REG - Kitwave Group PLC - Final Results
28/02/2023 07:00
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RNS Number : 2187R Kitwave Group PLC 28 February 2023
28 February 2023
Kitwave Group plc
("Kitwave", the "Group" or the "Company")
Final Results for the twelve months ended 31 October 2022
Kitwave Group plc (AIM: KITW), the delivered wholesale business, is pleased to
announce its final results for the twelve months ended 31 October 2022.
Financial summary
· Revenues of £503.1 million (FY21: £380.7 million)
· Gross profit margin increased to 20% during the year (FY21: 18%)
· Adjusted operating profit of £21.5 million (FY21: £7.1 million)*
· Profit before tax increased to £17.8 million (FY21: £2.1
million)
· £26.5 million net cash generated from operations (FY21: £7.9
million)*
· Pre-tax operational cash conversion of 105% (FY21: 85%)*
* 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 6.75 pence
per ordinary share, subject to approval at the Annual General Meeting to be
held on 24 March 2023, which will, if approved, result in a total dividend for
the financial year ended 31 October 2022 of 9.25 pence per ordinary share.
Operational highlights
· The Group opened its new 60,000 sq. ft Wakefield distribution centre
in March 2022. The upgraded facility which acts as the head office for
wholesaler HB Clark, has delivered operational and administrative
efficiencies, enabling the Foodservice division to deliver growth and improved
service levels.
· Acquisition of M.J. Baker Foodservice Limited, the West Country's
leading ambient and frozen foodservice supplier completed in February 2022.
M.J. Baker has been successfully integrated into the Foodservice division and
is performing in line with expectations.
· Launch of the new online trading platform across all divisions to
improve existing customer relationships whilst enhancing operational synergy
within the Group.
Post-period end
· Acquisition of Westcountry Food Holdings Limited, a leading
foodservice supplier of local, regional and imported fresh produce in the
South West of England in December 2022.
· Appointment of Teresa Octavio as a Non-Executive Director to the
Board in February 2023.
Paul Young, Chief Executive Officer of Kitwave, commented:
"I am pleased to report on the Group's final results for the twelve months
ending 31 October 2022.
"As announced in the Group's trading update in November 2022, the strong
performance during the first half of the year continued into the second half.
We are, therefore, able to report results in line with the upgraded market
expectations that were referred to in the interim results, published in July
2022. The Group's strong performance has continued into the first three months
of the new financial year.
"Kitwave has made significant progress, both operationally and commercially
during the period, despite the challenging macro environment backdrop. Whilst
the COVID-19 pandemic is mostly behind us, its knock-on effects still linger.
We remain cognisant of UK cost of living issues, however, the Group is well
placed to combat these and, as such, we are confident of a positive 2023
trading period.
"The opening of the Wakefield site and the launch of a new web-based trading
platform demonstrates the Group's drive to improve its systems and operations,
for the benefit of all stakeholders, including suppliers, colleagues and
customers. These initiatives play an important role in driving the inherent,
long-term value of the Group.
"The Board recognises the significant market opportunity within the fragmented
UK wholesale market and Kitwave's strategy is focused on capitalising on this.
The success of our acquisitions to date has demonstrated the viability of this
strategy, with the Group continuing to look to identify acquisition
opportunities to combine with its initiatives to drive organic growth.
Post-year end, we completed the acquisition of Westcountry Food Holdings
Limited, a specialist fresh produce wholesaler to the foodservice sector
operating in the South West of England. The acquisition is in line with our
criteria and will be incorporated into the existing Foodservice division.
"At Kitwave, it is our people that make the business the success that it is. I
would, therefore, like to take this opportunity to thank our colleagues,
across all aspects of the Group, for their hard work throughout the period.
"I am confident that the Board and management have the expertise and
experience to deliver the Group's growth strategy and generate value for the
Group and its shareholders."
- 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
Yellow Jersey PR Tel: +44 (0) 20 3004 9512
(Financial media and PR)
Sarah Hollins / Shivantha Thambirajah / Bessie Elliot
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, chilled and fresh foods, alcohol, groceries and tobacco to
approximately 42,000, mainly independent, customers.
With a network of 30 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 our second Annual Report since the Company's admission to AIM in May 2021,
we are pleased to report a year of excellent progress. In the prior year, the
Group had positioned itself to be able to capitalise on opportunities for
growth as the challenges of the COVID-19 pandemic eased. As can be seen from
the results for the year, all our divisions recovered quickly and performed
ahead of our expectations.
Results summary
The Group has demonstrated significant growth in both revenue and operating
profit during the year, with revenue of £503.1 million (FY21: £380.7
million) and operating profit of £20.4 million (FY21: £6.4 million).
Included in the results for the year is a contribution from M.J. Baker
Foodservice Limited which is in line with our expectations at the time of the
acquisition in February 2022.
Existing operations
£000 Acquisitions FY22 FY21
£000 £000 £000
Revenue 484.8 18.3 503.1 380.7
Operating profit 18.2 2.2 20.4 6.4
Adjusted operating profit *
19.3 2.2 21.5 7.1
* For more information on alternative performance measures please see the
glossary at the end of the announcement.
It is important to note the work undertaken by management to increase gross
margin in order to protect the Group from the inflationary pressures being
experienced in its cost base. Increases in overhead costs such as labour, fuel
and energy have been particularly significant. We are continually striving
to mitigate such cost increases and, as a result, the ratio of distribution
costs to revenue is only slightly ahead of the prior year and is in line with
our expectations.
Dividend
The Board has a progressive dividend policy that has the intention to pay a
total annual dividend of between 40% and 50% of profit after tax. In years
where the Group incurs higher cash outflows through its investment activity in
merger and acquisitions or infrastructure capital expenditure, the aggregate
annual dividend is likely to be at the lower end of the range. For those years
where there is no investment the annual dividend is likely to be at the higher
end of the range.
The Board is recommending a final dividend of 6.75 pence per ordinary share
(FY21: 4.50 pence), subject to approval at the AGM, which, if approved, will
result in a total dividend for the year of 9.25 pence per ordinary share
(FY21: 6.75 pence).
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. The Group continues to develop this framework and
the associated measures that will need to be considered.
Our colleagues are our most valuable asset and their welfare is a priority at
Kitwave. Especially during this cost-of-living crisis, we are pleased to be
able to provide sustainable employment and to increase remuneration across our
workforce.
To enhance the focus on safety across our divisions, we appointed a Group
Health and Safety Director in April 2022. This is a newly created position to
coordinate the activities of the individual Health and Safety Officers
operating in each business.
The Group continues to enhance its transparency of the risk environment in
which it operates through further development of the risk register and
associated mitigations and internal controls. During the year, the Group
adopted an Enterprise Risk Management (ERM) framework which incorporated a
review of its risk register and an update of the risk appetite for the Group's
principal risks. The ERM framework has allocated the management, monitoring
and reporting of the Group's principal risks to an appropriate risk champion
for each identified risk. Risk champions will have regular engagement with the
Board and are scheduled into the Board agenda for regular consideration.
In addition to strict governance policies, Kitwave maintains its commitment to
being a responsible corporate citizen through its many schemes to decrease its
environmental impact.
Board
As outlined in the Nomination Committee Report, a Board evaluation review was
undertaken during the year. One of the recommendations from the Committee to
the Board was the need to increase diversity among the Directors. Feedback
from shareholders had also indicated a desire for a more balanced position
between the number of Executive and Non-Executive members of the Board.
Consequently, a process to appoint a further Non-Executive Director commenced
in September 2022 and we were delighted to announce the appointment of Teresa
Octavio to the Board on 1 February 2023.
Our people
I would like to take this opportunity to thank all our colleagues at this
time, as they have continued to respond to the challenges faced by the
business with exceptional commitment. It is due to their dedication that we
continue to provide the high-quality service that our customers have come to
expect.
Outlook
Since Kitwave's IPO in May 2021, the Group has continued to go from strength
to strength. Unlike many of the other companies that joined AIM at a similar
time, Kitwave has significantly outperformed market expectations, despite the
challenges of the pandemic and the more recent inflationary cost pressures.
We continue to pursue our combined organic growth and acquisition-based
strategy and believe there are a large number of opportunities available to us
in what remains a fragmented delivered wholesale market in the UK. The success
of our acquisitions to date has demonstrated the viability of this strategy,
with the Group continuing to look to identify acquisition opportunities to
combine with its initiatives to drive organic growth. Post-year end, we
completed the acquisition of Westcountry Food Holdings Limited, a specialist
fresh produce wholesaler to the foodservice sector operating in the South West
of England. The acquisition is in line with our criteria and will be
incorporated into the existing Foodservice division.
FY23 has started well and, subject to successful management of the
inflationary headwinds referred to above, we expect a positive outcome for the
year and to continue to deliver value to our shareholders.
Steve Smith
Chairman
27 February 2023
Chief Executive Officer's review
Overview
I am pleased to report the Company's final results for the 12 months ending 31
October 2022.
Kitwave has made significant progress during the year, despite operating
against a challenging macro environment. Whilst the COVID-19 pandemic is now
mostly behind us, its knock-on effects still linger. We remain cognisant of UK
cost of living issues, however, the Group is well-placed to combat these and,
as such, we remain confident of a positive 2023 trading period.
As outlined further below, the Group has made significant progress, both
operationally and commercially, in the reporting period. As we announced in
the Group's trading update in November 2022, the strong performance during the
first half of the year continued into the second half. We are, therefore, able
to report results in line with the upgraded market expectations that were
referred to in the interim results, published in July 2022. We are pleased
with the Group's progress since its admission to trading on AIM in May 2021
and the results that we have reported to date, which put us on a strong
footing for FY23 and beyond.
Divisional summary
Set out below is the financial performance of the business by division for
FY22:
Ambient and Frozen & Chilled divisions
The Group's Ambient and Frozen & Chilled divisions both service the Retail
& Wholesale sector of the grocery market. To be consistent with the
market view these divisions are considered together and saw combined revenues
increase by £59.3 million to £378.9 million (FY21: £319.6 million), a 19%
increase from the year to October 2021.
Ambient
£000 FY22 FY21
Revenue 185,132 155,712
Gross profit 26,857 19,280
Gross margin % 14% 12%
Frozen & Chilled
£000 FY22 FY21
Revenue 193,810 163,895
Gross profit 42,574 34,923
Gross margin % 22% 21%
Foodservice division
The Group's Foodservice division, which was heavily affected by the pandemic,
has rebounded strongly and performed well during the period, resulting in an
increase in revenues to £124.1 million (FY21: £61.1 million).
This year saw the acquisition of M. J. Baker Foodservice Limited and included
in these numbers is £18.3 million of acquired revenues. On a like-for-like
basis, the division's organic growth was 73%, with an increase in revenues of
£44.7 million.
Foodservice
£000 FY22 FY21
Revenue 124,146 61,087
Gross profit 33,196 14,382
Gross margin % 27% 24%
Facilities
The Group was pleased to announce the opening of its new 60,000 sq. ft
Wakefield distribution centre in March 2022. The upgraded facility, which
replaced the previous centre in Wakefield and acts as the head office and
distribution hub for wholesaler HB Clark, has delivered operational and
administrative efficiencies, enabling the division to go on to deliver growth
and improved service levels.
The opening of the Wakefield site demonstrates the Group's drive to improve
its systems and operations, for the benefit of all stakeholders, including
suppliers, colleagues and customers. These initiatives play an important role
in driving the inherent, long-term value of the Group.
Strategy
The Group made strides in the execution of its strategy, which targets growth
through acquisition and organic growth, throughout the period. In line with
this strategy, we were delighted to announce the acquisition of M.J. Baker
Foodservice Limited, one of the West Country's leading ambient and frozen
foodservice supplier, in February 2022. The business, which joins Kitwave's
Foodservice division, has been successfully integrated into the Group and is
performing in line with expectations.
Further to this, post-period end in December 2022, we were also pleased to
acquire Westcountry Food Holdings Limited ("WestCountry"), a significant
foodservice supplier of local, regional and imported fresh produce in the
South West of England. WestCountry has developed a network of dedicated,
high-quality local growers of seasonal fresh produce, as well as direct supply
links with national and international fresh produce markets and represents an
excellent addition to the Group.
Both businesses complement the Group's existing Foodservice division and
enable the expansion of our reach into the South West. Foodservice provides a
market for future growth and these acquisitions allow Kitwave to capitalise on
opportunities available to it, which will deliver value to the Group.
Both acquisitions embody the Group's acquisition strategy. We look for strong,
financially-robust businesses with well-regarded local reputations,
established operations and teams with an ethos that reflects that of the
Group. We are, therefore, delighted to have M.J. Baker and WestCountry as part
of the Group.
We continue to assess further acquisition opportunities, which we feel will
complement Kitwave's current offering, enabling us to better serve our
customer base and deliver growth for the Group.
The second strand of our strategy focuses on organic growth through investment
in our systems, processes and service offering.
We are proud to have launched a web-based trading platform for the Frozen
& Chilled division in January 2022, which is now also operational in both
the Ambient and Foodservice divisions. This will provide a cornerstone for
future organic growth.
The results from the platform since its launch have been very encouraging,
with increased order numbers and order sizes. Feedback from users has also
been overwhelmingly positive. The initiative has enabled us to improve the
strong relationships we have with customers and enhance operational synergies
within the Group while driving sales.
Investment in infrastructure, systems, vehicles and people has enhanced the
Group's ability to identify opportunities in the market to improve revenue.
This was encapsulated during the summer when the warmer-than-normal weather
increased demand for frozen confectionery. The Group's depth of resource
allowed it to meet that demand and benefit from the opportunity.
The Board recognises the significant market opportunity within the fragmented
UK wholesale market and Kitwave's strategy is focused on capitalising on this.
I am confident that the Board and management team have the expertise and
experience to deliver the Group's growth strategy and generate value for the
Group and its shareholders.
Colleagues
At the start of the financial year, we welcomed Ben Maxted to the Board as
Chief Operating Officer. Since joining Kitwave in 2011, Ben has contributed
significantly to the development of the Group. His strong operational and
commercial expertise have been highly valued as we look to execute the Group's
growth strategy.
Post-period, we were also pleased to announce the appointment of Teresa
Octavio to the Board as Non-Executive Director. Teresa brings to Kitwave a
wealth of business transformation experience and insight, which will play an
important role in how the Group evolves in terms of regional reach, customer
base expansion, service provision and revenue growth.
At Kitwave, it is our people that make the business the success that it is. I
would, therefore, like to take this opportunity to thank our colleagues,
across all aspects of the Group, for their hard work throughout the period. We
recognise that these remain challenging times, so their efforts are greatly
appreciated. I am confident that their contribution will assist Kitwave in its
objective to continue its growth in FY23 and the years thereafter.
Summary and outlook
The results for the year reflect our focus on delivering an exceptionally high
standard of service to our customers. Since Kitwave was founded in 1987, this
has been at the heart of our business and will remain long into the future. We
have built an excellent platform for the Group from which to grow within the
UK wholesale market. With our focused strategy, we believe we are well-placed
to achieve this growth and deliver value to the Group and its investors.
We would like to thank all of our shareholders for their support throughout
the period, and we look forward to delivering further progress in the year to
come.
Paul Young
Chief Executive Officer
27 February 2023
Chief Financial Officer's review
Overview
As the fuller easing of lockdown restrictions took effect Group revenue
increased to £503.1 million, compared to £380.7 million in the year to
October 2022. This included £18.3 million of acquired revenue and on a
like-for-like basis a 27% increase in revenue.
The Group's Ambient and Frozen & Chilled divisions that service the Retail
& Wholesale sectors of the market saw revenues increase by £59.3 million
to £378.9 million a 19% increase in the year to October 2022.
The Group's Foodservice division, which had been more affected by the COVID-19
restrictions, saw revenues increase by £63.0 million to £124.1 million an
increase of 103% in the year to October 2022. This year saw the acquisition
of M.J. Baker Foodservice Limited in February 2022 and included in these
numbers is £18.3 million of acquired revenues. On a like-for-like basis the
divisions organic growth was 73% with an increase in revenues of £44.7
million.
During the last 12 months the grocery and foodservice market has begun to see
more significant levels of price inflation but also continued challenges with
supply chain shortages. Despite these challenges the Group continued to grow
its unit sales as well as benefiting from the price rise inflation in the
market.
Gross profit margin has increased by 2% to 20% during the year. The increase
being partly due to a mix change with the higher margin Foodservice division
trading at increased levels and the acquired operations also providing a gross
profit margin of 32%. Divisional margins are generally ahead of expectations
and the prior year.
Whilst inflationary pressure was seen in the cost base, overall distribution
costs as a proportion of revenues only rose slightly. The Foodservice
division saw the biggest absolute increase in distribution costs as volumes
returned to pre-COVID-19 levels. Overall distribution costs were 9% of Group
revenue (FY21: 8%).
The Group's adjusted operating profit of £21.5 million (FY21: £7.1 million)
represents 4% (FY21: 2%) of Group revenue. All divisions generated an increase
in adjusted operating profit margin compared with FY21.
In the 12 months ended October 2022 Group profit before tax increased by
£15.7 million to £17.8 million (FY21: £2.1 million). This is a result of
margin enhancing revenue growth in the business and the continued drive toward
efficient delivery and cost control within the overhead base.
Net finance costs of £2.5 million (FY21: £4.3 million) relate to the costs
associated with the working capital facilities utilised by the Group of £1.1
million (FY21: £1.3 million) and interest relating to leased assets
accounting of £1.4 million (FY21: £1.2 million). The prior year had other
net finance costs of £1.7 million relating to the Group's capital structure
prior to its IPO in May 2021.
The statutory basic and diluted earnings per share for FY22 is £0.20 (FY21:
£0.02).
The Board is recommending a final dividend of 6.75 pence per ordinary share
(FY21: 4.50 pence), subject to approval at the AGM, which, if approved, will
result in a total dividend for the year of 9.25 pence per ordinary share (6.75
pence). This is a 37% rise in dividend per share compared to FY21.
The Board has a progressive dividend policy that has the intention to pay a
total annual dividend of between 40% and 50% of profit after tax. In years
where the Group incurs higher cash outflows through its investment activity in
merger and acquisitions or infrastructure capital expenditure the total annual
dividend is likely to be at the lower end of the range. For those years where
there is no investment the annual dividend is likely to be at the higher end
of the range.
KPIs
FY22 FY21
Financial profitability KPIs
Gross margin % 20% 18%
Adjusted operating profit * £21.5m £7.1m
Adjusted operating margin * 4.3% 1.9%
EPS £0.20 £0.02
Financial structure KPIs
Leverage (inc IFRS16 debt)* 1.5x 2.3x
Leverage (exc IFRS16 debt)* 0.6x 0.9x
Pre tax operational cash conversion * 105% 85%
Non financial KPIs
Service levels 98% 98%
Service levels are assessed as the number of cases delivered right first time
compared to the number of cases ordered during the financial year.
* For more information on alternative performance measures please see the
glossary at the end of the announcement.
Capital expenditure
The Group has continued to invest in its operations over the financial year
with £2.4 million (FY21: £2.9 million) invested in new assets and £8.7
million (FY21: £10.9 million) in right-of-use assets.
Supply chain problems and long order times for new vehicles were seen right
through the year. Despite these delays, investment in the vehicle fleet
continued with £0.6 million (FY21: £0.3 million) of new vehicles acquired
and £3.1 million (FY21: £1.2 million) invested through right-of-use vehicle
replacement.
A new lease was signed for the Wakefield site that created an additional £4.6
million of right-of-use leasehold assets.
Cashflow
The net cash inflow from operating activities for the year was £26.5 million
(FY21: £7.9 million) after net inflow from working capital of £1.4 million
(FY21: £2.4 million outflow) and tax payments of £4.0 million (FY21: £2.4
million). This resulted in operating cash conversion of 91% and pre-tax
operational cash conversion* of 105%.
There was a cash outflow to the Group of £16.9 million in relation to the
acquisition of M.J. Baker Foodservice Limited. This amount is the full
consideration in relation to the transaction with no further payments due.
The Group paid a final dividend relating to FY21 in April 2022 of 4.50 pence
per ordinary share and an interim dividend in respect of FY22 in August 2022
of 2.50 pence per ordinary share. The total cash outflow relating to dividend
payments was £4.9 million (FY21: £1.6 million) during the year.
The net cash increase in the year was £0.5 million.
Financial position
At 31 October 2022, cash and cash equivalents totalled £5.5 million (FY21:
£5.0 million).
The Group had a total of £49.1 million (FY21: £39.3 million) of
interest-bearing debt facilities including £25.9 million (FY21: £21.6
million) of IFRS 16 lease liabilities.
The Group's CID facility that was drawn to a value of £20.4 million (FY21:
£14.6 million) at year end has one covenant requiring net debt not to exceed
three times EBITDA which was satisfied as at 31 October 2022. In addition to
the cash and cash equivalents, there were undrawn facilities available to the
Group of £23.1 million at the year end.
Post the financial year end the Group extended the expiry on its CID facility
by 18 months to December 2025. At the same time a new additional £20.0
million revolving credit facility was put in place with expiry in December
2025. This revolving credit facility is available to be utilised for permitted
acquisition opportunities undertaken by the Group. This facility includes the
same covenant as the CID facility plus an additional interest cover covenant
set at four times cover.
Taxation
The tax charge for the year was £3.5 million (FY21: £1.0 million) at an
effective rate of 20% (FY21: 48%). The effective rate in the prior year is
higher than the standard UK rate of corporation tax of 19% mainly due to 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.
Return on capital
Utilising an effective tax rate of 18% (FY21: 20%) the adjusted profit after
tax return on investment capital at 31 October 2022 was 15% (FY21: 5%). These
returns exclude the charges relating to share-based payments.
Share based payments
In the year there was an expense of £0.9 million (FY21: £0.2 million) for
share-based payments.
This relates to a Management Incentive Plan (MIP) that commenced in July 2021
post the completion of the IPO in May 2021. The expense in FY21 reflects a
partial charge in the year from the inception of the MIP to the year end and
the expense in FY22 reflects a full year charge.
David Brind
Chief Financial Officer
27 February 2023
Consolidated statement of profit and loss and other comprehensive income
Note Year ended Year ended
31 October 31 October
2022 2021
£000 £000
Revenue 3 503,088 380,694
Cost of sales (400,460) (312,109)
Gross profit 102,628 68,585
Other operating income 4 374 4,771
Distribution expenses (44,010) (31,203)
Administrative expenses (38,617) (35,755)
Operating profit 20,375 6,398
Analysed as:
Adjusted EBITDA 29,477 15,053
Amortisation of intangible assets 11 (99) (150)
Depreciation 12,13 (7,897) (7,817)
CPO income 4 - 2,255
Restructuring costs 5 - (1,257)
Acquisition expenses 5 (148) (181)
Compensation for post combination services 5 (95) (1,278)
Share based payment expense 5 (863) (227)
Total operating profit 20,375 6,398
Finance expenses 8 (2,534) (4,274)
Analysed as:
Interest payable on bank loans and bank facilities 8 (1,105) (1,327)
Interest and finance charges payable on loan notes and
debenture loans 8 - (7,078)
Finance charges on leases 8 (1,427) (1,239)
Fair value movement on financial liabilities 8 - 5,410
Other interest 8 (2) (40)
Finance expenses (2,534) (4,274)
Profit before tax 17,841 2,124
Tax on profit on ordinary activities 9 (3,501) (1,028)
Profit for the year 14,340 1,096
Other comprehensive income - -
Total comprehensive income for the year 14,340 1,096
Basic earnings per share (£) 10 0.20 0.02
Diluted earnings per share (£) 10 0.20 0.02
Consolidated balance sheet as at 31 October
Note 2022 2021
£000 £000
Non-current assets
Goodwill 11 44,342 31,249
Intangible assets 11 737 431
Tangible assets 12 13,037 10,104
Right-of-use assets 13 26,452 23,188
Investments 14 35 20
84,603 64,992
Current assets
Inventories 16 31,846 26,043
Trade and other receivables 17 57,698 52,814
Cash and cash equivalents 18 5,511 4,968
95,055 83,825
Total assets 179,658 148,817
Current liabilities
Other interest bearing loans and borrowings 20 (20,354) (14,620)
Lease liabilities 20 (5,509) (4,719)
Trade and other payables 19 (57,891) (47,332)
Tax payable (62) (370)
(83,816) (67,041)
Non-current liabilities
Lease liabilities 20 (23,240) (19,917)
Deferred tax liabilities 21 (715) (275)
(23,955) (20,192)
Total liabilities (107,771) (87,233)
Net assets 71,887 61,584
Equity attributable to equity holders of the
parent Company
Called up share capital 24 700 700
Share premium account 24 64,183 64,183
Consolidation reserve 24 (33,098) (33,098)
Share based payment reserve 23 1,090 227
Retained earnings 39,012 29,572
Equity 71,887 61,584
Company balance sheet as at 31 October
Note 2022 2021
£000 £000
Non-current assets
Investments 14 12,993 12,993
Deferred tax assets 21 273 57
13,266 13,050
Current assets
Trade and other receivables 17 61,535 63,081
Cash and cash equivalents 18 45 3,371
61,580 66,452
Total assets 74,846 79,502
Current liabilities
Trade and other payables 19 (61) (227)
Total liabilities (61) (227)
Net assets 74,785 79,275
Equity attributable to equity holders of the
parent Company
Called up share capital 24 700 700
Share premium account 24 64,183 64,183
Share based payment reserve 23 1,090 227
Retained earnings* 8,812 14,165
Equity 74,785 79,275
* The Company's loss after tax for the year was £453,000 (FY21: £3,989,000
profit)
Consolidated statement of changes 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 November 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)
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
Total comprehensive income
for the year
Profit - - - - 14,340 14,340
Other comprehensive income - - - - - -
Total comprehensive income for - - - - 14,340 14,340
the year
Transaction with owners, recorded
directly in equity
Dividends - - - - (4,900) (4,900)
Share based payment expense - - - 863 - 863
Total contribution by and transactions with the owners
- - - 863 (4,900) (4,037)
Balance at 31 October 2022 700 64,183 (33,098) 1,090 39,012 71,887
Company statement of changes 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 November 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)
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
Total comprehensive loss
for the year
Loss - - - (453) (453)
Other comprehensive income - - - - -
Total comprehensive loss for - - - (453) (453)
the year
Transaction with owners, recorded directly in equity
Dividends - - - (4,900) (4,900)
Share based payment expense - - 863 - 863
Total contribution by and transactions with the owners
- - 863 (4,900) (4,037)
Balance at 31 October 2022 700 64,183 1,090 8,812 74,785
Consolidated cash flow statement
Note Year ended Year ended
31 October 31 October
2022 2021
£000 £000
Cash flow from operating activities
Profit for the year 14,340 1,096
Adjustments for:
Depreciation and amortisation 11,12,13 7,996 7,967
Financial expense 8 2,534 4,274
Profit on sale of property, plant and equipment 4 (164) (55)
Net gain on remeasurement of right-of-use assets and lease liabilities 4 (8) (124)
Compensation for post combination services 5 95 1,278
Equity settled share based payment expense 5 863 227
Taxation 9 3,501 1,028
29,157 15,691
Increase in trade and other receivables (2,909) (8,244)
Increase in inventories (4,168) (2,845)
Increase in trade and other payables 8,450 8,671
30,530 13,273
Payments in respect of compensation for post combination services - (2,925)
Tax paid (4,005) (2,432)
Net cash inflow from operating activities 26,525 7,916
Cash flows from investing activities
Acquisition of property, plant and equipment (2,608) (2,961)
Proceeds from sale of property, plant and equipment 308 248
Acquisition of subsidiary undertakings (net of
overdrafts and cash acquired) 2 (16,914) -
Net cash outflow from investing activities (19,214) (2,713)
Cash flows from financing activities
IPO fund raise (net of expenses) - 61,889
Proceeds from new loan 20 - 5,500
Net movement in invoice discounting 20 5,734 4,559
Interest paid 8,20 (2,534) (5,093)
Net movement in bank trade loans 20 - (4,750)
Repayment of bank term loans 20 - (21,863)
Repayment of investor loans 20 - (34,176)
Payment of lease liabilities 20 (5,068) (5,068)
Dividends paid (4,900) (1,575)
Net cash outflow from financing activities (6,768) (577)
Net increase in cash and cash equivalents 543 4,626
Opening cash and cash equivalents 4,968 342
Cash and cash equivalents at year end 18 5,511 4,968
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 UK adopted international accounting standards.
The Group and Company financial statements are presented in pounds sterling
which is the functional currency of the Group. All values are rounded to the
nearest thousand (£000), except when otherwise indicated.
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 2022 or the
financial year ended 31 October 2021. Statutory accounts for the year ended 31
October 2021 have been delivered to the registrar of companies, and those for
the year ended 31 October 2022 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;
· Certain disclosures required by IFRS 13 Fair Value Measurement
and the disclosures required by IFRS 7 Financial Instruments have not been
provided; and
· Disclosure in respect of share based payments as required by IFRS
2 Share-based Payments 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 2022 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 2022
. 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, assessment and
estimation of the recoverable value of the cash generating units (CGUs) is
required. This process involves 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. The discount rate is a
key area of judgement and the forecast cash flow includes significant
accounting estimates.
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. More information on the assumptions and sensitivities
applied are set out in note 11 to these financial statements.
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 is an
accounting estimate requiring significant judgement of management to consider
historic, current and forward-looking information to determine the level of
provisioning required.
The Directors have assessed the ageing of the trade receivables, applying
their knowledge of the Group's customer base, and other economic factors as
indicators of potential impairment. Further information is considered in note
26 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.
Valuation of share based payments
IFRS 2, Share-based Payments, requires judgement on the classification of the
share based payment under the Management Incentive Plan ("MIP"), which
Directors have determined to be equity settled.
The grant date fair value of the MIP is based on a Monte Carlo option
valuation model, performed by independent experts, factoring in a number of
significant accounting estimates and judgements. Further information is
considered in note 23 of these financial statements.
Following review of the judgements and estimates applied to the valuation of
the MIP, the Directors have concluded that there is no sigificant risk of
material adjustment to the carrying value of the liability or charge to the
statement of profit and loss and other comprehensive income in the 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.
Following the easing of COVID-19 lockdown restrictions the Group was able to
quickly capitalise on opportunities for growth and return to pre-pandemic
levels of trading across all divisions. This was enabled by the readiness of
the workforce, the continued strong relationships with manufacturers,
suppliers and customers throughout the pandemic which allowed the Group to
increase volumes whilst maintaining its service levels.
Most notable were the return of volumes to the foodservice and vending
customers as the 'out of home' sector recovered with consumers returning to
restaurants, bars, hotels and places of work.
In the year the Group acquired M.J. Baker Foodservice Limited which added
£18,288,000 of revenue and £2,205,000 of operating profit. Including this
contribution, there was an improvement in cash flow from operations (before
tax payments) from £13,273,000 in FY21 to £30,530,000 in FY22. The
acquisition was completed without the need for additional facilities from the
Group's existing lenders further illustrating the continued strong cash
generation of the Group.
Post year end, Kitwave Limited completed the acquisition of the entire share
capital of Westcountry Food Holdings Limited ("WestCountry") for £28,500,000.
The acquisition was funded from the Group's current banking facilities and a
new three-year revolving credit facility provided by the Group's existing
lenders.
WestCountry is an independent foodservice supplier based in the South West of
England and offers a complementary product range and service level to the
Group's existing operations in the area. The acquisition will be incorporated
into the Group's existing Foodservice division and the Directors believe that
it will be immediately earnings enhancing.
WestCountry has an annual turnover of approximately £29,700,000. The acquired
balance sheet included £8,983,000 of cash and cash equivalents which
immediately became available to the Group.
The Group has prepared financial forecasts for a period of 20 months from the
date of approval of this financial information (the "going concern assessment
period"), which take into account the acquired balance sheet and forecast
trading of WestCountry, possible downsides to Group trading including any
impact of further inflationary pressure in 2023.
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.
Sensitivity analysis, primarily in respect of reducing revenue and adjusting
costs, and including a reverse stress test, have been performed to model the
impact of adverse assumptions to those included in the accounting estimates of
the forecast. The Directors concluded that there were no severe but possible
scenarios that would render the preparation of accounts on the assumption of a
going concern as inappropriate.
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 2022. 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:
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 26.
1.7 Non derivative financial instruments
Trade and other receivables
Trade and other receivables are recognised initially at transaction price.
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 17). These are repayable within 90 days of the invoice and carry
interest at a margin of 2.00%. This was initially a 2 year fixed facility
which was extended post year ended 31 October 2022 to expire in December 2025.
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.
1.8 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.
1.9 Business combinations
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.
1.10 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 5-10 years.
1.11 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 its 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. When the rebate is based on a
volume of purchases over a period, the most likely outcome model is used due
to the simple nature of rebate agreements with suppliers, principally whether
the Company has achieved the required level of purchases or not.
Certain volume related discounts are recognised as a deduction from cost of
sales on an accruals basis, calculated based on the expected entitlement that
has been earned up to the balance sheet date for each relevant supplier
contract. Accrued volume related discounts at the balance sheet date are
included within prepayments and accrued income.
1.12 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.
1.13 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 year 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. The amount recognised in the statement of
profit and loss and other comprehensive income was £95,000
(FY21:£1,278,000). The outstanding liability is included in other creditors
in note 19.
1.14 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.
1.15 Revenue
IFRS 15 "revenue from contracts with customers" 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.
The principal performance obligation, being delivery and sale of goods, 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.
1.16 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.
1.17 Taxation
Current tax
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
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. Deferred tax is recognised on an undiscounted
basis.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
1.18 Leases
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.
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.
An assessment of the discount rate used in the present value calculation for
new lease additions is performed at inception of the lease to ensure it
reflects the Group's incremental borrowing rate. The selected rate is
supported by quotes from third parties for financing the asset and the Groups'
weighted average cost of capital. The Directors believe that no reasonable
change in this accounting estimate would cause the carrying value of leases to
be materially misstated.
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.
1.19 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 Additional
Restrictions Grant and COVID-19 Additional Relief Fund Schemes. The income in
the prior year represented the funding provided by the Government under 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.
1.20 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 in the prior year is presented in note 4 and exceptional expenses are
presented in note 5.
1.21 Investments
Investments in subsidiaries are carried at cost less impairment in the parent
Company financial statements.
2 Acquisitions
Acquisitions in the year ended 31 October 2022
M.J. Baker Foodservice Limited
On 10 February 2022, the Group acquired the entire share capital of M.J. Baker
Foodservice Limited for a total consideration of £24,515,000. The purchase
consideration paid was £23,297,000 resulting from a reduction in loan
balances due to M.J. Baker from its previous shareholder of £1,218,000. The
resulting goodwill of £13,093,000 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 2,853
Right-of-use assets 967
Investments 25
Current assets
Inventories 1,635
Trade and other receivables 1,976
Cash and cash equivalents 6,383
Total assets 13,839
Current liabilities
Lease liabilities (412)
Trade and other payables (2,016)
Corporation tax (182)
Non-current liabilities
Lease liabilities (572)
Deferred tax (453)
Total liabilities (3,635)
Net identifiable assets 10,204
Goodwill 13,093
Total net assets acquired 23,297
Headline purchase consideration 24,515
Liabilities assumed (1,218)
Purchase consideration paid 23,297
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 including but not limited to access to new
geographic markets.
Following acquisition, the business contributed revenue of £18,288,000,
operating profit of £2,205,000 and profit after tax of £1,747,000 to the
Group for the year ended 31 October 2022.
If the business had been acquired at the start of the Group's financial year,
being 1 November 2021, it would have added £24,430,000 to Group revenue and
£2,704,000 to Group operating profit for the year ended 31 October 2022.
The total consideration paid in the year was £23,297,000. Net of cash and
cash equivalents of £6,383,000 the net cash outflow in the year was
£16,914,000.
On acquisition an assessment was made regarding the fair value of assets and
liabilities, which identified tangible assets, including two freehold
properties that required a fair valuation adjustment. The result of an
independent assessment of the freehold properties was an uplift in value of
£1,811,000 to the net book value held in M.J. Baker's accounts and is
reflected in the above table of acquired assets and liabilities. This fair
valuation has created a temporary difference with the tax base of the asset
resulting in the recognition of a deferred tax liability of £453,000. This
reflects a 25% UK corporation tax rate based on the expected timing of
reversal of this timing difference. No further fair valuation adjustments were
identified.
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 defined by products and their associated margins:
· 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.
The Group's forward look strategy is to provide an enhanced customer service
by making available the wider Group product range to its existing customer
base. As a result, the Board will be assessing the segments based on customer
type going forward with the customers in the Ambient and Frozen & Chilled
divisions operating in the retail and wholesale channel.
The following analysis shows how this development will be monitored in future
periods whilst demonstrating the link to the existing segemental information.
The presentation convention adopted in these financial statements is to show
the three operating segments as this is how the Board of Directors has
assessed performance during the year.
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 & Total retail & wholesale Foodservice Corporate Total
Chilled
£000 £000 £000 £000 £000
FY22
Revenue 185,132 193,810 378,942 124,146 - 503,088
Inter-segment revenue 13,813 2,551 16,364 572 - 16,936
Segment revenue 198,945 196,361 395,306 124,718 - 520,024
Adjusted EBITDA* 8,382 10,382 18,764 11,263 (550) 29,477
Amortisation of intangibles - (71) (71) (6) (22) (99)
Depreciation (1,584) (3,911) (5,495) (2,345) (57) (7,897)
Adjusted operating profit* 6,798 6,400 13,198 8,912 (629) 21,481
Acquisition expense - - - - (148) (148)
Compensation for post combination services - (95) (95) - - (95)
Share based payment expense - - - - (863) (863)
Interest expense (736) (1,057) (1,793) (520) (221) (2,534)
Segment profit/(loss) before tax 6,062 5,248 11,310 8,392 (1,861) 17,841
Segment assets 43,029 52,441 95,470 39,106 45,082 179,658
Segment liabilities (33,501) (45,218) (78,719) (27,886) (1,166) (107,771)
Segment net assets 9,528 7,223 16,751 11,220 43,916 71,887
Within Corporate segment assets is £44,342,000 of goodwill on consolidation.
This is allocated to the trading segments as follows (see note 11 for further
information).
Goodwill by segment 13,516 12,499 26,015 18,327 - 44,342
*For more information on alternative performance measures please see the
glossary at the end of the announcement.
Ambient Frozen & Total retail & wholesale Foodservice Corporate Total
Chilled
£000 £000 £000 £000 £000
FY21
Revenue 155,712 163,895 319,607 61,087 - 380,694
Inter-segment revenue 12,340 - 12,340 226 - 12,566
Segment revenue 168,052 163,895 331,947 61,313 - 393,260
Adjusted EBITDA* 4,347 9,275 13,622 2,000 (569) 15,053
Amortisation of intangibles - (144) (144) (6) - (150)
Depreciation (2,106) (3,910) (6,016) (1,801) - (7,817)
Adjusted operating profit* 2,241 5,221 7,462 193 (569) 7,086
CPO income - 2,255 2,255 - - 2,255
Restructuring costs (53) (41) (94) (42) (1,121) (1,257)
Acquisition expense - (19) (19) - (162) (181)
Compensation for post combination services - (1,278) (1,278) - - (1,278)
Share based payment expense - - - - (227) (227)
Interest expense (564) (1,286) (1,850) (288) (2,136) (4,274)
Segment profit/(loss) before tax 1,624 4,852 6,476 (137) (4,215) 2,124
Segment assets 38,790 49,979 88,769 22,888 37,160 148,817
Segment liabilities (28,559) (41,323) (69,882) (16,508) (843) (87,233)
Segment net assets 10,231 8,656 18,887 6,380 36,317 61,584
Within Corporate segment assets is £31,249,000 of goodwill on consolidation.
This is allocated to the trading segments as follows (see note 11 for further
information).
Goodwill by segment 13,516 12,499 26,015 5,234 - 31,249
*For more information on alternative performance measures please see the
glossary at the end of the announcement.
An analysis of revenue by destination is given below:
Geographical information:
FY22 FY21
£000 £000
United Kingdom 497,842 373,690
Overseas 5,246 7,004
Group revenue 503,088 380,694
No one customer accounts for more than 9% (FY21: 6%) of Group revenue.
4 Other operating income/(expense)
FY22 FY21
£000 £000
Net gain on disposal of fixed assets 164 55
Net gain/(loss) on foreign exchange 33 (2)
Net gain on remeasurement of right-of-use assets and lease liabilities 8 124
CPO income - 2,255
Grant income 169 2,339
374 4,771
Grant income in the year ended 31 October 2022 comprised of amounts received
from the Government with respect to the Additional Restrictions Grant and
COVID-19 Additional Relief Fund Schemes, which totalled £169,000. Grant
income in the year ended 31 October 2021 comprised of amounts received from
the Government with respect to the Coronavirus Job Retention Scheme which
totalled £2,339,000.
CPO income is in relation to the compulsory purchase order of a property lease
in Luton enacted by the Local Authority in the year ended October 2021. It was
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 the ordinary course of business.
5 Expenses
Included in profit/loss are the following:
FY22 FY21
£000 £000
Depreciation of tangible assets:
Owned 1,946 1,975
Right-of-use assets 5,951 5,842
Amortisation of intangible assets 99 150
Expense relating to short term and low value assets 1,255 715
Impairment loss on trade receivables 871 1,288
Dilapidation provision 48 570
The Group incurred a number of expenses not relating to the principal trading
activities of the Group as follows:
FY22 FY21
Exceptional expenses £000 £000
Restructuring expenses - 1,257
Acquisition expenses 148 181
Compensation for post combination services 95 1,278
Total exceptional expenses 243 2,716
Share based payment expense 863 227
Total exceptional expenses and share based payments 1,106 2,943
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 in the year ended 31 October 2021 include transaction
fees in relation to the IPO of £1,121,000. Other incurred expenses relate to
the restructuring of the Group's operations.
Acquisition expenses in both year include the legal and professional fees
connected to the acquisition of M.J. Baker Foodservice Limited completed on 10
February 2022.
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.
Share based payments relate to the MIP and are non cash expenses. For further
information see note 23.
Auditor's remuneration FY21 FY21
£000 £000
Audit of these financial statements 45 6
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements of subsidiaries of the Company 290 380
Taxation compliance services - 44
Tax advisory services - 109
Corporate finance services - 218
Other assurance services 5 -
The current year audit and non-audit fees were paid to Grant Thornton UK LLP.
The prior year audit and non-audit fees were paid to KPMG LLP. In addition to
the fee disclosed above for the current year, direct disbursements were paid
to Grant Thornton UK LLP of £11,000.
6 Staff numbers and costs
The average number of persons employed by the Group (including Directors)
during the year is analysed as follows:
FY22 FY21
Management and administration 193 176
Sales 212 194
Warehouse 436 338
Distribution 395 371
Directors 3 3
1,239 1,082
The aggregate payroll costs of these persons were as follows:
FY22 FY21
£000 £000
Wages and salaries 37,575 29,259
Social security costs 3,642 2,673
Other pension costs (note 22) 721 769
41,938 32,701
Staff costs accruing in the Company total £863,000 (FY21: £227,000) in relation to the Management Incentive plan, see note 23 for further details.
7 Directors' remuneration
Included within staff costs (note 6) are the following amounts in respect of Directors' emoluments
FY22 FY21
£000 £000
Directors' emoluments 922 636
Company contribution to personal pension scheme 20 32
942 668
Retirement benefits are accruing to three Directors under money purchase
pension schemes (FY21: two).
Amounts accrued under the share based payment plan for two of the Directors
was £863,000 (FY21: £227,000).
A detailed breakdown of the Director's total emoluments is included within the
Remuneration Committee report.
FY22 FY21
Highest paid Director £000 £000
Directors' emoluments 357 312
Company contribution to personal pension scheme 8 19
365 331
8 Finance income and expense
FY22 FY21
£000 £000 £000 £000
Interest payable and similar charges - cash items
Interest payable on bank loans and invoice discount facilities 1,105 1,327
Finance charges payable in respect of leases 1,427 1,239
Other finance interest payable on investor loans - 551
Other finance charges payable on debenture loans - 1,936
Other interest 2 40
2,534 5,093
Interest payable and similar charges -non-cash items
Other finance charges payable on debenture loans - 4,591
Fair value movement on financial liabilities (note 26) - (5,410)
- (819)
2,534 4,274
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 in the year ended 31
October 2021 arose from amortised transaction costs in respect to investor
loans and liabilities and movements in the fair value of the financial
liabilities which had no cash impact in that year. The above analysis has been
presented to clearly identify which elements have a cash impact.
9 Taxation
FY22 FY21
£000 £000 £000 £000
UK corporation tax
Current tax charge on income for the year 3,559 620
Adjustment in respect of prior periods (45) 187
Total current tax 3,514 807
Deferred tax (see note 21)
Origination/(reversal) of timing differences (109) 281
Adjustment in respect of prior periods 96 4
Effect of changes in tax rate - 107
Share based payment - (57)
IFRS 16 timing differences - (114)
Total deferred tax (credit) / charge (13) 221
Tax charge on profit on ordinary activities 3,501 1,028
FY22 FY21
£000 £000
Current tax reconciliation
Profit on ordinary activities after tax 14,340 1,096
Tax charge 3,501 1,028
Profit on ordinary activities before tax 17,841 2,124
Tax using the UK corporation tax of 19% (FY21: 19%) 3,390 404
Effect of:
Expenses not deductible for tax purposes 250 1,571
Income not taxable (26) (1,109)
Adjustments in respect of prior periods (45) 187
Change in tax rate on deferred tax balances 96 111
Share based payment (164) (57)
Other tax adjustments - (79)
Total current tax charge 3,501 1,028
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 2022 has been calculated based on these rates, reflecting the
expected timing of reversal of the related timing differences (FY21: 25%).
10 Earnings per share and dividends
Basic earnings per share
Basic earnings per share for the year ended 31 October 2022, and the previous
year ended 31 October 2021 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 year ended 31 October 2022, and previous
year ended 31 October 2021 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
FY22 FY21
£000 £000
Profit attributable to all shareholders 14,340 1,096
£ £
Basic earnings per ordinary share 0.20 0.02
Diluted earnings per ordinary share 0.20 0.02
Weighted average number of ordinary shares
FY22 FY21
Number Number
Weighted average number of ordinary shares (basic) during the year 70,033,033 46,036,531
Weighted average number of ordinary shares (diluted) during the year 70,033,033 46,055,901
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 year.
FY22 FY21
£000 £000
Profit attributable to all shareholders 14,340 1,096
Exceptional and share based payment expenses net of tax* 1,106 2,819
CPO income net of tax - (1,827)
Interest and finance charges payable on loans and debenture notes - 7,078
Fair value adjustments on the put option liability - (5,410)
Underlying profit attributable to ordinary shareholders 15,466 3,756
£ £
Basic underlying earnings per ordinary share 0.22 0.08
*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.
Dividends
During the year the Group paid dividends of £4,900,000 (FY21:£1,575,000) to
its equity shareholders. This represents a total payment of 7.00p per share
being the final dividend for the year ended 31 October 2021 of 4.50p per
share, plus the interim dividend for the year ended 31 October 2022 of 2.50p
per share.
The Board is recommending a final dividend of 6.75p per share for the year
ended 31 October 2022 subject to approval at the AGM. No liability in this
respect is recognised in the consolidated financial statements. No income tax
consequences are expected to arise as a result of this transaction at the
Company level.
11 Intangible assets
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 year 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
Group Intangible assets Goodwill Total
£000 £000 £000
Cost
Balance at 1 November 2021 725 36,761 37,486
Additions 405 13,093 13,498
Balance at 31 October 2022 1,130 49,854 50,984
Amortisation
Balance at 1 November 2021 294 5,512 5,806
Charge in year 99 - 99
Balance at 31 October 2022 393 5,512 5,905
Net book value
At 31 October 2022 737 44,342 45,079
At 31 October 2021 431 31,249 31,680
Goodwill arising on business combinations is assessed seperately under IFRS 3
in the period of acquisition. Each acquisition provides the Group with an
additional cash-generating unit ("CGU").
The Group allocates goodwill to groups of CGU's based on their operating
segment as set out in note 3 as they leverage and share from each others
operational infrastructure, centrally negotiate supplier terms and cross-sell
products to the Group's wider customer base. The operating segments therefore
represent the lowest level at which goodwill is monitored by the Board.
Goodwill has been assessed as follows:
2022 2021
£000 £000
Ambient 13,516 13,516
Frozen & Chilled 12,499 12,499
Foodservice 18,327 5,234
44,342 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:
2022 2021
Period forecasts are based on: 4 years 4 years
Growth rate applied: 2% 0%
Discount rate applied: 10.59% 8.32%
Impairment testing at 31 October 2022 has considered a further impact
inflation and its potential impact on demand and overheads the CGU's. The
Board expect product and overhead inflation to reduce from current levels.
Having operated through the trading restrictions of previous financial
periods, the Directors believe there is no reasonable prospective a reduction
in demand would result in a material impairment.
A 2% 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.
The increase in the discount rate follows the increase in risk free and market
risk rate for UK equities which have increased in reaction to the ongoing
worldwide economic issues associated with the war in Ukraine and post COVID-19
economic recessions.
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.
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 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
Transferred 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
Transferred between classifications - - (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
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 2021 2,922 2,203 5,479 2,162 7,806 20,572
Additions 2 43 697 555 728 2,025
Disposals - - - (1,161) (12) (1,173)
Transferred from right-of-use assets - - - 705 - 705
Acquired through business combinations 2,801 - 2 - 50 2,853
Balance at 31 October 2022 5,725 2,246 6,178 2,261 8,572 24,982
Depreciation
Balance at 1 November 2021 93 858 4,078 1,108 4,331 10,468
Charge in year 119 156 466 505 700 1,946
Disposals - - - (1,029) (11) (1,040)
Transferred from right-of-use assets - - - 571 - 571
Balance at 31 October 2022 212 1,014 4,544 1,155 5,020 11,945
Net book value
At 31 October 2022 5.513 1,232 1,634 1,106 3,552 13,037
At 31 October 2021 2.829 1,345 1,401 1,054 3,475 10,104
13 Right-of-use assets
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
Leasehold property Motor vehicles Plant and machinery Total
Group
£000 £000 £000 £000
Cost
Balance as at 1 November 2021 19,914 13,444 1,618 34,976
Additions 4,670 3,105 950 8,725
Transferred to tangible assets - (705) - (705)
Disposals (395) (301) (77) (773)
Gain/(loss) on remeasurement 23 (352) (14) (343)
Acquired through business combinations - 934 33 967
Balance at 31 October 2022 24,212 16,125 2,510 42,847
Depreciation
Balance as at 1 November 2021 3,956 6,989 843 11,788
Charge in year 2,111 3,450 390 5,951
Transferred to tangible assets - (571) - (571)
Disposals (395) (301) (77) (773)
Balance at 31 October 2022 5,672 9,567 1,156 16,395
Net book value
At 31 October 2022 18,540 6,558 1,354 26,452
At 31 October 2021 15,958 6,455 775 23,188
14 Investments
Unlisted Unlisted
investments investments
2022 2021
£000 £000
Group
Cost and net book value
At beginning of year 20 20
Acquired through business combinations 25 -
Disposals (10) -
At end of year 35 20
Shares in Group undertakings Shares in
Group undertakings
2022 2021
£000 £000
Company
Cost and net book value
At beginning and end of year 12,993 12,993
The Company has the following investments in subsidiaries:
Country of Class of shares held Ownership Ownership
incorporation 2022 2021
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% 95%
M.J. Baker Foodservice Limited* United Kingdom Ordinary 100% 100%
*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
2022 2021
Group £000 £000
Cost and net book value
At beginning of year - 175
Disposal - (175)
At end of year - -
The investment property was valued at £175,000 in 2018 by an external, independent valuer. The property was disposed of in the year ended 31 October 2021 to an unconnected third party.
16 Inventories
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Goods for resale 31,846 26,043 - -
31,846 26,043 - -
Goods for resale recognised as cost of sales in the year amount to £400,460,000 (FY21: £312,109,000).
17 Trade and other receivables
Group Company
2022 2021 2022 2021
£000 £000
Trade receivables 47,206 44,365 - -
Amounts owed by Group undertakings - - 61,429 63,074
Other debtors 1,510 1,881 - -
Prepayments and accrued income 8,982 6,568 106 7
57,698 52,814 61,535 63,081
Due within one year 56,926 51,697 61,535 63,081
Due after more than one year 772 1,117 - -
57,698 52,814 61,535 63,081
£23,946,000 (2021: £17,200,000) of Group trade receivables are used as
security against invoice discounting advances (note 20).
18 Cash and cash equivalents
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Cash at bank and in hand 5,511 4,968 45 3,371
Cash and cash equivalents per cashflow statement 5,511 4,968 45 3,371
19 Trade and other payables: amounts falling due within one year
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Trade payables 43,836 36,093 - -
Other creditors 4,478 3,563 - -
Accruals 9,577 7,676 39 173
Amounts owed to Group undertakings - - 22 54
57,891 47,332 61 227
20 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 26.
Group Company
2022 2021 2022 2021
Non current liabilities £000 £000 £000 £000
Lease liabilities 23,240 19,917 - -
23,240 19,917 - -
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Current liabilities
Lease liabilities 5,509 4,719 - -
Invoice discounting advances 20,354 14,620 - -
25,863 19,339 - -
Group Company
Lease liabilities 2022 2021 2022 2021
Lease liabilities payable as follows: £000 £000 £000 £000
Within one year 5,509 4,719 - -
In the second to fifth years 10,396 9,941 - -
Over five years 12,844 9,976 - -
28,749 24,636 - -
Terms and debt repayment schedule
2022 2022 2021 2021
Currency Nominal interest rate Year of maturity Face Carrying value Face Carrying value
value value
£000 £000 £000 £000
Lease liabilities Sterling 3.50% - 9.00% 2022-2040 37,686 28,749 31,571 24,636
Invoice discounting advances Sterling 2.00% + Base 2024 20,354 20,354 14,620 14,620
58,040 49,103 46,191 39,256
Changes in liabilities from financing activities Loans and Lease liabilities
borrowings Total
£000 £000 £000
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 2021 14,620 24,636 39,256
Changes from financing cash flows
Payment of lease liabilities - (5,068) (5,068)
Interest paid (1,105) (1,429) (2,534)
Total changes from financing cash flows (1,105) (6,497) (7,602)
Other changes
New borrowing 5,734 8,548 14,282
Interest expense 1,105 1,429 2,534
Remeasurement of lease liability - (351)
(351)
Added through business combinations - 984
984
Total other changes 6,839 10,610 17,449
Total debt at 31 October 2022 20,354 28,749 49,103
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 and carry interest at a margin of 2.75%.
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. This is undrawn at
the year end (2021:£nil).
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
17). These are repayable within 90 days of the date of the invoice and carry
interest at a margin of 2.00%. This was initially a 2 year fixed facility
which was extended post year ended 31 October 2022 to expire December 2025.
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.
The Bank trade loans and invoice discounting advances rank pari passu and
without preference between them in priority of payment.
21 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Group Assets Liabilities
2022 2021 2022 2021
£000 £000 £000 £000
Property, plant and equipment 322 429 (1,389) (906)
Tax value of loss carry forwards - 31 - -
Share based payment expense 272 57 - -
IFRS 16 timing differences 80 114 - -
Tax assets / (liabilities) 674 631 (1,389) (906)
Movement in deferred tax during the year:
Group 31 October Amounts arising from business combinations Recognised in income 31 October 2022
2021
£000 £000 £000 £000
Property, plant and equipment (477) (452) (139) (1,068)
Tax value of loss carry forwards 31 - (31) -
Share based payment expense 57 - 216 273
IFRS 16 timing differences 114 - (34) 80
Tax assets/(liabilities) (275) (452) 12 (715)
Company Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Share based payment expense 273 57 - -
Tax assets 273 57 - -
Company 31 October Recognised in income 31 October 2022
2021
£000 £000 £000
Property, plant and equipment - -
Tax value of loss carry forwards - -
Share based payment expense 57 216 273
IFRS 16 timing differences - -
Tax assets 57 216 273
22 Employee benefits
Defined contribution plans
The Group operates a defined contribution pension scheme. The pension cost
charge for the year represents contributions payable by the Group to the
scheme and to other personal pensions schemes and amounted to £721,000 (FY21:
£769,000).
23 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: 2022 2022
Weighted average exercise price Number of options
£
Outstanding at the beginning of the year - 10,000
Granted during the year -
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 £863,000 (FY21:
£227,000).
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 £1,090,000
(2021: £227,000).
24 Called up share capital
Group and Company 2022 2021
£000 £000
Authorised, called up and fully paid
70,000,000 ordinary shares of £0.01 each 700 700
700 700
Share premium
The share premium account relates to the premium paid on 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.
25 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 £20,354,000 (2021: £14,620,000) bank borrowings of its subsidiary
companies.
26 Financial instruments
26 (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 liability's
fair value:
Group 2022 2021
£000 £000
Financial assets held at amortised cost
Trade receivables 47,206 44,365
Cash and cash equivalents 5,511 4,968
52,717 49,333
Financial liabilities measured at amortised cost
Trade payable 43,836 36,093
Accruals 9,577 7,676
Invoice discounting advances 20,354 14,620
Obligations under lease liabilities 28,749 24,636
102,516 83,025
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 IFRS 9
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).
All financial instrurments for the year ended 31 October 2022 were categorised
as level 1. For the year ended 31 October 2021 a put option liability was
categorised as level 3. On admission to AIM the put option liability was
extinguished in full.
2022 2021
Liabilities - level 3 £000 £000
Opening balance - 5,410
Release on IPO to the statement of profit and loss - (5,410)
Closing balance - -
26 (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 9% 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.
2022 Gross Impairment Net
£000 £000 £000
Current 37,087 37,087
31-60 days from invoice 9,062 9,062
61-90 days from invoice 1,902 (845) 1,057
90+ days 1,243 (1,243) -
49,294 (2,088) 47,206
The maxmimum Group exposure to credit risk in the year ended 31 October 2022
was £47,206,000 (2021: £44,365,000) 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.
The bad debt expense for the year ended was 0.16% of Group revenue. The prior
financial year the annual bad debt expense had been c.0.34% of Group revenue,
higher due to the lower level of turnover as a result of COVID-19
restrictions. Applying the historic factor would result in a provision of
c.£1,712,000 for the year ended 31 October 2022.
The impairment charge on trade receivables in the 12 month period ended 31
October 2022 was £871,000 (note 5). Whilst the Directors are confident no
single trade receivable will have a material impact on the Group's cash flow,
they continue to take a prudent approach in relation to provisioning as the UK
economy faces a challenge in 2023 as a result of the cost of living increases.
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. The Directors consider the
level of provisioning to be materially correct based on these factors.
Group 2022 2021
£000 £000
At beginning of the year 2,017 2,011
Provided during the year 871 1,288
Added on acquisition 19 -
Utilised during the year (819) (1,282)
At the end of the year 2,088 2,017
26 (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 2022 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 43,836 43,836 43,836 - - -
Accruals 9,577 9,577 9,577 - - -
Lease liabilities 28,749 37,686 6,741 5,028 8,828 17,089
Invoice discounting advances* 20,354 20,354 20,354 - - -
102,516 111,453 80,508 5,028 8,828 17,089
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 - - -
Accruals 7,676 7,676 7,676 - - -
Lease liabilities 24,636 31,571 5,697 5,129 7,754 12,991
Invoice discounting advances* 14,620 14,620 14,620 - - -
83,025 89,960 64,086 5,129 7,754 12,991
* Both the invoicing discounting and bank trade loan facilities are revolving.
The invoice discounting facility is available up to £38,000,000 of drawn down
and is available until 2025. 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.
26 (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
2022 2021
£000 £000
Fixed rate instruments
Financial liabilities (28,749) (24,636)
(28,749) (24,636)
Group
2022 2021
£000 £000
Variable rate instruments
Financial liabilities (20,354) (14,620)
(20,354) (14,620)
Sensitivity analysis
An increase of 25 basis points in interest rates throughout the year 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 year:
Group
2022 2021
£000 £000
Profit or loss decreases 51 37
The above assumes the rate change is applicable on financial liabilities
accruing interest on base rate and SONIA and affects them in the same way.
26 (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 leasing
related borrowings of £28,749,000 (2021: £24,636,000), cash and cash
equivalents of £5,511,000 (2021: £4,968,000), an invoice discounting
facility with a limit fo £38,000,000 drawn at £20,354,000 (2021:
£14,620,000), a trade loan facility with a limit of £8,000,000 drawn at
£nil (2021:£nil) and equity attributable to the equity holders of the Group
of £71,887,000 (2021:£61,584,000).
The capital structure is reviewed regularly by the Directors. The Group's
policy is to maintain gearing at levels appropriate to the business and its
funders. The Directors take consideration of gearing by reference to the
leverage calculating including IFRS 16 lease liability and without. 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.
The Group has headroom on its working capital facilities of £23,100,000 at
the year end (2021: £28,400,000).
27 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 (Northern)
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, M.J. Baker Foodservice 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 the prior year in
relation to the former debenture holders (Pricoa Capital Group) are disclosed
in notes 8 and 20.
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 year amounts to
£942,439 (FY21: £714,114) in respect of short-term employment benefits,
£nil (FY21: £nil) in respect of past-employment benefits and £nil (FY21:
£nil) in respect of termination benefits.
28 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.
29 Post balance sheet events
Post year end the Group completed the acquisition of the entire ordinary share
capital of Westcountry Food Holdings Limited for total consideration of
£28,500,000 The acquired balance sheet included cash and cash equivalents of
£8,983,000. The business was acquired as part of the Group's growth
strategy will be incorporated into the existing Foodservice division.
Significant control was obtained through the acquisition of 100% of the share
capital.
The fair values of the assets and liabilities acquired, intangible assets
recognised and the associated goodwill arising from the acquisition are still
under review at the point of signing these financial statements.
The acquisition was funded through a new £20,000,000 Revolving Credit
Facility and headroom on existing bank facilities. The new and existing bank
facilities have an expiry of December 2025.
Alternative performance measure glossary
This report provides alternative performance measures ("APMs"), which are not
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.
APMs may not be comparable with similarly titled measures presented by other
companies. As such APMs should not be viewed in isolation but as supplementary
information.
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.
FY22 FY21
Note £000 £000
Total operating profit 20,375 6,398
CPO income 4 - (2,255)
Restructuring costs 5 - 1,257
Acquisition expenses 5 148 181
Compensation for post combination services 5 95 1,278
Share based payment expense 5 863 227
Adjusted operating profit 21,481 7,086
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.
FY22 FY21
Note £000 £000
Total operating profit 20,375 6,398
Amortisation of intangible assets 11 99 150
Depreciation 12,13 7,897 7,817
CPO income 4 - (2,255)
Restructuring costs 5 - 1,257
Acquisition expenses 5 148 181
Compensation for post combination services 5 95 1,278
Share based payment expense 5 863 227
Adjusted EBITDA 29,477 15,053
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.
FY22 FY21
£000 £000
Net cash inflow from operating activities 26,525 7,916
Tax paid 4,005 2,432
Payments in respect of compensation for post combination services - 2,925
Cash flow from operating activities pre tax and compensation for post 30,530 13,273
combination services (1)
Movement in working capital (1,373) 2,418
Cash flow from operating activities pre tax and compensation for post 29,157 15,691
combination services and movement in working capital (2)
Pre tax operational cash conversion (1) divided by (2) 105% 85%
After tax return on invested capital Represents adjusted profit after tax as a proportion of invested capital. This
measure informs the Board of how effective the Group is in generating returns
from the capital invested.
FY22 FY21
£000 £000
Adjusted operating profit 21,481 7,086
Operating lease interest (1,427) (1,239)
20,054 5,847
Tax charge at effective rate of tax of 18% (FY21: 20%) (3,690) (1,172)
Adjusted operating profit after tax (1) 16,364 4,675
Invested capital comprising:
Invoice discounting advances 20,354 14,620
Lease liabilities 28,749 24,636
Share capital 700 700
Share premium 64,183 64,183
Less cash at bank and in hand (5,511) (4,968)
Total invested capital (2) 108,475 99,171
After tax return on invested capital (1) divided by (2) 15% 5%
Leverage Management assess leverage by reference to adjusted EBITDA against net debt
including and excluding IFRS 16 lease liabilities and including the liability
for post combination services held within other creditors. This indicates how
much income is available to service debt before interest, tax, depreciation
and amortisation.
FY22 FY21
Note £000 £000
Adjusted EBITDA (1) 29,477 15,053
Invoice discounting advances 20 20,354 14,620
Lease liabilities 20 28,749 24,636
Liability for post combination services 807 712
Cash at bank and in hand 18 (5,511) (4,968)
Net debt (2) 44,399 35,000
Leverage (including IFRS 16 debt) (2) divided by (1) 1.5x 2.3x
IFRS 16 lease liabilities (25,902) (21,632)
Net debt excluding IFRS 16 lease liabilities (3) 18,497 13,368
Leverage (excluding IFRS 16 lease debt) (3) divided by (1) 0.6x 0.9x
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.
FY22 FY21
Note £000 £000
Total operating profit 20,375 6,398
Amortisation of intangible assets 11 99 150
Depreciation 12,13 7,897 7,817
CPO income 4 - (2,255)
Restructuring costs 5 - 1,257
Acquisition expenses 5 148 181
Compensation for post combination services 5 95 1,278
Share based payment expense 5 863 227
Adjusted EBITDA 29,477 15,053
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.
FY22 FY21
£000 £000
Net cash inflow from operating activities 26,525 7,916
Tax paid 4,005 2,432
Payments in respect of compensation for post combination services - 2,925
Cash flow from operating activities pre tax and compensation for post 30,530 13,273
combination services (1)
Movement in working capital (1,373) 2,418
Cash flow from operating activities pre tax and compensation for post 29,157 15,691
combination services and movement in working capital (2)
Pre tax operational cash conversion (1) divided by (2) 105% 85%
After tax return on invested capital
Represents adjusted profit after tax as a proportion of invested capital. This
measure informs the Board of how effective the Group is in generating returns
from the capital invested.
FY22 FY21
£000 £000
Adjusted operating profit 21,481 7,086
Operating lease interest (1,427) (1,239)
20,054 5,847
Tax charge at effective rate of tax of 18% (FY21: 20%) (3,690) (1,172)
Adjusted operating profit after tax (1) 16,364 4,675
Invested capital comprising:
Invoice discounting advances 20,354 14,620
Lease liabilities 28,749 24,636
Share capital 700 700
Share premium 64,183 64,183
Less cash at bank and in hand (5,511) (4,968)
Total invested capital (2) 108,475 99,171
After tax return on invested capital (1) divided by (2) 15% 5%
Leverage
Management assess leverage by reference to adjusted EBITDA against net debt
including and excluding IFRS 16 lease liabilities and including the liability
for post combination services held within other creditors. This indicates how
much income is available to service debt before interest, tax, depreciation
and amortisation.
FY22 FY21
Note £000 £000
Adjusted EBITDA (1) 29,477 15,053
Invoice discounting advances 20 20,354 14,620
Lease liabilities 20 28,749 24,636
Liability for post combination services 807 712
Cash at bank and in hand 18 (5,511) (4,968)
Net debt (2) 44,399 35,000
Leverage (including IFRS 16 debt) (2) divided by (1) 1.5x 2.3x
IFRS 16 lease liabilities (25,902) (21,632)
Net debt excluding IFRS 16 lease liabilities (3) 18,497 13,368
Leverage (excluding IFRS 16 lease debt) (3) divided by (1) 0.6x 0.9x
Reconciliation between existing and acquired operating profit for the year
Note Existing operations Acquisitions Year ended Year ended
31 October 31 October
2022 2021
£000 £000 £000 £000
Revenue 3 484,800 18,288 503,088 380,694
Cost of sales (387,951) (12,509) (400,460) (312,109)
Gross profit 96,849 5,779 102,628 68,585
Other operating income 4 340 34 374 4,771
Distribution expenses (41,816) (2,194) (44,010) (31,203)
Administrative expenses (37,203) (1,414) (38,617) (35,755)
Operating profit 18,170 2,205 20,375 6,398
Analysed as:
Adjusted EBITDA 26,955 2,522 29,477 15,053
Amortisation of intangible assets 11 (99) - (99) (150)
Depreciation 12,13 (7,580) (317) (7,897) (7,817)
CPO income 4 - - - 2,255
Restructuring costs 5 - - - (1,257)
Acquisition expenses 5 (148) - (148) (181)
Compensation for post combination services 5 (95) - (95) (1,278)
Share based payment expense 5 (863) - (863) (227)
Total operating profit 18,170 2,205 20,375 6,398
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