whether
or not the customer achieved the required level of purchases.
1.17 Financing income and expenses
Financing expenses comprise interest payable, finance charges on put option
liabilities and finance leases recognised in the statement of profit and loss
using the effective interest method, unwinding of the discount on provisions,
and net foreign exchange losses that are recognised in the statement of profit
and loss (see foreign currency accounting policy). Borrowing costs that are
directly attributable to the acquisition, construction or production of an
asset that takes a substantial time to be prepared for use, are capitalised as
part of the cost of that asset. Financing income comprise interest receivable
on funds invested, finance income on the put option liability, and net foreign
exchange gains.
Interest income and interest payable is recognised in the statement of profit
and loss as it accrues, using the effective interest method. Dividend income
is recognised in the statement of profit and loss on the date the entity's
right to receive payments is established. Foreign currency gains and losses
are reported on a net basis.
1.18 Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the statement of profit and loss except to the extent that it
relates to items recognised directly in equity, in which case it is recognised
in equity.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit other
than in a business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the temporary
difference can be utilised.
1.19 Leases
IFRS 16, Leases, became effective in the period ended 31 October 2020. The
Group adopts the requirements of IFRS 16 as follows:
The Group has lease arrangements in place for properties, vehicles, fork lift
trucks and other equipment including plant and machinery. At the inception
of the lease agreement, the Group assesses whether the contract conveys the
right to control the use of an identified assets for a certain period of time
and whether it obtains substantially all of the economic benefits from the use
of that assets in exchange for consideration. The Group recognises a lease
liability and a corresponding right-of-use asset with respect to all such
lease arrangements.
A right-of-use asset is capitalised on the balance sheet at cost, which
comprises the present value of the future lease payments at inception of the
lease. For those leases commencing prior to adoption of IFRS 16, the modified
retrospective approach has been adopted on transition to value the
right-of-use asset and lease liability.
Right-of-use assets are depreciated using a straight line method over the
shorter of the life of the asset or the lease term and are assessed in
accordance with IAS 36 'Impairment of Assets' to determine whether the asset
is impaired.
The lease liability is initially measured at the present value of the lease
payments as outlined above for the right-of-use asset and is increased by the
interest cost on the lease liability, subsequently reduced by the lease
payments made. Lease liabilities are classified between current and
non-current on the balance sheet.
The key estimate applied by the Directors relates to the assessment of the
incremental borrowing rate adopted by the Group to discount the future lease
rentals to present value in order to measure the lease liabilities. A rate has
been applied to each asset class supported by quotes from manufacturers for
financing and the Group's weighted average cost of capital.
The Group has relied upon the exemption under IFRS 16 to exclude the impact of
low-value leases and leases that are short-term in nature (defined as leases
with a term of 12 months or less). Costs on these leases are recognised on a
straight-line basis as an operating expense within the statement of profit and
loss. All other leases are accounted for in accordance with this policy as
determined by IFRS 16.
1.20 Government Grants
The Group has elected to present grants related to income separately under the
heading "Other income" within the statement of profit and loss. This income
represents the funding provided by the Government in relation to the
Coronavirus Job Retention Scheme.
This funding is applicable on furlough of employees subject to Government
criteria which has been met in each operating entity. The Directors do not
consider there to be a material risk that any funding received will be
repayable.
1.21 Exceptional items
Exceptional items are defined as income or expenses that arise from events or
transactions that are clearly distinct from the normal activities of the Group
and therefore are not expected to recur frequently or regularly.
Such items have been separately presented to enable a better understanding of
the Group's operating performance. Details of exceptional income relating to
the CPO is presented in note 4, exceptional expenses are presented in note 5.
1.22 Investments
Investments in subsidiaries are carried at cost less impairment in the parent
Company financial statements.
2 Acquisitions
Acquisitions in the 18 month period ended 31 October 2020
Central Supplies (Brierley Hill) Ltd
On 5 August 2019, the Group acquired 75% of the share capital of Central
Supplies (Brierley Hill) Ltd for a total consideration of £6,558,000. The
remaining share capital is subject to an agreement to acquire it within 4
years of the acquisition, further details are given below. The resulting
goodwill of £1,248,000 was capitalised and is subject to annual impairment
testing under IAS 36.
The acquisition had the following effect on the Group's assets and
liabilities:
Fair value
£000
Non-current assets
Tangible assets 2,970
Investment property 175
Right-of-use assets 2,155
Current assets
Inventories 1,407
Trade and other receivables 7,131
Other receivables 3,135
Total assets 16,973
Current liabilities
Interest bearing loans and borrowings (3,487)
Lease liabilities (512)
Trade and other payables (5,495)
Corporation tax (437)
Non-current liabilities
Lease liabilities (1,643)
Deferred tax (89)
Total liabilities (11,663)
Net identifiable assets and liabilities 5,310
Goodwill 1,248
Purchase consideration and costs of acquisition paid in period 6,558
The business was acquired as part of the Group's growth strategy. Significant
control was obtained through the acquisition of 75% of the share capital.
No material intangible assets were identified. Goodwill represents buying and
other operating synergies.
The acquired undertaking made a profit of £780,000 from the beginning of its
financial year to the date of acquisition. In its previous financial year
the profit was £818,000 before revaluations.
Following acquisition, the business contributed revenue of £80,493,000 and
operating profit of £2,644,000 to the Group for the period ended 31 October
2020.
If the business had been acquired at the start of the Group's financial
period, being 1 May 2019, it would have added £96,635,000 to Group revenue
and £3,185,000 to Group operating profit for the period ended 31 October 2020
A contingent payment, based on a fixed formula, has been agreed for the
remaining 25% of the share in Central Supplies (Brierley Hill) Ltd. The
payment is based on an employment condition under IFRS 3 and is therefore
classed as compensation for post-combination services. Consequently, no
non-controlling interest is recognised, and goodwill is measured as the
difference between the initial consideration and 100% of the acquired
company's net assets. Further detail on the calculation of this liability is
detailed within note 27.
In the year ended 31 October 2021 an additional payment of £2,925,000 was
made to purchase the entire shareholding of one minority shareholder and a
proportion of the other remaining minority shareholder's shareholding. The
remaining shareholding held by one minority shareholder is 5%.
This expense is accrued in administrative expenses as compensation for post
combination services.
There have been no subsequent adjustments made to the fair values recognised
on acquisition.
Alpine Fine Foods Limited
On 29 October 2019, the Group acquired the entire share capital of Alpine Fine
Foods Limited for a total consideration of £2,505,000. The resulting
goodwill of £2,690,000 was capitalised and is subject to annual impairment
testing under IAS 36.
The acquisition had the following effect on the Group's assets and
liabilities:
Fair value
£000
Non-current assets
Tangible assets 1,321
Right-of-use assets 355
Current assets
Inventories 625
Trade and other receivables 1,323
Total assets 3,624
Current liabilities
Interest bearing loans and borrowings (981)
Lease liabilities (261)
Trade and other payables (1,060)
Other payables (1,341)
Corporation tax (50)
Non-current liabilities
Lease liabilities (144)
Deferred tax 28
Total liabilities (3,809)
Net identifiable assets and liabilities (185)
Goodwill 2,690
Purchase consideration and costs of acquisition paid in period 2,505
The business was acquired as part of the Group's growth strategy. Significant
control was obtained through the acquisition of 100% of the share capital.
No material intangible assets were identified. Goodwill represents buying and
other operating synergies.
The acquired undertaking made a profit of £232,000 from the beginning of its
financial year to the date of acquisition. In its previous financial year
the loss after tax was £38,000.
Following acquisition, the business contributed revenue of £3,831,000 and
operating profit of £11,000 to the Group for the period ended 31 October
2020.
If the business had been acquired at the start of the Group's financial
period, being 1 May 2019, it would have added £10,537,000 to Group revenue
and £222,000 to Group operating profit for the period ended 31 October 2020
The trade and assets of Alpine Fine Foods Limited were hived up into David
Miller Frozen Foods Limited on 24 February 2020.
There have been no subsequent adjustments made to the fair values recognised
on acquisition.
3 Segmental information
The following analysis by segment is presented in accordance with IFRS 8 on the basis of those segments whose operating results are regularly reviewed by the Board (the Chief Operating Decision Maker as defined by IFRS 8) to assess performance and make strategic decisions about allocation of resources
The Group has the following operating segments:
· Ambient: Provides delivered wholesale of ambient food, drink and
tobacco products;
· Frozen & Chilled: Provides delivered wholesale of frozen and
chilled food products; and
· Foodservice: Provides delivered wholesale of alcohol, frozen and
chilled food to trade customers.
Corporate contains the central functions that are not devolved to the business
units
These segments offer different products and services to different customers types, attracting different margins. They each have separate management teams.
The segments share a commonality in service being delivered wholesale of food
and drink products. The Group therefore benefits from a range of expertise,
cross selling opportunities and operational synergies in order to run each
segment as competitively as possible.
Each segment is measured on its EBITDA, adjusted for acquisition costs and
reconstruction costs, and internal management reports are reviewed monthly by
the Board. This performance measure is deemed the most relevant by the Board
to evaluate the results of the segments relative to entities operating in the
same industry.
Ambient Frozen & Foodservice Corporate Total
Chilled
£000 £000 £000 £000 £000
FY21
Revenue 155,712 163,895 61,087 - 380,694
Inter-segment revenue 12,340 - 226 - 12,566
Segment revenue 168,052 163,895 61,313 - 393,260
Adjusted EBITDA* 4,347 9,275 2,000 (569) 15,053
CPO income - 2,255 - - 2,255
Amortisation of intangibles - (144) (6) - (150)
Depreciation (2,106) (3,910) (1,801) - (7,817)
Restructuring costs (53) (41) (42) (1,121) (1,257)
Acquisition expense - (19) - (162) (181)
Compensation for post combination services - (1,278) - - (1,278)
Share based payment expense - - - (227) (227)
Interest expense (564) (1,286) (288) (2,136) (4,274)
Segment profit/(loss) before tax 1,624 4,852 (137) (4,215) 2,124
Segment assets 38,790 49,979 22,888 37,160 148,817
Segment liabilities (28,559) (41,323) (16,508 (843) (87,233)
Segment net assets 10,231 8,656 6,380 36,317 61,584
Within Corporate segment assets is £31,349,000 of goodwill on consolidation.
This is allocated to the trading segments as follows (see note 11 for further
information)
Goodwill by segment 12,499 5,234 13,516 31,249
Ambient Frozen & Foodservice Corporate Total
Chilled
£000 £000 £000 £000 £000
FP20
Revenue 249,080 230,546 112,390 - 592,016
Inter-segment revenue 20,107 636 595 - 21,338
Segment revenue 269,187 231,182 112,985 - 613,354
Adjusted EBITDA* 7,327 17,155 3,949 (797) 27,634
Amortisation of intangibles - (140) (4) - (144)
Depreciation (3,210) (5,006) (2,797) - (11,013)
Restructuring costs (58) (26) (548) (835) (1,467)
Acquisition expense - (400) (228) - (628)
Compensation for post combination services - (2,358) - - (2,358)
Interest income - - - 1,453 1,453
Interest expense (961) (1,668) (556) (8,987) (12,172)
Segment profit/(loss) before tax 3,098 7,557 (184) (9,166) 1,305
Segment assets 37,635 37,380 20,237 34,611 129,864
Segment liabilities (28,200) (34,435) (15,389) (51,893) (129,917)
Segment net assets / (liabilities) 9,435 2,945 4,848 (17,282) (53)
Within Corporate segment assets is £31,349,000 of goodwill on consolidation.
This is allocated to the trading segments as follows (see note 11 for further
information)
Goodwill by segment 12,499 5,234 13,516 31,249
An analysis of revenue by destination is given below:
Geographical information:
FY21 FP20
£000 £000
United Kingdom 373,690 579,436
Overseas 7,004 12,580
Group Revenue 380,694 592,016
No one customer accounts for more than 6% of Group revenue.
4 Other operating income/(expense)
FY21 FP20
£000 £000
Net gain on disposal of fixed assets 55 5
Net gain/(loss) on foreign exchange (2) 5
Net gain on remeasurement of right-of-use assets and lease liabilities 124 -
CPO income 2,255 -
Grant income 2,339 3,010
4,771 3,020
Grant income comprises amounts received from the Government with respect to
the Coronavirus Job Retention Scheme. These totalled £2,339,000 (FP20:
£3,010,000).
CPO income is in relation to the compulsory purchase order of a property lease
in Luton enacted by the Local Authority. It has been classified as exceptional
income in the statement of profit and loss as it is not income relating to the
Group's principal activities and is not expected to recur in in the ordinary
course of business.
5 Expenses
Included in profit/loss are the following:
FY21 FP20
£000 £000
Depreciation of tangible assets:
Owned 1,975 3,120
Right-of-use assets 5,842 7,893
Amortisation of intangible assets 150 144
Expense relating to short term and low value assets 715 1,024
Impairment loss on trade receivables 1,288 1,563
Dilapidation provision 570 -
The Group incurred a number of expenses not relating to the principal trading
activities of the Group as follows:
FY21 FP20
Exceptional expenses £000 £000
Restructuring expenses 1,257 897
COVID-19 related restructuring costs - 570
Acquisition expenses 181 628
Compensation for post combination services 1,278 2,358
Total exceptional expenses 2,716 4,453
Share based payment expense 227 -
Total exceptional expenses and share based payments 2,943 4,453
The Board consider the exceptional items to be non-recurring in nature. Both
exceptional and share based payment expenses are adjusted for in the statement
of profit and loss to arrive at the adjusted EBITDA. This measure provides the
Board with a better understanding of the Group's operating performance.
Restructuring expenses include transaction fees in relation to the IPO of
£1,121,000 (FP20: 834,000). Other expenses related to the restructuring of
the Group's operations in the period.
COVID-19 related restructuring costs include a modest workforce reduction in
response to the reduced demand during Government led closure of customers'
operations.
Acquisition expenses include the legal and professional fees connected to the
actual and potential acquisitions of subsidiaries in the period.
Compensation for post combination services relates to the value of a liability
in connection the acquisition of the remaining share capital of Central
Supplies (Brierley Hill) Ltd which is subject to an agreement to acquire it
within two years of the acquisition, see note 2.
Share based payments relate to the MIP and are non cash expenses. For further
information see note 24.
FY21 FP20
£000 £000
Auditor's remuneration
Audit of these financial statements 6 9
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements of subsidiaries of the Company 380 250
Taxation compliance services 44 39
Tax advisory services 109 30
Corporate finance services 218 370
6 Staff numbers and costs
The average number of persons employed by the Group (including Directors)
during the period is analysed as follows:
FY21 FP20
Number of staff 1,079 1,157
Directors 3 2
1,082 1,159
The aggregate payroll costs of these persons were as follows:
FY21 FP20
£000 £000
Wages and salaries 29,259 44,897
Social security costs 2,673 4,094
Other pension costs (note 23) 769 1,151
32,701 50,142
7 Directors' remuneration
Included within staff costs (note 6) are the following amounts in respect of Directors' emoluments
FY21 FP20
£000 £000
Directors' emoluments 636 873
Company contribution to personal pension scheme 32 83
668 956
Retirement benefits are accruing to two Directors under money purchase pension
schemes (FP20: two).
Amounts accrued under the share based payment plan for one of the Directors
was £85,000 (FP20: £nil).
FY21 FP20
Highest paid Director £000 £000
Directors' emoluments 312 515
Company contribution to personal pension scheme 19 63
331 578
8 Finance income and expense
FY21 FP20
£000 £000 £000 £000
Interest payable and similar charges - cash items
Interest payable on bank loans and invoice discount facilities 1,327 2,805
Finance charges payable in respect of leases 1,239 1,579
Other finance interest payable on investor loans 551 -
Other finance charges payable on debenture loans 1,936 1,585
Other interest 40 -
5,093 5,969
Interest payable and similar charges -non-cash items
Other finance interest payable on investor loans - 4,327
Other finance charges payable on debenture loans 4,591 1,876
Fair value movement on financial liabilities (note 16) (5,410) (1,453)
(819) 4,750
4,274 10,719
Other finance charges on debenture loans comprise the amortisation of
transaction costs in respect of the Pricoa Capital Group. A significant
proportion of the interest payable and similar expenses arise from amortised
transaction costs in respect to investor loans and liabilities and movements
in the fair value of the financial liabilities which have no cash impact in
the period. The above analysis has been presented to clearly identify which
elements have a cash impact.
9 Taxation
FY21 FP20
£000 £000 £000 £000
UK corporation tax
Current tax charge on income for the period 620 1,765
Adjustment in respect of prior periods 187 95
Total current tax 807 1,860
Deferred tax (see note 22)
Origination/(reversal) of timing differences 281 (66)
Adjustment in respect of prior periods 4 10
Effect of changes in tax rate 107 1
Share based payment (57) -
IFRS 16 timing differences (114) -
Total deferred tax charge / (credit) 221 (55)
Tax charge on profit on ordinary activities 1,028 1,805
FY21 FP20
£000 £000
Current tax reconciliation
Profit/(loss) on ordinary activities after tax 1,096 (500)
Tax charge 1,028 1,805
Profit on ordinary activities before tax 2,124 1,305
Tax using the UK corporation tax of 19% (FP20: 19%) 404 248
Effect of:
Expenses not deductible for tax purposes 1,571 1,455
Income not taxable (1,109) -
Adjustments in respect of prior periods 187 95
Change in tax rate on deferred tax balances 111 10
Share based payment (57) -
Other tax adjustments (79) (3)
Total current tax charge 1,028 1,805
A UK corporation rate of 19% (effective 1 April 2020) was substantively
enacted on 17 March 2020, reversing the previously enacted reduction in the
rate from 19% to 17%.
An increase in the UK corporation rate from 19% to 25% (effective 1 April
2023) was substantively enacted on 24 May 2021. This will increase the
Group's future current tax charge accordingly. The deferred tax liability at
31 October 2021 has been calculated based on these rates, reflecting the
expected timing of reversal of the related timing differences (FP20: 19%).
10 Earnings per share
Basic earnings per share
Basic earnings per share for the period ending 31 October 2021, and the
previous 18 month period ending 31 October 2020 is calculated by dividing
profit attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during each period as calculated below.
Diluted earnings per share
Diluted earnings per share for the period ending 31 October 2021, and previous
18 month period ending 31 October 2020 is calculated by dividing profit
attributable to ordinary shareholders by the weighted average number of
ordinary shares, adjusted for the effects of all dilutive potential ordinary
shares, in this case issued equity warrants, outstanding during each period as
calculated below.
Profit attributable to ordinary shareholders
FY21 FP20
£000 £000
Profit/(loss) attributable to all shareholders 1,096 (500)
£ £
Basic earnings per ordinary share 0.02 (0.02)
Diluted earnings per ordinary share 0.02 (0.02)
Weighted average number of ordinary shares
FY21 FP20
Number Number
Weighted average number of ordinary shares (basic) during the period 46,036,531 27,333,323
Weighted average number of ordinary shares (diluted) during the period 46,055,901 27,333,323
The following Alternative Performance Measure ("APM") for earnings per share
is not defined or specified under the requirements of International Financial
Reporting Standards. The Board believes that this APM provides the readers
with important additional information regarding the earnings per share
performance of the Group:
Basic underlying earnings per share
Profit attributable to the equity holders of the Group prior to exceptional
items and the fair value movement of the put option liability measured through
the consolidated statement of profit and loss, divided by the weighted average
number of ordinary shares during the financial period.
FY21 FP20
£000 £000
Profit/(loss) attributable to all shareholders 1,096 (500)
Exceptional and share based payment expenses net of tax* 2,819 4,346
CPO income net of tax (1,827) -
Interest and finance charges payable on loans and debenture notes 7,078 7,788
Fair value adjustments on the put option liability (5,410) (1,453)
Underlying profit attributable to ordinary shareholders 3,756 10,181
£ £
Basic underlying earnings per ordinary share 0.08 0.37
*Exceptional expenses include restructuring fees, acquisition costs and
compensation for post combination services which are deemed to be
non-recurring. For full detail of exceptional and share based payment
expenses see note 5. For further details on exceptional income relating to the
CPO see note 4.
11 Intangible assets
Group Intangible assets Goodwill Total
£000 £000 £000
Cost
Balance at 1 May 2019 - 32,823 32,823
Additions 501 3,938 4,439
Transferred from tangible assets 55 - 55
Balance at 31 October 2020 556 36,761 37,317
Amortisation
Balance at 1 May 2019 - 5,512 5,512
Charge in period 144 - 144
Balance at 31 October 2020 144 5,512 5,656
Net book value
At 31 October 2020 412 31,249 31,661
At 30 April 2019 - 27,311 27,311
Group Intangible assets Goodwill Total
£000 £000 £000
Cost
Balance at 1 November 2020 556 36,761 37,317
Additions 169 - 169
Balance at 31 October 2021 725 36,761 37,486
Amortisation
Balance at 1 November 2020 144 5,512 5,656
Charge in period 150 - 150
Balance at 31 October 2021 294 5,512 5,806
Net book value
At 31 October 2021 431 31,249 31,680
At 31 October 2020 412 31,249 31,661
Goodwill acquired through business combinations has been allocated to cash
generating units ("CGUs"), as follows:
2021 2020
£000 £000
Frozen & Chilled 12,499 12,499
Foodservice 5,234 5,234
Ambient 13,516 13,516
31,249 31,249
Under IAS 36 the Group is required to test goodwill for impairment at least
annually or more frequently if indicators of impairment exist.
The recoverable amount of a CGU has been calculated with reference to its
value in use, using financial forecasts approved by the Board covering a 4
year period with the final period taken into perpetuity.
The key assumptions of this calculation are shown below:
CGUs Ambient Frozen & Chilled Foodservice
Period forecasts are based on: 4 years 4 years 4 years
Growth rate applied: 0% 0% 0%
Discount rate applied: 8.32% 8.32% 8.32%
Impairment testing at 31 October 2021 has considered a further impact of
COVID-19 on the CGU's. The Board expect trading to return to pre COVID-19
levels in the forecast period. Having operated through two financial periods
affected by COVID-19 trading restrictions the Directors believe no reasonable
prospective COVID-19 impact to trading would result in a material impairment.
A sensitivity has been tested in the event of further COVID-19 restrictions on
trade.
No growth rate assumption has been made on the terminal value in the
impairment calculation. The Group has demonstrated year on year growth outside
of COVID-19 impacted financial periods and growth in consumer spending on food
and drink was 2.5% in 2019, being the last period unaffected by COVID-19.
There is a demonstrable link between consumer spending on food and drink and
GDP trends. GDP is expected to grow to 2.1% by 2023. Notwithstanding the zero
growth assumption there is significant headroom under the annual impairment
review.
The discount rate is per the Group's current weighted average cost of capital
adjusted to reflect the pre tax rate at 25% corporation tax and a risk premium
from comparable listed entities to approximate a market based discount rate. A
specific risk premium has not been applied to each CGU as they all operate in
the wholesale of food and drinks and are therefore exposed to the same
macroeconomic risks. This would be reassessed if the discount rate indicated
potential impairment of any individual CGU.
Other than changes to the discount or growth rate the key assumption in the
forecast model is the gross margin generated by each CGU. The sensitivities
vary by CGU but no reasonable sensitivity would result in impairment on any
CGU.
The following sensitivities have been tested and do not result in an
impairment in ay CGU:
· Change in the pre-tax discounts rate by 300 bps
· Further impact to trade from COVID-19 by way of a two month lock
down
· Wage and fuel inflation
· Loss of a significant customer, which represents 6% of Group
revenue
Each of the CGU's has significant headroom under the annual impairment
review. The Directors believe that no reasonable change in any of the above
key assumptions would cause the carrying value of the unit to materially
exceed its recoverable amount.
12 Tangible assets
Group Freehold Leasehold improvements Fixtures and Fittings Motor vehicles Plant and machinery Total
property
£000 £000 £000 £000 £000 £000
Cost
Balance at 1 May 2019 - 2,289 4,314 6,679 4,459 17,741
Additions - 107 432 722 1,274 2,535
Disposals - - (1) (1,655) (62) (1,718)
Transferred to intangible assets - - - - (55) (55)
Acquired on business combinations 2,894 306 159 346 586 4,291
Transferred to right-of-use assets - (671) - (4,490) - (5,161)
Balance at 31 October 2020 2,894 2,031 4,904 1,602 6,202 17,633
Depreciation
Balance at 1 May 2019 - 621 3,007 1,730 2,448 7,806
Charge in period 50 172 726 1,018 1,154 3,120
Disposals - - (1) (1,312) (52) (1,365)
Transferred to right-of-use assets - (62) - (1,176) - (1,238)
Balance at 31 October 2020 50 731 3,732 260 3,550 8,323
Net book value
At 31 October 2020 2,844 1,300 1,172 1,342 2,652 9,310
At 30 April 2019 - 1,668 1,307 4,949 2,011 9,935
Group Freehold Leasehold improvements Fixtures and Fittings Motor vehicles Plant and machinery Total
property
£000 £000 £000 £000 £000 £000
Cost
Balance at 1 November 2020 2,894 2,031 4,904 1,602 6,202 17,633
Additions - 200 719 299 1,510 2,728
Disposals - - - (467) (71) (538)
Transferred from right-of-use assets - - - 749 - 749
Transfer between classifications 28 (28) (144) (21) 165 -
Balance at 31 October 2021 2,922 2,203 5,479 2,162 7,806 20,572
Depreciation
Balance at 1 November 2020 50 731 3,732 260 3,550 8,323
Charge in year 43 127 466 639 700 1,975
Disposals - - - (431) (55) (486)
Transferred from right-of-use assets - - - 656 - 656
Transfer between classifications 28 (671)- - (4,490) - (5,161) - - (120) (16) 136 -
Balance at 31 October 2021 93 858 4,078 1,108 4,331 10,468
Net book value
At 31 October 2021 2,829 1,345 1,401 1,054 3,475 10,104
At 31 October 2020 2,844 1,300 1,172 1,342 2,652 9,310
-
-
(120)
(16)
136
-
Balance at 31 October 2021
93
858
4,078
1,108
4,331
10,468
Net book value
At 31 October 2021
2,829
1,345
1,401
1,054
3,475
10,104
At 31 October 2020
2,844
1,300
1,172
1,342
2,652
9,310
13 Right-of-use assets
From 1 May 2019 and following the adoption of IFRS 16, Leases, leased assets are presented as right-of-use assets in the balance sheet per the following schedule:
Leasehold Property Motor vehicles Plant and machinery Total
Group
£000 £000 £000 £000
Cost
Transition to IFRS 16 12,111 1,455 1,075 14,641
Transferred from tangible assets 671 4,490 - 5,161
Additions 1,715 5,377 327 7,419
Acquired through business combinations 101 2,313 96 2,510
Balance at 31 October 2020 14,598 13,635 1,498 29,731
Depreciation
Transferred from tangible assets 62 1,176 - 1,238
Charge in period 3,301 4,003 589 7,893
Balance at 31 October 2020 3,363 5,179 589 9,131
Net book value
At 31 October 2020 11,235 8,456 909 20,600
Group Leasehold Property Motor vehicles Plant and machinery Total
£000 £000 £000 £000
Cost
Balance as at 1 November 2020 14,598 13,635 1,498 29,731
Additions 9,414 1,158 308 10,880
Transferred to tangible assets - (749) - (749)
Disposals (1,886) (470) (105) (2,461)
Loss on remeasurement (2,212) (130) (83) (2,425)
Balance at 31 October 2021 19,914 13,444 1,618 34,976
Depreciation
Balance as at 1 November 2020 3,363 5,179 589 9,131
Charge in year 2,479 2,990 373 5,842
Transferred to tangible assets - (656) - (656)
Disposals (1,886) (467) (105) (2,458)
Loss on remeasurement - (57) (14) (71)
Balance at 31 October 2021 3,956 6,989 843 11,788
Net book value
At 31 October 2021 15,958 6,455 775 23,188
At 31 October 2020 11,235 8,456 909 20,600
14 Investments
Unlisted Unlisted
investments investments
2021 2020
£000 £000
Group
Cost and net book value
At beginning and end of period 20 20
Shares in Group undertakings Shares in Group undertakings
2021 2020
£000 £000
Company
Cost and net book value
At beginning and end of period 12,993 12,993
The Company has the following investments in subsidiaries:
Country of Class of Shares hold Ownership Ownership
incorporation 2021 2020
Subsidiary undertaking
Kitwave Investments Limited United Kingdom Ordinary 100% 100%
Kitwave One Limited* United Kingdom Ordinary 100% 100%
Kitwave Limited* United Kingdom Ordinary 100% 100%
M&M Value Limited* United Kingdom Ordinary 100% 100%
Turner & Wrights Limited* United Kingdom Ordinary 100% 100%
FW Bishop & Son Limited* United Kingdom Ordinary 100% 100%
Westone Wholesale Limited* United Kingdom Ordinary 100% 100%
Automatic Retailing (Northern) Limited* United Kingdom Ordinary 100% 100%
Andersons (Wholesale) Limited* United Kingdom Ordinary 100% 100%
Teatime Tasties Limited* United Kingdom Ordinary 100% 100%
TG Foods Limited* United Kingdom Ordinary 100% 100%
Eden Farm Limited* United Kingdom Ordinary 100% 100%
Squirrels UK Limited* United Kingdom Ordinary 100% 100%
Thurston's Food's Limited* United Kingdom Ordinary 100% 100%
Angelbell Limited* United Kingdom Ordinary 100% 100%
David Miller Frozen Foods Limited* United Kingdom Ordinary 100% 100%
Phoenix Fine Foods Limited* United Kingdom Ordinary 100% 100%
MAS Frozen Foods Limited* United Kingdom Ordinary 100% 100%
Supplytech Limited* United Kingdom Ordinary 100% 100%
HB Clark Holdings Limited* United Kingdom Ordinary 100% 100%
HB Clark & Co (Successors) Limited* United Kingdom Ordinary 100% 100%
Churnet Valley Drinks Limited* United Kingdom Ordinary 100% 100%
Clarks Fine Wines Limited* United Kingdom Ordinary 100% 100%
FAM Soft Drinks Limited* United Kingdom Ordinary 100% 100%
Thorne Licence Wholesale Limited* United Kingdom Ordinary 100% 100%
Alpine Fine Foods Limited* United Kingdom Ordinary 100% 100%
Central Supplies (Brierley Hill) Ltd* United Kingdom Ordinary 95% 75%
*Held indirectly through Kitwave Investments Limited and its subsidiaries
The registered office of all the above companies is: Unit 3, Narvik Way, Tyne
Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ
15 Investment property
2021 2020
Group £000 £000
Cost and net book value
At beginning of period 175 -
Added through business combinations - 175
Disposal (175) -
At end of period - 175
The investment property was valued at £175,000 in 2018 by an external, independent valuer. The property was disposed of in the year to an unconnected third party.
16 Other financial liabilities
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Non-current
Financial liabilities designated as fair value through the statement of profit
and loss
Put option liability - 5,410 - 5,410
On admission to AIM the put option liability in relation to the Pricoa Group
Capital option was extinguished in full.
17 Inventories
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Goods for resale 26,043 23,198 - -
26,043 23,198 - -
Goods for resale recognised as cost of sales in the year amount to £312,109,000 (FP20: £484,842,000).
18 Trade and other receivables
Group Company
2021 2020 2021 2020
£000 £000
Trade receivables 44,365 34,316 - -
Amounts owed by Group undertakings - - 63,074 7,557
Other debtors 1,881 2,304 - -
Corporation tax - - - 195
Prepayments and accrued income 6,568 7,938 7 -
52,814 44,558 63,081 7,752
Due within one year 51,697 43,915 63,081 7,752
Due after more than one year 1,117 643 - -
52,814 44,558 63,081 7,752
£17,200,000 (FP20: £11,836,000) of Group trade receivables are used as
security against invoice discounting advances (note 21).
19 Cash and cash equivalents
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Cash at bank and in hand 4,968 342 3,371 -
Cash and cash equivalents per cashflow statement 4,968 342 3,371 -
20 Trade and other payables: amounts falling due within one year
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Trade payables 36,093 27,832 - -
Other creditors 2,852 3,302 - -
Accruals 7,676 6,815 173 536
Amounts owed to Group undertakings - - 54 54
Compensation for post combination services 711 2,358 - -
47,332 40,307 227 590
21 Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note 27.
Group Company
2021 2020 2021 2020
Non current liabilities £000 £000 £000 £000
Investor loans - 29,586 - -
Lease liabilities 19,917 16,200 - -
Bank and term loans - 13,493 - -
19,917 59,279 - -
Put option liability - 5,410 - 5,410
19,917 64,689 - 5,410
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Current liabilities
Lease liabilities 4,719 5,202 - -
Bank trade loans - 4,750 - -
Invoice discounting advances 14,620 10,061 - -
Bank term loans - 2,870 - -
19,339 22,883 - -
Group Company
Lease liabilities 2021 2020 2021 2020
Lease liabilities payable as follows: £000 £000 £000 £000
Within one year 4,719 5,202 - -
In the second to fifth years 9,941 11,295 - -
Over 5 years 9,976 4,905 - -
24,636 21,402 - -
Terms and debt repayment schedule
2021 2021 2020 2020
Currency Nominal interest rate Year of maturity Face value Carrying value Face Carrying value
value
£000 £000 £000 £000
Lease liabilities Sterling 3% - 5% 2022-2040 24,636 24,636 21,402 21,402
Bank Senior A Sterling 3.5% + LIBOR 2021 - - 3,613 3,613
Bank Senior B Sterling 4.0% + LIBOR 2021 - - 12,750 12,750
Invoice discounting advances Sterling 2.25% + Base 2023 14,620 14,620 10,061 10,061
Bank trade loans Sterling 2.65% + Base 2023 - - 4,750 4,750
Put option liability Sterling - - - 5,410
Non-investor loans 39,256 39,256 52,576 57,986
Investor mezzanine Sterling 14% 2021 - - 23,575 21,014
Amortised deal costs Sterling (650)
Investor subordinated Sterling 9% 2021 - - 10,601 9,222
Sub-total investor loans Sterling - - 34,176 29,586
39,256 39,256 86,752 87,572
Amortised deal costs are directly attributable to all of the investor
instruments as they were all issued at fair value as part of the same
financing transaction. Therefore these costs have been included as a single
line to reconcile the debt carrying value to the value in these financial
statements.
Changes in liabilities from financing activities Loans and Lease liabilities
borrowings Total
£000 £000 £000
Balance at 1 May 2019 - pre IFRS 16 adoption 69,108 4,043 73,151
Initial application of IFRS 16 - 14,641 14,641
Balance restated 1 May 2019 69,108 18,684 87,792
Changes from financing cash flows
Repayment of borrowings (12,274) - (12,274)
Payment of lease liabilities - (7,173) (7,173)
Interest paid (4,390) (1,579) (5,969)
Total changes from financing cash flows (16,664) (8,752) (25,416)
Other changes
New borrowing 5,000 9,671 14,671
Interest expense 10,593 1,579 12,172
Movement in fair value of put option liability (1,453) - (1,453)
Interest included in accruals at period end (414) - (414)
Added through business combination - 220 220
Total other changes 13,726 11,470 25,196
Total debt at 31 October 2020 66,170 21,402 87,572
Changes from financing cash flows
Repayment of borrowings (60,790) - (60,790)
Payment of lease liabilities - (5,068) (5,068)
Interest paid (3,854) (1,239) (5,093)
Total changes from financing cash flows (64,644) (6,307) (70,951)
Other changes
New borrowing 10,059 10,784 20,843
Interest expense 8,445 1,239 9,684
Release of the put option liability (5,410) - (5,410)
Remeasurement of lease liability - (2,482) (2,482)
Total other changes 13,094 9,541 22,635
Total debt at 31 October 2020 14,620 24,636 39,256
All borrowings are denominated in Sterling.
Bank trade loans are secured by means of debenture and cross guarantees over
the assets of all Group undertakings. These are generally repayable within 35
days of drawdown and form an integral part of the Group's day to day short
term cash management.
Receipts and payments from trade loans are disclosed on a net basis in the
cash flow statement under IAS 7 22(b) on the basis they are short maturity.
The invoice discounting advances are secured against trade receivables (note
18). These are repayable within 90 days of the date of the invoice and carry
interest at a margin of 2.25%. This is a fixed facility expiring in 2023.
Under this arrangement trade customers remit cash directly to the Group
companies and the Group companies use the trade receivables as security to
draw down funds from finance providers. Cash receipts and cash payments with
the finance provider are disclosed on a net basis in the cashflow statement as
allowed under IAS 7 22(b) on the basis that they are short maturity.
During the year the Company was admitted to AIM, raising gross proceeds for
the Company of £64,000,000 on listing.
Following settlement of transaction fees, the proceeds of the listing were
used to de-gear the Group by paying down the external debt structure. This
included the repayment of Facility A and Facility B held as bank term loans,
and repayment of the investors mezzanine and investors subordinated loan
notes.
Remaining free cash following discharge of the bank term loans and investor
mezzanine and investor subordinated loans was used to reduce the Group's
indebtedness on its invoice discount advances and trade loans.
The Bank trade loans and invoice discounting advances rank pari passu and
without preference between them in priority of payment.
22 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Group Assets Liabilities
2021 2020 2021 2020
£000 £000 £000 £000
Property, plant and equipment 429 295 (906) (397)
Tax value of loss carry forwards 31 48 - -
Share based payment expense 57 - - -
IFRS 16 timing differences 114 - - -
Tax assets / (liabilities) 631 343 (906) (397)
Movement in deferred tax during the period:
Group 31 October Recognised in income 31 October 2021
2020
£000 £000 £000
Property, plant and equipment (102) (375) (477)
Tax value of loss carry forwards 48 (17) 31
Share based payment expense - 57 57
IFRS 16 timing differences - 114 114
Tax assets/(liabilities) (54) (221) (275)
Company Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Share based payment expense 57 - - -
Tax assets 57 - - -
Company 31 October Recognised in income 31 October 2021
2020
£000 £000 £000
Property, plant and equipment - - -
Tax value of loss carry forwards - - -
Share based payment expense - 57 57
IFRS 16 timing differences - - -
Tax assets - 57 57
23 Employee benefits
Defined contribution plans
The Group operates a defined contribution pension scheme. The pension cost
charge for the period represents contributions payable by the Group to the
scheme and to other personal pensions schemes and amounted to £769,000 (FP20:
£1,151,000)
24 Employee share scheme
The Group has in place a Management Incentive Plan ("MIP") whereby the option
is expected to be equity settled. This was established following the Company
listing on AIM on 24 May 2021. Prior to this there were no other material
employee share schemes in place.
The MIP is accounted for as a share-based payment under IFRS 2 and is expected
to be settled by physical delivery of shares.
Group and Company Date of Grant Employees entitled Number of shares granted Principal vesting conditions Contractual life
Management incentive plan July 2021 Selected senior employees Nil Service during vesting period 3 years 6 months
EPS performance hurdle
Market capitalisation hurdle
The shares outstanding in relation to the MIP are: 2021 2021
Weighted average exercise price Number of options
£
Outstanding at the beginning of the year -
Granted during the year - 10,000
Outstanding at the end of the year - 10,000
None of the share options outstanding at the end of the year are exercisable.
Growth shares were issued in Kitwave Limited with a subscription price of
£5.24 per option was paid on subscription. The growth shares are exchangeable
for shares in the Company subject to achieving the principal vesting
conditions. The options are not exercisable before 1 March 2025.
The MIP has incurred an expense under employee expenses of £227,000 (FP20:
£nil).
The share based payment reserve represents the accumulation of this cost in
accordance with the treatment of equity settled share based payment expense
under IFRS 2. As at 31 October 2021 the balance on this reserve is £227,000
(FP20: £nil).
25 Called up share capital
Group and Company 2020
£
Authorised, called up and fully paid
24,000 ordinary A shares of £0.01 each 240
56,000 ordinary B1 shares of £0.01 each 560
10,666 ordinary B2 shares of £0.01 each 107
9,334 ordinary B3 shares of £0.01 each 93
100 ordinary C1 share of £0.01 each 1
1,000 ordinary C3 shares of £0.001 each 0
1,001
Several adjustments have been made to share capital and share premium during
the year in preparation for the Company's listing on AIM. These include bonus
issues and subdivisions applied to A, B1, B2, B3, C1 and C3 share classes as
well as a reduction to share premium into distributable reserves.
Immediately prior to IPO, all pre-existing share classes were converted to the
new class of ordinary shares. Upon IPO, 42,666,667 of these new ordinary
shares were created for issue.
Group and Company 2021
£
Authorised, called up and fully paid
70,000,000 ordinary shares of £0.01 each 700,000
700,000
Share premium
The share premium account increased for the premium paid on the new shares
issued over their nominal value being £63,300,000. Under IAS 32 the
transaction costs associated with the issuance of new equity on IPO of the
Company have been deducted from the share premium account, being a total of
£2,110,000.
26 Contingent liabilities
Group bank borrowings (including invoice discounting advances) are subject to
cross guarantee and debenture agreements over Group companies.
The Company is party to a cross guarantee and debenture agreement to secure
the £14,620,000 (2020: £31,000,000) bank borrowings of its subsidiary
companies.
27 Financial instruments
27 (a) Fair values of financial instruments
The carrying value of all financial assets and financial liabilities by class,
are shown below. The carrying value approximates to each asset and liabilities
fair value:
Group 2021 2020
£000 £000
Financial assets held at amortised cost
Trade receivables 44,365 34,316
Cash and cash equivalents 4,968 342
49,333 34,658
Financial liabilities measured at fair value through the statement of profit
and loss
Put option liability - 5,410
Compensation for post combination services 711 2,358
711 7,768
Financial liabilities measured at amortised cost
Trade payable 36,093 27,832
Bank trade loans - 4,750
Bank term loans - 16,363
Investor loans - 29,586
Invoice discounting advances 14,620 10,061
Obligations under lease liabilities 24,636 21,402
75,349 109,994
Financial instruments - IFRS 9
The Group holds a financial asset instrument, being trade receivables.
The trade receivables are held at amortised cost. The objective of the
business model for realising trade receivables is by collecting contractual
cash flows for genuine debts. The considerations of Solely Principal Payments
and Interest ("SPPI") have also been considered and the criteria met for
holding at amortised cost as the trade receivables are for fixed payments due
by fixed dates with no variable element of payment required.
The standard requires impairment of trade receivables held at amortised cost
is considered by reference to the expected credit loss method, discussed in
the credit risk section of the financial information.
Financial instruments measured at fair value through profit and loss The table
below analyses financial instruments into a fair value hierarchy based on the
valuation technique used to determine fair value.
· Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
· Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly (ie, as
prices) or indirectly (ie, derived from prices)
· Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The following table shows the valuation techniques used for Level 3 fair
values as well as the significant unobservable inputs used for Level 3 items.
Valuation technique Significant unobservable inputs
Put option liability The fair value of the option is based on the forecast Group enterprise value Forecast EBITDA per annum
less the value of net debt as at March 2023.
Forecast net debt position as at the option date
Discount rate of 7.43% being the Group discount rate pre IPO
Contingent consideration The fair value of the option is based on Central Supplies (Brierley Hill) Net asset position
Ltd's EBITDA for the last 12 months and net assets at the balance sheet date
of redemption Discount rate of 5.19%
On admission to AIM the put option liability in relation to the Pricoa option
was extinguished in full.
The Group has a liability in relation to 5% shareholding in Central Supplies
(Brierley Hill) Ltd retained by which is exercisable two years from
acquisition. The redemption value at maturity date is based on a fixed formula
relating to last 12 months EBITDA and net assets at the date of redemption.
The Group has considered the sensitivity on the fair value of the liability
which are as follows:
· A 25 basis point increase in discount rate would reduce the fair
value of the put option liability by £4,000.
· A £500,000 reduction in forecast EBITDA would reduce the fair value
of the put option liability by £276,000.
The reconciliation between opening and closing balances for Level 3 is
detailed in the table below:
2021 2020
£000 £000
Liabilities - level 3
Opening balance 7,768 6,863
Amounts charged to the statement of profit and loss 1,278 905
Payments made (2,925) -
Release on IPO (5,410) -
711 7,768
27 (b) 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, and arises principally from the Group's receivables from
customers.
The Group has a well-established and diverse portfolio of customers including
a large number of customers paying cash on delivery. The Directors do not
believe there is a significant concentration risk as evidenced with no one
customer accounting for more than 6% of Group revenue.
All customers who wish to trade on credit terms are subject to credit
verification procedures.
The Group establishes an allowance for impairment that represents its estimate
of incurred losses using a provision matrix which is based on historical
levels of impairment and assessment of the quality of the receivable book to
calculate a forward looking estimate.
2021 Gross Impairment Net
£000 £000 £000
Current 33,075 - 33,075
31-60 days from invoice 10,230 - 10,230
61-90 days from invoice 1,612 (552) 1,060
90+ days 1,465 (1,465) -
46,382 (2,017) 44,365
The maximum Group exposure to credit risk in the period ended 31 October 2021
was £44,365,000 (2020: £34,316,000) being the total carrying amount of trade
receivables and other receivables net of provision.
The Directors assess the risk to trade receivables by reviewing the ageing of
debt rather than by reference to the amount overdue. Many customers operate on
terms requiring payment for the previous delivery on receipt of their next
order, referred to as 'one over one'. As such a large population of debt would
be classed as overdue due to the parameters of the Group's accounting software
with debt operating under the agreement made with the customer. The expected
credit loss on invoices less than 90 days old is immaterial.
For the last two financial periods, the annual bad debt expense has been
c.0.25% of Group revenue. Applying the historic factor would result in a
provision of c.£950,000 for the year ended 31 October 2021.
The impairment charge on trade receivables in the 12 month period ended 31
October 2021 £1,288,000 (note 5) with the impairment charged in the prior 18
month period to 31 October 2020 being £1,563,000. During FP20 the Group
reduced trade receivables significantly with collections from customers
affected by COVID-19 materially collected with minimal bad debt levels. The
Directors continue to take a prudent approach in relation to provisioning due
to potential additional COVID-19 impacts on the Group's customer base.
Debt is reviewed regularly by dedicated credit control teams within each
division and information from credit rating agencies is often used to assess a
customer's ability to meet its obligations.
If there is significant doubt regarding a receivable a specific provision is
created. In addition, a provision is created to account for the estimated
losses that may be incurred in future periods. Management consider the level
of provisioning to be materially correct based on these factors.
Group 2021 2020
£000 £000
As at 1 November 2020 2,011 1,422
Provided during the period 1,288 1,563
Utilised during the period (1,282) (974)
As at 31 October 2021 2,017 2,011
27 (c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
The Group manages its liquidity risk by monitoring existing facilities and
cash flows against forecast requirements based on a rolling cash forecast.
The following are the contractual maturities of financial liabilities,
including estimated interest payments and excluding the effect of netting
agreements:
Group = 2021 Carrying Contractual 1 year or less 1-2 years 2-5 years More than
amount cashflow 5 years
£000 £000 £000 £000 £000 £000
Financial liabilities
Trade payables 36,093 36,093 36,093 - - -
Lease liabilities 24,636 31,571 5,697 5,129 7,754 12,991
Bank Senior A - - - - - -
Bank Senior B - - - - - -
Investor mezzanine loan notes - - - - - -
Investor subordinated loan notes - - - - - -
Invoice discounting advances* 14,620 14,620 14,620 - - -
Bank trade loans* - - - - - -
Put option liability - - - - - -
Compensation for post combination services 711 711 711 - - -
76,060 82,995 57,121 5,129 7,754 12,991
Group - 2020 Carrying Contractual 1 year or less 1-2 years 2-5 years More than
amount cashflow 5 years
£000 £000 £000 £000 £000 £000
Financial liabilities
Trade payables 27,832 27,832 27,832 - - -
Lease liabilities 21,402 24,917 6,044 5,066 8,272 5,535
Bank Senior A 3,613 3,781 3,011 770 - -
Bank Senior B 12,750 14,015 542 542 12,931 -
Investor mezzanine loan notes 20,364 35,485 2,385 2,482 30,618 -
Investor subordinated loan notes 9,222 14,266 - - 14,266 -
Invoice discounting advances* 10,061 10,061 10,061 - - -
Bank trade loans* 4,750 4,750 4,750 - - -
Put option liability 5,410 6,871 - - 6,871 -
Compensation for post combination services 2,358 3,143 3,143 - - -
117,762 145,121 57,768 8,860 72,958 5,535
* Both the invoicing discounting and bank trade loan facilities are revolving.
The invoice discounting facility is available up to £35,000,000 of drawn down
and is available until 2023. The trade loan facility is for £8,000,000 and
repayable within 35 days of draw down. It forms an integral part of the
Group's day to day short term cash management.
27 (d) Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices will affect the Group's
income or the value of its holdings of financial instruments.
The Group has an immaterial exposure to currency risk on purchases denominated
in a currency other than the functional currency of the Group since the
balance owed to non UK business is immaterial at each period end.
The Group is exposed to interest rate risk principally where its borrowings
are at variable interest rates.
At the balance sheet date the interest rate profile of the Group's
interest-bearing financial instruments was:
Group
2021 2020
£000 £000
Fixed rate instruments
Financial assets - -
Financial liabilities (24,636) (50,987)
(27,835) (50,987)
Group
2021 2020
£000 £000
Variable rate instruments
Financial assets - -
Financial liabilities (14,620) (31,174)
(14,620) (31,174)
Sensitivity analysis
An increase of 25 basis points in interest rates throughout the period would
have affected the statement of profit and loss by the amounts shown below.
This calculation assumes that the charge occurred at all points in the period
and had been applied to the average risk exposures throughout the period:
Group
2021 2020
£000 £000
Profit or loss decreases 37 78
The above assumes the rate change is applicable on financial liabilities
accruing interest on base rate and LIBOR and affects them in the same way.
27 (e) Capital management
The primary objective of the Group is to manage its capital to ensure it is
able to continue as a going concern, whilst maximising shareholder value.
The capital structure of the Group consists of debt, which includes
borrowings, cash and cash equivalents and equity attributable to the equity
holders of the Group.
The Group's policy is to maintain gearing at levels appropriate to the
business and its funders. The Group produces annual forecasts to enable the
Board to assess the level of working capital needed in the business, taking
careful account of working capital cycles, which are predictable, and the
Board have significant experience of managing them.
28 Related party transactions
Kitwave One Limited, Kitwave Investments Limited, Kitwave Limited, Turner
& Wrights Limited, FW Bishop & Son Limited, M & M Value Limited,
Westone Wholesale Limited, Andersons (Wholesale) Limited, Teatime Tasties
Limited, TG Foods Limited, Eden Farm Limited, Squirrels UK Limited, Thurston's
Food's Limited, David Miller Frozen Foods Limited, Angelbell Limited, MAS
Frozen Foods Limited, Supplytech Limited, Automatic Retailing Limited, Phoenix
Fine Foods Limited, H B Clark (Successors) Limited, H B Clark Holdings
Limited, Churnet Valley Drinks Limited, Clarks Fine Foods Limited, F.A.M Soft
Drinks Limited and Alpine Fine Foods Limited are all 100% owned subsidiaries
of this Company. Central Supplies (Brierley Hill) Ltd is a 95% owned
subsidiary of this Company
Details of interest payable and other finance charges in relation to the
former debenture holders (Pricoa Capital Group) are disclosed in notes 7 and
21. Fees totalling £25,000 (FP20: £60,000) were payable to Pricoa Capital
Group in respect of the period.
From 1 March 2016, Pricoa Capital Group (and entities related to Pricoa
Capital Group) were the holders of all the A ordinary shares of £0.01 each.
Following admission to AIM the Pricoa Capital Group no longer hold any shares
in the Company.
Key management personnel
Total compensation of key management personnel in the period amounts to
£714,114 (FP20: £1,073,593) in respect of short-term employment benefits,
£nil (FP20: £nil) in respect of past-employment benefits and £nil (FP20:
£nil) in respect of termination benefits.
29 Ultimate controlling party
The Company is listed on the Alternative Investment Market of the London Stock
Exchange. Material shareholders are detailed within the Directors' report.
There is no ultimate controlling party of the Group.
30 Post balance sheet events
Post year end the Group completed the acquisition of the entire ordinary share capital of M.J. Baker Foodservice Limited. The acquisition was funded through existing bank facilities and will be incorporated into the existing Foodservice division.
Alternative performance measure glossary
This report provides alternative performance measures ("APMs"), which are note
defined or specified under the requirements of International Financial
Reporting Standards. The Board believes that these APMs provide readers with
important additional information on the Group.
Alternative performance measure Definition and purpose
Adjusted operating profit Represents the operating profit prior to exceptional (income) / expenses and
share based payment expenses. This measure is consistent with how the Group
measures performance and is reported to the Board.
FY21 FP20
Note £000 £000
Total operating profit 6,398 12,204
CPO income 4 (2,255) -
Restructuring costs 5 1,257 1,467
Acquisition expenses 5 181 628
Compensation for post combination services 5 1,278 2,358
Share based payment expense 5 227 -
Adjusted operating profit 7,086 16,477
Adjusted EBITDA Represents the operating profit prior to exceptional (income) / expenses,
share based payment expenses, fixed asset depreciation and intangible
amortisation. This measure is consistent with how the Group measures trading
and cash generative performance and is reported to the Board.
FY21 FP20
Note £000 £000
Total operating profit 6,398 12,204
Amortisation of intangible assets 11 150 144
Depreciation 12,13 7,817 11,013
CPO income 4 (2,255) -
Restructuring costs 5 1,257 1,467
Acquisition expenses 5 181 628
Compensation for post combination services 5 1,278 2,358
Share based payment expense 5 227 -
Adjusted EBITDA 15,053 27,634
Pre tax operational cash conversion Represents the cash generated from operating activities pre tax as a
proportion of cash flow from operating activities pre movements in working
capital and tax. This measure informs the Board of the Group's cash conversion
from operating activities, is used to monitor liquidity and is reported to the
Board.
FY21 FP20
£000 £000
Net cash inflow from operating activities 7,916 35,855
Tax paid 2,432 2,693
Payments in respect of compensation for post combination services 2,925 -
Cash flow from operating activities pre tax and compensation for post 13,273 38,548
combination services (1)
Movement in working capital 2,418 (13,014)
Cash flow from operating activities pre tax and compensation for post 15,691 25,534
combination services and movement in working capital (2)
Pre tax operational cash conversion (1) divided by (2) 85% 151%
Adjusted EBITDA
Represents the operating profit prior to exceptional (income) / expenses,
share based payment expenses, fixed asset depreciation and intangible
amortisation. This measure is consistent with how the Group measures trading
and cash generative performance and is reported to the Board.
FY21 FP20
Note £000 £000
Total operating profit 6,398 12,204
Amortisation of intangible assets 11 150 144
Depreciation 12,13 7,817 11,013
CPO income 4 (2,255) -
Restructuring costs 5 1,257 1,467
Acquisition expenses 5 181 628
Compensation for post combination services 5 1,278 2,358
Share based payment expense 5 227 -
Adjusted EBITDA 15,053 27,634
Pre tax operational cash conversion
Represents the cash generated from operating activities pre tax as a
proportion of cash flow from operating activities pre movements in working
capital and tax. This measure informs the Board of the Group's cash conversion
from operating activities, is used to monitor liquidity and is reported to the
Board.
FY21 FP20
£000 £000
Net cash inflow from operating activities 7,916 35,855
Tax paid 2,432 2,693
Payments in respect of compensation for post combination services 2,925 -
Cash flow from operating activities pre tax and compensation for post 13,273 38,548
combination services (1)
Movement in working capital 2,418 (13,014)
Cash flow from operating activities pre tax and compensation for post 15,691 25,534
combination services and movement in working capital (2)
Pre tax operational cash conversion (1) divided by (2) 85% 151%
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