Source - LSE Regulatory
RNS Number : 2187R
Kitwave Group PLC
28 February 2023
 


 

28 February 2023

Kitwave Group plc

 

("Kitwave", the "Group" or the "Company")

 

Final Results for the twelve months ended 31 October 2022

 

Kitwave Group plc (AIM: KITW), the delivered wholesale business, is pleased to announce its final results for the twelve months ended 31 October 2022.

 

Financial summary

 

·    Revenues of £503.1 million (FY21: £380.7 million) 

·    Gross profit margin increased to 20% during the year (FY21: 18%) 

·    Adjusted operating profit of £21.5 million (FY21: £7.1 million)*

·    Profit before tax increased to £17.8 million (FY21: £2.1 million) 

·    £26.5 million net cash generated from operations (FY21: £7.9 million)* 

·    Pre-tax operational cash conversion of 105% (FY21: 85%)* 

 

* For more information on alternative performance measures please see the glossary at the end of the announcement.

 

The Board has declared that it is recommending a final dividend of 6.75 pence per ordinary share, subject to approval at the Annual General Meeting to be held on 24 March 2023, which will, if approved, result in a total dividend for the financial year ended 31 October 2022 of 9.25 pence per ordinary share.

 

Operational highlights

 

·    The Group opened its new 60,000 sq. ft Wakefield distribution centre in March 2022. The upgraded facility which acts as the head office for wholesaler HB Clark, has delivered operational and administrative efficiencies, enabling the Foodservice division to deliver growth and improved service levels. 

 

·    Acquisition of M.J. Baker Foodservice Limited, the West Country's leading ambient and frozen foodservice supplier completed in February 2022. M.J. Baker has been successfully integrated into the Foodservice division and is performing in line with expectations. 

 

·    Launch of the new online trading platform across all divisions to improve existing customer relationships whilst enhancing operational synergy within the Group.  

 

Post-period end

 

·    Acquisition of Westcountry Food Holdings Limited, a leading foodservice supplier of local, regional and imported fresh produce in the South West of England in December 2022.

 

·    Appointment of Teresa Octavio as a Non-Executive Director to the Board in February 2023.

 

Paul Young, Chief Executive Officer of Kitwave, commented:

 

"I am pleased to report on the Group's final results for the twelve months ending 31 October 2022.

 

"As announced in the Group's trading update in November 2022, the strong performance during the first half of the year continued into the second half. We are, therefore, able to report results in line with the upgraded market expectations that were referred to in the interim results, published in July 2022. The Group's strong performance has continued into the first three months of the new financial year.

"Kitwave has made significant progress, both operationally and commercially during the period, despite the challenging macro environment backdrop. Whilst the COVID-19 pandemic is mostly behind us, its knock-on effects still linger. We remain cognisant of UK cost of living issues, however, the Group is well placed to combat these and, as such, we are confident of a positive 2023 trading period. 

"The opening of the Wakefield site and the launch of a new web-based trading platform demonstrates the Group's drive to improve its systems and operations, for the benefit of all stakeholders, including suppliers, colleagues and customers. These initiatives play an important role in driving the inherent, long-term value of the Group.

 

"The Board recognises the significant market opportunity within the fragmented UK wholesale market and Kitwave's strategy is focused on capitalising on this. The success of our acquisitions to date has demonstrated the viability of this strategy, with the Group continuing to look to identify acquisition opportunities to combine with its initiatives to drive organic growth. Post-year end, we completed the acquisition of Westcountry Food Holdings Limited, a specialist fresh produce wholesaler to the foodservice sector operating in the South West of England. The acquisition is in line with our criteria and will be incorporated into the existing Foodservice division.

 

"At Kitwave, it is our people that make the business the success that it is. I would, therefore, like to take this opportunity to thank our colleagues, across all aspects of the Group, for their hard work throughout the period.

 

"I am confident that the Board and management have the expertise and experience to deliver the Group's growth strategy and generate value for the Group and its shareholders."

 

- Ends -

For further information please contact:

 

Kitwave Group plc

Paul Young, Chief Executive Officer

David Brind, Chief Financial Officer

www.kitwave.co.uk  

 

Tel: +44 (0) 191 259 2277

 

Canaccord Genuity Limited
(Nominated Adviser and Sole Broker)

Bobbie Hilliam

 

Tel: +44 (0) 20 7523 8150

Yellow Jersey PR
(Financial media and PR)

Sarah Hollins / Shivantha Thambirajah / Bessie Elliot

Tel: +44 (0) 20 3004 9512

 

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

 

Company Overview


Founded in 1987, following the acquisition of a single-site confectionery wholesale business based in North Shields, United Kingdom, Kitwave is a delivered wholesale business, specialising in selling and delivering impulse products, frozen, chilled and fresh foods, alcohol, groceries and tobacco to approximately 42,000, mainly independent, customers.

 

With a network of 30 depots, Kitwave is able to support delivery throughout the UK to a diverse customer base, which includes independent convenience retailers, leisure outlets, vending machine operators, foodservice providers and other wholesalers, as well as leading national retailers.
 

The Group's growth to date has been achieved both organically and through a strategy of acquiring smaller, predominantly family-owned, complementary businesses in the fragmented UK grocery and foodservice wholesale market.

 

Kitwave Group plc (AIM: KITW) was admitted to trading on AIM of the London Stock Exchange on 24 May 2021.

 

For further information, please visit: www.kitwave.co.uk.

 


Chairman's statement

 

Overview

 

In our second Annual Report since the Company's admission to AIM in May 2021, we are pleased to report a year of excellent progress. In the prior year, the Group had positioned itself to be able to capitalise on opportunities for growth as the challenges of the COVID-19 pandemic eased. As can be seen from the results for the year, all our divisions recovered quickly and performed ahead of our expectations.

 

Results summary


The Group has demonstrated significant growth in both revenue and operating profit during the year, with revenue of £503.1 million (FY21: £380.7 million) and operating profit of £
20.4 million (FY21: £6.4 million).  

 

Included in the results for the year is a contribution from M.J. Baker Foodservice Limited which is in line with our expectations at the time of the acquisition in February 2022. 

 


Existing operations

£000

 

Acquisitions

£000

 

FY22

£000

 

FY21

£000

Revenue

484.8

18.3

503.1

380.7

Operating profit

18.2

2.2

20.4

6.4

Adjusted operating profit *

 

19.3

 

2.2

 

21.5

 

7.1

 

 

* For more information on alternative performance measures please see the glossary at the end of the announcement.

 

It is important to note the work undertaken by management to increase gross margin in order to protect the Group from the inflationary pressures being experienced in its cost base. Increases in overhead costs such as labour, fuel and energy have been particularly significant.  We are continually striving to mitigate such cost increases and, as a result, the ratio of distribution costs to revenue is only slightly ahead of the prior year and is in line with our expectations.

 

Dividend

 

The Board has a progressive dividend policy that has the intention to pay a total annual dividend of between 40% and 50% of profit after tax. In years where the Group incurs higher cash outflows through its investment activity in merger and acquisitions or infrastructure capital expenditure, the aggregate annual dividend is likely to be at the lower end of the range. For those years where there is no investment the annual dividend is likely to be at the higher end of the range.

 

The Board is recommending a final dividend of 6.75 pence per ordinary share (FY21: 4.50 pence), subject to approval at the AGM, which, if approved, will result in a total dividend for the year of 9.25 pence per ordinary share (FY21: 6.75 pence).

 

Environmental, Social and Governance (ESG)

 

We are committed to ensuring the highest standards of ESG practices across our business and recognise that we have social and environmental responsibilities arising from our operations. The Group continues to develop this framework and the associated measures that will need to be considered. 

 

Our colleagues are our most valuable asset and their welfare is a priority at Kitwave. Especially during this cost-of-living crisis, we are pleased to be able to provide sustainable employment and to increase remuneration across our workforce.  

 

To enhance the focus on safety across our divisions, we appointed a Group Health and Safety Director in April 2022. This is a newly created position to coordinate the activities of the individual Health and Safety Officers operating in each business.  

 

The Group continues to enhance its transparency of the risk environment in which it operates through further development of the risk register and associated mitigations and internal controls. During the year, the Group adopted an Enterprise Risk Management (ERM) framework which incorporated a review of its risk register and an update of the risk appetite for the Group's principal risks. The ERM framework has allocated the management, monitoring and reporting of the Group's principal risks to an appropriate risk champion for each identified risk. Risk champions will have regular engagement with the Board and are scheduled into the Board agenda for regular consideration.

 

In addition to strict governance policies, Kitwave maintains its commitment to being a responsible corporate citizen through its many schemes to decrease its environmental impact.

 

Board

 

As outlined in the Nomination Committee Report, a Board evaluation review was undertaken during the year. One of the recommendations from the Committee to the Board was the need to increase diversity among the Directors. Feedback from shareholders had also indicated a desire for a more balanced position between the number of Executive and Non-Executive members of the Board. Consequently, a process to appoint a further Non-Executive Director commenced in September 2022 and we were delighted to announce the appointment of Teresa Octavio to the Board on 1 February 2023.

 

Our people

 

I would like to take this opportunity to thank all our colleagues at this time, as they have continued to respond to the challenges faced by the business with exceptional commitment. It is due to their dedication that we continue to provide the high-quality service that our customers have come to expect.

 

Outlook

 

Since Kitwave's IPO in May 2021, the Group has continued to go from strength to strength. Unlike many of the other companies that joined AIM at a similar time, Kitwave has significantly outperformed market expectations, despite the challenges of the pandemic and the more recent inflationary cost pressures.

 

We continue to pursue our combined organic growth and acquisition-based strategy and believe there are a large number of opportunities available to us in what remains a fragmented delivered wholesale market in the UK. The success of our acquisitions to date has demonstrated the viability of this strategy, with the Group continuing to look to identify acquisition opportunities to combine with its initiatives to drive organic growth. Post-year end, we completed the acquisition of Westcountry Food Holdings Limited, a specialist fresh produce wholesaler to the foodservice sector operating in the South West of England. The acquisition is in line with our criteria and will be incorporated into the existing Foodservice division.

 

FY23 has started well and, subject to successful management of the inflationary headwinds referred to above, we expect a positive outcome for the year and to continue to deliver value to our shareholders.

 

Steve Smith

Chairman

27 February 2023

 


Chief Executive Officer's review

 

Overview

 

I am pleased to report the Company's final results for the 12 months ending 31 October 2022. 

 

Kitwave has made significant progress during the year, despite operating against a challenging macro environment. Whilst the COVID-19 pandemic is now mostly behind us, its knock-on effects still linger. We remain cognisant of UK cost of living issues, however, the Group is well-placed to combat these and, as such, we remain confident of a positive 2023 trading period. 


As outlined further below, the Group has made significant progress, both operationally and commercially, in the reporting period. As we announced in the Group's trading update in November 2022, the strong performance during the first half of the year continued into the second half. We are, therefore, able to report results in line with the upgraded market expectations that were referred to in the interim results, published in July 2022. We are pleased with the Group's progress since its admission to trading on AIM in May 2021 and the results that we have reported to date, which put us on a strong footing for FY23 and beyond.

 

Divisional summary


Set out below is the financial performance of the business by division for FY22:

Ambient and Frozen & Chilled divisions

The Group's Ambient and Frozen & Chilled divisions both service the Retail & Wholesale sector of the grocery market.  To be consistent with the market view these divisions are considered together and saw combined revenues increase by £59.3 million to £378.9 million (FY21: £319.6 million), a 19% increase from the year to October 2021.

 

Ambient

 

£000

FY22

FY21

Revenue

185,132

155,712

Gross profit

26,857

19,280

Gross margin %

14%

12%

 

Frozen & Chilled

 

£000

FY22

FY21

Revenue

193,810

163,895

Gross profit

42,574

34,923

Gross margin %

22%

21%

 

Foodservice division

The Group's Foodservice division, which was heavily affected by the pandemic, has rebounded strongly and performed well during the period, resulting in an increase in revenues to £124.1 million (FY21: £61.1 million).

This year saw the acquisition of M. J. Baker Foodservice Limited and included in these numbers is £18.3 million of acquired revenues. On a like-for-like basis, the division's organic growth was 73%, with an increase in revenues of £44.7 million.

 

Foodservice

 

£000

FY22

FY21

Revenue

124,146

61,087

Gross profit

33,196

14,382

Gross margin %

27%

24%


 

 

 


 

Facilities

 

The Group was pleased to announce the opening of its new 60,000 sq. ft Wakefield distribution centre in March 2022. The upgraded facility, which replaced the previous centre in Wakefield and acts as the head office and distribution hub for wholesaler HB Clark, has delivered operational and administrative efficiencies, enabling the division to go on to deliver growth and improved service levels.

 

The opening of the Wakefield site demonstrates the Group's drive to improve its systems and operations, for the benefit of all stakeholders, including suppliers, colleagues and customers. These initiatives play an important role in driving the inherent, long-term value of the Group.

 

Strategy

 

The Group made strides in the execution of its strategy, which targets growth through acquisition and organic growth, throughout the period. In line with this strategy, we were delighted to announce the acquisition of M.J. Baker Foodservice Limited, one of the West Country's leading ambient and frozen foodservice supplier, in February 2022. The business, which joins Kitwave's Foodservice division, has been successfully integrated into the Group and is performing in line with expectations.

 

Further to this, post-period end in December 2022, we were also pleased to acquire Westcountry Food Holdings Limited ("WestCountry"), a significant foodservice supplier of local, regional and imported fresh produce in the South West of England. WestCountry has developed a network of dedicated, high-quality local growers of seasonal fresh produce, as well as direct supply links with national and international fresh produce markets and represents an excellent addition to the Group.

 

Both businesses complement the Group's existing Foodservice division and enable the expansion of our reach into the South West. Foodservice provides a market for future growth and these acquisitions allow Kitwave to capitalise on opportunities available to it, which will deliver value to the Group.

Both acquisitions embody the Group's acquisition strategy. We look for strong, financially-robust businesses with well-regarded local reputations, established operations and teams with an ethos that reflects that of the Group. We are, therefore, delighted to have M.J. Baker and WestCountry as part of the Group.

 

We continue to assess further acquisition opportunities, which we feel will complement Kitwave's current offering, enabling us to better serve our customer base and deliver growth for the Group.

 

The second strand of our strategy focuses on organic growth through investment in our systems, processes and service offering.

 

We are proud to have launched a web-based trading platform for the Frozen & Chilled division in January 2022, which is now also operational in both the Ambient and Foodservice divisions. This will provide a cornerstone for future organic growth.

 

The results from the platform since its launch have been very encouraging, with increased order numbers and order sizes. Feedback from users has also been overwhelmingly positive. The initiative has enabled us to improve the strong relationships we have with customers and enhance operational synergies within the Group while driving sales.

 

Investment in infrastructure, systems, vehicles and people has enhanced the Group's ability to identify opportunities in the market to improve revenue. This was encapsulated during the summer when the warmer-than-normal weather increased demand for frozen confectionery. The Group's depth of resource allowed it to meet that demand and benefit from the opportunity.

 

The Board recognises the significant market opportunity within the fragmented UK wholesale market and Kitwave's strategy is focused on capitalising on this. I am confident that the Board and management team have the expertise and experience to deliver the Group's growth strategy and generate value for the Group and its shareholders.

 

Colleagues

 

At the start of the financial year, we welcomed Ben Maxted to the Board as Chief Operating Officer. Since joining Kitwave in 2011, Ben has contributed significantly to the development of the Group. His strong operational and commercial expertise have been highly valued as we look to execute the Group's growth strategy.

 

Post-period, we were also pleased to announce the appointment of Teresa Octavio to the Board as Non-Executive Director. Teresa brings to Kitwave a wealth of business transformation experience and insight, which will play an important role in how the Group evolves in terms of regional reach, customer base expansion, service provision and revenue growth.

 

At Kitwave, it is our people that make the business the success that it is. I would, therefore, like to take this opportunity to thank our colleagues, across all aspects of the Group, for their hard work throughout the period. We recognise that these remain challenging times, so their efforts are greatly appreciated. I am confident that their contribution will assist Kitwave in its objective to continue its growth in FY23 and the years thereafter.

 

Summary and outlook

 

The results for the year reflect our focus on delivering an exceptionally high standard of service to our customers. Since Kitwave was founded in 1987, this has been at the heart of our business and will remain long into the future. We have built an excellent platform for the Group from which to grow within the UK wholesale market. With our focused strategy, we believe we are well-placed to achieve this growth and deliver value to the Group and its investors.

 

We would like to thank all of our shareholders for their support throughout the period, and we look forward to delivering further progress in the year to come.

 

Paul Young

Chief Executive Officer

27 February 2023

 


Chief Financial Officer's review

 

Overview

 

As the fuller easing of lockdown restrictions took effect Group revenue increased to £503.1 million, compared to £380.7 million in the year to October 2022. This included £18.3 million of acquired revenue and on a like-for-like basis a 27% increase in revenue.

The Group's Ambient and Frozen & Chilled divisions that service the Retail & Wholesale sectors of the market saw revenues increase by £59.3 million to £378.9 million a 19% increase in the year to October 2022. 


The Group's Foodservice division, which had been more affected by the COVID-19 restrictions, saw revenues increase by £63.0 million to £124.1 million an increase of 103% in the year to October 2022.  This year saw the acquisition of M.J. Baker Foodservice Limited in February 2022 and included in these numbers is £18.3 million of acquired revenues.  On a like-for-like basis the divisions organic growth was 73% with an increase in revenues of £44.7 million.

During the last 12 months the grocery and foodservice market has begun to see more significant levels of price inflation but also continued challenges with supply chain shortages. Despite these challenges the Group continued to grow its unit sales as well as benefiting from the price rise inflation in the market.

 

Gross profit margin has increased by 2% to 20% during the year. The increase being partly due to a mix change with the higher margin Foodservice division trading at increased levels and the acquired operations also providing a gross profit margin of 32%. Divisional margins are generally ahead of expectations and the prior year.

 

Whilst inflationary pressure was seen in the cost base, overall distribution costs as a proportion of revenues only rose slightly.  The Foodservice division saw the biggest absolute increase in distribution costs as volumes returned to pre-COVID-19 levels. Overall distribution costs were 9% of Group revenue (FY21: 8%).

The Group's adjusted operating profit of £21.5 million (FY21: £7.1 million) represents 4% (FY21: 2%) of Group revenue. All divisions generated an increase in adjusted operating profit margin compared with FY21.

 

In the 12 months ended October 2022 Group profit before tax increased by £15.7 million to £17.8 million (FY21: £2.1 million). This is a result of margin enhancing revenue growth in the business and the continued drive toward efficient delivery and cost control within the overhead base.

 

Net finance costs of £2.5 million (FY21: £4.3 million) relate to the costs associated with the working capital facilities utilised by the Group of £1.1 million (FY21: £1.3 million) and interest relating to leased assets accounting of £1.4 million (FY21: £1.2 million). The prior year had other net finance costs of £1.7 million relating to the Group's capital structure prior to its IPO in May 2021.

 

The statutory basic and diluted earnings per share for FY22 is £0.20 (FY21: £0.02).

 

The Board is recommending a final dividend of 6.75 pence per ordinary share (FY21: 4.50 pence), subject to approval at the AGM, which, if approved, will result in a total dividend for the year of 9.25 pence per ordinary share (6.75 pence). This is a 37% rise in dividend per share compared to FY21.

 

The Board has a progressive dividend policy that has the intention to pay a total annual dividend of between 40% and 50% of profit after tax. In years where the Group incurs higher cash outflows through its investment activity in merger and acquisitions or infrastructure capital expenditure the total annual dividend is likely to be at the lower end of the range. For those years where there is no investment the annual dividend is likely to be at the higher end of the range.

 

KPIs


FY22

FY21

Financial profitability KPIs



Gross margin %

20%

18%

Adjusted operating profit *

£21.5m

£7.1m

Adjusted operating margin *

4.3%

1.9%

EPS

£0.20

£0.02

 

Financial structure KPIs



Leverage (inc IFRS16 debt)*

1.5x

2.3x

Leverage (exc IFRS16 debt)*

0.6x

0.9x

Pre tax operational cash conversion *

105%

85%

Non financial KPIs



Service levels

98%

98%

 

Service levels are assessed as the number of cases delivered right first time compared to the number of cases ordered during the financial year.

 

* For more information on alternative performance measures please see the glossary at the end of the announcement.

 

Capital expenditure

 

The Group has continued to invest in its operations over the financial year with £2.4 million (FY21: £2.9 million) invested in new assets and £8.7 million (FY21: £10.9 million) in right-of-use assets.

 

Supply chain problems and long order times for new vehicles were seen right through the year.  Despite these delays, investment in the vehicle fleet continued with £0.6 million (FY21: £0.3 million) of new vehicles acquired and £3.1 million (FY21: £1.2 million) invested through right-of-use vehicle replacement. 

 

A new lease was signed for the Wakefield site that created an additional £4.6 million of right-of-use leasehold assets.

 

Cashflow

 

The net cash inflow from operating activities for the year was £26.5 million (FY21: £7.9 million) after net inflow from working capital of £1.4 million (FY21: £2.4 million outflow) and tax payments of £4.0 million (FY21: £2.4 million).  This resulted in operating cash conversion of 91% and pre-tax operational cash conversion* of 105%.

 

There was a cash outflow to the Group of £16.9 million in relation to the acquisition of M.J. Baker Foodservice Limited. This amount is the full consideration in relation to the transaction with no further payments due.

 

The Group paid a final dividend relating to FY21 in April 2022 of 4.50 pence per ordinary share and an interim dividend in respect of FY22 in August 2022 of 2.50 pence per ordinary share. The total cash outflow relating to dividend payments was £4.9 million (FY21: £1.6 million) during the year.

 

The net cash increase in the year was £0.5 million.

 

Financial position

 

At 31 October 2022, cash and cash equivalents totalled £5.5 million (FY21: £5.0 million).

 

The Group had a total of £49.1 million (FY21: £39.3 million) of interest-bearing debt facilities including £25.9 million (FY21: £21.6 million) of IFRS 16 lease liabilities.

 

The Group's CID facility that was drawn to a value of £20.4 million (FY21: £14.6 million) at year end has one covenant requiring net debt not to exceed three times EBITDA which was satisfied as at 31 October 2022. In addition to the cash and cash equivalents, there were undrawn facilities available to the Group of £23.1 million at the year end.

 

Post the financial year end the Group extended the expiry on its CID facility by 18 months to December 2025.  At the same time a new additional £20.0 million revolving credit facility was put in place with expiry in December 2025. This revolving credit facility is available to be utilised for permitted acquisition opportunities undertaken by the Group. This facility includes the same covenant as the CID facility plus an additional interest cover covenant set at four times cover.

 

Taxation

 

The tax charge for the year was £3.5 million (FY21: £1.0 million) at an effective rate of 20% (FY21: 48%). The effective rate in the prior year is higher than the standard UK rate of corporation tax of 19%  mainly due to the non-deductible element of interest charges and fair value adjustments to debt instruments under the pre-Admission debt structure. A full reconciliation of the tax charge is shown in note 9 of the financial statements.

 

Return on capital

 

Utilising an effective tax rate of 18% (FY21: 20%) the adjusted profit after tax return on investment capital at 31 October 2022 was 15% (FY21: 5%). These returns exclude the charges relating to share-based payments.

 

Share based payments

 

In the year there was an expense of £0.9 million (FY21: £0.2 million) for share-based payments.

 

This relates to a Management Incentive Plan (MIP) that commenced in July 2021 post the completion of the IPO in May 2021. The expense in FY21 reflects a partial charge in the year from the inception of the MIP to the year end and the expense in FY22 reflects a full year charge. 

 

David Brind

Chief Financial Officer

27 February 2023

 


Consolidated statement of profit and loss and other comprehensive income

 


Note

 

Year ended

31 October

2022

Year ended

31 October

2021

 

 

 

£000

£000

 

 

 

 


Revenue

3

 

503,088

380,694

Cost of sales

 

 

(400,460)

(312,109)


 

 

             

             

Gross profit

 

 

102,628

68,585

 

 

 

 


Other operating income

4

 

374

4,771

Distribution expenses

 

 

(44,010)

(31,203)

Administrative expenses

 

 

(38,617)

(35,755)


 

 

             

             

Operating profit

 

 

20,375

6,398

 

 

 

 


Analysed as:

 

 

 


Adjusted EBITDA

 

 

29,477

15,053

Amortisation of intangible assets

11

 

(99)

(150)

Depreciation

12,13

 

(7,897)

(7,817)

CPO income

4

 

-

2,255

Restructuring costs

5

 

-

(1,257)

Acquisition expenses

5

 

(148)

(181)

Compensation for post combination services

5

 

(95)

(1,278)

Share based payment expense

5

 

(863)

(227)


 

 

             

             

Total operating profit

 

 

20,375

6,398


 

 

             

             


 

 

 


Finance expenses

8

 

(2,534)

(4,274)


 

 

 


Analysed as:

 

 

 


Interest payable on bank loans and bank facilities

8

 

(1,105)

(1,327)

Interest and finance charges payable on loan notes and

 debenture loans

 

8

 

 

-

 

(7,078)

Finance charges on leases

8

 

(1,427)

(1,239)

Fair value movement on financial liabilities

8

 

-

5,410

Other interest

8

 

(2)

(40)

 

 

 

             

             

Finance expenses

 

 

(2,534)

(4,274)

 

 

 

             

             

 

 

 

 


Profit before tax

 

 

17,841

2,124

Tax on profit on ordinary activities

9

 

(3,501)

(1,028)

 

 

 

             

             

Profit for the year

 

 

14,340

1,096


 

 

             

             

Other comprehensive income

 

 

-

-

 

 

 

             

             

Total comprehensive income for the year

 

 

14,340

1,096

 

 

 

             

             

 

 

 

 


Basic earnings per share (£)

10

 

0.20

0.02

Diluted earnings per share (£)

10

 

0.20

0.02

 


Consolidated balance sheet as at 31 October

 


Note


2022

2021

 

 


£000

£000

Non-current assets

 


 


Goodwill

11


44,342

31,249

Intangible assets

11


737

431

Tangible assets

12


13,037

10,104

Right-of-use assets

13


26,452

23,188

Investments

14


35

20


 


             

             


 


84,603

64,992


 


             

             

Current assets

 


 


Inventories

16


31,846

26,043

Trade and other receivables

17


57,698

52,814

Cash and cash equivalents

18


5,511

4,968


 


             

             

 

 


95,055

83,825

 

 


             

             

Total assets

 


179,658

148,817


 


             

             

Current liabilities

 


 


Other interest bearing loans and borrowings

20


(20,354)

(14,620)

Lease liabilities

20


(5,509)

(4,719)

Trade and other payables

19


(57,891)

(47,332)

Tax payable

 


(62)

(370)


 


             

             


 


(83,816)

(67,041)


 


             

             

Non-current liabilities



 


Lease liabilities

20


(23,240)

(19,917)

Deferred tax liabilities

21


(715)

(275)


 


             

             




(23,955)

(20,192)




             

             

Total liabilities



(107,771)

(87,233)

 



             

             

Net assets



71,887

61,584




             

             

Equity attributable to equity holders of the

parent Company

 


 


Called up share capital

24


700

700

Share premium account

24


64,183

64,183

Consolidation reserve

24


(33,098)

(33,098)

Share based payment reserve

23


1,090

227

Retained earnings

 


39,012

29,572


 


             

             

Equity

 


71,887

61,584


 


             

             

 


Company balance sheet as at 31 October

 


Note


2022

2021

 

 


£000

£000

Non-current assets

 


 


Investments

14


12,993

12,993

Deferred tax assets

21


273

57


 


             

             


 


13,266

13,050


 


             

             

Current assets

 


 


Trade and other receivables

17


61,535

63,081

Cash and cash equivalents

18


45

3,371


 


             

             

 

 


61,580

66,452

 

 


             

             

Total assets

 


74,846

79,502


 


             

             

Current liabilities

 


 


Trade and other payables

19


(61)

(227)


 


             

             

Total liabilities



(61)

(227)

 



             

             

Net assets



74,785

79,275




             

             

Equity attributable to equity holders of the

parent Company

 


 


Called up share capital

24


700

700

Share premium account

24


64,183

64,183

Share based payment reserve

23


1,090

227

Retained earnings*

 


8,812

14,165


 


             

             

Equity

 


74,785

79,275


 


             

             

 

* The Company's loss after tax for the year was £453,000 (FY21: £3,989,000 profit)

 


Consolidated statement of changes in equity

 


Called up

share

capital 

Share

premium

account

 

Consolidation

reserve

Share based payment reserve

Profit

and loss

account

 

Total

equity

 

£000

£000

£000

£000

£000

£000


 

 

 

 

 

 

Balance at 1 November 2020

1

12,993

(33,098)

-

20,051

(53)


             

             

             

             

             

             

Total comprehensive income

for the year





 

Profit

-

-

-

-

1,096

1,096

Other comprehensive income

-

-

-

-

-

-


             

             

             

             

             

             

Total comprehensive income for

 the year

-

-

-

-

1,096

1,096

 







Transaction with owners, recorded

 directly in equity


 

 

 

 

Share capital reduction

-

(10,000)

-

-

10,000

-

New share issuance

699

63,300

-

-

-

63,999

Costs directly attributable to new share issuance

-

(2,110)

-

-

-

(2,110)

Dividends

-

-

-

-

(1,575)

(1,575)

Share based payment expense

-

-

-

227

-

227


             

             

             

             

             

             

Total contribution by and transactions with the owners

 

699

 

51,190

 

-

 

227

 

8,425

 

60,541


             

             

             

             

             

             

Balance at 31 October 2021

700

64,183

(33,098)

227

29,572

61,584

Total comprehensive income

for the year





 

Profit

-

-

-

-

14,340

14,340

Other comprehensive income

-

-

-

-

-

-


             

             

             

             

             

             

Total comprehensive income for

 the year

-

-

-

-

14,340

14,340

Transaction with owners, recorded

 directly in equity


 

 

 

 

Dividends

-

-

-

-

(4,900)

(4,900)

Share based payment expense

-

-

-

863

-

863


             

             

             

             

             

             

Total contribution by and transactions with the owners

 

-

 

-

 

-

 

863

 

(4,900)

 

(4,037)


             

             

             

             

             

             

Balance at 31 October 2022

700

64,183

(33,098)

1,090

39,012

71,887


             

             

             

             

             

             

 


Company statement of changes in equity

 


 

Called up

share

capital 

Share

premium

account

Share based payment reserve

Profit

and loss

account

 

Total

equity

 

 

£000

£000

£000

£000

£000


 

 

 

 

 

 

Balance at 1 November 2020

 

1

12,993

-

1,751

14,745


 

             

             

             

             

             

Total comprehensive income for the year





Profit


-

-

-

3,989

3,989

Other comprehensive income

 

-

-

-

-

-


 

             

             

             

             

             

Total comprehensive income for

 the year

 

-

-

-

3,989

3,989

 







Transaction with owners, recorded directly in equity

 

 

 

 

Share capital reduction


-

(10,000)

-

10,000

-

New share issuance


699

63,300

-

-

63,999

Costs directly attributable to new share issuance


-

(2,110)

-

-

(2,110)

Dividends


-

-

-

(1,575)

(1,575)

Share based payment expense


-

-

227

-

227


 

             

             

             

             

             

Total contribution by and transactions with the owners

 

 

699

 

51,190

 

227

 

8,425

 

60,541


 

             

             

             

             

             

Balance at 31 October 2021

 

700

64,183

227

14,165

79,275

Total comprehensive loss

for the year





 

Loss

 

-

-

-

(453)

(453)

Other comprehensive income

 

-

-

-

-

-


 

             

             

             

             

             

Total comprehensive loss for

 the year

 

-

-

-

(453)

(453)

Transaction with owners, recorded directly in equity

 

 

 

 

Dividends


-

-

-

(4,900)

(4,900)

Share based payment expense


-

-

863

-

863


 

             

             

             

             

             

Total contribution by and transactions with the owners

 

 

-

 

-

 

863

 

(4,900)

 

(4,037)


 

             

             

             

             

             

Balance at 31 October 2022

 

700

64,183

1,090

8,812

74,785


 

             

             

             

             

             

 


Consolidated cash flow statement

 


Note


Year ended

31 October

2022

Year ended

31 October

2021


 


£000

£000

 

 


 



 


 


Cash flow from operating activities

 


 


Profit for the year

 


14,340

1,096

Adjustments for:

 


 


Depreciation and amortisation

11,12,13


7,996

7,967

Financial expense

8


2,534

4,274

Profit on sale of property, plant and equipment

4


(164)

(55)

Net gain on remeasurement of right-of-use assets and lease liabilities

4


(8)

(124)

Compensation for post combination services

5


95

1,278

Equity settled share based payment expense

5


863

227

Taxation

9


3,501

1,028


 


             

             

 

 


29,157

15,691


 


 


Increase in trade and other receivables

 


(2,909)

(8,244)

Increase in inventories

 


(4,168)

(2,845)

Increase in trade and other payables

 


8,450

8,671


 


             

             


 


30,530

13,273


 


 


Payments in respect of compensation for post combination services

 


-

(2,925)

Tax paid

 


(4,005)

(2,432)


 


             

             

Net cash inflow from operating activities

 


26,525

7,916


 


             

             

Cash flows from investing activities

 


 


Acquisition of property, plant and equipment

 


(2,608)

(2,961)

Proceeds from sale of property, plant and equipment

 


308

248

Acquisition of subsidiary undertakings (net of

overdrafts and cash acquired)

 

2


 

(16,914)

 

-


 


             

             

Net cash outflow from investing activities

 


(19,214)

(2,713)


 


             

             

Cash flows from financing activities

 


 


IPO fund raise (net of expenses)

 


-

61,889

Proceeds from new loan              

20


-

5,500

Net movement in invoice discounting

20


5,734

4,559

Interest paid

8,20


(2,534)

(5,093)

Net movement in bank trade loans

20


-

(4,750)

Repayment of bank term loans

20


-

(21,863)

Repayment of investor loans

20


-

(34,176)

Payment of lease liabilities

20


(5,068)

(5,068)

Dividends paid

 


(4,900)

(1,575)




             

             

Net cash outflow from financing activities



(6,768)

(577)




             

             

Net increase in cash and cash equivalents



543

4,626

Opening cash and cash equivalents



4,968

342




             

             

Cash and cash equivalents at year end

18


5,511

4,968




             

             



Notes

1              Accounting policies

Kitwave Group plc (the "Company") is a public company limited by shares and incorporated, domiciled and registered in England in the UK. The registered number is 9892174 and the registered address is Unit S3, Narvik Way, Tyne Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ.

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The parent Company financial statements present information about the Company as a separate entity.

The Group financial statements have been prepared and approved by the Directors in accordance with UK adopted international accounting standards.

The Group and Company financial statements are presented in pounds sterling which is the functional currency of the Group. All values are rounded to the nearest thousand (£000), except when otherwise indicated.

The Company financial statements were prepared in accordance with the Companies Act 2006 as applicable to companies using Financial Reporting Standard 101 'Reduced Disclosure Framework' ("FRS 101"). The Company applies the recognition, measurement and disclosure requirements of IFRS, but makes amendments where necessary in order to comply with Companies Act 2006.

The financial information set out above does not constitute the Group or the Company's statutory accounts for the year ended 31 October 2022 or the financial year ended 31 October 2021. Statutory accounts for the year ended 31 October 2021 have been delivered to the registrar of companies, and those for the year ended 31 October 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under s498 (2) or (3) of the Companies Act 2006.

In publishing the Company financial statements together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual statement of profit and loss and related notes that form a part of these approved financial statements.

The Company has applied the following exemptions in the preparation of its financial statements:

·      A cash flow statement and related notes have not been presented;

·      Disclosures in respect of new standards and interpretations that have been issued but which are not yet effective have not been provided;

·      Disclosures in respect of transactions with wholly-owned subsidiaries have not been made;

·      Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instruments have not been provided; and

·      Disclosure in respect of share based payments as required by IFRS 2 Share-based Payments have not been provided.

The accounting policies set out below have, unless otherwise stated, been applied consistently to both periods presented in these consolidated financial statements.

The consolidated financial statements include the results of all subsidiaries owned by the Company per note 14.  Certain of these subsidiaries have taken exemption from an audit for the year ended 31 October 2022 by virtue of s479A Companies Act 2006. To allow these subsidiaries to take the audit exemption, the Company has given a statutory guarantee of all the outstanding liabilities as at 31 October 2022

. The subsidiaries which have taken this exemption from audit are:

·      Alpine Fine Foods Limited;

·      TG Foods Limited;

·      Anderson (Wholesale) Limited;

·      Angelbell Limited;

·      Phoenix Fine Foods Limited; and

·      Supplytech Limited

 

1.1          Critical accounting estimates and judgements

The preparation of financial statements requires the Directors to make judgements, estimates and assumptions concerning the future performance and activities of the Group. There are no significant judgements applied in the preparation of these financial statements. Estimates and assumptions are based on the historical experience and acquired knowledge of the Directors, the result of which forms the basis of the judgements made about the carrying value of assets and liabilities that are not clear from external sources.  In concluding that there are no significant risks of material adjustment from accounting estimates and judgements, the Directors have reviewed the following:

 

Impairment of goodwill

 

In accordance with IAS 36 "Impairment of Assets", the Board identifies appropriate Cash-Generating Units ("CGU's") and the allocation of goodwill to these units. Where an indication of impairment is identified, assessment and estimation of the recoverable value of the cash generating units (CGUs) is required.  This process involves estimation of the future cash flows from the CGUs and also the selection of appropriate discount rates in order to calculate the net present value of those cash flows. The discount rate is a key area of judgement and the forecast cash flow includes significant accounting estimates.

 

Each of the CGU's has significant headroom under the annual impairment review and the Directors believe that no reasonable change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount. More information on the assumptions and sensitivities applied are set out in note 11 to these financial statements.

 

Impairment of trade receivables

 

IFRS 9, Financial Instruments, requires that provisioning for financial assets needs to be made on a forward-looking expected credit loss model.  This is an accounting estimate requiring significant judgement of management to consider historic, current and forward-looking information to determine the level of provisioning required.

 

The Directors have assessed the ageing of the trade receivables, applying their knowledge of the Group's customer base, and other economic factors as indicators of potential impairment. Further information is considered in note 26 of these financial statements.

 

Following review of the above accounting estimates and judgements the Directors have concluded that there is no significant risk of material adjustment to the carrying amount of assets and liabilities within the next financial year.

Valuation of share based payments

IFRS 2, Share-based Payments, requires judgement on the classification of the share based payment under the Management Incentive Plan ("MIP"), which Directors have determined to be equity settled.

The grant date fair value of the MIP is based on a Monte Carlo option valuation model, performed by independent experts, factoring in a number of significant accounting estimates and judgements. Further information is considered in note 23 of these financial statements.

Following review of the judgements and estimates applied to the valuation of the MIP, the Directors have concluded that there is no sigificant risk of material adjustment to the carrying value of the liability or charge to the statement of profit and loss and other comprehensive income in the year.

 

1.2          Measurement convention

The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: financial instruments classified at fair value through the statement of profit and loss, unlisted investments and investment property.



1.3          Going concern

The financial information has been prepared on a going concern basis which the Directors consider to be appropriate for the following reasons.

 

Following the easing of COVID-19 lockdown restrictions the Group was able to quickly capitalise on opportunities for growth and return to pre-pandemic levels of trading across all divisions. This was enabled by the readiness of the workforce, the continued strong relationships with manufacturers, suppliers and customers throughout the pandemic which allowed the Group to increase volumes whilst maintaining its service levels.

 

Most notable were the return of volumes to the foodservice and vending customers as the 'out of home' sector recovered with consumers returning to restaurants, bars, hotels and places of work.

In the year the Group acquired M.J. Baker Foodservice Limited which added £18,288,000 of revenue and £2,205,000 of operating profit. Including this contribution, there was an improvement in cash flow from operations (before tax payments) from £13,273,000 in FY21 to £30,530,000 in FY22. The acquisition was completed without the need for additional facilities from the Group's existing lenders further illustrating the continued strong cash generation of the Group.

Post year end, Kitwave Limited completed the acquisition of the entire share capital of Westcountry Food Holdings Limited ("WestCountry") for £28,500,000. The acquisition was funded from the Group's current banking facilities and a new three-year revolving credit facility provided by the Group's existing lenders.

WestCountry is an independent foodservice supplier based in the South West of England and offers a complementary product range and service level to the Group's existing operations in the area. The acquisition will be incorporated into the Group's existing Foodservice division and the Directors believe that it will be immediately earnings enhancing.

WestCountry has an annual turnover of approximately £29,700,000. The acquired balance sheet included £8,983,000 of cash and cash equivalents which immediately became available to the Group.

The Group has prepared financial forecasts for a period of 20 months from the date of approval of this financial information (the "going concern assessment period"), which take into account the acquired balance sheet and forecast trading of WestCountry, possible downsides to Group trading including any impact of further inflationary pressure in 2023.

These forecasts show that the Group will have sufficient levels of financial resources available both to meet its liabilities as they fall due for that period and comply with remaining covenant requirements on its working capital facilities.

Sensitivity analysis, primarily in respect of reducing revenue and adjusting costs, and including a reverse stress test, have been performed to model the impact of adverse assumptions to those included in the accounting estimates of the forecast. The Directors concluded that there were no severe but possible scenarios that would render the preparation of accounts on the assumption of a going concern as inappropriate.

Consequently, the Directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of this financial information and therefore have prepared the financial statements on a going concern basis.

 

1.4          Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 October 2022.  A subsidiary undertaking is an entity that is controlled by the Company.  The results of subsidiary undertakings are included in the consolidated statement of profit and loss account from the date that control commences until the date that control ceases. Control is established when the Company is exposed to, or has rights to, variable returns from its involvement with an entity and has the ability to affect those returns through its power over the entity.  In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

In respect of the legal acquisition of Kitwave One Limited by the Company in the year ended 30 April 2017, the principles of reverse acquisition have been applied under IFRS 3.  The Company, via its 100% owned subsidiary Kitwave Investments Limited, is the legal acquirer of Kitwave One Limited but Kitwave One Limited was identified as the accounting acquirer of the Company. The assets and liabilities of the Company and the assets and liabilities of Kitwave One Limited continued to be measured at book value. By applying the principles of reverse acquisition accounting the Group is presented as if the Company has always owned Kitwave One Limited.  The comparative consolidated reserves of the Group were adjusted to reflect the statutory share capital and share premium of the Company as if it had always existed, adjusted for movements in the underlying Kitwave One Limited's share capital and reserves until the date of the acquisition. A consolidation reserve was created which reflects the difference between the capital structure of the Company and Kitwave One Limited at the date of acquisition less any cash and deferred cash consideration for the transaction.

 

1.5          Foreign currency

Transactions in foreign currencies are translated to the Group companies' functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognised in the statement of profit and loss.

 

1.6          Classification of financial instruments


Financial assets

Financial assets are classified at initial recognition, and subsequently measured at amortised cost, Fair Value through Other Comprehensive Income ("FVOCI") or Fair Value through the statement of Profit and Loss ("FVTPL"). The classification of financial assets under IFRS 9 is based on two criteria:

·      the Group's business model for managing the assets; and

·      whether the instruments' contractual cash flows represent 'Solely Payments of Principal and Interest' on the principal amount outstanding (the "SPPI criterion").

A summary of the Group's financial assets is as follows:

Trade and other receivables*                                           Amortised cost - hold to collect business model and SPPI met

Cash and short-term deposits                                            Amortised cost

 

Financial liabilities

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

(a)           they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

(b)           where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability.  Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares. 

 

A summary of the Group's financial liabilities is as follows:

Bank loans and overdrafts                                                  Amortised cost

Trade and other payables*                                                Amortised cost

*Prepayments, other receivables, other taxation and social security payables and other payables do not meet the definition of financial instruments.

Further information is included in note 26.

 

1.7          Non derivative financial instruments

               
Trade and other receivables

Trade and other receivables are recognised initially at transaction price.  Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.

               
Trade and other payables

Trade and other payables are recognised initially at fair value.  Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

               
Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.

               
Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.


Invoice discounting

The Group is party to an invoice discounting arrangement which provides additional working capital up to the value of a set proportion of its trade receivables balances.  The advances are secured against trade receivables (note 17). These are repayable within 90 days of the invoice and carry interest at a margin of 2.00%.  This was initially a 2 year fixed facility which was extended post year ended 31 October 2022 to expire in December 2025. The net movement of the balance is disclosed in the cash flow statement.


Equity investments

Equity investments are instruments that meet the definition of equity from the issuer's perspective: that is they do not contain an obligation to pay and provide a residual interest in the assets of the issuer.  Equity investments are held at fair value through the statement of profit and loss.

 

1.8          Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Depreciation is charged to the statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

·    Leasehold improvements            straight line over the term of the lease

·    Freehold property                        2% straight line

·    Plant and machinery                     10-25% reducing balance and straight line

·    Fixtures and fittings                       15-20% reducing balance and straight line

·    Motor vehicles                               15-25% reducing balance and straight line

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

 

1.9          Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

At the acquisition date, the Group measures goodwill at the acquisition date as:

·    the fair value of the consideration (excluding contingent consideration) transferred; plus

·    estimated amount of the contingent consideration (see below): plus

·    the fair value of the existing equity interest in the acquiree; less

·    the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities and contingent liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in the statement of profit and loss.

Any contingent consideration payable is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in the statement of profit and loss.

 

1.10        Intangible assets and goodwill

               
Goodwill

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units ("CGUs") and is not amortised but is tested annually for impairment.


Intangible assets

Intangible assets are stated at costs less accumulated amortisation. They relate to capitalised software and development costs and are being amortised on a straight line basis over 5-10 years.

 

1.11        Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle.

The Group participates in rebate schemes with its suppliers. Rebates are principally earned from suppliers on purchase of inventory and are recognised at point of delivery to the Group. Where the rebate earned relates to inventories which are held by the Group at the period end, the rebates are deducted from the cost of those inventories. When the rebate is based on a volume of purchases over a period, the most likely outcome model is used due to the simple nature of rebate agreements with suppliers, principally whether the Company has achieved the required level of purchases or not.

 

Certain volume related discounts are recognised as a deduction from cost of sales on an accruals basis, calculated based on the expected entitlement that has been earned up to the balance sheet date for each relevant supplier contract. Accrued volume related discounts at the balance sheet date are included within prepayments and accrued income.


1.12        Impairment excluding inventories and deferred tax assets

               
Non derivative financial assets - trade receivables

               
The Group recognises loss allowance for Expected Credit Losses ("ECLs") on trade receivables measured at amortised cost.
The Group measures loss allowances at an amount equal to lifetime ECLs as the term of the asset is considered short.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment including forward looking information.

 

The Group utilises the practical expediency for short term receivables by adopting the simplified 'matrix' approach to calculate expected credit losses. The provision matrix is based on an entity's historical default rates over the expected life of the trade receivables as adjusted for forward looking estimates.

 

The Group assumes that the credit risk on a financial asset has increased if it is aged more than 90 days since delivery. This is not relevant in all cases and management use its historical experience and knowledge of the customer base to assess whether this is an indicator of increased risk on a customer by customer basis.

 

The Group considers the financial asset to be in default when the borrower is unlikely to pay its obligations or has entered a formal insolvency process or other financial reorganisation.

 

Loss allowances for financial assets measured at amortised costs are deducted from the gross carrying amount of the assets.

               
Non-financial assets

 

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit" or "CGU"). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

 

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of profit and loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.


1.13        Employee benefits

               
Defined contribution plans and other long term employee benefits

 

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of profit and loss in the periods during which services are rendered by employees.

 

Share-based payment transactions

 

Share-based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Company.

 

The Group operates a Management Incentive Plan for certain employees that incorporates a put option on the Company's ordinary shares. The fair value at the grant date of the options is recognised as an employee expense with a corresponding increase in equity, over the period in which the employee becomes unconditionally entitled to the awards.

 

The fair value of the awards granted is measured using an option valuation model, taking into account the terms and conditions upon which the awards were granted. The Monte Carlo option valuation model was adopted for share based payment arrangements entered into in the year ended 31 October 2021.

 

The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

 

Under IFRS 3 the contingent payment which has been agreed for the remaining 5% of the share in Central Supplies (Brierley Hill) Ltd is classified as remuneration for post-combination services, as consideration for the shares is linked to an employment condition. The amount recognised in the statement of profit and loss and other comprehensive income was £95,000 (FY21:£1,278,000). The outstanding liability is included in other creditors in note 19.

               

1.14        Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

 

1.15        Revenue

IFRS 15 "revenue from contracts with customers" establishes a principles-based approach for revenue recognition and is based on the concept of recognising revenue for performance obligations only where they are satisfied, and the control of goods or service is transferred.  In doing so, the standard applies a five-step approach to the timing of revenue recognition and applies to all contracts with customers, except those in the scope of other standards. 

 

The principal performance obligation, being delivery and sale of goods, is discharged on delivery/collection of the products by the customer at which point control of the goods has transferred.  Customer discounts and rebates comprise variable consideration and are accounted for as a reduction in the transaction price, based on the most likely outcome basis.

 

The most likely outcome model is used due to the simple nature of rebate agreements and the limited number of possible outcomes - principally whether or not the customer achieved the required level of purchases.

 

1.16        Financing income and expenses

 

Financing expenses comprise interest payable, finance charges on put option liabilities and finance leases recognised in the statement of profit and loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the statement of profit and loss (see foreign currency accounting policy).  Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of the cost of that asset. Financing income comprise interest receivable on funds invested, finance income on the put option liability, and net foreign exchange gains.

 

Interest income and interest payable is recognised in the statement of profit and loss as it accrues, using the effective interest method. Dividend income is recognised in the statement of profit and loss on the date the entity's right to receive payments is established.  Foreign currency gains and losses are reported on a net basis.

 

1.17        Taxation

Current tax

 

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the statement of profit and loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax

 

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

 

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax is recognised on an undiscounted basis.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

 

1.18        Leases


The Group adopts the requirements of IFRS 16 as follows:

 

The Group has lease arrangements in place for properties, vehicles, fork lift trucks and other equipment including plant and machinery.  At the inception of the lease agreement, the Group assesses whether the contract conveys the right to control the use of an identified assets for a certain period of time and whether it obtains substantially all of the economic benefits from the use of that assets in exchange for consideration. The Group recognises a lease liability and a corresponding right-of-use asset with respect to all such lease arrangements.

 

A right-of-use asset is capitalised on the balance sheet at cost, which comprises the present value of the future lease payments at inception of the lease.

 

Right-of-use assets are depreciated using a straight line method over the shorter of the life of the asset or the lease term and are assessed in accordance with IAS 36 'Impairment of Assets' to determine whether the asset is impaired.

 

The lease liability is initially measured at the present value of the lease payments as outlined above for the right-of-use asset and is increased by the interest cost on the lease liability, subsequently reduced by the lease payments made. Lease liabilities are classified between current and non-current on the balance sheet.

 

An assessment of the discount rate used in the present value calculation for new lease additions is performed at inception of the lease to ensure it reflects the Group's incremental borrowing rate. The selected rate is supported by quotes from third parties for financing the asset and the Groups' weighted average cost of capital.  The Directors believe that no reasonable change in this accounting estimate would cause the carrying value of leases to be materially misstated.

 

The Group has relied upon the exemption under IFRS 16 to exclude the impact of low-value leases and leases that are short-term in nature (defined as leases with a term of 12 months or less). Costs on these leases are recognised on a straight-line basis as an operating expense within the statement of profit and loss. All other leases are accounted for in accordance with this policy as determined by IFRS 16.

 

1.19        Government grants

The Group has elected to present grants related to income separately under the heading "Other income" within the statement of profit and loss. This income represents the funding provided by the Government in relation to Additional Restrictions Grant and COVID-19 Additional Relief Fund Schemes. The income in the prior year represented the funding provided by the Government under the Coronavirus Job Retention Scheme.

 

This funding is applicable on furlough of employees subject to Government criteria which has been met in each operating entity. The Directors do not consider there to be a material risk that any funding received will be repayable.

 

1.20        Exceptional items

Exceptional items are defined as income or expenses that arise from events or transactions that are clearly distinct from the normal activities of the Group and therefore are not expected to recur frequently or regularly.

 

Such items have been separately presented to enable a better understanding of the Group's operating performance. Details of exceptional income relating to the CPO in the prior year is presented in note 4 and exceptional expenses are presented in note 5.

 

1.21        Investments

Investments in subsidiaries are carried at cost less impairment in the parent Company financial statements.

 

2              Acquisitions

Acquisitions in the year ended 31 October 2022

M.J. Baker Foodservice Limited

On 10 February 2022, the Group acquired the entire share capital of M.J. Baker Foodservice Limited for a total consideration of £24,515,000.  The purchase consideration paid was £23,297,000 resulting from a reduction in loan balances due to M.J. Baker from its previous shareholder of £1,218,000.  The resulting goodwill of £13,093,000 was capitalised and is subject to annual impairment testing under IAS 36.  The acquisition had the following effect on the Group's assets and liabilities:


Fair value


£000

Non-current assets


Tangible assets

2,853

Right-of-use assets

967

Investments

25



Current assets


Inventories

1,635

Trade and other receivables

1,976

Cash and cash equivalents

6,383


             

Total assets

13,839


             

Current liabilities


Lease liabilities

(412)

Trade and other payables

(2,016)

Corporation tax

(182)



Non-current liabilities


Lease liabilities

(572)

Deferred tax

(453)


             

Total liabilities

(3,635)


             

Net identifiable assets

10,204

Goodwill

13,093


             

Total net assets acquired

23,297


             



Headline purchase consideration

24,515

Liabilities assumed

(1,218)


             

Purchase consideration paid

23,297


             

The business was acquired as part of the Group's growth strategy. Significant control was obtained through the acquisition of 100% of the share capital.

No material intangible assets were identified. Goodwill represents buying and other operating synergies including but not limited to access to new geographic markets.

Following acquisition, the business contributed revenue of £18,288,000, operating profit of £2,205,000 and profit after tax of £1,747,000 to the Group for the year ended 31 October 2022.

If the business had been acquired at the start of the Group's financial year, being 1 November 2021, it would have added £24,430,000 to Group revenue and £2,704,000 to Group operating profit for the year ended 31 October 2022.

The total consideration paid in the year was £23,297,000. Net of cash and cash equivalents of £6,383,000 the net cash outflow in the year was £16,914,000.

On acquisition an assessment was made regarding the fair value of assets and liabilities, which identified tangible assets, including two freehold properties that required a fair valuation adjustment. The result of an independent assessment of the freehold properties was an uplift in value of £1,811,000 to the net book value held in M.J. Baker's accounts and is reflected in the above table of acquired assets and liabilities. This fair valuation has created a temporary difference with the tax base of the asset resulting in the recognition of a deferred tax liability of £453,000. This reflects a 25% UK corporation tax rate based on the expected timing of reversal of this timing difference. No further fair valuation adjustments were identified.

3              Segmental information

The following analysis by segment is presented in accordance with IFRS 8 on the basis of those segments whose operating results are regularly reviewed by the Board (the Chief Operating Decision Maker as defined by IFRS 8) to assess performance and make strategic decisions about allocation of resources

The Group has the following operating segments defined by products and their associated margins:

·      Ambient: Provides delivered wholesale of ambient food, drink and tobacco products;

·      Frozen & Chilled: Provides delivered wholesale of frozen and chilled food products; and

·      Foodservice: Provides delivered wholesale of alcohol, frozen and chilled food to trade customers.

Corporate contains the central functions that are not devolved to the business units

These segments offer different products and services to different customers types, attracting different margins. They each have separate management teams.

The segments share a commonality in service being delivered wholesale of food and drink products. The Group therefore benefits from a range of expertise, cross selling opportunities and operational synergies in order to run each segment as competitively as possible.

The Group's forward look strategy is to provide an enhanced customer service by making available the wider Group product range to its existing customer base. As a result, the Board will be assessing the segments based on customer type going forward with the customers in the Ambient and Frozen & Chilled divisions operating in the retail and wholesale channel.

The following analysis shows how this development will be monitored in future periods whilst demonstrating the link to the existing segemental information.

The presentation convention adopted in these financial statements is to show the three operating segments as this is how the Board of Directors has assessed performance during the year.

 

Each segment is measured on its EBITDA, adjusted for acquisition costs and reconstruction costs, and internal management reports are reviewed monthly by the Board.  This performance measure is deemed the most relevant by the Board to evaluate the results of the segments relative to entities operating in the same industry.

 

 

 

 

Ambient

Frozen &

Chilled

Total retail & wholesale

Foodservice

Corporate

Total


£000

£000

 

£000

£000

£000

FY22

 






Revenue

185,132

193,810

378,942

124,146

-

503,088

Inter-segment revenue

13,813

2,551

16,364

572

-

16,936


             

             

             

             

             

             

Segment revenue

198,945

196,361

395,306

124,718

-

520,024







             

Adjusted EBITDA*

8,382

10,382

18,764

11,263

(550)

29,477

Amortisation of intangibles

-

(71)

(71)

(6)

(22)

(99)

Depreciation

(1,584)

(3,911)

(5,495)

(2,345)

(57)

(7,897)

Adjusted operating profit*

6,798

6,400

13,198

8,912

(629)

21,481

Acquisition expense

-

-

-

-

(148)

(148)

Compensation for post combination services

-

(95)

(95)

-

-

(95)

Share based payment expense

-

-

-

-

(863)

(863)

Interest expense

(736)

(1,057)

(1,793)

(520)

(221)

(2,534)


             

             

             

             

             

             

Segment profit/(loss) before tax

6,062

5,248

11,310

8,392

(1,861)

17,841


             

             

             

             

             

             

Segment assets

43,029

52,441

95,470

39,106

45,082

179,658

Segment liabilities

(33,501)

(45,218)

(78,719)

(27,886)

(1,166)

(107,771)


             

             

             

             

             

             

Segment net assets

9,528

7,223

16,751

11,220

43,916

71,887


             

             

             

             

             

             



Within Corporate segment assets is £44,342,000 of goodwill on consolidation. This is allocated to the trading segments as follows (see note 11 for further information).

Goodwill by segment

13,516

12,499

26,015

18,327

-

44,342

 

*For more information on alternative performance measures please see the glossary at the end of the announcement.

 

 

Ambient

Frozen &

Chilled

Total retail & wholesale

Foodservice

Corporate

Total

 

FY21

£000

£000

 

£000

£000

£000

Revenue

155,712

163,895

319,607

61,087

-

380,694

Inter-segment revenue

12,340

-

12,340

226

-

12,566


             

             

             

             

             

             

Segment revenue

168,052

163,895

331,947

61,313

-

393,260







             

Adjusted EBITDA*

4,347

9,275

13,622

2,000

(569)

15,053

Amortisation of intangibles

-

(144)

(144)

(6)

-

(150)

Depreciation

(2,106)

(3,910)

(6,016)

(1,801)

-

(7,817)

Adjusted operating profit*

2,241

5,221

7,462

193

(569)

7,086

CPO income

-

2,255

2,255

-

-

2,255

Restructuring costs

(53)

(41)

(94)

(42)

(1,121)

(1,257)

Acquisition expense

-

(19)

(19)

-

(162)

(181)

Compensation for post combination services

-

(1,278)

(1,278)

-

-

(1,278)

Share based payment expense

-

-

-

-

(227)

(227)

Interest expense

(564)

(1,286)

(1,850)

(288)

(2,136)

(4,274)


             

             

             

             

             

             

Segment profit/(loss) before tax

1,624

4,852

6,476

(137)

(4,215)

2,124


             

             

             

             

             

             

Segment assets

38,790

49,979

88,769

22,888

37,160

148,817

Segment liabilities

(28,559)

(41,323)

(69,882)

(16,508)

(843)

(87,233)


             

             

             

             

             

             

Segment net assets

10,231

8,656

18,887

6,380

36,317

61,584


             

             

             

             

             

             

Within Corporate segment assets is £31,249,000 of goodwill on consolidation. This is allocated to the trading segments as follows (see note 11 for further information).

 

Goodwill by segment

13,516

12,499

26,015

5,234

-

31,249

*For more information on alternative performance measures please see the glossary at the end of the announcement.

 

An analysis of revenue by destination is given below:


Geographical information:



 

FY22

FY21



 

£000

£000



 

 


United Kingdom


 

497,842

373,690

Overseas


 

5,246

7,004



 

             

             

Group revenue


 

503,088

380,694



 

             

             

 No one customer accounts for more than 9% (FY21: 6%) of Group revenue.

 

4              Other operating income/(expense)



 

FY22

FY21



 

£000

£000



 

 


Net gain on disposal of fixed assets


 

164

55

Net gain/(loss) on foreign exchange


 

33

(2)

Net gain on remeasurement of right-of-use assets and lease liabilities

 

8

124

CPO income


 

-

2,255

Grant income


 

169

2,339



 

             

             



 

374

4,771



 

             

             


Grant income in the year ended 31 October 2022 comprised of amounts received from the Government with respect to the Additional Restrictions Grant and COVID-19 Additional Relief Fund Schemes, which totalled £169,000.  Grant income in the year ended 31 October 2021 comprised of amounts received from the Government with respect to the Coronavirus Job Retention Scheme which totalled £2,339,000.

 

CPO income is in relation to the compulsory purchase order of a property lease in Luton enacted by the Local Authority in the year ended October 2021. It was been classified as exceptional income in the statement of profit and loss as it is not income relating to the Group's principal activities and is not expected to recur in the ordinary course of business.

 

5              Expenses

Included in profit/loss are the following:



 

FY22

FY21



 

£000

£000



 

 


Depreciation of tangible assets:


 

 


                Owned


 

1,946

1,975

                Right-of-use assets


 

5,951

5,842

Amortisation of intangible assets


 

99

150

Expense relating to short term and low value assets


 

1,255

715

Impairment loss on trade receivables


 

871

1,288

Dilapidation provision


 

48

570



 

             

             

 

The Group incurred a number of expenses not relating to the principal trading activities of the Group as follows:

 



 

FY22

FY21

Exceptional expenses


 

£000

£000



 

 


Restructuring expenses


 

-

1,257

Acquisition expenses


 

148

181

Compensation for post combination services


 

95

1,278



 

             

             

Total exceptional expenses


 

243

2,716

Share based payment expense


 

863

227



 

             

             

Total exceptional expenses and share based payments


 

1,106

2,943



 

             

             

The Board consider the exceptional items to be non-recurring in nature.  Both exceptional and share based payment expenses are adjusted for in the statement of profit and loss to arrive at the adjusted EBITDA.  This measure provides the Board with a better understanding of the Group's operating performance.

 

Restructuring expenses in the year ended 31 October 2021 include transaction fees in relation to the IPO of £1,121,000. Other incurred expenses relate to the restructuring of the Group's operations.

 

Acquisition expenses in both year include the legal and professional fees connected to the acquisition of M.J. Baker Foodservice Limited completed on 10 February 2022.

 

Compensation for post combination services relates to the value of a liability in connection the acquisition of the remaining share capital of Central Supplies (Brierley Hill) Ltd which is subject to an agreement to acquire it within two years of the acquisition.

 

Share based payments relate to the MIP and are non cash expenses. For further information see note 23.

 

Auditor's remuneration


 

FY21

FY21

 


 

£000

£000



 

 


Audit of these financial statements


 

45

6

Amounts receivable by auditors and their associates in respect of:

 

 


Audit of financial statements of subsidiaries of the Company

 

290

380

Taxation compliance services


 

-

44

Tax advisory services


 

-

109

Corporate finance services


 

-

218

Other assurance services


 

5

-

 

 


 

             

             

 

The current year audit and non-audit fees were paid to Grant Thornton UK LLP. The prior year audit and non-audit fees were paid to KPMG LLP. In addition to the fee disclosed above for the current year, direct disbursements were paid to Grant Thornton UK LLP of £11,000.

 

6              Staff numbers and costs

The average number of persons employed by the Group (including Directors) during the year is analysed as follows:

 



 

FY22

FY21



 

 


Management and administration


 

193

176

Sales


 

212

194

Warehouse


 

436

338

Distribution


 

395

371

Directors


 

3

3



 

             

             



 

1,239

1,082



 

             

             

The aggregate payroll costs of these persons were as follows:



 

FY22

FY21



 

£000

£000

Wages and salaries


 

37,575

29,259

Social security costs


 

3,642

2,673

Other pension costs (note 22)


 

721

769



 

             

             



 

41,938

32,701



 

             

             

Staff costs accruing in the Company total £863,000 (FY21: £227,000) in relation to the Management Incentive plan, see note 23 for further details.

7              Directors' remuneration

Included within staff costs (note 6) are the following amounts in respect of Directors' emoluments



 

FY22

FY21



 

£000

£000



 

 


Directors' emoluments


 

922

636

Company contribution to personal pension scheme


 

20

32



 

             

             



 

942

668



 

             

             

 

Retirement benefits are accruing to three Directors under money purchase pension schemes (FY21: two).

Amounts accrued under the share based payment plan for two of the Directors was £863,000 (FY21: £227,000).

A detailed breakdown of the Director's total emoluments is included within the Remuneration Committee report.

 



 

FY22

FY21

Highest paid Director


 

£000

£000



 

 


Directors' emoluments


 

357

312

Company contribution to personal pension scheme


 

8

19



 

             

             



 

365

331



 

             

             

8              Finance income and expense



FY22

FY21



£000

£000

£000

£000



 

 



Interest payable and similar charges - cash items


 

 



Interest payable on bank loans and invoice discount facilities

1,105

 

1,327


Finance charges payable in respect of leases


1,427

 

1,239


Other finance interest payable on investor loans


-

 

551


Other finance charges payable on debenture loans


-

 

1,936


Other interest


2

 

40




             

 

             

             



 

2,534


5,093

Interest payable and similar charges -non-cash items

 

 



Other finance charges payable on debenture loans


-

 

4,591


Fair value movement on financial liabilities (note 26)


-

 

(5,410)




             

 

             




 

-


(819)



 

             


             

  


 

2,534


4,274




             


             

Other finance charges on debenture loans comprise the amortisation of transaction costs in respect of the Pricoa Capital Group.  A significant proportion of the interest payable and similar expenses in the year ended 31 October 2021 arose from amortised transaction costs in respect to investor loans and liabilities and movements in the fair value of the financial liabilities which had no cash impact in that year. The above analysis has been presented to clearly identify which elements have a cash impact.

 

9              Taxation



FY22

FY21



£000

£000

£000

£000

UK corporation tax


 

 



Current tax charge on income for the year


3,559

 

620


Adjustment in respect of prior periods


(45)

 

187




             

             

             

             

Total current tax


 

3,514


807

 


 

 



Deferred tax (see note 21)


 

 



Origination/(reversal) of timing differences


(109)

 

281


Adjustment in respect of prior periods


96

 

4


Effect of changes in tax rate


-

 

107


Share based payment


-

 

(57)


IFRS 16 timing differences


-

 

(114)




             

 

             


Total deferred tax (credit) / charge


 

(13)


221



 

             


             

Tax charge on profit on ordinary activities


 

3,501


1,028



 

             


             

 

 

 



 

FY22 

FY21 



 

£000

£000



 

 


Current tax reconciliation


 

 


Profit on ordinary activities after tax


 

14,340

1,096

Tax charge


 

3,501

1,028



 

             

             

Profit on ordinary activities before tax


 

17,841

2,124

Tax using the UK corporation tax of 19% (FY21: 19%)


 

3,390

404

 

Effect of:


 

 


Expenses not deductible for tax purposes


 

250

1,571

Income not taxable


 

(26)

(1,109)

Adjustments in respect of prior periods


 

(45)

187

Change in tax rate on deferred tax balances


 

96

111

Share based payment


 

(164)

(57)

Other tax adjustments


 

-

(79)



 

             

             

Total current tax charge


 

3,501

1,028



 

             

             

 

An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021.  This will increase the Group's future current tax charge accordingly. The deferred tax liability at 31 October 2022 has been calculated based on these rates, reflecting the expected timing of reversal of the related timing differences (FY21: 25%). 

10           Earnings per share and dividends

Basic earnings per share

Basic earnings per share for the year ended 31 October 2022, and the previous year ended 31 October 2021 is calculated by dividing profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during each period as calculated below.

Diluted earnings per share

Diluted earnings per share for the year ended 31 October 2022, and previous year ended 31 October 2021 is calculated by dividing profit attributable to ordinary shareholders by the weighted average number of ordinary shares, adjusted for the effects of all dilutive potential ordinary shares, in this case issued equity warrants, outstanding during each period as calculated below.

 

Profit attributable to ordinary shareholders



 

FY22

FY21



 

£000

£000



 

 


Profit attributable to all shareholders


 

14,340

1,096



 

£

£

Basic earnings per ordinary share


 

0.20

0.02

Diluted earnings per ordinary share


 

0.20

0.02



 

             

             

 

 

Weighted average number of ordinary shares



 

FY22

FY21 



 

Number

Number



 

 


Weighted average number of ordinary shares (basic) during the year

70,033,033

46,036,531



 

             

            

Weighted average number of ordinary shares (diluted) during the year

70,033,033

46,055,901

 

The following Alternative Performance Measure ("APM") for earnings per share is not defined or specified under the requirements of International Financial Reporting Standards. The Board believes that this APM provides the readers with important additional information regarding the earnings per share performance of the Group:

 

Basic underlying earnings per share

 

Profit attributable to the equity holders of the Group prior to exceptional items and the fair value movement of the put option liability measured through the consolidated statement of profit and loss, divided by the weighted average number of ordinary shares during the financial year.

 



 

FY22

FY21



 

£000

£000



 

 


Profit attributable to all shareholders


 

14,340

1,096

Exceptional and share based payment expenses net of tax*


 

1,106

2,819

CPO income net of tax


 

-

(1,827)

Interest and finance charges payable on loans and debenture notes


 

-

7,078

Fair value adjustments on the put option liability


 

-

(5,410)



 

             

             

Underlying profit attributable to ordinary shareholders


 

15,466

3,756



 

£

£

Basic underlying earnings per ordinary share


 

0.22

0.08



 

             

             


*Exceptional expenses include restructuring fees, acquisition costs and compensation for post combination services which are deemed to be non-recurring.  For full detail of exceptional and share based payment expenses see note 5. For further details on exceptional income relating to the CPO see note 4.

 

Dividends

During the year the Group paid dividends of £4,900,000 (FY21:£1,575,000) to its equity shareholders. This represents a total payment of 7.00p per share being the final dividend for the year ended 31 October 2021 of 4.50p per share, plus the interim dividend for the year ended 31 October 2022 of 2.50p per share.

 

The Board is recommending a final dividend of 6.75p per share for the year ended 31 October 2022 subject to approval at the AGM. No liability in this respect is recognised in the consolidated financial statements. No income tax consequences are expected to arise as a result of this transaction at the Company level.

 

11           Intangible assets

Group

 

Intangible assets

Goodwill

Total

 

 

£000

£000

£000






Cost





Balance at 1 November 2020


556

36,761

37,317

Additions


169

-

169



             

             

             

Balance at 31 October 2021

 

725

36,761

37,486

 


             

             

             

Amortisation





Balance at 1 November 2020


144

5,512

5,656

Charge in year


150

-

150



             

             

             

Balance at 31 October 2021

 

294

5,512

5,806

 


             

             

             

Net book value





At 31 October 2021

 

431

31,249

31,680

 


             

             

             

At 31 October 2020


412

31,249

31,661



             

             

             

Group


Intangible assets

Goodwill

Total



£000

£000

£000






Cost





Balance at 1 November 2021


725

36,761

37,486

Additions


405

13,093

13,498



             

             

             

Balance at 31 October 2022

 

1,130

49,854

50,984



             

             

             

Amortisation





Balance at 1 November 2021


294

5,512

5,806

Charge in year


99

-

99



             

             

             

Balance at 31 October 2022

 

393

5,512

5,905

 


             

             

             

Net book value





At 31 October 2022

 

737

44,342

45,079

 


             

             

             

At 31 October 2021


431

31,249

31,680



             

             

             

 

Goodwill arising on business combinations is assessed seperately under IFRS 3 in the period of acquisition. Each acquisition provides the Group with an additional cash-generating unit ("CGU").

 

The Group allocates goodwill to groups of CGU's based on their operating segment as set out in note 3 as they leverage and share from each others operational infrastructure, centrally negotiate supplier terms and cross-sell products to the Group's wider customer base. The operating segments therefore represent the lowest level at which goodwill is monitored by the Board.

 

Goodwill has been assessed as follows:

 




2022

2021




£000

£000




 


Ambient



13,516

13,516

Frozen & Chilled



12,499

12,499

Foodservice



18,327

5,234




               

               




44,342

31,249




             

             

 

Under IAS 36 the Group is required to test goodwill for impairment at least annually or more frequently if indicators of impairment exist.

 

The recoverable amount of a CGU has been calculated with reference to its value in use, using financial forecasts approved by the Board covering a 4 year period with the final period taken into perpetuity.

 

The key assumptions of this calculation are shown below:

 



2022

2021

Period forecasts are based on:


4 years

4 years

Growth rate applied:


2%

0%

Discount rate applied:


10.59%

8.32%

 

Impairment testing at 31 October 2022 has considered a further impact inflation and its potential impact on demand and overheads the CGU's. The Board expect product and overhead inflation to reduce from current levels. Having operated through the trading restrictions of previous financial periods, the Directors believe there is no reasonable prospective a reduction in demand would result in a material impairment.

 

A 2% growth rate assumption has been made on the terminal value in the impairment calculation. The Group has demonstrated year on year growth outside of COVID-19 impacted financial periods and growth in consumer spending on food and drink was 2.5% in 2019, being the last period unaffected by COVID-19. There is a demonstrable link between consumer spending on food and drink and GDP trends.

 

The increase in the discount rate follows the increase in risk free and market risk rate for UK equities which have increased in reaction to the ongoing worldwide economic issues associated with the war in Ukraine and post COVID-19 economic recessions.

 

Other than changes to the discount or growth rate the key assumption in the forecast model is the gross margin generated by each CGU.  The sensitivities vary by CGU but no reasonable sensitivity would result in impairment on any CGU.

 

Each of the CGU's has significant headroom under the annual impairment review.  The Directors believe that no reasonable change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.

 

12           Tangible assets

Group

Freehold

property

Leasehold improvements

Fixtures and Fittings

Motor vehicles

Plant and machinery

Total


£000

£000

£000

£000

£000

£000

Cost







Balance at 1 November 2020

2,894

2,031

4,904

1,602

6,202

17,633

Additions

-

200

719

299

1,510

2,728

Disposals

-

-

-

(467)

(71)

(538)

Transferred from right-of-use assets

-

-

-

749

-

749

Transferred between classifications

28

(28)

(144)

(21)

165

-


             

             

             

             

             

             

Balance at 31 October 2021

2,922

2,203

5,479

2,162

7,806

20,572


             

             

             

             

             

             

Depreciation







Balance at 1 November 2020

50

731

3,732

260

3,550

8,323

Charge in year

43

127

466

639

700

1,975

Disposals

-

-

-

(431)

(55)

(486)

Transferred from right-of-use assets

-

-

-

656

-

656

Transferred between classifications

-

-

(120)

(16)

136

-


             

             

             

             

             

             

Balance at 31 October 2021

93

858

4,078

1,108

4,331

10,468


             

             

             

             

             

             

Net book value







At 31 October 2021

2,829

1,345

1,401

1,054

3,475

10,104


             

             

             

             

             

             

At 31 October 2020

2,844

1,300

1,172

1,342

2,652

9,310


             

             

             

             

             

             

Group

 

Freehold

property

Leasehold improvements

Fixtures and Fittings

Motor vehicles

Plant and machinery

Total

 

£000

£000

£000

£000

£000

£000

Cost







Balance at 1 November 2021

2,922

2,203

5,479

2,162

7,806

20,572

Additions

2

43

697

555

728

2,025

Disposals

-

-

-

(1,161)

(12)

(1,173)

Transferred from right-of-use assets

-

-

-

705

-

705

Acquired through business combinations

2,801

-

2

-

50

2,853


             

             

            

             

             

             

Balance at 31 October 2022

5,725

2,246

6,178

2,261

8,572

24,982


             

             

             

             

             

             

Depreciation







Balance at 1 November 2021

93

858

4,078

1,108

4,331

10,468

Charge in year

119

156

466

505

700

1,946

Disposals

-

-

-

(1,029)

(11)

(1,040)

Transferred from right-of-use assets

-

-

-

571

-

571


             

             

             

             

             

             

Balance at 31 October 2022

212

1,014

4,544

1,155

5,020

11,945


             

             

             

             

             

             

Net book value







At 31 October 2022

5.513

1,232

1,634

1,106

3,552

13,037


             

             

             

             

             

             

At 31 October 2021

2.829

1,345

1,401

1,054

3,475

10,104


             

             

             

             

             

             









13           Right-of-use assets


Group

 



Leasehold property

Motor vehicles

Plant and machinery

Total




£000

£000

£000

£000

Cost







Balance as at 1 November 2020



14,598

13,635

1,498

29,731

Additions



9,414

1,158

308

10,880

Transferred to tangible assets



-

(749)

-

(749)

Disposals



(1,886)

(470)

(105)

(2,461)

Loss on remeasurement



(2,212)

(130)

(83)

(2,425)




             

             

             

             

Balance at 31 October 2021

 

 

19,914

13,444

1,618

34,976




             

             

             

             

Depreciation







Balance as at 1 November 2020



3,363

5,179

589

9,131

Charge in year



2,479

2,990

373

5,842

Transferred to tangible assets



-

(656)

-

(656)

Disposals



(1,886)

(467)

(105)

(2,458)

Loss on remeasurement



-

(57)

(14)

(71)




             

             

             

             

Balance at 31 October 2021

 

 

3,956

6,989

843

11,788




             

             

             

             

Net book value







At 31 October 2021

 

 

15,958

6,455

775

23,188




             

             

             

             

At 31 October 2020



11,235

8,456

909

20,600




             

             

             

             

 

 

Group



Leasehold property

Motor vehicles

Plant and machinery

Total




£000

£000

£000

£000

Cost







Balance as at 1 November 2021



19,914

13,444

1,618

34,976

Additions



4,670

3,105

950

8,725

Transferred to tangible assets



-

(705)

-

(705)

Disposals



(395)

(301)

(77)

(773)

Gain/(loss) on remeasurement



23

(352)

(14)

(343)

Acquired through business combinations


-

934

33

967




             

             

             

             

Balance at 31 October 2022

 

 

24,212

16,125

2,510

42,847




             

             

             

             

Depreciation







Balance as at 1 November 2021



3,956

6,989

843

11,788

Charge in year



2,111

3,450

390

5,951

Transferred to tangible assets



-

(571)

-

(571)

Disposals



(395)

(301)

(77)

(773)




             

             

             

             

Balance at 31 October 2022

 

 

5,672

9,567

1,156

16,395




             

             

             

             

Net book value







At 31 October 2022

 

 

18,540

6,558

1,354

26,452




             

             

             

             

At 31 October 2021



15,958

6,455

775

23,188




             

             

             

             








14           Investments




Unlisted

investments 

Unlisted

investments 




2022

2021




£000

£000

Group



 


Cost and net book value



 


At beginning of year



20

20

Acquired through business combinations



25

-

Disposals



(10)

-




             

             

At end of year



35

20

 

 



             

             

 



 

Shares in Group undertakings 

Shares in

Group undertakings



 

2022

2021



 

£000

£000

Company


 

 


Cost and net book value


 

 




 

             

             

At beginning and end of year


 

12,993

12,993

 

 


 

             

             

 

The Company has the following investments in subsidiaries:


Country of

incorporation

Class of shares held

Ownership

2022

Ownership

2021

Subsidiary undertaking

 

 

 

 

Kitwave Investments Limited

United Kingdom

Ordinary

100%

100%

Kitwave One Limited*

United Kingdom

Ordinary

100%

100%

Kitwave Limited*

United Kingdom

Ordinary

100%

100%

M&M Value Limited*

United Kingdom

Ordinary

100%

100%

Turner & Wrights Limited*

United Kingdom

Ordinary

100%

100%

FW Bishop & Son Limited*

United Kingdom

Ordinary

100%

100%

Westone Wholesale Limited*

United Kingdom

Ordinary

100%

100%

Automatic Retailing (Northern) Limited*

United Kingdom

Ordinary

100%

100%

Andersons (Wholesale) Limited*

United Kingdom

Ordinary

100%

100%

Teatime Tasties Limited*

United Kingdom

Ordinary

100%

100%

TG Foods Limited*

United Kingdom

Ordinary

100%

100%

Eden Farm Limited*

United Kingdom

Ordinary

100%

100%

Squirrels UK Limited*

United Kingdom

Ordinary

100%

100%

Thurston's Food's Limited*

United Kingdom

Ordinary

100%

100%

Angelbell Limited*

United Kingdom

Ordinary

100%

100%

David Miller Frozen Foods Limited*

United Kingdom

Ordinary

100%

100%

Phoenix Fine Foods Limited*

United Kingdom

Ordinary

100%

100%

MAS Frozen Foods Limited*

United Kingdom

Ordinary

100%

100%

Supplytech Limited*

United Kingdom

Ordinary

100%

100%

HB Clark Holdings Limited*

United Kingdom

Ordinary

100%

100%

HB Clark & Co (Successors) Limited*

United Kingdom

Ordinary

100%

100%

Churnet Valley Drinks Limited*

United Kingdom

Ordinary

100%

100%

Clarks Fine Wines Limited*

United Kingdom

Ordinary

100%

100%

FAM Soft Drinks Limited*

United Kingdom

Ordinary

100%

100%

Thorne Licence Wholesale Limited*

United Kingdom

Ordinary

100%

100%

Alpine Fine Foods Limited*

United Kingdom

Ordinary

100%

100%

Central Supplies (Brierley Hill) Ltd*

United Kingdom

Ordinary

95%

95%

M.J. Baker Foodservice Limited*

United Kingdom

Ordinary

100%

100%

 

*Held indirectly through Kitwave Investments Limited and its subsidiaries

 

The registered office of all the above companies is: Unit 3, Narvik Way, Tyne Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ

 

15           Investment property




2022

2021

Group



£000

£000

Cost and net book value



 


At beginning of year



-

175

Disposal



-

(175)




             

             

At end of year



-

-

 



             

             

The investment property was valued at £175,000 in 2018 by an external, independent valuer. The property was disposed of in the year ended 31 October 2021 to an unconnected third party.

 

16           Inventories



Group

Company



2022

2021

2022

2021



£000

£000

£000

£000

Goods for resale


31,846

26,043

-

-



             

             

             

             

 


31,846

26,043

-

-



             

             

             

             

Goods for resale recognised as cost of sales in the year amount to £400,460,000 (FY21: £312,109,000).

 

17           Trade and other receivables



Group

Company



2022

2021

2022

2021



£000

£000

 


Trade receivables


47,206

44,365

-

-

Amounts owed by Group undertakings


-

-

61,429

63,074

Other debtors


1,510

1,881

-

-

Prepayments and accrued income


8,982

6,568

106

7



             

             

             

             

 


57,698

52,814

61,535

63,081

 


             

             

             

             

Due within one year


56,926

51,697

61,535

63,081

Due after more than one year


772

1,117

-

-



             

             

             

             



57,698

52,814

61,535

63,081

 


             

             

             

             

£23,946,000 (2021: £17,200,000) of Group trade receivables are used as security against invoice discounting advances (note 20).

 

18           Cash and cash equivalents



Group

Company



2022

2021

2022

2021



£000

£000

£000

£000

Cash at bank and in hand


5,511

4,968

45

3,371



             

             

             

             

Cash and cash equivalents per cashflow statement


5,511

4,968

45

3,371



             

             

             

             

 

19           Trade and other payables: amounts falling due within one year



Group

Company



2022

2021

2022

2021



£000

£000

£000

£000

Trade payables


43,836

36,093

-

-

Other creditors


4,478

3,563

-

-

Accruals


9,577

7,676

39

173

Amounts owed to Group undertakings


-

-

22

54



             

             

             

             

 


57,891

47,332

61

227

 

 


             

             

             

             

 

20           Interest-bearing loans and borrowings

This note provides information about the contractual terms of the Group's loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note 26.



Group

Company



2022

2021

2022

2021

Non current liabilities


£000

£000

£000

£000

Lease liabilities


23,240

19,917

-

-



             

             

             

             

 


23,240

19,917

-

-

 


             

             

             

             



Group

Company



2021

2020

2021

2020

 


£000

£000

£000

£000

Current liabilities


 


 


Lease liabilities


5,509

4,719

-

-

Invoice discounting advances


20,354

14,620

-

-



             

             

             

             

 


25,863

19,339

-

-

 


             

             

             

             

 

 

 


Group

Company

Lease liabilities


2022

2021

2022

2021

Lease liabilities payable as follows:


£000

£000

£000

£000

Within one year


5,509

4,719

-

-

In the second to fifth years


10,396

9,941

-

-

Over five years


12,844

9,976

-

-



             

             

             

             

 


28,749

24,636

-

-

 


             

             

             

             

 

 

 

Terms and debt repayment schedule


 

 

 

2022

2022

2021

2021


Currency

Nominal interest rate

Year of maturity

Face

value

Carrying value

Face

value

Carrying value


 

 

 

£000

£000

£000

£000

Lease liabilities

Sterling

3.50% - 9.00%

2022-2040

37,686

28,749

31,571

24,636

Invoice discounting advances

Sterling

2.00% + Base

2024

20,354

20,354

14,620

14,620





             

             

             

             





58,040

49,103

46,191

39,256





             

             

             

             

 

Changes in liabilities from financing activities

 

 Loans and

borrowings

 Lease liabilities

 

Total


 

£000

£000

£000


 

 

 

 

Total debt at 31 October 2020

 

66,170

21,402

87,572

 





Changes from financing cash flows





Repayment of borrowings


(60,790)

-

(60,790)

Payment of lease liabilities


-

(5,068)

(5,068)

Interest paid


(3,854)

(1,239)

(5,093)

 


             

             

             

Total changes from financing cash flows


(64,644)

(6,307)

(70,951)

 


             

             

             

Other changes





New borrowing


10,059

10,784

20,843

Interest expense


8,445

1,239

9,684

Release of the put option liability


(5,410)

-

(5,410)

Remeasurement of lease liability


-

(2,482)

(2,482)

 


             

             

             

Total other changes


13,094

9,541

22,635



             

             

             

Total debt at 31 October 2021

 

14,620

24,636

39,256

 

 

 

 

 

Changes from financing cash flows

 



 

Payment of lease liabilities

 

-

(5,068)

(5,068)

Interest paid

 

(1,105)

(1,429)

(2,534)

 


             

             

             

Total changes from financing cash flows

 

(1,105)

(6,497)

(7,602)

 


             

             

             

Other changes

 

 

 

 

New borrowing

 

5,734

8,548

14,282

Interest expense

 

1,105

1,429

2,534

Remeasurement of lease liability

 

-

(351)

 

(351)

Added through business combinations

 

-

984

 

984

 


             

             

             

Total other changes

 

6,839

10,610

17,449



             

             

             

Total debt at 31 October 2022

 

20,354

28,749

49,103



             

             

             

 

All borrowings are denominated in Sterling.


Bank trade loans are secured by means of debenture and cross guarantees over the assets of all Group undertakings and carry interest at a margin of 2.75%. These are generally repayable within 35 days of drawdown and form an integral part of the Group's day to day short term cash management. This is undrawn at the year end (2021:£nil).
Receipts and payments from trade loans are disclosed on a net basis in the cash flow statement under IAS 7 22(b) on the basis they are short maturity.


The invoice discounting advances are secured against trade receivables (note 17).  These are repayable within 90 days of the date of the invoice and carry interest at a margin of 2.00%.  This was initially a 2 year fixed facility which was extended post year ended 31 October 2022 to expire December 2025.

Under this arrangement trade customers remit cash directly to the Group companies and the Group companies use the trade receivables as security to draw down funds from finance providers.  Cash receipts and cash payments with the finance provider are disclosed on a net basis in the cashflow statement as allowed under IAS 7 22(b) on the basis that they are short maturity.

The Bank trade loans and invoice discounting advances rank pari passu and without preference between them in priority of payment.

 

21           Deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Group


Assets

Liabilities



2022

2021

2022

2021

 


£000

£000

£000

£000

Property, plant and equipment


322

429

(1,389)

(906)

Tax value of loss carry forwards


-

31

-

-

Share based payment expense


272

57

-

-

IFRS 16 timing differences


80

114

-

-



             

             

             

             

Tax assets / (liabilities)


674

631

(1,389)

(906)

 


             

             

             

             

 

Movement in deferred tax during the year:

Group

 

31 October

2021

Amounts arising from business combinations

Recognised in income

31 October 2022


 

£000

£000

£000

£000


 


 

 


Property, plant and equipment

 

(477)

(452)

(139)

(1,068)

Tax value of loss carry forwards

 

31

-

(31)

-

Share based payment expense

 

57

-

216

273

IFRS 16 timing differences

 

114

-

(34)

80


 

             

             

             

             

Tax assets/(liabilities)

 

(275)

(452)

12

(715)

 

 

             

             

             

             

 

Company


Group

Company



2022

2021

2022

2021

 


£000

£000

£000

£000

Share based payment expense


273

57

-

-



             

             

             

             

Tax assets


273

57

-

-

 


             

             

             

             

 

Company

 

31 October

2021

Recognised in income

31 October 2022


 

£000

£000

£000


 


 


Property, plant and equipment

 

-


-

Tax value of loss carry forwards

 

-


-

Share based payment expense

 

57

216

273

IFRS 16 timing differences

 

-


-


 

             

             

             

Tax assets

 

57

216

273

 

 

 

             

             

             

22           Employee benefits


Defined contribution plans

The Group operates a defined contribution pension scheme.  The pension cost charge for the year represents contributions payable by the Group to the scheme and to other personal pensions schemes and amounted to £721,000 (FY21: £769,000).

23           Employee share scheme

The Group has in place a Management Incentive Plan ("MIP") whereby the option is expected to be equity settled. This was established following the Company listing on AIM on 24 May 2021. Prior to this there were no other material employee share schemes in place.

The MIP is accounted for as a share-based payment under IFRS 2 and is expected to be settled by physical delivery of shares.

 

Group and Company

 

Date of Grant

 

Employees entitled

Number of shares granted

Principal vesting conditions

Contractual life

Management incentive plan

July 2021

Selected senior employees

Service during vesting period

EPS performance hurdle

Market capitalisation hurdle

3 years 6 months

 

The shares outstanding in relation to the MIP are:

 

 

2022

2022


 

 

Weighted average exercise price

Number of options


 


£


Outstanding at the beginning of the year

 


-

10,000

Granted during the year

 


-



 


             

             

Outstanding at the end of the year

 


-

10,000

 

 


             

             

 

None of the share options outstanding at the end of the year are exercisable. Growth shares were issued in Kitwave Limited with a subscription price of £5.24 per option was paid on subscription. The growth shares are exchangeable for shares in the Company subject to achieving the principal vesting conditions.  The options are not exercisable before 1 March 2025.


The MIP has incurred an expense under employee expenses of £863,000 (FY21: £227,000).


The share based payment reserve represents the accumulation of this cost in accordance with the treatment of equity settled share based payment expense under IFRS 2. As at 31 October 2021 the balance on this reserve is £1,090,000 (2021: £227,000).

 

24           Called up share capital

Group and Company

 

 

2022

2021


 

 

£000

£000


 

 

 


Authorised, called up and fully paid

 

 

 


70,000,000 ordinary shares of £0.01 each

 

 

700

700


 

 

             

             

 

 

 

700

700

 

 

 

             

             

Share premium

The share premium account relates to the premium paid on shares issued over their nominal value being £63,300,000. Under IAS 32 the transaction costs associated with the issuance of new equity on IPO of the Company have been deducted from the share premium account, being a total of £2,110,000.

 

25           Contingent liabilities

Group bank borrowings (including invoice discounting advances) are subject to cross guarantee and debenture agreements over Group companies.

 

The Company is party to a cross guarantee and debenture agreement to secure the £20,354,000 (2021: £14,620,000) bank borrowings of its subsidiary companies.

 

26           Financial instruments

26 (a) Fair values of financial instruments

The carrying value of all financial assets and financial liabilities by class, are shown below. The carrying value approximates to each asset and liability's fair value:

 

Group


 

2022

2021

 


 

£000

£000

Financial assets held at amortised cost


 

 


Trade receivables


 

47,206

44,365

Cash and cash equivalents


 

5,511

4,968



 

52,717

49,333



 

             

             

 


 

 


Financial liabilities measured at amortised cost


 

 


Trade payable


 

43,836

36,093

Accruals


 

9,577

7,676

Invoice discounting advances


 

20,354

14,620

Obligations under lease liabilities


 

28,749

24,636



 

             

             



 

102,516

83,025

 


 

             

             

Financial instruments - IFRS 9

The Group holds a financial asset instrument, being trade receivables.

The trade receivables are held at amortised cost. The objective of the business model for realising trade receivables is by collecting contractual cash flows for genuine debts. The considerations of Solely Principal Payments and Interest ("SPPI") have also been considered and the criteria met for holding at amortised cost as the trade receivables are for fixed payments due by fixed dates with no variable element of payment required.

The standard requires impairment of trade receivables held at amortised cost is considered by reference to the expected credit loss method, discussed in the credit risk section of the financial information.

Financial instruments measured at fair value through profit and loss IFRS 9 analyses financial instruments into a fair value hierarchy based on the valuation technique used to determine fair value.

·       Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

·       Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie, as prices) or indirectly (ie, derived from prices)

·       Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

All financial instrurments for the year ended 31 October 2022 were categorised as level 1. For the year ended 31 October 2021 a put option liability was categorised as level 3. On admission to AIM the put option liability was extinguished in full.

 


 

2022

2021

Liabilities - level 3


 

£000

£000

Opening balance


 

-

5,410

Release on IPO to the statement of profit and loss


 

-

(5,410)



 

             

             

Closing balance


 

-

-

 


 

             

             

 

26 (b) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers.

 

The Group has a well-established and diverse portfolio of customers including a large number of customers paying cash on delivery.  The Directors do not believe there is a significant concentration risk as evidenced with no one customer accounting for more than 9% of Group revenue.

 

All customers who wish to trade on credit terms are subject to credit verification procedures.

 

The Group establishes an allowance for impairment that represents its estimate of incurred losses using a provision matrix which is based on historical levels of impairment and assessment of the quality of the receivable book to calculate a forward looking estimate.

 

2022


Gross

Impairment

Net

 


£000

£000

£000

Current


37,087


37,087

31-60 days from invoice


9,062


9,062

61-90 days from invoice


1,902

(845)

1,057

90+ days


1,243

(1,243)

-



             

             

             



49,294

(2,088)

47,206



             

             

             

 

The maxmimum Group exposure to credit risk in the year ended 31 October 2022 was £47,206,000 (2021: £44,365,000) being the total carrying amount of trade receivables and other receivables net of provision.

 

The Directors assess the risk to trade receivables by reviewing the ageing of debt rather than by reference to the amount overdue. Many customers operate on terms requiring payment for the previous delivery on receipt of their next order, referred to as 'one over one'. As such a large population of debt would be classed as overdue due to the parameters of the Group's accounting software with debt operating under the agreement made with the customer. The expected credit loss on invoices less than 90 days old is immaterial.

 

The bad debt expense for the year ended was 0.16% of Group revenue. The prior financial year the annual bad debt expense had been c.0.34% of Group revenue, higher due to the lower level of turnover as a result of COVID-19 restrictions. Applying the historic factor would result in a provision of c.£1,712,000 for the year ended 31 October 2022.

 

The impairment charge on trade receivables in the 12 month period ended 31 October 2022 was £871,000 (note 5).  Whilst the Directors are confident no single trade receivable will have a material impact on the Group's cash flow, they continue to take a prudent approach in relation to provisioning as the UK economy faces a challenge in 2023 as a result of the cost of living increases.

 

Debt is reviewed regularly by dedicated credit control teams within each division and information from credit rating agencies is often used to assess a customer's ability to meet its obligations.

 

If there is significant doubt regarding a receivable a specific provision is created. In addition, a provision is created to account for the estimated losses that may be incurred in future periods. The Directors consider the level of provisioning to be materially correct based on these factors.

 

Group

 

 

2022

2021


 

 

£000

£000


 

 

 

 

At beginning of the year

 

 

2,017

2,011

Provided during the year



871

1,288

Added on acquisition



19

-

Utilised during the year



(819)

(1,282)

 



             

             

At the end of the year

 

 

2,088

2,017




             

             

26 (c) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

 

The Group manages its liquidity risk by monitoring existing facilities and cash flows against forecast requirements based on a rolling cash forecast.

 

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effect of netting agreements:

 

Group 2022

Carrying

amount

Contractual

cashflow

1 year or less

1-2 years

2-5 years

More than

5 years


£000

£000

£000

£000

£000

£000

Financial liabilities

 






Trade payables

43,836

43,836

43,836

-

-

-

Accruals

9,577

9,577

9,577

-

-

-

Lease liabilities

28,749

37,686

6,741

5,028

8,828

17,089

Invoice discounting advances*

20,354

20,354

20,354

-

-

-


             

             

             

             

             

             

 

102,516

111,453

80,508

5,028

8,828

17,089

 

             

             

             

             

             

             

 

 

Group 2021

Carrying

amount

Contractual

cashflow

1 year or less

1-2 years

2-5 years

More than

5 years


£000

£000

£000

£000

£000

£000

Financial liabilities

 






Trade payables

36,093

36,093

36,093

-

-

-

Accruals

7,676

7,676

7,676

-

-

-

Lease liabilities

24,636

31,571

5,697

5,129

7,754

12,991

Invoice discounting advances*

14,620

14,620

14,620

-

-

-


             

             

             

             

             

             

 

83,025

89,960

64,086

5,129

7,754

12,991

 

             

             

             

             

             

             

 

* Both the invoicing discounting and bank trade loan facilities are revolving. The invoice discounting facility is available up to £38,000,000 of drawn down and is available until 2025. The trade loan facility is for £8,000,000 and repayable within 35 days of draw down. It forms an integral part of the Group's day to day short term cash management.

 

26 (d) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments.

 

The Group has an immaterial exposure to currency risk on purchases denominated in a currency other than the functional currency of the Group since the balance owed to non UK business is immaterial at each period end.

 

The Group is exposed to interest rate risk principally where its borrowings are at variable interest rates.

 

At the balance sheet date the interest rate profile of the Group's interest-bearing financial instruments was:

 




Group




2022

2021




£000

£000

Fixed rate instruments



 


Financial liabilities



(28,749)

(24,636)




             

             

 



(28,749)

(24,636)