Ceps Regulatory News (CEPS)

CEPS PLC

('CEPS' OR THE 'COMPANY' OR THE 'GROUP')

FINAL RESULTS

The Board of CEPS is pleased to announce its final results for the year ended 31 December 2019.

CHAIRMAN'S STATEMENT

I sincerely hope that all our shareholders, customers and suppliers are safe and bearing up in these very difficult and exceptional times.

To our knowledge all our employees are safe and well during this period of Coronavirus lockdown and it is important to stress that, however CEPS PLC and our subsidiaries move forward from this current position, it will only be done after full consideration of people's safety and welfare.

Writing this report now feels very strange as our plans and strategies have, literally, been put on hold until a move to normalisation is commenced. However, it is also equally important to stress that all steps that can be taken have been taken to ensure that when that happens CEPS and its subsidiaries are ready to implement, as appropriate, our plans and strategies.

Financial review

The financial year being reported on epitomises the recent challenge with CEPS: most of the companies doing well or very well with one subsidiary doing very badly and, consequently, tainting the whole picture. This year we decided that we were unable to continue supporting the merged CEM and Sampling International as the losses and cash requirement grew to unacceptable levels. This grouping was placed into administration. However, in order to maximise the chances of an employee led buy-out we delayed this until early January 2020. The expectation is that in 2020 an exceptional gain on the ultimate disposal will be recognised. Therefore, whilst our intention was to enter the new year with a clear, trouble-free profile we were not able to achieve this before the current circumstances have, effectively, put a clean set of accounts on hold until at least 2021.

Although the consolidated results for the year include CEM and Sampling International, to get a better understanding of the results and the make-up of the Group from 2020 onwards we have included two supplementary pages (notes 13 and 14) which analyse the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Cash Flow between 'continuing' (made up of Aford Awards, Davies Odell, Friedman's and Hickton Consultants) and 'to be discontinued' (made up of CEM and Sampling International) operations.

Total revenue for 2019 was £21.8m (2018: £21.6m; £18.5m from continuing operations), of which £16.1m was generated from continuing operations and £5.7m from to be discontinued operations.

The segmental result (EBITDA) before exceptional items of £971,000 (2018: £1.5m; £1.7m from continuing operations) shows EBITDA of £2.5m from continuing operations. For all companies within this category there was an improvement in performance when compared to the previous year.

The operating loss for the year was £1.9m (2018: loss of £12,000; operating profit of £391,000 from continuing operations), which includes the £3.5m losses from CEM and Sampling International, part of which was the £1.2m exceptional cost resulting from the write-down of assets to their net realisable value. If we exclude these amounts the operating profits generated from continuing operations were £1.6m.

The loss for the year before taxation was £2.3m (2018: loss of £308,000; profits of £137,000 from continuing operations), but the profits of the continuing businesses in 2019 amounted to £1.3m and the losses of to be discontinued operations totalled £3.6m.

The loss for the year after taxation was £2.6m (2018: loss of £876,000; £431,000 from continuing operations), but the profits from continuing operations in 2019 amounted to £935,000 while the losses of to be discontinued operations totalled £3.6m.

Loss per share on a basic and diluted basis was 15.86p (2018: loss per share of 9.06p; loss from continuing operations 6.26p) which can be analysed between earnings per share of 1.47p from continuing operations and a loss per share of 17.33p from to be discontinued operations.

From a cash perspective, the cash generated from operations was £365,000 in 2019 (2018: £1.7m; cash generated from continuing operations £1.4m), of which £1.4m cash was generated by continuing operations and £1.1m was used by CEM and Sampling International.

Net debt increased over the year from £1.4m at the end of 2018 to £4.3m at the end of 2019 and as a result the gearing ratio increased from 25% to 156% over the same period. Borrowings by CEPS increased by £4.3m, part of which was used to finance new acquisitions and part was used to support CEM and Sampling International, prior to the decision to place the companies into administration.

On 1 January 2019, the Group implemented IFRS 16 Leases, which replaces IAS 17 Leases. The new standard brings most leases on to the Consolidated Statement of Financial Position for lessees and eliminates the distinction between operating and finance leases. Under IFRS 16 a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is treated in a similar way to a non-financial asset and is depreciated. The lease liability is initially measured at the present value of the stream of lease payments over the lease term, discounted at the incremental borrowing rate.

The Group implemented IFRS 16 from 1 January 2019 by applying the modified retrospective approach meaning that comparative figures in the financial statements for the year ending 31 December 2019 are not restated to show the impact of IFRS 16.

The operating leases that are recorded for the first time relate to properties and vehicles. The right-of-use asset in the Consolidated Statement of Financial Position at 31 December 2019 was £1.1m and the lease liabilities were £1.2m.

As stated in note 9 of notes to the financial statements the most recent valuation of the Dinkie Heel Defined Benefit Pension Scheme at 1 July 2019 showed a surplus in the scheme and, based on this result, no recovery plan is necessary at least until the next triennial valuation in 2022. In real terms, this means a cash saving to CEPS of £81,000 per annum.

It is clear that, prior to the impact of the Coronavirus pandemic, the likelihood was that the Group, made up of continuing operations as defined in 2019, would be profitable and cash generative in 2020.

In the last quarter of 2019, anticipating that 2020 was going to be the start of a very positive outcome for CEPS, we signed up with a third party research company who we engaged to produce 'independent' research to inform potential investors about the activities and financial performance of CEPS. Sadly, this has now had to be put on hold for obvious reasons and will be resurrected in the latter part of this year if the UK emerges from lockdown in a satisfactory manner.

Operational review

I will now report on the performance of the individual companies.

Aford Awards

Trading was in line with expectations. Steps were taken through the year to improve efficiencies in the business in all areas and, consequently, the busy seasonal periods were better managed than in the past. This encouraged the management team to scale up marketing in the busy period of 2020 confident that it could manage and deliver more late notice business.

The company continued to repay its outstanding loan notes and by the end of the year had reduced these original acquisition loans to the shareholder loans, totalling £300,000, of which CEPS' share is 70%.

During the year the decision was taken to close C & M, the small shop-based operation acquired in the previous year, and transfer as much recurring trade as possible back to the Aford Awards base in Maidstone.

This has been successful and will be one of the business drivers for the company in the future. The trophies/awards/engraving sector, despite the internet, remains very fragmented and Aford Awards will, in the future, act as a consolidator. This is, of course, a relatively low-risk method of expansion as the purchase price of these businesses is, essentially, the stock and equipment and the work that can be transferred will make a significant marginal contribution.

Davies Odell

The company remains marginally loss-making following the reduction in overheads in 2018. The process of rightsizing the business continues and, sadly, additional people have left the company. The benefit of this overhead reduction was to have been felt in 2020, but its impact has been lessened by the effects of the Coronavirus on the performance of the company.

Friedman's

The business continued to make very good profits in 2019 and steps were taken to increase the sales and marketing efforts in order to better utilise the increased capacity put in place the previous year.

The management team was very busy and involved for a good part of the year on the purchase of Milano International Limited ('Milano') on 4 October 2019. Milano, based in Preston, is a supplier of gymnastic leotards made from Lycra, some of which is supplied by Friedman's.

Discussions had been off and on with the owners of Milano over a period of five years. Signature Holdings, the holding company for Friedman's, has acquired Milano financed by £1m of loan stock from CEPS, vendor loans and funding from cash generated by Friedman's.

Since the purchase considerable work and investment has gone into expanding the manufacturing capacity, revamping the sales and marketing efforts and broadening the product range. Everything was planned to be launched in early April, but of course is now on hold.

Hickton Consultants

Another excellent year from the company.

Trading in Hickton was ahead of expectations, although the performance of the much smaller subsidiary, BRCS, continued to disappoint.

Partially to address this, post year end on 11 March 2020, a major transaction was completed which had been in process from the end of 2018. This was the purchases of Cook Brown Building Control Limited, a building control company like BRCS, and Cook Brown Energy Limited (together 'Cook Brown'). The transaction was completed by forming a new company called Hickton Group Limited which acquired both Hickton Consultants and Cook Brown.

As part of this exercise James Cook and Matthew Brown received shares in Hickton Group and will work alongside Tony Mobbs, Chairman of Hickton Group, and Janet Pryke, Finance Director.

CEPS 'rolled over' its entire investment into 55% of the equity of the Hickton Group with, in addition, £2.24m of loan stock.

The Board is very excited about the future development of this specialist building services group.

Outlook

It is of course very difficult or even impossible at this stage to write anything about the outlook that will possibly bear scrutiny in a month or two, never mind in 12 months' time.

The management teams at each subsidiary are doing their utmost to protect their companies from the current pressing issues, whilst ensuring that they will be ready to emerge from our current lockdown state in strong operational positions ready to make a significant recovery and then progress.

I believe that the restructuring of the Group over the last two years now leaves it with subsidiaries that are well positioned to grow and to deliver attractive shareholder returns, once the world returns to more normal conditions.

David Horner

Chairman

21 May 2020

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

David Horner, Chairman, CEPS PLC

Tel: 01225 483030

James Caithie, Cairn Financial Advisers LLP

Nominated Adviser

Tel: 020 7213 0880

The Impact of Coronavirus on the Group

At the date of signing these accounts, Coronavirus represents both a risk to the business and its people. The Group is taking active measures to ensure its people remain safe and healthy. Measures include additional education on cleanliness, self-isolation, social distancing and the ability to work from home or in roster patterns where necessary. There are daily business continuity and health and safety meetings to ensure compliance with the measures introduced.

As with most businesses, there are some short-term practical difficulties that have had to be managed. The severity and length of economic downturn is unknown due to the social distancing methods currently in place by the UK Government. However, the majority of the Group's subsidiaries are continuing to trade by the virtue of being online or in a construction related sector, albeit it at a reduced volume.

The pledges made by the UK Government provide further comfort to the directors that they will have access to additional funding, should they require, from the various measures that the Government has put in place to help protect employment and support businesses through this period of uncertainty. All subsidiaries are currently accessing the UK Government's Job Retention Scheme and are pursuing other relevant schemes available to them.

The directors have prepared Group cash flow projections for the period to 30 June 2021 based on latest subsidiary forecasts that show that the Group will be able to operate within the Group's current funding resources. The financial uncertainty created within the economy as a result of Covid-19 is clearly difficult to forecast and predict, but the directors have produced sensitised forecasts based on their best estimates of likely outcomes and they believe that, for the 12 month period from the date of signing these financial statements, the Group will be able to operate within the financial facilities available to it. Post year end, the Group has secured an extension and additional funding from existing debt providers to 30 June 2021 to enable the business to operate within the financial facilities available to it.

Furthermore, the directors are comforted by the clear sentiment from the UK Government that they will support business during this difficult time with a range of measures already outlined to protect jobs and business, with more to come.

On this basis, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and for at least 12 months from the date of these financial statements. The directors, therefore, continue to adopt the going concern basis in preparing the financial statements.

CEPS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2019

CEPS PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

The loss within the parent company financial statements for the year was £3,254,000 (2018: loss of £5,808,000).CEPS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 DECEMBER 2019

CEPS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS (PRIOR YEAR)

YEAR ENDED 31 DECEMBER 2019

CEPS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2019

Share capital comprises the nominal value of shares subscribed for.

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

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

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

Notes to the financial information

1. General information

The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is 11 Laura Place, Bath BA2 4BL and the registered number of the Company is 00507461.

2. Basis of preparation

This announcement is an extract from the consolidated financial statements of the Company for the year ended 31 December 2019 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issuance on 21 May 2020. The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2018 or 2019 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Company's Annual General Meeting. The auditor's report on the statutory accounts for the year ended 31 December 2018 was unqualified and for the year ended 31 December 2019 was unqualified with reference to a material uncertainty in respect of going concern due to the global Coronavirus pandemic, and do not contain statements under s498(2) or (3) Companies Act 2006.

This financial information has been prepared in accordance with the International Financial Reporting Standards ('IFRSs') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Details of the key accounting policies applied are set out in the financial statements.

Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast

The Group financial statements are presented in GBP (£) and to the nearest thousand ('000). This Group expects to transact more of its business in GBP than any other currency and it is also the functional currency of the Group.

The financial information set out in this announcement was approved by the Board on 21 May 2020.

3. Critical accounting assumptions, judgements and estimates

The directors make estimates and assumptions concerning the future. They are also required to exercise judgement in the process of applying the Company's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are assessed below:

i) Impairment of intangible assets (including goodwill)

The Group tests annually whether intangible assets (including goodwill) have suffered any impairment, in accordance with the relevant accounting policy. The recoverable amounts of the cash-generating units have been determined based on value-in-use calculations. The calculations require the use of estimates (note 10).

ii) Impairment of non-current assets

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

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

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

· Significant negative industry or economic trends.

iii) Depreciation and residual values

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

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

iv) Carrying value of stocks

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

v) Recoverability of trade debtors

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

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

vi) Leases

Where the Group has an option to extend or terminate a lease, management uses its judgement to determine whether such an option would be reasonably certain to be exercised. Management considers all facts and circumstances, including past practice and costs that would be incurred if an option were to be exercised, to help it determine the lease term. Management has also applied judgements in assessing the discount rate, which is based on the incremental borrowing rate. Such judgements could impact lease terms and associated lease liabilities. The Group has availed itself of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Consequently, the definition of a lease, in accordance with IAS 17 and the guidance in IFRIC 4, will continue to be applied to those leases entered into or modified before 1 January 2019.

vii) Taxation

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

viii) Retirement benefit liabilities

The Group operates a defined benefits pension scheme. The scheme is subject to triennial actuarial valuation and the Group commissions an independent qualified actuary to update to each financial year end the previous triennial result. The results of this update are included in the financial statements. In reaching the annually updated results management makes assumptions and estimates. These assumptions and estimates are made advisedly, but are not any guarantee of the performance of the scheme or of the outcome of each triennial review.

4. Segmental analysis

The Chief Operating Decision Maker ('CODM') of the Group is its Board. Each operating segment regularly reports its performance to the Board which, based on those reports, allocates resources to and assesses the performance of those operating segments.

Operating segments and their principal activities are as follows:

- Aford Awards, a sports trophy and engraving company

- CEM Press, including Travelfast (trading as Sampling International), a manufacturer of fabric, carpet and wallpaper pattern books, swatches and shade cards;

- Davies Odell, a manufacturer and distributor of protection equipment, matting and footwear components

- Friedman's, a convertor and distributor of specialist Lycra, including Milano International (trading as Milano Pro-Sport), a designer and manufacturer of leotards;

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

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

- Group costs, costs incurred at Head Office level to support the activities of the Group

The United Kingdom is the main country of operation from which the Group derives its revenue and operating profit and is the principal location of the assets and liabilities of the Group. All Group revenue is recognised at a point in time, rather than over a period in time, in line with the requirements of IFRS 15.

The Board assesses the performance of each operating segment by a measure of adjusted earnings before interest, tax, Group costs, depreciation and amortisation (EBITDA) before exceptional costs. Other information provided to the Board is measured in a manner consistent with that in the financial statements.

i) Results by segment

Year ended 31 December 2019

Year ended 31 December 2018

ii) Assets and liabilities by segment

As at 31 December

5. Taxation

The tax assessed for the year is higher (2018: higher) than the standard rate of corporation tax in the UK (19%) (2018: 19%)

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

As at 31 December 2019 the substantively enacted rate for deferred tax calculation purposes was 17% and deferred taxation has been calculated at this rate.

On 11 March 2020 the Chancellor of the Exchequer announced that the tax rate reduction from 19% to 17% was no longer going to be implemented.

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

6. Earnings per share

Basic earnings per share is calculated on the loss for the year after taxation attributable to the owners of the parent of £2,696,000 (2018: loss £1,369,000) and on 17,000,000 (2018: 15,105,176) ordinary shares, being the weighted number in issue during the year.

Basic earnings per share for continuing operations is calculated on the profit for the year after taxation attributable to owners of the parent of £250,000 (2018: loss £946,000) and on 17,000,000 (2018: 15,105,176) ordinary shares, being the weighted number in issue during the year. Basic earnings per share for discontinued operations is calculated on the loss for the year after taxation attributable to owners of the parent of £2,946,000 (2018: loss £423,000) and on 17,000,000 (2018: 15,105,176) ordinary shares, being the weighted number in issue during the year.

7. Property, plant and equipment

At the year end, assets held under hire purchase contracts and capitalised as plant, machinery, tools and moulds have a net book value of £nil (2018: £290,000) and an accumulated depreciation balance of £nil (2018: £2,410,000).

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

8. Right-of-use assets

Right-of-use assets relating to CEM Press and Travelfast have been excluded from the above analysis as their fair value is considered to be £nil as they entered into administration post year-end.

9. Business combinations

i) Acquisition in 2019 of Travelfast Limited (trading as Sampling International)

On 27 March 2019 CEMTeal Limited acquired 100 per cent of the issued share capital of Travelfast Limited, trading as Sampling International, for an initial consideration of £9 with up to a further £1.2m payable in cash over three years based on financial performance over the period.

The acquisition has been accounted for using the acquisition method of accounting. After the alignment of accounting policies and other adjustments to the valuation of assets and liabilities to reflect their fair value at acquisition, the fair value of net liabilities acquired was £395,000.

Goodwill of £395,000 arose from the acquisition.

The following table shows the fair value of assets and liabilities included in the consolidated statements at the date of acquisition:

From the date of acquisition Travelfast Limited contributed £3,808,000 of revenue and £1,574,000 loss before tax. If the combination had taken place at the beginning of the year, revenue would have been £5,047,000 and the loss before tax would have been £1,716,000.

Despite management's efforts and cash injections from CEPS PLC it was not possible to achieve the envisaged savings and efficiencies from consolidating CEM Press and Sampling International's operations and streamlining the processes. As a result, Travelfast Limited was placed into administration on 15 January 2020. On 17 January 2020 the administrator sold the business and assets of Travelfast Limited to a newly formed company called Sampling International Enterprises Limited (trading as Sampling International). No return to CEPS PLC arose from this sale.

Consequently, the £395,000 goodwill that arose on acquisition was written-off in 2019.

ii) Acquisition in 2019 of Milano International Limited (trading as Milano Pro-Sport)

On 4 October 2019 Signature Fabrics Limited acquired 90 per cent of the issued share capital of a newly incorporated company, Milano International Holdings Limited, which had been formed to acquire 100 per cent of the issued share capital of Milano International Limited, trading as Milano Pro-Sport, for a consideration of £1,850,000.

The acquisition has been accounted for using the acquisition method of accounting. After the alignment of accounting policies and other adjustments to the valuation of assets and liabilities to reflect their fair value at acquisition, the fair value of net assets acquired was £186,000.

Goodwill of £1,683,000 arose from the acquisition.

The following table shows the fair value of assets and liabilities included in the consolidated statements at the date of acquisition:

From the date of acquisition Milano International Limited contributed £578,000 of revenue and £177,000 profit before tax. If the combination had taken place at the beginning of the year, revenue would have been £1,725,000 and the profit before tax would have been £220,000.

10. Intangible assets

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

Customer lists are subject to annual impairment reviews.

Other intangibles relate to computer software, website costs and licences and are amortised over their estimated economic lives. The annual amortisation charge is expensed to cost of sales in the Consolidated Statement of Comprehensive Income.

Impairment tests for goodwill and intangible assets

The Group tests goodwill and intangible assets arising on the acquisition of a subsidiary (customer lists) annually for impairment or more frequently if there are indications that goodwill or customer lists may be impaired.

For the purpose of impairment testing, goodwill is allocated to the Group's cash generating units (CGUs) on a business segment basis:

The recoverable amount of a CGU is based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond five years are assumed to be constant. A discount rate of 10.60% (2018: 9.36%), representing the estimated pre-tax cost of capital, has been applied to these projections.

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

Management has determined the budgeted revenue growth and gross margins based on past performance and their expectations of market developments in the future. Long-term growth rates are based on the lower of the UK long-term growth rate and management's general expectations for the relevant CGU.

In respect of Aford Awards, Friedman's, including Milano Pro-Sport, and Hickton Consultants the value-in-use calculation gives rise to sufficient headroom such that reasonable changes in the key assumptions do not eliminate the headroom.

At 31 December 2019 an impairment charge of £395,000 was taken against the goodwill arising on the acquisition of Travelfast Limited (trading as Sampling International) as it went into administration on 15 January 2020.

11. Share capital and share premium