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 0.0% 30.00 28.00 32.00 30.00 30.00 30.00 0.00 08:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Support Services 21.6 -0.3 -9.1 - 5

CEPS PLC Final Results

08/05/2019 7:00am

UK Regulatory (RNS & others)


Ceps (LSE:CEPS)
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RNS Number : 2894Y

CEPS PLC

08 May 2019

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 2018.

CHAIRMAN'S STATEMENT

Financial review

These accounts from CEPS PLC are even more complicated than usual with discontinued activities in the form of Sunline Direct Mail ("Sunline"), exceptional costs being non-cash write-offs relating to CEM and of course movements on the deferred tax account which every other year make the tax charge look somewhat unusual!

The headline results are that total revenue was GBP21.6m for the year ended 31 December 2018 (2017: GBP23.6m) with some GBP3.1m represented by the discontinued activities of Sunline. Therefore, continuing revenue was GBP18.5m (2017: GBP16.9m).

Adjusted operating profit was GBP629,000 (2017: GBP1.1m) but included discontinued losses of GBP350,000 (2017: losses of GBP61,000). Consequently, ongoing operating profits were GBP979,000 (2017: GBP1.2m), which included significant losses in two of the five remaining subsidiaries. Both 2018 and 2017 had intangible impairments of GBP588,000 (customer lists) and GBP847,000 (goodwill) respectively. The operating loss after exceptional items was GBP12,000 (2017: operating profit after exceptional items GBP254,000).

In 2018 there was a loss before tax of GBP308,000 (2017: profit of GBP55,000) but this was after including discontinued losses of GBP445,000 (2017: losses of GBP156,000) and an intangible write-off of GBP588,000 (2017: GBP847,000). Consequently, the ongoing profit was a modest GBP137,000 (2017: GBP211,000).

Group costs were higher than last year at GBP386,000 (2017: GBP322,000) but included non-recurring costs of

GBP25,000.

Loss per share on a basic and diluted basis was 9.06p (2017: (4.11p)). The loss per share for the continuing operations was 6.26p (2017: (3.14p)) and if the impact of intangible impairments in both years is ignored, as well as the deferred tax asset write-off of GBP220,000 in 2018, the loss per share improves to 0.91p (2017: earnings per share 3.4p).

In the year 2018, cash generated from operations was GBP1.7m (2017: GBP1.8m) and there was a net increase in cash and cash equivalents of GBP854,000 (2017: GBP807,000). Year-end cash was GBP1.7m (2017: GBP851,000).

Operational review

Aford Awards

This company had another very good year and produced record profits. The repayment of the CEPS acquisition loan notes has commenced with GBP163,000 repaid in the year.

Several acquisition opportunities were investigated with a very small operation, C & M Trophies, being acquired in Littlehampton. This was modestly successful. However, it was decided in October to close the operation and to retain as much business as possible and service it out of Aford Awards' operation in Maidstone. This was a very useful exercise and gave the team much needed experience.

Other bolt-on deals are being investigated.

CEM Press

2018 was a very disappointing year for this company. Whilst it did win a number of large orders, as expected last year, it was unable to efficiently produce the volume of product within a demanding production schedule. It is also even more disappointing as other parts of the business performed well but were dragged back by the deficiencies of this production process.

After the year-end a major strategic move was made by the acquisition on 27 March 2019 of Travelfast Limited, trading as Sampling International ("Sampling"), based in Batley in West Yorkshire, for up to GBP1.2m conditional on the performance of the combined CEM and Sampling operations over a three-year period.

Sampling is approximately twice the size of CEM and this merged group creates one of the largest pattern book and shade card makers in the UK with two production facilities.

Some 40% of Sampling's business is in carpet sampling, a completely new area of sampling for CEM.

The objective of the merger is to broaden the CEM/Sampling business and, over time, become more efficient through the specialism of activities. Inevitably this will make 2019 a year of transition as exceptional costs are incurred in setting up the merged business such that it can deliver our expectation of good and growing profits into the future.

As we stated last year, we wanted CEM to be a consolidator in a fragmented industry sector. The first major step has been achieved and we are confident that there will other opportunities to grow by targeted acquisition going forward.

Under accounting rules, the carrying value of the intangible assets (customer lists and goodwill) needs to be reviewed annually and impaired if required. Consequently, the Board decided to write-off completely the value of the customer lists (GBP588,000). This a non-cash item and does not affect the underlying value of the business.

Davies Odell

This company had a tough year and was loss-making, which was disappointing after the move back into modest profit, at the EBITDA level before exceptional costs, the previous year

This company unfortunately had to make three people redundant to drive greater efficiency through the business and this cost was taken in the last quarter of the year with none of the benefit of the reduced cost base coming through in the results.

Since the year end this company has been profitable each month from a lower cost base, is ahead of budget and is working hard to improve efficiency and service levels. Its financial position and balance sheet are now better than they have been for many years and is the result of several years of steady improvement in the working capital position.

Friedman's

Another excellent year for this company with record ongoing profitability, pre-exceptional costs, which in turn has produced very strong cash generation.

The move to the new premises in Altrincham in March of last year was executed with minimum disruption to the business. These premises now showcase this excellent business and it is a real pleasure to have seen the development of this company over the past 12 years of CEPS' ownership.

The new premises and access to sufficient power has "future-proofed" the business and has enabled the team to set up a new product area marketed through the website www.alexandermaverick.co.uk which is selling customer designed and coloured cottons and linen for home furnishings. This goes alongside the rapidly growing Funki Fabrics website, www.funkifabrics.com, which is selling customer designed and coloured Lycra.

Hickton Consultants

This was a record set of results for this company with an acceleration in performance in the year with the second half being a significant improvement on the first half as the benefits of the acquisition of BRCS started to appear.

We are keen to expand this business and have reviewed several acquisition opportunities.

Sunline

As we reported at the interim stage this company went into administration on 13 June 2018. Having struggled to improve efficiency through automation and mechanisation and to change the product mix from some 90% plastic/10% paper to 60% plastic/40% paper, the impact of the introduction of the EU General Data Protection Act ("GDPR") in the first quarter of last year, which caused clients to delay placing orders, and the whole "Plastics Debate" led to the eventual administration of this company.

It is pleasing to note that anecdotally staff made redundant were able to find new roles in other organisations within a very short period.

Dividend

Whilst we had planned to carry out a capital reconstruction last year to enable CEPS to be able to pay a dividend, events around the Sunline administration meant that the Board considered this to be inappropriate.

Recognising the confidence that the Board has in the future of CEPS, this process will be "resurrected".

Power to allot additional shares

CEPS will be convening its Annual General Meeting to be held on 17 June 2019. 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

The Board is most grateful to the ongoing efforts of all the Group's employees at a time of pressure and challenges in our companies. The Board would like to thank Mark Pollard for his three years of service and to welcome David Johnson as a non-executive director.

Outlook

I feel that there is no doubt that the CEPS "Group" in overall terms is going in the right direction. Certainly, as I said earlier, these accounts are very confusing and complicated, and it is hard, in the absence of individual company monthly management accounts, for the CEPS shareholder to discern this level of progress and improvement. I sincerely hope that the interim accounts and then final accounts in one year's time will clearly evidence what I believe to be the case.

To assist in the understanding of CEPS and its group of companies, the Board is investigating commissioning a third-party research company to produce periodic research which can be displayed on our website and sent out to interested parties, including existing and potential shareholders.

We are investigating a number of potential bolt-on acquisitions for 2019. These types of transaction bring considerable benefit, typically at a reasonable price and should, logically, be lower risk.

It is pleasing to have managed to get to this point without mentioning Brexit! We have reflected over the last few years on the impact some form of Brexit may have on our companies and it is our belief that if the UK economy continues to grow, as various august bodies are forecasting, then the economic environment will be satisfactory for our companies.

As the UK is still unclear around the outcome of Brexit and the likely impact on the UK economy, it is not possible to have a clear view on how this will impact the Group. However, because the Group has trading with Europe we acknowledge that there may be some impact.

Trading so far in the current year is marginally ahead of the Board's expectations and we will do all we can to keep pushing things forward.

David Horner

Chairman

7 May 2019

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 2018

 
                                      Continuing   Discontinued 
                                      Operations     Operations 
                                         Audited        Audited    Audited    Audited 
                                            2018           2018       2018       2017 
                                         GBP'000        GBP'000    GBP'000    GBP'000 
 Revenue (note 4)                         18,474          3,118     21,592     23,601 
 Cost of sales                          (12,469)        (3,172)   (15,641)   (18,187) 
                                    ------------  -------------  ---------  --------- 
 Gross profit                              6,005           (54)      5,951      5,414 
 
 Administration expenses                 (5,026)          (296)    (5,322)    (4,313) 
 
 Adjusted operating profit/(loss)            979          (350)        629      1,101 
 Exceptional items                             -           (53)       (53)          - 
 Goodwill impairment 
  (note 8)                                     -              -          -      (847) 
 Customer list impairment 
  (note 8)                                 (588)              -      (588)          - 
 
 Operating profit/(loss)                     391          (403)       (12)        254 
 
 Analysis of adjusted 
  operating profit/(loss) 
                                    ------------  -------------  ---------  --------- 
  - Trading                                1,365          (350)      1,015      1,423 
  - Exceptional item                           -           (53)       (53)          - 
  - Goodwill impairment                        -              -          -      (847) 
  - Customer list impairment               (588)              -      (588)          - 
  - Group costs                            (386)              -      (386)      (322) 
                                    ------------  -------------  ---------  --------- 
                                             391          (403)       (12)        254 
                                    ------------  -------------  ---------  --------- 
 
 Finance income                               15              -         15        128 
 Finance costs                             (269)           (42)      (311)      (337) 
 Profit on disposal of 
  investment                                   -              -          -         10 
                                    ------------ 
 Profit/(loss) before 
  tax                                        137          (445)      (308)         55 
 Taxation (note 5)                         (568)              -      (568)      (276) 
                                    ------------  -------------  ---------  --------- 
 Loss for the year from 
  continuing operations                    (431)          (445)      (876)      (221) 
                                    ------------  -------------  ---------  --------- 
 
 Other comprehensive 
  loss: 
  Items that will not 
  be reclassified to profit 
  or loss 
 Actuarial loss on defined 
  benefit pension plans                     (88)              -       (88)       (66) 
                                    ------------  -------------  ---------  --------- 
               Other comprehensive 
            loss for the year, net 
                            of tax          (88)              -       (88)       (66) 
                                    ------------ 
 Total comprehensive 
  loss for the year                        (519)          (445)      (964)      (287) 
                                    ------------  -------------  ---------  --------- 
 
 (Loss)/income attributable 
  to: 
 Owners of the parent                      (946)          (423)    (1,369)      (532) 
 Non-controlling interest                    515           (22)        493        311 
                                    ------------  -------------  ---------  --------- 
                                           (431)          (445)      (876)      (221) 
                                    ------------  -------------  ---------  --------- 
 
 Total comprehensive 
  (loss)/income attributable 
  to: 
 Owners of the parent                    (1,034)          (423)    (1,457)      (598) 
 Non-controlling interest                    515           (22)        493        311 
                                    ------------  -------------  ---------  --------- 
                                           (519)          (445)      (964)      (287) 
                                    ------------  -------------  ---------  --------- 
 Earnings per share 
  - basic and diluted 
   (note 6)                              (6.26p)        (2.80p)    (9.06p)    (4.11p) 
                                    ------------  -------------  ---------  --------- 
 

CEPS PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2018

 
                                                             2018      2017 
                                                          GBP'000   GBP'000 
                                                         --------  -------- 
 Assets 
 Non-current assets 
 Property, plant and equipment (note 7)                       991     2,320 
 Intangible assets (note 8)                                 4,741     5,600 
 Deferred tax asset                                             -       226 
                                                            5,732     8,146 
                                                         --------  -------- 
 
 Current assets 
 Inventories                                                1,815     1,770 
 Trade and other receivables                                3,331     3,691 
 Cash and cash equivalents (excluding bank overdrafts)      1,705     1,371 
                                                            6,851     6,832 
                                                         --------  -------- 
 Total assets                                              12,583    14,978 
                                                         ========  ======== 
 
 Equity 
 Capital and reserves attributable to owners 
  of the parent 
 Called up share capital (note 9)                           1,700     1,320 
 Share premium                                              5,841     4,843 
 Retained earnings                                        (4,013)   (2,556) 
                                                         --------  -------- 
                                                            3,528     3,607 
 Non-controlling interest in equity                         1,932     1,347 
 Total equity                                               5,460     4,954 
                                                         --------  -------- 
 
 Liabilities 
 Non-current liabilities 
 Borrowings                                                 1,128     2,223 
 Trade and other payables                                       -       313 
 Deferred tax liability                                        88        71 
 Provisions for liabilities                                     -        50 
                                                            1,216     2,657 
                                                         --------  -------- 
 
 Current liabilities 
 Borrowings                                                 2,734     3,503 
 Trade and other payables                                   2,925     3,556 
 Current tax liabilities                                      248       258 
 Provisions for liabilities                                     -        50 
                                                            5,907     7,367 
                                                         --------  -------- 
 Total liabilities                                          7,123    10,024 
                                                         --------  -------- 
 Total equity and liabilities                              12,583    14,978 
                                                         ========  ======== 
 

The loss within the parent company financial statements for the year was GBP5,808,000 (2017: profit of GBP301,000).

CEPS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

YEARED 31 DECEMBER 2018

 
                                                       2018      2017 
                                                    GBP'000   GBP'000 
 Cash flows from operating activities 
 (Loss)/profit before income tax                      (308)        55 
 Adjustments for: 
   Depreciation and amortisation                        470       497 
   Profit on disposal of a subsidiary                 (147)         - 
   Customer list impairment                             588         - 
   Goodwill impairment                                    -       847 
   Loss/(profit) on disposal of property, plant 
    and equipment                                        29      (17) 
   Net finance costs                                    296       209 
 Changes in working capital: 
   Movement in inventories                             (86)       250 
   Movement in trade and other receivables            (773)        11 
   Movement in trade and other payables               1,682      (75) 
   Movement in provisions                             (100)      (12) 
                                                   --------  -------- 
 Cash generated from operations                       1,651     1,765 
 Income tax paid                                      (258)     (229) 
 Interest received                                        -       128 
 Interest paid                                        (311)     (337) 
                                                   --------  -------- 
 Net cash generated from operations                   1,082     1,327 
                                                   --------  -------- 
 
 Cash flows from investing activities 
 Acquisition of subsidiary net of cash acquired           -     (444) 
 Increase in existing shareholding in subsidiary          -       (7) 
 Purchase of property, plant and equipment            (859)     (266) 
 Proceeds from sale of assets                             1        32 
 Purchase of intangibles                              (150)      (11) 
 Net cash used in investing activities              (1,008)     (696) 
                                                   --------  -------- 
 
 Cash flows from financing activities 
 Repayment of borrowings                              (267)     (476) 
 Proceeds from share issue net of issue costs         1,326     1,263 
 Dividend paid to non-controlling interests            (45)     (225) 
 Repayment of capital element of finance leases       (234)     (386) 
                                                   --------  -------- 
 Net cash generated from financing activities           780       176 
                                                   --------  -------- 
 
 Net increase in cash and cash equivalents              854       807 
 Cash and cash equivalents at the beginning 
  of the year                                           851        44 
                                                   --------  -------- 
 Cash and cash equivalents at the end of the 
  year                                                1,705       851 
                                                   --------  -------- 
 
 

CEPS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEARED 31 DECEMBER 2018

 
                                                                          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 2017                         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 
                                    ----------  ----------  -----------  -------------  ------------------  --------- 
 Actuarial loss                              -           -         (88)           (88)                   -       (88) 
 (Loss)/profit for the 
  year                                       -           -      (1,369)        (1,369)                 493      (876) 
                                    ----------  ----------  -----------  -------------  ------------------  --------- 
 Total comprehensive 
  (loss)/income for the 
  year                                       -           -      (1,457)        (1,457)                 493      (964) 
                                    ----------  ----------  -----------  -------------  ------------------  --------- 
 Changes in ownership 
  interest in a subsidiary                   -           -            -              -                 137        137 
 Dividend paid to non-controlling 
  interest                                   -           -            -              -                (45)       (45) 
                                    ----------  ----------  -----------  -------------  ------------------  --------- 
 Total distributions 
  recognised directly 
  in equity                                  -           -            -              -                  92         92 
                                    ----------  ----------  -----------  -------------  ------------------  --------- 
 Correction to opening 
  position                                   -          52            -             52                   -         52 
 Proceeds from shares 
  issued net of costs                      380         946            -          1,326                   -      1,326 
                                    ----------  ----------  -----------  -------------  ------------------  --------- 
 At 31 December 2018                     1,700       5,841      (4,013)          3,528               1,932      5,460 
                                    ----------  ----------  -----------  -------------  ------------------  --------- 
 

Share capital comprises the nominal value of shares subscribed for.

Share premium represents the amount above nominal value received for shares issued, less transaction costs.

Retained earnings comprise accumulated comprehensive income for the year and prior periods attributable to the parent, less dividends paid.

Non-controlling interest represents the element of retained earnings which is not attributable to the owners of the parent.

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 2018 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issuance on 7 May 2019. The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2018 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the Company's Annual General Meeting. The auditor's reports on the statutory accounts for the years ended 31 December 2017 and 31 December 2018 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 key 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 7 May 2019.

   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 (note 8).

   b)       Impairment of non-current assets 

The Company assesses the impairment of tangible fixed assets subject to depreciation whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an impairment review include the following:

   --    Significant underperformance relative to historical or projected future operating results; 

-- Significant changes in the manner of the use of the acquired assets or the strategy for the overall business; and

   --    Significant negative industry or economic trends. 
   c)       Depreciation and residual values 

The Directors have reviewed the asset lives and associated residual values of all fixed asset classes and have concluded that asset lives and residual values are appropriate.

The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projects' disposal values.

   d)       Carrying value of stocks 

Management reviews the market value of and demand for its stocks on a periodic basis to ensure stock is recorded in the financial statements at the lower of cost and net realisable value. Any provision for impairment is recorded against the carrying value of stocks. Management uses its knowledge of market conditions, historical experiences and estimates of future events to assess future demand for the Company's products and achievable selling prices.

   e)       Recoverability of trade debtors 

Trade and other debtors are recognised to the extent that they are judged recoverable. Management reviews are performed to estimate the level of reserves required for irrecoverable debt. Provisions are made specifically against invoices where recoverability is uncertain.

Management makes allowance for doubtful debts based on an assessment of the recoverability of debtors. Allowances are applied to debtors where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analyses historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the provision for doubtful debts. Where the expectation is different from the original estimate, such difference will impact the carrying value of debtors and the charge in the Consolidated Statement of Comprehensive Income.

   f)        Leases 

Management must determine whether leases entered into by the Company either as a lessor or a lessee are operating or finance leases. These decisions depend on an assessment of whether the risks and rewards of ownership have been transferred from the lessor to the lessee on a lease by lease basis based on an evaluation of the terms and conditions of the arrangements, and accordingly whether the lease requires an asset and liability to be recognised in the Consolidated Statement of Financial Position.

   g)       Taxation 

There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due.

   h)       Deferred tax assets 

Certain subsidiaries of the Group (principally Davies Odell) have accelerated capital allowances and brought forward tax losses. In the previous year deferred tax assets were 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. Due to the uncertainty around the level of future profits deferred tax assets have been written-off this year.

   i)        Retirement benefit liabilities 

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.

   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, including BRCS, a provider of services to the construction industry 

- Sunline, a supplier of services to the direct mail market. The company entered administration on 13 June 2018 and is therefore shown as a discontinued operation in these financial statements

   -     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. All Group revenue is recognised at a point in time, rather than over a period in time, in line with the requirements of IFRS 15.

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 2018

 
                               Aford       CEM    Davies   Friedman's   Hickton    Continuing    Discon- 
                              Awards     Press     Odell                           operations     tinued      Total 
                                                                                                 Sunline      Group 
                                2018      2018      2018         2018      2018          2018       2018       2018 
                             GBP'000   GBP'000   GBP'000      GBP'000   GBP'000       GBP'000    GBP'000    GBP'000 
 Revenue                       1,902     2,824     3,919        5,345     4,484        18,474      3,118     21,592 
                            --------  --------  --------  -----------  --------  ------------  ---------  --------- 
 Expenses                    (1,564)   (3,251)   (4,026)      (4,173)   (3,771)      (16,785)    (3,322)   (20,107) 
 Segmental result 
  (EBITDA) before 
  exceptional costs              338     (427)     (107)        1,172       713         1,689      (204)      1,485 
                                                --------  -----------  -------- 
 Depreciation and 
  amortisation charge           (13)      (68)      (58)        (179)       (6)         (324)      (146)      (470) 
 Exceptional items                                                                          -       (53)       (53) 
 Customer list impairment                                                               (588)          -      (588) 
 Group costs                                                                            (386)          -      (386) 
 Net finance costs                                                                      (254)       (42)      (296) 
                                                                                 ------------  ---------  --------- 
 Profit/(loss) before 
  taxation                                                                                137      (445)      (308) 
 Taxation                                                                               (568)          -      (568) 
                                                                                 ------------  ---------  --------- 
 Loss for the year                                                                      (431)      (445)      (876) 
                                                                                 ------------  ---------  --------- 
 

Year ended 31 December 2017

 
                           Aford       CEM    Davies   Friedman's   Hickton    Continuing    Discon- 
                          Awards     Press     Odell                           operations     tinued      Total 
                                                                                             Sunline      Group 
                            2017      2017      2017         2017      2017          2017       2017       2017 
                         GBP'000   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        16,926      6,675     23,601 
                        --------  --------  --------  -----------  --------  ------------  ---------  --------- 
 Expenses                (1,579)   (2,724)   (3,771)      (3,855)   (3,301)      (15,230)    (6,451)   (21,681) 
 Segmental result 
  (EBITDA) before 
  exceptional costs          328     (310)        33        1,198       447         1,696        224      1,920 
                                            --------  -----------  -------- 
 Depreciation and 
  amortisation charge       (23)      (70)      (72)         (41)       (6)         (212)      (285)      (497) 
 Goodwill impairment                                                                (847)          -      (847) 
 Group costs                                                                        (322)          -      (322) 
 Net finance costs                                                                  (114)       (95)      (209) 
 Profit on disposal 
  of investments                                                                       10          -         10 
                                                                             ------------  ---------  --------- 
 Profit/(loss) before 
  taxation                                                                            211      (156)         55 
 Taxation                                                                           (276)          -      (276) 
                                                                             ------------  ---------  --------- 
 Loss for the year                                                                   (65)      (156)      (221) 
                                                                             ------------  ---------  --------- 
 
   ii)          Assets and liabilities by segment 

As at 31 December

 
                    Segment assets        Segment liabilities       Segment net assets/(liabilities) 
                     2018        2017        2018         2017              2018                    2017 
                  GBP'000     GBP'000     GBP'000      GBP'000           GBP'000                 GBP'000 
                 --------   ---------   ---------   ----------   ---------------      ------------------ 
 CEPS Group            59          41     (1,623)      (1,078)           (1,564)                 (1,037) 
 Aford Awards       1,762       1,558       (494)        (346)             1,268                   1,212 
 CEM Press          1,090       1,400     (1,410)      (1,627)             (320)                   (227) 
 Davies Odell       1,426       1,974       (966)      (1,401)               460                     573 
 Friedman's         4,759       3,860     (1,017)        (800)             3,742                   3,060 
 Hickton            3,487       3,368     (1,613)      (1,942)             1,874                   1,426 
 Sunline                -       2,777           -      (2,830)                 -                    (53) 
                 --------   ---------   ---------   ----------   ---------------      ------------------ 
 Total - Group     12,583      14,978     (7,123)     (10,024)             5,460                   4,954 
                 --------   ---------   ---------   ----------   ---------------      ------------------ 
 
 
   5.          Tax 
 
                                          2018      2017 
                                       GBP'000   GBP'000 
                                      --------  -------- 
 Analysis of taxation in the year: 
 Current tax 
 Tax in respect of current year            323       317 
 Tax in respect of prior years               2      (21) 
                                      --------  -------- 
 Total current tax                         325       296 
                                      --------  -------- 
 Deferred tax 
 Current year deferred tax movement        237      (20) 
 Tax in respect of prior years               6         - 
 Total deferred tax                        243      (20) 
                                      --------  -------- 
 Total tax charge                          568       276 
                                      --------  -------- 
 

The tax assessed for the year is higher (2017: higher) than the standard rate of corporation tax in the UK (19%) (2017: 19%)

 
 Factors affecting current tax: 
 (Loss)/profit before taxation                    (308)     55 
                                                 ------  ----- 
 (Loss)/profit multiplied by the standard rate 
  of UK tax of 19% (2017: 19%)                     (59)     11 
 Effects of: 
 Expenses not deductible                             16     10 
 Expenses not deductible goodwill impairment        112    161 
 Capital allowances in excess of depreciation         4   (11) 
 Adjustment to tax in prior periods                   8   (21) 
 Other timing differences                           (5)   (40) 
 Deferred tax write-off                             220      - 
 Deferred tax not recognised                        272    166 
 Total tax charge                                   568    276 
                                                 ------  ----- 
 

The standard rate of corporation tax in the UK changed to 19% with effect from 1 April 2017. Accordingly, the Group's profits for the previous accounting year are taxed at an effective rate of 19%. Current year profits have been taxed at the actual 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 17%.

There are unused trading losses within various subsidiaries. Please refer to the subsidiary accounts for further information.

   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 GBP1,369,000 (2017: loss GBP532,000) and on 15,105,176 (2017: 12,951,576) ordinary shares, being the weighted number in issue during the year.

   7.    Property, plant and equipment 
 
                                             Leasehold   Plant, machinery,       Motor     Total 
                                              property           tools and    vehicles 
                                          improvements              moulds 
 Group                                         GBP'000             GBP'000     GBP'000   GBP'000 
                                        --------------  ------------------  ----------  -------- 
  Cost 
  at 1 January 2017                                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 
  Additions at cost                                316                 581          32       929 
  Disposals                                      (146)             (4,648)       (142)   (4,936) 
                                        --------------  ------------------  ----------  -------- 
  at 31 December 2018                              384               2,760          38     3,182 
                                        --------------  ------------------  ----------  -------- 
  Accumulated depreciation 
  at 1 January 2017                                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 
  Charge for the year                               32                 340          40       412 
  Disposals                                      (108)             (2,867)       (115)   (3,090) 
  at 31 December 2018                               79               2,087          25     2,191 
                                        --------------  ------------------  ----------  -------- 
  Net book amount 
  at 31 December 2018                              305                 673          13       991 
                                        --------------  ------------------  ----------  -------- 
  at 31 December 2017                               59               2,213          48     2,320 
                                        --------------  ------------------  ----------  -------- 
 

At the year end, assets held under hire purchase contracts and capitalised as plant, machinery, tools and moulds have a net book value of GBP290,000 (2017: GBP1,479,000) and an accumulated depreciation balance of GBP2,410,000 (2017: GBP2,194,000).

The depreciation has been charged to cost of sales in the Consolidated Statement of Comprehensive Income.

   8.       Intangible assets 
 
                                                 Customer 
                                      Goodwill      lists     Other     Total 
 Group                                 GBP'000    GBP'000   GBP'000   GBP'000 
                                     ---------  ---------  --------  -------- 
  Cost 
  at 1 January 2017                      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 
  Additions at cost                          -          -       150       150 
  Fair value adjustment                  (363)          -         -     (363) 
  Disposals                            (2,981)          -         -   (2,981) 
  At 31 December 2018                    5,606        772       250     6,628 
                                     ---------  ---------  --------  -------- 
          Accumulated amortisation 
           and impairment 
  at 1 January 2017                      3,311          1        44     3,356 
  Amortisation charge                        -          4        15        19 
  Impairment                               847          -         -       847 
  at 31 December 2017                    4,158          5        59     4,222 
  Amortisation charge                       44          4        10        58 
  Impairment                                 -        588         -       588 
  Disposals                            (2,981)          -         -   (2,981) 
  at 31 December 2018                    1,221        597        69     1,887 
                                     ---------  ---------  --------  -------- 
  Net book amount 
  at 31 December 2018                    4,385        175       181     4,741 
                                     ---------  ---------  --------  -------- 
  at 31 December 2017                    4,792        767        41     5,600 
                                     ---------  ---------  --------  -------- 
 

Goodwill is not amortised under IFRS, but is subject to impairment testing either annually or on the occurrence of a triggering event. Impairment charges are included in administration expenses and disclosed as an exceptional cost.

Customer lists are subject to annual impairment reviews.

Other intangibles relate to computer software, website costs and licences 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 goodwill and intangible assets

The Group tests goodwill and intangible assets arising on acquisition of a subsidiary (customer lists) 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     Total 
                          GBP'000   GBP'000      GBP'000     GBP'000   GBP'000 
                         --------  --------  -----------  ----------  -------- 
 at 1 January 2017          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 
 Fair value adjustment          -         -            -       (363)     (363) 
 Amortisation charge          (4)         -         (44)           -      (48) 
 Impairment                     -     (588)            -           -     (588) 
                         --------  --------  -----------  ----------  -------- 
 at 31 December 
  2018                      1,043         -        1,484       2,033     4,560 
                         --------  --------  -----------  ----------  -------- 
 

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 9.36% (2017: 9.95%), representing the estimated pre-tax cost of capital has been applied to these projections.

The key assumptions used in the value-in-use calculations are as follows:-

 
                  Revenue growth     Gross margin     Long-term growth 
                    2018     2017     2018    2017       2018      2017 
                       %        %        %       %          %         % 
 Aford Awards        1.0      3.0     32.2    31.6        1.0       1.0 
 CEM Press           4.7      2.0     33.0    34.0        0.0       1.0 
 Friedman's          3.0      5.0     45.0    42.0        2.0       2.0 
 Hickton             2.0      2.0     40.6    41.1        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, 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 2018 an impairment charge of GBP588,000 was taken against the carrying value of goodwill related to CEM Press. This reflected the challenging economic and trading environment of the pattern book market in which the business was operating.

   9.         Share capital and share premium 
 
                           Number of 
                              shares   Share capital   Share premium     Total 
                                             GBP'000         GBP'000   GBP'000 
 At 1 January 2017         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 
 Shares issued             3,800,060             380             950     1,330 
 Transaction costs                 -               -             (4)       (4) 
 Correction of opening 
  position                         -               -              52        52 
                         -----------  --------------  --------------  -------- 
 At 31 December 2018      17,000,000           1,700           5,841     7,541 
                         -----------  --------------  --------------  -------- 
 
   10.       Post balance sheet event 

Acquisition of Sampling International

On 27 March 2019 CemTeal Limited purchased 100% of the share capital of Travelfast Limited, which trades as Sampling International, for a consideration of GBP9. There is the potential for further consideration to be paid, dependent on performance of the company, with a maximum consideration of GBP1,200,009. The remaining consideration is payable over a three-year period from the completion date.

   11.       Distribution of the Annual Report and Notice of AGM 

A copy of the 2018 Annual Report, together with a notice of the Company's Annual General Meeting to be held at 11:30am on Monday 17 June 2019 at 11 Laura Place, Bath BA2 4BL, will be sent to all shareholders on Tuesday 14 May 2019. 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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR UBOBRKAAVRAR

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May 08, 2019 02:00 ET (06:00 GMT)

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