REG - Kitwave Group PLC - Interim Results
04/07/2023 07:00
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RNS Number : 8275E Kitwave Group PLC 04 July 2023
4 July 2023
Kitwave Group plc
("Kitwave", the "Group" or the "Company")
Unaudited interim results for the six months ended 30 April 2023
Kitwave Group plc (AIM: KITW), the delivered wholesale business, is pleased to
announce its unaudited interim results for the six months ended 30 April 2023
("the period" or "H1 2023").
The tables and commentary below include comparatives for both the six months
ended 30 April 2022 (H1 2022) and the 12 months ended 31 October 2022 (FY
2022).
Highlights
· Revenues up 23% to £275.0 million (H1 2022: £223.3 million; FY
2022: £503.1 million).
· Consolidated gross margin improved to 21.6% (H1 2022: 19.8%; FY 2022:
20.4%).
· Profit before tax increased by 48% to £8.3 million (H1 2022: £5.6
million; FY 2022: £17.8 million).
· Cash generation from operating activities of £11.7 million (H1 2022:
£17.1 million; FY 2022: £26.5 million) leading to pre-tax operational cash
conversions of 87% (H1 2022: 166%; FY 2022: 105%).
· Trading since the period end has been strong across all divisions and
ahead of Board expectations at the time of the trading update released in May
2023. The Board anticipates that the Group's results for the full financial
year will therefore be ahead of market expectations that were established at
the start of the financial year.
· Successful integration of Westcountry Food Holdings Ltd
("WestCountry"), a specialist fresh produce wholesaler to the foodservice
sector, acquired in December 2022, which complements the Group's existing
Foodservice division and enables further expansion into the South West
following the Group's acquisition of M.J. Baker Foodservice Limited ("M.J.
Baker") in February 2022.
· Appointment of Teresa Octavio as an additional Non-Executive Director
to the Board in February 2023.
· The Board has declared an interim dividend of 3.75 pence per share
for the six months to 30 April 2023. This dividend will be paid on 4 August
2023 to shareholders on the register at the close of business on 14 July 2023
and the ex-dividend date will be 13 July 2023.
Post-period end
· Construction of a new 80,000 sq. ft distribution site to fully
integrate the Group's South West foodservice operations commenced in June 2023
with a planned completion of Q3 2024.
Financial summary
H1 2023 H1 2022 FY 2022
Unaudited
Unaudited
Audited
£m £m
£m
Revenue 275.0 223.3 503.1
Gross profit 59.3 44.1 102.6
Gross profit margin % 21.6% 19.8% 20.4%
Operating profit 10.2 6.7 20.4
Operating margin % 3.7% 3.0% 4.1%
Profit before tax 8.3 5.6 17.8
Net cash inflow from operating activities
11.7 17.1 26.5
Pre-tax operational cash conversion * 87% 166% 105%
*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:
"We are pleased to report continued strong progress across the Group in the
six months ended 30 April 2023. With trading in the wholesale sector typically
weighted towards the second half of the year, we are confident that this
positive momentum will continue throughout 2023, and results for the full
financial year will be ahead of market expectations that were established at
the start of the financial year.
"A significant highlight during the period was the Group's successful
acquisition and integration of WestCountry into our Foodservice division,
where we are now able to deliver high-quality fresh produce throughout the
South West. This acquisition demonstrates the strong results that can be
achieved when taking advantage of the considerable opportunities available in
the UK's fragmented wholesale market.
"We believe that our unwavering focus on operational efficiency, strategic
investments, and customer satisfaction, means we are well placed to drive
sustainable growth, both organically and through acquisitions to deliver value
for the Group and its shareholders."
- Ends -
For further information please contact:
Kitwave Group plc Tel: +44 (0) 191 259 2277
Paul Young, Chief Executive Officer
David Brind, Chief Financial Officer
www.kitwave.co.uk (http://www.kitwave.co.uk/)
Canaccord Genuity Limited Tel: +44 (0) 20 7523 8150
(Nominated Adviser and Sole Broker)
Bobbie Hilliam
Yellow Jersey PR Tel: +44 (0) 20 3004 9512
(Financial media and PR)
Sarah Hollins / Shivantha Thambirajah / Bessie Elliot
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 29 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 2023. Despite the challenging macroeconomic conditions facing the wider
industry, Kitwave has delivered a strong performance and has increased
revenues across all divisions of the business. While commodity-led price
inflation contributed significantly to the increased revenues, volume as
measured by cases delivered has also increased compared to H1 2022.
During the period, our acquisition growth strategy continued to deliver as we
welcomed Westcountry Food Holdings Ltd ("WestCountry") into the Group. The
acquisition has enabled us to expand our product range to include high-quality
fresh produce to complement our existing presence in the South West. The
integration of WestCountry into the Group has been successful, and the
business is performing in line with our expectations.
Due to the seasonal nature of the wholesale business trading is weighted to
the second half of the financial year. We remain confident that the positive
momentum seen in the first six months will continue throughout 2023.
Financial summary
In the six months to 30 April 2023, the Group achieved revenue of £275.0
million (H1 2022: £223.3 million), resulting in a 52% increase in operating
profit to £10.2 million (H1 2022: £6.7 million).
H1 2023 H1 2022 FY 2022
Unaudited
Unaudited
Audited
£m £m
£m
Revenue 275.0 223.3 503.1
Gross profit 59.3 44.1 102.6
Gross profit margin % 21.6% 19.8% 20.4%
Operating profit 10.2 6.7 20.4
Operating margin % 3.7% 3.0% 4.1%
Cash generation remained strong in the period with £11.7 million generated
from operating activities.
The net cash outflow relating to the acquisition of WestCountry was £19.6
million after taking into account cash and overdrafts acquired. No further
cash outflows in relation to the transaction are expected. The acquisition was
funded by a new £20.0 million revolving credit facility that was drawn in
full on the date of the acquisition.
Allowing for cash outflows to satisfy debt service payments and dividends
paid, the Group's cash and cash equivalents decreased by £2.2 million during
the period. The majority of this cash absorption is due to an increase in
working capital, with £1.3 million of this relating to an outflow in working
capital in WestCountry post-acquisition as part of the normal annual cycle
from a seasonal low point in December 2022. Excluding this part-year effect in
WestCountry the Group achieved the targeted 95% pre-tax operational cash
conversion.
The Group's balance sheet as of 30 April 2023 had equity reserves of £74.0
million (30 April 2022: £63.3 million; 31 October 2022: £71.9 million) and
net debt of £64.4 million (30 April 2022: £47.4 million; 31 October 2022:
£44.4 million). The increase in debt relates to a new £20.0 million banking
facility utilised for the acquisition of WestCountry.
The acquisition of WestCountry resulted in an increase in Goodwill of £14.4
million to £58.7 million (30 April 2022: £44.3 million; 31 October 2022:
£44.3 million) and an increase in intangible assets in the form of brand and
customer relationships of £5.0 million. The amortisation associated with
these intangible assets was £0.4 million in the period.
The increase in debt of £20.0 million since the year-end 31 October 2022
relates to the net cash outflow from the acquisition. Leverage has increased
to 1.9x since the year end and interest costs have increased accordingly. It
is expected that the strong continued cash generation nature of the Group will
drive the principal debt down during the remainder of the current financial
year. The Board is committed to maintaining a prudent leverage policy moving
forward.
Divisional summary
Set out below is the financial performance of the business by division:
H1 2023 H1 2022 FY 2022
Unaudited
Unaudited
Audited
£m £m
£m
Group revenue 275.0 223.3 503.1
Ambient 98.1 87.0 185.1
Frozen & Chilled 96.1 82.0 193.8
Retail & wholesale 194.2 169.0 378.9
Foodservice 80.8 54.3 124.2
Corporate - - -
Group adjusted operating profit** 11.7 7.3 21.5
Ambient 3.8 2.6 6.8
Frozen & chilled 1.8 1.7 6.4
Retail & wholesale 5.6 4.3 13.2
Foodservice 6.1 3.1 8.9
Corporate 0.0 (0.1) (0.6)
** Group operating profit / (loss) adjusted for restructuring, acquisition,
amortisation of intangible assets arising on acquisition, share-based payments
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 has demonstrated significant growth in both revenue and operating
profit during the period, with a 23% increase in revenue to £275.0 million
(H1 2022: £223.3 million) and a 52% increase in operating profit to £10.2
million (H1 2022: £6.7 million). Group adjusted operating profit increased by
60% to £11.7 million (H1 2022: £7.3 million).
The Group's gross profit margin increased to 21.6% (H1 2022: 19.8%)
representing both margin improvements within divisions and the fact that a
higher proportion of Group revenue is generated by the Foodservice division
compared to H1 2022 reflecting the impact of recent acquisitions.
Excluding the acquisition of WestCountry revenue grew by 17% and adjusted
operating profit by 46% compared to H1 2022.
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. It is expected that these cost pressure increases will ease over time,
as we anticipate lower levels of fuel pricing and lower wage inflation
compared to the last 18 months.
Retail & wholesale division
The Group's Ambient and Frozen & Chilled product businesses both service
the Retail & Wholesale sector of the grocery market. To be consistent with
the market view, these divisions are considered together and saw combined
revenue increase by 15% to £194.2 million (H1 2022: £169.0 million).
The retail & wholesale businesses performed ahead of expectations during
the period. The division benefitted from the continued focus on gross margin
improvement and operational efficiency workstreams designed to reduce the cost
to serve our customer base, which together have generated an improvement in
our operating profit percentage compared to H1 2022. Inflation in the
marketplace contributed to an increase in revenue and gross profit which
assisted in covering any operating cost-based inflation.
Foodservice division
In December 2022, the division acquired the entire issued share capital of
Westcountry Food Holdings Ltd.
The acquisition of WestCountry has enabled the Group to expand its product
range to include high-quality fresh produce in the South West. This
complements Kitwave's existing foodservice offering in the region, following
the acquisition of M.J. Baker Foodservice Limited ("M.J. Baker") in 2022.
The division saw revenue increase by 49% to £80.7 million (H1 2022: £54.3
million). Excluding the acquisition of WestCountry, revenue increased by
£13.7 million representing 25% growth compared to H1 2022. This also included
the full period effect of M.J. Baker which was acquired in February 2022.
Overall, the division traded ahead of expectations for the period, as customer
numbers and volumes have not to date been materially impacted by the
cost-of-living crisis. The demand for affordable socialising and eat-out
occasions coupled with the defensive nature of care homes and volumes from
educational establishments have served to maintain customer numbers and
volumes. While the division, like the rest of the Group, suffered some
operating cost-based inflation, the improvement in gross margins and overall
close control of costs ensured an improved operating profit percentage.
Operational review
Following the investment in the Group's new web-based trading platform, it has
been rolled out across all businesses and utilisation of the platform has
increased month on month. Electronic and online order capture now stands at
44% with average order values compared to more traditional methods of order
taking remaining 8% ahead due to the additional e-commerce functionalities
that the web platform offers. The brand owner engagement has been positive
with a large proportion of our brand partners developing mutually beneficial
ecommerce partnerships resulting in an improved customer experience and sales
offering.
The acquisition of WestCountry together with M.J. Baker creates an opportunity
to fully integrate the Group's South West operations and, in order to do this
a new design and build 80,000 sq. ft distribution site has been acquired on a
leasehold. The construction of the unit commenced in June 2023 with a planned
completion of Q3 2024. The integrated site will be able to offer a full
Kitwave wide product offering with a complete food service range, ice cream,
fresh produce, and on-trade into the South West customer base. This is an
important step for the Group as the infrastructure will drive organic growth
opportunities within the Foodservice division. It is expected that the cost of
the new build will be cash neutral with the planned disposal of the existing
freehold property occupied by M.J. Baker.
We are also pleased that Tom Johnson, who joined the Group as Health &
Safety Director in early 2022, has brought improvements to the Group's health
and safety function and culture alongside launching the new Kitwave health and
safety digital compliance and reporting platform. The role underlines the
Group's commitment to colleague safety and will drive that element of the
Group's environmental, social and governance (ESG) agenda.
Our commitment to carbon reduction is further demonstrated by the Group's
latest investment in solar with a new PHEV scheme at the Luton distribution
centre being installed in 2023.
In February 2023, the Group was delighted to welcome our new Non-Executive
Director, Teresa Octavio, to the Board. Teresa has brought significant
expertise from her experience in a host of different executive roles in global
businesses, including Kantar Consulting and consumer-facing multinationals
Diageo plc and Procter & Gamble.
Strategy
We remain focused on executing our strategy, which targets both organic growth
and growth through acquisition. In line with this strategy, the successful
acquisition during the period of WestCountry is our 12th wholesale distributor
integrated into the Group since 2011. We will continue to look for
well-regarded, financially-sound businesses with established operations and a
similar ethos to Kitwave.
Dividend
The final dividend of 6.75 pence per share for the financial year ended 31
October 2022 was paid on 28 April 2023.
The Board is pleased to declare an interim dividend of 3.75 pence per share
(H1 2022: 2.50 pence per share) for the six months to 30 April 2023. It will
be paid on 4 August 2023 to shareholders on the register at the close of
business on 14 July 2023 and the ex-dividend date will be 13 July 2023.
Summary and outlook
During the period, the Group continued to deliver strong progress across all
the core businesses, reflecting our focus on providing an exceptionally high
standard of service to our customers through investment in systems, processes,
and service offerings.
Trading since the period end has continued to be ahead of expectations. This
is through a combination of strong order volumes, sustained commodity price
inflation, the determination to maintain and improve gross margins and
continued operational cost control.
The recent WestCountry acquisition broadened our provision of high-quality
fresh produce in the South West and has been successfully integrated into our
Foodservice division. We will continue to execute our buy-and-build strategy
through further targeted acquisitions, which we feel complements Kitwave's
current offering to our customer base.
Although trading in the wholesale sector is typically weighted towards the
second half of the year and being mindful of the continuing wider
macroeconomic challenges, we remain confident that the positive momentum seen
in the first six months of the year will continue throughout 2023, and results
for the full financial year will be ahead of the market expectations
established at the start of the financial year.
We have built an excellent platform for growth within the UK wholesale market.
With our focused growth strategy, both organically and through acquisitions,
we believe that we are well-placed to deliver value for the Group and its
shareholders.
Paul Young
Chief Executive Officer
4 July 2023
Condensed consolidated statement of profit and loss and other comprehensive
income
Note 6 months ended Year ended
31 October 2022 Audited
6 months ended 30 April 2022 Unaudited
30 April 2023 Unaudited
£000 £000 £000
Revenue 3 274,950 223,312 503.088
Cost of sales (215,621) (179,195) (400,460)
Gross profit 59,329 44,117 102,628
Other operating income 4 157 42 374
Distribution expenses (26,262) (19,351) (44,010)
Administrative expenses (23,008) (18,119) (38,617)
Operating profit 10,216 6,689 20,375
Analysed as:
Adjusted EBITDA 16,017 11,125 29,477
Amortisation of intangible assets 5 (66) (45) (99)
Amortisation of intangible assets arising on acquisition 5 (383) - -
Depreciation 5 (4,210) (3,764) (7,897)
Acquisition expenses 5 (648) (148) (148)
Compensation for post combination services 5 (48) (48) (95)
Share based payment expense 5 (446) (431) (863)
Total operating profit 10,216 6,689 20,375
Finance expenses (1,956) (1,126) (2,534)
Analysed as:
Interest payable on bank loans and bank facilities (1,190) (443) (1,105)
Finance charges on leases (766) (683) (1,427)
Other interest - - (2)
Financial expenses (1,956) (1,126) (2,534)
Profit before tax 8,260 5,563 17,841
Tax on profit on ordinary activities (1,901) (1,136) (3,501)
Profit for the financial period 6,359 4,427 14,340
Other comprehensive income - - -
Total comprehensive income for the period 6,359 4,427 14,340
Basic earnings per share (pence) 6 9.1 6.3 20.5
Diluted earnings per share (pence) 6 8.7 6.3 20.5
Condensed consolidated balance sheet
30 April 2023 Unaudited 30 April 2022 Unaudited 31 October 2022
Audited
£000 £000 £000
Non-current assets
Goodwill 58,680 44,342 44,342
Intangible assets 5,384 535 737
Tangible assets 16,404 13,100 13,037
Right-of-use assets 26,575 27,346 26,452
Investments 45 35 35
107,088 85,358 84,603
Current assets
Inventories 45,769 39,718 31,846
Trade and other receivables 65,388 63,783 57,698
Cash and cash equivalents 3,288 6,111 5,511
114,445 109,612 95,055
Total assets 221,533 194,970 179,658
Current liabilities
Other interest bearing loans and borrowings (16,816) (23,420) (20,354)
Lease liabilities (5,899) (5,204) (5,509)
Trade and other payables (77,767) (77,656) (57,891)
Tax payable (973) (573) (62)
(101,455) (106,853) (83,816)
Non-current liabilities
Other interest bearing loans and borrowings (20,000) - -
Lease liabilities (24,092) (24,097) (23,240)
Deferred tax liabilities (2,019) (728) (715)
(46,111) (24,825) (23,955)
Total liabilities (147,566) (131,678) (107,771)
Net assets 73,967 63,292 71,887
Equity attributable to equity holders of the
Parent Company
Called up share capital 700 700 700
Share premium account 64,183 64,183 64,183
Consolidation reserve (33,098) (33,098) (33,098)
Share based payment reserve 1,536 658 1,090
Retained earnings 40,646 30,849 39,012
Equity 73,967 63,292 71,887
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 November2021 (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
Total comprehensive income for the 6 month period
Profit - - - - 9,913 9,913
Other comprehensive income - - - - - -
Total comprehensive income
for the 6 month period - - - - 9,913 9,913
Transaction with owners, recorded directly in equity
Dividends - - - - (1,750) (1,750)
Share based payment expense - - - 432 - 432
Total contribution by and transactions with the owners
- - - 432 (1,750) (1,318)
Balance at 31 October 2021 (audited) 700 64,183 (33,098) 1,090 39,012 71,887
Total comprehensive income for the 6 month period
Profit - - - - 6,359 6,359
Other comprehensive income - - - - - -
Total comprehensive income for
the 6 month period - - - - 6,359 6,359
Transaction with owners, recorded directly in equity
Dividends - - - - (4,725) (4,725)
Share based payment expense - - - 446 - 446
Total contribution by and transactions with the owners
- - - 446 (4,725) (4,279)
Balance at 30 April 2023 (unaudited) 700 64,183 (33,098) 1,536 40,646 73,967
Condensed consolidated cash flow statement
Note 6 months ended 30 April 2023 Unaudited 6 months ended 30 April 2022 Unaudited Year ended
31 October 2022 Audited
£000 £000 £000
Cash flow from operating activities
Profit for the period 6,359 4,427 14,340
Adjustments for:
Depreciation and amortisation 4,659 3,809 7,996
Financial expense 1,956 1,126 2,534
Profit on sale of property, plant and equipment (156) (39) (164)
Net gain on remeasurement of right-of-use assets and lease liabilities (1) - (8)
Compensation for post combination services 48 48 95
Equity settled share based payment expense 446 431 863
Taxation (1,901) 1,136 3,501
15,212 10,938 29,157
(Increase) in trade and other receivables (5,555) (8,993) (2,909)
(Increase) in inventories (12,912) (12,040) (4,168)
Increase in trade and other payables 16,489 28,260 8,450
13,234 18,165 30,530
Tax paid (1,528) (1,115) (4,005)
Net cash inflow from operating activities 11,706 17,050 26,525
Cash flows from investing activities
Acquisition of property, plant and equipment (1,629) (1,140) (2,608)
Proceeds from sale of property, plant and equipment 269 108 308
Acquisition of subsidiary undertakings (including 2 (19,593) (16,914) (16,914)
overdrafts and cash acquired)
Net cash outflow from investing activities (20,953) (17,946) (19,214)
Cash flows from financing activities
Proceeds from new loan 20,000 - -
Net movement in invoice discounting (3,538) 4,300 5,734
Interest paid (1,522) (1,126) (2,534)
Net movement in bank trade loans - 4,500 -
Payment of lease liabilities (3,191) (2,485) (5,068)
Dividends paid (4,725) (3,150) (4,900)
Net cash inflow/(outflow) from financing activities 7,024 2,039 (6,768)
Net (decrease)/increase in cash and cash equivalents (2,223) 1,143 543
Opening cash and cash equivalents 5,511 4,968 4,968
Cash and cash equivalents at period end 3,288 6,111 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 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 2023 and the comparative figures for the six
months ended 30 April 2022 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 2022 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 explain 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 2022, 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 2022.
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 consolidated financial statements for the year ended 31 October 2022,
as described in those financial statements.
2 Acquisitions
Acquisitions in the 6 month period ended 30 April 2023
Westcountry Food Holdings Ltd
On 9 December 2022, the Group acquired the entire share capital of Westcountry
Food Holdings Ltd 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:
Book value Recognised on acquisition 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 liabilities (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
Headline purchase consideration 29,000
Net asset adjustment refunded (514)
Purchase consideration paid 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 Ltd.
An independent valuation was performed to identify the 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 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 for the year ended 1 January 2022 the profit after tax
was £3,112,000.
Following acquisition, the business contributed revenue of £12,714,000 and
operating profit of £674,000 to the Group for the six months ended 30 April
2023.
If the business had been acquired at the start of the Group's financial
period, being 1 November 2021, it would have added £14,897,000 to Group
revenue and £790,000 to Group operating profit for the six months ended 30
April 2023.
On acquisition an independent assessment was made regarding the fair value of
tangible assets which includes two freehold properties. The result of this
independent assessment was no change to the net book value held in Westcountry
Food Holdings Ltd's 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 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 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 following analysis shows how this development is now being monitored
whilst demonstrating the link to the previously reported segmental information
for reference.
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 period.
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)
Six months ended 30 April 2023 Ambient Frozen & Total retail & wholesale Foodservice Corporate Total
Chilled
£000 £000 £000 £000 £000 £000
Revenue 98,124 96,096 194,220 80,730 - 274,950
Inter-segment revenue 6,925 1,334 8,259 322 - 8,581
Segment revenue 105,049 97,430 202,479 81,052 - 283,531
Adjusted EBITDA* 4,689 3,764 8,453 7,461 103 16,017
Amortisation of intangibles - (40) (40) (3) (23) (66)
Depreciation (822) (1,944) (2,766) (1,398) (46) (4,210)
Adjusted operating profit* 3,867 1,780 5,647 6,060 34 11,741
Amortisation of intangible assets arising on acquisition - - - - (383) (383)
Acquisition expense - - - - (648) (648)
Compensation for post combination services - (48) (48) - - (48)
Share based payment expense - - - - (446) (446)
Interest expense (433) (623) (1,056) (355) (565) (1,956)
Segment profit/(loss) before tax 3,434 1,109 4,543 5,725 (2,008) 8,260
Segment assets 43,807 65,532 109,339 46,140 66,054 221,533
Segment liabilities (32,356) (58,449) (90,805) (31,605) (25,156) (147,566)
Segment net assets 11,451 7,083 18,534 14,535 40,898 73,967
Within Corporate assets is £58,680,000 of goodwill on consolidation. This is
allocated to the trading segments as follows:
Goodwill by segment 13,516 12,499 26,015 32,665 - 58,680
3 Segmental information (continued)
Six months ended 30 April 2022 Ambient Frozen & Total retail & wholesale Foodservice Corporate Total
Chilled
£000 £000 £000 £000 £000 £000
Revenue 87,043 81,983 169,026 54,286 - 223,312
Inter-segment revenue 6,023 935 6,958 120 - 7,078
Segment revenue 93,066 82,918 175,984 54,406 (62) 230,390
Adjusted EBITDA* 3,428 3,612 7,040 4,147 (7) 11,125
Amortisation of intangibles - (32) (32) (6) - (45)
Depreciation (779) (1,934) (2,713) (1,051) - (3,764)
Adjusted operating profit* 2,649 1,646 4,295 3,090 (69) 7,316
Acquisition expense - - - - (148) (148)
Compensation for post combination services - (48) (48) - - (48)
Share based payment expense - - - - (431) (431)
Interest expense (322) (470) (792) (226) (108) (1,126)
Segment profit/(loss) before tax 2,327 1,128 3,455 2,864 (756) 5,563
Segment assets 42,230 68,397 110,627 39,712 44,631 194,970
Segment liabilities (35,850) (63,888) (99,738) (29,377) (2,563) (131,678)
Segment net assets 6,380 4,509 10,889 10,335 42,068 63,292
Within Corporate assets is £44,342,000 of goodwill on consolidation. This is
allocated to the trading segments as follows:
Goodwill by segment 13,516 12,499 26,015 18,327 - 44,342
3 Segmental information (continued)
Year ended 31 October 2022 Ambient Frozen & Total retail & wholesale Foodservice Corporate Total
Chilled
£000 £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* 8,382 10,382 18,764 11,263 (550) 29,477
Amortisation of intangibles - (71) (71) (6) (22) (99)
Depreciation (1,584) (3,911) (5,495) (2,345) (57) (7,897)
Adjusted operating profit* 6,798 6,400 13,198 8,912 (629) 21,481
Acquisition expense - - - - (148) (148)
Compensation for post combination services - (95) (95) - - (95)
Share based payment expense - - - - (863) (863)
Interest expense (736) (1,057) (1,793) (520) (221) (2,534)
Segment profit/(loss) before tax 6,062 5,248 11,310 8,392 (1,861) 17,841
Segment assets 43,029 52,441 95,470 39,106 45,082 179,658
Segment liabilities (33,501) (45,218) (78,719) (27,886) (1,166) (107,771)
Segment net assets 9,528 7,223 16,751 11,220 43,916 71,887
Within Corporate assets is £44,342,000 of goodwill on consolidation. This is
allocated to the trading segments as follows:
Goodwill by segment 13,516 12,499 26,015 18,327 - 44,342
An analysis of revenue by destination is given below:
Geographical information:
6 months ended 6 months ended Year ended 31 October 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
United Kingdom 272,280 221,167 497,842
Overseas 2,670 2,145 5,246
Group revenue 274,950 223,312 503,088
No one customer accounts for more than 10% of Group revenue.
4 Other operating income
6 months ended 6 months ended Year ended 31 October 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
Net gain on disposal of fixed assets 156 39 164
Net gain on foreign exchange - 2 33
Net gain on remeasurement of right-of-use assets and lease liabilities
1 - 8
Grant income - 1 169
157 42 374
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
Included in profit/loss are the following:
6 months ended 6 months ended Year ended 31 October 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
Depreciation of tangible assets:
Owned 1,138 1,099 1,946
Right-of-use assets 3,072 2,665 5,951
Amortisation of intangible assets 66 45 99
Amortisation of intangible assets arising on acquisition
383 - -
Expenses relating to short term and low value assets
1,018 487 1,255
Impairment loss on trade receivables 237 475 871
Dilapidation provision 6 50 48
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 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
Exceptional expenses £000 £000 £000
Acquisition expenses 648 148 148
Compensation for post combination services
48 48 95
Total exceptional expenses 696 196 243
Share based payment expense 446 431 863
Total exceptional expenses and share based payments
1,142 627 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 include the legal and professional fees connected to the
acquisition of Westcountry Food Holdings Ltd completed on 9 December 2022.
In the six month period ended 30 April 2022 and the year ended 31 October 2021
these expenses were incurred in connection with the acquisition of M.J.Baker
Foodservice Limited completed on 10 February 2022.
Compensation for post combination services relates to the value of a liability
in connection the acquisition of the remaining share capital of Central
Supplies (Brierley Hill) Ltd which is subject to an agreement to acquire which
can now be called at any time.
Share based payments relate to the Management Incentive Plan and Long term
Incentive Plan 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 2023, and
the previous six month period ending 30 April 2022 and the 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 six month period ending 30 April 2023, and
the previous six month period ending 30 April 2022 and the 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 and for the six month period
ended 31 October 2023, shares that may vest under the terms of equity
incentive plans , as calculated below.
Profit attributable to ordinary shareholders
6 months ended 6 months ended Year ended 31 October 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
Profit attributable to all shareholders 6,359 4,427 14,340
Pence Pence Pence
Basic earnings per ordinary share 9.1 6.3 20.5
Diluted earnings per ordinary share 8.7 6.3 20.5
Weighted average number of ordinary shares
6 months ended 6 months ended Year ended 31 October 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
Number Number Number
Weighted average number of ordinary shares (basic) during the period 70,146,766 70,000,000 70,033,033
Weighted average number of ordinary shares (diluted) during the period 72,946,766 70,000,000 70,033,033
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 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
Total operating profit 10,216 6,689 20,375
Amortisation of intangible assets arising on acquisition
383 - -
Acquisition expenses 648 148 148
Compensation for post combination services
48 48 95
Share based payment expense
446 431 863
Adjusted operating profit
11,741 7,316 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.
6months ended 6 months ended Year ended 31 October 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
Total operating profit 10,216 6,689 20,375
Amortisation of intangible assets
66 45 99
Amortisation of intangible assets arising on acquisition
383 - -
Depreciation 4,210 3,764 7,897
Acquisition expenses 648 148 148
Compensation for post combination services
48 48 95
Share based payment expense
446 431 863
Adjusted EBITDA 16,017 11,125 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 and is used to monitor liquidity by the Board.
6 months ended 6 months ended Year ended 31 October 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
Net cash inflow from operating activities
11,706 17,050 26,525
Tax paid 1,528 1,115 4,005
Cash flow from operating activities pre tax and compensation for post
combination services (1)
13,234 18,165 30,530
Movement in working capital
1,978 (7,227) (1,373)
Cash flow from operating activities pre tax and compensation for post
combination services and movement in working capital (2)
15,212 10,938 29,157
Pre tax operational cash conversion (1) divided by (2)
87% 166% 105%
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 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
Total operating profit 10,216 6,689 20,375
Amortisation of intangible assets
66 45 99
Amortisation of intangible assets arising on acquisition
383 - -
Depreciation 4,210 3,764 7,897
Acquisition expenses 648 148 148
Compensation for post combination services
48 48 95
Share based payment expense
446 431 863
Adjusted EBITDA 16,017 11,125 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 and is used to monitor liquidity by the Board.
6 months ended 6 months ended Year ended 31 October 2022 Audited
30 April 2022 Unaudited
30 April 2023
Unaudited
£000 £000 £000
Net cash inflow from operating activities
11,706 17,050 26,525
Tax paid 1,528 1,115 4,005
Cash flow from operating activities pre tax and compensation for post
combination services (1)
13,234 18,165 30,530
Movement in working capital
1,978 (7,227) (1,373)
Cash flow from operating activities pre tax and compensation for post
combination services and movement in working capital (2)
15,212 10,938 29,157
Pre tax operational cash conversion (1) divided by (2)
87% 166% 105%
After tax return on invested capital Represents adjusted profit after tax for the 12 months ending on the period
end date as a proportion of invested capital as at the period end date. This
measure informs the Board of how effective the Group is in generating returns
from the capital invested.
30 April 2022 Unaudited
30 April 2023 31 October 2022 Audited
Unaudited
£000 £000 £000
Adjusted operating profit
25,906 14,583 21,481
Operating lease interest 766 (683) (1,427)
26,672 13,900 20,054
Tax charge at effective rate of tax of 22.5% (FY22: 18.4%)
(6,001) (2,558) (3,690)
Adjusted operating profit after tax (1) 20,671 11,343 16,364
Invested capital comprising:
Interest bearing loans and borrowings
36,816 23,420 20,354
Lease liabilities 29,991 29,301 28,749
Share capital 700 700 700
Share premium 64,143 64,183 64,183
Less cash at bank and in hand
(3,288) (6,111) (5,511)
Total invested capital (2) 128,402 111,493 108,475
After tax return on invested capital (1) divided by (2)
16% 10% 15%
Leverage (including IFRS 16 debt) Management assess leverage by reference to adjusted EBITDA for the 12 months
ending on the period end date against net debt including and excluding IFRS 16
& lease liabilities and including the liability for post combination services
held within other creditors, as at the period end date. This indicates how
Leverage (excluding IFRS 16 debt) much income is available to service debt before interest, tax, depreciation
and amortisation.
30 April 2022 Unaudited
30 April 2023 31 October 2022 Audited
Unaudited
£000 £000 £000
Adjusted EBITDA (1) 34,369 22,344 29,477
Interest bearing loans and borrowings
36,816 23,420 20,354
Lease liabilities 29,991 29,301 28,749
Liability for post combination services
854 759 807
Cash at bank and in hand (3,288) (6,111) (5,511)
Net debt (2) 64,373 47,369 44,399
Leverage (including IFRS 16 debt) (2) divided by (1)
1.9x 2.1x 1.5x
IFRS 16 lease liabilities (26,329) (26,459) (25,902)
Net debt excluding IFRS 16 lease liabilities (3)
38,044 20,910 18,497
Leverage (excluding IFRS 16 lease debt) (3) divided by (1)
1.1x 0.9x 0.6x
Leverage (including IFRS 16 debt)
&
Leverage (excluding IFRS 16 debt)
Management assess leverage by reference to adjusted EBITDA for the 12 months
ending on the period end date against net debt including and excluding IFRS 16
lease liabilities and including the liability for post combination services
held within other creditors, as at the period end date. This indicates how
much income is available to service debt before interest, tax, depreciation
and amortisation.
30 April 2022 Unaudited
30 April 2023 31 October 2022 Audited
Unaudited
£000 £000 £000
Adjusted EBITDA (1) 34,369 22,344 29,477
Interest bearing loans and borrowings
36,816 23,420 20,354
Lease liabilities 29,991 29,301 28,749
Liability for post combination services
854 759 807
Cash at bank and in hand (3,288) (6,111) (5,511)
Net debt (2) 64,373 47,369 44,399
Leverage (including IFRS 16 debt) (2) divided by (1)
1.9x 2.1x 1.5x
IFRS 16 lease liabilities (26,329) (26,459) (25,902)
Net debt excluding IFRS 16 lease liabilities (3)
38,044 20,910 18,497
Leverage (excluding IFRS 16 lease debt) (3) divided by (1)
1.1x 0.9x 0.6x
Reconciliation between existing and acquired operating profit for the period
Note Existing operations Acquisitions Total 6 months ended Year ended
31 October 2022 Audited
6 months ended 30 April 2022 Unaudited
30 April 2023 Unaudited
£000 £000 £000 £000 £000
Revenue 3 262,282 12,668 274,950 223,312 503.088
Cost of sales (207,579) (8,042) (215,621) (179,195) (400,460)
Gross profit 54,703 4,626 59,329 44,117 102,628
Other operating income/ (expense) 4 166 (9) 157 42 374
Distribution expenses (24,023) (2,239) (26,262) (19,351) (44,010)
Administrative expenses (21,304) (1,704) (23,008) (18,119) (38,617)
Operating profit 9,542 674 10,216 6,689 20,375
Analysed as:
Adjusted EBITDA 14,825 1,192 16,017 11,125 29,477
Amortisation of intangible assets 5 (66) - (66) (45) (99)
Amortisation of intangible assets arising on acquisition 5 - (383) (383) - -
Depreciation 5 (4,075) (135) (4,210) (3,764) (7,897)
Acquisition expenses 5 (648) - (648) (148) (148)
Compensation for post combination services 5 (48) - (48) (48) (95)
Share based payment expense 5 (446) - (446) (431) (863)
Total operating profit 9,542 674 10,216 6,689 20,375
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