CEPS Swings To Annual Loss After Sunline Falls Into Administation

LONDON (Alliance News) - CEPS PLC on Wednesday said it swung to a loss in 2018 after its Sunline Direct Mail business went into administration.

The company, which buys majority stakes in UK small and medium-sized businesses, posted a pretax loss of GBP308,000 for the year, reversing a GBP55,000 profit the year before.

This included a GBP445,000 discontinued loss, compared to a GBP156,000 discontinued loss in 2017.

The jump in the discontinued loss is attributable to Sunline, which went into administration in June 2018 having failed to make the necessary improvements to efficiency through automation and mechanisation or to change its product mix from 90% plastic and 10% paper to 60% plastic and 40% paper.

The EU General Data Protection Act, which caused order delays, coupled with concerns over plastic use, ultimately tipped Sunline into administration.

The pretax profit figure also includes a GBP588,000 of intangible write-off, less than the GBP847,000 write-off last year. Ongoing profit was GBP137,000 versus GBP211,000 in 2017.

Revenue decreased 8.5% to GBP21.6 million from GBP23.6 million, of which GBP3.1 million was from the discontinued activities of Sunline. Continuing revenue, which excludes Sunline, rose 9.5% to GBP18.5 million from GBP16.9 million.

Although CEPS had intended to pay a dividend, the Sunline administration means board views such a dividend as "inappropriate".

David Horner, chair of CEPS, said its accounts are "very confusing and complicated" and it is considering commissioning a third-party research firm to produce periodic research on the company, which CEPS would then post on its website.

The company is considering a number of possible bolt-on acquisitions, which are "typically at a reasonable price" and, Horner believes, will be lower risk.

In terms of Brexit, Horner expects that "the economic environment will be satisfactory" to support CEPS companies provided the UK economy is still growing.

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

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

Shares in CEPS were untraded on Wednesday, last quoted at 32.50 pence.