Volvere Regulatory News (VLE)

Volvere plc

("Volvere" or the "Company" and, together with its subsidiaries, the "Group")

Final results for the year ended 31 December 2019

Volvere plc (AIM: VLE), the growth and turnaround investment company, announces its final results for the year ended 31 December 2019.

Highlights

· Good performance from Shire Foods, the Group's food manufacturing business, which achieved revenue and profit before tax and intra-group management and interest charges(2) of £23.04 million (2018: £18.34 million) and £1.38 million (2018: £0.85 million) respectively. Profit before tax for the year was £1.18 million (2018: £0.65 million).

· Positive exit with the disposal of Sira Defence & Security for £3 million.

· Share buy-backs undertaken in 2019 returned a total of £16.6 million to shareholders.

· Record net assets per share(1) of £13.85.

Forward-looking statements:

This report may contain certain statements about the future outlook for Volvere plc. Although the Directors believe their expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

Note

1 Based on the net assets attributable to owners of the parent company and the respective period end shares in issue of 1,834,182, 3,118,109 and 1,834,182.

2 Profit before intra-group management and interest charges is considered to be a relevant and useful interpretation of the trading results of the business such that its performance can be understood on a basis which is independent of its ownership by the Group. Further information is included in the Chief Executive's statement and Financial review.

For further information:

Hobart Capital Markets LLP

Lee Richardson Tel: +44 (0) 20 7070 5691

Chairman's statement

I am pleased to report on the results for the year ended 31 December 2019.

The Group's performance in 2019 was once again pleasing, with a good trading performance from Shire Foods and a disposal in May 2019 of Sira Defence & Security for £3 million. Following the share buy-backs totalling £16.6 million in 2019, the Group's net assets per share* increased to £13.85 (2018: £12.50).

David Buchler

Chairman

28 May 2020

*Net assets attributable to owners of the parent company divided by total number of ordinary shares outstanding at the reporting date (less those held in treasury), see note 19.

Chief Executive's statement

Introduction

The results of 2019 reflect the trading performance of Shire Foods Limited ("Shire") and the gain on the disposal of Sira Defence & Security Limited ("Sira"), which was sold in May 2019. I was once again pleased with Shire's performance for the year and delighted with the positive exit from Sira. I wish the Sira team well in their new home and thank them for their contribution to the Group.

Principal activities

The Company is a holding company that identifies and invests in undervalued and/or distressed businesses and securities as well as businesses that are complementary to existing Group companies. The Company provides management services to those businesses.

The trading subsidiaries' activities during the year were food manufacturing and security software solutions. In light of the disposal of Sira, which formed the security software solutions segment, that company's activities have been classified as discontinued. The financial performance of the remaining segments is summarised below and set out in more detail in the financial review, as well as note 5 to the consolidated financial statements.

The Group acquired the business and certain assets of Indulgence Patisserie Limited ("Indulgence") in February 2020. Indulgence manufactures premium frozen desserts and cakes for the retail and foodservice markets.

Operating review

Food manufacturing

Shire, in which the Group has an 80% stake, was acquired in 2011. The company manufactures frozen pies, pasties and other pastry products for food retailers and foodservice customers.

Revenues grew by approximately 26% to £23.04 million (2018: £18.34 million) and the company achieved a profit before tax, intra-group interest and management charges of approximately £1.38 million (2018: £0.85 million). Profit before tax was £1.18 million (2018: £0.65 million) - with the difference being intra-group interest and management charges. Further commentary on the financial performance is set out in the financial review.

I am pleased with the growth achieved in 2019, which came principally from a deepening of relationships with existing customers, resulting in wider distribution and broader product ranges. Particularly encouraging was the growth in vegan product lines, where we believe we have developed flavours and textures that appeal to a wide consumer audience. Our new product development strategy with respect to vegan products is to make them appealing not only to vegans, but to address the much larger opportunity represented by those consumers wishing to consume less meat.

More generally, our strategy in relation to Shire is continuing to pay dividends - and it did in fact pay a dividend in the period for the first time since we invested of £0.5 million, of which the Group retained £0.4 million. We strive to provide our customers with the best tasting products in their category and to innovate constantly. We employ people that "go the extra mile" and believe that our flat structure, open communication and direct approach makes Shire a partner supplier of choice. We appreciate that without the loyalty of our customers and staff Shire would not have achieved the success, nor have been able to extend and grow its manufacturing capabilities, in the way that it has. I am very grateful to everyone at Shire for their efforts and to our customers for their support.

We know, however, that we need to remain efficient and productive and are investing further in site capacity in 2020 with a further £0.4 million committed to installation of an additional manufacturing line.

The impact of the COVID-19 pandemic is explained below.

Further information about Shire can be found at www.shirefoods.com.

As reported previously, the Group acquired Indulgence in February 2020. Indulgence manufactures a range of premium sweet dessert products for both the retail and foodservice markets. We have been working to integrate that business, streamline its operations and to improve its performance. The impact of COVID-19 pandemic is explained below.

COVID - 19

The Group's trading businesses are both food manufacturers and, as a result, have an important part to play during the current COVID-19 pandemic.

In the first quarter of 2020 there has been an uplift in sales made to our retail customers when compared with the comparable period of 2019. However, it is too early to say whether this will be sustained and ultimately translate into higher sales for the Group for the year overall. In both Shire and Indulgence there are foodservice customers from whom we have seen a downturn in orders.

In the case of Shire, foodservice represented about 12.5% of sales in 2019. We have some reducing debt and stock exposure to those customers but at this time we expect that, once the pandemic restrictions are eased, normal trading will resume over time.

In Indulgence, foodservice previously represented a larger part of sales, but as we are actively rebuilding that business, historical sales are less important. More generally, since the acquisition date, we have been working to improve customer and supplier relationships, increasing teamwork and investing in new systems - and whilst we have been encouraged on a number of fronts, there is still work to be done in making the business more efficient and reducing costs.

Throughout the COVID-19 period to date we have not seen material staff absences from illness and at both companies we have put in place mitigating measures to try to reduce the risk of internal contagion. Whilst those measures are modestly affecting our short-term capacity and resulting in increased labour costs, we are still achieving an encouraging level of output and, for the most part, meeting customer demand. Our staff's welfare is a continual focus.

Irrespective of the current pandemic, the Group is in a strong financial position, with significant cash resources.

Investing and management services

The Group's investing and management services segment comprises central overheads, partially offset by management and interest charges to Group companies and returns from treasury management activities on current asset investments.

Future strategy

We are already seeing increased levels of distressed deal flow due to the COVID-19 pandemic. The length of the economic effects is uncertain, but I fear it is likely to extend well into 2021 and possibly beyond. The anticipated reductions in financial support from state schemes will probably trigger more hardship for individuals and companies.

We will do what we can to rescue those businesses which we believe viable, in all sectors and geographies, in accordance with our investment mandate, but with added focus on building a larger group of food businesses, leveraging our competencies in this area.

Jonathan Lander

Chief Executive

28 May 2020

Financial performance

Detailed information about the Group's segments is set out in note 5 to the consolidated financial statements which should be read in conjunction with this financial review and the Chairman's and Chief Executive's statements.

Overview

The Group's disposal in May 2019 of Sira has resulted in that business's results being treated as discontinued operations and the comparative results for 2018 have been restated accordingly. Group revenue from continuing operations increased by approximately 26% to £23.04 million (re-presented 2018: £18.34 million), all of which arose in Shire.

The overall profit before tax for the year was £3.2 million, including the profit arising from discontinued operations of £3.1 million (re-presented 2018: £23.2 million). The profit before tax on continuing operations was £0.1 million (re-presented 2018: loss £2.5 million), which was a small improvement over the underlying result for 2018 (since the loss for that year was stated after incentive payments of approximately £2.5 million relating to a further discontinued business sold in 2018).

The trading performance of each of our businesses is outlined in the Chief Executive's statement and set out further in note 5 to the consolidated financial statements and below.

Food manufacturing

This segment reflects the trading of Shire Foods, owned since July 2011.

Shire's revenue increased to £23.04 million from £18.34 million in 2018 and profit before tax and intra-group management and interest charges increased to £1.38 million (2018: £0.85 million). Profit before tax for the year was £1.18 million (2018: £0.65 million) - with the difference being intra-group interest and management charges.

The overall materials margin in Shire increased slightly compared to 2018, principally due to price rises agreed with customers that took effect during the year along with an improved product mix towards vegan products. The effect of these was partially offset by the increase in the National Living Wage and employer pension contributions. In addition to further increases in these in 2020, we also expect to see increasing distribution costs.

Shire had no Group debt outstanding at the start or end of the year but did borrow £0.2m for a short period during 2019 (2018: £nil) to meet working capital requirements. Group management charges totalled £0.2 million in the period (2018: £0.2 million). During 2019 Shire invested £1.8 million in new plant and equipment (of which £1.1 million was funded by external debt). The company paid a dividend of £0.5 million, of which £0.1 million was paid to third party shareholders.

Investment revenues, other gains and losses and finance income and expense

Whilst continuing to review and assess further investments in trading activities, the Group had significant cash on hand. This was held on deposit at a UK bank but prevailing low interest rates meant very low investment revenues (£nil) were achieved (2018: £0.12 million). In the previous year, active treasury management resulted in other gains of £0.37 million (2019: nil).

The Group's net finance income was £0.06 million (2018: £0.06 million). Despite the Group's significant cash balances, individual Group trading companies utilise leverage where appropriate, and without recourse to the remainder of the Group.

Profit from discontinued business

The Group sold Sira in May 2019 for a total consideration of £3 million. The gain on sale arising, before management and staff incentives associated with the disposal (which are included in continuing business overheads), was £3.08 million. Of the sale proceeds, £0.24 million is held in escrow, as is customary in such transactions, for a period of 18 months from the date of sale.

Statement of financial position

Overall position

Group net assets were £27.0 million at the year end (2018: £40.4 million). The decrease year-on-year was due principally to treasury share purchases, as explained further below.

Cash and current investments

Year-end cash totalled £19.3 million (2018: £34.1 million).

The principal movements in the cash during the year arose from the disposal of Sira, offset by purchases of the Group's own shares. The final consideration receivable by the Group on the sale of Sira was £3 million (£0.24m of which is in escrow, as explained above). The share purchases resulted in outflows of £16.6 million, bringing share purchases to date to approximately £32 million.

Dividends

In accordance with the policy set out at the time of admission to AIM, the Board is not recommending the payment of a dividend at this time and prefers to retain such profits as they arise for investment in future opportunities, or to purchase its own shares for treasury where that is considered to be in the best interests of shareholders. As noted above, Shire paid a dividend of which third party shareholders received £0.1 million.

Purchase of own shares

During the year the Company purchased 1,283,927 (2018: 550,254) of its own shares, which are held in treasury, at a cost of £16.6 million (2018: £6.1 million).

Earnings per share

Basic and diluted loss per ordinary share from continuing operations was (5.7)p (2018: (63.3)p). The basic and diluted profit per ordinary share from discontinued operations was 127.9p (2018: 649.5p). Total basic and diluted earnings per ordinary share were 122.2p (2018: 586.2p).

Investing strategy

The Company's investing strategy is to invest in, or acquire: quoted companies where, in the Directors' opinion, the market capitalisation does not reflect the value of the assets; any company that is in distress but offers the possibility of a turnaround; and any company that fits strategically with an existing portfolio investment.

The Company may also invest in quoted or unquoted start-up, early or development-stage companies in sectors where the Directors have experience of investing or where they have identified management teams with experience in those areas.

The Company may invest in any company (or similar structure) or third-party fund on a short or long-term basis, where the Directors have experience of investing, especially where such investment is similar or complementary to an existing or past investment of the Company.

The Company may also create and invest in fund vehicles owned, managed or controlled by the Company, including where there is the possibility of raising third party investment; and invest in third party funds where the investment strategy of those funds is in the Directors' opinion similar to that of the Company, and specifically including funds that invest in distressed debt and equity, or that invest in derivative securities of distressed debt or equity.

The Company has a preference for active rather than passive investing and for holding a small number of investments, including a single investment, and does not necessarily seek to diversify risk across a wide range of investments, unless this can be achieved without affecting the Company's active investment style. The Company's preference is to make investments in the UK and Continental Europe.

Where the Company makes a direct investment, investment decisions will be made by the Directors, who collectively have many years of experience in selecting and managing investments. Investments made by fund vehicles, if owned, managed or controlled by the Company, will be made by the executives of the investment manager of the fund vehicle, which will include representatives of the Board. Investments made by fund vehicles owned, managed or controlled by third parties, will normally be made by the fund investment manager which may or may not include the involvement of Company executives.

Screening and due diligence of potential investments (including any initial investment in a fund vehicle) will be carried out by the executive management of the Company. Any decision on whether to proceed will be made by the unanimous decision of the Board.

Outside consultants and professional advisers will be used where appropriate but the Company will endeavour to keep this to a minimum in order to control expenses.

The Board seeks shareholder approval for the investing strategy on an annual basis. The Directors expect to be able to find suitable investment or acquisition candidates within the next 12 months, however there is no time limit and if no suitable acquisition or investment has been identified before the Company's next annual general meeting, the Directors may review the Company's investing strategy at that time.

Key performance indicators (KPIs)

The Group uses key performance indicators suitable for the nature and size of the Group's businesses. The key financial performance indicators are revenue and profit before tax. The performance of the Group and the individual trading businesses against these KPIs is outlined above, in the Chief Executive's statement and disclosed in note 5 to the consolidated financial statements.

Internally, management uses a variety of non-financial KPIs as follows: in respect of the food manufacturing sector order intake, manufacturing output and sales are monitored weekly and reported monthly and order intake is monitored monthly in respect of the security solutions segment.

Principal risk factors

The Company and Group face a number of specific business risks that could affect the Company's or Group's success. The Company and Group invests in distressed businesses and securities, which by their nature often carry a higher degree of risk than those that are not distressed. The Group's businesses are principally engaged in the provision of goods and services that are dependent on the continued employment of the Group's employees and availability of suitable, profitable workload. In the food manufacturing segment, there is a dependency on a small number of customers and a reduction in the volume or range of products supplied to those customers or the loss of any one of them could impact the Group materially. The current COVID-19 pandemic could impact on the Group's employees, customers, suppliers and financial position but has not had a material effect to date.

These risks are managed by the Board in conjunction with the management of the Group's businesses.

More information on the Group's financial risks is disclosed in note 16 to the consolidated financial statements.

Statement by the Directors relating to their statutory duties under s172(1) Companies Act 2006

The Board of Directors considers, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of the members as a whole (having regard to the stakeholders and the matters set out in s172(1)(a-f) of the Act) in the decisions taken during the year ended 31 December 2019.

The Company is a holding company for which the investing strategy is approved by members annually at the Company's Annual General Meeting. The Company's success in following this investing strategy is measurable ultimately in terms of the value arising - both from operating results and upon any final exit - from the investments undertaken.

There is an inherent and probable interdependency between the Company's success and the success of its underlying investments. Those investments are monitored by the Board on a regular basis and the success of those investments is key to the success of the Company over time. However, it is possible that actions taken, or not taken, from time to time by the Board in relation to the underlying investments could be perceived as, or be, in conflict with stakeholder interests within those investments themselves.

Notwithstanding this:

· The Board assesses risk in the application of capital when making investment decisions both at the time of initial investment and subsequently thereafter. The long-term potential outcome of an investment opportunity is inherently uncertain, but the Board seeks to minimise downside risk and achieve investment success.

· The Company and its subsidiaries are dependent upon the loyalty and hard work of their employees and seeks to reward those employees fairly whilst creating an environment that is both safe, secure and rewarding with responsive and trusted leadership.

· The Company's subsidiaries are encouraged to maintain regular and honest contact with customers and suppliers, to understand their needs and to build a partnering approach to business generally for the long term.

· The Company's subsidiaries consider the impact of their operations on their local communities with charitable activities encouraged and supported. 

· The Company and its subsidiaries consider the impact of their operations on the environment, with travel minimised and recyclable packaging materials employed where possible.

· The Board's intention, for itself and for its subsidiaries, is to operate responsibly within a governance culture and framework that is appropriate to nature and size.

· The Board, through its Annual General Meeting and ad hoc Stock Market announcements, communicates with members fairly and equally by providing clear and informative information about the Company's business and its investments. 

Nick Lander

Chief Financial & Operating Officer

28 May 2020

Corporate governance report

All members of the Board believe in the value and importance of good corporate governance and in our accountability to all the Group's stakeholders, including shareholders, staff, clients and suppliers. In the statement below, we explain our approach to governance, and how the Board and its committees operate.

The corporate governance framework which the Group operates, including Board leadership and effectiveness, Board remuneration, and internal control is based upon practices which the Board believes are proportionate to the size, risks, complexity and operations of the business and is reflective of the Group's values. We have partially adopted and partially comply with the Quoted Companies Alliance's ("QCA") Corporate Governance Code for small and mid-size quoted companies (revised in April 2018 to meet the requirements of AIM Rule 26).

The QCA Code is constructed around ten broad principles and a set of disclosures. We have considered how we apply each principle to the extent that the Board judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each. Except as set out below, the Board considers that it does not depart from any of the principles of the QCA Code. The information below was last updated on 11 May 2020.

The following paragraphs set out the Group's compliance (or otherwise) with the ten principles of the QCA Code. 

1. Establish a strategy and business model which promote long-term value for shareholders

Explanation

The Company's strategy is to identify and invest in undervalued and/or distressed businesses and securities as well as businesses that are complementary to existing Group companies. The Company provides management services to those businesses.

Since 2002 the Company's shares have been traded on the Alternative Investment Market ("AIM") of the London Stock Exchange (ticker VLE).

In order to execute the Company's strategy successfully, the following key issues are addressed:

Investment Identification - the Company's executive directors are responsible for identifying potential investments. This is done through maintaining relationships with intermediaries and through personal networks.

Investment Assessment - the Company's executive directors are responsible for assessing potential investments as a basis for delivering long-term shareholder value. This is done principally by undertaking due diligence on such investments, such work being done largely by the executive directors themselves. Where considered necessary, cost-effective and practicable, external advisers may be used.

Investment Structuring - the Company's executive directors are responsible for determining the initial investment structure relating to potential investments. Investments have individual management teams and risk and reward profiles and the Company puts in place an investment structure that seeks to balance the risks and potential rewards for all such stakeholders.

Investment Performance Improvement - the Company's executive directors are responsible for implementing a strategy that improves the performance of investments (where such investments are not simply held for treasury purposes). This will typically involve board leadership and an appropriate level of operational involvement to ensure that financial and operational risks are minimised through increased profitability and cash generation. This is typically done by improving customer service and quality, clearer financial reporting and control, increasing management responsibility and target setting.

Investment Exit - the Board is responsible for assessing the optimum time to exit from an investment. This is determined based on a range of factors, including the potential divestment valuation, the nature of any potential acquirer, the external environment and other stakeholder intentions.

Compliance Departure and Reason - None.

2. Seek to understand and meet shareholder needs and expectations

Explanation

Responsibility for investor relations rests with the CEO, supported by the CFO. The Company communicates in different ways with its shareholders to ensure that shareholder needs and expectations are clearly understood.

Communication with shareholders is principally through the Annual Report and Accounts, full-year and half-year announcements, trading updates and the annual general meeting ("AGM"). A range of corporate information (including all Company announcements) is also available to shareholders, investors and the public on our website. The AGM is the principal opportunity for dialogue with private shareholders, and all Board members seek to attend it and answer shareholder questions. The Notice of Meeting is sent to shareholders at least 21 days before the meeting. In addition, the CEO attends potential investor shows in order to increase the Company's profile.

Compliance Departure and Reason - None.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

Explanation

The Group's ability to deliver on its strategy is dependent partly upon its effective engagement with stakeholders and a wider recognition of the social implications of its operations. In all businesses, the typical key stakeholders are shareholders, customers, staff and suppliers.

Customers - in all businesses the Group seeks to provide clients with products and services that are differentiated from competitors. This is done through meeting clients to understand their needs and through understanding competitors' offerings.

Staff - the Group's staff are critical to delivering client satisfaction over the longer term. All Group companies have in place staff communication forums and flat management structures, which aid communication. Group management is accessible to company staff. In situations where individual subsidiary decisions would impact on staff security or morale, the relevant company will seek to minimise the impact on staff.

Suppliers - to varying degrees the Group is dependent upon the reliable and efficient service of its supply chain. In the case of significant suppliers, each Group company will meet periodically with them to review and determine future trading arrangements and to share the relevant company's requirements of that supplier.

Compliance Departure and Reason - None.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

Explanation

Recognising and managing business risks is key to ensuring the delivery of strategy and the creation of long-term shareholder value.

As part of the Group's annual reporting to shareholders, specific financial risks are evaluated, including those related to foreign currency, interest rates, liquidity and credit. The Group's key risks are set out in the Annual Report & Accounts.

The nature of the Group's operations is such that individual companies are organised independently and operate business and IT systems that are appropriate to their individual businesses. The Audit Committee reviews the findings of the Group's auditors and considers whether there are remedial actions necessary to improve the control environment in each company.

The Group has in place and Anti-Bribery Policy and a Share Dealing Code that apply to staff.

Compliance Departure and Reason - None.

5. Maintain the board as a well-functioning, balanced team led by the chair

Explanation

Board members have a collective responsibility and legal obligation to promote the interests of the Company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.

The Board consists of three directors of which two are executive and one (the Chairman) is non-executive. The Chairman is considered independent and independent directors will stand for re-election on an annual basis in the event of having more than 10 years continuous board service. The QCA Code requires that the Company has two non-executive directors.

The board is supported by both Audit and Remuneration committees, the member of each of which is the Chairman.

The Board meets formally on a regular basis (typically 4-6 times per annum), with interim meetings convened on an as-required basis. The Audit committee undertakes an annual review and the Remuneration committee undertakes reviews on an as-required basis. All directors commit the required time to meet the needs of the Group from time-to-time.

Compliance Departure and Reason - As currently constituted the Board includes only one non-executive director. The Board considers that the size of the Group does not merit the appointment of an additional non-executive director but will continue to review this over time.

6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

Explanation

The Company's directors are David Buchler (Chairman), Jonathan Lander (CEO) and Nicholas Lander (COO/CFO). All members of the Board have experience relevant to delivering the Company's strategy.

The Board believes that, as currently constituted, it has a blend of relevant experience, skills and personal qualities to enable it to successfully execute its strategy.

The Directors' biographies are in the Annual Report and Accounts and incorporated here by reference.

Compliance Departure and Reason - The QCA Code requires, inter alia, that the Company describes the relevant experience, skills, personal qualities and capabilities that each director brings to the Board. The Board believes the individual's biography as noted above, coupled with their successful service to date with the Company, is sufficiently objective evidence that the Board has the necessary requirements to fulfil their roles individually and collectively.

7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

Explanation

The Board does not formally review the effectiveness of itself as a unit nor of the Remuneration and Audit committees. The small size of the Board means that individual directors' contributions are transparent. Where the Company identifies potential Board members, these are noted for any possible future vacancies as part of succession planning or to bring in additional skills or capabilities.

Compliance Departure and Reason - Where the need for Board changes has become evident in the past, the necessary changes have been implemented. It is not considered necessary to formally review performance given this embedded approach, whereby review of effectiveness is continuous.

Explanation

The nature of the Group's businesses are diverse and, by their nature, may have different cultures and values relevant to their sector. However, there are some core values that the Group adopts throughout all its businesses, irrespective of their nature and size.

These values are: honesty, integrity, openness and respect. The Board leads by example, demonstrating through its collective actions and individually as directors through theirs, to local management teams and staff. The Company has an Anti-bribery Policy and makes an annual Modern Slavery statement.

Compliance Departure and Reason - None.

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

Explanation

The Board provides strategic leadership for the Group and operates within the scope of a robust corporate governance framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves setting the culture, values and practices that operate throughout the Group's businesses as well as defining its strategic goals. The Board has approved terms of reference for its Audit and Remuneration committees to which certain responsibilities are delegated.

The individual roles and responsibilities of the Board, the Board members and the Audit and Remuneration Committees are set out below.

The Board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as the Group evolves. The Board is satisfied that the current framework will evolve in line with the current growth plans of the Group.

Compliance Departure and Reason - None.

10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

Explanation

A healthy dialogue should exist between the Board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the Company. In particular, appropriate communication and reporting structures should exist between the Board and all constituent parts of its shareholder base. This will assist:

· the communication of shareholders' views to the Board; and

· the shareholders' understanding of the unique circumstances and constraints faced by the Company. It should be clear where these communication practices are described (annual report or website).

The Group's Annual Report and Accounts and other governance-related material, along with notices of all general meetings over the last five years (as a minimum) are accessible via the Company's website.

Audit Committee Report - the Audit Committee's annual meeting is minuted. All matters raised by the Group's auditors are carefully considered and actions implemented where considered appropriate. The approach and role of the Audit Committee is noted in section 9 above.

Remuneration Committee Report - the Remuneration Committee's meetings are minuted. The remuneration of the Board is set out in the Annual Report and Accounts. The approach and role of the Remuneration Committee is noted in section 9 above.

Compliance Departure and Reason - The Audit Committee and Remuneration Committee have not prepared formal reports as required by the Code. Given the small size of the Board, such formal reporting is not considered necessary.

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of financial position

Company number 04478674

Consolidated statement of cash flows

Notes forming part of the preliminary announcement

The financial information set out above, which was approved by the Board on 28 May 2020, is derived from the full Group accounts for the year ended 31 December 2019 and does not constitute the statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group accounts on which the auditors have given an unqualified report, which does not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2019, will be delivered to the Registrar of Companies in due course. Copies of the Company's Annual Report and Financial Statements are expected to be sent to shareholders on 3 June 2020 and will be available online at www.volvere.co.uk.

1 Accounting policies

Basis of accounting

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations) as adopted by the European Union ("adopted IFRS") and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under adopted IFRS.

Going concern 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. In addition, note 16 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The Group has considerable financial resources and, as a consequence, the directors believe that the Group is well placed to manage the business risks inherent in its activities despite the current uncertain economic outlook.

The directors have a reasonable expectation that the Group has adequate resources to enable it to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

The following principal accounting policies have been applied consistently, in all material respects, in the preparation of these financial statements:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All subsidiaries have a reporting date of 31 December.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.

The results and net assets of subsidiaries whose accounts are denominated in foreign currencies are retranslated into Sterling at average and year-end rates respectively.

Business combinations

The Group applies the acquisition method of accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of the fair value of consideration transferred, the recognised amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.

The purchase of a non-controlling interest is not a business combination within the scope of IFRS 3, since the acquiree is already controlled by its parent. Such transactions are accounted for as equity transactions, as they are transactions with equity holders acting in their capacity as such. No change in goodwill is recognised and no gain or loss is recognised in profit or loss.

Goodwill

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. See above for information on how goodwill is initially determined. Goodwill is carried at cost less accumulated impairment losses and is reviewed annually for impairment.

Revenue recognition

Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the group expects to be entitled in exchange for those goods or services net of discounts, VAT and other sales-related taxes. The group concludes that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer. Payment is typically due within 60 days. Contracts with customers do not contain a financing component or any element of variable consideration. The group does not offer an option to purchase a warranty.

Revenue from the sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally when the customer has taken undisputed delivery of the goods. There are no service obligations attached to the sale of goods. Customer rebates are deducted from revenue.

Revenue earned on time and materials contracts is recognised as costs are incurred. Income from fixed price contracts is recognised in proportion to the stage of completion, determined on the basis of work done, of the relevant contract. 

Revenue from consulting services is recognised when the services are provided by reference to the contract's stage of completion at the reporting date. When the outcome can be assessed reliably, contract revenue and associated costs are recognised by reference to the stage of completion of the contract activity at the reporting date. When the outcome of a contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs that have been incurred and are recoverable. Contract costs are recognised in the period in which they are incurred or, where recoverable from clients, are included in work-in-progress.

Revenue from consulting services relating to fixed price contracts is recognised in relation to the delivery of the performance obligations specified in the contract. Penalties for non-performance against specific terms of the contract are provided for when there is a probable outflow of resources under the contract terms and the amount can be reliably estimated. Such adjustments are deducted from revenue.

Revenue from software licences is recognised either upfront (where the grant of the licence is at inception of a contract and where maintenance is provided as a separate service) or periodically in line with the time for which the licence is provided (where such provision is part of an ongoing managed service).

If it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately in profit or loss.

The gross amount due from customers for contract work is presented within trade and other receivables for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds progress billings. The gross amount due to customers for contract work is presented within other liabilities for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).

Discontinued operations

Discontinued operations represent cash generating units or groups of cash generating units that have either been disposed of or classified as held for sale, and represent a separate major line of business or are part of a single co-ordinated plan to dispose of a separate major line of business. Cash generating units forming part of a single co-ordinated plan to dispose of a separate major line of business are classified within continuing operations until they meet the criteria to be held for sale. The post-tax profit or loss of the discontinued operation is presented as a single line on the face of the consolidated income statement, together with any post-tax gain or loss recognised on the re-measurement to fair value less costs to sell or on the disposal of the assets or disposal group constituting the discontinued operation. On changes to the composition of groups of units comprising discontinued operations, the presentation of discontinued operations within prior periods is restated to reflect consistent classification of discontinued operations across all periods presented.

Operating segments

IFRS 8 "Operating Segments" requires the disclosure of segmental information for the Group on the basis of information reported internally to the chief operating decision-maker for decision-making purposes. The Group considers that the role of chief operating decision-maker is performed collectively by the Board of Directors.

Volvere plc is a holding company that identifies and invests principally in undervalued and distressed businesses and securities as well as businesses that are complementary to existing Group companies. Its customers are based primarily in the UK.

Financial information (including revenue and profit before tax and intra-group charges) is reported to the board on a segmental basis. Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the board represents the profit earned by each segment before tax and intra-group charges. For the purposes of assessing segment performance and for determining the allocation of resources between segments, the board reviews the non-current assets attributable to each segment as well as the financial resources available. All assets are allocated to reportable segments. Assets that are used jointly by segments are allocated to the individual segments on a basis of revenues earned.

All liabilities are allocated to individual segments. Information is reported to the Board of Directors on a segmental basis as management believes that each segment exposes the Group to differing levels of risk and rewards due to their varying business life cycles. The segment profit or loss, segment assets and segment liabilities are measured on the same basis as amounts recognised in the financial statements. Each segment is managed separately.

Leasing

The company applies IFRS 16 Leases. Accordingly leases are all accounted for in the same manner:

- A right-of-use asset and lease liability is recognised on the statement of financial position, initially measured at the present value of future lease payments;

- Depreciation of right-of-use assets and interest on lease liabilities are recognised in the statement of comprehensive income;

- The total amount of cash paid is recognised in the statement of cash flows, split between payments of principal (within financing activities) and interest (also within financing activities)  

The initial measurement of the right-of-use asset and lease liability takes into account the value of lease incentives such as rent free periods.

The costs of leases of low value items and those with a short term at inception are recognised as incurred.

Foreign currencies

Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Gains and losses arising on retranslation are included in net profit or loss for the period.

Retirement benefit costs

The Group's subsidiary undertakings operate defined contribution retirement benefit schemes. Payments to these schemes are charged as an expense in the period to which they relate. The assets of the schemes are held separately from those of the relevant company and Group in independently administered funds.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement 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.

Deferred tax is the tax expected to be payable or recoverable on temporary 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 associates, 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 reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 

Deferred tax is measured on an undiscounted basis using the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Freehold property is revalued on a periodic basis. Depreciation is charged so as to write off the cost or valuation of assets, less their residual values, over their estimated useful lives, using the straight line method, on the following bases:

Freehold property - 1.5% per annum

Improvements to short-term leasehold property - Over the life of the lease

Plant and machinery - 4%-33% per annum

Investments

Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, including transaction costs. Available for sale current asset investments are carried at fair value with adjustments recognised in other comprehensive income.

Investment income

Income from investments is included in the income statement at the point the Group becomes legally entitled to it. Interest income and expenses are reported on an accruals basis using the effective interest method.

Impairment of property, plant and equipment and intangible assets (including goodwill)

At each reporting date the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and any risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Share-based payments

The Group issues equity-settled share-based payments to certain directors and employees. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of options that will ultimately vest.

Fair value is measured by use of a Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Inventories

Inventories are stated at the lower of cost and net realisable value. Raw materials are valued at purchase price and the costs of ordinarily interchangeable items are assigned using a weighted average cost formula. The cost of finished goods comprises raw materials directly attributable to manufacturing processes based on product specification and packaging cost. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, overnight deposits and treasury deposits. The Group considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents.

Financial assets

Recognition and derecognition

Financial assets and financial instruments are recognised when the Group becomes a party to the contractual provisions of the financial asset.

Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire, or when the financial asset and substantially all of the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and initial recognition of financial assets

Except for trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

Financial asset, other than those designated and effective as hedging instruments are classified into the following categories:

- Amortised cost

- Fair value through profit or loss (FVTPL)

- Fair value through other comprehensive income (FVOCI)

The classification is determined by both:

- The entity's business model for managing the financial asset

- The contractual cash flow characteristics of the financial asset 

All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within administrative expenses.

Subsequent measurement of financial assets

Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):

- They are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows

- The contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding

After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where its effect is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category. This category also includes investments in equity instruments.

Financial assets which are designated as FVTPL are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined with reference to active market transactions or using a valuation technique where no active market exists.

Financial assets classified as available for sale (AFS) under IAS 39 (comparative periods)

AFS financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets (FVTPL or held to maturity and loans and receivables). The Group's AFS financial assets include listed equity securities.

All AFS financial assets were measured at fair value. Gains and losses were recognised in other comprehensive income and reported within the AFS reserve within equity, except for interest and dividend income, impairment losses and foreign exchange differences on monetary assets which are recognised in profit or loss. When the asset was disposed of or was determined to be impaired, the cumulative gain or loss recognised in other comprehensive income was reclassified from the equity reserve to profit or loss. Interest calculated using the effective interest method and dividends were recognised in profit or loss within finance income.

Impairment of financial assets

IFRS 9's impairment requirements use forward looking information to recognise expected credit losses - the 'expected credit loss (ECL) method'. Recognition of credit losses is no longer dependent on first identifying a credit loss event, but considers a broader range of information in assessing credit risk and credit losses including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

In applying this forward looking approach, a distinction is made between:

- Financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk ('stage 1') and

- Financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low ('stage 2').

Stage 3 would cover financial assets that have objective evidence of impairment at the reporting date.

12 month expected credit losses are recognised for the first category while lifetime expected credit losses are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial asset.

Trade and other receivables and contract assets

The group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix.

The Group assesses impairment of trade receivables on a collective basis, as they possess shared credit risk characteristics, they have been grouped based on the days past due.

Classification and measurement of financial liabilities

FVTPL: This category comprises only out-of-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the income statement.

Other financial liabilities: Other financial liabilities include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Bank and other borrowings are initially recognised at the fair value of the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense in this context includes initial transaction costs and premia payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Invoice discounting

The Group uses an invoice discounting facility and retains all significant benefits and risks relating to the relevant trade receivables. The gross amounts of the receivables are included within assets and a corresponding liability in respect of proceeds received from the facility is included within liabilities. The interest and charges are recognised as they accrue and are included in the income statement with other interest charges.

Significant management judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The nature of the Group's business is such that there can be unpredictable variation and uncertainty regarding its business. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Significant management judgements (other than estimates)

The judgements that have a significant impact on the carrying value of assets and liabilities are discussed below:

Consolidation

Management have concluded that it is not appropriate to utilise the exemption from consolidation available to investment entities under IFRS 10 as the company is not considered to meet all of the essential elements of the definition of an investment entity as performance is not measured or evaluated on a fair value basis. Accordingly the consolidation includes all entities which the Company controls.

Revenue recognition

Management makes judgements against the terms of fixed price contracts and whether they could result in penalties relating to non-performance against specific terms. This relates to £nil revenue in 2019 (2018: £nil).

Deferred tax asset

The Group recognises a deferred tax asset in respect of temporary differences relating to capital allowances, revenue losses and other short term temporary differences when it considers there is sufficient evidence that the asset will be recovered against future taxable profits.

This requires management to make decisions on such deferred tax assets based on future forecasts of taxable profits. If these forecast profits do not materialise, or there is a change in the tax rates or to the period over which temporary timing differences might be recognised, the value of the deferred tax asset will need to be revised in a future period.

The most sensitive area of estimation risk is with respect to losses. The Group has losses for which no value has been recognised for deferred tax purposes in these financial statements, as future economic benefit of these temporary differences is not probable. If appropriate profits are earned in the future, recognition of the benefit of these losses may result in a reduced tax charge in a future period.

Significant estimates

Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.

Useful lives of depreciable assets

The depreciation charge for an asset is derived using estimates of its expected useful life and expected residual value, which are reviewed annually. Increasing an asset's expected life or residual value would result in a reduced depreciation charge in the consolidated income statement.

Management determines the useful lives and residual values for assets when they are acquired, based on experience with similar assets and taking into account other relevant factors such as any expected changes in technology or regulations.

Inventories

In determining the cost of inventories management have to make estimates to arrive at cost and net realisable value.

Furthermore, determining the net realisable value of the wider range of products held requires judgement to be applied to determine the saleability of the product and estimations of the potential price that can be achieved. In arriving at any provisions for net realisable value management take into account the age, condition and quality of the product stocked and the recent sales trend. The future realisation of these inventories may be affected by market-driven changes that may reduce future selling prices.

Fair value measurement

Management uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

New and revised standards and interpretations applied

The following new and revised Standards and Interpretations have been issued and are effective for the current financial year of the Group:

IFRS 16 was adopted on 1 January 2019 without restatement of comparative figures. No transitional adjustments were required upon adoption.

All leases are accounted for in the same manner:

- A right of use asset and lease liability is recognised on the statement of financial position, initially measured at the present value of future lease payments;

- Depreciation of right-of-use assets and interest on lease liabilities are recognised in the statement of comprehensive income;

- The total amount of cash paid is recognised in the statement of cash flows, split between payments of principal (within financing activities) and interest (also within financing activities).

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs, less any lease incentives received.

The right-of-use asset is subsequently depreciated in accordance with the company's depreciation policies. The estimated useful lives of right-of-use assets are determined on the same basis as those of other tangible fixed assets. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements, all of which are effective for the accounting period commencing 1 January 2020. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

- Amendments to References to the Conceptual Framework in IFRS Standards

- Amendments to IFRS 3: Definition of a Business

- Amendments to IAS 1 and IAS 8: Definition of Material

2 Operating (loss)/profit

Operating (loss)/profit is stated after charging:

3 Staff costs

Staff costs comprise:

The average number of employees (including Directors) in the Group was as follows:

4 Directors' remuneration

The remuneration of the directors was as follows:

The services of Jonathan Lander and Nick Lander are provided under the terms of a Service Agreement with D2L Partners LLP. The amount due under these agreements, which is in addition to the amounts disclosed above, for the year amounted to £528,000 (2018: £861,000). Amounts owed to D2L Partners LLP at the year end totalled £nil (2018: £333,000).

The amount paid to David Buchler in the year was paid to DB Consultants Limited (which is controlled by him and is therefore a related party) and the amount outstanding at the year end was £11,250 (2018: £11,250). None of the directors were members of the Group's defined contribution pension plan in the year (2018: none).

5 Operating segments

Analysis by business segment:

An analysis of key financial data by business segment is provided below. The Group's food manufacturing segment is engaged in the production and sale of food products to third party customers, and the investing and management services segment incurs central costs, provides management services and financing to other Group segments and undertakes treasury management on behalf of the Group. A more detailed description of the activities of each segment is given in the Strategic Report.

During the year, the security solutions segment was sold and therefore the results of this segment are now included within Profit in the year from discontinued operations and have been excluded from the following analysis:

(1) stated before intra-group management and interest charges

(2) assets and liabilities stated excluding intra-group balances

Geographical analysis: