REG - Kitwave Group PLC - Final Results
27/02/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240227:nRSa5239Ea&default-theme=true
RNS Number : 5239E Kitwave Group PLC 27 February 2024
27 February 2024
Kitwave Group plc
("Kitwave", the "Group" or the "Company")
Final Results for the twelve months ended 31 October 2023
Kitwave Group plc (AIM: KITW), the delivered wholesale business, is pleased to
announce its final results for the twelve months ended 31 October 2023.
Financial summary
· Revenues increased by 20% to £602.2 million (FY22: £503.1
million)
· Gross profit margin increased to 22% during the year (FY22: 20%)
· Adjusted operating profit increased by 49% to £32.0 million (FY22:
£21.5 million)*
· Profit before tax increased by 40% to £24.9 million (FY22: £17.8
million)
· £30.3 million net cash generated from operations (FY22: £26.5
million)*
· Pre-tax operational cash conversion of 90% (FY22: 105%)*
* 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 7.45 pence
per ordinary share, subject to approval at the Annual General Meeting ("AGM")
to be held on 22 March 2024, which will, if approved, result in a total
dividend for the financial year ended 31 October 2023 of 11.20 pence per
ordinary share.
Operational highlights
· Acquisition of Westcountry Food Holdings Limited ("WestCountry"), a
specialised fresh produce wholesaler in December 2022. WestCountry has been
successfully integrated into the Foodservice division and has performed in
line with expectations.
· Commenced construction of the new 80,000 sq. ft distribution centre to
fully integrate the Group's South West operations, with completion scheduled
for Autumn 2024.
· Expansion of the online trading platform across all divisions to improve
existing customer relationships and enhance operational synergy within the
Group.
Post-period end
· Paul Young, Chief Executive Officer will be retiring and stepping down
from the Board after the AGM on 22 March 2024 with Ben Maxted, the current
Chief Operating Officer becoming the new Chief Executive Officer.
· Acquisition of WLG (Holdings) Limited which trades as Wilds of Oldham,
a composite family-run drinks wholesaler, which was incorporated into the
existing Foodservice on-trade business, HB Clark in November 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 2023.
"As announced in the Group's trading update in November 2023, the strong
performance continues to deliver growth with sustained momentum achieved
throughout FY23. We are, therefore, able to report results in line with the
significantly upgraded market expectations that were established after the
Group's interim results, published in July 2023.
"As can be seen from the results for this year, all our divisions have
continued to grow while managing well the inflationary pressures in their cost
base that existed throughout the year.
"The successful integration of WestCountry into the Foodservice division
demonstrates the value of our buy-and-build philosophy, with the Group
continually assessing acquisition opportunities to combine with our
initiatives to drive organic growth.
"While we have now acquired and successfully integrated 13 businesses since
2011, the Board believes there remain a large number of opportunities
available to us in what is a fragmented delivered wholesale market in the UK.
"In addition to acquisitions we also seek operational improvement. The new
distribution centre is an example as it will be key to increasing the
efficiency and capacity of the Group's South West operations.
"The launch of a web-based trading platform in February 2022 has brought
immediate success, with electronic ordering becoming the predominant source of
order capture for the Group at 47% of all orders in the quarter to October
2023. We recognise the importance of technology and will continue to invest to
improve our operational capability.
"The Group is strategically positioned to continue to deliver a high service
offering within the UK wholesale market and we are confident of another
positive trading period in 2024.
"Finally, after over 35 years since Kitwave was founded and being a part of
that process, I will be retiring after the AGM on 22 March 2024. It has been a
pleasure to see the Group grow and with Ben Maxted taking over as the new
Chief Executive Officer, I am confident that the Board and management have the
expertise and experience to deliver Kitwave's growth strategy and generate
further value for the Group and its shareholders.
"I would like to take this opportunity to acknowledge and thank everyone
within the Group. I am extremely grateful for my tenure as Chief Executive
Officer and I wish Kitwave every success for the future."
- 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
Alex Orr
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
We are pleased to report another year of excellent progress. In the prior
year, the Group had capitalised on opportunities for growth as the challenges
of the COVID-19 pandemic eased. As can be seen from the results for this year,
all our divisions have continued to grow while managing well the inflationary
pressures in their cost base that existed throughout the year.
Results summary
The Group has achieved significant growth in both revenue and adjusted
operating profit during the year, with revenue increasing by 19.7% to £602.2
million (FY22: £503.1 million) and adjusted operating profit increasing by
48.8% to £32.0 million (FY22: £21.5 million).
Included in the results for the year is an 11 month contribution from
Westcountry Food Holdings Limited which is in line with our expectations at
the time of the acquisition in December 2022.
Existing operations
£m Acquisitions FY23 FY22
£m £m £m
Adjusted operating profit *
27.3 4.7 32.0 21.5
*For more information on alternative performance measures please see the
glossary at the end of the announcement.
While increases in overhead costs such as labour, fuel and energy continue to
be significant, management has again focussed on increasing gross margin in
order to offset the adverse effects of inflationary increases in the Group's
cost base. 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 7.45 pence per ordinary share
(FY22: 6.75 pence), subject to approval at the AGM, which, if approved, will
result in an increase in the total dividend for the year of 21.1% to 11.20
pence per ordinary share (FY22: 9.25 pence).
Environmental, Social and Governance (ESG)
We remain of the belief that a long term sustainable business model is
essential to the success of the Group and are committed to ensuring the
highest standards of ESG practices across our business. The Group continues to
develop its ESG framework and during the year, under the guidance of the ESG
steering group, embedded its Corporate Social Responsibility Strategy within
the overall Group Strategy.
The Group is a significant user of energy to refrigerate and light its
warehouse locations. During the financial year, we invested in the
installation of solar panels at our Luton distribution centre. The Group now
has solar power generation at seven of its larger sites producing 10.7% of the
Group's annual energy requirements. Feasibility studies are being carried out
on additional locations for further investment in 2024.
Our colleagues are our most valuable asset and their welfare is a priority at
Kitwave. We are pleased to be able to provide sustainable employment and to
increase remuneration and benefits whenever possible across our workforce.
The appointment of a Group Health and Safety Director in April 2022 has led to
a number of changes including improved reporting and information flow, the
standardisation of risk assessments and the roll out of defibrillators to all
of our sites.
The financial year also saw the implementation of the Kitwave One Employee
Benefits portal, providing our colleagues with basic medical cover, death in
service life cover as well as discounts on retail goods.
The Enterprise Risk Management (ERM) framework, established in the prior year,
was further developed and has been used as the tool for the Board to have
regular engagement with appointed risk champions. Risks are scheduled into the
Board agenda with the aim of having an in depth review of each of the
strategic risks at least once in the year. Following the review of risks
associated with cyber security, we have invested further in hardware, software
and advisers to enhance our mitigation of this key risk. These additional
investments have created a more secure environment facilitating the
introduction of a cyber security insurance policy to provide further risk
protection.
Board
On 1 February 2023, Teresa Octavio joined the Board as a Non-Executive
Director. She has already made a valuable contribution and we look forward to
her ongoing input to our discussions and decision making.
On 6 November 2023, we announced that Paul Young, Chief Executive Officer,
would be retiring and stepping down from the Board at the end of the Company's
Annual General Meeting to be held in March 2024 and that Ben Maxted, the
Group's Chief Operating Officer, would become Chief Executive Officer
following Paul's retirement.
Paul's retirement next year will mark the end of a remarkable career with
Kitwave. Having founded the Company in 1987 as a single-site confectionery
business Paul has been instrumental in its growth and development into the
delivered wholesale business that it is today. On behalf of everyone at
Kitwave, we thank Paul for his vision and enduring contribution to the Group
and we wish him well in his retirement.
We are delighted that the handover of responsibilities has gone well and that
Ben will become Chief Executive Officer following the Company's Annual General
Meeting. As Chief Operating Officer, Ben has demonstrated excellent commercial
and operational expertise and these skills will continue to be invaluable in
his new role and in delivering the next phase of our growth strategy.
In line with our policy, a Board evaluation review was carried out during the
year. As in the prior year this was led by me and took the form of a detailed
questionnaire followed by an in depth discussion around those areas which
scored least well. While in general the Board felt that it was functioning
well a number of minor actions were agreed. One of these actions involved the
commencement of a Board development exercise to assist in understanding
different leadership styles, to increase self awareness and to identify
opportunities for improved teamwork. With facilitation provided by a third
party practitioner this exercise commenced in October 2023.
Our people
It is in large part due to the dedication of our colleagues that we continue
to provide the high-quality service that our customers have come to expect. I
would therefore like to take this opportunity to thank all of them for their
continued exceptional commitment.
Outlook
While less than three years since Kitwave's IPO in May 2021, the Group has, in
line with its strategy, grown significantly both organically and through the
three acquisitions it has made since IPO. In addition it has adapted well to
the different challenges of a pandemic and inflationary cost pressures to
continually outperform market expectations.
We continue to pursue our combined organic growth and acquisition-based
strategy and believe there remain a large number of opportunities available to
us in what is 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 WLG (Holdings) Limited, which
trades as Wilds of Oldham, a composite drinks wholesaler operating in the
North West of England. The acquisition is in line with our criteria and has
already been integrated into HB Clark our on-trade business.
FY24 has started satisfactorily and, subject to successful management of the
continued 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
26 February 2024
Chief Executive Officer's statement
Overview
I am pleased to report the Company's final results for the 12 months ending 31
October 2023.
This year, Kitwave has once again proven itself to be a resilient business
despite wider macroeconomic pressures and inflationary challenges. The Group
continued to perform well across all its divisions, Ambient, Frozen &
Chilled and Foodservice, and we are pleased to report results in line with the
significantly upgraded market expectations that were established after the
Group's interim results, published in July 2023.
The Group made strong progress as we delivered growth by making advancements,
both operationally and commercially in the reporting period. As outlined in
our trading update in November 2023, the integration of Westcountry Food
Holdings ("WestCountry"), acquired in December 2022 has been successful. The
Group's web-based trading platform has also delivered excellent results in
terms of brand partner and customer engagement, resulting in electronic order
capture standing at 47% for the quarter to October 2023.
Divisional summary
Set out below is the financial performance of the business by division for
FY23:
Ambient and Frozen & Chilled divisions
The Group's Ambient and Frozen & Chilled divisions that service the Retail
& Wholesale sectors of the grocery market saw combined revenues increase
by £44.7 million to £423.6 million (FY22 £378.9 million), a 12% increase
from the year to October 2022. The gross margin in both divisions advanced by
1% at the same time as this revenue growth.
Ambient
£000 FY23 FY22
Revenue 207,195 185,132
Gross profit 30,862 26,857
Gross margin % 15% 14%
Frozen & Chilled
£000 FY23 FY22
Revenue 216,399 193,810
Gross profit 49,037 42,574
Gross margin % 23% 22%
Foodservice division
The Group's Foodservice division has also performed well during the period,
resulting in an increase in revenues to £178.6 million (FY22 £124.1
million). The division's organic growth was 15%, with an increase in revenues
of £18.6 million.
This year saw the acquisition of WestCountry and included in these numbers is
£35.9 million of acquired revenues.
Foodservice
£000 FY23 FY22
Revenue 178,626 124,146
Gross profit 52,226 33,196
Gross margin % 29% 27%
Facilities
As part of Kitwave's 'buy-and-build' strategy, we were pleased to welcome
WestCountry into the Group during the period. As a testament to the successful
integration of WestCountry in June 2023, we commenced the construction of a
new 80,000 sq. ft. distribution centre, due to be completed in Autumn 2024.
The new distribution centre will be key to increasing the capacity of the
Group's South West operations, and we look forward to updating the market on
its progress in due course.
Additionally, in line with our ESG commitments and to ensure our warehouse
facilities are reducing their energy emissions, Kitwave continues to engage
Businesswise Solutions as its energy management partner. The collaboration
aims to mitigate Kitwave's carbon footprint by implementing energy-saving
practices across its warehouses such as investing in solar generation. The
Group now has solar PV capabilities at seven of its larger sites producing
513,000 kWh of energy in the year. Installed solar generation capacity is
offering 10.7% self-sufficient energy generation.
Strategy
The Group remains committed to targeting expansion through strategic
acquisitions. The Board recognises the significant opportunity within the
fragmented UK wholesale market and it is focused on expanding the Group's
market share from its existing position.
The acquisition of WestCountry during the period enabled the Group to expand
its offering to cover local, regional and imported fresh produce throughout
the South West of England. This strategic investment complements existing
businesses in the Foodservice division.
In November 2023, which is post-period end, the Group acquired WLG (Holdings)
Limited, a composite drinks wholesaler trading as Wilds of Oldham. The
business has been established as a family-run drinks wholesaler for over 25
years, and it marks the 13(th) acquisition that the Group has made since 2011.
Currently, Wilds of Oldham has 35 colleagues, 11 fleet vehicles, and annual
revenue of £10.2 million. Following the acquisition, the business will be
incorporated into the Group's existing Foodservice on-trade business HB Clark.
The Foodservice division continues to be a key driver for the Group and these
acquisitions enable it to expand its presence in the market; providing a
platform for further growth.
The second fundamental element of the Group's strategy is the importance of
organic growth and driving operational efficiency. The Group's investment in
its infrastructure, systems, vehicles, and people has allowed it to continue
to enhance its existing services and divisions providing an exceptionally high
standard of service to customers.
A notable investment by the Group is the focus on our people, with the
implementation of the 'Kitwave One' programme. The initial roll-out of the
programme, launched in October 2023, to over 600 colleagues within the Group,
has provided a new online portal. This will improve engagement and provides
external benefits to promote the wellbeing of our colleagues.
We are confident that the Board and management team have the expertise and
experience to deliver Kitwave's growth strategy, generating value for the
Group and its shareholders.
Colleagues
In February 2023, we were delighted to welcome Teresa Octavio as a
Non-Executive Director. Teresa has proven herself to be a key member of the
Board, with her wealth of experience in global businesses such as Kantar
Consulting, Diageo Plc and Procter & Gamble.
The Group has also welcomed young adults on Universal Credit between the ages
of 16-24 to work in our warehouses as part of the government-sponsored
'Kickstart' scheme. As a result, the Group has offered many apprenticeships to
these individuals and the opportunity to start working in the form of
longer-term employment. We are pleased to welcome them to the Kitwave
community.
As announced post-period end on 6 November 2023, I will be retiring at the
Company's Annual General Meeting in March 2024. Having founded the Company in
1987, I could not be prouder of how far Kitwave has come as a business.
I would also like to acknowledge that at Kitwave, our successes are inherently
tied to the dedication of our team. I would like to express my gratitude to
our colleagues across all areas of the Group for their unwavering commitment
during this period.
Ben Maxted, currently our Chief Operating Officer, will become the Chief
Executive Officer following my retirement. Throughout his time at Kitwave, he
has demonstrated strong operational and commercial expertise, and the
Directors believe that the Group will be in very capable hands under his
leadership.
Summary and outlook
Our FY23 results highlight yet another year of delivering growth for our
business. We are proud of our high standard of service to our existing
customers, as well as expanding our customer base and service offering through
strategic acquisitions, both in the South West, and in the North West
post-period end. The new distribution facility under construction in the South
West region will open up new business opportunities, whilst improving both the
ability to handle goods as well as the efficiency of the Group.
The Group recognises the opportunities for the existing business model to
continue to grow within the UK wholesale market yet understands that the
business is evolving with technology. Our online order capturing has grown at
a consistent rate since the launch in FY22 and expect greater utilisation by
our customers in FY24 to become the preferred option.
There remain many more acquisition opportunities in the UK's fragmented
wholesale market, and Kitwave is well-positioned to capitalise on these
opportunities and deliver further value to the Group and its shareholders.
We would like to thank all our investors and stakeholders for their continued
support throughout the period and look forward to updating the market with our
progress in FY24.
Paul Young
Chief Executive Officer
26 February 2024
Chief Financial Officer's review
Overview
Group revenue increased to £602.2 million, compared to £503.1 million in the
year to October 2022. This included £35.9 million of acquired revenue and on
a like-for-like basis a 13% increase in revenue.
The Group's Ambient and Frozen & Chilled divisions that service the Retail
& Wholesale sectors of the market saw revenues increase by £44.7 million
to £423.6 million, a 12% increase in the year to October 2023.
The Group's Foodservice division, saw revenues increase by £54.5 million to
£178.6 million, an increase of 44% in the year to October 2023. This year saw
the acquisition of Westcountry Food Holdings Limited in December 2022 and
included in these numbers is £35.9 million of acquired revenues. On a
like-for-like basis, the division's organic growth was 15% with an increase in
revenues of £18.6 million.
During the last 12 months, the grocery and foodservice market experienced more
significant levels of price inflation and continued challenges with supply
chain shortages. Despite these challenges, the Group continued to grow its
overall unit sales as well as benefiting from the price rise inflation in the
market.
Gross profit margin has increased by 1.5% to 21.9% during the year. The
increase is partly due to a mix change with the higher margin Foodservice
division trading at increased revenue levels further helped by the acquired
operations contributing a gross profit margin of 36.9%. Divisional margins are
also ahead of the prior year.
While inflationary pressure was seen in the cost base, overall distribution
costs as a proportion of revenues only rose slightly. This includes the effect
of the higher service levels in the acquired business that had a cost to serve
of 15.4%. Overall distribution costs were 9.1% of Group revenue (FY22: 8.7%).
The Group's adjusted operating profit of £32.0 million (FY22: £21.5
million) represents 5.3% (FY22: 4.3%) of Group revenue. All divisions
generated an increase in adjusted operating profit margin compared with FY22.
In the 12 months ended October 2023, Group profit before tax increased by
£7.0 million to £24.9 million (FY22: £17.9 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 £4.5 million (FY22: £2.5 million) relate to the costs
associated with the working capital facilities utilised by the Group of £2.8
million (FY22: £1.1 million) and interest relating to leased assets
accounting of £1.7 million (FY22: £1.4 million).
The statutory basic earnings per share for FY23 is 27.1 pence (FY22: 20.5
pence).
The Board is recommending a final dividend of 7.45 pence per ordinary share
(FY22: 6.75 pence), subject to approval at the AGM, which, if approved, will
result in a total dividend for the year of 11.20 pence per ordinary share.
This is a 21.1% rise in dividend per share compared to FY22.
KPIs
FY23 FY22
Financial profitability KPIs
Gross margin % 21.9% 20.4%
Adjusted operating profit * £32.0m £21.5m
Adjusted operating margin * 5.3% 4.3%
EPS (Basic) 27.1 pence 20.5 pence
Financial structure KPIs
Leverage (inc IFRS16 debt) * 1.4x 1.5x
Leverage (exc IFRS16 debt) * 0.8x 0.6x
Pre tax operational cash conversion * 90% 105%
Return on Investment Capital * 19% 15%
Return on Net assets * 30% 24%
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 £3.8 million (FY22: £2.0 million) invested in new assets and £10.0
million (FY22: £8.7 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 £1.5 million (FY22: £0.6 million) of new vehicles acquired
and £7.7 million (FY22: £3.1 million) invested through right-of-use vehicle
replacement.
Five of our leased premised were renewed resulting in an increase in
right-of-use assets of £1.9 million. Included within the plant and machinery
increase was £0.4 million due to the installation of solar panels at the
Luton depot.
Cashflow
The net cash inflow from operating activities for the year was £30.3 million
(FY22: £26.5 million) after net outflow from working capital of £3.9 million
(FY22: £1.4 million inflow) and tax payments of £6.1 million (FY22: £4.0
million). This resulted in operating cash conversion of 75% (FY22: 91%) and
pre-tax operational cash conversion* of 90% (FY22: 105%).
There was a cash outflow to the Group of £19.6 million in relation to the
acquisition of Westcountry Food Holdings Limited ("WestCountry"). This amount
is the full consideration in relation to the transaction with no further
payments due. During the period, WestCountry contributed a working capital
outflow of £0.8 million as a result of the part year of ownership. Excluding
WestCountry the like for like pre-tax operational cash conversion would have
been 91%.
The Group paid a final dividend relating to FY22 in April 2023 of 6.75 pence
per ordinary share and an interim dividend in respect of FY23 in August 2023
of 3.75 pence per ordinary share. The total cash outflow relating to dividend
payments was £7.4 million (FY22: £4.9 million) during the year.
The net cash decrease in the year was £4.8 million.
Financial position
At 31 October 2023, cash and cash equivalents totalled £0.7 million (FY22:
£5.5 million).
The Group had a total of £59.1 million (FY22: £49.1 million) of
interest-bearing debt facilities including £26.2 million (FY22: £25.9
million) of IFRS 16 lease liabilities.
The Group's CID facility was drawn to a value of £6.4 million (FY22: £20.4
million) at year end. It has one covenant requiring net debt (including IFRS
16 lease liabilities) not to exceed three times the last twelve months' EBITDA
which was satisfied as at 31 October 2023. In addition to the cash and cash
equivalents, there were undrawn facilities available to the Group of £39.6
million at the year end (FY22: £25.6 million).
During the period the Group extended the expiry on its CID facility by 18
months to December 2025. At the same time a new £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 and was fully drawn at 31 October 2023.
This facility includes the same covenant as the CID facility plus an
additional interest cover covenant set such that the last twelve month's
EBITDA is required to cover the last twelve month's interest charge by at
least four times. This covenant was comfortably satisfied at 31 October 2023.
Taxation
The tax charge for the year was £5.9 million (FY22: £3.5 million) at an
effective rate of 24% (FY22: 20%). An increase in the UK corporation tax rate
from 19% to 25% was enacted part way through the Group's financial year and as
a result a pro-rated tax rate of 23% is applicable to earnings for the period
ending 31 October 2023. The effective rate is higher than the pro-rated tax
rate mainly due to the non-deductible element of acquisition costs and
compensation for post combination services. 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 23% (FY22: 18%) the adjusted profit after
tax return on investment capital at 31 October 2023 was 19% (FY22: 15%). These
returns exclude the charges relating to share-based payments.
The Group drives its profitability through investment in operational
infrastructure (property leases, IT & motor vehicles) and investment in
working capital. The Board considers the returns on this investment in
relation to capital allocation. A second returns measure is therefore included
in this report again utilising an effective tax rate of 23% (FY22: 18%). The
adjusted profit after tax return on net assets at 31 October 2023 was 30%
(FY22: 24%).
*For more information on alternative performance measures including
calculations on return on capital measures
please see the glossary at the end of the announcement.
Share based payments
In the year there was an expense of £1.0 million (FY22: £0.9 million) for
share-based payments comprising:
· £0.9 million relating to shares under the Management Incentive Plan
(MIP) that commenced in July 2021 post the completion of the IPO in May 2021.
· £0.1 million relating to shares under the Long-Term incentive plan
(LTIP) that were granted in March 2023.
David Brind
Chief Financial Officer
26 February 2024
Consolidated statement of profit and loss and other comprehensive income
Year ended 31 October Year ended 31 October
2023 2022
Note £000 £000
Revenue 3 602,220 503,088
Cost of sales (470,095) (400,460)
Gross profit 132,125 102,628
Other operating income 4 183 374
Distribution expenses (54,570) (44,010)
Administrative expenses (48,375) (38,617)
Operating profit 29,363 20,375
Analysed as:
Adjusted EBITDA 41,141 29,477
Amortisation of intangible assets 5, 11 (975) (99)
Depreciation 5, 12,13 (8,992) (7,897)
Acquisition expenses 5 (648) (148)
Compensation for post combination services 5 (199) (95)
Share based payment expense 5 (964) (863)
Total operating profit 29,363 20,375
Finance expenses 8 (4,505) (2,534)
Analysed as:
Interest payable on bank loans and bank facilities 8 (2,842) (1,105)
Finance charges on leases 8 (1,656) (1,427)
Other interest 8 (7) (2)
Financial expense (4,505) (2,534)
Profit before tax 24,858 17,841
Tax on profit on ordinary activities 9 (5,902) (3,501)
Profit for the financial year 18,956 14,340
Other comprehensive income - -
Total comprehensive income for the year 18,956 14,340
Basic earnings per share (pence) 10 27.1 20.5
Diluted earnings per share (pence) 10 26.0 20.5
¶
Consolidated balance sheet as at 31 October
2023 2022
Note £000 £000
Non-current assets
Goodwill 11 58,680 44,342
Intangible assets 11 4,878 737
Tangible assets 12 16,614 13,037
Right-of-use assets 13 29,716 26,452
Investments 14 45 35
109,933 84,603
Current assets
Inventories 15 35,410 31,846
Trade and other receivables 16 63,569 57,698
Cash and cash equivalents 17 673 5,511
99,652 95,055
Total assets 209,585 179,658
Current liabilities
Other interest bearing loans and borrowings 19 (6,405) (20,354)
Lease liabilities 19 (6,402) (5,509)
Trade and other payables 18 (63,596) (57,891)
Tax payable (594) (62)
(76,997) (83,816)
Non - current liabilities
Other interest bearing loans and borrowings 19 (20,000) -
Lease liabilities 19 (26,267) (23,240)
Deferred tax liabilities 20 (1,876) (715)
(48,143) (23,955)
Total liabilities (125,140) (107,771)
Net assets 84,445 71,887
Equity attributable to equity holders of the parent Company
Called up share capital 23 700 700
Share premium account 23 64,183 64,183
Consolidation reserve 23 (33,098) (33,098)
Share based payment reserve 22 2,042 1,090
Retained earnings 50,618 39,012
Equity 84,445 71,887
Company balance sheet as at 31 October
2023 2022
Note £000 £000
Non current assets
Investments 14 12,993 12,993
Deferred tax assets 20 514 273
13,507 13,266
Current assets
Trade and other receivables 16 60,033 61,535
Cash and cash equivalents 17 3 45
60,036 61,580
Total assets 73,543 74,846
Current liabilities
Trade and other payables 18 (94) (61)
Tax payable (45) -
(139) (61)
Total liabilities (139) (61)
Net assets 73,404 74,785
Equity attributable to equity holders of the parent Company
Called up share capital 23 700 700
Share premium account 23 64,183 64,183
Share based payment reserve 22 2,042 1,090
Retained earnings* 6,479 8,812
Equity 73,404 74,785
* The Company's profit after tax for the year was £5,017,000 (FY22: £453,000
loss)
Consolidated statement of changes in equity
Called up share capital Share premium account Consolidation Share based payment reserve Profit and loss account Total equity
reserve
£000 £000 £000 £000 £000 £000
Balance at 1 November 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 the year - - - - 14,340 14,340
Transactions with owners, recorded directly in equity
Dividends - - - - (4,900) (4,900)
Share based payment expense - - - 863 - 863
Total contribution by and transactions with owners
- - - 863 (4,900) (4,037)
Balance at 31 October 2022 700 64,183 (33,098) 1,090 39,012 71,887
Total comprehensive income for the year
Profit - - - - 18,956 18,956
Other comprehensive income - - - - - -
Total comprehensive
income for the year
- - - - 18,956 18,956
Transactions with owners, recorded directly in equity
Dividends - - - - (7,350) (7,350)
Share based payment expense - - - 952 - 952
Total contribution by and transactions with the owners
- - - 952 (7,350) (6,398)
Balance at 31 October 2023 700 64,183 (33,098) 2,042 50,618 84,445
Company statement of changes in equity
Called up share capital Share premium account Share based payment reserve Profit and loss account Total equity
£000 £000 £000 £000 £000
Balance at 1 November 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 the year - - - (453) (453)
Transactions with owners, recorded directly in equity
Dividends - - - (4,900) (4,900)
Share based payment expense - - 863 - 863
Total contribution by and distribution to owners - - 863 (4,900) (4,037)
Balance at 31 October 2022 700 64,183 1,090 8,812 74,785
Total comprehensive income for the year
Profit - - - 5,017 5,017
Other comprehensive income - - - - -
Total comprehensive income for the year - - - 5,017 5,017
Transactions with owners, recorded directly in equity
Dividends - - - (7,350) (7,350)
Share based payment expense - - 952 - 952
Total contribution by and distributions with the owners - - 952 (7,350) (6,398)
Balance at 31 October 2023 700 64,183 2,042 6,479 73,404
Consolidated cash flow statement
Year ended Year ended
31 October 31 October
2023 2022
Note £000 £000
Cash flow statement
Cash flow from operating activities
Profit for the year 18,956 14,340
Adjustments for:
Depreciation and amortisation 11,12,13 9,967 7,996
Financial expense 8 4,505 2,534
Profit on sale of property, plant and equipment 4 (179) (164)
Net gain on remeasurement of right-of-use assets and lease liabilities 4 (4) (8)
Compensation for post combination services 5 199 95
Equity settled share based payment expense 5 964 863
Taxation 9 5,902 3,501
40,310 29,157
Increase in trade and other receivables (3,737) (2,909)
Increase in inventories (2,553) (4,168)
Increase in trade and other payables 2,353 8,450
36,373 30,530
Tax paid (6,075) (4,005)
Net cash inflow from operating activities 30,298 26,525
Cash flows from investing activities
Acquisition of property, plant and equipment (3,915) (2,608)
Proceeds from sale of property, plant and equipment 473 308
Acquisition of subsidiary undertakings (net of overdrafts and cash acquired) 2 (19,593) (16,914)
Net cash outflow from investing activities (23,035) (19,214)
Cash flows from financing activities
Proceeds from new loan 19 20,000 -
Net movement in invoice discounting 19 (13,948) 5,734
Interest paid 8,19 (4,248) (2,534)
Repayment of lease liabilities 19 (6,555) (5,068)
Dividends paid (7,350) (4,900)
Net cash outflow from financing activities (12,101) (6,768)
Net (decrease)/increase in cash and cash equivalents (4,838) 543
Opening cash and cash equivalents 5,511 4,968
Cash and cash equivalents at year end 17 673 5,511
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 financial information set out above does not constitute the Group or the
Company's statutory accounts for the year ended 31 October 2023 or the
financial year ended 31 October 2022. Statutory accounts for the year ended 31
October 2022 have been delivered to the registrar of companies, and those for
the year ended 31 October 2023 will be delivered in due course. The auditor
has reported on those accounts; their reports were (i) unqualified, (ii) did
not include a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and (iii) did not contain a
statement under s498 (2) or (3) of the Companies Act 2006.
In publishing the Company financial statements together with the Group
financial statements, the Company is taking advantage of the exemption in s408
of the Companies Act 2006 not to present its individual statement of profit
and loss and related notes that form a part of these approved financial
statements.
The Company has applied the following exemptions in the preparation of its
financial statements:
· A cash flow statement and related notes have not been presented;
-
· Disclosures in respect of new standards and interpretations that have
been issued but which are not yet effective have not been provided;
· Disclosures in respect of transactions with wholly-owned subsidiaries
have not been made; and
· Certain disclosures required by IFRS 13 Fair Value Measurement and the
disclosures required by IFRS 7 Financial Instruments have not been provided.
· Disclosures in respect of share based payments as required by IFRS 2
Share-based Payment 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 2023 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 2023.
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. Critical accounting estimates have been identified as
follows:
Impairment of goodwill
In accordance with IAS 36 "Impairment of Assets", the Board identifies
appropriate Cash-Generating Units ("CGUs") 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 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 CGUs 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.
Valuation of intangible assets arising on acquisition
Under IFRS 3 Business Combinations, when an acquisition takes place the Group
is required to assess whether there are any additional intangible assets
arising separately from goodwill. This requires significant accounting
estimates and judgements to be applied to the valuation of brands and customer
relationships.
In the year ended 31 October 2023, the Group acquired the entire share capital
of Westcountry Food Holdings Limited. An independent valuation of the acquired
intangible assets was performed by experts, requiring estimates of weighted
average cost of capital, customer attrition and estimate future cash flows
utilising the multi-period excess earnings methodology.
The intangibles identified are set out in note 2 and the Directors have
concluded that there is no significant risk of material adjustments to the
fair value of assets acquired 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.
1.3 Going concern
The Group has continued to deliver on its growth strategy, both operationally
and financially, in the year ended 31 October 2023, with the recent
acquisitions of M.J. Baker Foodservice Limited ("MJ Baker") and Westcountry
Food Holdings Limited ("WestCountry") contributing to increased profitability
and continued positive cash generation.
MJ Baker and WestCountry have both delivered strong performances since their
integration into the Group. The Directors are confident both entities will
continue to go from strength to strength as they leverage from their
complementary product ranges and customer lists.
The year has seen a rising costs of living in the UK, as food prices, energy
prices and interest rates have increased. In line with the Directors
expectations, this has not impacted demand for the Group's products with case
numbers up year on year. Impulse product in particular, fulfilled by the
Ambient and Frozen & Chilled divisions, has remained resilient of the cost
of living impact. Manufacturer led pricing increases have compensated for the
inflationary increase in overheads seen within the Group with an overall
improvement in operating profit year on year.
The acquisition of WestCountry added £35,887,000 of revenue and £4,657,000
of operating profit, contributing to the improvement in cash flow from
operations (before tax payments) from £30,530,000 in FY22 to £36,373,000 in
FY23. The acquisition was funded via a new three-year revolving credit
facility provided by the Group's existing lenders. This facility includes an
option for the Group to extend it by a further two years.
Post year end, H.B.Clark & Co. Successors Limited ("HB Clark") completed
the acquisition of WLG (Holdings) Limited ("WLG") for £2,700,000. The
acquisition was funded from headroom in the Group's current banking
facilities.
WLG is an on-trade supplier based in the North West of England allowing the
Group to expand is existing on-trade offering through HB Clark into this
geography.
WLG has annual turnover of approximately £10,200,000 and will be immediately
earnings and cash flow enhancing to the Group.
The Group has prepared financial forecasts and projections for a 12 month
period from the date of this report (the "going concern assessment period"),
which take into account the acquired balance sheet and forecast trading of
WLG. A 'severe but plausible' downside sensitivity has been prepared to
support the Directors conclusion regarding going concern. In addition, a
reverse stress test has been performed the results of which have not changed
the conclusion around going concern. These sensitivities include a possible
downside scenario to Group trading as a result of further inflationary
pressure in 2024.
The Group has significant headroom on banking facilities at the year end and
throughout the forecast period. These facilities are committed beyond the
forecast period under review.
These forecasts show that the Group will have sufficient levels of financial
resources available both to meet its liabilities as they fall due for that
period and comply with remaining covenant requirements on its working capital
facilities.
Consequently, the Directors are confident that the Group and Company will have
sufficient funds to continue to meet its liabilities as they fall due for at
least 12 months from the date of approval of this financial information and
therefore have prepared the financial statements on a going concern basis.
1.4 Basis of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiary undertakings made up to 31 October 2023. 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 25.
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 expected credit 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. For payments
received through electronic payment systems the Group recognises cash, and
derecognises the relevant trade receivable, when the payment is completed, and
the cash is received.
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
16) and are presented in trade and other payables (note 18). These are
repayable within 90 days of the invoice and carry interest at a margin of
2.00%. This is a committed facility which expires 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 Other financial instruments
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or
loss on remeasurement to fair value is recognised immediately in the statement
of profit and loss. No hedge accounting has been applied.
1.9 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Depreciation is charged to the statement of profit and loss on a straight-line
basis over the estimated useful lives of each part of an item of property,
plant and equipment. Land is not depreciated. The estimated useful lives are
as follows:
· Leasehold improvements 5-10% straight line or straight line over
the term of the lease
· Freehold property 2% straight line
· Plant and machinery 10-20% reducing balance and straight
line
· Fixtures and fittings 10-25% reducing balance and
straight line
· Motor vehicles 15-25% reducing balance
and straight line
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
1.10 Business combinations
Business combinations are accounted for 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.
1.11 Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units ("CGUs") and is not amortised but is tested
annually for impairment.
Intangible assets arising on acquisition and other intangible assets
Intangibles assets arising on acquisition are capitalised at far value as
determined at the date of acquisition and are stated at fair value less
accumulated amortisation.
Amortisation is charged to the statement of profit and loss on a straight line
basis over the estimated useful lives of acquired intangible assets from the
date they are acquired as follows:
· Customer relationships 6 years
· Brands 2 years
Other 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.
The cost of computer software purchased or developed in house which has the
capacity to generate economic benefits for a period in excess of one year is
capitalised as an intangible asset.
1.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
based on the weighted average principle.
The Group participates in rebate schemes with 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. Any rebates based on a volume of
purchases over a period are only recognised when the volume target has been
achieved.
1.13 Impairment excluding inventories and deferred tax assets
Non derivative financial assets - trade receivables
The Group recognises loss allowance for Expected Credit Losses ("ECLs") on
trade receivables measured at amortised cost. The Group measures loss
allowances at an amount equal to lifetime ECLs as the term of the asset is
considered short.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Group
considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Group's historical
experience and informed credit assessment including forward looking
information.
The Group utilises the practical expediency for short term receivables by
adopting the simplified 'matrix' approach to calculate expected credit losses.
The provision matrix is based on an entity's historical default rates over the
expected life of the trade receivables as adjusted for forward looking
estimates.
The Group assumes that the credit risk on a financial asset has increased if
it is aged more than 90 days since delivery. This is not relevant in all cases
and management use its historical experience and knowledge of the customer
base to assess whether this is an indicator of increased risk on a customer by
customer basis.
The Group considers the financial asset to be in default when the borrower is
unlikely to pay its obligations or has entered a formal insolvency process or
other financial reorganisation.
Loss allowances for financial assets measured at amortised costs are deducted
from the gross carrying amount of the assets.
Non-financial assets
The carrying amounts of the Group's non-financial assets, other than
inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. For
goodwill, and intangible assets that have indefinite useful lives or that are
not yet available for use, the recoverable amount is estimated each year at
the same time.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For the purpose of
impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of other
assets or groups of assets (the "CGU"). The goodwill acquired in a business
combination, for the purpose of impairment testing, is allocated to CGUs.
Subject to an operating segment ceiling test, for the purposes of goodwill
impairment testing, CGUs to which goodwill has been allocated are aggregated
so that the level at which impairment is tested reflects the lowest level at
which goodwill is monitored for internal reporting purposes. Goodwill acquired
in a business combination is allocated to groups of CGUs that are expected to
benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognised in
the statement of profit and loss. Impairment losses recognised in respect of
CGUs are allocated first to reduce the carrying amount of any goodwill
allocated to the units, and then to reduce the carrying amounts of the other
assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
1.14 Employee benefits
Defined contribution plans and other long term employee benefits
A defined contribution plan is a post-employment benefit plan under which the
Group pays fixed contributions into a separate entity and will have no legal
or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution pension plans are recognised as an
expense in the statement of profit and loss in the periods during which
services are rendered by employees.
Share-based payment transactions
Share-based payment arrangements in which the Company receives goods or
services as consideration for its own equity instruments are accounted for as
equity-settled share-based payment transactions, regardless of how the equity
instruments are obtained by the Company.
The Group operates a Management Incentive Plan ("MIP") for certain Directors
and a Long Term Incentive Plan ("LTIP") for certain Directors and senior staff
members, granting them equity settled share option rights to the Company's
equity instruments.
The fair value at the grant date of the options is recognised as an employee
expense with a corresponding increase in equity, on a straight line basis over
the vesting period.
Under both the MIP and LTIP, 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 both schemes and independent expert advice was sought for both
schemes.
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 market based 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.
Further information is included in note 22.
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 £199,000 (FY22: £95,000).
1.15 Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, that can be
reliably measured, and it is probable that an outflow of economic benefits
will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
risks specific to the liability.
1.16 Revenue
IFRS 15 "revenue from contracts with customers" 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 of 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.
1.17 Financing income and expenses
Financing expenses comprise interest payable, finance charges on put option
liabilities and finance leases recognised in the statement of profit and loss
using the effective interest method, unwinding of the discount on provisions,
and net foreign exchange losses that are recognised in the statement of profit
and loss (see 1.5 foreign currency accounting policy). Borrowing costs that
are directly attributable to the acquisition, construction or production of an
asset that takes a substantial time to be prepared for use, are capitalised as
part of the cost of that asset. Financing income comprise interest receivable
on funds invested, finance income on the put option liability, and net foreign
exchange gains.
Interest income and interest payable is recognised in the statement of profit
and loss as it accrues, using the effective interest method. Dividend income
is recognised in the statement of profit and loss on the date the entity's
right to receive payments is established. Foreign currency gains and losses
are reported on a net basis.
1.18 Taxation
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.
1.19 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 Group's
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.
1.20 Government Grants
The Group has elected to present grants related to income separately under the
heading "Other income" within the statement of profit and loss. This income in
the prior year represents the funding provided by the Government in relation
to Additional Restrictions Grant and COVID-19 Additional Relief Fund Schemes.
The Directors do not consider there to be a material risk that any funding
received will be repayable.
1.21 Exceptional items
Exceptional items are defined as income or expenses that arise from events or
transactions that are clearly distinct from the recurring activities of the
Group as a delivered wholesale business.
Such items have been separately presented to enable a better understanding of
the Group's operating performance. Details of exceptional expenses are
presented in note 5.
1.22 Investments
Investments in subsidiaries are carried at cost less impairment in the parent
Company financial statements.
2. Acquisitions in the year
Acquisitions in the year ended 31 October 2023
Westcountry Food Holdings Limited
On 9 December 2022, the Group acquired the entire share capital of Westcountry
Food Holdings Limited for a total consideration of £28,485,811. After
recognition of acquired intangible assets and associated deferred tax
liabilities, the resulting goodwill of £14,338,000 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:
Consolidated balance sheet as at 9 December 2022 Book value Fair value adjustments Fair value
£000 £000 £000
Non-current assets
Tangible assets 2,146 - 2,146
Intangible assets - 4,992 4,992
Right-of-use assets 262 - 262
Investments 7 - 7
Current assets
Inventories 1,011 - 1,011
Trade and other receivables 2,135 - 2,135
Cash and cash equivalents 8,893 - 8,893
Total assets 14,454 4,992 19,446
Current liabilities
Lease liabilities (49) - (49)
Trade and other payables (2,908) - (2,908)
Corporation tax (453) - (453)
Non-current liabilities
Lease liabilities (499) - (499)
Deferred tax (163) (1,226) (1,389)
Total liabilities (4,072) (1,226) (5,298)
Net identifiable assets and liabilities 10,382 3,766 14,148
Goodwill 14,338
Total net assets acquired 28,486
Initial purchase consideration paid 29,000
Net asset adjustment refunded (514)
Purchase consideration and costs of acquisition paid in period 28,486
Cash acquired (8,893)
Purchase consideration net of cash acquired 19,593
The business and its trading subsidiary, Westcountry Fruit Sales Limited, were
acquired as part of the Group's growth strategy. Significant control was
obtained through the acquisition of 100% of the share capital of Westcountry
Food Holdings Limited.
An independent valuation was performed to identify and intangible assets on
acquisition per IFRS 3. As a result of this valuation, intangible assets in
relation to brand and customer relationships were identified, and recognised,
with attributable fair values of £260,000 and £4,732,000 respectively. The
recognition of these intangible assets resulted in deferred tax liabilities of
£63,000 for the brand intangible and £1,163,000 for the customer intangible
also being recognised at acquisition.
The acquired undertakings made a consolidated profit of £3,479,000 from the
beginning of its financial year on 2 January 2022 to the date of acquisition.
In its previous financial year the profit after tax was £3,112,000.
Following acquisition, the business contributed revenue of £35,887,000 and
operating profit of £4,657,000 to the Group for the year ended 31 October
2023.
If the business had been acquired at the start of the Group's financial
period, being 1 November 2022, it would have added £37,861,000 to Group
revenue and £4,773,000 to Group operating profit for the year ended 31
October 2023
The initial consideration paid was £29,000,000 from which an amount of
£514,189 was repaid by the vendor following submission of completion accounts
which triggered a repayment to the Kitwave Group for the difference between
the net asset target in the sales purchase agreement and the completion
accounts net assets. This resulted in a net consideration paid in the period
of £28,485,811. Net of cash and cash equivalents of £8,893,000 the net cash
outflow from the Group as a result of the acquisition was £19,592,811.
On acquisition an assessment was made regarding the fair value of tangible
assets which includes two freehold property. The result of an independent
assessment was no change to the net book value held in Westcountry Food
Holdings Limited accounts.
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 of Directors (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 and chilled: Provides delivered wholesale of frozen and chilled
food products;
· Foodservice: Provides delivered wholesale of alcohol, frozen, chilled
and fresh 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 customer
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 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.
The following analysis shows how this development will be monitored in future
periods whilst demonstrating the link to the existing segmental information
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.
Frozen & Chilled Total Retail and
Ambient £000 Wholesale Foodservice Corporate Total
FY23 £000 £000 £000 £000 £000
Revenue 207,195 216,399 423,594 178,626 - 602,220
Inter-segment revenue 15,561 3,392 18,953 625 - 19,578
Segment revenue 222,756 219,791 442,547 179,251 - 621,798
Adjusted EBITDA* 12,291 14,115 26,406 20,030 (5,295) 41,141
Amortisation of intangibles - (80) (80) (6) (47) (133)
Depreciation (1,773) (4,130) (5,903) (2,995) (94) (8,992)
Adjusted operating profit* 10,518 9,905 20,423 17,029 (5,436) 32,016
Group management charge (1,230) (840) (2,070) (1,750) 3,820 -
Amortisation of intangible assets arising on acquisition - - - - (842) (842)
Acquisition expense - - - - (648) (648)
Compensation for post - (199) (199) - - (199)
combination services
Share based payment expense - - - - (964) (964)
Interest expense (918) (1,344) (2,262) (689) (1,554) (4,505)
Segment profit/(loss) before tax 8,370 7,522 15,892 14,590 (5,624) 24,858
Segment assets 43,697 56,373 100,070 44,586 64,929 209,585
Segment liabilities (28,380) (45,691) (74,071) (29,288) (21,781) (125,140)
Segment net assets 15,317 10,682 25,999 15,298 43,148 84,445
Within Corporate segment assets is £56,680,000 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 32,665 - 58,680
*For more information on alternative performance measures please see the
glossary on pages at the end of the announcement
Frozen & Chilled Total Retail and
Ambient £000 Wholesale Foodservice Corporate Total
FY22 £000 £000 £000 £000 £000
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* 9,112 11,222 20,334 12,263 (3,120) 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* 7,528 7,240 14,768 9,912 (3,199) 21,481
Group management charge (730) (840) (1,570) (1,000) 2,570 -
Acquisition expense - - - - (148) (148)
Compensation for post - (95) (95) - - (95)
combination services
Share based payment expense - - - - (863) (863)
Interest expense (736) (1,057) (1,793) (520) (221) (2,534)
Segment profit 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 / (liabilities) 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
An analysis of revenue by destination is given below:
Geographical information
FY23 FY22
£000 £000
United Kingdom 597,292 497,842
Overseas 4,928 5,246
Group revenue 602,220 503,088
No one customer accounts for more than 9% (FY22: 9%) of Group revenue.
4. Other operating income
FY23 FY22
£000 £000
Net gain on disposal of fixed assets 179 164
Net gain on foreign exchange - 33
Net gain on remeasurement of right-of-use assets and lease liabilities 4 8
Grant income - 169
183 374
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.
5. Expenses
FY23 FY22
£000 £000
Included in profit/loss are the following:
Depreciation of tangible assets
Owned 2,253 1,946
Right-of-use assets 6,739 5,951
Amortisation of intangible assets 975 99
Expense relating to short term and low value assets 1,992 1,255
Impairment loss on trade receivables 675 871
The Group incurred a number of expenses not relating to the principal trading
activities of the Group as follows:
FY23 FY22
£000 £000
Exceptional expenses
Acquisition expenses 648 148
Compensation for post combination services 199 95
Total exceptional expenses 847 243
Share based payment expense 964 863
Total exceptional expenses and share based payments 1,811 1,106
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.
Acquisition expenses on both periods include the legal and professional fees
connected to the acquisition of Westcountry Food Holdings Limited in the
current year and M.J. Baker Foodservice Limited in the prior year.
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 LTIP and are non cash expenses. For
further information see note 22.
¶
Auditor's remuneration:
FY23 FY22
£000 £000
Audit of these financial statements 51 45
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements of subsidiaries of the Company 364 290
Other assurance services 5 5
In the current and prior year audit and non-audit fees were paid to Grant
Thornton UK LLP. In addition to the fee disclosed above, direct disbursements
were paid to Grant Thornton UK LLP of £9,000 (FY22: £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:
FY23 FY22
Management and administration 227 193
Sales 241 212
Warehouse 533 436
Distribution 508 395
Directors 3 3
1,512 1,239
The aggregate payroll costs of these persons were as follows;
FY23 FY22
£000 £000
Wages and salaries 49,475 37,575
Social security costs 4,790 3,642
Other pension costs (note 21) 1,066 721
55,331 41,938
Staff costs accruing in the Company total £964,000 (FY22: £863,000) in
relation to both the Management Incentive Plan and the Long term incentive
plan (including employer NIC Costs), see note 22 for further details.
7. Directors' remuneration
Included within staff costs (note 6) are the following amounts in respect of
Directors' emoluments
FY23 FY22
£000 £000
Directors' emoluments 1,164 922
Company contribution to personal pension scheme 15 20
1,179 942
Retirement benefits are accruing to three Directors under money purchase
pension schemes (FY22: three)
Amounts accrued under the MIP for two of the Directors was £863,000 (FY22:
£863,000). Amount accrued under the LTIP for two of the Directors was
£40,000 (FY22: £nil).
FY23 FY22
£000 £000
Highest paid Director
Directors' emoluments 389 357
Company contribution to personal pension scheme 8 8
397 365
8. Finance income and expense
FY23 FY22
£000 £000
Interest payable and similar charges
Interest payable on bank loans and invoice discount facilities 2,842 1,105
Finance charges payable in respect of leases 1,656 1,427
Other interest 7 2
4,505 2,534
Included in the above is £257,000 of interest accrued not paid as at 31
October 2023 in relation to the Revolving Credit Facility (FY22: £nil).
9. Taxation
FY23 FY22
£000 £000
UK corporation tax
Current tax charge on income for the year 6,193 3,559
Adjustment in respect of prior periods (39) (45)
Total current tax 6,154 3,514
Deferred tax (see note 20)
Reversal of timing differences (290) (109)
Adjustment in respect of prior periods 38 96
Total deferred tax credit (252) (13)
Tax charge on profit on ordinary activities 5,902 3,501
FY23 FY22
£000 £000
Current tax reconciliation
Profit on ordinary activities after tax 18,956 14,340
Tax charge 5,902 3,501
Profit on ordinary activities before tax 24,858 17,841
Tax using the UK corporation tax of 23% (FY22: 19%) 5,631 3,390
Effect of:
Expenses not deductible for tax purposes 455 250
Permanent fixed asset differences 46 -
Income not taxable (27) (26)
Adjustments in respect of prior periods (39) (45)
Adjustment in respect of prior period - deferred tax 38 96
Share based payment (217) (164)
Other tax adjustments 15 -
Total current tax charge 5,902 3,501
An increase in the UK corporation rate from 19% to 25% (effective 1 April
2023) was substantively enacted on 24 May 2021. As the rate is effective part
way through the Group's financial year, a pro-rated tax rate of 23% has been
adopted in the above reconciliation in line with the relevant legislation.
The deferred tax liability at 31 October 2023 has been calculated based on the
25% UK corporation tax rate, reflecting the expected timing of reversal of the
related timing differences (FY22: 25%).
10. Earnings per share
Basic earnings per share
Basic earnings per share for the year ended 31 October 2023, and the previous
year ended 31 October 2022 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 2023, and previous
year ended 31 October 2022 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
FY23 FY22
£000 £000
Profit attributable to all shareholders 18,956 14,340
pence pence
Basic earnings per ordinary share 27.1 20.5
Diluted earnings per ordinary shares 26.0 20.5
Weighted average number of ordinary shares
FY23 FY22
Number Number
Weighted average number of ordinary shares (basic) during the year 70,000,000 70,000,000
Weighted average number of ordinary shares (diluted) during the year 73,047,991 70,033,033
11. Intangible assets
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
Group
Acquired intangibles Intangible assets Goodwill Total
£000 £000 £000 £000
Cost
Balance at 1 November 2022 - 1,130 49,854 50,984
Additions - 124 - 124
Recognised through business combinations 4,992 - 14,338 19,330
Balance at 31 October 2023 4,992 1,254 64,192 70,438
Amortisation
Balance at 1 November 2022 - 393 5,512 5,905
Charge in year 842 133 - 975
Balance at 31 October 2023 842 526 5,512 6,880
Net book value
At 31 October 2023 4,150 728 58,680 63,558
At 31 October 2022 - 737 44,342 45,079
Included in acquired intangibles are customer relationships with a net book
value of £4,009,000 and brands with a net book value of £141,000. At the
year ended 31 October 2023 both acquired intangibles relate to the acquisition
of Westcountry Food Holdings Limited. No intangibles have been recognised on
prior period acquisitions. The intangibles arise on consolidation only and are
not recognised in the accounts of the trading entity. The customer
relationships have an amortisation period of 5 years, and the brands have an
amortisation period of 1 year remaining as at 31 October 2023.
Impairment testing
Goodwill arising on business combinations is assessed separately 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
2023 2022
£000 £000
Ambient 13,516 13,516
Frozen & Chilled 12,499 12,499
Foodservice 32,665 18,327
58,680 44,342
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:
2023 2022
Period forecasts are based on: 4 years 4 years
Growth rate applied: 2% 2%
Pre-tax discount rate applied: 11.58% 10.59%
Impairment testing at 31 October 2023 has considered a further impact of
inflation and its potential impact on demand and overheads the CGU's. The
Board expect product and overhead inflation to reduce from levels seen in the
year ended 31 October 2023. Having operated through the trading restrictions
of previous financial periods the Directors believe there is no reasonable
prospective of a reduction in demand that 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 discount rate is per the Group's current weighted average cost of capital
adjusted to reflect the pre tax rate at 25% corporation tax and a risk premium
from comparable listed entities to approximate a market based discount rate. A
specific risk premium has not been applied to each CGU as they all operate in
the wholesale of food and drinks and are therefore exposed to the same
macroeconomic risks. This would be reassessed if the discount rate indicated
potential impairment of any individual CGU.
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 wider
economic issues, and also the increase in interest rates affecting the rate
paid on debt instruments linked to base rate and SONIA.
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 CGUs 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 property Leasehold improvements Fixtures and fittings Motor vehicles Plant & machinery Total
£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
Group Freehold property Leasehold improvements Fixtures and fittings Motor vehicles Plant & machinery Total
£000 £000 £000 £000 £000 £000
Cost
Balance at 1 November 2022 5,725 2,246 6,178 2,261 8,572 24,982
Additions 95 271 772 1,459 1,191 3,788
Disposals - (40) (113) (167) (49) (369)
Transferred from right-of-use - 673 - 778 - 1,451
Acquired through business combinations 1,270 - 135 186 247 1,838
Balance at 31 October 2023 7,090 3,150 6,972 4,517 9,961 31,690
Depreciation
Balance at 1 November 2022 212 1,014 4,544 1,155 5,020 11,945
Charge in year 171 171 558 624 729 2,253
Disposals - - (88) (59) (4) (151)
Transferred from right-of-use - 359 - 670 - 1,029
Balance at 31 October 2023 383 1,544 5,014 2,390 5,745 15,076
Net book value
At 31 October 2023 6,707 1,606 1,958 2,127 4,216 16,614
At 31 October 2022 5,513 1,232 1,634 1,106 3,552 13,037
13. Right-of-use assets
Group Leasehold property Motor vehicles Plant & Machinery Total
£000 £000 £000 £000
Cost
Balance 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 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)
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
Group Leasehold property Motor vehicles Plant & Machinery Total
£000 £000 £000 £000
Cost
Balance at 1 November 2022 24,212 16,125 2,510 42,847
Additions 1,922 7,704 402 10,028
Transferred to tangible assets (673) (778) - (1,451)
Disposals (683) (2,131) (692) (3,506)
Loss on remeasurement (133) (167) (36) (336)
Acquired through business combinations 242 307 20 569
Balance at 31 October 2023 24,887 21,060 2,204 48,151
Depreciation
Balance at 1 November 2022 5,672 9,567 1,156 16,395
Charge in year 2,113 4,161 465 6,739
Transferred to tangible assets (359) (670) - (1,029)
Disposals (683) (2,055) (692) (3,430)
Loss on remeasurement (107) (111) (22) (240)
Balance at 31 October 2023 6,636 10,892 907 18,435
Net book value
At 31 October 2023 18,251 10,168 1,297 29,716
At 31 October 2022 18,540 6,558 1,354 26,452
14. Investments
Unlisted investments
2023 2022
Group £000 £000
Cost and net book value
At beginning of year 35 20
Additions 3 -
Acquired on business combinations 7 25
Disposals - (10)
At end of year 45 35
Shares in Group undertakings
2023 2022
Company £000 £000
Cost and net book value
At beginning and end of year 12,993 12,993
The Company has the following investments in subsidiaries
Subsidiary Country of Class of Ownership Ownership
undertaking
incorporation
shares held
2023
2022
Kitwave Investments Limited UK Ordinary 100% 100%
Kitwave One Limited* UK Ordinary 100% 100%
Kitwave Limited* UK Ordinary 100% 100%
M&M Value Limited* UK Ordinary 100% 100%
Turner & Wrights Limited* UK Ordinary 100% 100%
FW Bishop & Son Limited* UK Ordinary 100% 100%
Westone Wholesale Limited* UK Ordinary 100% 100%
Automatic Retailing (Northern) Limited* UK Ordinary 100% 100%
Andersons (Wholesale) Limited* UK Ordinary 100% 100%
Teatime Tasties Limited* UK Ordinary 100% 100%
TG Foods Limited* UK Ordinary 100% 100%
Eden Farm Limited* UK Ordinary 100% 100%
Squirrels UK Limited* UK Ordinary 100% 100%
Thurston's Food's Limited* UK Ordinary 100% 100%
Angelbell Limited* UK Ordinary 100% 100%
David Miller Frozen Foods Limited* UK Ordinary 100% 100%
Phoenix Fine Foods Limited* UK Ordinary 100% 100%
MAS Frozen Foods Limited* UK Ordinary 100% 100%
Supplytech Limited* UK Ordinary 100% 100%
HB Clark Holdings Limited* UK Ordinary 100% 100%
HB Clark & Co (Successors) Limited* UK Ordinary 100% 100%
Churnet Valley Drinks Limited* UK Ordinary 100% 100%
Clarks Fine Wines Limited* UK Ordinary 100% 100%
FAM Soft Drinks Limited* UK Ordinary 100% 100%
Thorne Licence Wholesale Limited* UK Ordinary 100% 100%
Alpine Fine Foods Limited* UK Ordinary 100% 100%
Central Supplies (Brierley Hill) Ltd UK Ordinary 95% 95%
M.J. Baker Foodservice Limited UK Ordinary 100% 100%
Westcountry Food Holdings Limited* UK Ordinary 100% 0%
Westcountry Fruit Sales Limited* UK Ordinary 100% 0%
Veggies & More Limited * UK Ordinary 100% 0%
Westcountry Fine Foods Limited* UK Ordinary 100% 0%
*held indirectly thought Kitwave Investments Limited and its subsidiaries
The registered office of all the above companies is: Unit S3 Narvik Way, Tyne
Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ
*held indirectly thought Kitwave Investments Limited and its subsidiaries
The registered office of all the above companies is: Unit S3 Narvik Way, Tyne
Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ
15. Inventories
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Goods for resale 35,410 31,846 - -
35,410 31,846 - -
Goods for resale recognised as cost of sales in the year amount to
£470,095,000 (FY22: £400,460,000).
16. Trade and other receivables
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Trade receivables 50,985 47,206 - -
Amounts owed by Group undertakings - - 59,958 61,429
Other debtors 1,383 1,510 - -
Prepayments and accrued income 11,201 8,982 75 106
63,569 57,698 60,033 61,535
Due within one year 62,692 56,926 60,033 61,535
Due after more than one year 877 772 - -
63,569 57,698 60,033 61,535
£7,539,000 (FY22: £23,946,000) of Group trade receivables are used as
security against invoice discounting advances (note 19).
17. Cash and cash equivalents
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Cash at bank and in hand 673 5,511 3 45
Cash and cash equivalents per cashflow statement 673 5,511 3 45
18. Trade and other payables: amounts falling due within one year
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Trade payables 45,679 43,836 - -
Other creditors 6,773 4,478 - -
Accruals 11,144 9,577 57 39
Amounts owed to Group undertakings - - 37 22
63,596 57,891 94 61
19. 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
2023 2022 2023 2022
Non current liabilities £000 £000 £000 £000
Lease liabilities 26,267 23,240 - -
Revolving Credit Facility 20,000 - - -
46,267 23,240 - -
Group Company
2023 2022 2023 2022
Current liabilities £000 £000 £000 £000
Lease liabilities 6,402 5,509 - -
Invoice discounting advances 6,405 20,354 - -
12,807 25,863 - -
The Group leases warehousing facilities, commercial vehicles and other
logistics equipment for use in its operations. The Group made a commitment for
a new lease relating to the distribution centre in the South West. This was
not signed at the year end and will have a lease liability of £5,853,000 on
commencement of the lease, expected in the year ended 31 October 2024.
Group Company
2023 2022 2023 2022
Lease liabilities £000 £000 £000 £000
Lease liabilities payable as follows:
Within one year 6,402 5,509 - -
In the second to fifth years 14,106 10,396 - -
Over five years 12,161 12,844 - -
32,669 28,749 - -
Terms and debt repayment schedule
2023 2023 2022 2022
Face Carrying Face value Carrying
value
Currency Nominal interest rate Year of maturity
value £000 value
£000
£000 £000
Lease liabilities Sterling 3.50% - 9.00% 2024-2041 41,333 32,669 37,686 28,749
Invoice discounting advances Sterling 2.00% + Base 2025 6,405 6,405 20,354 20,354
Revolving Credit Facility Sterling 2.05% + SONIA 2025 20,000 20,000 - -
67,738 59,074 58,040 49,103
Loans and borrowings Lease liabilities
Changes in liabilities from financing activities Total
£000 £000 £000
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 liabilities - (351) (351)
Added through business combination - 984 984
Total other changes 6,839 10,610 17,449
Total debt at 31 October 2022 20,354 28,749 49,103
Changes from financing cash flows
Repayment of borrowings (13,949) - (13,949)
Payment of lease liabilities - (6,555) (6,555)
Interest paid (2,585) (1,656) (4,241)
Total changes from financing cash flows (16,534) (8,211) (24,745)
Other changes
New borrowing 20,000 10,025 30,025
Interest expense 2,585 1,656 4,241
Remeasurement of lease liability - (99) (99)
Added through business combinations - 549 549
Total other changes 22,585 12,131 34,716
Total debt at 31 October 2023 26,405 32,669 59,074
All borrowings are denominated in Sterling.
Bank trade loans are secured by means of debenture and cross guarantees over
the assets of all Group undertakings. These are generally repayable within 35
days of drawdown and form an integral part of the Group's day to day short
term cash management.
Receipts and payments from trade loans are disclosed on a net basis in the
cash flow statement under IAS 7 22(b) on the basis they are short maturity.
The invoice discounting advances are secured against trade receivables (note
16). These are repayable within 90 days of the date of the invoice and carry
interest at a margin of 2.00%. This is a committed facility due 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.
A £20,000,000 Revolving Credit Facility ("RCF") was entered into in December
2022 as part of the funding for the Westcountry Food Holdings Limited
acquisition. The permitted use of the RCF is to fund acquisitions and it is
not part of the Group's working capital finance. The facility is in place
until December 2025 and the Group has an option to extend this by two years to
December 2027. The interest margin is based on leverage at the year ended was
paid at c.2.25% over SONIA and has reduced post year end to 2.05% due to the
reduction in the Group's leverage position.
The Bank trade loans, invoice discounting and RCF advances rank pari passu and
without preference between them in priority of payment.
20. Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Group
Assets Liabilities
2023 2022 2023 2022
£000 £000 £000 £000
Property, plant and equipment 208 322 (2,701) (1,389)
Share based payment expense 514 272 - -
IFRS 16 timing differences 103 80 - -
Tax assets / (liabilities) 825 674 (2,701) (1,389)
Movement in deferred tax during the period:
Group Amounts arising from business Recognised in 31 October
31 October 2022 income 2023
£000 £000 £000 £000
Property, plant and equipment (1,068) (1,389) (34) (2,491)
Share based payment 273 - 241 514
IFRS 16 timing differences 80 - 21 101
Tax assets/ (liabilities) (715) (1,389) 228 (1,876)
Company
Assets Liabilities
2023 2022 2023 2022
£000 £000 £000 £000
Shared based payment expense 514 273 - -
Tax assets 514 273 - -
Company
Amounts arising from business 31 October
31 October 2022 Recognised in income 2023
£000 £000 £000 £000
Share based payment 273 - 241 514
Tax assets 273 - 241 514
21. 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 £1,066,000
(FY22: £721,000)
22. Employee share schemes
The Group has in place a MIP and an LTIP whereby the options are expected to
be equity settled. The charge for the year in respect of the schemes,
excluding NIC costs in relation to the LTIP, was as follows:
2023 2022
£000 £000
MIP 863 863
LTIP 89 -
952 863
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 Employees Number of shares granted
entitled
Date of grant Principal vesting conditions Contractual life
Management Incentive Plan July 2021 Selected senior Nil Service during vesting period 3 years,
employees EPS performance hurdle 6 months
Market capitalisation hurdle
Long term Incentive Plan March 2023 Selected senior Nil Service during vesting period 3 years,
employees EPS performance hurdle
Total Shareholder return hurdle
MIP
2022
Weighted average exercise price
£
2023 2023 2022
Weighted average Number of options Number of options
exercise price
£
Outstanding at the beginning of the year - 10,000 - 10,000
Granted during the year - - - -
Outstanding at the end of the year - 10,000 - 10,000
Under the MIP, Growth shares were issued in Kitwave Limited with a
subscription price of £5.24 per option was paid on subscription. The 10,000
growth shares are exchangeable for shares in the Company up to a maximum of 4
per cent of the Company's issued ordinary shares subject to achieving the
principal vesting conditions.
LTIP
2022
Weighted average exercise price
£
2023 2023 2022
Weighted average exercise price Number of options Number of options
£
Outstanding at the beginning of the year - - - -
Granted during the year - 225,000 - -
Outstanding at the end of the year - 225,000 - -
Under the LTIP, the participants are offered the opportunity to acquire shares
in Kitwave Group plc at nil cost subject to achieving the principal vesting
conditions.
The LTIP has incurred an expense under employee expenses of £101,000 (FY22:
£nil). Of this expenditure, £89,000 has been taken to the share based
payment reserve, the other £12,000 representing an accrual of employer NIC on
the value of the options
The share based payment reserve represents the accumulation of the cost of the
MIP and LTIP in accordance with the treatment of equity settled share based
payment expense under IFRS 2. As at 31 October 2023 the balance on this
reserve is £2,042,000 (FY22: £1,090,000).
The vesting period for the LTIP is 3 years. Executive Directors have a two
year post vest holding period for awards under this scheme.
23. Called up share capital
Group and Company 2023 2022
£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 increased for the premium paid on the new shares
issued over their nominal value being £63,300,000. Under IAS 32 the
transaction costs associated with the issuance of new equity on IPO of the
Company have been deducted from the share premium account, being a total of
£2,110,000.
24. 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 £6,405,000 (2022: £20,354,000) bank borrowings of its subsidiary
companies.
25. Financial instruments
25 (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
2023 2022
£000 £000
Financial assets held at amortised cost
Trade receivables 50,985 47,206
Cash and cash equivalents 673 5,511
51,658 52,717
Financial liabilities measured at amortised cost
Trade payables 45,679 43,836
Accruals 11,144 9,577
Invoice discounting advances 6,405 20,354
Obligations under lease liabilities 32,669 28,749
Revolving Credit Facility 20,000 -
115,897 102,516
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 the statement of profit
and loss
IFRS 9 analyses financial instruments into a fair value hierarchy based on the
valuation technique used to determine fair value.
ï Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities
ï Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices)
ï Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
All financial instruments for the year ended 31 October 2023 and 2022 were
categorised as level 1.
25 (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. Management 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.
2023 Gross Impairment Net
£000 £000 £000
Current 41,833 - 41,833
31-60 days from invoice 9,547 (395) 9,152
61-90 days from invoice 900 (900) -
90+ days 859 (859) -
53,139 (2,154) 50,985
The maximum Group exposure to credit risk in the period ended 31 October 2023
was £50,985,000 (2022: £47,206,000) 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 0.12% of Group revenue. The prior
financial year annual debt expense was 0.16% of Group revenue. Applying the
historic factor would result in a provision of c.£964,000 for the year ended
31 October 2023.
The impairment charge on trade receivables in the 12 month period ended 31
October 2023 £675,000 (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 full
impact of interest rate increases, consumer price inflation to date is
expected to be seen in FY24.
Debt is reviewed regularly by dedicated credit control teams within each
division and information from credit rating agencies is often used to assess a
customer's ability to meet its obligations.
If there is significant doubt regarding a receivable a specific provision is
created. In addition, a provision is created to account for the estimated
losses that may be incurred in future periods. Management considers the level
of provisioning to be materially correct based on these factors.
Movement in expected credit loss 2023 2022
£000 £000
At beginning of the year 2,088 2,017
Provided during the year 675 871
Added on acquisition 107 19
Utilised during the year (716) (819)
At the end of the year 2,154 2,088
25 (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:
2023 Carrying Contractual cashflow 1 year 1-2 2-5 More than
amount
or less
years years 5 years
£000 £000 £000 £000 £000 £000
Financial liabilities
Trade payables 45,679 45,679 45,679 - - -
Accruals 11,144 11,144 11,144 - - -
Lease liabilities 32,669 41,333 7,775 6,140 11,548 15,870
Invoice discounting advances* 6,405 6,405 6,405 - - -
Revolving Credit Facility* 20,000 20,000 - 20,000
115,897 124,561 71,003 26,140 11,548 15,870
2022 Carrying Contractual cashflow 1 year 1-2 2-5 More than
amount
or less
years years 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
* The invoice discounting, Revolving Credit Facility (RCF) and bank trade loan
are all revolving facilities. 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. Both
the invoice discounting and trade loan facility form an integral part of the
Group's day to day short term cash management. The RCF is available up to
£20,000,000 and is committed until 2025, with the Group's option to extend it
for a further two years to 2027. The permitted use of the RCF is to fund
acquisitions and it is presently fully drawn following the acquisition of
Westcountry Food Holdings Limited in December 2022.
25 (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
2023 2022
Fixed rate instruments £000 £000
Financial liabilities (32,669) (28,749)
(32,669) (28,749)
2023 2022
Variable rate instruments £000 £000
Financial liabilities (26,405) (20,354)
(26,405) (20,354)
Sensitivity analysis
An increase of 25 basis points in interest rates throughout the period would
have affected the statement of profit and loss by the amounts shown below.
This calculation assumes that the charge occurred at all points in the period
and had been applied to the average risk exposures throughout the period:
2023 2022
£000 £000
Profit or loss decreases 66 51
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
25 (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 £32,669,000 (2022: £28,749,000), cash and cash
equivalents of £673,000 (2022: £5,511,000), an invoice discounting facility
with a limit of £38,000,000 drawn at £6,405,000 (2022: £20,354,000), a
trade loan facility with a limit of £8,000,000 draw at nil (2022: nil), a
revolving credit facility drawn at £20,000,000 (2022: £nil) and equity
attributable to the equity holders of the Group of £84,445,000 (2022:
£71,887,000).
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, excluding cash, of
£39,600,000 at the year end (2022: £25,600,000).
26. 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, Alpine Fine Foods
Limited, Westcountry Food Holdings Limited, Westcountry Fruit Sales Limited,
Veggies & More Limited and Westcountry Fine Foods Limited are all 100%
owned subsidiaries of this Company. Central Supplies (Brierley Hill) Ltd is a
95% owned subsidiary of this Company.
Key management personnel
Total compensation of key management personnel in the period amounts to
£1,179,394 (FY22: £942,439) in respect of short-term employment benefits,
£nil (FY22: £nil) in respect of past-employment benefits and £nil (FY22:
nil) in respect of termination benefits.
27. 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.
28. Post balance sheet events
Post year end the Group completed the acquisition of the entire ordinary share
capital of WLG (Holdings) Limited for total consideration of £2,700,000. The
acquired balance sheet included cash and cash equivalents of £192,000. The
business 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 headroom on existing bank facilities.
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.
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.
FY23 FY22
Note £000 £000
Total operating profit 29,363 20,375
Amortisation of intangible assets arising on acquisition 3 842 -
Acquisition expenses 5 648 148
Compensation for post combination services 5 199 95
Share based payment expense 5 964 863
Adjusted operating profit 32,016 21,481
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.
FY23 FY22
Note £000 £000
Total operating profit 29,363 20,375
Amortisation of intangible assets 11 975 99
Depreciation 12,13 8,992 7,897
Acquisition expenses 5 648 148
Compensation for post combination services 5 199 95
Share based payment expense 5 964 863
Adjusted EBITDA 41,141 29,477
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.
FY23 FY22
£000 £000
Net cash inflow from operating activities 30,298 26,525
Tax paid 6,075 4,005
Cash flow from operating activities pre tax and compensation for post 36,373 30,530
combination services (1)
Movement in working capital 3,937 (1,373)
Cash flow from operating activities pre tax and compensation for post 40,310 29,157
combination services and movement in working capital (2)
Pre tax operational cash conversion (1) divided by (2)
90% 105%
Alternative performance measure Definition and purpose
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.
FY23 FY22
£000 £000
Adjusted operating profit 32,016 21,481
Operating lease interest (1,656) (1,427)
30,360 20,054
Tax charge at effective rate of tax of 23% (FY22:18%) (6,831) (3,690)
Adjusted operating profit after tax (1) 23,529 16,364
Invested capital comprising:
Invoice discounting advances 6,405 20,354
Lease liabilities 32,669 28,749
Revolving Credit Facility 20,000 -
Share capital 700 700
Share premium 64,183 64,183
Less cash at bank and in hand (673) (5,511)
Total invested capital (2) 123,284 108,475
After tax return on invested capital (1) divided by (2)
19% 15%
Return on net assets Represents adjusted profit after tax as a proportion of the Group's investment
in fixed assets and working capital. This measure informs the Board of how
effective the Group is in generating returns from its fixed assets and net
working capital.
FY23 FY22
£000 £000
Adjusted operating profit 32,016 21,481
Tax charge at effective rate of tax of 23% (FY22:18%) (7,204) (3,953)
Adjusted operating profit after tax (1) 24,812 17,528
Fixed assets and net working capital comprising:
Intangible assets* 728 737
Fixed assets 16,614 13,037
Right-of-use assets 29,716 26,452
Investments 45 35
Inventories 35,410 31,846
Trade and other receivables 63,569 57,698
Trade and other payables (63,596) (57,891)
Liability for post combination services** 1,006 806
Total invested capital (2) 83,492 72,720
After tax return on invested capital (1) divided by (2) 30% 24%
* excluding acquired intangibles arising on acquisition
** adjustment to exclude the liability for post combination services from
trade and other payables
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.
FY23 FY22
Note £000 £000
Adjusted EBITDA (1) 41,141 29,477
Invoice discounting advances 6,405 20,354
Lease liabilities 32,669 28,749
Revolving Credit Facility 20,000 0
Liability for post combination services 1,006 807
Cash at bank and in hand (673) (5,511)
Net debt (2) 59,407 44,399
Leverage (including IFRS 16 debt) (2) divided by (1) 1.4 1.5
IFRS 16 lease liabilities 26,197 25,902
Net debt excluding IFRS 16 lease liabilities (3) 33,210 18,497
Leverage (excluding IFRS 16 lease debt) (3) dividend by (1) 0.8 0.6
Alternative performance measure Definition and purpose
Reconciliation between
existing and acquired operating profit for the year
Existing operations Total year ended Year ended 31 October
2023 Acquisitions 31 October 2022
Note £000 2023 2023 £000
£000 £000
Revenue 3 566,333 35,887 602,220 503,088
Cost of sales (447,466) (22,629) (470,095) (400,460)
Gross profit 118,867 13,258 132,125 102,628
Other operating income 4 201 (18) 183 374
Distribution expenses (49,026) (5,544) (54,570) (44,010)
Administrative expenses (45,336) (3,039) (48,375) (38,617)
Operating profit 24,706 4,657 29,363 20,375
Analysed as:
Adjusted EBITDA 36,145 4,996 41,141 29,477
Amortisation of intangible assets 11 (975) - (975) (99)
Depreciation 12,13 (8,653) (339) (8,992) (7,897)
Acquisition expenses 5 (648) - (648) (148)
Compensation for post combination services 5 (199) - (199) (95)
Share based payment expense 5 (964) - (964) (863)
Total operating profit 24,706 4,657 29,363 20,375
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR TFMBTMTITTBIRecent news on Kitwave
See all newsREG - Kitwave Group PLC - Trading Update
AnnouncementREG - Kitwave Group PLC - Director/PDMR Shareholding
AnnouncementREG - Kitwave Group PLC - Director/PDMR Shareholdings
AnnouncementREG - Kitwave Group PLC - Holding(s) in Company
AnnouncementREG - Kitwave Group PLC - Acquisition of Total Foodservice Solutions Limited
Announcement