Volvere Regulatory News (VLE)

Volvere plc

("Volvere" or the "Group")

Preliminary results for the year ended 31 December 2015

Volvere plc (AIM: VLE), the growth and turnaround investment company, announces its preliminary results for the year ended 31 December 2015.

Highlights

Note

1 Based on the net assets attributable to owners of the parent company and the respective period end shares in issue of 4,085,958, 4,145,958 and 4,085,958.

2 The results for the year ended 31 December 2014 and the six months ended 30 June 2015 have been re-presented to reflect the results of discontinued operations.

3 In 2014 there was a one-off exceptional credit in Shire Foods amounting to £0.85 million.

· Shire Foods delivered record performance with profit before tax and intra-group management and interest charges of £1.59 million on revenue of £15.48 million.

· Impetus Automotive, acquired in March 2015, achieved revenue and profit before tax and intra-group management and interest charges of £12.1 million and £0.58 million respectively.

· Group disposed of its 76% share in JMP Consultants in December 2015 for £6.48 million (acquired in May 2013 for £0.42 million).

· Balance sheet continues to remain strong with high liquidity.

For further information:

Chairman's statement

I am pleased to report on the results for the year ended 31 December 2015.

In 2015 we saw a number of changes in the Group, notably the acquisition in March of Impetus Automotive and the disposal in December of JMP Consultants. Both Impetus and JMP, along with Shire Foods, performed well in the period.

The sale of JMP for well in excess of book value significantly boosted our net assets per share and added 1% per annum to the annual growth rate that we have achieved to date. At the year-end, our net assets per share had risen to £5.69 from £4.31, increasing the compound growth rate from 14% to 15% per annum since the company's inception in 2002.

We are looking forward to continued progress in 2016.

David Buchler

Chairman

26 May 2016

*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 20

Chief Executive's statement

Introduction

2015 was an excellent year for the Group with good underlying profits generated by our ongoing businesses and a successful disposal.

Our transport planning and engineering consultancy, JMP Consultants Limited, was sold in December for total cash consideration of £8.5 million (of which the Group's share was £6.48 million before related costs). We are delighted to have restored JMP to growth and secured the future for the company and staff as part of a larger group. The sale also achieved an excellent financial outcome for our shareholders.

We were also very pleased to complete the acquisition in March of Impetus Automotive Limited which we believe is an excellent addition 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, security solutions and automotive consulting, and each of these is reported as a separate segment. The transport planning & engineering segment activities ceased during the year following the disposal of JMP.

Operating review

The financial performance of each segment is summarised below and in the financial review and further detailed in note 5 to this announcement.

Food manufacturing

Shire Foods Limited ("Shire"), in which the Group has an 80% stake, was acquired in 2011 and manufactures frozen pies, pasties and other pastry products for retailers and food service customers. This year was Shire's fourth full year of trading within the Group. Its performance was exceptionally good, producing the highest underlying yearly profit of any company that we have owned to date.

Shire's revenue for the year increased to £15.48 million (2014: £12.13 million) and it achieved a profit before tax and intra-group management and interest charges of £1.59 million (2014: £1.65 million). Underlying profits improved significantly as 2014's result was flattered by an exceptional, non-recurring, credit of £0.85 million relating to the conclusion of the company voluntary arrangement entered into in 2012.

Shire has continued to develop the relationships it has within the UK retail market and has seen growth arise from both wider ranges and from key customers' market share growth. Although the business is performing well, since the end of the year, one customer (whose volumes have been on a declining trend in recent years) has brought some of its manufacturing in-house, which will result in lower revenue for that customer and is likely to reduce profitability as a whole for 2016. This reduction was expected by us for some time and we have been and are actively seeking additional opportunities to utilise our available capacity and are positive about being able to do so.

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

Automotive consulting

On 25 March 2015, we announced the acquisition of Impetus Automotive Limited ("Impetus"). Impetus's principal activity is the provision of consulting services to the automotive sector, including vehicle manufacturers, dealerships and national sales companies. The company, which has UK offices in Warwick and Cranfield, employs approximately 200 people serving clients in the UK and a number of other international markets. Further information on Impetus's activities can be found at www.impetusautomotive.com.

The Group paid a total, including costs, of £1.25 million for Impetus and related intellectual property assets. During the period from acquisition to the end of the year (just over nine months) Impetus had revenue of £12.1m and profit before tax and intra-group management and interest charges of £0.58 million.

We have spent time with both customers and staff to stabilise the business and prepare it for growth. We are part way through a programme to decentralise decision-making and the winning of work, improve our core back-office systems and processes whilst ensuring that the success of our client programmes remain the absolute focus of everyone at all levels in the business. Geographically, we are now operating in the UK, Australia, China, Japan and a number of European countries for a range of different clients.

The automotive sector undoubtedly faces many challenges, but there remains the need for manufacturers and their distribution networks to develop sustainable profit from long-term relationships with customers, whether-they are trade or end-user. The improvement of vehicle parts and accessories sales and distribution, after-sales service, and vehicle sales and profit margins, are all areas where Impetus's people have wide knowledge and expertise. As a result, we are optimistic about Impetus's prospects and look forward to its contribution to the Group.

Security solutions

Sira Defence & Security Limited ("Sira"), the Group's digital CCTV viewing software business, continued its progress with revenue increasing to £0.31 million (2014: £0.25 million) and achieving a profit of £0.12 million (2014: £0.08 million).

Sira remains focused on being the universal interface for accessing multiple format CCTV footage in the law enforcement sector.

Further information about Sira can be found at www.siraview.com.

Transport planning & engineering - discontinued

The Group sold JMP Consultants Limited ("JMP"), its transport planning & engineering business, in December 2015. JMP is a consultancy that supports the transport planning aspects of property and land development, as well as providing a range of design, engineering and travel behaviour services. The Group owned approximately 76% of JMP.

JMP's turnover grew from £11.76 million in 2014 (full year) to £12.82 million for the 11½ month period to sale, and generated profits before tax and intra-group management and interest charges of £1.1 million in the period to disposal compared to £0.45 million in the previous full year.

The Group's share of the disposal proceeds of £8.5 million amounted to £6.48 million. We were pleased with the outcome given that JMP had been acquired for £0.42m in 2013, had already repaid all working capital loans provided by the Group, and paid us a dividend of £0.45 million as well.

Future strategy

The Group's success to date reflects our consistent approach to value creation by sourcing businesses where we believe we can make operational and financial improvements. We are optimistic that our approach will give continued positive returns to shareholders.

Jonathan Lander

Chief Executive

26 May 2016

Financial review

Financial performance

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

Overview

In 2015 our Group revenue including the discontinued operations of JMP Consultants Limited ("JMP"), reached a record level of more than £40 million, with peak staff numbers in excess of 500 people. Total revenue from continuing operations increased from £12.4 million to £27.9 million, largely due to the acquisition of Impetus Automotive Limited ("Impetus"), but also reflecting strong growth in Shire Foods Limited ("Shire").

The total profit for the year was £6.68 million (2014: £1.47 million), stated after the profit arising (£5.67 million) on the sale of JMP. Profit before tax from continuing operations rose from £1.2m in 2014 to £1.34m despite 2014's figures being flattered by an exceptional credit in Shire of £0.85 million.

Continuing businesses

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

Food manufacturing

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

Shire's revenue for the year increased by 28% to £15.48 million (2014: £12.13 million). Profit before tax and intra-group management and interest charges was £1.59 million (2014: £1.65 million). The 2014 result included an exceptional credit of £0.85 million relating to the conclusion of the company voluntary arrangement entered into in 2012.

The 5-year financial performance of Shire is summarised in the table below:

Automotive consulting

This segment reflects the trading of Impetus, which was acquired in March 2015. For the 9 month period to 31 December Impetus's revenue was £12.1m and profit before tax and intra-group management and interest charges was £0.58 million.

The overall purchase consideration for Impetus and related intellectual property assets was approximately £1.25 million, of which £1.08 million was to repay bank debt at acquisition. The internal funding of this was principally by way of loan. Additionally, the Group supported Impetus with working capital loans throughout the period. During the period Impetus was charged interest by the Group on outstanding loans amounting to £0.1 million and the Group received management charges of £0.2 million.

The combination of trading profits and the working capital cycle following the year end has meant that the outstanding loan balance at the date of this report is £1.1 million. At the end of the period, Impetus had net assets before deducting Group loans (and excluding goodwill arising on consolidation) of £2.1 million.

Discontinued operations - Transport planning & engineering

As outlined in the Chief Executive's statement, the Group sold JMP in December 2015 for £8.5 million, of which the Group received £6.48 million. The total profit from discontinued activities was £5.67 million. This represents the Group's share of JMP's profit after tax for 2015 to the date of disposal, plus the Group's share of the sale consideration less the Group's share of the net assets sold. Further details are set out in note 6.

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 and has continued with active treasury management in response to prevailing low interest rates. This strategy achieved investment revenues and other gains and losses totalling £0.59 million (2014: £0.21 million).

The Group's net finance expense was £0.12 million (2014: £0.11 million). In spite of the Group's significant cash balances, individual Group trading companies utilise leverage where possible, and without recourse to the remaining Group.

Statement of financial position

Cash

Cash at the year end totalled £11.97 million (2014: £12.22 million). As noted below, the Group made purchases during the year of its own shares for treasury for a total consideration of £0.18 million (2014: £0.31 million).

Available for sale investments

At the year end the Group held available for sale investments with a market value of £4.31 million (2014: £0.92 million). The value of these investments was below their cost, resulting in an unrealised loss on valuation of £0.61 million.

Overall position

The Group balance sheet has strengthened substantially in the year as a result of the profits achieved not only from the sale of JMP, but also because of the underlying performance of the Group's continuing businesses. Total net assets increased from £19.0 million to £24.3 million at the end of 2015.

Dividends

In accordance with the policy set out at the time of admission to AIM, the Board does not currently intend to recommend payment of a dividend and prefers to retain profits as they arise for investment in future opportunities, or to purchase own shares for treasury where that is considered to be in the best interests of shareholders.

Purchase of own shares

The Group purchased for treasury a total of 60,000 shares (2014: 114,000 shares) for total consideration of £0.18 million (2014: £0.31 million) representing an average price of £3 per share (2014: £2.69 per share). As of 31 December 2015, the Group's share repurchases total £5.94 million.

Earnings per share

Basic and diluted earnings per ordinary share were 158.8p compared to 25.6p in the previous year.

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.

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; in the automotive consulting segment staff utilisation, amounts billed to clients and cash collected are closely monitored; order intake is monitored monthly in respect of the security solutions segment.

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 services that are dependent on the continued employment of the Group's employees and availability of suitable, profitable workload. Also, in the automotive consulting and food manufacturing segments, there is a dependency on a small number of customers and a reduction in the volume or range of products or services supplied to those customers or the loss of any one of them could impact the Group materially.

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 17.

Directors' interests

The Directors' interests in the share capital of the Company at 31 December are disclosed below:

No director held any share options at 31 December 2015 or 2014.

No changes in directors' shareholdings (or options) occurred between 31 December and the date of this announcement.

Nick Lander

Chief Financial & Operating Officer

26 May 2016

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of financial position

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 26 May 2016, is derived from the full Group accounts for the year ended 31 December 2015 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 2015, 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 1 June 2016 and will be available from the Company's registered office, Warnford Court, 29 Throgmorton Street, London, EC2N 2AT and website 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 17 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 operates in a number of different market sectors. 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 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.

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 (ie 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.

Other intangible assets 

All other intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis as set out below over their estimated useful lives, which are considered finite. Registered design rights are amortised over the life of the registration. Residual values and useful lives are reviewed at each reporting date and they are subject to impairment testing where indicators of impairment are present.

Intellectual property rights - 10% straight line

Software - 33% straight line

When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the asset, and is recognised in profit or loss within other income or other expenses.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership, generally when the customer has taken undisputed delivery of the goods. There are no service obligations attached to the sale of goods.

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.

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, Europe and the USA.

Financial information (including revenue and operating profits) 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. 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

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and the reduction of lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Foreign currencies

Transactions in currencies other than pounds 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 tangible 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.

In determining the Group's share-based payment charge in 2014 arising in respect of the shares issued to non-controlling interests (as set out in note 24), the Group evaluated the enterprise value of JMP (in 2015 treated as a discontinued business). This evaluation considered the range of possible earnings multiples that could apply on an exit to a business such as JMP, the rights attaching to the shares issued, the proportion of the resulting equity participation and the existence of a single large shareholder with significant influence.

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

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:

Fair value through profit or loss (FVTPL): This category comprises only in-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. The Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method less any provision for impairment. Receivables are considered for impairment when there is a risk of counterparty default.

Available-for-sale: Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise the Group's investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value recognised directly in equity (other comprehensive income). Fair value is determined by reference to independent valuation statements provided by the investment manager or broker (as the case may be) through whom such investments are made. Where the underlying investments are exchange-traded, the mid-price of the investment is used.

Impairment: All financial assets except those at FVTPL are reviewed for impairment at each reporting date to identify whether there is any objective evidence that a financial asset or group of assets is impaired. Different methods are used to determine impairment as described above.

Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Group's accounting policy for each category is as follows:

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

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

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.

Current asset investments

Declines in the fair value of current asset investments are considered for indicators of impairment. Where the decline in value is significant or prolonged the asset may be considered to be impaired with the resulting impairment losses recognised in the income statement. Short term and insignificant declines in fair value that are considered to be temporary are reflected in other comprehensive income.

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.

Revenue recognition

Due to the nature of some services provided by certain of the Group's businesses the recoverability of receivables can be subject to management estimates. Whilst the Group has a thorough process for reviewing the requirement for receivables and credit note provisions, this area is inherently subjective.

Useful lives of depreciable assets

Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain equipment used in the production of food.

Inventories

Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by market-driven changes that may reduce future selling prices.

Consolidation

Management have concluded that is not appropriate to utilise the exemption from consolidation available to investment entities under IFRS10. Accordingly the consolidation includes all entities which the Company controls.

Business combinations

Management uses valuation techniques in determining the fair values of the various elements of a business combination (see note 22).

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 standards and interpretations - in issue but not yet effective

At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been published by the IASB that are not yet effective, and have not been adopted early by the Group. Information on those expected to be relevant to the Group's financial statements is provided below.

Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either adopted or listed below are not expected to have a material impact on the Group's financial statements.

IFRS 9 'Financial Instruments' (2015)

The IASB recently released IFRS 9 'Financial Instruments' (2015), representing the completion of its project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. The new standard introduces extensive changes to IAS 39's guidance on the classification and measurement of financial assets and introduces a new 'expected credit loss' model for the impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting.

IFRS 9 is effective for reporting periods beginning on or after 1 January 2018. The Group's management have not yet assessed the impact of IFRS 9 on the consolidated financial statements.

IFRS 15 'Revenue from Contracts with Customers'

IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related Interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities.

IFRS 15 is effective for reporting periods beginning on or after 1 January 2017. The Group's management have not yet assessed the impact of IFRS 15 on the consolidated financial statements.

2 Operating profit

Operating profit is stated after charging/(crediting):

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 £1,128,000 (2014: £551,000). The amount paid to David Buchler in the year was paid to a third party on an invoice basis. The increase in directors' remuneration reflects the performance of the Group for the year. None of the directors were members of the Group's defined contribution pension plan in the year (2014: none).

5 Operating segments

Analysis by business segment: