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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ceps Plc | LSE:CEPS | London | Ordinary Share | GB00B86TNX04 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 17.50 | 15.00 | 20.00 | 17.50 | 15.00 | 15.00 | 0.00 | 08:00:04 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Fabricated Rubber Pds, Nec | 26.45M | 460k | 0.0219 | 7.99 | 3.68M |
From Apr 2019 to Apr 2024
TIDMCEPS
RNS Number : 7337N
CEPS PLC
11 May 2018
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 2017.
CHAIRMAN'S STATEMENT
Financial review
Group revenue at GBP23.60m for the year (2016: GBP24.32m) was down by 3% whilst operating profit more than doubled to GBP1.10m from GBP536,000. Profit before tax was up at GBP902,000 (2016: GBP146,000) before the exceptional goodwill impairment charge of GBP847,000 (2016: GBP611,000).
Group costs were slightly higher than last year at GBP322,000 (2016: GBP308,000), but include the professional fees for the triennial valuation of the Dinkie Heel Retirement Benefit Scheme. The post-tax loss was GBP221,000 (2016: loss GBP913,000).
Loss per share on a basic and diluted basis was (4.11p) (2016: (11.83p)). In the year cash generated from operations improved to GBP1.77m (2016: GBP1.11m), and there was a net increase in cash and cash equivalents of GBP807,000 (2016: net decrease of GBP67,000). Year-end cash was GBP1.37m (2016: GBP840,000).
Operational review
Aford Awards
Aford Awards has continued to make good progress and produce record profits. The cash generated from these profits has meant the vendor loans have now been completely repaid and the repayment of CEPS acquisition loans will now commence.
A number of "bolt-on" acquisitions are being investigated and it is hoped that at least one of these will be acquired in the second half.
CEM Press
A complete overhaul of the business has taken place over the past year. In a difficult and very competitive market CEM Press was again loss making. However, there is no doubt that we now have a more efficient and more competitive company. We are very encouraged by the level of sales enquiries which we are hoping will convert into confirmed orders and will provide a significant boost to the second half of 2018.
In a very small sector, with only a handful of competitors, there will be in the future scope for consolidation and we, and the management team at CEM Press, intend to be the consolidator.
Under accounting rules it is necessary every year to review the carrying value of the goodwill of each company. Whilst this review produced a very positive result for several of the CEPS subsidiaries, because of the poor financial performance of CEM Press in the recent past, this review showed that the carrying value of goodwill needed to be reduced. The Board decided to write-off the carrying value of goodwill in full in this company. This is a non-cash item and does not affect the underlying value of the company.
Davies Odell
The company returned to modest profitability and has at the same time invested in new products across its various activities, which should produce greater sales going forward. Better control of working capital has meant that the balance sheet has got stronger and should in time lead to further debt reduction.
Friedman's
Another exceptional year with record profits and very strong cash generation.
When CEPS bought this company with David Kaitiff in 2005 we quickly moved the business to premises that were three times larger. In March of this year Friedman's moved to premises that are double in size to their previous ones. This increase in space has enabled Friedman's to significantly increase capacity by acquiring more digital printing machines and having access to more power capacity. These machines will be used in the expansion of the existing business and also to enable it to move into new business areas.
Hickton Consultants
The company has continued to generate profits and a steady stream of new contract wins, whilst some of the longer standing, larger projects have been extended, providing predictability of income.
BRCS (Building Control) was acquired in May 2017 to provide a complementary offering to the clerk-of-works, quality assurance role provided by Hickton Consultants. The two management teams are working well together to integrate the business. Clients of both companies have expressed an interest in the additional services now on offer and there have been some cross-referrals.
Sunline
The polywrap and letter shop business moved into profit last year although, again, December proved to be a seriously loss-making month and was much worse than expected. The fulfilment business, which from 2018 is in a separate company called CYNC, was moved to new and much larger premises in December. Whilst the move was entirely necessary, the timing was certainly not ideal and large unexpected costs were incurred in 2017. There have also been operational issues in the new premises which have proved very challenging. For these reasons, Sunline recorded a loss for the year.
Dividend
Recognising the confidence that the Board has in the future of the Company, the clearest tangible signal of this confidence is to reintroduce the payment of an annual dividend. It is twenty years since the Company last paid a dividend and the Board feels that now is an appropriate time to provide shareholders with a revenue reward for holding the shares.
Because of the write-offs in goodwill over the past few years the Company, in accounting terms, is currently prevented from paying a dividend. Therefore, as part of the business carried out at the Annual General Meeting, a resolution will be put forward to enable the Company to undertake a capital reconstruction as soon as possible during 2018, which will facilitate the payment of this and future dividends.
Power to allot additional shares
The Company will be convening its Annual General Meeting to be held on 18 June 2018. Among other resolutions to be proposed, the Board will seek authority to allot shares equating to 100% of its present issued ordinary share capital in line with the requirements of our acquisition strategy.
People
Following a very busy period where each of the businesses has faced challenges, the Board is most grateful for the ongoing efforts of all the Group's employees.
Outlook
Since I became Chairman three years ago considerable effort has been expended, by all CEPS colleagues, on growing the successful companies and getting those companies that were performing less well back on the right track for future profitability and growth. This does not happen overnight and it is undoubtedly the case that everything seems to take longer than one expects and hopes.
We now feel that we are making progress and that in the future the accounts will, hopefully, demonstrate this current confidence.
Considerable time, and no little investment, is being spent on improving the operational efficiency of each company. Targeted effort is going into automating and mechanising processes wherever possible.
The combination of a tightening labour supply market and the introduction of the Minimum Wage, Auto Enrolment and the Apprentice Levy have all led to significant increases in the cost of employing people, presupposing the right skilled people can be found. We believe that this situation will only get worse in the future and it is, therefore, essential that we work at "future-proofing" the businesses today.
Trading in the current year is marginally behind the Board's expectations. However, we expect the Group to make progress as the year unfolds.
David Horner
Chairman
10 May 2018
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
James Caithie
Nominated Adviser
Tel: 020 7213 0880
CEPS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 DECEMBER 2017
Hot Features
Premium
2017 2016
GBP'000 GBP'000
Continuing operations
Revenue (note 4) 23,601 24,320
Cost of sales (18,187) (19,465)
--------- ---------
Gross profit 5,414 4,855
Administration expenses (4,313) (4,319)
Operating profit 1,101 536
Goodwill impairment (847) (611)
Adjusted operating profit/(loss) 254 (75)
Analysis of operating profit/(loss)
--------- ---------
- Trading 1,423 844
- Goodwill impairment (847) (611)
- Group costs (322) (308)
--------- ---------
254 (75)
--------- ---------
Finance income 128 26
Finance costs (337) (416)
Profit on disposal of investment 10 -
Profit/(loss) before tax 55 (465)
Taxation (note 5) (276) (448)
--------- ---------
Loss for the year from continuing operations (221) (913)
--------- ---------
Other comprehensive loss:
Items that will not be reclassified to profit
or loss
Actuarial loss on defined benefit pension
plans (66) (80)
--------- ---------
Items that may be subsequently reclassified - -
to profit or loss
--------- ---------
Other comprehensive loss for the year, net
of tax (66) (80)
Total comprehensive loss for the year (287) (993)
--------- ---------
(Loss)/income attributable to:
Owners of the parent (532) (1,132)
Non-controlling interest 311 219
--------- ---------
(221) (913)
--------- ---------
Total comprehensive (loss)/income attributable
to:
Owners of the parent (598) (1,212)
Non-controlling interest 311 219
--------- ---------
(287) (993)
--------- ---------
Earnings per share
- basic and diluted (note 6) (4.11)p (11.83)p
--------- ---------
CEPS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
2017 2016
GBP'000 GBP'000
-------- --------
Assets
Non-current assets
Property, plant and equipment (note 7) 2,320 2,419
Intangible assets (note 9) 5,600 5,738
Deferred tax asset 226 220
8,146 8,377
-------- --------
Current assets
Inventories 1,770 2,020
Trade and other receivables 3,691 3,701
Cash and cash equivalents (excluding bank
overdrafts) 1,371 840
6,832 6,561
-------- --------
Total assets 14,978 14,938
======== ========
Equity
Capital and reserves attributable to owners
of the parent
Called up share capital (note 10) 1,320 957
Share premium 4,843 3,943
Retained earnings (2,556) (1,924)
-------- --------
3,607 2,976
Non-controlling interest in equity 1,347 1,227
Total equity 4,954 4,203
-------- --------
Liabilities
Non-current liabilities
Borrowings 2,223 2,600
Trade and other payables 313 -
Deferred tax liability 71 80
Provisions for liabilities and charges 50 50
2,657 2,730
-------- --------
Current liabilities
Borrowings 3,503 3,838
Trade and other payables 3,556 3,934
Current tax liabilities 258 171
Provisions for liabilities and charges 50 62
7,367 8,005
-------- --------
Total liabilities 10,024 10,735
-------- --------
Total equity and liabilities 14,978 14,938
======== ========
The profit within the parent company financial statements for the year was GBP301,000 (2016: GBP160,000).
CEPS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARED 31 DECEMBER 2017
2017 2016
GBP'000 GBP'000
Cash flows from operating activities
Profit/(loss) before income tax 55 (465)
Adjustments for:
Depreciation and amortisation 497 478
Intangible assets written off 847 611
Loss on disposal of property, plant and
equipment (17) -
Net finance costs 209 390
Changes in working capital:
Decrease in inventories 250 10
Decrease/(increase) in trade and other receivables 11 (546)
(Decrease)/Increase in trade and other payables (75) 578
(Decrease)/increase in provisions (12) 57
-------- --------
Cash generated from operations 1,765 1,113
Income tax paid (229) (236)
Interest received 128 26
Interest paid (337) (416)
-------- --------
Net cash generated from operations 1,327 487
-------- --------
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired (444) (188)
Increase in existing shareholding in subsidiary (7) -
Purchase of property, plant and equipment (266) (899)
Proceeds from sale of assets 32 -
Purchase of intangibles (11) (33)
Disposal of property, plant and equipment - -
Interest received - 26
Net cash used in investing activities (696) (1,094)
-------- --------
Cash flows from financing activities
(Repayment of)/proceeds from borrowings (476) 1,067
Proceeds from share issue net of issue costs 1,263 -
Dividend paid to non-controlling interests (225) (180)
Repayment of capital element of finance
leases (386) (321)
-------- --------
Net cash generated from financing activities 176 566
-------- --------
Net increase/(decrease) in cash and cash
equivalents 807 (67)
Cash and cash equivalents at the beginning
of the year 44 111
-------- --------
Cash and cash equivalents at the end of
the year 851 44
-------- --------
CEPS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 DECEMBER 2017
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 2016 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
---------- ---------- ----------- ------------- ------------------ ---------
Actuarial loss - - (66) (66) - (66)
(Loss)/profit for the year - - (532) (532) 311 (221)
---------- ---------- ----------- ------------- ------------------ ---------
Total comprehensive (loss)/income
for the year - - (598) (598) 311 (287)
---------- ---------- ----------- ------------- ------------------ ---------
Changes in ownership interest
in a subsidiary - - (34) (34) 34 -
Dividend paid to non-controlling
interest - - - - (225) (225)
---------- ---------- ----------- ------------- ------------------ ---------
Total distributions recognised
directly in equity - - (34) (34) (191) (225)
---------- ---------- ----------- ------------- ------------------ ---------
Proceeds from shares issued
net of costs 363 900 - 1,263 - 1,263
---------- ---------- ----------- ------------- ------------------ ---------
At 31 December 2017 1,320 4,843 (2,556) 3,607 1,347 4,954
---------- ---------- ----------- ------------- ------------------ ---------
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 2017 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issuance on 10 May 2018. The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2017 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting. The auditors' reports on the statutory accounts for the years ended 31 December 2016 and 31 December 2017 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 10 May 2018.
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 Hickton Holdings Limited acquired 100 per cent of BRCS (Building Control) 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, a supplier of 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 GBP23,601,000 (2016: GBP24,320,000) revenue GBP21,001,000 (2016: GBP21,666,000) is derived from UK customers with the remaining GBP2,600,000 (2016: GBP2,654,000) 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 2017
Aford CEM Davies Friedman's Hickton Sunline Total
Awards Press Odell
2017 2017 2017 2017 2017 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- ----------- -------- -------- --------
Revenue 1,907 2,414 3,804 5,053 3,748 6,675 23,601
-------- -------- -------- ----------- -------- -------- --------
Segmental result
(EBITDA) 328 (310) 33 1,198 447 224 1,920
-------- ----------- -------- -------- --------
Depreciation and
amortisation charge (497)
Goodwill impairment (847)
Group costs (322)
Net finance costs (209)
Profit on disposal
of investments 10
Profit before taxation 55
Taxation (276)
--------
Loss for the year (221)
========
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)
========
ii) Assets and liabilities by segment
As at 31 December
Segment assets Segment liabilities Segment net assets
2017 2016 2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ---------- ---------- ---------- ---------
CEPS Group 41 30 (1,078) (873) (1,037) (843)
Aford Awards 1,558 1,465 (346) (430) 1,212 1,035
CEM Press 1,400 2,422 (1,627) (1,924) (227) 498
Davies Odell 1,974 1,919 (1,401) (1,353) 573 566
Friedman's 3,860 3,549 (800) (915) 3,060 2,634
Hickton 3,368 2,431 (1,942) (1,220) 1,426 1,211
Sunline 2,777 3,122 (2,830) (4,020) (53) (898)
Total - Group 14,978 14,938 (10,024) (10,735) 4,954 4,203
======== ======== ========== ========== ========== =========
5. Tax
2017 2016
GBP'000 GBP'000
-------- --------
Analysis of taxation in the year:
Current tax
Tax in respect of current year 317 215
Tax in respect of prior years (21) 14
-------- --------
Total current tax 296 229
-------- --------
Deferred tax
Current year deferred tax movement (20) -
Origination and reversal of temporary differences - 219
Total deferred tax (20) 219
-------- --------
Total tax charge 276 448
-------- --------
Deferred tax charged to the Consolidated
Statement of Changes in Equity - -
-------- --------
The tax assessed for the year is higher (2016: higher) than the standard rate of corporation tax in the UK (19%) (2016: 20%)
Factors affecting current tax:
Profit/(loss) before taxation 55 (465)
----- ------
Profit/(loss) multiplied by the standard
rate of UK tax of 19%
(2016: 20%) 11 (93)
Effects of:
Permanent differences 306 308
Current year deferred tax movement (20) -
Prior year adjustment, current tax (21) 14
Prior year adjustment, deferred tax - 219
Total tax charge 276 448
----- ------
The standard rate of corporation tax in the UK changed to 19% with effect from 1 April 2017. Accordingly, the Group's profits for this accounting year are taxed at an effective rate of 19%.
Reduction in the United Kingdom corporation tax rate to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future current tax charge accordingly. The deferred tax balance has been calculated based on the rate of 19%.
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 GBP532,000 (2016: loss GBP1,132,000) and on 12,951,576 (2016: 9,573,822) 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, machinery, Motor vehicles Total
property tools and
improvements moulds
Group GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------------ --------------- --------
Cost
at 1 January 2016 138 5,657 166 5,961
Additions at cost 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
Additions at cost 15 380 21 416
Assets acquired on
purchase of a subsidiary 21 45 - 66
Disposals - (64) (28) (92)
-------------- ------------------ --------------- --------
at 31 December 2017 214 6,827 148 7,189
-------------- ------------------ --------------- --------
Accumulated depreciation
at 1 January 2016 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
Assets acquired on
purchase of a subsidiary 21 33 - 54
Charge for the year 9 452 17 478
Disposals - (20) (23) (43)
at 31 December 2017 155 4,614 100 4,869
-------------- ------------------ --------------- --------
Net book amount
at 31 December 2017 59 2,213 48 2,320
-------------- ------------------ --------------- --------
at 31 December 2016 53 2,317 49 2,419
-------------- ------------------ --------------- --------
At the year end, assets held under hire purchase contracts and capitalised as plant, machinery, tools and moulds have a net book value of GBP1,479,000 (2016: GBP1,679,000) and an accumulated depreciation balance of GBP2,194,000 (2016: GBP1,961,000).
The depreciation has been charged to cost of sales in the Consolidated Statement of Comprehensive income.
8. Acquisitions in 2017
(a) BRCS (Building Control) Limited
During the year Hickton Holdings Limited acquired 100 per cent of the issued share capital of BRCS (Building Control) Limited. The initial consideration was GBP616,000 with the balance of the consideration payable over the next two years, dependent on financial performance over the period. No equity investment from CEPS was required to undertake the transaction, which was completed on 18 May 2017.
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 GBP132,000.
Goodwill of GBP717,000 arose from the acquisition. Of this amount GBP182,000 was allocated to customer lists.
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
Cash and cash equivalents 98
Property, plant and equipment 12
Trade and other receivables 146
Trade and other payables (120)
Deferred tax liabilities (4)
-----------
132
-----------
Consideration calculation
Purchase price consideration 616
Deferred consideration 226
Stamp duty 7
849
-----------
Goodwill 717
-----------
Analysis of cash flows on acquisition
Cash paid 616
Less: net cash acquired with subsidiary (98)
-----------
Net cash flow on acquisition 518
-----------
From the date of acquisition BRCS (Building Control) contributed GBP273,000 of revenue and GBP72,000 loss before tax. If the combination had taken place at the beginning of the year, revenue would have been GBP519,000 and loss before tax would have been GBP4,000.
(b) Acquisition of additional interest in CemTeal Limited
During the year the Group acquired an additional 7% interest in the voting shares of CemTeal, increasing its effective ownership interest to 80%. Cash consideration of GBP7,000 was paid to the non-controlling shareholders. The carrying value of the net liabilities of CemTeal (excluding goodwill on the original acquisition) was GBP27,000. Shown below is a schedule of the additional interest acquired:
GBP'000
Cash paid to non-controlling shareholders 7
Less: carrying value of the additional interest 27
--------
Difference recognised in retained earnings 34
--------
9. Intangible assets
Customer
Goodwill lists Other Total
Group GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- -------- --------
Cost
at 1 January 2016 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
Acquisition 535 182 - 717
Additions at cost - - 11 11
At 31 December 2017 8,950 772 100 9,822
--------- --------- -------- --------
Accumulated amortisation
and impairment
at 1 January 2016 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
Amortisation charge - 4 15 19
Impairment 847 - - 847
at 31 December 2017 4,158 5 59 4,222
--------- --------- -------- --------
Net book amount
at 31 December 2017 4,792 767 41 5,600
--------- --------- -------- --------
at 31 December 2016 5,104 589 45 5,738
--------- --------- -------- --------
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 assessed to have indefinite life. When a decision is taken to terminate a product or service, the related customer lists are amortised over the remaining life of the product. Impairment reviews are undertaken annually or if changes in circumstances indicate a potential impairment.
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 2016 1,039 1,435 1,528 - 611 4,613
Acquisition of
subsidiary - - - 1,679 - 1,679
Additions - customer
lists 13 - - - - 13
Amortisation charge (1) - - - (1)
Impairment - - - - (611) (611)
-------- -------- ----------- ---------- -------- --------
at 31 December
2016 1,051 1,435 1,528 1,679 - 5,693
Acquisition of
subsidiary - - - 535 - 535
Additions - customer
lists - - 11 182 - 193
Amortisation charge (4) - (11) - - (15)
Impairment - (847) - - - (847)
-------- -------- ----------- ---------- -------- --------
at 31 December
2017 1,047 588 1,528 2,396 - 5,559
-------- -------- ----------- ---------- -------- --------
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 9.95% (2016: 10.85%), 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
2017 2016 2017 2016 2017 2016
% % % % % %
Aford Awards 3.0 1.0 31.6 32.4 1.0 1.0
CEM Press 2.0 1.0 34.0 38.7 1.0 1.0
Friedman's 5.0 3.0 42.0 42.0 2.0 2.0
Hickton Consultants 2.0 1.0 41.1 37.0 - -
Sunline 2.0 2.0 42.2 33.0 1.0 1.0
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 2017 an impairment charge of GBP847,000 was taken against the carrying value of goodwill related to CemTeal. This reflected the challenging economic and trading environment of the pattern book market in which the business was operating.
10. Share Capital
Number of
shares Share capital Share premium Total
GBP'000 GBP'000 GBP'000
At 1 January 2016 and 31 December
2016 9,573,822 957 3,943 4,900
Shares issued 3,626,118 363 907 1,270
Transaction costs - - (7) (7)
----------- -------------- -------------- --------
At 31 December 2017 13,199,940 1,320 4,843 6,163
----------- -------------- -------------- --------
11. Distribution of the Annual Report and Notice of AGM
A copy of the 2017 Annual Report, together with a notice of the Company's Annual General Meeting to be held at 11:30am on Monday 18 June 2018 at 11 Laura Place, Bath BA2 4BL, will be sent to all shareholders on Wednesday 16 May 2018. 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
FR URSBRWKAVAAR
(END) Dow Jones Newswires
May 11, 2018 02:00 ET (06:00 GMT)
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