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