TIDMKITW
RNS Number : 8275E
Kitwave Group PLC
04 July 2023
4 July 2023
Kitwave Group plc
("Kitwave", the "Group" or the "Company")
Unaudited interim results for the six months ended 30 April
2023
Kitwave Group plc (AIM: KITW), the delivered wholesale business,
is pleased to announce its unaudited interim results for the six
months ended 30 April 2023 ("the period" or "H1 2023").
The tables and commentary below include comparatives for both
the six months ended 30 April 2022 (H1 2022) and the 12 months
ended 31 October 2022 (FY 2022).
Highlights
-- Revenues up 23% to GBP275.0 million (H1 2022: GBP223.3 million; FY 2022: GBP503.1 million) .
-- Consolidated gross margin improved to 21.6% (H1 2022: 19.8%; FY 2022: 20.4%) .
-- Profit before tax increased by 48% to GBP8.3 million (H1
2022: GBP5.6 million; FY 2022: GBP17.8 million) .
-- Cash generation from operating activities of GBP11.7 million
(H1 2022: GBP17.1 million; FY 2022: GBP26.5 million) leading to
pre-tax operational cash conversions of 87% (H1 2022: 166%; FY
2022: 105%) .
-- Trading since the period end has been strong across all
divisions and ahead of Board expectations at the time of the
trading update released in May 2023. The Board anticipates that the
Group's results for the full financial year will therefore be ahead
of market expectations that were established at the start of the
financial year.
-- Successful integration of Westcountry Food Holdings Ltd
("WestCountry"), a specialist fresh produce wholesaler to the
foodservice sector, acquired in December 2022, which complements
the Group's existing Foodservice division and enables further
expansion into the South West following the Group's acquisition of
M.J. Baker Foodservice Limited ("M.J. Baker") in February 2022.
-- Appointment of Teresa Octavio as an additional Non-Executive
Director to the Board in February 2023.
-- The Board has declared an interim dividend of 3.75 pence per
share for the six months to 30 April 2023. This dividend will be
paid on 4 August 2023 to shareholders on the register at the close
of business on 14 July 2023 and the ex-dividend date will be 13
July 2023.
Post-period end
-- Construction of a new 80,000 sq. ft distribution site to
fully integrate the Group's South West foodservice operations
commenced in June 2023 with a planned completion of Q3 2024.
Financial summary
H1 2023 H1 2022 FY 2022
Unaudited Unaudited Audited
GBPm GBPm GBPm
----------------------- ----------- ----------- ---------
Revenue 275.0 223.3 503.1
----------------------- ----------- ----------- ---------
Gross profit 59.3 44.1 102.6
Gross profit margin
% 21.6% 19.8% 20.4%
Operating profit 10.2 6.7 20.4
----------------------- ----------- ----------- ---------
Operating margin % 3.7% 3.0% 4.1%
Profit before tax 8.3 5.6 17.8
----------------------- ----------- ----------- ---------
Net cash inflow from
operating activities 11.7 17.1 26.5
Pre-tax operational
cash conversion * 87% 166% 105%
----------------------- ----------- ----------- ---------
*For more information on alternative performance measures please
see the glossary at the end of the announcement.
Paul Young, Chief Executive Officer of Kitwave, commented:
"We are pleased to report continued strong progress across the
Group in the six months ended 30 April 2023. With trading in the
wholesale sector typically weighted towards the second half of the
year, we are confident that this positive momentum will continue
throughout 2023, and results for the full financial year will be
ahead of market expectations that were established at the start of
the financial year.
"A significant highlight during the period was the Group's
successful acquisition and integration of WestCountry into our
Foodservice division, where we are now able to deliver high-quality
fresh produce throughout the South West. This acquisition
demonstrates the strong results that can be achieved when taking
advantage of the considerable opportunities available in the UK's
fragmented wholesale market.
"We believe that our unwavering focus on operational efficiency,
strategic investments, and customer satisfaction, means we are well
placed to drive sustainable growth, both organically and through
acquisitions to deliver value for the Group and its
shareholders."
- Ends -
For further information please contact:
Kitwave Group plc Tel: +44 (0) 191 259 2277
Paul Young, Chief Executive Officer
David Brind, Chief Financial Officer
www.kitwave.co.uk
Canaccord Genuity Limited Tel: +44 (0) 20 7523 8150
(Nominated Adviser and Sole Broker)
Bobbie Hilliam
Yellow Jersey PR Tel: +44 (0) 20 3004 9512
(Financial media and PR)
Sarah Hollins / Shivantha Thambirajah
/ Bessie Elliot
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 29 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.
Chief Executive Officer's statement
Introduction
I am pleased to report the Group's interim results for the six
months ended 30 April 2023. Despite the challenging macroeconomic
conditions facing the wider industry, Kitwave has delivered a
strong performance and has increased revenues across all divisions
of the business. While commodity-led price inflation contributed
significantly to the increased revenues, volume as measured by
cases delivered has also increased compared to H1 2022.
During the period, our acquisition growth strategy continued to
deliver as we welcomed Westcountry Food Holdings Ltd
("WestCountry") into the Group. The acquisition has enabled us to
expand our product range to include high-quality fresh produce to
complement our existing presence in the South West. The integration
of WestCountry into the Group has been successful, and the business
is performing in line with our expectations.
Due to the seasonal nature of the wholesale business trading is
weighted to the second half of the financial year. We remain
confident that the positive momentum seen in the first six months
will continue throughout 2023.
Financial summary
In the six months to 30 April 2023, the Group achieved revenue
of GBP275.0 million ( H1 2022: GBP223.3 million) , resulting in a
52% increase in operating profit to GBP10.2 million ( H1 2022:
GBP6.7 million).
H1 2023 H1 2022 FY 2022
Unaudited Unaudited Audited
GBPm GBPm GBPm
Revenue 275.0 223.3 503.1
Gross profit 59.3 44.1 102.6
Gross profit margin
% 21.6% 19.8% 20.4%
Operating profit 10.2 6.7 20.4
Operating margin % 3.7% 3.0% 4.1%
Cash generation remained strong in the period with GBP11.7
million generated from operating activities.
The net cash outflow relating to the acquisition of WestCountry
was GBP19.6 million after taking into account cash and overdrafts
acquired. No further cash outflows in relation to the transaction
are expected. The acquisition was funded by a new GBP20.0 million
revolving credit facility that was drawn in full on the date of the
acquisition.
Allowing for cash outflows to satisfy debt service payments and
dividends paid, the Group's cash and cash equivalents decreased by
GBP2.2 million during the period. The majority of this cash
absorption is due to an increase in working capital, with GBP1.3
million of this relating to an outflow in working capital in
WestCountry post-acquisition as part of the normal annual cycle
from a seasonal low point in December 2022. Excluding this
part-year effect in WestCountry the Group achieved the targeted 95%
pre-tax operational cash conversion.
The Group's balance sheet as of 30 April 2023 had equity
reserves of GBP74.0 million (30 April 2022: GBP 63.3 million; 31
October 2022: GBP71.9 million ) and net debt of GBP64.4 million (30
April 2022: GBP47.4 million; 31 October 2022: GBP44.4 million). The
increase in debt relates to a new GBP20.0 million banking facility
utilised for the acquisition of WestCountry.
The acquisition of WestCountry resulted in an increase in
Goodwill of GBP14.4 million to GBP58.7 million (30 April 2022:
GBP44.3 million; 31 October 2022: GBP44.3 million ) and an increase
in intangible assets in the form of brand and customer
relationships of GBP5.0 million. The amortisation associated with
these intangible assets was GBP0.4 million in the period.
The increase in debt of GBP20.0 million since the year-end 31
October 2022 relates to the net cash outflow from the acquisition.
Leverage has increased to 1.9x since the year end and interest
costs have increased accordingly. It is expected that the strong
continued cash generation nature of the Group will drive the
principal debt down during the remainder of the current financial
year. The Board is committed to maintaining a prudent leverage
policy moving forward.
Divisional summary
Set out below is the financial performance of the business by
division:
H1 2023 H1 2022 FY 2022
Unaudited Unaudited Audited
GBPm GBPm GBPm
Group revenue 275.0 223.3 503.1
-------------------- ----------- ----------- ---------
Ambient 98.1 87.0 185.1
Frozen & Chilled 96.1 82.0 193.8
-------------------- ----------- ----------- ---------
Retail & wholesale 194.2 169.0 378.9
Foodservice 80.8 54.3 124.2
Corporate - - -
Group adjusted operating
profit** 11.7 7.3 21.5
-------------------------- ----- ------ ------
Ambient 3.8 2.6 6.8
Frozen & chilled 1.8 1.7 6.4
-------------------------- ----- ------ ------
Retail & wholesale 5.6 4.3 13.2
Foodservice 6.1 3.1 8.9
Corporate 0.0 (0.1) (0.6)
** Group operating profit / (loss) adjusted for restructuring,
acquisition, amortisation of intangible assets arising on
acquisition, share-based payments and compensation for post
combination costs and income. For more information on alternative
performance measures please see the glossary at the end of the
announcement.
The Group has demonstrated significant growth in both revenue
and operating profit during the period, with a 23% increase in
revenue to GBP275.0 million (H1 2022: GBP223.3 million) and a 52%
increase in operating profit to GBP10.2 million (H1 2022: GBP6.7
million). Group adjusted operating profit increased by 60% to
GBP11.7 million ( H1 2022: GBP7.3 million).
The Group's gross profit margin increased to 21.6% (H1 2022:
19.8%) representing both margin improvements within divisions and
the fact that a higher proportion of Group revenue is generated by
the Foodservice division compared to H1 2022 reflecting the impact
of recent acquisitions.
Excluding the acquisition of WestCountry revenue grew by 17% and
adjusted operating profit by 46% compared to H1 2022.
The Group's cost base has been affected by inflationary
pressures, with the majority of increases being reflected in labour
and delivery-based costs. 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 period. It is
expected that these cost pressure increases will ease over time, as
we anticipate lower levels of fuel pricing and lower wage inflation
compared to the last 18 months.
Retail & wholesale division
The Group's Ambient and Frozen & Chilled product businesses
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 revenue increase by 15% to
GBP194.2 million ( H1 2022: GBP169.0 million ).
The retail & wholesale businesses performed ahead of
expectations during the period. The division benefitted from the
continued focus on gross margin improvement and operational
efficiency workstreams designed to reduce the cost to serve our
customer base, which together have generated an improvement in our
operating profit percentage compared to H1 2022. Inflation in the
marketplace contributed to an increase in revenue and gross profit
which assisted in covering any operating cost-based inflation.
Foodservice division
In December 2022, the division acquired the entire issued share
capital of Westcountry Food Holdings Ltd.
The acquisition of WestCountry has enabled the Group to expand
its product range to include high-quality fresh produce in the
South West. This complements Kitwave's existing foodservice
offering in the region, following the acquisition of M.J. Baker
Foodservice Limited ("M.J. Baker") in 2022.
The division saw revenue increase by 49% to GBP80.7 million ( H1
2022: GBP54.3 million ). Excluding the acquisition of WestCountry,
revenue increased by GBP13.7 million representing 25% growth
compared to H1 2022. This also included the full period effect of
M.J. Baker which was acquired in February 2022.
Overall, the division traded ahead of expectations for the
period, as customer numbers and volumes have not to date been
materially impacted by the cost-of-living crisis. The demand for
affordable socialising and eat-out occasions coupled with the
defensive nature of care homes and volumes from educational
establishments have served to maintain customer numbers and
volumes. While the division, like the rest of the Group, suffered
some operating cost-based inflation, the improvement in gross
margins and overall close control of costs ensured an improved
operating profit percentage.
Operational review
Following the investment in the Group's new web-based trading
platform, it has been rolled out across all businesses and
utilisation of the platform has increased month on month.
Electronic and online order capture now stands at 44% with average
order values compared to more traditional methods of order taking
remaining 8% ahead due to the additional e-commerce functionalities
that the web platform offers. The brand owner engagement has been
positive with a large proportion of our brand partners developing
mutually beneficial ecommerce partnerships resulting in an improved
customer experience and sales offering.
The acquisition of WestCountry together with M.J. Baker creates
an opportunity to fully integrate the Group's South West operations
and, in order to do this a new design and build 80,000 sq. ft
distribution site has been acquired on a leasehold. The
construction of the unit commenced in June 2023 with a planned
completion of Q3 2024. The integrated site will be able to offer a
full Kitwave wide product offering with a complete food service
range, ice cream, fresh produce, and on-trade into the South West
customer base. This is an important step for the Group as the
infrastructure will drive organic growth opportunities within the
Foodservice division. It is expected that the cost of the new build
will be cash neutral with the planned disposal of the existing
freehold property occupied by M.J. Baker.
We are also pleased that Tom Johnson, who joined the Group as
Health & Safety Director in early 2022, has brought
improvements to the Group's health and safety function and culture
alongside launching the new Kitwave health and safety digital
compliance and reporting platform. The role underlines the Group's
commitment to colleague safety and will drive that element of the
Group's environmental, social and governance (ESG) agenda.
Our commitment to carbon reduction is further demonstrated by
the Group's latest investment in solar with a new PHEV scheme at
the Luton distribution centre being installed in 2023.
In February 2023, the Group was delighted to welcome our new
Non-Executive Director, Teresa Octavio, to the Board. Teresa has
brought significant expertise from her experience in a host of
different executive roles in global businesses, including Kantar
Consulting and consumer-facing multinationals Diageo plc and
Procter & Gamble.
Strategy
We remain focused on executing our strategy, which targets both
organic growth and growth through acquisition. In line with this
strategy, the successful acquisition during the period of
WestCountry is our 12th wholesale distributor integrated into the
Group since 2011. We will continue to look for well-regarded,
financially-sound businesses with established operations and a
similar ethos to Kitwave.
Dividend
The final dividend of 6.75 pence per share for the financial
year ended 31 October 2022 was paid on 28 April 2023.
The Board is pleased to declare an interim dividend of 3.75
pence per share ( H1 2022: 2.50 pence per share) for the six months
to 30 April 2023. It will be paid on 4 August 2023 to shareholders
on the register at the close of business on 14 July 2023 and the
ex-dividend date will be 13 July 2023.
Summary and outlook
During the period, the Group continued to deliver strong
progress across all the core businesses, reflecting our focus on
providing an exceptionally high standard of service to our
customers through investment in systems, processes, and service
offerings.
Trading since the period end has continued to be ahead of
expectations. This is through a combination of strong order
volumes, sustained commodity price inflation, the determination to
maintain and improve gross margins and continued operational cost
control.
The recent WestCountry acquisition broadened our provision of
high-quality fresh produce in the South West and has been
successfully integrated into our Foodservice division. We will
continue to execute our buy-and-build strategy through further
targeted acquisitions, which we feel complements Kitwave's current
offering to our customer base.
Although trading in the wholesale sector is typically weighted
towards the second half of the year and being mindful of the
continuing wider macroeconomic challenges, we remain confident that
the positive momentum seen in the first six months of the year will
continue throughout 2023, and results for the full financial year
will be ahead of the market expectations established at the start
of the financial year.
We have built an excellent platform for growth within the UK
wholesale market. With our focused growth strategy, both
organically and through acquisitions, we believe that we are
well-placed to deliver value for the Group and its
shareholders.
Paul Young
Chief Executive Officer
4 July 2023
Condensed consolidated statement of profit and loss and other
comprehensive income
Note
6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 Unaudited 2022 Unaudited
GBP000 GBP000 GBP000
Revenue 3 274,950 223,312 503.088
Cost of sales (215,621) (179,195) (400,460)
Gross profit 59,329 44,117 102,628
Other operating income 4 157 42 374
Distribution expenses (26,262) (19,351) (44,010)
Administrative expenses (23,008) (18,119) (38,617)
Operating profit 10,216 6,689 20,375
Analysed as:
Adjusted EBITDA 16,017 11,125 29,477
Amortisation of intangible
assets 5 (66) (45) (99)
Amortisation of intangible
assets arising on acquisition 5 (383) - -
Depreciation 5 (4,210) (3,764) (7,897)
Acquisition expenses 5 (648) (148) (148)
Compensation for post
combination services 5 (48) (48) (95)
Share based payment
expense 5 (446) (431) (863)
Total operating profit 10,216 6,689 20,375
Finance expenses (1,956) (1,126) (2,534)
Analysed as:
Interest payable on
bank loans and bank
facilities (1,190) (443) (1,105)
Finance charges on leases (766) (683) (1,427)
Other interest - - (2)
Financial expenses (1,956) (1,126) (2,534)
Profit before tax 8,260 5,563 17,841
Tax on profit on ordinary
activities (1,901) (1,136) (3,501)
Profit for the financial
period 6,359 4,427 14,340
Other comprehensive - - -
income
Total comprehensive
income for the period 6,359 4,427 14,340
Basic earnings per
share (pence) 6 9.1 6.3 20.5
Diluted earnings per
share (pence) 6 8.7 6.3 20.5
Condensed consolidated balance sheet
30 April 30 April 31 October
2023 Unaudited 2022 Unaudited 2022
Audited
GBP000 GBP000 GBP000
Non-current assets
Goodwill 58,680 44,342 44,342
Intangible assets 5,384 535 737
Tangible assets 16,404 13,100 13,037
Right-of-use assets 26,575 27,346 26,452
Investments 45 35 35
107,088 85,358 84,603
Current assets
Inventories 45,769 39,718 31,846
Trade and other receivables 65,388 63,783 57,698
Cash and cash equivalents 3,288 6,111 5,511
114,445 109,612 95,055
Total assets 221,533 194,970 179,658
Current liabilities
Other interest bearing
loans and borrowings (16,816) (23,420) (20,354)
Lease liabilities (5,899) (5,204) (5,509)
Trade and other payables (77,767) (77,656) (57,891)
Tax payable (973) (573) (62)
(101,455) (106,853) (83,816)
Non-current liabilities
Other interest bearing
loans and borrowings (20,000) - -
Lease liabilities (24,092) (24,097) (23,240)
Deferred tax liabilities (2,019) (728) (715)
(46,111) (24,825) (23,955)
Total liabilities (147,566) (131,678) (107,771)
Net assets 73,967 63,292 71,887
Equity attributable to
equity holders of the
Parent Company
Called up share capital 700 700 700
Share premium account 64,183 64,183 64,183
Consolidation reserve (33,098) (33,098) (33,098)
Share based payment reserve 1,536 658 1,090
Retained earnings 40,646 30,849 39,012
Equity 73,967 63,292 71,887
Condensed consolidated statement of change in equity
Called Share Share Profit
up premium Consolidation based payment and loss Total
share account reserve reserve account equity
capital
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 November2021
(audited) 700 64,183 (33,098) 227 29,572 61,584
Total comprehensive income
for the 6 month period
Profit - - - - 4,427 4,427
Other comprehensive - - - - - -
income
Total comprehensive
income for
the 6 month period - - - - 4,427 4,427
Transaction with owners, recorded
directly in equity
Dividends - - - - (3,150) (3,150)
Share based payment
expense - - - 431 - 431
Total contribution
by and transactions
with the owners - - - 431 (3,150) (2,719)
Balance at 30 April
2022 (unaudited) 700 64,183 (33,098) 658 30,849 63,292
Total comprehensive income
for the 6 month period
Profit - - - - 9,913 9,913
Other comprehensive - - - - - -
income
Total comprehensive
income
for the 6 month period - - - - 9,913 9,913
Transaction with owners, recorded
directly in equity
Dividends - - - - (1,750) (1,750)
Share based payment
expense - - - 432 - 432
Total contribution
by and transactions
with the owners - - - 432 (1,750) (1,318)
Balance at 31 October
2021 (audited) 700 64,183 (33,098) 1,090 39,012 71,887
Total comprehensive income
for the 6 month period
Profit - - - - 6,359 6,359
Other comprehensive - - - - - -
income
Total comprehensive
income for
the 6 month period - - - - 6,359 6,359
Transaction with owners, recorded
directly in equity
Dividends - - - - (4,725) (4,725)
Share based payment
expense - - - 446 - 446
Total contribution
by and transactions
with the owners - - - 446 (4,725) (4,279)
Balance at 30 April
2023 (unaudited) 700 64,183 (33,098) 1,536 40,646 73,967
Condensed consolidated cash flow statement
Note 6 months 6 months Year ended
ended 30 ended 30 31 October
April 2023 April 2022 2022 Audited
Unaudited Unaudited
GBP000 GBP000 GBP000
Cash flow from operating
activities
Profit for the period 6,359 4,427 14,340
Adjustments for:
Depreciation and amortisation 4,659 3,809 7,996
Financial expense 1,956 1,126 2,534
Profit on sale of property,
plant and equipment (156) (39) (164)
Net gain on remeasurement
of right-of-use assets
and lease liabilities (1) - (8)
Compensation for post combination
services 48 48 95
Equity settled share based
payment expense 446 431 863
Taxation (1,901) 1,136 3,501
15,212 10,938 29,157
(Increase) in trade and
other receivables (5,555) (8,993) (2,909)
(Increase) in inventories (12,912) (12,040) (4,168)
Increase in trade and other
payables 16,489 28,260 8,450
13,234 18,165 30,530
Tax paid (1,528) (1,115) (4,005)
Net cash inflow from operating
activities 11,706 17,050 26,525
Cash flows from investing
activities
Acquisition of property,
plant and equipment (1,629) (1,140) (2,608)
Proceeds from sale of property,
plant and equipment 269 108 308
Acquisition of subsidiary
undertakings (including
overdrafts and cash acquired) 2 (19,593) (16,914) (16,914)
Net cash outflow from
investing activities (20,953) (17,946) (19,214)
Cash flows from financing
activities
Proceeds from new loan 20,000 - -
Net movement in invoice
discounting (3,538) 4,300 5,734
Interest paid (1,522) (1,126) (2,534)
Net movement in bank trade
loans - 4,500 -
Payment of lease liabilities (3,191) (2,485) (5,068)
Dividends paid (4,725) (3,150) (4,900)
Net cash inflow/(outflow)
from financing activities 7,024 2,039 (6,768)
Net (decrease)/increase
in cash and cash equivalents (2,223) 1,143 543
Opening cash and cash equivalents 5,511 4,968 4,968
Cash and cash equivalents
at period end 3,288 6,111 5,511
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 Company's principal activity is to act as a holding company
for its subsidiaries (together "the Group"), which together make up
the Group's consolidated financial information.
The condensed consolidated financial information presented in
this statement for the six months ended 30 April 2023 and the
comparative figures for the six months ended 30 April 2022 are
unaudited.
The condensed consolidated financial information does not
constitute statutory accounts as defined in Section 435 of the
Companies Act 2006. The statutory accounts for the year ended 31
October 2022 have been delivered to the Registrar of Companies and
the report of the auditor was (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 Section 498 (2) or (3) of the Companies
Act 2006.
The condensed consolidated financial information does not
include all the information required for the full annual financial
statements, however, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual consolidated financial
statements.
The condensed consolidated financial information has been
prepared in accordance with IAS 34 Interim Financial Reporting and
should be read in conjunction the Group's last annual consolidated
financial statements.
The unaudited consolidated interim financial information has
been prepared under the historical cost convention and in
accordance with the recognition and measurement requirements of
UK-Adopted International Accounting Standards. The condensed
consolidated interim financial information does not constitute
financial statements within the meaning of Section 434 of the
Companies Act 2006 and does not include all of the information and
disclosures required for full annual financial statements. It
should therefore be read in conjunction with the Group's Annual
Report for the year ended 31 October 2022, which has been prepared
in accordance with UK-Adopted International Accounting Standards
and is available on the Group's investor website.
There have been no new accounting standards or changes to
existing accounting standards applied for the first time from 1
November 2021 which have a material effect on these interim
results.
1.1 Critical accounting estimates and judgements
The critical accounting estimates and judgements affecting the
Group are unchanged from those set out in the Group's last annual
consolidated financial statements for the year ended 31 October
2022.
The Directors have reviewed financial forecasts and are
satisfied that the Group has sufficient levels of financial
resources available to both fund operations and to pursue its
stated growth strategy. The Directors are confident that the Group
will have sufficient funds to meet its liabilities as they fall due
for the foreseeable future and therefore adopt the going concern
basis in preparing the condensed consolidated interim financial
information.
1.2 Accounting policies
The accounting policies applied in preparing the condensed
consolidated interim financial information are the same as those
applied in the preparation of the consolidated financial statements
for the year ended 31 October 2022, as described in those financial
statements.
2 Acquisitions
Acquisitions in the 6 month period ended 30 April 2023
Westcountry Food Holdings Ltd
On 9 December 2022, the Group acquired the entire share capital
of Westcountry Food Holdings Ltd for a total consideration of
GBP28,485,811. After recognition of acquired intangible assets and
associated deferred tax liabilities, the resulting goodwill of
GBP14,338,000 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:
Book value Recognised Fair value
on acquisition
GBP000 GBP000 GBP000
Non-current assets
Tangible assets 2,146 - 2,146
Intangible assets - 4,992 4,992
Right-of-use assets 262 - 262
Investments 7 - 7
Current assets
Inventories 1,011 - 1,011
Trade and other receivables 2,135 - 2,135
Cash and cash equivalents 8,893 - 8,893
Total assets 14,454 4,992 19,446
Current liabilities
Lease liabilities (49) - (49)
Trade and other payables (2,908) - (2,908)
Corporation tax (453) - (453)
Non-current liabilities
Lease liabilities (499) - (499)
Deferred tax liabilities (163) (1,226) (1,389)
Total liabilities (4,072) (1,226) (5,298)
Net identifiable assets
and liabilities 10,382 3,766 14,148
Goodwill 14,338
Total net assets acquired 28,486
Headline purchase consideration 29,000
Net asset adjustment refunded (514)
Purchase consideration
paid 28,486
Cash acquired (8,893)
Purchase consideration
net of cash acquired 19,593
The business and its trading subsidiary, Westcountry Fruit Sales
Limited, were acquired as part of the Group's growth strategy.
Significant control was obtained through the acquisition of 100% of
the share capital of Westcountry Food Holdings Ltd.
An independent valuation was performed to identify the
intangible assets on acquisition per IFRS 3. As a result of this
valuation, intangible assets in relation to brand and customer
relationships were identified, and recognised, with attributable
fair values of GBP260,000 and GBP4,732,000 respectively. The
recognition of these intangible assets resulted in deferred tax
liabilities of GBP63,000 for the brand intangible and GBP1,163,000
for the customer intangible also being recognised at
acquisition.
The acquired undertakings made a profit of GBP3,479,000 from the
beginning of its financial year on 2 January 2022 to the date of
acquisition. In its previous financial year for the year ended 1
January 2022 the profit after tax was GBP3,112,000.
Following acquisition, the business contributed revenue of
GBP12,714,000 and operating profit of GBP674,000 to the Group for
the six months ended 30 April 2023.
If the business had been acquired at the start of the Group's
financial period, being 1 November 2021, it would have added
GBP14,897,000 to Group revenue and GBP790,000 to Group operating
profit for the six months ended 30 April 2023.
On acquisition an independent assessment was made regarding the
fair value of tangible assets which includes two freehold
properties. The result of this independent assessment was no change
to the net book value held in Westcountry Food Holdings Ltd's
accounts.
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 Executive 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:
-- 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 customer 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 is now being
monitored whilst demonstrating the link to the previously reported
segmental information for reference.
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
period.
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.
3 Segmental information (continued)
Six months ended Ambient Frozen Total Foodservice Corporate Total
30 April 2023 & retail
Chilled & wholesale
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 98,124 96,096 194,220 80,730 - 274,950
Inter-segment revenue 6,925 1,334 8,259 322 - 8,581
Segment revenue 105,049 97,430 202,479 81,052 - 283,531
Adjusted EBITDA* 4,689 3,764 8,453 7,461 103 16,017
Amortisation of intangibles - (40) (40) (3) (23) (66)
Depreciation (822) (1,944) (2,766) (1,398) (46) (4,210)
Adjusted operating
profit* 3,867 1,780 5,647 6,060 34 11,741
Amortisation of intangible
assets arising on
acquisition - - - - (383) (383)
Acquisition expense - - - - (648) (648)
Compensation for post
combination services - (48) (48) - - (48)
Share based payment
expense - - - - (446) (446)
Interest expense (433) (623) (1,056) (355) (565) (1,956)
Segment profit/(loss)
before tax 3,434 1,109 4,543 5,725 (2,008) 8,260
Segment assets 43,807 65,532 109,339 46,140 66,054 221,533
Segment liabilities (32,356) (58,449) (90,805) (31,605) (25,156) (147,566)
Segment net assets 11,451 7,083 18,534 14,535 40,898 73,967
Within Corporate assets is GBP58,680,000 of goodwill on consolidation.
This is allocated to the trading segments as follows:
Goodwill by segment 13,516 12,499 26,015 32,665 - 58,680
--------
3 Segmental information (continued)
Six months ended Ambient Frozen Total Foodservice Corporate Total
30 April 2022 & retail
Chilled & wholesale
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 87,043 81,983 169,026 54,286 - 223,312
Inter-segment revenue 6,023 935 6,958 120 - 7,078
Segment revenue 93,066 82,918 175,984 54,406 (62) 230,390
Adjusted EBITDA* 3,428 3,612 7,040 4,147 (7) 11,125
Amortisation of intangibles - (32) (32) (6) - (45)
Depreciation (779) (1,934) (2,713) (1,051) - (3,764)
Adjusted operating
profit* 2,649 1,646 4,295 3,090 (69) 7,316
Acquisition expense - - - - (148) (148)
Compensation for post
combination services - (48) (48) - - (48)
Share based payment
expense - - - - (431) (431)
Interest expense (322) (470) (792) (226) (108) (1,126)
Segment profit/(loss)
before tax 2,327 1,128 3,455 2,864 (756) 5,563
Segment assets 42,230 68,397 110,627 39,712 44,631 194,970
Segment liabilities (35,850) (63,888) (99,738) (29,377) (2,563) (131,678)
Segment net assets 6,380 4,509 10,889 10,335 42,068 63,292
Within Corporate assets is GBP44,342,000 of goodwill on consolidation.
This is allocated to the trading segments as follows:
Goodwill by segment 13,516 12,499 26,015 18,327 - 44,342
--------
3 Segmental information (continued)
Year ended 31 October Ambient Frozen Total Foodservice Corporate Total
2022 & retail
Chilled & wholesale
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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 assets is GBP44,342,000 of goodwill on consolidation.
This is allocated to the trading segments as follows:
Goodwill by segment 13,516 12,499 26,015 18,327 - 44,342
--------
An analysis of revenue by destination is given below:
Geographical information:
6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
GBP000 GBP000 GBP000
United Kingdom 272,280 221,167 497,842
Overseas 2,670 2,145 5,246
Group revenue 274,950 223,312 503,088
No one customer accounts for more than 10% of Group revenue.
4 Other operating income
6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
GBP000 GBP000 GBP000
Net gain on disposal of
fixed assets 156 39 164
Net gain on foreign exchange - 2 33
Net gain on remeasurement
of right-of-use assets
and lease liabilities 1 - 8
Grant income - 1 169
157 42 374
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 GBP169,000.
5 Expenses
Included in profit/loss are the following:
6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
GBP000 GBP000 GBP000
Depreciation of tangible
assets:
Owned 1,138 1,099 1,946
Right-of-use assets 3,072 2,665 5,951
Amortisation of intangible
assets 66 45 99
Amortisation of intangible
assets arising on acquisition 383 - -
Expenses relating to short
term and low value assets 1,018 487 1,255
Impairment loss on trade
receivables 237 475 871
Dilapidation provision 6 50 48
The Group incurred a number of expenses not relating to the
principal trading activities of the Group as follows:
6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
Exceptional expenses GBP000 GBP000 GBP000
Acquisition expenses 648 148 148
Compensation for post combination
services 48 48 95
Total exceptional expenses 696 196 243
Share based payment expense 446 431 863
Total exceptional expenses
and share based payments 1,142 627 1,106
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.
Acquisition expenses include the legal and professional fees
connected to the acquisition of Westcountry Food Holdings Ltd
completed on 9 December 2022. In the six month period ended 30
April 2022 and the year ended 31 October 2021 these expenses were
incurred in connection with 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 which can now be called at any time.
Share based payments relate to the Management Incentive Plan and
Long term Incentive Plan and are non cash expenses.
6 Earnings per share
Basic earnings per share
Basic earnings per share for the six month period ending 30
April 2023, and the previous six month period ending 30 April 2022
and the year ended 31 October 2022 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 six month period ending 30
April 2023, and the previous six month period ending 30 April 2022
and the year ended 31 October 2022 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 and for the six month period ended
31 October 2023, shares that may vest under the terms of equity
incentive plans , as calculated below.
Profit attributable to ordinary shareholders
6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
GBP000 GBP000 GBP000
Profit attributable to
all shareholders 6,359 4,427 14,340
Pence Pence Pence
Basic earnings per ordinary
share 9.1 6.3 20.5
Diluted earnings per ordinary
share 8.7 6.3 20.5
Weighted average number of ordinary shares
6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
Number Number Number
Weighted average number
of ordinary shares (basic)
during the period 70,146,766 70,000,000 70,033,033
Weighted average number
of ordinary shares (diluted)
during the period 72,946,766 70,000,000 70,033,033
Alternative performance measure glossary
This report provides alternative performance measures ("APMs"),
which are note defined or specified under the requirements of
International Financial Reporting Standards. The Board believes
that these APMs provide readers with important additional
information on the Group.
Alternative Definition and purpose
performance
measure
------------ ----------------------------------------------------------------------------------------------------------------------
Existing Existing operations are disclosed separately
operations from acquisitions in the statement of profit
and loss in order to provide greater comparison
between the current and prior periods which do
not include current period acquisitions.
------------ ----------------------------------------------------------------------------------------------------------------------
Adjusted Represents the operating profit prior to exceptional
operating (income) / expenses and share based payment expenses.
profit This measure is consistent with how the Group
measures performance and is reported to the Board. 6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
GBP000 GBP000 GBP000
Total operating
profit 10,216 6,689 20,375
Amortisation
of intangible
assets arising 383 - -
on acquisition
Acquisition expenses 648 148 148
Compensation
for post combination
services 48 48 95
Share based payment
expense 446 431 863
Adjusted operating
profit 11,741 7,316 21,481
Adjusted Represents the operating profit prior to exceptional
EBITDA (income) / expenses, share based payment expenses,
fixed asset depreciation and intangible amortisation.
This measure is consistent with how the Group
measures trading and cash generative performance
and is reported to the Board. 6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
GBP000 GBP000 GBP000
Total operating
profit 10,216 6,689 20,375
Amortisation of
intangible assets 66 45 99
Amortisation of
intangible assets
arising on acquisition 383 - -
Depreciation 4,210 3,764 7,897
Acquisition expenses 648 148 148
Compensation for
post combination
services 48 48 95
Share based payment
expense 446 431 863
Adjusted EBITDA 16,017 11,125 29,477
Pre tax Represents the cash generated from operating
operational activities pre tax as a proportion of cash flow
cash from operating activities pre movements in working
conversion capital and tax. This measure informs the Board
of the Group's cash conversion from operating
activities and is used to monitor liquidity by
the Board. 6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 2022 Unaudited
Unaudited
GBP000 GBP000 GBP000
Net cash inflow
from operating
activities 11,706 17,050 26,525
Tax paid 1,528 1,115 4,005
Cash flow from
operating activities
pre tax and compensation
for post combination
services (1) 13,234 18,165 30,530
Movement in working
capital 1,978 (7,227) (1,373)
Cash flow from
operating activities
pre tax and compensation
for post combination
services and movement
in working capital
(2) 15,212 10,938 29,157
Pre tax operational
cash conversion
(1) divided by
(2) 87% 166% 105%
After tax return Represents adjusted profit after tax for the
on invested capital 12 months ending on the period end date as a
proportion of invested capital as at the period
end date. This measure informs the Board of how
effective the Group is in generating returns
from the capital invested.
30 April 2023 30 April 31 October
Unaudited 2022 Unaudited 2022 Audited
GBP000 GBP000 GBP000
Adjusted operating profit 25,906 14,583 21,481
Operating lease interest 766 (683) (1,427)
26,672 13,900 20,054
Tax charge at effective rate of tax of
22.5% (FY22: 18.4%) (6,001) (2,558) (3,690)
Adjusted operating profit after tax (1) 20,671 11,343 16,364
Invested capital comprising:
Interest bearing loans and borrowings 36,816 23,420 20,354
Lease liabilities 29,991 29,301 28,749
Share capital 700 700 700
Share premium 64,143 64,183 64,183
Less cash at bank and in hand (3,288) (6,111) (5,511)
Total invested capital (2) 128,402 111,493 108,475
After tax return on invested capital (1)
divided by (2) 16% 10% 15%
--------------------- ------------------------------------------------------------------------------------------
Leverage (including Management assess leverage by reference to adjusted
IFRS 16 debt) EBITDA for the 12 months ending on the period
& end date against net debt including and excluding
Leverage (excluding IFRS 16 lease liabilities and including the liability
IFRS 16 debt) for post combination services held within other
creditors, as at the period end date. This indicates
how much income is available to service debt
before interest, tax, depreciation and amortisation.
30 April 2023 30 April 2022 31 October 2022 Audited
Unaudited Unaudited
GBP000 GBP000 GBP000
Adjusted EBITDA (1) 34,369 22,344 29,477
Interest bearing loans
and borrowings 36,816 23,420 20,354
Lease liabilities 29,991 29,301 28,749
Liability for post
combination services 854 759 807
Cash at bank and in
hand (3,288) (6,111) (5,511)
Net debt (2) 64,373 47,369 44,399
Leverage (including
IFRS 16 debt) (2)
divided by (1) 1.9x 2.1x 1.5x
IFRS 16 lease
liabilities (26,329) (26,459) (25,902)
Net debt excluding IFRS
16 lease liabilities
(3) 38,044 20,910 18,497
Leverage (excluding
IFRS 16 lease debt)
(3) divided by (1) 1.1x 0.9x 0.6x
Reconciliation between existing and acquired operating profit
for the period
Note Existing Acquisitions Total
operations 6 months 6 months Year ended
ended ended 31 October
30 April 30 April 2022 Audited
2023 Unaudited 2022 Unaudited
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 3 262,282 12,668 274,950 223,312 503.088
Cost of sales (207,579) (8,042) (215,621) (179,195) (400,460)
Gross profit 54,703 4,626 59,329 44,117 102,628
Other operating income/
(expense) 4 166 (9) 157 42 374
Distribution expenses (24,023) (2,239) (26,262) (19,351) (44,010)
Administrative expenses (21,304) (1,704) (23,008) (18,119) (38,617)
Operating profit 9,542 674 10,216 6,689 20,375
Analysed as:
Adjusted EBITDA 14,825 1,192 16,017 11,125 29,477
Amortisation of intangible
assets 5 (66) - (66) (45) (99)
Amortisation of intangible
assets arising on acquisition 5 - (383) (383) - -
Depreciation 5 (4,075) (135) (4,210) (3,764) (7,897)
Acquisition expenses 5 (648) - (648) (148) (148)
Compensation for post
combination services 5 (48) - (48) (48) (95)
Share based payment
expense 5 (446) - (446) (431) (863)
Total operating profit 9,542 674 10,216 6,689 20,375
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END
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