ENTU UK Regulatory News (ENTU)

Entu (UK) plc

Final Results for the Year Ended 31 October 2015

· Revenue growth of 7.3% to £99.0m on continuing operations

· Operating profit before exceptionals of £8m - in line with guidance

· Cash at year end of £1.4m and no debt

· Recommended final dividend of 2.67 pence per share - in line with guidance

· Total ordinary dividend for the year of 5.34 pence per share

· Current order book in excess of £27m

· Core Home Improvements business performed well

· Successful acquisition and integration of Astley, acquired in March 2015

· Board and senior management team strengthened

· Swift action taken to close Solar business following dramatic cuts in feed-in tariffs

· Initiatives to improve profit performance underway

· Job Worth Doing ("JWD"), the Group's branded national installation service, awarded the "Which" approved "Trusted Trader" status

Chief Executive Ian Blackhurst said:

"The closure of the solar business and the required investment in infrastructure has undoubtedly affected the profit potential of the Group over the next couple of years. Accordingly, the Group is now taking a more prudent view on the outcome for the year than it had previously. The Board currently expects that the results for the year ended 31 October 2016 will be marginally below those reported for the year ended 31 October 2015 for continuing operations.

"Despite the challenges we have faced this year and will continue to face as we reshape the business in response to market changes, our core strategy remains unchanged. We have market leading positions, a diversified product portfolio and an improving understanding of the market in which we operate. We look forward to the future with confidence in our ability to deliver growth and improved shareholder returns over the medium term."

ENQUIRIES

Chairman's Statement

Results

Group revenue for the year fell only slightly from £119.0m to £116.9m despite the closure during the year, as previously announced, of the Group's solar business and the sale of Norwood Interiors (UK) Limited ("Norwood"). Both the solar business and Norwood have been classified in these accounts as discontinued operations.

Group revenue from our continuing operations increased from £92.3m to £99.0m. Group operating profit from continuing operations (before exceptional items) fell 13% to £8.0m (2014: £9.2m). Losses from discontinued operations amounted to £3.8m (2014: profit £1.1m) and exceptional charges were £0.5m (2014: £1.3m). Taxation was £1.0m (2014: £2.2m). As a result, total profit for the year fell to £2.7m from £6.7m. Earnings per Share from continuing operations (before accounting for exceptional items) increased from 8.7p per share to 9.9p per share with Earnings per Share on a statutory basis falling to 4.2p per share (2014: 10.3p).

At the year end, the Group had net cash of £1.4million (2014: £5.8m) and no borrowings.

Dividend

As a result of its limited distributable reserves at the point of IPO, the Company did not declare a final dividend for the year ended 31 October 2014, but did instead declare a special dividend amounting to 1.5p per share which was paid on 13 March 2015.

Subsequently the Board declared and paid an interim dividend of 2.67p per share and, as forecast, is recommending a final dividend of 2.67p per share payable on 6 May 2016 to shareholders on the register on 8 April 2016.

In the coming year the Board aims to maintain the current level of dividends, and would expect the payment profile to return to a more orthodox split paying one third as an interim dividend and two thirds as a final dividend.

Review of the year

The flotation of the Group in October 2014 represented the start of another significant phase in its progression. As a result of being listed, the improved profile of the Group has undoubtedly increased the number of potential business and acquisition opportunities available to it, as well as improved senior management retention. However, although the majority of the Group's core operations performed well during the year, the Group faced one substantial issue.

The UK market for Solar PV had become increasingly competitive and, despite a continuing fall in the cost of solar panels year on year, it was becoming difficult to foresee how margins could be maintained in the future.

Subsequently, the dramatic cut in feed-in tariffs recently announced by the government rendered the Solar PV product in the UK unattractive to consumers. Against this backdrop, the Board came to the considered view that the Group's resources would be better allocated elsewhere in the Group. Accordingly, the business of selling solar products to retail customers was closed in the run up to the year end. The prompt decision to close the solar division was difficult but necessary, but it allows the Group to avoid the risk of future trading losses in this sector and focus Group management and resources on alternative and more attractive areas of growth.

Additionally, the small Norwood kitchen interiors business, which the Group considered non-core to its operations and its strategy, was also sold for a nominal sum during the year.

As the year progressed, it also became apparent that the Group needed to invest further in infrastructure and senior management resource in order to fulfil its obligations as a public company.

These issues, important as they are, disguise the fact that the Group's other trading divisions all had a good year. Nevertheless, the closure of the solar division, and the resultant inability to allocate overheads against that division in the future, highlight the need for the management team to ensure sales costs and other variable costs are controlled, whilst simultaneously reducing fixed overheads arising from the Group's various brands and operating locations to a minimum.

The acquisition of Astley Facades Limited ("Astley") in March 2015 has proved very beneficial. Whilst its contribution to this year's result is modest, the opportunity to cross sell the Group's services and broaden the customer base are particularly significant. The Board is therefore confident that the full benefits of this acquisition will be seen this year and in the future.

Profit improvement initiatives

When the decision to close the solar business was made, the Board turned its attention to a review of the Group's cost base as well as a number of profit improvement initiatives aimed at driving out process inefficiencies in its various sales and delivery models, whilst preserving the high level of customer satisfaction required to make any business in this sector a success.

Board

There have been a number of changes to the Board during the year as we have sought to expand the skills, experience and resources available to the Group this year.

On 29 May 2015, Geoff Stevens was appointed to the Board as Chief Financial Officer ("CFO ") at the same time as Darren Cornwall assumed the position of Corporate Development Director. The Board had intended the CFO role to be part time, supported by a central finance function and other executive management. The Board now believes the role needs to be full time and as a result, following an extensive external search, it was announced on 14 January 2016 that Neill Skinner had joined the Board as CFO on a full time basis.

Neill has extensive experience of financial leadership roles, having previously been CFO at AIM-listed Clean Air Power and having held senior financial roles at British Nuclear Fuels plc. He is a Chartered Accountant who began his career at PwC and EY. Neill also has a strong commercial background, having been International Development Director and then Strategy Director at Speedy Hire PLC before joining Clean Air Power. On the same date, Geoff Stevens stepped down as Chief Financial Officer and assumed the role of Non-executive director replacing David Grundy who resigned during the year. The Board would like to thank David Grundy for his wise counsel during the flotation process and up until his resignation on 28 August 2015.

After the conclusion of the forthcoming AGM, Geoff will be appointed Chairman of the Audit Committee and become a member of the Remuneration Committee. The Board is delighted that they will retain the knowledge and experience of Geoff Stevens in his new role.

On 14 January 2016 we also announced the appointment of Andrew Corless to the Board as Chief Operating Officer. Andrew Corless is currently Managing Director of Entu Energy Services, which comprises the Group's installation businesses Job Worth Doing ("JWD") and Astley. Andrew has been with Entu since September 2014 during which time he led JWD and the growth of corporate and commercial contracts. Andrew's promotion reflects the importance to Group strategy of the development of long term corporate contracts, and of Entu's installation platform, which is a key differentiator for the Group.

People

Our transition to public company status in what has been a difficult year would not have been achieved without the enthusiasm, professionalism and commitment of our people. On behalf of the Board, I would therefore like to thank them for their hard work and enthusiasm in embracing the changes necessary over the year, and as the Group aims to drive for greater efficiencies and synergy benefits in the coming year.

Acquisitions

Whilst the short term focus is on securing gains from operational efficiencies and organic growth, it remains the Board's long term strategy to make selective acquisitions to further develop the Group's position as a national medium-sized operator in what is a highly fragmented sector. We therefore continue to actively seek complementary acquisitions in the product and geographical areas in which we currently operate, providing always that we can see a sensible return for the Group and its shareholders within a modest timescale. We recognise that these aims can be met through commercial partnerships and distribution agreements potentially at lower cost and lower risk to shareholders, as well as through outright acquisitions. It is fair to say that the executive management of the Group would have hoped to have completed more than one acquisition in its first year as a public company.

Trading Update and Outlook

There is a trading update in the Chief Executive's report which follows this statement.

It remains clear that the flotation will provide the Group with additional opportunities for growth, both by raising the profile of its existing businesses and through a wider range of sources of funding for acquisitions and investment. The Board intends to take advantage of these new opportunities as much as is prudent, whilst ensuring that the risks inherent in the Group remain properly managed and controlled.

The strategy remains unchanged. Entu is one of the UK's leading home energy efficiency groups providing energy efficiency products and services to homeowners and businesses nationwide. We are aiming to build a business that anticipates a broadening of its sales channels and is well placed to serve them, with an increasing range of products, through an efficient and established infrastructure.

The Group enters the 2015/16 financial year with an ungeared balance sheet, a variety of new growth opportunities and an internal infrastructure better suited to its needs. The Board therefore remains confident that the Group is well placed to take advantage of the opportunities presented by the Company's flotation for further profitable growth.

David M Forbes

Chairman

Chief Executive's Statement

Overview

This has been a year of mixed fortunes for the Group following its admission to AIM in October 2014. On the one hand the acquisition of Astley, although small, was an excellent example of our successful acquisition strategy, not only in increasing Group profits from Astley itself but also the new opportunities that Astley brings to other businesses within the Entu Group. On the other hand, the difficulties that we faced in the solar business and its subsequent closure as the Government slashed feed in tariffs for consumers was a significant blow. It may take us some time to find alternative sources of profit to completely replace those lost through the solar closure. Our strategy continues to be to develop a diversified and integrated product portfolio with, at its core, high levels of customer satisfaction across the product range. It is also fair to say that management time has been diverted as we have come to understand our new obligations as a publicly listed company.

Results

The Group's results for the year ended 31 October 2015 included in this annual report and accounts show the progress we have made to date. Despite the closure of our solar business and the sale of Norwood during the year, Group revenue fell only slightly from £119.0m to £116.9m. Perhaps more importantly going forward our revenue from continuing operations increased from £92.3m to £99.0m.

Group operating profit (before exceptional items) from our continuing operations was £8.0m, a 13% decrease from £9.2m in 2014. Discontinued operations, solar and Norwood, in aggregate contributed a loss of £3.8m after related central cost recharges and closure costs (2014: Profit £1.1m).

During the year the Group incurred exceptional charges of £0.8m, £0.3m of which related to discontinued operations and which are detailed in note 5 to the financial statements included in this document. This compares to exceptional charges of £1.3m for the year ended 31 October 2014 which related to costs associated with the listing on AIM.

Taxation was £1.0m (2014: £2.2m). As a result, total profit for the year fell to £2.7m from £6.7m.

Adjusted earnings per share (excluding discontinued operations and exceptional items) for the year ended 31 October 2015 was 10.7p (2014: 10.7p). Basic earnings per share fell to 4.2p (2014: 10.3p).

At 31 October 2015, the Group had cash equivalents of £1.4m with no drawn borrowings, compared to net cash and cash equivalents of £5.8m a year earlier. The principal cash outflows during the year included dividends of £2.7m and IPO fees of £1.3m. The acquisition of Astley with its different working capital profile is a large part of the reason for the increase in receivables.

Operational Review

During the year, the Group redefined its segmental reporting analysis to reflect the closure of its solar division and the sale of Norwood. In particular, the closure of the solar division eliminated the vast majority of revenue and costs from the existing Energy Generation & Saving segment, and the remaining boiler revenue and costs were therefore merged for reporting purposes, with the Insulation segment under the new title Energy Saving & Insulation.

Home Improvements

Our home improvement products, doors, windows, conservatories and roofline, are sold through separate brands which are market leaders in their respective regions. The division, which remains our largest single division, has continued to perform well as our market share has held up.

Margins came under pressure in common with the industry as a whole but also as the division began to rationalise its finance offering in the second half, resulting in lower finance commission in the run up to a full re set of the division's finance offering (in the light of recent FCA guidance) with effect from 1 November 2015.

The order book continued to remain strong at approximately £9m throughout the year (2014 approximately £9m), and was £9m at the year-end. We continue to sense increasing consumer confidence as home owners decide to make improvements to their homes.

In the year to 31 October 2015, the division (excluding Norwood referred to below) reported profits of £4.0m (2014: £4.1m) on sales of £82.0m (2014: £80.6m). Net margin for the division was 4.9% (2014: 5.1%).

During the year, the Group decided to dispose of its Norwood business because it was considered non-core to its operations and its strategy. On 1 October 2015, the Norwood business was disposed of for a nominal sum. In the year ended 31 October 2015, Norwood made attributable losses of £0.6m (2014: £0.3m) on revenue of £3.3m (2014: £3.7m).

Energy Saving & Insulation

During the year, products sold included solar photovoltaic installations, air to air heat pumps, voltage regulators, remote heating controls and boilers as well as cavity wall insulation, external wall insulation and loft insulation.

At the beginning of the year, we saw significant disruption in our solar business caused by the poaching of part of our sales team by a competitor. A great deal of management time and resources were devoted to recruitment, training and managing this business in order to ensure that the customer experience was affected as little as possible by this disruption. The Group was then hit by the Government's decision to slash feed-in tariffs which rendered the solar panel product dramatically less attractive to consumers. Faced with an obvious collapse of customer demand, the Group took a prompt decision to cease selling its solar panel products to the consumer. Since that point, it has wound down its solar installation activities in order to meet its existing obligations. Many of the sales personnel have been retrained in other parts of the Group's activities in order to minimise job losses and redundancy costs.

The acquisition of Astley is significant. Astley is a market leader in energy efficient insulation and cladding products. Whilst it was loss making when it was acquired, it is now trading profitably. Its order book now stands in excess of £18m which has grown from just over £2m when the business was acquired. The Board sees this area as one of real opportunity as we expand into new energy efficiency markets through new products and skills.

For the year ended 31 October 2015, divisional sales for the continuing businesses were £14.3m (2014: £9.3m), an increase of 54% due largely to the acquisition of Astley in March 2015. This excluded sales of £14.5m (2014: £23.0m) related to the sale of solar product to retail customers, now discontinued. Attributable profit for continuing operations was £1.9m (2014: £3.2m). The shortfall in profit in this division arose almost entirely in insulation products, where attributable profit dropped from £2.7m in 2014 to £1.7m this year as a result of the reduction of carbon offset funding through energy suppliers, although volumes have increased.

The discontinued solar business was budgeted to contribute, after central costs, some £1.6m to Group profit. Instead, when central costs are taken into account, the solar business has lost £3.1m this year including exceptional redundancy costs of £0.3m. The value of the Group's diversified offering is shown by the modest impact this closure will have on the Group's results in the medium term.

Notwithstanding the setback, Energy Saving & Insulation continues to be a segment in which we see significant opportunities for growth in the long term with the increasing adoption of energy efficient products and technologies.

Repair and Renewals Service Agreement (RRSA)

Our RRSA programme is an annual cover plan offered to customers on the majority of our products. It represented £2.7m of Group sales during the year up 12% on the previous year (2014: £2.4m). Attributable profit of £2.1m (2014: £1.9m) was earned giving the segment a margin of 78.9% in 2015 (2014: 78.8%) and, at the year end, around 55% of our customers were members of the programme (2014: 55%). One of the attractions of this business is that the run off value grows year on year and currently stands at £12.5 million based on current attrition levels.

JWD

Our national installation service, JWD, has comprehensive nationwide coverage with 80% of the population living within one hour's drive of one of our fourteen strategically located installation service centres. It therefore unites all our brands and products, and facilitates cross selling and the roll out of new products and services.

During the year, the division has sought contracts to build on its high quality installation network across the UK with corporate customers and national retail chains. For one national retail chain, after successful regional trials, JWD has been appointed as a national installation partner for its energy efficient windows and door products. Whilst it is early days yet, there are good signs that the partner installation process is working well, quality levels are being maintained and that the retailer is pleased with the progress made to date. The key to this work is customer satisfaction levels and the Company is working hard in this area in order to seek more work from national retailers of energy efficient products. To support our commitment to service, JWD has been awarded the "Which" approved "Trusted Trader" status. We believe JWD is the first national installer of energy efficient products to achieve this.

Entu Energy Services does not account separately for its work the vast majority of which is for other Group companies and to whom all costs are directly recharged. As the amount of work carried out directly for third parties becomes material, we will consider how best to account for this revenue and profit.

The opportunities for Entu

 A significant opportunity amongst the Group's existing portfolio is in the area of energy saving and efficiency. With household energy costs rising materially in recent years and continuing cost volatility, consumers' recognition of the long term economic advantages of energy efficiency continues to drive adoption. The Group covers this need across all of its divisions but particularly in cavity wall insulation, loft insulation, high efficiency boilers and the growing use of technology in controlling energy usage in the home. With our unique offering we are well placed to establish a market leading presence in the home efficiency market due to our integrated portfolio of services.

Another significant opportunity is the cross selling of the Group's products and services into our base of 1.2 million customers. For example, in energy switching, we are beginning to offer all our customers the opportunity to seamlessly switch their energy supplier to the most cost effective option, with total independence and saving consumers up to 40% off their energy bills. Whilst this is a new area for Entu, early signs are encouraging.

We are currently at an early stage of promoting products that will allow consumers to monitor their energy usage online and also to control remotely, on a real time basis, their use of energy within the home. Secondly, there is a major push on replacing older and inefficient boilers with new energy efficient boilers making material savings on household bills.

Entu's Group focus on these areas will help it develop its market leading position in energy efficiency.

The Opportunities in JWD

The balance between customer satisfaction, customer service and maximising efficiencies within our operating model has always been a difficult one to get right. Over the last six months, we have undertaken a thorough review of our processes from the point of sale through to final payment in order to remove some of the inefficiencies in that model whilst preserving high standards of customer satisfaction. Customer satisfaction is crucial to the cross selling of Group products and the additional contribution generated. We are targeting increasing conversion rates, minimising wasted visits and the introduction of survey fees, all in order to help minimise the amount of time spent by our installation teams which is not income generating. Some of the changes were introduced on 1 November 2015 and we are encouraged by the results so far.

Longer term we have to be prepared for changes in the way our products are sold by the market. Through JWD we are building a platform that can anticipate and access different sales channels with a common flexible delivery platform.

New Products

Through JWD we have a national installation service covering over 80% of the population. We are actively looking, therefore, at the opportunity to introduce new products to this network which will allow further efficiencies in the use of that network as well as providing contribution from those new product lines themselves. Acquisitions of, and commercial partnerships in relation to, complementary product lines and market areas in our highly fragmented sector remain a key part of our strategy.

Common Branding

Entu has been built by combining a series of brands, each of which have been leaders in their own regional markets. Behind these brands, we have developed JWD as a national installation service. We are investigating and examining the benefits of replacing those various brands with the Entu brand across the UK. Up until now, each brand has had its own way of accessing its own market, recognising that there are various approaches which work differently in different regions of the UK. However, we are now seeking ways of reducing the burden of supporting all those brands, and also looking at the practices both in the sales areas and in the way each operation interacts with JWD in order to drive further profit improvements and efficiencies from the various models we operate. We need to do this in a way which preserves, as far as possible, the goodwill built up in each of those brands. This will not be an overnight process, but we believe that it will allow us to be more efficient when making further moves towards unified brands in our Home Improvement business.

Central Costs

Running a listed company with public shareholders requires additional management time and investment to meet our obligations in terms of corporate governance, shareholder interest and the time spent interacting with the City. We have had to recruit and invest in our Board and infrastructure in order to fulfil these obligations. At the same time, the closure of our solar division means that our central costs will have to be recovered over a smaller portfolio of businesses. We therefore have to make our businesses more efficient and grow our portfolio of businesses through the introduction of new products and complementary acquisitions and/or eliminate some central costs in order that those costs do not become an undue burden on the Group.

Trading update

The closure of the solar business and the required investment in Group infrastructure has undoubtedly affected the profit potential of the Group over the next couple of years. Critically the central and management costs that had historically been allocated to the solar division, need to be eliminated or absorbed across the remaining continuing operations or by businesses yet to be acquired and/or they will need to be offset against growth opportunities elsewhere or from the profit improvement initiatives referred to above. Accordingly, the Group is now taking a more prudent view on the outcome for the year than it had previously. The Board currently expects that the results for the year ending 31 October 2016 will be marginally below those reported for the year ended 31 October 2015 for continuing operations.

Outlook

Despite the challenges we have faced this year and will continue to face as we reshape the business in response to market changes, our core strategy remains unchanged. We have market leading positions, a diversified product portfolio and an improving understanding of the market in which we operate. We look forward to the future with confidence in our ability to deliver growth and improved shareholder returns over the medium term.

Ian P Blackhurst

Chief Executive

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 October

The comparative figures for the year ended 31 October 2014 have been restated to reflect the discontinued operations disclosed in note10.

The notes below are an integral part of these consolidated financial statements.

There are no other items of comprehensive income for the year other than the profit attributable to the equity holders

CONSOLIDATED BALANCE SHEET

At 31 October

The financial statements above and below were approved by the Board of Directors and authorised for issue.

They were signed on its behalf by:

Ian Blackhurst

Group Chief Executive Officer

28 January 2016

Entu (UK) plc

Registered number 08957339

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 October

Equity attributable to the equity holders

Share capital

The share capital account includes the nominal value of all shares issued and outstanding.

Retained earnings

The retained earnings reserve includes the accumulated profits and losses arising from the consolidated statement of comprehensive income, and certain items from the statement of changes in equity attributable to equity shareholders net of distributions to shareholders.

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting policies

General information

The principal activity of Entu (UK) plc ('the Company') and its subsidiaries' (together 'the Group') is the sale of replacement windows, double glazing, entrance doors, patio doors and exterior improvement products within the United Kingdom. The Group closed its solar operation during the year.

The Company is incorporated and domiciled in the UK. The Company's registered number is 08957339 and its registered office is 8 Bow Chambers, Tib Lane, Manchester, M2 4JB.

The Company is a public limited company and has its primary listing on the AIM division of the London Stock Exchange.

The consolidated and company financial statements were authorised for issue by the Board on 28 January 2016.

Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), IFRS Interpretations Committee (IFRS IC) Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have also been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The financial statements have been prepared in GBP, being the Groups presentational currency and have been presented in thousands.

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Additional details on the Group's critical accounting estimates are provided below.

Basis of consolidation

The Group controls an entity when the Group has power over an entity, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group has applied IFRS 10 retrospectively in accordance with transition provisions of IFRS 10.

The accounting periods of subsidiary undertakings are coterminous with those of the Company. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Subsidiaries' accounting policies have been changed, where necessary, to ensure consistency with the policies adopted by the Group.

Transactions, balances and unrealised gains on transactions between Group companies have been eliminated on consolidation. Unrealised gains have also been eliminated to the extent that they do not represent an impairment of a transferred asset.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

1. Accounting policies continued

Adoption of new or amended standards and interpretations in the current year

In the current year, the following new or amended standards have been adopted.

IFRS 10 "Consolidated financial statements" is effective for annual reporting periods beginning on or after 1 January 2014. This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within consolidated financial statements.

IFRS 11 "Joint arrangements" is effective for annual periods beginning on or after 1 January 2014. This standard provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. This is not expected to have a material impact.

IFRS 12 "Disclosure of interests in other entities" is effective for annual periods beginning on or after 1 January 2014. This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

IFRIC 21 "Levies", sets out the accounting for an obligation to pay levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy. The Company is not currently subject to significant levies so the impact on the Company is not material. Effective for annual periods beginning on or after 1 January 2014.

IAS 27 (revised) "Separate financial statements" is effective for annual periods beginning on or after 1 January 2014. This standard includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10.

IAS 28 (revised) "Investments in associates and joint ventures" is effective for annual periods beginning on or after 1 January 2014. This standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11.

IAS 32 "Offsetting financial assets and liabilities" is effective for annual periods beginning on or after 1 January 2014 and provides clarification on the application of offsetting rules.

The adoption of these new standards has had no material impact on the Group financial statements for the year ended 31 October 2015.

New or amended standard and interpretations in issue but not yet effective or EU endorsed

The following are new standards, amendments to standards and interpretations that are expected to apply to the Group, which have not been applied in these financial statements, were in issue, but are not yet effective, or EU endorsed.

IFRS 9 "Financial Instruments" is effective for annual reporting periods commencing on or after 1 January 2018 (not currently EU endorsed).

IFRS 15 "Revenue from contracts with customers" is effective for annual reporting periods starting on or after 1 January 2018 onwards.

Annual improvements 2010-2012 (effective 1 July 2014) (endorsed for 1 Feb 2015)

Amendment to IAS 19, 'Employee benefits', on defined benefit plans (effective 1 July 2014) (endorsed for 1 Feb 2015)

Amendment to IFRS 11,'Joint arrangements' on acquisition of an interest in a joint operation (effective 1 January 2016) (subject to EU endorsement)

Amendment to IAS 16 ,'Property, plant and equipment' and IAS 38,'Intangible assets', on depreciation and amortisation (effective 1 January 2016) (subject to EU endorsement)

Amendments to IAS 16, 'Property, plant and equipment' and IAS 41, 'Agriculture' on bearer plants (effective 1 January 2016) (subject to EU endorsement)

Amendments to IAS 27, 'Separate financial statements' on equity accounting (effective 1 January 2016) (subject to EU endorsement)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

1. Accounting policies continued

New or amended standard and interpretations in issue but not yet effective or EU endorsed continued

Amendments to IFRS 10, 'Consolidated financial statements' and IAS 28,'Investments in associates and joint ventures' on applying the consolidation exemption (effective 1 January 2016) subject to EU endorsement

Amendments to IAS 1,'Presentation of financial statements' disclosure initiative (effective 1 January 2016) (subject to EU endorsement)

The Group is in the process of assessing the impact these new or amended standards may have on the Group financial statements in future periods. At the current time the Group is not able to reliably estimate the potential impact of these standards and further disclosure of the potential impact will be given in future periods when a reliable estimate has been established.

Going concern

The financial statements have been prepared on a going concern basis. For the purpose of considering going concern the board has considered a period of at least 12 months from the date of approving these financial statements. The principal operating and financial risks facing the Group are set out in note 3 on pages x to x of these financial statements. The Directors, having taken account of future forecast trading and cashflows and the availability of funding and facilities consider that it remains appropriate to adopt the going concern basis of preparation in these financial statements.

Revenue

Revenue from the sales of goods is recognised when the Group has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Group will receive the previously agreed upon payment. These criteria are considered to be met when installation has been completed.

The Group acquired Astley Facades Limited ('Astley') during the year. Astley engages in the provision of goods and services that meet the definition of long term contracts as defined in IAS 18 and as such they are accounted for in a manner consistent with the nature of the contracts. Revenue from contracts operated by Astley is measured based on the stage of completion which is assessed and measured by qualified chartered surveyors. Revenue is recognised having taken account of the total forecast revenue under the terms of the contract and the agreed stage of completion. Where contracts are forecast to be loss making full provision is made for the loss when it is first forecast. Where amounts have been billed to customers in excess of the stage of completion of contracts, revenue is deferred and is recognised as the contracts progress. Where the stage of completion has exceeded the amounts billed to customers, revenue is accrued in line with contractual terms.

Revenue is recognised net of VAT and any sales discounts and rebates offered. Warranty sales are recognised at the point of sale, which is upon the completion of installation as the contracts are non-cancellable following an initial 14 day cooling off period.

Provided the amount of revenue can be measured reliably and it is probable that the Group will receive the appropriate consideration, revenue for services is recognised in the period in which they are rendered.

Finance commission income

The Group recognises finance commissions receivable from finance providers upon receipt, which occurs upon completion of the sale of finance to the end customer. In so doing, provisions are put in place for an estimated claw back of commission receivable based upon past history. Finance commission income is recognised within revenue in the statement of comprehensive income.

Exceptional items

The Group separately discloses items which are considered by the Directors to be exceptional in nature rather than being representative of the underlying trading of the Group. The Directors apply judgement in assessing the particular items concerned which by virtue of their scale and nature, are disclosed in further detail in note 5 to the financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

1. Accounting policies continued

Discontinued operations

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operation that has either been sold or closed. Where operations are discontinued through closure they are classified as discontinued when such operations have ceased.

Discontinued operations are presented in the combined statement of comprehensive income as a single line, which comprises the post-tax profit or loss of the discontinued operations concerned, together with the post-tax gain or loss recognised on sale or closure.

Prior periods are re stated for comparative purposes.

Segmental reporting

Operating segments are reported in a manner consistent with the internal monitoring of performance provided to the Chief Operating Decision maker (CODM), who is responsible for allocating resources and assessing performance. The CODM has been defined as the Executive Board.

Goodwill

Goodwill represents the excess of the cost of a business combination over the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets acquired, liabilities assumed and equity instruments issued. Consideration is included in cost at the fair value at the acquisition date and, in the case of contingent consideration classified as a financial liability, re-measured subsequently through profit or loss. Direct costs of acquisition are recognised immediately as an expense in profit or loss.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the date of acquisition.

Goodwill impairment

Goodwill is allocated to each of the Group's cash generating units expected to benefit from the combination. Cash generating units to which goodwill has been allocated are tested annually for impairment, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in profit or loss.

Business combinations

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group's share of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income. Costs directly attributable to the cost of the acquisition are expensed to the statement of comprehensive income as an exceptional item.

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1. Accounting policies continued

Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

The Group's ordinary shares are classified as equity instruments.

Dividends

Dividends are recognised when they are approved by shareholders and become legally payable.

Property plant and equipment

Assets are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the item concerned.

Depreciation is charged so as to write off the cost or valuation of assets, other than land, over their estimated useful lives, using the straight line method, on the following basis:

per annum

Residual values, remaining useful lives and depreciation methods are reviewed annually and adjusted if appropriate.

Gains or losses on disposal are included in the profit or loss for the year within administrative costs.

Leases

Payments made under operating leases are recognised in profit and loss on a straight line basis over the term of the lease. The aggregate benefit of lease incentives is recognised as a reduction in the rental expense over the lease term on a straight line basis.

Trade receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment is made when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables, and is measured as the difference between the carrying value and the present value of estimated future cash flows. Subsequent recoveries of previously impaired trade receivables are recognised as a credit to profit as recorded.

Trade payables

Trade payables are not interest bearing, and are stated at fair value and subsequently measured at amortised cost.

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1. Accounting policies continued

Borrowings

Interest bearing bank loans and overdrafts are recorded at fair value, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis through the statement of comprehensive income using the effective interest method, and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and balances with banks, including outstanding bank overdrafts.

Financial instruments

On initial recognition the Group classifies financial instruments (or their component parts) as a financial asset, financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are recognised in the balance sheet at fair value when the Group becomes a party to the contractual arrangements concerned.

Defined contribution schemes

Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year in which they are incurred.

Finance income and costs

Finance income and costs are recognised in the statement of comprehensive income in the period in which they are incurred.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Weighted average cost is used to determine the cost of ordinarily interchangeable items.

Provisions

The Group recognises provisions for liabilities where the timing or amount may be uncertain, including provisions for warranty claims. Provisions recognised are the best estimate of the expenditure required to settle the obligation at the reporting date, discounted at a pre-tax rate.

The Group's principal provisions are in respect of potential warranty costs that may arise on the sale of goods to customers, where warranties are offered. Provisions for future warranty costs are recognised at the date the sale is completed based on management's best estimate of future costs and historical experience discounted at an appropriate rate. Adjustments are made to the warranty provision where additional information becomes available that provides evidence that the existing level of provision may need to be adjusted.

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1. Accounting policies continued

Share based payments

The Group operates a number of equity settled, share based compensation plans. The economic cost of awarding shares and share options to employees is recognised as an expense in the statement of comprehensive income equivalent to the fair value of the benefit awarded. The fair value is determined by reference to option pricing models, principally Black-Scholes and Monte Carlo models. The fair value of the award is recognised in the statement of comprehensive income over the vesting period of the award. At each balance sheet date, the Group revises its estimate of the number of options that are expected to become exercisable. Any revision to the original estimate is reflected in the statement of comprehensive income with a corresponding adjustment to equity, immediately, to the extent it relates to past service and the remainder over the rest of the vesting period. All options cancelled are fully expensed to the statement of comprehensive income upon cancellation.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

Any amount charged or credited to the statement of comprehensive income by any of the Group's subsidiaries is reflected in the books of the Company via an increase or decrease in investments, with a corresponding increase or decrease to equity. These entries are eliminated within the consolidated financial statements.

Taxation

Tax expense represents the sum of income tax payable and deferred tax.

Income tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group's liability for current and deferred tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced to the extent that it is not probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited to equity, in which case the deferred tax is also dealt with in equity.

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

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2. Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that carry a higher risk of a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Critical accounting judgements and key sources of estimation uncertainty

· Impairment of goodwill

Determining whether goodwill is impaired requires an estimate of the 'value in use' of the cash generating units from which goodwill has been derived. The 'value in use' calculation requires an entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. Any change in estimates could result in an adjustment to recorded amounts.

· Warranty provisions

The Group holds warranty provisions to cover the estimated cost of possible future remedial work. Such costs are estimated based upon applicable sales made (including those made before the acquisition of any companies acquired) and the Group's historical experience of warranty claims made against sales, and the net present value of the costs involved is calculated using an appropriate discount rate. Any change in the historical experience of warranty claims, method of estimation of the costs involved or the discount rate could lead to an adjustment of the warranty provision.

· Astley revenue recognition

Astley Facades (UK) Limited recognises revenue based on the stage of completion of long term contracts, measured by qualified chartered surveyors. The level of revenue and profit recognised is determined based on the stage of completion and the estimated costs to complete the contracts concerned. In so doing, management apply estimates in determining the stage of completion and costs to complete which, were they to ultimately differ, could impact the level of revenue and profit recognised.

3. Financial instruments - risk management

General objectives, policies and processes

The Directors of the Group's parent company entu (UK) plc have overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.

The overall objective of the Directors is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the method used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

Financial instruments include trade receivables, trade payables and cash and cash equivalents which are treated as loans and receivables or financial liabilities at amortised cost for IFRS 7 classification purposes.

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3. Financial instruments - risk management continued

Credit risk

Credit risk is the risk that financial loss arises from the failure of a customer or counterparty to meet its obligations under a contract. The Group has dedicated standards, policies and procedures to control and monitor all such risks. Although the Group is potentially exposed to credit loss in the event of non-performance by counterparties, such credit risk is managed through third party credit rating agencies (for corporate customers) and internal financial reviews of the counterparties involved, and by limiting the total amount of exposure to any one party.

An analysis of the international long term credit ratings of counterparties where cash and cash equivalents are held is as follows:

The Group is also exposed to credit risk in respect of amounts due from Trade receivables. Given the nature of the Group's operations and customer base there is no concentration of credit risk to the Group. Therefore no additional disclosure has been provided in respect of the credit worthiness of counterparties given that they are largely individuals and not companies.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group monitors its risk to a shortage of funds through the regular forecasting of its cash position and effective cash management. The Group's objective is to maintain a balance in the continuity of its available funds to allow it to invest as necessary.

Capital risk management

The primary objective of the Group's capital management process is to ensure that it maintains a strong credit rating and healthy capital ratios. 

The Group manages its capital structure and makes adjustments to suit economic conditions. In the absence of any long term debt, the Group regards called up share capital and retained earnings as its capital.

The Group sets the amount of capital required in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The Group does not seek to maintain any particular capital ratio, but will consider opportunities on their merits and fund them in the most effective manner.

Fair value and cash flow interest rate risk

The Group had no outstanding loan balances throughout the year other than short term overdrafts. Therefore a change in LIBOR of 1%, being the average change in the LIBOR rate seen over the last 12 months, would change the Group's profit before tax by an insignificant amount.

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3. Financial instruments - risk management continued

Financial instruments by category

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4. Segmental analysis

The Chief Operating Decision Maker (CODM) has been identified as the Executive Board which comprises the three Executive Directors. The CODM reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports, including an allocation of central costs as appropriate.

The CODM considers the business from an operating perspective and the reporting segments are Home Improvements, Energy Saving & Insulation and the Repair and Renewal Service Agreements. In the prior year the Group reported the new Energy Saving and Insulation segment as two distinct segments, being Energy Generation & Saving, and Insulation. As result of the decision to close the Groups solar operations, the CODM now considers the performance of these two segments as one and segmental reporting has been amended to align with the Groups internal reporting and management.

The CODM assesses performance based on operating profit before any exceptional items. Other information provided to the CODM, except as noted below, is measured in a manner consistent with that of the financial statements. The analysis below covers analysis of statement comprehensive income only, as no monthly balance sheet analysis is reported by segment.

All revenue, profit and assets of the Group and all segments arise in the Companies country of domicile, being the United Kingdom.

Operating segments

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4. Operating segments continued

The segmental analysis has restated to reflect the impact of the closure of the solar division along with the sale of Norwood Interiors (UK) Limited.

The Group's revenue and profit principally arise from the sale of goods.

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5. Exceptional items

Discontinued exceptional costs represent reorganisation costs following the closure of the Group's solar operations and the consequent need to reduce the overhead cost base within the Group as a whole.

Exceptional costs in the prior year related to legal and professional fees incurred as part of the Group's IPO.

6. Profit for the year from continuing operations - analysis by nature

Profit for the year has been arrived at after charging:

A more detailed analysis of auditors' remuneration is provided below:

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7. Directors and employees

Employee benefits

The average monthly number of employees (including Executive Directors) was as follows:

Costs incurred in respect of the above were as follows:

In order to provide a flexible operational resource the Group also contracts with selfemployed sales and installation staff.

Directors' remuneration

The costs incurred in respect of the Directors (who are regarded as key management personnel) including Non-Executive Directors, were as follows:

There were no costs in respect of share based payments for the year (2014: £nil).

For the year ended 31 October 2015 the highest paid Director received total remuneration of £285,000 (2014: £385,000) and pension contributions of £1,200 (2014: £1,200).

8. Finance income and costs

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9. Taxation

UK corporation tax is calculated at 20.42% (2014: 21%) of the estimated assessable profit for the year.

The tax charge for the year can be reconciled to the profit in the consolidated statement of comprehensive income as follows:

Factors that may affect future tax charges 

Changes to UK corporation tax rates were announced in the Chancellor's Budget on 8 July 2015 and were substantively enacted into UK law on 26 October 2015. These include reductions to reduce the principal rate to 19% from 1 April 2017 and to 18% from 1 April 2020.

As the changes have been substantively enacted at the balance sheet date deferred tax balances have been re measured to the rate at which the deferred tax amounts are expected to reverse, which ranges between 20% and 18% according to the nature of each element of deferred tax. The impact of the changes in tax rates has not been material to the Group.

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10. Discontinued operations

Solar division

On 2 September 2015 the board signalled its intention to pull out of the retail solar market as a result of continuing uncertainty in the level of future 'feed in' tariffs supporting the commercial case for end user customers, and increasingly challenging market conditions. As a result the Group ceased sales of solar panels by the year end, and limited the costs of closure through the retraining and re allocation of experienced sales staff to other Group activities.

Statement of comprehensive income:

The associated cash outflow for the year was £3,869,000 (2014: cash inflow £1,071,000).

Norwood Interiors (UK) Ltd

On 2 October 2015 the Group completed the disposal of its Kitchen retail operation, Norwood Interiors (UK) Ltd, as this operation did not form part of the Group's core strategy

Statement of comprehensive income:

The associated cash outflow for the year was £742,000 (2014: cash outflow £528,000).

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11. Dividends

Proposed final dividend

The Directors are pleased to declare a final dividend of 2.67 pence for the year ended 31 October 2015, which will be paid in accordance with the following timetable:

Ex-dividend date: 7 April 2016

Record date: 8 April 2016

Payment date: 6 May 2016

The resulting final dividend amounting to £1,752,000 has not been recognised as a liability in these financial statements.

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12. Earnings per share

Basic earnings per share and diluted earnings per share are calculated by dividing profit for the year attributable to equity holders by the weighted average number of shares in issue.

Basic earnings per share is calculated using the weighted average number of ordinary shares in issue during the year, excluding those held by the Company or any of its subsidiaries, based on the profit for the year attributable to shareholders.

Adjusted earnings per share figures are given to exclude the effects of discontinued operations and exceptional items, all net of taxation, and are considered to show the underlying performance of the Group.

Deferred shares have been excluded from the basic and diluted number of shares as deferred shares carry no voting rights and no rights to any distributions to be made by the Group.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. The Company has dilutive potential ordinary shares arising from share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year and where performance conditions attached to shares, as applicable, are expected to be achieved.

Potential ordinary shares are dilutive at the point, from a continuing operations level, when their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations. Potential ordinary shares have been treated as dilutive, as their inclusion in the diluted earnings per share calculation decreases earnings per share from continuing operations.

There were no events occurring after the balance sheet date that would have changed significantly the number of ordinary shares or dilutive potential ordinary shares outstanding at the balance sheet date if those transactions had occurred before the end of the reporting year.

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12. Earnings per share continued

Adjusted basic and diluted earnings per share figures are calculated by dividing adjusted profit after tax for the year by the weighted average number of shares in issue (as above). The adjusted profit after tax, which is deemed by the Directors to give a better understanding of the underlying trading performance of the Group, is as follows:

13. Intangible assets 

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13. Intangible assets continued

Goodwill has arisen as follows:

Impairment testing of goodwill

The allocation of goodwill to Cash-Generating Units (CGU) is as follows:

The recoverable amount of a CGU is determined based on 'value-in-use' calculations. These calculations use pre-tax cash flow projections based on financial budgets, covering three years that are approved by the Board. Income and costs within the budgets are derived on a detailed, 'bottom up' basis. All income streams and cost lines are considered and appropriate growth / decline, rates are assumed for each based on historical experience, all of which are then reviewed and challenged, firstly by senior management and ultimately by the Board. Income and cost growth forecasts are risk adjusted to reflect the specific risks facing each CGU and take account of the markets in which they operate. Cash flows beyond the budgeted period are extrapolated using the estimated growth rate stated below. The growth rate does not exceed the long term average growth rate for the markets in which the CGUs operate. Further, it is assumed that there are no material adverse changes in legislation that would affect the forecast cash flows. The key assumptions used in the 'value-in-use' calculations for each CGU are as follows:

· Growth rate (after budget period): 2.0%

· Market risk premium: 5.75%

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13. Intangible assets continued

The pre-tax discount rate used within the recoverable amount calculations was 10.0% (2014: 10.0%) and is based upon the weighted average cost of capital reflecting the specific principal risks and uncertainties applicable to each CGU. The discount rate takes into account, amongst other things, the risk free rate of return, the cost of equity and the market risk premium, which is used in deriving the cost of equity. The same discount rate has been used for each CGU as the principal risks and uncertainties associated with the Group, as highlighted earlier in this report as being those risks with the highest likelihood or impact, would also impact each CGU in a similar manner. The Board acknowledge that there are additional factors that could impact the risk profile of each CGU given the difference in operations, customer base and trading performance over recent years. These additional factors were considered by way of a sensitivity analysis performed as part of the annual impairment tests. A sensitivity analysis has been performed around the base assumptions with the conclusion that no reasonable possible changes in key assumptions would cause the recoverable amount of the goodwill assets to be less than the carrying value.

Having completed the 2015 annual impairment review, the Group has recognised no impairment (2014: £nil). The level of any impairment recognised is predominantly dependent upon judgements used in arriving at future growth rates and the discount rate applied to cash flow projections. Key drivers to future growth rates are dependent on the Group's ability to maintain and grow income streams whilst effectively managing operating costs. The level of headroom may change if different growth rate assumptions or a different pre-tax discount rate were used in the cash flow projections.

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14. Property, plant and equipment

At 31 October 2015, the Group had entered into commitments for the acquisition of property, plant and equipment amounting to £nil (2014: £nil).

15. Inventories

Inventories are regularly reviewed and written off on an ongoing basis in the event the customer cancels their order. The cost of inventories recognised as an expense and included in cost of sales amounts to £30.6m (2014: £33.1m). 

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16. Trade and other receivables

The fair value of trade and other receivables has been considered to be consistent with the book value given their short term nature.

Movements in the Group provision for impairment of trade receivables are as follows:

Provisions are estimated by management based on past default experience and their assessment of the current economic environment. The creation and release of provisions for receivables is charged/(credited) to administrative expenses in the statement of comprehensive income.

The credit risk of customers is assessed at a subsidiary and Group level, taking into account their financial positions, past experiences and other relevant factors. Individual customer credit limits are imposed, as appropriate, based on these factors.

Given the nature of the Groups customer base the Group has no concentration of credit risk, and therefore no additional analysis of credit risk has been deemed required.

No other receivables have been deemed to be impaired.

The following table shows trade receivables at the reporting date which are overdue and for which no allowance for impairment has been recognised:

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17. Cash and cash equivalents

Cash and cash equivalents represent cash at bank and in hand and bank overdrafts. Bank overdrafts have been offset against cash at bank and in hand as the Group has an enforceable right to offset and settle bank overdrafts net with cash at bank and in hand. As at 31 October 2015 bank overdrafts offset against cash at bank and in hand totalled £0.9m (2014: £0.5m)

18. Trade and other payables

Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs. The Directors consider the carrying amount of trade and other payables approximates to their fair value due to their short term nature.

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19. Deferred tax

Certain deferred tax assets and liabilities have been offset in accordance with IAS 12 'Income taxes'. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

There are no amounts on which a deferred tax asset is not recognised.

20. Provisions