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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Ceps Plc | LSE:CEPS | London | Ordinary Share | GB00B86TNX04 | ORD 0.3P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 19.00 | 17.00 | 21.00 | 19.00 | 19.00 | 19.00 | 30,000 | 08:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Fabricated Rubber Pds, Nec | 26.45M | 460k | 0.0219 | 8.68 | 3.99M |
TIDMCEPS
RNS Number : 9690D
CEPS PLC
03 May 2017
3 May 2017
CEPS PLC
("CEPS" OR THE "COMPANY")
FINAL RESULTS
The Board of CEPS is pleased to announce its final results for the year ended 31 December 2016.
CHAIRMAN'S STATEMENT
I am pleased to report that the stronger companies within the Group continue to make excellent progress. An analysis of the performance by company in 2016 is set out in the Operational Review below.
In the 2015 Chairman's Statement I reported that three of the Group companies were facing operational challenges. During 2016, these companies have taken the necessary steps towards recovery. However, such steps have inevitably incurred further costs and, so, increased their losses in the year. We are hopeful that these companies are, as a result of the actions taken, moving forward and will continue to do so over the next twelve months. Our intention is to continue to support them during this period of transition.
It is worth highlighting that as a result of our annual goodwill impairment review we have reduced the value of the goodwill in Sunline by GBP611,000 reflecting the fact that the business lost money in the year. In addition, we have had to write-off half the deferred tax asset in Davies Odell, amounting to GBP219,000. Although these adjustments have had no cash impact, they have clearly had a major impact on the trading results of the Group. Aford Awards, Friedman's and Hickton Consultants have performed solidly in the year and there is strong value being created at these companies.
In the past year there has been considerable coverage of the EU Referendum in June, the consequent fallout and conjecture about Article 50 and the Brexit terms, the change of leaders in all but one of the political parties, the unexpected election of President Trump and the continuing issues in the European Union, including the ongoing problems in Portugal, Spain, Italy and Greece and now, in turn, the UK election in a few weeks. These events have all caused uncertainty which typically leads to action being deferred.
The immediate impact on CEPS was limited to an increase in the cost of purchasing products from overseas in Aford Awards and Davies Odell. Longer term there may be an issue in respect of being able to hire enough people to fill the various roles throughout the Group companies. As an aside, each company has a brief to consider any capital expenditure that can be made to reduce labour costs, improve efficiency and quality.
At CEPS we are taking the view that life will go on and that, in common with the view of Lord Mervyn King, the previous Governor of the Bank of England, in 30 years it will not be possible to pinpoint the exact moment of Brexit on a chart of the long term growth of the UK.
Financial review
Group revenue at GBP24.32m for the year (2015: GBP18.23m) was up by 33% whilst operating profit grew by 10% to GBP536,000 from GBP486,000. Profit before tax was down at GBP146,000 (2015: GBP256,000) before the exceptional goodwill impairment charge of GBP611,000.
Group costs were lower than last year at GBP308,000, but 2015 central costs included a GBP79,000 write-off of historic goodwill. If this is excluded, Group costs are marginally up by GBP17,000 as compared to GBP291,000 in 2015. The post-tax loss was GBP913,000 (2015: profit GBP57,000).
Earnings per share on a basic and diluted basis was (11.83p) (2015: (3.65p)). In the year there was an improvement in cash generated from operations amounting to GBP1,113,000 (2015: GBP889,000), but there was a net decrease in cash and cash equivalents of GBP67,000 (2015: net increase of GBP206,000). Year-end cash and cash equivalents (excluding bank overdrafts) were GBP840,000 (2015: GBP854,000).
Operational review
Aford Awards
Aford Awards continued to make good progress in the year and produced record profits which, coupled with the acquisition of a small business in Littlehampton, has broadened and expanded the business. Additional space has been rented to manage this growth and to improve efficiency.
CEM Press
Once we took full control of CEM Press it became clear there was a need to change aspects of the management team and to enhance the sales team. Whilst there have been no significant sales wins as yet, considerable efforts have been made to reposition the company in the market place and we are very hopeful of this being evidenced in the second half of 2017.
Davies Odell
The company was badly affected by the precipitous decline in the value of Sterling after the Referendum as much of the company's product is purchased is in Dollars and Euros. Prices have since been increased and marginally profitable products have been removed from the range, so that having lost money last year the company is now optimistic that the current year, 2017, will be much improved.
In addition, some excellent manufacturing contracts have been won as the current Sterling/Dollar rate makes UK produced product very price competitive.
Continued efficiency gains are being achieved with further reductions in the head count, with no reduction in output.
Friedman's
Friedman's has had another record year with the online business-to-consumer business, Funkifabrics, showing a real step forward in monthly sales and profitability. The company is planning to move to much larger premises in order to have the space and power to develop a new range of printed textile products, with a view to significantly increasing the size of the company over the next three years.
Hickton Consultants
Hickton Consultants had a very pleasing first year under CEPS' ownership in which the company exceeded expectations. Further strong growth is budgeted for in the current year and the company is currently on track. Additionally, and always part of the plan when the business was acquired, the company is looking to acquire other businesses in what is a very fragmented market segment.
Sunline
Having promised much at this stage last year, the business badly disappointed. The Fulfilment and Marketing Services divisions both reduced losses in line with expectations. The major disappointment was the loss incurred by the Polywrap division in the final quarter of the year.
A radical change has been made to the operational approach of the business and in the first three months of the current year the results have been very pleasing. It now appears that the investment of two years ago is finally beginning to pay dividends. This investment was based on the reduction in labour costs, which certainly did not occur in the busy "golden" quarter of last year. The real test as to whether the full recovery has been achieved in this business will not be known until December of this year. However, we are much encouraged by the weekly labour reports showing a significant reduction in labour costs.
The Fulfilment division is growing very rapidly and will become a major profit contributor in the future.
Dividend
A dividend is not proposed at this time (2015:GBPnil).
Power to issue and purchase shares
The Company will be convening its Annual General Meeting to be held on 12 June 2017. Among other resolutions to be proposed, the Board will seek authority to allot shares equating to 111% of its present issued ordinary share capital in line with the requirements of our acquisition strategy.
People
The Board is most grateful for the diligent efforts of all the Group's employees in 2016.
Outlook
As I write this report I currently feel that all businesses are moving in the right direction, appear under a lot more control than in the past and that all the changes and efforts of the past six months are beginning to produce good results. It is our intention to support all our companies and to this end we have secured a GBP1m loan from a third party in April 2017. The new loan is designed to provide a highly flexible facility to address the possibility of cash demands over the next year and for the purpose of acquisition funding.
In the latest equity placing at the end of January CEPS raised GBP1.27m and I was happy to invest the maximum I was allowed to at 30% of the issue. I remain completely convinced that the Group is on the right track and that the continuing hard work by many people in the companies will become clearer and the real value of the Group will then be evidenced.
David Horner
Chairman
2 May 2017
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
David Horner, Chairman, CEPS PLC
Tel: 01225 483030
Tony Rawlinson, Cairn Financial Advisers LLP
Nominated Adviser
Tel: 020 7213 0880
CEPS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 DECEMBER 2016
2016 2015 GBP'000 GBP'000 Continuing operations Revenue (note 4) 24,320 18,229 Cost of sales (19,465) (15,035) --------- --------- Gross profit 4,855 3,194 Administration expenses (4,319) (2,708) Operating profit 536 486 Goodwill impairment (611) - Adjusted operating (loss)/profit (75) 486 Analysis of operating (loss)/profit --------- --------- - Trading 844 856 - Goodwill impairment (611) - - Group costs (308) (370) --------- --------- (75) 486 --------- --------- Finance income 26 8 Finance costs (416) (121) Loss on disposal of investment - (150)
Share of profit of associate - 21 Profit on disposal of associate - 12 (Loss)/profit before tax (465) 256 Taxation (note 5) (448) (199) --------- --------- (Loss)/profit for the year from continuing operations (913) 57 --------- --------- Other comprehensive loss: Items that will not be reclassified to profit or loss Actuarial loss on defined benefit pension plans (80) (68) --------- --------- Items that may be subsequently - - reclassified to profit or loss --------- --------- Other comprehensive loss for the year, net of tax (80) (68) Total comprehensive loss for the year (993) (11) --------- --------- (Loss)/income attributable to: Owners of the parent (1,132) (275) Non-controlling interest 219 332 --------- --------- (913) 57 --------- --------- Total comprehensive (loss)/income attributable to: Owners of the parent (1,212) (343) Non-controlling interest 219 332 --------- --------- (993) (11) --------- --------- Earnings per share - basic and diluted (note 6) (11.83)p (3.65)p --------- ---------
CEPS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
2016 2015 GBP'000 GBP'000 -------- -------- Assets Non-current assets Property, plant and equipment (note 7) 2,419 2,122 Intangible assets (note 9) 5,738 4,652 Deferred tax asset 220 440 8,377 7,214 -------- -------- Current assets Inventories 2,020 2,030 Trade and other receivables 3,701 3,155 Cash and cash equivalents (excluding bank overdrafts) 840 854 6,561 6,039 -------- -------- Total assets 14,938 13,253 ======== ======== Equity Capital and reserves attributable to owners of the parent Called up share capital (note 10) 957 957 Share premium 3,943 3,943 Retained earnings (1,924) (712) -------- -------- 2,976 4,188 Non-controlling interest in equity 1,227 873 Total equity 4,203 5,061 -------- -------- Liabilities Non-current liabilities Borrowings 2,600 2,275 Deferred tax liability 80 77 Provisions for liabilities and charges 50 55 2,730 2,407 -------- -------- Current liabilities Borrowings 3,838 2,319 Trade and other payables 3,934 3,359 Current tax liabilities 171 107 Provisions for liabilities and charges 62 - 8,005 5,785 -------- -------- Total liabilities 10,735 8,192 -------- -------- Total equity and liabilities 14,938 13,253 ======== ========
The profit within the parent financial statements for the year was GBP160,000 (2015: loss GBP478,000).
CEPS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARED 31 DECEMBER 2016
2016 2015 GBP'000 GBP'000 Cash generated from operations Cash generated from operations 1,113 889 Income tax paid (236) (59) Income tax received - 8 Interest paid (416) (18) -------- -------- Net cash generated from operations 461 820 -------- -------- Cash flows from investing activities Acquisition of subsidiary net of cash acquired (188) (267) Purchase of property, plant and equipment (899) (205) Proceeds from sale of assets - 12 Purchase of intangibles (33) (35) Disposal of property, plant and equipment - 295 Interest received 26 - Net cash used in from investing activities (1,094) (200) -------- -------- Cash flows from financing activities Proceeds from/(repayment of) borrowings 1,067 (1,306) Dividend paid to non-controlling interests (180) (180) Share issue net of costs - 1,245 Repayment of capital element of finance leases (321) (173) -------- -------- Net cash generated from/(used in) financing activities 566 (414) -------- -------- Net (decrease)/increase in cash and cash equivalents (67) 206 Cash and cash equivalents at the beginning of the year 111 (95) -------- -------- Cash and cash equivalents at the end of the year 44 111 -------- -------- Cash generated from operations (Loss)/profit before income tax (465) 256 Adjustments for: Depreciation and amortisation 478 503 Intangible assets written off 611 - Profit of associate - (21) Loss on disposal on step acquisition - 138 Net finance costs 390 113 Changes in working capital: Decrease in inventories 10 165 Increase in trade and other receivables (546) (112) Increase/(decrease) in trade and other payables 578 (93) Increase/(decrease) in provisions 57 (60) -------- -------- Cash generated from operations 1,113 889 -------- --------
CEPS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 DECEMBER 2016
Attributable to owners Non-controlling Share Share Retained of the interest Total capital premium earnings parent equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 January 2015 541 3,114 (281) 3,374 694 4,068 ----------- ---------- ----------- ------------- ------------------ --------- Other comprehensive income - re--measurement of post employee benefit obligations - - (68) (68) - (68) (Loss)/profit for the year - - (275) (275) 332 57 ----------- ---------- ----------- ------------- ------------------ --------- Total comprehensive (loss)/ income for the year - - (343) (343) 332 (11) ----------- ---------- ----------- ------------- ------------------ --------- Proceeds from shares issued net of expenses 416 829 - 1,245 - 1,245 ----------- ---------- ----------- ------------- ------------------ --------- Total contribution by owners of the parent recognised
in equity 416 829 - 1,245 - 1,245 ----------- ---------- ----------- ------------- ------------------ --------- Dividend paid to non-controlling interest - - - - (180) (180) ----------- ---------- ----------- ------------- ------------------ --------- Total transactions recognised directly in equity - - - - (180) (180) ----------- ---------- ----------- ------------- ------------------ --------- Change in ownership interest in an associate - - (88) (88) - (88) Acquisition of a subsidiary - - - - 27 27 ----------- ---------- ----------- ------------- ------------------ --------- Total changes in ownership interest that do not result in a loss of control - - (88) (88) 27 (61) ----------- ---------- ----------- ------------- ------------------ --------- Total transactions with owners recognised directly in equity - - (88) (88) (153) (241) ----------- ---------- ----------- ------------- ------------------ --------- At 31 December 2015 957 3,943 (712) 4,188 873 5,061 ----------- ---------- ----------- ------------- ------------------ --------- Actuarial loss - - (80) (80) - (80) (Loss)/profit for the year - - (1,132) (1,132) 219 (913) Total comprehensive (loss)/income for the year - - (1,212) (1,212) 219 (993) ----------- ---------- ----------- ------------- ------------------ --------- Dividend paid to non-controlling interest - - - - (180) (180) ----------- ---------- ----------- ------------- ------------------ --------- Total distributions recognised directly in equity - - - - (180) (180) ----------- ---------- ----------- ------------- ------------------ --------- Acquisition of a subsidiary - - - - 315 315 ----------- ---------- ----------- ------------- ------------------ --------- At 31 December 2016 957 3,943 (1,924) 2,976 1,227 4,203 ----------- ---------- ----------- ------------- ------------------ ---------
Notes to the financial information
1. General information
The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is 11 Laura Place, Bath BA2 4BL and the registered number of the Company is 00507461.
2. Basis of preparation
This announcement is an extract from the consolidated financial statements of the Company for the year ended 31 December 2016 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issuance on 2 May 2017. The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2015 or 2016 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting. The auditors' reports on the statutory accounts for the years ended 31 December 2015 and 31 December 2016 were
unqualified and do not contain statements under s498(2) or (3) Companies Act 2006 .
This financial information has been prepared in accordance with the International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Details of the accounting policies applied are set out in the financial statements.
Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.
The Group financial statements are presented in GBP (GBP) and to the nearest thousand ('000). This Group expects to transact more of its business in GBP than any other currency and it is also the functional currency of the Group.
The financial information set out in this announcement was approved by the Board on 2 May 2017.
3. Critical accounting assumptions, judgements and estimates
The fair values of all financial assets and liabilities approximate to their carrying values.
a) Impairment of intangible assets (including goodwill and customer relationships)
The Group tests annually whether intangible assets (including goodwill) have suffered any impairment. The recoverable amounts of the cash-generating units have been determined based on value-in-use calculations. The calculations require the use of estimates.
b) Deferred tax assets
Certain subsidiaries of the Group (principally Davies Odell) have accelerated capital allowances and brought forward tax losses. Deferred tax assets have been recognised in respect of the brought-forward tax losses. The recognition of the assets reflects management's estimate of the recoverable amounts in respect of these items.
c) Retirement benefit liabilities
One subsidiary of the Group operates a defined benefits pension scheme. The scheme is subject to triennial actuarial valuation and the Group commissions an independent qualified actuary to update to each financial year end the previous triennial result. The results of this update are included in the financial statements. In reaching the annually updated results management makes assumptions and estimates. These assumptions and estimates are made advisedly, but are not any guarantee of the performance of the scheme or of the outcome of each triennial review.
d) Acquisitions
During the year the Group acquired Hickton Holdings Limited. Management has made estimates concerning the intangible assets arising on acquisition as well as the fair value of the assets and liabilities at the acquisition date.
4. Segmental analysis
The Chief Operating Decision Maker ("CODM) of the Group is its Board. Each operating segment regularly reports its performance to the Board which, based on those reports, allocates resources to and assesses the performance of those operating segments.
Operating segments and their principal activities are as follows:
- Aford Awards, a sports trophy and engraving company - CEM Press, a manufacturer of fabric and wallpaper pattern books, swatches and shade cards
- Davies Odell, a manufacturer and distributor of protection equipment, matting and footwear components
- Friedman's, a convertor and distributor of specialist Lycra - Hickton Consultants, a supplier of clerk of works services to the construction industry - Sunline, a supplier of services to the direct mail market - Group costs, costs incurred at Head Office level to support the activities of the Group
The United Kingdom is the main country of operation from which the Group derives its revenue and operating profit and is the principal location of the assets and liabilities of the Group. The Group information provided below, therefore, also represents the geographical segmental analysis. Of the GBP24,320,000 (2015: GBP18,229,000) revenue GBP21,666,000 (2015: GBP15,884,000) is derived from UK customers with the remaining GBP2,654,000 (2015: GBP2,345,000) being derived from a number of overseas countries, none of which is material in isolation.
The Board assesses the performance of each operating segment by a measure of adjusted earnings before interest, tax, Group costs, depreciation and amortisation (EBITDA). Other information provided to the Board is measured in a manner consistent with that in the financial statements.
i) Results by segment
Year ended 31 December 2016
Aford CEM Davies Friedman's Hickton Sunline Total Awards Press Odell 2016 2016 2016 2016 2016 2016 2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 -------- -------- -------- ----------- -------- -------- -------- Revenue 1,596 2,954 4,317 4,555 2,961 7,937 24,320 -------- -------- -------- ----------- -------- -------- -------- Segmental result (EBITDA) 298 (149) (10) 887 386 (90) 1,322 -------- ----------- -------- -------- -------- Depreciation and amortisation charge (478) Goodwill impairment (611) Group costs (308) Net finance costs (390) -------- -------- -------- ----------- -------- -------- Loss before taxation (465) Taxation (448) -------- -------- -------- ----------- -------- -------- -------- Loss for the year (913) ======== ======== ======== =========== ======== ======== ========
Year ended 31 December 2015
Aford CEM Davies Friedman's Hickton Sunline Total Awards Press Odell 2015 2015 2015 2015 2016 2015 2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 -------- -------- -------- ----------- -------- -------- -------- Revenue 1,468 654 4,971 4,221 - 6,915 18,229 -------- -------- -------- ----------- -------- -------- -------- Segmental result (EBITDA) before exceptional costs 273 (49) (73) 925 - 204 1,280 -------- -------- -------- ----------- -------- -------- -------- Depreciation and amortisation charge (424) Group costs (370) Net finance costs (113) Loss on step acquisition (138) Share of investment accounted for using the equity method 21 -------- -------- -------- ----------- -------- -------- -------- Profit before taxation 256 Taxation (199) -------- -------- -------- ----------- -------- -------- -------- Profit for the year 57 ======== ======== ======== =========== ======== ======== ======== ii) Assets and liabilities by segment
As at 31 December
Segment net Segment assets Segment liabilities assets 2016 2015 2016 2015 2016 2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 -------- -------- ----------- --------- -------- -------- CEPS Group 30 275 (873) (178) (843) 97 Aford Awards 1,465 1,393 (430) (489) 1,035 904 CEM Press 2,422 2,645 (1,924) (2,031) 498 614 Davies Odell 1,919 2,147 (1,353) (1,256) 566 891 Friedman's 3,549 3,408 (915) (1,031) 2,634 2,377 Hickton 2,431 - (1,220) - 1,211 - Sunline 3,122 3,385 (4,020) (3,207) (898) 178 Total - Group 14,938 13,253 (10,735) (8,192) 4,203 5,061 ======== ======== =========== ========= ======== ======== 5. Tax 2016 2015 GBP'000 GBP'000 -------- -------- Analysis of taxation in the year: Current tax Tax in respect of current year 215 111 Tax in respect of prior years 14 - -------- -------- Total current tax 229 111 -------- -------- Deferred tax Origination and reversal of temporary differences 219 88 Total deferred tax 219 88 -------- -------- Total tax charge 448 199 -------- -------- Deferred tax charged to the Consolidated Statement of Changes in Equity - - -------- --------
The tax assessed for the year is higher (2015: higher) than the standard rate of corporation tax in the UK (20%) (2015: 20.25%)
Factors affecting current tax: (Loss)/profit before taxation (465) 256 ------ ---- (Loss)/profit multiplied by the standard rate of UK tax of 20% (2015: 20.25%) (93) 52 Effects of: Permanent differences 308 147 Prior year adjustment, current tax 14 - Prior year adjustment, deferred tax 219 - Total tax charge 448 199 ------ ----
The standard rate of corporation tax in the UK changed to 20% with effect from 1 April 2016. Accordingly, the Group's profits for this accounting year are taxed at an effective rate of 20%.
Reductions in the United Kingdom corporation tax rate to 19% (effective from 1 April 2017) and 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. This will reduce the Group's future current tax charge accordingly. The deferred tax balance has been calculated based on the rate of 20%.
6. Earnings per share
Basic earnings per share is calculated on the loss for the year after taxation attributable to owners of the parent of GBP1,132,000 (2015: loss GBP275,000) and on 9,573,822 (2015:7,530,443) ordinary shares, being the weighted number in issue during the year.
No adjustment is required for dilution in either year as there are no items that would have a dilutive impact on earnings per share.
7. Property, plant and equipment Leasehold Plant, Motor Total property machinery, vehicles improvements tools and moulds Group GBP'000 GBP'000 GBP'000 GBP'000 -------------- ------------ ---------- -------- Cost at 1 January 2015 137 5,146 145 5,428 Additions 1 183 21 205 Assets acquired on purchase of a subsidiary - 330 - 330 Disposals - (2) - (2) -------------- ------------ ---------- -------- at 31 December 2015 138 5,657 166 5,961 Additions 20 727 4 751 Assets acquired on purchase of a subsidiary 20 128 - 148 Disposals - (46) (15) (61) -------------- ------------ ---------- -------- at 31 December 2016 178 6,466 155 6,799 -------------- ------------ ---------- -------- Accumulated depreciation at 1 January 2015 85 3,264 80 3,429 Charge for the year 11 381 18 410 at 31 December 2015 96 3,645 98 3,839 Assets acquired on purchase of
a subsidiary 20 105 - 125 Adjustment - 1 1 2 Charge for the year 9 440 17 466 Disposals - (42) (10) (52) at 31 December 2016 125 4,149 106 4,380 -------------- ------------ ---------- -------- Net book amount at 31 December 2016 53 2,317 49 2,419 -------------- ------------ ---------- -------- at 31 December 2015 42 2,012 68 2,122 -------------- ------------ ---------- --------
At the year end, assets held under hire purchase contracts and capitalised as plant, machinery, tools and moulds have a net book value of GBP1,679,000 (2015: GBP1,453,000) and an accumulated depreciation balance of GBP1,961,000 (2015: GBP1,699,000).
The depreciation has been charged to cost of sales in the Consolidated Statement of Comprehensive income.
8. Acquisition in 2016
On 1 February 2016 CEPS announced that it had acquired 54.97% of the issued share capital of a newly incorporated company, Hickton Holdings Limited (formerly RAM (1003) Limited) for an investment of GBP670,000 made up of 54,973 ordinary shares for GBP55,000 and GBP615,000 Shareholder Loan Notes with an 8% interest rate. Hickton Holdings Limited was formed to acquire 100% of Hickton Consultants Limited, a leading provider of clerk of works services to the construction industry, providing a quality assurance resource on larger value projects across the UK, with customers ranging from end-user clients, architects, project management firms and contractors. The business was established in 1991 and is based in Elsecar, South Yorkshire.
In order to finance the acquisition, CEPS received a loan from a third party for GBP690,000. The loan carried interest at 10% pa and was repayable in accordance with the terms of the loan agreement.
The acquisition has been accounted for using the acquisition method of accounting. After the alignment of accounting policies and other adjustments to the valuation of assets and liabilities to reflect their fair value at acquisition, the fair value of net assets acquired was GBP698,000.
The goodwill of GBP1,679,000 arising from the acquisition is attributable to the people acquired.
The following table shows the fair value of assets and liabilities included in the consolidated Financial Statements at the date of acquisition.
Fair Value GBP'000 Identifiable assets Property, plant and equipment 23 Cash and cash equivalents 404 Trade and other receivables 680 Trade and other payables (405) Deferred tax liabilities (4) ----------- 698 ----------- Net assets acquired Purchase price consideration (cash GBP592,000, equity GBP55,000 and loan stock GBP1,416,000) 2,063 Total identifiable net assets (698) Non-controlling interests on acquisition 314 Goodwill 1,679 ----------- Analysis of cash flows on acquisition Cash paid 592 Less: net cash acquired with subsidiary (404) ----------- Net cash flow on acquisition 188 ----------- 9. Intangible assets Customer Goodwill lists Other Total Group GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- -------- -------- Cost at 1 January 2015 5,878 - 96 5,974 Acquisition 858 577 - 1,435 Additions at cost - - 35 35 Disposals - - (62) (62) --------- --------- -------- -------- At 31 December 2015 6,736 577 69 7,382 --------- --------- -------- -------- Acquisition 1,679 - - 1,679 Additions at cost - 13 20 33 At 31 December 2016 8,415 590 89 9,094 --------- --------- -------- -------- Accumulated amortisation and impairment at 1 January 2015 2,621 - 68 2,689 Amortisation charge - - 14 14 Impairment 79 - - 79 Disposals - - (52) (52) --------- --------- -------- -------- at 31 December 2015 2,700 - 30 2,730 Adjustment - - 3 3 Amortisation Charge - 1 11 12 Impairment 611 - - 611 at 31 December 2016 3,311 1 44 3,356 --------- --------- -------- -------- Net book amount at 31 December 2016 5,104 589 45 5,738 --------- --------- -------- -------- at 31 December 2015 4,036 577 39 4,652 --------- --------- -------- --------
Goodwill is not amortised under IFRS, but is subject to impairment testing either annually or on the occurrence of a triggering event. Amortisation charges are included in administration expenses.
Customer lists are not amortised, but are subject to annual impairment reviews.
Other intangibles relate to computer software and website costs and are amortised over their estimated economic lives. The annual amortisation charge is expensed to cost of sales in the Consolidated Statement of Comprehensive income.
Impairment tests for intangible assets (goodwill and customer lists)
The Group tests goodwill and intangible assets arising on acquisition of a subsidiary (customer relationships) annually for impairment or more frequently if there are indications that goodwill or customer lists may be impaired.
For the purpose of impairment testing, goodwill is allocated to the Group's cash generating units (CGUs) on a business segment basis:
Aford CEM Awards Press Friedman's Hickton Sunline Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 -------- -------- ----------- ---------- -------- -------- at 1 January 2015 1,039 - 1,529 - 689 3,257 Acquisition of subsidiary Goodwill - 858 - - - 858 Customer lists - 577 - - - 577 Amortisation charge - - (1) - (78) (79) at 31 December 2015 1,039 1,435 1,528 - 611 4,613 -------- -------- ----------- ---------- -------- -------- Acquisition of subsidiary Goodwill - - - 1,679 - 1,679 Additions - customer list 13 - - - - 13 Amortisation charge (1) - - - (1) Impairment - - - - (611) (611) -------- -------- ----------- ---------- -------- -------- at 31 December 2016 1,051 1,435 1,528 1,679 - 5,693 -------- -------- ----------- ---------- -------- --------
The recoverable amount of CGU is based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five year period. Cash flows beyond five years are assumed to be constant. A discount rate of 10.85% (2015: 12.23%), representing the estimated pre-tax cost of capital has been applied to these projections. The risk profile of both CGUs is considered to be similar.
The key assumptions used in the value-in-use calculations are as follows:-
Revenue growth Gross margin Long-term growth 2016 2015 2016 2015 2016 2015 % % % % % % Aford Awards 1.0 3.0 32.4 38.1 1.0 2.0 CEM Press 1.0 2.0 38.7 41.0 1.0 2.0 Friedman's 3.0 3.0 42.0 34.1 2.0 2.0 Hickton Consultants 1.0 - 37.0 - - - Sunline 2.0 3.0 33.0 39.2 1.0 2.0
Management has determined the budgeted revenue growth and gross margins based on past performance and their expectations of market developments in the future. Long-term growth rates are based on the lower of the UK long-term growth rate and management's general expectations for the relevant CGU.
In respect of Aford Awards, CEM Press, Friedman's and Hickton Consultants the value-in-use calculation gives rise to sufficient headroom such that reasonable changes in the key assumptions do not eliminate the headroom.
At December 2016 an impairment charge of GBP611,000 was taken against the carrying value of goodwill related to Sunline. This reflected the challenging economic and trading environment of the direct mail market in which the business was operating.
10. Share Capital Number Share Share of shares capital premium Total GBP'000 GBP'000 GBP'000 At 31 December 2015 and 31 December 2016 9,573,822 957 3,943 4,900 ----------- --------- --------- -------- 11. Events after the Reporting Period (a) Equity placing
On 26 January 2017 the Company successfully placed 3,626,118 new ordinary shares at a price of 35 pence per share to raise GBP1,269,141 (before expenses) with institutional and private investors. The placing's proceeds were used to repay a loan entered into at the time of the acquisition of Hickton Holdings Limited (formerly RAM 1003 Limited) and for general working capital purposes.
Following the issue of the placing shares, the enlarged issued share capital of the Company comprised 13,199,940 ordinary shares of 10 pence each.
(b) Increase in shareholding in CemTeal Limited
On 21 February 2017 the Company announced that it had increased its shareholding in its subsidiary CemTeal Limited through the purchase of 7,000 shares for a total consideration of GBP7,000.
The Company's shareholding in CemTeal Limited and its wholly owned subsidiary CEM Press Limited has, therefore, increased from 73% to 80%.
(c) Third party loan
On 25 April the Company secured a third party loan for GBP1m, payable in two tranches of GBP500,000 each on 2 May 2017 and 15 September 2017, repayable in full by 30 June 2018 and incurring interest at 10% per annum.
12. Distribution of the Annual Report and Notice of AGM
A copy of the 2016 Annual Report, together with a notice of the Company's Annual General Meeting to be held at 11:30am on Monday 12 June 2017 at 11 Laura Place, Bath BA2 4BL, will be sent to all shareholders on Wednesday 10 May 2017. Further copies will be available to the public from the Company Secretary at the Company's registered address at 11 Laura Place, Bath BA2 4BL and from the Group website, www.cepsplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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(END) Dow Jones Newswires
May 03, 2017 02:00 ET (06:00 GMT)
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