Half-year Report
24/11/2022 07:00
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RNS Number : 4137H Grafenia plc 24 November 2022
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK Market Abuse
Regulation. With the publication of this announcement via a Regulatory
Information Service, this inside information is now considered to be in the
public domain.
24 November 2022
Grafenia plc
("Grafenia", "the Group" or "the Company")
Unaudited Interim Results for the period ended 30 September 2022
Financial highlights
Six months to Six months to
30 September 30 September
2022 2021
Continuing operations £4.97m £4.39m
Turnover
EBITDA* £(0.05)m £0.27m
Operating Loss £(0.49)m £(0.23)m
Loss Before Tax £(0.54)m £(0.39)m
Tax £0.05m £0.15m
Total Comprehensive Loss £(0.48)m £(0.24)m
EPS (0.42)p (0.21)p
Development Expenditure £0.18m £0.31m
Cash and Cash Equivalents £5.01m £2.67m
Net Debt £(3.28)m £(4.49)m
*Earnings before interest, tax, depreciation and amortisation
Operational highlights
● Completed the sale and separation of Works
Manchester
● Revenue from continuing operations up by
£0.58m, a 13% increase
● Licence fees and subscriptions up by £0.04m, a
4% increase
● Partner product spend saw 31% increase, up by
£0.36m
● Revenue from online and trade up by £0.25m, a
27% increase
● Investment in Software Circle - our acquisition
strategy, is bearing fruit
● Raised £4.25m through additional bond issue to
fund acquisitions
Interim Statement
Our team has spent the past six months laying the foundations for the next
part of our journey. In our Annual Report, we discussed the ongoing
transition of our business and the sale of our manufacturing hub Works
Manchester, announced on 19 May 2022. Our teams have worked hard to ensure
that transition has been smooth. We'd like to thank everyone involved for
successfully managing the process. Simplifying our business and completing the
transition to one focussed on software and systems.
Previously we divided our reporting structure into two business units:
everything software and licence (we call this business unit Nettl Systems);
and everything production (we called that Works Manchester). Given the sale of
Works Manchester on 31 May 2022, you'll see below that we are reporting
results from "continuing" and "discontinued" operations, as we did in our full
year results released in July. In plain English, "continuing" are the figures
for the period as if we had sold Works Manchester at the beginning of the
comparative periods. "Discontinued" is everything else.
Trading Results and Cash
Revenue from continuing operations rose to £4.97m (2021: £4.39m). Total
revenue reduced to £5.84m (2021: £6.31m) following the disposal of Works
Manchester at the end of May 2022, meaning discontinued operations only
contributed revenue of £0.87m (2021: £1.92m).
Total gross profit fell to £2.66m (2021: £3.44m), again as a result of the
sale of Works Manchester. Our overall Gross margin percentage fell to 45.5%
(2021: 54.5%) as, following the sale, Works Manchester became our largest
Works Maker and we entered into a five-year supply agreement to provide
products through our platforms for our Company stores and Partners. This
change reduces the gross profit percentage of the Group, but at the same time
reduces staff costs and overheads. To accurately reflect the performance of
continuing operations, the financials have been presented to show the results
had the disposal and new supply agreement been in effect for both the current
and the comparative financial years. Gross Profit from continuing operations
was £2.02m (2021: £1.83m). It fell slightly as a percentage of revenue,
40.6% (2021: 41.7%), as a greater proportion of revenue has been generated
through our brand partners in the first six months of this financial year
compared to last.
Total operating costs reduced in total following the Sale of Works Manchester,
with total staff costs of £1.60m (2021: £1.91m) and total other operating
charges of £1.00m (2021: £1.04m). Our continuing operations have however
experienced increases. Covid related employee wage support schemes ended, and
we invested in both people and professional fees in our pursuit of additional
software companies to bring into the Grafenia group. Alongside this, as with
most other businesses, we experienced inflationary pressures, particularly on
wages with higher costs of living, and a higher rate of national insurance. As
a result, staff costs for continuing operations increased to £1.18m (2021:
£0.84m) and other operating charges increased to £0.85m (2021: £0.64m).
This led to EBITDA from continuing operations falling to a loss of £0.05m
(2021: profit £0.27m) and an operating loss from continuing operations of
0.49m (2021: loss of £0.23m). With the sale of Works Manchester, the overall
operating loss reduced to £0.44m (2021: 0.53m).
At 30 September 2022, the Company had cash of £5.01m (2021: £2.67m) and debt
of £8.29m (2021: £7.16m). An additional £4.25m of cash was raised from a
bond issue on 27 September 2022 to fund the acquisition of Vertical Plus
Limited in October 2022, along with further acquisitions that are expected to
be announced in the near future. Our operating activities utilised £0.29m
of cash (2021: generated £0.43m) as we transitioned to our new operating
model.
Capital expenditure was £0.18m (2021: £0.34m). Almost all of this amount was
invested in the ongoing development of our platform which underpins our
operations and is licensed to our partners.
Trading Review
We've improved the revenue performance of Nettl Systems. Our investment in
Software Circle is beginning to bear fruit and we continue to make progress
building the best operating model for our new focus.
Nettl Systems
Our Nettl Systems business operates within the Graphics sector. Licencing
software and brands to graphic professionals. Designers, printers, signmakers,
marketing agencies and other graphic professionals use our marketing tools,
workflow management system and supply chain to deliver the best service to
their clients. We also own five Nettl company stores in Birmingham, Dublin,
Exeter, Liverpool and Manchester all utilising our software platform. We use
these to train new people, refine new software initiatives and develop best
practice.
We have hundreds of partners who utilise this best practice and licence our
systems. Partners pay us a monthly subscription which gives them access to our
systems, training and support. Using the Nettl system, they're able to buy
factory-direct print and display that is seamlessly integrated from multiple
suppliers. We call them Works Makers. Partners resell these products to
clients.
Increasingly, partners are also reselling recurring subscriptions for
centralised digital marketing services like SEO, Social Media and Paid Search.
We expect to extend these centralised service offerings to help partners
increase the recurring revenues they generate.
An example of this is the launch of SEO Console. A platform for clients
available through the Nettl system, to help get found in online searches.
Clients have access to a portal that enables them to optimise their website
and manage listings and reviews. Working alongside our current SEO service
offering, our partners can resell SEO Console as recurring subscriptions to
their clients.
Partners that use the Nettl or printing.com brand in conjunction with their
own, we call 'brand partners'. They're our exclusive partner in their
neighbourhood. We licence printing.com and Nettl directly in the UK and
Ireland. We also licence Nettl in Belgium, France, the Netherlands and in the
USA. In Australia and New Zealand, we have a master licence agreement.
In the interim period, revenue from Nettl Systems increased by 13% to £4.97m
(2021: £4.39m). Within this segment, company stores decreased by 5% to
£1.18m (2021: £1.24m). This decrease was due to team transitions in two
store locations. Licence fee and subscription income increased to £1.07m
(2021: £1.04m). We continue to listen to feedback from our partners and
extend the capabilities of our platform. This has helped us improve partner
retention rates during the period. Most recently we've improved enquiry
management with 'The Pipeline' and made it easier for partners to build
proposals, estimates, jobs and orders using their own Standard Price List
items. We're currently working on improving the User Interface of key order
screens. Our aim is to equip our partners with the tools they'll need in the
studio of tomorrow.
Along with the successful transition of Works Manchester to new owners PFI,
we've continued to add new Works Makers to widen the product range available
to our partners. The products our partners buy from us at wholesale prices -
like signage, printing and promo goods - has increased by 31% to £1.53m
(2021: £1.17m).
We also sell print and signs to professional buyers through Marqetspace and a
few other online channels. We utilise our w3shop software module, available as
part of the Nettl System. It is a fertile ground for cultivating Nettl
partners and gives us insight into where gaps in our product range are. That
knowledge has been used to find new Works Makers to improve the product range
available throughout our software systems. We continue to see an increase in
Marqetspace revenues to £1.19m (2021: £0.94m)
Software Circle
With our renewed focus on Software & Systems, as detailed in our Annual
Report, our acquisition strategy is now aimed at software businesses. To
extend our scale, capability and resilience. We have continued to invest in
building the structure required for us to be a serial acquirer and permanent
home for software businesses and management talent.
Our team of analysts and searchers actively look for software businesses that
match our criteria, for us to acquire and become part of the Group. We've made
progress in building a scalable, acquisition flywheel.
We're particularly interested in Vertical Market Software (VMS) businesses.
Niche, mission critical platforms, where revenues are recurring in nature. The
kind of software that is the glue holding a business together. Keeping clients
using it, year after year. Perhaps where the owner is thinking about
retirement planning or a change of pace. Often looking for a commercial
partner to take care of their IP, team and client base for the long term.
We're an ideal permanent home. Providing continuity of support and helping
maintain relationships.
We'll retain their brands but we're not planning to integrate or migrate them
to our platform. They'll keep their technology stack and be run in a
decentralised way.
The investment in our Software Circle team and progressing ongoing potential
deals, has impacted the EBITDA for this period. However, that investment is
starting to bear fruit with the acquisition of Vertical Plus Ltd detailed in
our announcement on 22 September 2022. Having raised funds for other
acquisitions in the pipeline, detailed in our update of 27 September 2022
we're hopeful of adding other businesses to the Group. We will provide further
updates as things come to fruition.
If you own a vertical market software business or get talking with someone who
does, please hop to www.grafenia.com/acquisition
(http://www.grafenia.com/acquisition) or email letmein@grafenia.com
(mailto:letmein@grafenia.com) .
Outlook
Trading continues to outperform the same period last year. November looks set
to continue that trend. It is difficult to foresee how business confidence
will be impacted by the economic climate. However, sales are in line with
current internal forecasts.
Our attention is focussed on building our recurring revenue streams. That's by
a mix of buying and successfully running software companies through Software
Circle. And by building tools to licence to professionals in the graphic arts,
print and sign sectors with Nettl Systems.
In the last few announcements, we've discussed our goal of achieving 10-15%
EBITDA. With reducing the size of the group in May 2022 following the disposal
of Works Manchester, whilst retaining the central costs of operating a
publicly listed business and investing in our acquisition strategy, these
levels of return have not yet been possible. However, given our improved
trading to date, alongside the acquisition of Vertical Plus, and other
acquisitions expected to follow, we firmly believe that this goal remains
achievable in the mid-term.
Jan
Mohr
Gavin Cockerill
Chairman
Acting Chief Executive Officer
23 November 2022
Unaudited Interim Results for the period ended 30 September 2022
Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2022
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
Note Six months to 30 September 2022 Six months to 30 September 2022 Six months to 30 September 2022 Six months to 30 September 2021 Six months to 30 September 2021 Six months to 30 September 2021 Year ended Year ended Year ended
31 March 31 March 31 March
2022 2022 2022
£000 £000 £000 £000 £000 £000 £000 £000 £000
Continuing operation Discontinued operation Total Continuing operation Discontinued operation Total Continuing operation Discontinued operation Total
Revenue 3 4,969 870 5,839 4,386 1,921 6,307 8,916 3,445 12,361
Raw materials and consumables used (2,946) (235) (3,181) (2,555) (317) (2,872) (5,377) (286) (5,663)
Gross profit 2,023 635 2,658 1,831 1,604 3,435 3,539 3,159 6,698
Staff costs (1,179) (417) (1,596) (838) (1,075) (1,913) (2,019) (2,221) (4,240)
Doubtful debt expense (49) (10) (59) (90) (2) (92) (32) (11) (43)
Other operating charges (848) (155) (1,003) (636) (402) (1,038) (1,322) (763) (2,085)
Earnings before interest, tax depreciation and amortisation (53) 53 - 267 125 392 166 164 330
Depreciation and amortisation (440) - (440) (495) (429) (924) (944) (569) (1,513)
Operating loss (493) 53 (440) (228) (304) (532) (778) (405) (1,183)
Financial income 54 - 54 5 - 5 6 - 6
Financial expenses (96) (21) (117) (164) (92) (256) (346) (186) (532)
Net financing expense (42) (21) (63) (159) (92) (251) (340) (186) (526)
Loss before tax (535) 32 (503) (387) (396) (783) (1,118) (591) (1,709)
Taxation 51 - 51 150 - 150 559 - 559
Loss for the period (484) 32 (452) (237) (396) (633) (559) (591) (1,150)
Re-measurement to fair value on discontinued operations
12 - (235) (235) - - - - (686) (686)
Total comprehensive loss for the period (484) (203) (687) (237) (396) (633) (559) (1,277) (1,836)
Earnings per share 7 (0.42)p (0.18)p (0.60)p (0.21)p (0.34)p (0.55)p (0.49)p (1.12)p (1.60)p
Consolidated Statement of Financial Position
at 30 September 2022
Unaudited Unaudited Audited
Note 30 September 2022 30 September 2021 31 March
2022
£000 £000 £000
Non-current assets
Property, plant and equipment 972 4,705 1,077
Intangible assets 1,233 3,282 1,391
Deferred consideration receivable 8 1,804 -
Total non-current assets 4,009 7,987 2,468
Current assets
Inventories 26 434 29
Trade and other receivables 4 1,329 2,426 1,281
Deferred consideration receivable 8 618 - -
Prepayments 106 320 283
Cash and cash equivalents 5,008 2,669 1,462
Assets relating to disposal group 12 - - 6,234
Total current assets 7,087 5,849 9,289
Total assets 11,096 13,836 11,757
Current liabilities
Other interest-bearing loans and borrowings
6 386 1,345 308
Trade and other payables 5 1,012 2,708 1,512
Deferred income 5 - 24 77
Liabilities relating to disposal group 12 - - 3,530
Total current liabilities 1,398 4,077 5,427
Non-current liabilities
Other interest-bearing loans and borrowings
6 7,900 5,811 3,842
Deferred tax liabilities - 323 -
Total non-current liabilities 7,900 6,134 3,842
Total liabilities 9,298 10,211 9,269
Net assets 1,798 3,625 2,488
Equity
Share capital 1,145 1,145 1,145
Share premium account 7,866 7,866 7,866
Merger reserve 838 838 838
Retained earnings (8,202) (6,312) (7,515)
Translation reserve 63 - 66
Share based payment reserve 88 88 88
Total equity 1,798 3,625 2,488
Consolidated Statement of Changes in Shareholders Equity
for the six months ended 30 September 2022 (unaudited)
Share Share Premium Merger Retained Share based payment reserve Translation reserve
Capital Reserve earnings Total
£000 £000 £000 £000 £000 £000 £000
Opening shareholders' funds at 1 April 2021 1,145 7,866 838 (5,679) 84 - 4,254
Loss and total comprehensive income for the period from continuing operation
- - - (237) - - (237)
Loss and total comprehensive income for the period from discontinued operation
- - - (396) - - (396)
Share option reserve - - - - 4 - 4
Closing shareholders' funds at 30 September 2021 1,145 7,866 838 (6,312) 88 - 3,625
Loss and total comprehensive income for the period from continuing operation
- - - (322) - - (322)
Loss and total comprehensive income for the period from discontinued operation
- - - (881) - - (881)
Retranslation of net assets of overseas subsidiaries - - - - - 66 66
Closing shareholders' funds at 31 March 2022 1,145 7,866 838 (7,515) 88 66 2,488
Loss and total comprehensive income for the period from continuing operation
- - - (484) - - (484)
Loss and total comprehensive income for the period from discontinued operation
- - - (203) - - (203)
Retranslation of net assets of overseas subsidiaries - - - - - (3) (3)
Closing shareholders' funds at 30 September 2022 1,145 7,866 838 (8,202) 88 63 1,798
Consolidated Statement of Cash Flows
for the six months ended 30 September 2022
Unaudited Unaudited Audited
Half year Half year Full year
2022 2021 2022
£000 £000 £000
Cash flows from operating activities
Loss for the period (484) (237) (559)
Adjustments for:
Depreciation, amortisation and impairment 440 495 944
Release of deferred profit on sale of plant and equipment - (5) (9)
Share based payments - 4 4
Net finance expense 42 159 340
Bad debt expense 49 90 (54)
Foreign exchange loss - - 66
Tax income (51) (150) (559)
Operating cash flow before changes in working capital and provisions (4) 356 173
Change in trade and other receivables 149 (778) (86)
Change in inventories 3 - 2
Change in trade and other payables (519) 441 184
Cash (utilised) / generated by operations (371) 19 273
Interest received 2 5 -
Tax (paid)/received (21) - -
Net cash (outflow) / inflow from operating activities from continuing (390) 24 273
operation
Net cash inflow / (outflow) from operating activities from discontinued 104 403 (139)
operation
Net cash (outflow) / inflow from operating activities (286) 427 134
Cash flows from investing activities
Proceeds from sale of subsidiary 100 - -
Acquisition of plant and equipment (2) (19) (27)
Capitalised development expenditure (175) (307) (525)
Acquisition of other intangible assets - (8) (20)
Net cash used in investing activities from continuing operation (77) (334) (572)
Net cash used in investing activities from discontinued operation - (2) (3)
Net cash used in investing activities (77) (336) (575)
Cash flows from financing activities
Proceeds from loans 4,250 - -
Repayment of loans (150) (79) (196)
Capital payment of lease liabilities (56) (58) (115)
Interest payment of lease liabilities (31) (36) (67)
Net cash inflow / (outflow) from financing activities from continuing 4,013 (173) (378)
operation
Net cash inflow / (outflow) from financing activities from discontinued (95) 11 (330)
operation
Net cash inflow / (outflow) from financing activities 3,918 (162) (708)
Net (decrease) / increase in cash and cash equivalents from continuing 3,546 (483) (677)
operations
Exchange difference on cash and cash equivalents (9) - -
Net (decrease) / increase in cash and cash equivalents from discontinued 9 412 (472)
operations
Cash and cash equivalents at start of period 1,462 2,740 2,740
Cash and cash equivalents at end of period 5,008 2,669 1,591
Comprises of:
Cash and cash equivalents from continuing operation 5,008 2,483 1,462
Cash and cash equivalents from discontinued operation - 186 129
Notes
(forming part of the interim financial statements)
1 Basis of preparation
Grafenia plc (the "Company") is a company incorporated and domiciled in the
UK.
These financial statements do not include all information required for full
annual financial statements and should be read in conjunction with the
financial statements of the Company as at and for the year ended 31 March
2022. Those accounts have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors was: (i)
unqualified; (ii) did not include a reference to any matters to which the
auditors 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.
These interim financial statements are prepared on the same basis as the
financial statements for the year ended 31 March 2022, in which our full set
of accounting policies, including critical judgements and key sources of
estimation uncertainty, can be found.
The Directors review a two-year forecast when approving the interim financial
statements to ensure that adequate cash resources are in operational existence
to support trading for the foreseeable future.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 23 November 2022.
2 Significant accounting policies
The accounting policies applied by the Company in these condensed consolidated
interim financial statements are the same as those applied by the Company in
its consolidated financial statements for the year ended 31 March 2022.
3 Segmental information
The Company's primary operating segments are geographic being UK &
Ireland, Europe and others. The secondary segmental analysis is by nature of
sales channel and service.
This disclosure correlates with the information which is presented to the
Acting Chief Executive (CEO), the Chief Operating Decision Maker pursuant to
IFRS 8, who reviews revenue (which is considered to be the primary growth
indicator) by segment. The Company's costs, finance income, tax charges,
non-current liabilities, net assets and capital expenditure are only reviewed
by the CEO at a consolidated level and therefore have not been allocated
between segments.
Analysis by location of sales
UK & Ireland
Europe Other Total
£000 £000 £000 £000
Six months ended 30 September 2022 5,653 103 83 5,839
Six months ended 30 September 2021 5,987 123 197 6,307
Year ended 31 March 2022 11,723 289 349 12,361
Revenue generated outside the UK is attributable to partners in Belgium,
France, Ireland, New Zealand, The Netherlands and the USA. No single customer
provided the Group with over 10% of its revenue.
DISAGGREGATION OF REVENUE
The disaggregation of revenue from contracts with customers is as follows:
Continuing Operations Discontinued Operation Total
Licence Fees Company Stores Brand Partner Print Online & Trade
Works Sign Businesses
£000 £000 £000 £000 £000 £000 £000
Six months ended 30 September 2022 1,074 1,177 1,531 1,187 4,969 870 5,839
Six months ended 30 September 2021 1,036 1,242 1,171 937 4,386 1,921 6,307
Year ended 31 March 2022 2,135 2,462 2,439 1,880 8,916 3,445 12,361
4 Trade and other receivables
Unaudited Unaudited Audited
Half year Half year Full year
2022 2021 2022
£000 £000 £000
Trade receivables 2,181 3,229 3,290
Less provision for trade receivables (1,031) (1,122) (1,089)
Trade receivables net 1,150 2,107 2,201
Total financial assets other than cash and cash equivalents classified at 1,150 2,107 2,201
amortised cost
Corporation tax 72 247 167
Other receivables 107 72 70
Total Other receivables 179 319 237
Total trade and other receivables 1,329 2,426 2,438
Total relating to discontinued operation - 1,155 1,157
Total relating to continuing operation 1,329 1,271 1,281
5 Trade and other payables
Unaudited Unaudited Audited
Half year Half year Full year
Current liabilities 2022 2021 2022
£000 £000 £000
Trade payables 686 1,382 1,445
Accruals 183 443 373
Other liabilities 143 883 529
Total financial liabilities, excluding 'non-current' loans and borrowings
classified as financial liabilities measured at amortised cost
1,012 2,708 2,347
Total relating to discontinued operation - 844 835
Total relating to continuing operation 1,012 1,864 1,512
Deferred Income - 24 77
Total relating to discontinued operation - - -
Total relating to continuing operation - 24 77
Total trade and other payables 1,012 2,732 2,424
6 Borrowings
Unaudited Unaudited Audited
Half year Half year Full year
Current liabilities 2022 2021 2022
£000 £000 £000
Invoice financing - 509 512
Lease liabilities 116 673 683
Loans 270 163 172
386 1,345 1,367
Total relating to discontinued operation - 1,073 1,059
Total relating to continuing operation 386 272 308
Non-current liabilities
Lease liabilities 830 2,851 2,517
Loans 465 771 683
Bearer bonds 6,605 2,189 2,270
7,900 5,811 5,470
Total relating to discontinued operation - 1,905 1,628
Total relating to continuing operation 7,900 3,906 3,842
On 27 September 2022 the Company issued further bonds via the perpetual bond
facility put in place in July 2020. The Company issued £5.00m of the Bonds,
at nominal value, to investors, raising £4.25m before expenses.
7 Earnings per share
The calculations of earnings per share are based on the following profits and
numbers of shares:
Unaudited Unaudited Audited
Six months to 30 September Six months to 30 September Year ended 31 March
2022 2021 2022
£000 £000 £000
Loss for the period from continuing operations (484) (237) (559)
Profit for the period from discontinued operations (203) (396) (1,277)
Total loss after taxation for the financial year (687) (633) (1,836)
Weighted average number of shares in issue 114,490,828 114,490,828 114,490,828
Basic earnings per share (0.60)p (0.55)p (1.60)p
Basic earnings per share from continuing operation (0.42)p (0.21)p (0.49)p
Basic earnings per share from discontinued operation (0.18)p (0.34)p (1.12)p
Share options had no dilutive effect on the weighted average number of shares
and therefore no diluted earnings per share have been stated.
8 Deferred consideration receivable
Unaudited Unaudited Audited
Half year Half year Full year
2022 2021 2022
£000 £000 £000
Receivable within one year 618 - -
Receivable after one year 1,804 -
Total deferred consideration receivable 2,422 - -
The total discounted cash consideration still to be received for disposal of
the manufacturing operation based in Manchester referred to as 'Works
Manchester' is £2.42m (£2.81m gross consideration).
9 Dividend
The Directors are not declaring an Interim Dividend (2021: Nil).
10 Post Balance Sheet Events
On 1 October 2022 the Company completed the acquisition of Vertical Plus
Limited, an ecommerce software business, for total consideration rising to
£2.88m. The acquisition is expected to be cash flow generative and earnings
enhancing in the first year after acquisition.
11 Related Party Transactions
As part of the Bond issue on 27 September 2022, Mediqon Group AG, where our
Chairman, Jan-Hendrik Mohr, is CEO, were issued £4.2m nominal nominal value
of the bonds, at the same discount rate as other participants.
12 Discontinued operation
On 31 May 2022, the group sold its manufacturing operation based in
Manchester. The manufacturing operation, referred to as 'Works Manchester'
consists of the legal entity, Works Manchester Limited, along with the
Manchester based production assets, related leases and staff contracts of
Grafenia Operations Limited. Accordingly, these assets and liabilities have
been designated as held for sale and separately disclosed in the statement of
financial position and the financial impact of the discontinued operation is
separately disclosed in the Statement of comprehensive income.
Following the disposal, Grafenia entered into a five-year supply agreement
with Works Manchester Limited to provide products to our Company stores and
Partners. This change reduces the gross profit percentage of the group, but at
the same time reduces staff costs and overheads. To accurately reflect the
performance of continuing operations, the Statement of comprehensive income
has been presented to show the results had the disposal and new supply
agreement been in effect for both the current and the comparative financial
years.
Following preparation of the Completion Accounts, the total discounted cash
consideration to be received was reduced from £2.70m (£3.16m gross
consideration) to £2.47m (£2.91m gross consideration), with the final
instalment due in May 2026. The £0.23m impairment has been recognised within
discontinued operations in the current period.
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