Ceps Regulatory News (CEPS)

RNS Number : 7337N

CEPS PLC

11 May 2018

 

 

CEPS PLC

("CEPS" OR THE "COMPANY")

 

FINAL RESULTS

 

The Board of CEPS is pleased to announce its final results for the year ended 31 December 2017.

 

CHAIRMAN'S STATEMENT

 

Financial review

Group revenue at £23.60m for the year (2016: £24.32m) was down by 3% whilst operating profit more than doubled to £1.10m from £536,000. Profit before tax was up at £902,000 (2016: £146,000) before the exceptional goodwill impairment charge of £847,000 (2016: £611,000).

 

Group costs were slightly higher than last year at £322,000 (2016: £308,000), but include the professional fees for the triennial valuation of the Dinkie Heel Retirement Benefit Scheme. The post-tax loss was £221,000 (2016: loss £913,000).

 

Loss per share on a basic and diluted basis was (4.11p) (2016: (11.83p)). In the year cash generated from operations improved to £1.77m (2016: £1.11m), and there was a net increase in cash and cash equivalents of £807,000 (2016: net decrease of £67,000). Year-end cash was £1.37m (2016: £840,000).

 

Operational review

Aford Awards

Aford Awards has continued to make good progress and produce record profits. The cash generated from these profits has meant the vendor loans have now been completely repaid and the repayment of CEPS acquisition loans will now commence.

A number of "bolt-on" acquisitions are being investigated and it is hoped that at least one of these will be acquired in the second half.

CEM Press

A complete overhaul of the business has taken place over the past year. In a difficult and very competitive market CEM Press was again loss making. However, there is no doubt that we now have a more efficient and more competitive company. We are very encouraged by the level of sales enquiries which we are hoping will convert into confirmed orders and will provide a significant boost to the second half of 2018.

In a very small sector, with only a handful of competitors, there will be in the future scope for consolidation and we, and the management team at CEM Press, intend to be the consolidator.

Under accounting rules it is necessary every year to review the carrying value of the goodwill of each company. Whilst this review produced a very positive result for several of the CEPS subsidiaries, because of the poor financial performance of CEM Press in the recent past, this review showed that the carrying value of goodwill needed to be reduced. The Board decided to write-off the carrying value of goodwill in full in this company. This is a non-cash item and does not affect the underlying value of the company.

Davies Odell

The company returned to modest profitability and has at the same time invested in new products across its various activities, which should produce greater sales going forward. Better control of working capital has meant that the balance sheet has got stronger and should in time lead to further debt reduction.

Friedman's

Another exceptional year with record profits and very strong cash generation.

When CEPS bought this company with David Kaitiff in 2005 we quickly moved the business to premises that were three times larger. In March of this year Friedman's moved to premises that are double in size to their previous ones. This increase in space has enabled Friedman's to significantly increase capacity by acquiring more digital printing machines and having access to more power capacity. These machines will be used in the expansion of the existing business and also to enable it to move into new business areas.

Hickton Consultants

The company has continued to generate profits and a steady stream of new contract wins, whilst some of the longer standing, larger projects have been extended, providing predictability of income.

BRCS (Building Control) was acquired in May 2017 to provide a complementary offering to the clerk-of-works, quality assurance role provided by Hickton Consultants. The two management teams are working well together to integrate the business. Clients of both companies have expressed an interest in the additional services now on offer and there have been some cross-referrals.

Sunline

The polywrap and letter shop business moved into profit last year although, again, December proved to be a seriously loss-making month and was much worse than expected. The fulfilment business, which from 2018 is in a separate company called CYNC, was moved to new and much larger premises in December. Whilst the move was entirely necessary, the timing was certainly not ideal and large unexpected costs were incurred in 2017. There have also been operational issues in the new premises which have proved very challenging. For these reasons, Sunline recorded a loss for the year.

Dividend

Recognising the confidence that the Board has in the future of the Company, the clearest tangible signal of this confidence is to reintroduce the payment of an annual dividend. It is twenty years since the Company last paid a dividend and the Board feels that now is an appropriate time to provide shareholders with a revenue reward for holding the shares.

Because of the write-offs in goodwill over the past few years the Company, in accounting terms, is currently prevented from paying a dividend. Therefore, as part of the business carried out at the Annual General Meeting, a resolution will be put forward to enable the Company to undertake a capital reconstruction as soon as possible during 2018, which will facilitate the payment of this and future dividends.

Power to allot additional shares

The Company will be convening its Annual General Meeting to be held on 18 June 2018. Among other resolutions to be proposed, the Board will seek authority to allot shares equating to 100% of its present issued ordinary share capital in line with the requirements of our acquisition strategy.

 

People

Following a very busy period where each of the businesses has faced challenges, the Board is most grateful for the ongoing efforts of all the Group's employees.

Outlook

Since I became Chairman three years ago considerable effort has been expended, by all CEPS colleagues, on growing the successful companies and getting those companies that were performing less well back on the right track for future profitability and growth. This does not happen overnight and it is undoubtedly the case that everything seems to take longer than one expects and hopes.

 

We now feel that we are making progress and that in the future the accounts will, hopefully, demonstrate this current confidence.

 

Considerable time, and no little investment, is being spent on improving the operational efficiency of each company. Targeted effort is going into automating and mechanising processes wherever possible.

 

The combination of a tightening labour supply market and the introduction of the Minimum Wage, Auto Enrolment and the Apprentice Levy have all led to significant increases in the cost of employing people, presupposing the right skilled people can be found. We believe that this situation will only get worse in the future and it is, therefore, essential that we work at "future-proofing" the businesses today.

 

Trading in the current year is marginally behind the Board's expectations. However, we expect the Group to make progress as the year unfolds.

 

 

 

David Horner

Chairman

 

10 May 2018

 

 

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

 

 

David Horner, Chairman, CEPS PLC

Tel: 01225 483030

 

Tony Rawlinson, Cairn Financial Advisers LLP

James Caithie

Nominated Adviser

Tel: 020 7213 0880

 

CEPS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2017

 

	2017	2016
	£'000	£'000
Continuing operations
Revenue (note 4)	23,601	24,320
Cost of sales	(18,187)	(19,465)
Gross profit	5,414	4,855
Administration expenses	(4,313)	(4,319)
Operating profit	1,101	536
Goodwill impairment	(847)	(611)
Adjusted operating profit/(loss)	254	(75)
Analysis of operating profit/(loss)
- Trading	1,423	844
- Goodwill impairment	(847)	(611)
- Group costs	(322)	(308)
	254	(75)
Finance income	128	26
Finance costs	(337)	(416)
Profit on disposal of investment	10	-
Profit/(loss) before tax	55	(465)
Taxation (note 5)	(276)	(448)
Loss for the year from continuing operations	(221)	(913)
Other comprehensive loss: Items that will not be reclassified to profit or loss
Actuarial loss on defined benefit pension plans	(66)	(80)
Items that may be subsequently reclassified to profit or loss	-	-
Other comprehensive loss for the year, net of tax	(66)	(80)
Total comprehensive loss for the year	(287)	(993)
(Loss)/income attributable to:
Owners of the parent	(532)	(1,132)
Non-controlling interest	311	219
	(221)	(913)
Total comprehensive (loss)/income attributable to:
Owners of the parent	(598)	(1,212)
Non-controlling interest	311	219
	(287)	(993)
Earnings per share
- basic and diluted (note 6)	(4.11)p	(11.83)p

 

 

CEPS PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

	2017	2016
	£'000	£'000
Assets
Non-current assets
Property, plant and equipment (note 7)	2,320	2,419
Intangible assets (note 9)	5,600	5,738
Deferred tax asset	226	220
	8,146	8,377
Current assets
Inventories	1,770	2,020
Trade and other receivables	3,691	3,701
Cash and cash equivalents (excluding bank overdrafts)	1,371	840
	6,832	6,561
Total assets	14,978	14,938
Equity
Capital and reserves attributable to owners of the parent
Called up share capital (note 10)	1,320	957
Share premium	4,843	3,943
Retained earnings	(2,556)	(1,924)
	3,607	2,976
Non-controlling interest in equity	1,347	1,227
Total equity	4,954	4,203
Liabilities
Non-current liabilities
Borrowings	2,223	2,600
Trade and other payables	313	-
Deferred tax liability	71	80
Provisions for liabilities and charges	50	50
	2,657	2,730
Current liabilities
Borrowings	3,503	3,838
Trade and other payables	3,556	3,934
Current tax liabilities	258	171
Provisions for liabilities and charges	50	62
	7,367	8,005
Total liabilities	10,024	10,735
Total equity and liabilities	14,978	14,938

 

The profit within the parent company financial statements for the year was £301,000 (2016: £160,000).CEPS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 DECEMBER 2017

	2017	2016
	£'000	£'000
Cash flows from operating activities
Profit/(loss) before income tax	55	(465)
Adjustments for:
Depreciation and amortisation	497	478
Intangible assets written off	847	611
Loss on disposal of property, plant and equipment	(17)	-
Net finance costs	209	390
Changes in working capital:
Decrease in inventories	250	10
Decrease/(increase) in trade and other receivables	11	(546)
(Decrease)/Increase in trade and other payables	(75)	578
(Decrease)/increase in provisions	(12)	57
Cash generated from operations	1,765	1,113
Income tax paid	(229)	(236)
Interest received	128	26
Interest paid	(337)	(416)
Net cash generated from operations	1,327	487
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired	(444)	(188)
Increase in existing shareholding in subsidiary	(7)	-
Purchase of property, plant and equipment	(266)	(899)
Proceeds from sale of assets	32	-
Purchase of intangibles	(11)	(33)
Disposal of property, plant and equipment	-	-
Interest received	-	26
Net cash used in investing activities	(696)	(1,094)
Cash flows from financing activities
(Repayment of)/proceeds from borrowings	(476)	1,067
Proceeds from share issue net of issue costs	1,263	-
Dividend paid to non-controlling interests	(225)	(180)
Repayment of capital element of finance leases	(386)	(321)
Net cash generated from financing activities	176	566
Net increase/(decrease) in cash and cash equivalents	807	(67)
Cash and cash equivalents at the beginning of the year	44	111
Cash and cash equivalents at the end of the year	851	44

 

 

 

CEPS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2017

	Share capital	Share premium	Retained earnings	Attributable to owners of the parent	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2016	957	3,943	(712)	4,188	873	5,061
Actuarial loss	-	-	(80)	(80)	-	(80)
(Loss)/profit for the year	-	-	(1,132)	(1,132)	219	(913)
Total comprehensive (loss)/ income for the year	-	-	(1,212)	(1,212)	219	(993)
Dividend paid to non-controlling interest	-	-	-	-	(180)	(180)
Total distributions recognised directly in equity	-	-	-	-	(180)	(180)
Acquisition of a subsidiary	-	-	-	-	315	315
At 31 December 2016	957	3,943	(1,924)	2,976	1,227	4,203
Actuarial loss	-	-	(66)	(66)	-	(66)
(Loss)/profit for the year	-	-	(532)	(532)	311	(221)
Total comprehensive (loss)/income for the year	-	-	(598)	(598)	311	(287)
Changes in ownership interest in a subsidiary	-	-	(34)	(34)	34	-
Dividend paid to non-controlling interest	-	-	-	-	(225)	(225)
Total distributions recognised directly in equity	-	-	(34)	(34)	(191)	(225)
Proceeds from shares issued net of costs	363	900	-	1,263	-	1,263
At 31 December 2017	1,320	4,843	(2,556)	3,607	1,347	4,954

 

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 2017 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issuance on 10 May 2018. The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2017 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting. The auditors' reports on the statutory accounts for the years ended 31 December 2016 and 31 December 2017 were unqualified and do not contain statements under s498(2) or (3) Companies Act 2006 .This financial information has been prepared in accordance with the International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Details of the accounting policies applied are set out in the financial statements.Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.

The Group financial statements are presented in GBP (£) 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 10 May 2018.

3. Critical accounting assumptions, judgements and estimates

The fair values of all financial assets and liabilities approximate to their carrying values.

 

a) Impairment of intangible assets (including goodwill and customer relationships)

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

 

b) Deferred tax assets

Certain subsidiaries of the Group (principally Davies Odell) have accelerated capital allowances and brought forward tax losses. Deferred tax assets have been recognised in respect of the brought-forward tax losses. The recognition of the assets reflects management's estimate of the recoverable amounts in respect of these items.

 

c) Retirement benefit liabilities

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

 

d) Acquisitions

During the year Hickton Holdings Limited acquired 100 per cent of BRCS (Building Control) Limited. Management has made estimates concerning the intangible assets arising on acquisition as well as the fair value of the assets and liabilities at the acquisition date.

4. Segmental analysis

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

 

Operating segments and their principal activities are as follows:

- Aford Awards, a sports trophy and engraving company

- CEM Press, a manufacturer of fabric and wallpaper pattern books, swatches and shade cards

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

- Friedman's, a convertor and distributor of specialist Lycra

- Hickton, a supplier of services to the construction industry

- Sunline, a supplier of services to the direct mail market

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

 

The United Kingdom is the main country of operation from which the Group derives its revenue and operating profit and is the principal location of the assets and liabilities of the Group. The Group information provided below, therefore, also represents the geographical segmental analysis. Of the £23,601,000 (2016: £24,320,000) revenue £21,001,000 (2016: £21,666,000) is derived from UK customers with the remaining £2,600,000 (2016: £2,654,000) being derived from a number of overseas countries, none of which is material in isolation.

 

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

 

i) Results by segment

Year ended 31 December 2017

	Aford Awards	CEMPress	DaviesOdell	Friedman's	Hickton	Sunline	Total
	2017	2017	2017	2017	2017	2017	2017
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	1,907	2,414	3,804	5,053	3,748	6,675	23,601
Segmental result (EBITDA)	328	(310)	33	1,198	447	224	1,920
Depreciation and amortisation charge							(497)
Goodwill impairment							(847)
Group costs							(322)
Net finance costs							(209)
Profit on disposal of investments							10
Profit before taxation							55
Taxation							(276)
Loss for the year							(221)

 

Year ended 31 December 2016

	Aford Awards		CEMPress	Davies Odell		Friedman's	Hickton	Sunline	Total
	2016		2016	2016		2016	2016	2016	2016
	£'000		£'000	£'000		£'000	£'000	£'000	£'000
Revenue	1,596	2,954		4,317	4,555		2,961	7,937	24,320
Segmental result (EBITDA)	298	(149)		(10)	887		386	(90)	1,322
Depreciation and amortisation charge									(478)
Goodwill impairment									(611)
Group costs									(308)
Net finance costs									(390)
Loss before taxation									(465)
Taxation									(448)
Loss for the year									(913)

 

 

 

ii) Assets and liabilities by segment

 

As at 31 December

	Segment assets		Segment liabilities		Segment net assets
	2017	2016	2017	2016	2017	2016
	£'000	£'000	£'000	£'000	£'000	£'000
CEPS Group	41	30	(1,078)	(873)	(1,037)	(843)
Aford Awards	1,558	1,465	(346)	(430)	1,212	1,035
CEM Press	1,400	2,422	(1,627)	(1,924)	(227)	498
Davies Odell	1,974	1,919	(1,401)	(1,353)	573	566
Friedman's	3,860	3,549	(800)	(915)	3,060	2,634
Hickton	3,368	2,431	(1,942)	(1,220)	1,426	1,211
Sunline	2,777	3,122	(2,830)	(4,020)	(53)	(898)
Total - Group	14,978	14,938	(10,024)	(10,735)	4,954	4,203

 

5. Tax

	2017	2016
	£'000	£'000
Analysis of taxation in the year:
Current tax
Tax in respect of current year	317	215
Tax in respect of prior years	(21)	14
Total current tax	296	229
Deferred tax
Current year deferred tax movement	(20)	-
Origination and reversal of temporary differences	-	219
Total deferred tax	(20)	219
Total tax charge	276	448
Deferred tax charged to the Consolidated Statement of Changes in Equity	-	-

 

The tax assessed for the year is higher (2016: higher) than the standard rate of corporation tax in the UK (19%) (2016: 20%)

 

Factors affecting current tax:
Profit/(loss) before taxation	55	(465)
Profit/(loss) multiplied by the standard rate of UK tax of 19%(2016: 20%)	11	(93)
Effects of:
Permanent differences	306	308
Current year deferred tax movement	(20)	-
Prior year adjustment, current tax	(21)	14
Prior year adjustment, deferred tax	-	219
Total tax charge	276	448

 

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

 

Reduction in the United Kingdom corporation tax rate to 17% (effective from 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future current tax charge accordingly. The deferred tax balance has been calculated based on the rate of 19%.

 

 

 

 

 

 

6. Earnings per share

Basic earnings per share is calculated on the loss for the year after taxation attributable to owners of the parent of £532,000 (2016: loss £1,132,000) and on 12,951,576 (2016: 9,573,822) ordinary shares, being the weighted number in issue during the year.

 

No adjustment is required for dilution in either year as there are no items that would have a dilutive impact on earnings per share.

 

7. Property, plant and equipment

		Leasehold property improvements	Plant, machinery, tools and moulds	Motor vehicles	Total
Group		£'000	£'000	£'000	£'000
	Cost
	at 1 January 2016	138	5,657	166	5,961
	Additions at cost	20	727	4	751
	Assets acquired on purchase of a subsidiary	20	128	-	148
	Disposals	-	(46)	(15)	(61)
	at 31 December 2016	178	6,466	155	6,799
	Additions at cost	15	380	21	416
	Assets acquired on purchase of a subsidiary	21	45	-	66
	Disposals	-	(64)	(28)	(92)
	at 31 December 2017	214	6,827	148	7,189
	Accumulated depreciation
	at 1 January 2016	96	3,645	98	3,839
	Assets acquired on purchase of a subsidiary	20	105	-	125
	Adjustment	-	1	1	2
	Charge for the year	9	440	17	466
	Disposals	-	(42)	(10)	(52)
	at 31 December 2016	125	4,149	106	4,380
	Assets acquired on purchase of a subsidiary	21	33	-	54
	Charge for the year	9	452	17	478
	Disposals	-	(20)	(23)	(43)
	at 31 December 2017	155	4,614	100	4,869
	Net book amount
	at 31 December 2017	59	2,213	48	2,320
	at 31 December 2016	53	2,317	49	2,419

 

At the year end, assets held under hire purchase contracts and capitalised as plant, machinery, tools and moulds have a net book value of £1,479,000 (2016: £1,679,000) and an accumulated depreciation balance of £2,194,000 (2016: £1,961,000).

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

 

8. Acquisitions in 2017

(a) BRCS (Building Control) Limited

During the year Hickton Holdings Limited acquired 100 per cent of the issued share capital of BRCS (Building Control) Limited. The initial consideration was £616,000 with the balance of the consideration payable over the next two years, dependent on financial performance over the period. No equity investment from CEPS was required to undertake the transaction, which was completed on 18 May 2017.

 

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 £132,000.

 

Goodwill of £717,000 arose from the acquisition. Of this amount £182,000 was allocated to customer lists.

 

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

	Fair Value
	£'000
Identifiable assets
Cash and cash equivalents	98
Property, plant and equipment	12
Trade and other receivables	146
Trade and other payables	(120)
Deferred tax liabilities	(4)
	132
Consideration calculation
Purchase price consideration	616
Deferred consideration	226
Stamp duty	7
	849
Goodwill	717
Analysis of cash flows on acquisition
Cash paid	616
Less: net cash acquired with subsidiary	(98)
Net cash flow on acquisition	518

 

From the date of acquisition BRCS (Building Control) contributed £273,000 of revenue and £72,000 loss before tax. If the combination had taken place at the beginning of the year, revenue would have been £519,000 and loss before tax would have been £4,000.

 

(b) Acquisition of additional interest in CemTeal Limited

During the year the Group acquired an additional 7% interest in the voting shares of CemTeal, increasing its effective ownership interest to 80%. Cash consideration of £7,000 was paid to the non-controlling shareholders. The carrying value of the net liabilities of CemTeal (excluding goodwill on the original acquisition) was £27,000. Shown below is a schedule of the additional interest acquired:

 

	£'000
Cash paid to non-controlling shareholders	7
Less: carrying value of the additional interest	27
Difference recognised in retained earnings	34

 

9. Intangible assets

		Goodwill	Customer lists	Other	Total
Group		£'000	£'000	£'000	£'000
	Cost
	at 1 January 2016	6,736	577	69	7,382
	Acquisition	1,679	-	-	1,679
	Additions at cost	-	13	20	33
	At 31 December 2016	8,415	590	89	9,094
	Acquisition	535	182	-	717
	Additions at cost	-	-	11	11
	At 31 December 2017	8,950	772	100	9,822
	Accumulated amortisation and impairment
	at 1 January 2016	2,700	-	30	2,730
	Adjustment	-	-	3	3
	Amortisation charge	-	1	11	12
	Impairment	611	-	-	611
	at 31 December 2016	3,311	1	44	3,356
	Amortisation charge	-	4	15	19
	Impairment	847	-	-	847
	at 31 December 2017	4,158	5	59	4,222
	Net book amount
	at 31 December 2017	4,792	767	41	5,600
	at 31 December 2016	5,104	589	45	5,738

 

Goodwill is not amortised under IFRS, but is subject to impairment testing either annually or on the occurrence of a triggering event. Amortisation charges are included in administration expenses.

 

Customer lists are assessed to have indefinite life. When a decision is taken to terminate a product or service, the related customer lists are amortised over the remaining life of the product. Impairment reviews are undertaken annually or if changes in circumstances indicate a potential impairment.

 

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

 

Impairment tests for intangible assets (goodwill and customer lists)

 

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

 

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

 

	Aford Awards	CEMPress	Friedman's	Hickton	Sunline	Total
	£'000	£'000	£'000	£'000	£'000	£'000
at 1 January 2016	1,039	1,435	1,528	-	611	4,613
Acquisition of subsidiary	-	-	-	1,679	-	1,679
Additions - customer lists	13	-	-	-	-	13
Amortisation charge	(1)	-	-	-		(1)
Impairment	-	-	-	-	(611)	(611)
at 31 December 2016	1,051	1,435	1,528	1,679	-	5,693
Acquisition of subsidiary	-	-	-	535	-	535
Additions - customer lists	-	-	11	182	-	193
Amortisation charge	(4)	-	(11)	-	-	(15)
Impairment	-	(847)	-	-	-	(847)
at 31 December 2017	1,047	588	1,528	2,396	-	5,559

 

The recoverable amount of CGU is based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five year period. Cash flows beyond five years are assumed to be constant. A discount rate of 9.95% (2016: 10.85%), representing the estimated pre-tax cost of capital has been applied to these projections. The risk profile of both CGUs is considered to be similar.

 

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

 

	Revenue growth		Gross margin		Long-term growth
	2017	2016	2017	2016	2017	2016
	%	%	%	%	%	%
Aford Awards	3.0	1.0	31.6	32.4	1.0	1.0
CEM Press	2.0	1.0	34.0	38.7	1.0	1.0
Friedman's	5.0	3.0	42.0	42.0	2.0	2.0
Hickton Consultants	2.0	1.0	41.1	37.0	-	-
Sunline	2.0	2.0	42.2	33.0	1.0	1.0

 

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

 

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

 

At December 2017 an impairment charge of £847,000 was taken against the carrying value of goodwill related to CemTeal. This reflected the challenging economic and trading environment of the pattern book market in which the business was operating.

 

10. Share Capital

	Number of shares	Share capital	Share premium	Total
		£'000	£'000	£'000
At 1 January 2016 and 31 December 2016	9,573,822	957	3,943	4,900
Shares issued	3,626,118	363	907	1,270
Transaction costs	-	-	(7)	(7)
At 31 December 2017	13,199,940	1,320	4,843	6,163

 

 

11. Distribution of the Annual Report and Notice of AGM

A copy of the 2017 Annual Report, together with a notice of the Company's Annual General Meeting to be held at 11:30am on Monday 18 June 2018 at 11 Laura Place, Bath BA2 4BL, will be sent to all shareholders on Wednesday 16 May 2018. Further copies will be available to the public from the Company Secretary at the Company's registered address at 11 Laura Place, Bath BA2 4BL and from the Group website, www.cepsplc.com.

 

This information is provided by RNS

The company news service from the London Stock Exchange