REG - Kitwave Group PLC - Interim Results
05/07/2022 07:00
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RNS Number : 2843R Kitwave Group PLC 05 July 2022
5 July 2022
Kitwave Group plc
("Kitwave", the "Group" or the "Company")
Unaudited interim results for the six months ended 30 April 2022
Kitwave Group plc (AIM: KITW), the delivered wholesale business, is pleased to
announce its unaudited interim results for the six months ended 30 April 2022
("the period" or "H1 2022").
The tables and commentary below include comparatives for both the six months
ended 30 April 2021 (H1 2021) and the 12 months ended 31 October 2021 (FY
2021).
Highlights
· Trading returned to pre-pandemic levels with particularly strong
demand in the latter part of the period, with revenue up 51.8% to £223.3
million (H1 2021: £147.1 million).
· Consolidated gross margin improved to 19.8% (H1 2021: 17.9%; FY 2021:
18.0%).
· Strong recovery in profit after tax at £4.4 million (H1 2021: loss
after tax £3.4 million).
· Strong cash generation from operating activities of £17.1 million
(H1 2021: £9.8 million; FY 2021: £7.9 million) leading to pre-tax
operational cash conversions of 166% (H1 2021: 174%; FY 2021: 85%).
· Trading since the period end has been significantly ahead of
expectations, leading the Board to revise its financial expectations upwards
for the full year ended 31 October 2022.
· Acquisition of M.J. Baker Foodservice Limited ("M.J. Baker"), the
South West's leading independent foodservice supplier. The Board considers the
business an excellent addition to the Group's Foodservice division and expands
its nationwide reach into the Southwest. M.J. Baker has traded in line with
the Board's expectations since the acquisition was completed.
· Opened a new 60,000 sq. ft distribution centre in Wakefield as part
of the development of the Group's on-trade business. The facility provides the
ability to deliver efficiencies in stock holding, through consolidation,
improved stock handling, the potential for bonded warehousing and own brand
manufacturing. This upgraded facility replaces the previous Wakefield
distribution centre.
· The Board has declared an interim dividend of 2.50 pence per share
for the financial year ending 31 October 2022. This dividend will be paid on 5
August 2022 to shareholders on the register at the close of business on 15
July 2022 and the ex-dividend date will be 14 July 2022.
Financial summary
H1 2022 H1 2021 * FY 2021
Unaudited
Unaudited
Audited
£m £m
£m
Revenue 223.3 147.1 380.7
Gross profit 44.1 26.3 68.6
Gross profit margin % 19.8% 17.9% 18.0%
Operating profit 6.7 0.8 6.4
Operating margin % 3.0% 0.5% 1.7%
Profit / (loss) after tax 4.4 (3.4) 1.1
Net cash inflow from operating activities 17.1 9.8 7.9
Pre-tax operational cash conversion ** 166% 174% 85%
* H1 2021 covers a financial period prior to the admission of the Company to
AIM in May 2021. It also represents a period where the adverse impact of
COVID-19 on the Group's customer base was more severe than H1 2022.
**For more information on alternative performance measures please see the
glossary at the end of the announcement.
Paul Young, Chief Executive Officer of Kitwave, commented:
"With the detrimental effects of COVID-19 significantly reduced, the Group
made great strides operationally and commercially during the period.
"Trading recovered at a quicker pace from the pandemic than we had
anticipated, notably within vending, ambient and foodservice. It should be
noted that this reporting period includes Christmas 2021, a period that was
still overshadowed by high rates of positive COVID-19 cases and hesitancy to
socialise amongst consumers.
"The outlook for the UK economy is dominated by cost-of-living issues which
provide an element of uncertainty in relation to end consumer demand for the
Group's products. While the Board is cognisant that these issues could impact
trading in future periods, given the better than expected performance in H1
and the strong start to H2, we expect to be significantly ahead of
expectations for the current year."
- Ends -
For further information please contact:
Kitwave Group plc Tel: +44 (0) 191 259 2277
Paul Young, Chief Executive Officer
David Brind, Chief Financial Officer
www.kitwave.co.uk (http://www.kitwave.co.uk/)
Canaccord Genuity Limited Tel: +44 (0) 20 7523 8150
(Nominated Adviser and Sole Broker)
Bobbie Hilliam
Georgina McCooke
Alex Aylen - Sales
Yellow Jersey PR Tel: +44 (0) 20 3004 9512
(Financial media and PR)
Sarah Hollins
Henry Wilkinson
James Lingfield
Company Overview
Founded in 1987, following the acquisition of a single-site confectionery
wholesale business based in North Shields, United Kingdom, Kitwave is a
delivered wholesale business, specialising in selling and delivering impulse
products, frozen and chilled foods, alcohol, groceries and tobacco to
approximately 39,000, mainly independent, customers.
With a network of 27 depots, Kitwave is able to support delivery throughout
the UK to a diverse customer base, which includes independent convenience
retailers, leisure outlets, vending machine operators, foodservice providers
and other wholesalers, as well as leading national retailers.
The Group's growth to date has been achieved both organically and through a
strategy of acquiring smaller, predominantly family-owned, complementary
businesses in the fragmented UK grocery and foodservice wholesale market.
Kitwave Group plc (AIM: KITW) was admitted to trading on AIM of the London
Stock Exchange on 24 May 2021.
For further information, please visit www.kitwave.co.uk
(http://www.kitwave.co.uk/) .
Chief Executive Officer's statement
Introduction
I am pleased to report the Group's interim results for the six months ended 30
April 2022. Trading in the first couple of months of the period was adversely
affected by the effects of the Omicron variant, but it is pleasing to note
that since COVID-19-related restrictions were lifted after the 2021 Christmas
period, all divisions of the business have traded positively.
It was also exceptionally pleasing to complete the Company's first acquisition
since the admission to AIM. The addition of M.J. Baker to the Group is a
positive statement of our future growth intentions in the Foodservice
division.
Financial summary
In the six months to 30 April 2022, the Group achieved revenue of £223.3
million (H1 2021: £147.1 million), resulting in an operating profit of £6.7
million (H1 2021: £0.8 million). The performance in the prior comparative
period was affected by the challenges that the Group faced because of the
COVID-19 restrictions.
H1 2022 H1 2021 FY 2021
Unaudited
Unaudited
Audited
£m £m
£m
Revenue 223.3 147.1 380.7
Gross profit 44.1 26.3 68.6
Gross profit margin % 19.8% 17.9% 18.0%
Operating profit 6.7 0.8 6.4
Operating margin % 3.0% 0.5% 1.7%
Cash generation remained strong in the period with £17.1 million generated
from operating activities.
The net cash outflow relating to the acquisition of M.J. Baker was £16.9
million after taking into account cash and overdrafts acquired. No further
cash outflows in relation to the transaction are expected.
Allowing for cash outflows to satisfy debt service payments and dividends the
Group's cash and cash equivalents increased by £1.1 million during the
period.
The Group's balance sheet as at 30 April 2022 had equity reserves of £63.3
million (30 April 2021: £3.5 million accumulated deficit; 31 October 2021:
£61.6 million equity reserves) and net debt of £46.6 million (30 April 2021:
£88.2 million; 31 October 2021: £34.3 million).
Divisional summary
Set out below is the financial performance of the business by division:
H1 2022 H1 2021 FY 2021
Unaudited
Unaudited
Audited
£m £m
£m
Group revenue 223.3 147.1 380.7
Ambient 87.0 64.5 155.7
Frozen & Chilled 82.0 71.7 163.9
Foodservice 54.3 10.9 61.1
Corporate - - -
Group adjusted operating profit / (loss)** 7.3 (0.2) 7.1
Ambient 2.6 0.4 2.2
Frozen & Chilled 1.7 1.9 5.2
Foodservice 3.1 (2.3) 0.2
Corporate (0.1) (0.2) (0.5)
** Group operating profit / (loss) adjusted for restructuring, acquisition and
compensation for post combination costs and income. For more information on
alternative performance measures please see the glossary at the end of the
announcement.
The Group's Foodservice division experienced some level of impact from the
stop-start nature of COVID-19 lockdown restrictions, particularly in the first
two months of the period, as customers found it more difficult to service
consumers. This seemed to affect customers in several ways, including staff
shortages, consumer hesitancy and, in some cases, challenges in the supply
chain.
In our experience, since Kitwave was founded in 1987, our independent
customers have always proven to be both determined and resilient, adapting
their businesses where necessary to meet differing economic challenges.
During the period, the Group's ethos to service quality and the ability to
provide access to a wide product range ensured limited disruption to our
customer base. As the period ended, our customer base was trading well and
delivery numbers across the Group had returned to pre-pandemic levels.
The Group's cost base has been affected by inflationary pressures, with the
majority of increases being reflected in labour and delivery-based costs. We
are continually striving to mitigate such cost increases and as a result the
ratio of distribution costs to revenue is only slightly ahead of the prior
period and is in line with our expectations.
Ambient division
The Ambient business performed ahead of expectations during the period as the
division traded back to pre-pandemic levels earlier than expected. While the
division, like the rest of the Group, suffered some cost base inflation, the
improvement in gross margin and overall close control of costs ensured an
improved operating profit percentage.
Frozen & Chilled division
The division maintains its strong presence in the market. Further
opportunities, both through acquisitions and the operational gearing effect of
increased product sales across its customer base, continue to be pursued.
The results for the period were affected by the proportionally larger
workforce in this division and the associated increase in costs generated
through inflationary pressures. These costs have been incurred ahead of the H2
revenue which historically has been stronger than H1. During the period there
was limited scope to improve margin structures, but these are expected to be
achieved in H2 as sales of impulse products rise. The division traded slightly
behind expectations for the period, but the work undertaken on improving gross
margin during the period still leaves it on track to meet expectations for the
full year.
Foodservice division
COVID-19 had the largest adverse effect on the Foodservice division,
particularly during the usually very busy Christmas periods. This was the case
for Christmas 2021, which forms part of the reporting period. Since then, the
division has geared up its workforce in a controlled manner as customer
volumes increased, reflecting the easing of the COVID-19 restrictions.
Overall, the division traded ahead of expectations for the period, as customer
numbers and volumes returned quicker than expected. The control of both the
gross margin and overheads in the business ensured that the benefits of the
increase in volume have returned an increased operating profit.
Operational review
In January 2022, the Group's first new web-based trading platform was launched
in the Frozen & Chilled division. This has been received extremely well
by customers and brand partners alike. Utilisation of the platform is
increasing month on month, with positive trends seen on average order values
compared to more traditional methods of order taking. This new web-based
platform provides efficiency and service benefits in the order and fulfilment
process. Further developments will continue to be made to its functionality
with a phased roll out across the whole Group planned to be achieved by the
end of calendar year 2022.
In March 2022, the new Wakefield distribution centre, specifically designed
and commissioned for dealing with on-trade product operations in the
Foodservice division, was opened. The facility provides the ability to deliver
efficiencies in stock holding through consolidation, improved stock handling
and the potential for bonded warehousing and central own brand manufacturing.
This upgraded facility replaced the previous Wakefield distribution centre.
We are also pleased that Ben Maxted has now joined the Kitwave Board. Ben has
excellent experience within the Group, and the industry more broadly, and is a
highly valued member of the team. His contributions will no doubt be of great
value as we collectively drive the business forward.
Strategy
Kitwave's strategy remains focused on the acquisition of smaller regional
players across the fragmented UK grocery and foodservice wholesale market,
while simultaneously driving organic growth. This strategy has proven highly
successful to date, with 11 wholesale distributors having been acquired and
integrated into the Group since 2011.
The Board is firmly of the opinion that the Group's admission to AIM has
enhanced its ability to execute this strategy, as well as building the brands
within its portfolio in order to further develop its position as one of the
leading delivered wholesale providers in the UK.
Dividend
During the period, the final dividend of 4.50 pence per share for the
financial year ended 31 October 2021 was paid on 29 April 2022.
The Board is pleased to declare an interim dividend of 2.50 pence per share
for the financial year to 31 October 2022. It will be paid on 5 August 2022 to
shareholders on the register at the close of business on 15 July 2022 and the
ex-dividend date will be 14 July 2022.
Summary and outlook
Our customers have shown remarkable resilience in responding to the challenges
that COVID-19 has put forward. The reporting period, while incorporating a
number of trading months that can largely be considered as being after the
worst effects of the pandemic, still includes the 2021 Christmas period that
was affected by reduced activity and underlying uncertainty due to the Omicron
variant. With this in mind, the Group's results should be regarded as a very
positive performance.
With a track record of successfully integrating acquired businesses into the
Group and having now executed our first acquisition since the Company's
admission to AIM, we look forward to sourcing and acquiring targets that fit
within our criteria, in line with our buy-and-build strategy. Meanwhile,
efforts continue on converting opportunities for organic growth, such as
through the roll out of the web-based trading platforms across the Group.
These initiatives enable us to grow revenue and further improve relations with
both our brand partners and our customers.
With trading having returned quicker than we expected post-COVID-19, Kitwave
finds itself in a strong position to capitalise upon the opportunities
available to it. While remaining focused on delivering an excellent service to
our customers, we look forward to driving the growth of the business and
returning value to our shareholders. The outlook for the UK economy is
dominated by cost-of-living issues which provide an element of uncertainty in
relation to end consumer demand for the Group's products. While the Board is
cognisant that these issues could impact trading in future periods, given the
better than expected performance in H1 and the strong start to H2 we expect to
be significantly ahead of expectations for the current year.
Paul Young
Chief Executive Officer
5 July 2022
Condensed consolidated statement of profit and loss and other comprehensive
income
Note Existing operations Acquisitions Total 6 months ended Year ended
31 October 2021 Audited
6 months ended 30 April 2021 Unaudited
30 April 2022 Unaudited
£000 £000 £000 £000 £000
Revenue 3 218,081 5,231 223,312 147,112 380,694
Cost of sales (175,621) (3,574) (179,195) (120,841) (312,109)
Gross profit 42,460 1,657 44,117 26,271 68,585
Other operating income/ (expense) 4 47 (5) 42 4,423 4,771
Distribution expenses (18,768) (583) (19,351) (12,712) (31,203)
Administrative expenses (17,720) (399) (18,119) (17,192) (35,755)
Operating profit 6,019 670 6,689 790 6,398
Analysed as:
Adjusted EBITDA 10,353 772 11,125 3,834 15,053
Amortisation of intangible assets 5 (45) - (45) (75) (150)
Depreciation 5 (3,662) (102) (3,764) (3,940) (7,817)
CPO income 4 - - - 2,260 2,255
Restructuring costs 5 - - - (68) (1,257)
Acquisition expenses 5 (148) - (148) - (181)
Compensation for post combination services 5 (48) - (48) (1,221) (1,278)
Share based payment expense 5 (431) - (431) - (227)
Total operating profit 6,019 670 6,689 790 6,398
Finance expenses (1,126) (4,269) (4,274)
Analysed as:
Interest payable on bank loans and bank facilities (443) (769) (1,327)
Interest and finance charges payable on loan notes and debenture loans - (2,889) (7,078)
Finance charges on leases (683) (611) (1,239)
Fair value movement on financial liabilities - - 5,410
Other interest - - (40)
Financial expenses (1,126) (4,269) (4,274)
Profit/(loss) before tax 5,563 (3,479) 2,124
Tax on profit/(loss) on ordinary activities (1,136) 34 (1,028)
Profit/(loss) for the financial period 4,427 (3,445) 1,096
Other comprehensive income - - -
Total comprehensive income / (loss) for the period 4,427 (3,445) 1,096
Basic earnings / (loss) per share 6 0.06 (0.13) 0.02
Diluted earnings / (loss) per share 6 0.06 (0.13) 0.02
Condensed consolidated balance sheet
30 April 2022 Unaudited 30 April 2021 Unaudited 31 October 2021
Audited
£000 £000 £000
Non-current assets
Goodwill 44,342 31,249 31,249
Intangible assets 535 336 431
Tangible assets 13,100 9,854 10,104
Right-of-use assets 27,346 22,987 23,188
Investments 35 20 20
Investment property - 175 -
85,358 64,621 64,992
Current assets
Inventories 39,718 32,961 26,043
Trade and other receivables 63,783 47,945 52,814
Cash and cash equivalents 6,111 7,117 4,968
109,612 88,023 83,825
Total assets 194,970 152,644 148,817
Current liabilities
Other interest bearing loans and borrowings (23,420) (16,661) (14,620)
Lease liabilities (5,204) (4,448) (4,719)
Trade and other payables (77,656) (59,255) (47,332)
Tax payable (573) (1,472) (370)
(106,853) (81,836) (67,041)
Non-current liabilities
Other interest bearing loans and borrowings - (49,507) -
Lease liabilities (24,097) (19,335) (19,917)
Other financial liabilities - (5,410) -
Deferred tax liabilities (728) (54) (275)
(24,825) (74,306) (20,192)
Total liabilities (131,678) (156,142) (87,233)
Net assets/(liabilities) 63,292 (3,498) 61,584
Equity attributable to equity holders of the
Parent Company
Called up share capital 700 1 700
Share premium account 64,183 12,993 64,183
Consolidation reserve (33,098) (33,098) (33,098)
Share based payment reserve 658 - 227
Retained earnings 30,849 16,606 29,572
Equity/(accumulated deficit) 63,292 (3,498) 61,584
Condensed consolidated statement of change in equity
Called up Share Share based payment reserve Profit
share premium Consolidation and loss Total
capital account reserve account equity
£000 £000 £000 £000 £000 £000
Balance at 1 November 2020 (audited) 1 12,993 (33,098) - 20,051 (53)
Total comprehensive income for the 6 month period
Loss - - - - (3,445) (3,445)
Other comprehensive income - - - - - -
Total comprehensive loss for
the 6 month period - - - - (3,445) (3,445)
Balance at 30 April 2021 (unaudited) 1 12,993 (33,098) - 16,606 (3,498)
Total comprehensive income for the 6 month period
Profit - - - - 4,541 4,541
Other comprehensive income - - - - - -
Total comprehensive income - - - - 4,541 4,541
for the 6 month period
Transaction with owners, recorded directly in equity
Share capital reduction - (10,000) - - 10,000 -
New share issuance 699 63,300 - - - 63,999
Costs directly attributable to new share issuance - (2,110) - - - (2,110)
Dividends - - - - (1,575) (1,575)
Share based payment expense - - - 227 - 227
Total contribution by and transactions with the owners
699 51,190 - 227 8,425 60,541
Balance at 31 October 2021 (audited) 700 64,183 (33,098) 227 29,572 61,584
Total comprehensive income for the 6 month period
Profit - - - - 4,427 4,427
Other comprehensive income - - - - - -
Total comprehensive income for
the 6 month period - - - - 4,427 4,427
Transaction with owners, recorded directly in equity
Dividends - - - - (3,150) (3,150)
Share based payment expense - - - 431 - 431
Total contribution by and transactions with the owners
- - - 431 (3,150) (2,719)
Balance at 30 April 2022 (unaudited) 700 64,183 (33,098) 658 30,849 63,292
Condensed consolidated cash flow statement
6 months ended 30 April 2022 Unaudited 6 months ended 30 April 2021 Unaudited Year ended
31 October 2021 Audited
£000 £000 £000
Cash flow from operating activities
Profit/(loss) for the period 4,427 (3,445) 1,096
Adjustments for:
Depreciation and amortisation 3,809 4,015 7,967
Financial expense 1,126 4,269 4,274
Profit on sale of property, plant and equipment (39) (25) (55)
Net gain on remeasurement of right-of-use assets and lease liabilities - (98) (124)
Compensation for post combination services 48 1,221 1,278
Equity settled share based payment expense 431 - 227
Taxation 1,136 (34) 1,028
10,938 5,903 15,691
(Increase) in trade and other receivables (8,993) (1,666) (8,244)
(Increase) in inventories (12,040) (9,763) (2,845)
Increase in trade and other payables 28,260 15,791 8,671
18,165 10,265 13,273
Payments in respect of compensation for post combination services - - (2,925)
Tax paid (1,115) (469) (2,432)
Net cash inflow from operating activities 17,050 9,796 7,916
Cash flows from investing activities
Acquisition of property, plant and equipment (1,140) (1,772) (2,961)
Proceeds from sale of property, plant and equipment 108 43 248
Acquisition of subsidiary undertakings (including (16,914) - -
overdrafts and cash acquired)
Net cash outflow from investing activities (17,946) (1,729) (2,713)
Cash flows from financing activities
IPO fund raise (net of expenses) - - 61,889
Proceeds from new loan - 5,500 5,500
Net movement in invoice discounting 4,300 (429) 4,559
Interest paid (1,126) (2,513) (5,093)
Net movement in bank trade loans 4,500 57 (4,750)
Repayment of bank term loans - (1,390) (21,863)
Repayment of investor loans - - (34,176)
Payment of lease liabilities (2,485) (2,517) (5,068)
Dividends paid (3,150) - (1,575)
Net cash outflow from financing activities 2,039 (1,292) (577)
Net increase in cash and cash equivalents 1,143 6,775 4,626
Opening cash and cash equivalents 4,968 342 342
Cash and cash equivalents at period end 6,111 7,117 4,968
Notes
1 Accounting policies
Kitwave Group plc (the "Company") is a public company limited by shares and
incorporated, domiciled and registered in England in the UK. The registered
number is 9892174 and the registered address is Unit S3, Narvik Way, Tyne
Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ.
The Company's principal activity is to act as a holding company for its
subsidiaries (together "the Group"), which together make up the Group's
consolidated financial information.
The condensed consolidated financial information presented in this statement
for the six months ended 30 April 2022 and the comparative figures for the six
months ended 30 April 2021 are unaudited.
The condensed consolidated financial information does not constitute statutory
accounts as defined in Section 435 of the Companies Act 2006. The statutory
accounts for the year ended 31 October 2021 have been delivered to the
Registrar of Companies and the report of the auditor was (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 Section 498 (2) or (3) of the Companies Act 2006.
The condensed consolidated financial information does not include all the
information required for the full annual financial statements, however,
selected explanatory notes are included to expain events and transactions that
are significant to an understanding of the changes in the Group's financial
position and performance since the last annual consolidated financial
statements.
The condensed consolidated financial information has been prepared in
accordance with IAS 34 Interim Financial Reporting and should be read in
conjunction the Group's last annual consolidated financial statements.
The unaudited consolidated interim financial information has been prepared
under the historical cost convention and in accordance with the recognition
and measurement requirements of UK-Adopted International Accounting Standards.
The condensed consolidated interim financial information does not constitute
financial statements within the meaning of Section 434 of the Companies Act
2006 and does not include all of the information and disclosures required for
full annual financial statements. It should therefore be read in conjunction
with the Group's Annual Report for the year ended 31 October 2021, which has
been prepared in accordance with UK-Adopted International Accounting Standards
and is available on the Group's investor website.
There have been no new accounting standards or changes to existing accounting
standards applied for the first time from 1 November 2021 which have a
material effect on these interim results.
1.1 Critical accounting estimates and judgements
The critical accounting estimates and judgements affecting the Group are
unchanged from those set out in the Group's last annual consolidated financial
statements for the year ended 31 October 2021.
The Directors have reviewed financial forecasts and are satisfied that the
Group has sufficient levels of financial resources available to both fund
operations and to pursue its stated growth strategy. The Directors are
confident that the Group will have sufficient funds to meet its liabilities as
they fall due for the foreseeable future and therefore adopt the going concern
basis in preparing the condensed consolidated interim financial information.
1.2 Accounting policies
The accounting policies applied in preparing the condensed consolidated
interim financial information are the same as those applied in the preparation
of the consolidted financial statements for the year ended 31 October 2021, as
described in those financial statements.
2 Acquisitions
Acquisitions in the 6 month period ended 30 April 2022
M.J. Baker Foodservice Limited
On 10 February 2022, the Group acquired the entire share capital of M.J. Baker
Foodservice Limited for a total consideration of £24,515,000. The purchase
consideration paid was £23,297,000 resulting from a reduction in loan
balances due to M.J. Baker from its previous shareholder of £1,218,000. The
resulting goodwill of £13,093,000 was capitalised and is subject to annual
impairment testing under IAS 36.
The acquisition had the following effect on the Group's assets and
liabilities:
Fair value
£000
Non-current assets
Tangible assets 2,836
Right-of-use assets 984
Investments 25
Current assets
Inventories 1,635
Trade and other receivables 1,976
Cash and cash equivalents 6,383
Total assets 13,839
Current liabilities
Lease liabilities (412)
Trade and other payables (2,016)
Corporation tax (182)
Non-current liabilities
Lease liabilities (572)
Deferred tax liabilities (453)
Total liabilities (3,635)
Net identifiable assets and liabilities 10,204
Goodwill 13,093
Total net assets acquired 23,297
Headline purchase consideration 24,515
Liabilities assumed (1,218)
Purchase consideration paid 23,297
The business was acquired as part of the Group's growth strategy. Significant
control was obtained through the acquisition of 100% of the share capital.
The provisional assessment following acquisition has not identified any
material intangible assets. Goodwill represents buying and other operating
synergies.
The acquired undertaking made a profit of £72,000 from the beginning of its
financial year on 1 January 2022 to the date of acquisition. In its previous
financial year the profit after tax was £2,041,000.
Following acquisition, the business contributed revenue of £5,231,000 and
operating profit of £670,000 to the Group for the six months ended 30 April
2022.
If the business had been acquired at the start of the Group's financial
period, being 1 November 2021, it would have added £11,283,000 to Group
revenue and £1,169,000 to Group operating profit for the six months ended 30
April 2022.
The total consideration paid in the period of £23,297,000. Net of cash and
cash equivalents of £6,383,000 the net cash outflow in the period was
£16,914,000.
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 an uplift in value of £1,811,000 to the net book value held in
M.J. Baker's accounts and is reflected in the above table of acquired assets
and liabilities. This fair valuation has created a temporary difference with
the tax base of the asset resulting in the recognition of a deferred tax
liability of £453,000. This reflects a 25% UK corporation tax rate based on
the expected timing of reversal of this timing difference.
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 Executive Board (the Chief Operating Decision Maker as defined by IFRS 8) to assess performance and make strategic decisions about allocation of resources
The Group has the following operating segments:
· Ambient: Provides delivered wholesale of ambient food, drink and
tobacco products;
· Frozen & Chilled: Provides delivered wholesale of frozen and
chilled food products; and
· Foodservice: Provides delivered wholesale of alcohol, frozen and
chilled food to trade customers.
Corporate contains the central functions that are not devolved to the business
units
These segments offer different products and services to different customers types, attracting different margins. They each have separate management teams.
The segments share a commonality in service being delivered wholesale of food
and drink products. The Group therefore benefits from a range of expertise,
cross selling opportunities and operational synergies in order to run each
segment as competitively as possible.
Each segment is measured on its EBITDA, adjusted for acquisition costs and
reconstruction costs, and internal management reports are reviewed monthly by
the Board. This performance measure is deemed the most relevant by the Board
to evaluate the results of the segments relative to entities operating in the
same industry.
3 Segmental information (continued)
Ambient Frozen & Foodservice Corporate Total
Chilled
6 months ended 30 April 2022 Unaudited £000 £000 £000 £000 £000
Revenue 87,043 81,983 54,286 - 223,312
Inter-segment revenue 6,023 935 120 - 7,078
Segment revenue 93,066 82,918 54,406 - 230,390
Adjusted EBITDA* 3,428 3,612 4,147 (62) 11,125
Amortisation of intangibles - (32) (6) (7) (45)
Depreciation (779) (1,934) (1,051) - (3,764)
Acquisition expense - - - (148) (148)
Compensation for post combination services - (48) - - (48)
Share based payment expense - - - (431) (431)
Interest expense (322) (470) (226) (108) (1,126)
Segment profit before tax 2,327 1,128 2,864 (756) 5,563
Segment assets 42,230 68,397 39,712 44,631 194,970
Segment liabilities (35,850) (63,888) (29,377) (2,563) (131,678)
Segment net assets 6,380 4,509 10,335 42,068 63,292
Within Corporate segment assets is £44,342,000 of goodwill on consolidation.
This is allocated to the trading segments as follows
Goodwill by segment 12,499 5,234 26,609 44,342
3 Segmental information (continued)
Ambient Frozen & Foodservice Corporate Total
Chilled
6 months ended 30 April 2021 Unaudited £000 £000 £000 £000 £000
Revenue 64,495 71,729 10,888 - 147,112
Inter-segment revenue 5,622 - 94 - 5,716
Segment revenue 70,117 71,729 10,982 - 152,828
Adjusted EBITDA* 1,405 3,879 (1,282) (168) 3,834
CPO income - 2,260 - - 2,260
Amortisation of intangibles - (73) (2) - (75)
Depreciation (1,049) (1,920) (971) - (3,940)
Restructuring costs (52) (7) (1) (8) (68)
Compensation for post combination services - (1,221) - - (1,221)
Interest expense (278) (603) (148) (3,240) (4,269)
Segment profit/(loss) before tax 26 2,315 (2,404) (3,416) (3,479)
Segment assets 35,043 60,392 17,092 40,117 152,644
Segment liabilities (27,239) (58,547) (13,043) (57,313) (156,142)
Segment net assets 7,804 1,845 4,049 (17,196) (3,498)
Within Corporate segment assets is £31,349,000 of goodwill on consolidation.
This is allocated to the trading segments as follows
Goodwill by segment 12,499 5,234 13,516 31,249
3 Segmental information (continued)
Ambient Frozen & Foodservice Corporate Total
Chilled
Year ended 31 October 2021 Audited £000 £000 £000 £000 £000
Revenue 155,712 163,895 61,087 - 380,694
Inter-segment revenue 12,340 - 226 - 12,566
Segment revenue 168,052 163,895 61,313 - 393,260
Adjusted EBITDA* 4,347 9,275 2,000 (569) 15,053
CPO income - 2,255 - - 2,255
Amortisation of intangibles - (144) (6) - (150)
Depreciation (2,106) (3,910) (1,801) - (7,817)
Restructuring costs (53) (41) (42) (1,121) (1,257)
Acquisition expense - (19) - (162) (181)
Compensation for post combination services - (1,278) - - (1,278)
Share based payment expense - - - (227) (227)
Interest expense (564) (1,286) (288) (2,136) (4,274)
Segment profit/(loss) before tax 1,624 4,852 (137) (4,215) 2,124
Segment assets 38,790 49,979 22,888 37,160 148,817
Segment liabilities (28,559) (41,323) (16,508 (843) (87,233)
Segment net assets 10,231 8,656 6,380 36,317 61,584
Within Corporate segment assets is £31,349,000 of goodwill on consolidation.
This is allocated to the trading segments as follows
Goodwill by segment 12,499 5,234 13,516 31,249
An analysis of revenue by destination is given below:
Geographical information:
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
United Kingdom 221,167 143,838 373,690
Overseas 2,145 3,274 7,004
Group revenue 223,312 147,112 380,694
No one customer accounts for more than 10% of Group revenue.
4 Other operating income/(expense)
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Net gain on disposal of fixed assets 39 25 55
Net gain/(loss) on foreign exchange 2 (2) (2)
Net gain on remeasurement of right-of-use assets and lease liabilities - 98 124
CPO income - 2,260 2,255
Grant income 1 2,042 2,339
42 4,423 4,771
Grant income comprises amounts received from the Government with respect to
Additional Restrictions Grants in the six month period ended 30 April 2022. In
the six month period ended 30 April 2021 and the year ended 31 October 2021
the grant income principally comprises the amounts receved from the
Coronavirus Job Retention Scheme. These grants totalled £2,339,000 for the
full year to 31 October 2021.
CPO income is in relation to the compulsory purchase order of a property lease
in Luton enacted by the Local Authority. It has been classified as exceptional
income in the statement of profit and loss as it is not income relating to the
Group's principal activities and is not expected to recur in in the ordinary
course of business.
5 Expenses
Included in profit/loss are the following:
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Depreciation of tangible assets:
Owned 1,099 1,638 1,975
Right-of-use assets 2,665 2,302 5,842
Amortisation of intangible assets 45 75 150
Impairment loss on trade receivables 475 462 1,288
Dilapidation provision 50 - 570
The Group incurred a number of expenses not relating to the principal trading
activities of the Group as follows:
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
Exceptional expenses £000 £000 £000
Restructuring expenses - 68 1,257
Acquisition expenses 148 - 181
Compensation for post combination services 48 1,221 1,278
Total exceptional expenses 196 1,289 2,716
Share based payment expense 431 - 227
Total exceptional expenses and share based payments 627 1,289 2,943
The Board consider the exceptional items to be non-recurring in nature. Both
exceptional and share based payment expenses are adjusted for in the statement
of profit and loss to arrive at the adjusted EBITDA. This measure provides the
Board with a better understanding of the Group's operating performance.
Restructuring expenses in the year ended 31 Ocotber 2021 include transaction
fees in relation to the IPO of £1,121,000. Other expenses related to the
restructuring of the Group's operations.
Acquisition expenses include the legal and professional fees connected to the
actual and potential acquisitions of subsidiaries in the period. In the 6
month period ended 30 April 2022 these expenses were incurred in connection
with the acquisition of M.J. Baker Foodservice Limited.
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 agremeent to acquire which
can now be called at any time.
Share based payments relate to the Management Incentive Plan ("MIP") and are
non cash expenses.
6 Earnings per share
Basic earnings per share
Basic earnings per share for the six month period ending 30 April 2022, and
the previous six month period ending 30 April 2021 and the year ended 31
October 2021 is calculated by dividing profit attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding
during each period as calculated below.
Diluted earnings per share
Diluted earnings per share for the six month period ending 30 April 2022, and
the previous six month period ending 30 April 2021 and the year ended 31
October 2021 is calculated by dividing profit attributable to ordinary
shareholders by the weighted average number of ordinary shares, adjusted for
the effects of all dilutive potential ordinary shares, in this case issued
equity warrants, outstanding during each period as calculated below.
Profit attributable to ordinary shareholders
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Profit/(loss) attributable to all shareholders 4,427 (3,445) 1,096
£ £ £
Basic earnings per ordinary share 0.06 (0.13) 0.02
Diluted earnings per ordinary share 0.06 (0.13) 0.02
Weighted average number of ordinary shares
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
Number Number Number
Weighted average number of ordinary shares (basic) during the period 70,000,000 27,333,336 46,036,531
Weighted average number of ordinary shares (diluted) during the period 70,000,000 27,333,336 46,055,901
The following Alternative Performance Measure ("APM") for earnings per share
is not defined or specified under the requirements of International Financial
Reporting Standards. The Board believes that this APM provides the readers
with important additional information regarding the earnings per share
performance of the Group:
Basic underlying earnings per share
Profit attributable to the equity holders of the Group prior to exceptional
items and the fair value movement of the put option liability measured through
the consolidated statement of profit and loss, divided by the weighted average
number of ordinary shares during the financial period.
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Profit/(loss) attributable to all shareholders 4,427 (3,445) 1,096
Exceptional and share based payment expenses net of tax* 627 1,276 2,819
CPO income net of tax - (1,831) (1,827)
Interest and finance charges payable on loans and debenture notes - 2,889 7,078
Fair value adjustments on the put option liability - - (5,410)
Underlying profit attributable to ordinary shareholders 5,054 (1,110) 3,756
£ £ £
Basic underlying earnings per ordinary share 0.07 (0.04) 0.08
*Exceptional expenses include restructuring fees, acquisition costs and
compensation for post combination services which are deemed to be
non-recurring. For full detail of exceptional and share based payment
expenses see note 5. For further details on exceptional income relating to the
CPO see note 4.
Alternative performance measure glossary
This report provides alternative performance measures ("APMs"), which are note
defined or specified under the requirements of International Financial
Reporting Standards. The Board believes that these APMs provide readers with
important additional information on the Group.
Alternative performance measure Definition and purpose
Existing operations Existing operations are disclosed separately from acquisitions in the
statement of profit and loss in order to provide greater comparison between
the current and prior periods which do not include current period
acquisitions.
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.
6months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Total operating profit 6,689 790 6,398
CPO income - (2,260) (2,255)
Restructuring costs - 68 1,257
Acquisition expenses 148 - 181
Compensation for post combination services 48 1,221 1,278
Share based payment expense 431 - 227
Adjusted operating profit/(loss) 7,316 (181) 7,086
Adjusted EBITDA Represents the operating profit prior to exceptional (income) / expenses,
share based payment expenses, fixed asset depreciation and intangible
amortisation. This measure is consistent with how the Group measures trading
and cash generative performance and is reported to the Board.
6months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Total operating profit 6,689 790 6,398
Amortisation of intangible assets
45 75 150
Depreciation 3,764 3,940 7,817
CPO income - (2,260) (2,255)
Restructuring costs - 68 1,257
Acquisition expenses 148 - 181
Compensation for post combination services
48 1,221 1,278
Share based payment expense 431 - 227
Adjusted EBITDA 11,125 3,834 15,053
Pre tax operational cash conversion Represents the cash generated from operating activities pre tax as a
proportion of cash flow from operating activities pre movements in working
capital and tax. This measure informs the Board of the Group's cash conversion
from operating activities, is used to monitor liquidity and is reported to the
Board.
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Net cash inflow from operating activities 17,050 9,796 7,916
Tax paid 1,115 469 2,432
Payments in respect of compensation for post combination services
- - 2,925
Cash flow from operating activities pre tax and compensation for post 18,165 10,265 13,273
combination services (1)
Movement in working capital
(7,227) (4,362) 2,418
Cash flow from operating activities pre tax and compensation for post
combination services and movement in working capital (2)
10,938 5,903 15,691
Pre tax operational cash conversion (1) divided by (2)
166% 174% 85%
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.
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Total operating profit 6,689 790 6,398
Amortisation of intangible assets
45 75 150
Depreciation 3,764 3,940 7,817
CPO income - (2,260) (2,255)
Restructuring costs - 68 1,257
Acquisition expenses 148 - 181
Compensation for post combination services
48 1,221 1,278
Share based payment expense 431 - 227
Adjusted EBITDA 11,125 3,834 15,053
Pre tax operational cash conversion
Represents the cash generated from operating activities pre tax as a
proportion of cash flow from operating activities pre movements in working
capital and tax. This measure informs the Board of the Group's cash conversion
from operating activities, is used to monitor liquidity and is reported to the
Board.
6 months ended 6 months ended Year ended 31 October 2021 Audited
30 April 2021 Unaudited
30 April 2022
Unaudited
£000 £000 £000
Net cash inflow from operating activities 17,050 9,796 7,916
Tax paid 1,115 469 2,432
Payments in respect of compensation for post combination services
- - 2,925
Cash flow from operating activities pre tax and compensation for post 18,165 10,265 13,273
combination services (1)
Movement in working capital
(7,227) (4,362) 2,418
Cash flow from operating activities pre tax and compensation for post
combination services and movement in working capital (2)
10,938 5,903 15,691
Pre tax operational cash conversion (1) divided by (2)
166% 174% 85%
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