XPD.L Regulatory News (XPD)

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

 12 April 2021

XPEDIATOR PLC

("Xpediator", the "Company" or the "Group")

FINAL RESULTS

Xpediator Plc (AIM: XPD), a leading provider of freight management services across the UK and Central and Eastern Europe, is pleased to announce its final results for the twelve months ended 31 December 2020.

2020 Financial Highlights

· Generated Group turnover of £221.2m (2019: £213.2m) an increase of 3.7% reflecting a generally resilient performance during the Covid-19 impacted months coupled with a strong performance in the last quarter of 2020

· Delivered a 38.5% increase in adjusted profit before tax of £7.2m (2019: £5.2m) helped by early cost reductions in March 2020, alongside some core markets benefiting from Covid-19 related changes and with areas of weakness (e.g. high street retail and transport services) being offset by the diversity of businesses across multiple markets

· Reported profit before tax of £3.9m (2019: £2.2m)Adjusted basic earnings per share of 3.84 pence (2019: 2.80 pence)

· Basic earnings per share of 1.46 pence (2019 : 0.60 pence)

· Strong cash generation and working capital management continues with net cash stable at £6.8 m despite paying £4.4m (2019: £0.2m) in deferred acquisition payments

· Dividend per share increased by 12.8% to 1.50 pence (2019: 1.33 pence)

2020 Operational Highlights

· Appointment of Robert Ross as new CEO in October 2020, previously Group CFO and in March 2021 appointment of Mike Williamson as new CFO

· Reaffirmed core strategic outlook coupled with new CEO vision for how to achieve commercial objectives

· Recorded strong growth in the Freight Forwarding Division supported by resilient and profitable performances by both the Transport and Warehouse & Logistics divisions both of which were held back by the pandemic:

o Freight Forwarding delivered revenue of £171.0m, an increase of 7.1%

o Warehouse & Logistics delivered revenue of £44.5m, a decrease of 6.3%

o Transport Services delivered revenue of £5.7m, a decrease of 6.9%

· On 5 October 2020 completed the successful acquisition of Nidd Transport Ltd

· Disposal of loss making B2C business EshopWedrop

2021 Outlook

· First quarter trading results are positive and ahead of management expectations

· Consolidation and improved overall financing terms of UK banking facilities with a new £18m finance facility with Investec Bank Plc replacing the existing £9.5m facility

· Managing transportation post Brexit more complex than anticipated with customers requiring additional support which is net profitable for the Group

· First full year of benefit from £0.5m of annualised cost savings made as part of the response to the pandemic

· Healthy pipeline of potential acquisitions

Alex Borrelli, Chairman, commented:

"We are naturally very pleased to have delivered this performance during such a challenging year. Increasing both revenues and profitability is an excellent achievement and we think confirms the strength of the platform the Group has. Added to this, we now have a new senior management team led by CEO Robert Ross whilst retaining the expertise and knowledge of Stephen Blyth, the founder of the business, on the Board.

Our aim to become a leading international freight management and logistics provider, is unchanged. We continue to examine strategic acquisitions with a focus on building a scalable and risk adjusted platform to support an expanding portfolio of freight management companies across the UK and Europe with a particular expertise on Central and Eastern Europe. 2021 has begun well and we are quietly confident of our ability to achieve our objectives."

For all investors Robert Ross (CEO) and Mike Williamson (CFO) will be giving a presentation on the FY results today at 10.30am via Investor Meet Company, to register please click on the following link: https://www.investormeetcompany.com/xpediator-plc/register-investor

Enquiries

About Xpediator:

Xpediator is a well-established international provider of freight management services. Established in 1988 by the current Deputy Chairman Stephen Blyth today the Group's International network of offices provides road, sea and air freight services, together with logistics and warehousing in the UK and Romania. The business offers integrated freight management within the supply chain logistics and fulfilment sector, through their three main areas: freight forwarding, logistics & warehousing and transport solutions. With headquarters in Braintree, Essex and country offices in nine CEE countries across 31 sites, the Group currently employs over 1,000 people and was successfully listed on London's AIM market in August 2017.

For more information, please visit: www.xpediator.com.

Alternatively, do follow us on Twitter at @Xpediator or find us on LinkedIn at Xpediator Plc.

CHAIRMAN'S STATEMENT

INTRODUCTION

I am delighted to present these accounts which show strong performance and demand for our services despite the impact of Covid-19 during the year.

With revenues increasing to £221.2 million, which is up by 3.7% on the prior year, we delivered adjusted profit before tax substantially ahead of last year at £7.2 million, up by 38.5%. The Group's asset light business model proved to be very resilient during 2020 and there are strong signs of further growth being delivered in 2021. Strategically, Xpediator remains focused on establishing its network of freight management companies across the UK and Europe with a particular expertise in the fast growing Central and Eastern European ("CEE") regions. Recognising the market opportunity, the Group is seeking to exploit the growth across the CEE regions. In terms of Brexit, following the United Kingdom's exit from the European Union, the demands for custom clearance services have increased, and the Group expects additional revenue streams from this, with further profit generation as volumes increase. Importantly, the Company continues to have a good pipeline of acquisition opportunities which meet the criteria of enhancing the Group's geographical capabilities, developing our existing operational locations and extending the Group's international presence in air and sea transportation. Overall, the Group is in a strong position.

Our people

The Group recognises that our people are our greatest asset. During the year, the first Group wide employee engagement survey was launched. As a result of this survey, several focus groups were initiated to discuss the results of the survey and formulate an action plan to promote the wellbeing of our employees and the work environments in which we operate.

During 2021, the Group has launched Group wide values and held its first Senior Leadership Conference to set out the strategic priorities of the Board. We also plan to review the benefits of all of our people to ensure that Xpediator is seen as an employer of choice. In February 2021, the Group launched a Company Share Option Plan for senior employees.

Board and management changes

On 2 January 2020, the Company confirmed the appointment of Robert Rossas Chief Financial Officer ("CFO"). Robert previously held the position of Finance Director at Europa Worldwide Group. On 5 June 2020, the Group announced that Stephen Blyth would retire from the role of Chief Executive Officer ("CEO") moving to a non-executive position as Founder and Deputy Chairman. Stephen has also taken up the position of Chairman of the newly formed Mergers and Acquisitions committee. After an extensive process with both internal and external candidates, Robert was subsequently appointed CEO on 2 October 2020. On 19 January 2021, the Group announced Michael Williamson as the new CFO from 1 March 2021. He joined from international freight forwarding company Rohlig Logistics where he was the Global Director of Finance & Controlling and Regional CFO of Northern Europe. The Board would like to express its thanks to Stephen for his service to the Group over the last 32 years, and for extending the period for which he was CEO, following the changes announced in September 2019.

Dividend

Subject to approval by shareholders, the Board is recommending a final dividend of 1.05p per share to be paid to shareholders in June 2021. Taken with the interim dividend of 0.45p per share, this takes the full year dividend to 1.50p per share, a 12.8% increase on the prior year (2019:1.33p). The final dividend for 2019 was a scrip issue. The final dividend will be payable to shareholders on the register in June 2021, with the ex-dividend date being in July 2021.

Outlook

The Group is well positioned for further growth in 2021, with the first quarter results slightly ahead of the Board's expectations, despite the on-going Covid-19 restrictions. The Board continues to examine strategic acquisitions, whilst completing the integration of those made previously. With the hopeful easing of Covid-19 restrictions across Europe, opportunities arising from Brexit and building on the success of 2020, the Board is confident of delivering results in line with market expectations for 2021. Having joined the Company in 2016 and overseeing the continued growth of Group revenues, profitability and shareholder value, with a strong management team now in place and in recognition of corporate governance guidelines and best practice regarding tenure, I will be standing down subsequent to the Group's 2021 Annual General Meeting, once my successor has been identified.

Alex BorrelliNon-Executive Chairman

CHIEF EXECUTIVE OFFICER'S STATEMENT

INTRODUCTION

In my first financial year, initially as Chief Financial Officer, and then as Chief Executive Officer from October, we have overcome many significant challenges and I am grateful to all our staff for their commitment, determination and resilience.

Whilst Covid-19 continues to challenge us and market conditions remain competitive, we are focused on delivering exceptional customer service. Demand for our freight management services, logistics and transport solutions and services remains high and following a strong 2020 final quarter, we delivered an adjusted profit before tax of £7.2 million. Demand for freight management in the UK and CEE countries was extremely buoyant during the year. Whilst volumes reduced during March and April 2020 because of a number of stay-at-home policies throughout Europe, Covid-19 has led to changes in consumer trends that have driven economic growth within our core markets.

The CEE region, in particular, saw increased demand, with 62% (2019: 58%) of the Group's revenue now being generated in mainland Europe. The financial results achieved in 2020 are testament to the hard work of our people and in our core markets our experience and infrastructure enabled us to win contracts against the largest competitors. Whilst growth in the UK was more subdued during 2020, mainly due to the impact of Covid-19, we are confident that higher growth rates will return during 2021.

Cash generation in the Group remains strong. Net cash (excluding right-of-use assets) remained at similar levels to the prior year despite the Group settling £4.4m (2019: £0.2m) of deferred consideration on Import Services Limited (£3.0m), Anglia Forwarding Group Limited (£1.1m) and Regional Express Limited (£0.3m). During 2020, the Group identified £0.5million of annualised savings which will feed through to an improvement in operating profit, as well as maintaining strong cash generation.

Acquisitions and disposals

We remain focused on making strategic acquisitions (both in the UK and in Central and Eastern Europe) and to act as a consolidator of the highly fragmented freight management market. In the last three years the Group has completed four transactions which have added over 1,200 new customers together with significantly expanding the Group's air and sea freight capabilities.

On 1 January 2020, the Group obtained operational and management control of International Cargo Centre Limited ("ICC"). This has been accounted for as a business combination on 1 January 2020 under the definition of IFRS 3 "Business Combinations". On 30 April 2020, the Group acquired the remaining 60% of the issued share capital of ICC, having acquired the original 40% on 4 June 2018. On 5 October 2020, the Group acquired the entire share capital of Nidd Transport Limited, a Company that specialises in daily express deliveries to mainland Western Europe and UK distribution, particularly in the North of England. This has also been accounted for as a business combination under the definition of IFRS 3 "Business Combinations". On 31 December 2020, the Group disposed of the EshopWedrop business. This loss-making part of the Group was considered non-core and was sold to the Managing Director, Mircea Bandean. The integration of the acquisitions made during 2017 and 2018 continues with statutory and IT simplification programmes due to be completed by the end of the first half of 2021. The newly formed Mergers and Acquisitions Committee, chaired by Stephen Blyth, will be focused on delivering continued profitable expansion of the Group.

COVID-19

Covid-19 has impacted our business in many ways. Throughout the pandemic our primary focus has been on the well-being and safety of our people, customers and suppliers. The Group has traded strongly through this extraordinary period and whilst activities are broadly similar to prior years, the freight forwarding division has been strong throughout. Those areas which are dependent on either traffic volumes (Affinity) or exposed to market conditions with Government restrictions, such as Easy Managed Transport Limited ("EMT")(UK High Street Fashion) or Benfleet Forwarding Limited (with China and Italy being key markets) experienced reduced trading levels in the earlier part of the year. Whilst conditions for fashion retailers in the UK High Street and therefore EMT, remain tough, all other parts of the Group are back to trading ahead of or broadly in-line with pre-pandemic levels. During the pandemic, the Group identified some good developmental opportunities, whilst challenging and flexing the cost base to meet the demand. In March 2020, the Group took the decision to introduce temporary pay reductions, to reduce costs in areas of reduced activity and suspend certain capital investment projections as the full extent of the pandemic was initially unknown. By August 2020, the Group had reinstated salaries back to their normal levels and any salary reductions have been repaid in full.

BREXIT

Over the last three years, we have allocated resource to be part of a specific BREXIT team. These people have been working closely with customers to ensure a smooth transition and clarity on the new ways of working. Following the announcement of the free trade agreement on 24th December 2020, we have seen a considerable change in the requirements for moving goods between the UK and mainland Europe. These requirements are considerably more complex than initially anticipated. We continue to work closely with our customers to ensure that the correct paperwork is completed, and our services continue.

With the additional paperwork, we have had to allocate and recruit additional people to manage the workload. However, offsetting this additional cost is additional revenue from our customers. We see there being a net benefit to the profitability of the Group from this additional work although we recognise the uncertainty BREXIT may bring.

OUR VISION AND STRATEGY

Xpediator is a leading Freight Management provider in a very fragmented and competitive logistics market.

Our vision as a Group remains unchanged in that over the next five years we want to maintain the rate of growth achieved over the last five years and become a leading international freight management and logistics provider.

Our strategy remains focussed around building a scalable and risk adjusted platform to support an expanding portfolio of freight management companies across the UK and Europe with a particular expertise on CEE.

As we moved into 2021, I challenged all our senior leaders at our inaugural Senior Leadership Conference to focus on three items. Firstly, to simplify their business units by streamlining processes, investing in IT and driving out complexity. Secondly to invest in the growth of our staff so everyone is doing the job they should be doing rather than the job they want to be doing. And finally, to be the best that we can be by working together, encouraging commitment over compliance and living by our new Group values.

As a Group we want to deliver sustainable solutions to our clients who are at the centre of our service offerings. We focus on offering our clients the optimal solution for their transport and logistics needs with consistently high quality and competitive services.

We also look to ensure our client base is diverse, not just in terms of the number of clients, but also the sectors we service. No single client contributes more than 2% of Group revenue. As an acquisitive business, one of the areas of focus when considering acquisition opportunities, is how the opportunity can add to this diversity. Accordingly, strategically selected acquisitions have added to our ability to be able to offer more services to our existing client base as well as attracting new clients. We are now able to offer even stronger industry-specific solutions for our clients in the retail and fashion, toys and games sector.

We are developing our port centric warehousing and logistics in the UK with the expansion of our Logistics facilities in Southampton where we will open a new 20,000 sqm facility at the end H1 2021.

We continue to focus on targeted, earnings enhancing acquisitions. Operating in a large, fragmented market means there are numerous acquisition targets and our strategy is to focus on global freight forwarders and contract logistics providers which are supported by a strong client base with a strong earnings track record.

As we operate in a low margin industry, we strive to identify ways in which we can continue to provide high quality services to our clients in a cost-effective way. The senior leadership team within the Group is now complete following the recruitment of an Estates Director to manage our property portfolio. As the revenue of the Group grows and we continue to focus on driving out complexity, operational leverage of this senior team will enhance our net profit margin. In addition, we continue to enhance our online functionality that allows us to offer our clients a seamless solution to make bookings and track their consignments. The digitalisation of these processes will be margin enhancing as we take out overhead costs, whilst ensuring our clients have a competitive and robust solution. Ultimately, at the heart of the Group's vision is client service, delivered through optimal solutions, whilst being competitively priced and delivering consistently high levels of customer service.

Outlook

We are currently operating in an extraordinary period, and some of the impacts of Covid-19 may be with us for some time. I am proud of the way everyone across the Group has responded to the crisis. The resilience shown by our people and the willingness to pull together to get through this period has been humbling. We have a strong business that has delivered a fantastic set of results. 2021 has started well and our focuses for the year are on delivering further growth from investment in our sales function, efficiencies in our operations from continued digitalisation and working more closely together as a Group. I would like to thank everyone for their efforts through this extremely challenging year. We will continue with our vision and drive our strategic objectives thus ensuring we provide greater job security and rewards for our employees, and most importantly, enhancing returns for investors.

Robert Ross

Chief Executive Officer

Divisional ReviewFREIGHT FORWARDING

REVENUE£171.0m (2019: £159.6m)

SEGMENT PROFIT BEFORE CENTRAL OVERHEAD ALLOCATION£6.8m (2019: £3.4m)

Freight forwarding services, largely provided under the Delamode brand, specialising in connecting our local offices in CEE countries and the UK with each other and rest of Europe. In 2020, freight forwarding revenues increased by £11.4 million, of which £8.9 million related to organic growth and £2.5 million related to the acquisitions of Nidd Transport Limited and International Cargo Centre Limited.

Revenues across the Baltics and Balkans continued to grow significantly against prior year comparatives, with Delamode Baltics revenue up by £8.9 million and Delamode Bulgaria up by £3.8 million. Both businesses have benefitted from an increase in online customer demand and the consolidation of new service lines. Profit before tax in Lithuania increased by £2.2 million to £4.1 million (2019 - £1.9million) and in Bulgaria by £0.3million to £1.1m (2019 - £0.8 million). In addition, both Serbia and Estonia delivered a strong performance as these businesses matured.

Like for like revenue in the UK decreased by £6.0 million mainly due to Covid-19 impacting trading volumes, particularly Chinese and Italian related business, however, by the end of 2020, revenues were broadly in line with prior years. Despite revenue being lower, operating profits in the UK were stable following a review of the cost base which was flexed in line with demand.

Regional Express Limited won a major contract that commenced operations in August 2019. Whilst the initial implementation was slow, H2 2020 showed strong growth and trading in 2021 is slightly ahead of management's expectations.

During 2020, our e-commerce business EshopWedrop was sold and our other e-commerce business Buzzbrand was discontinued. EshopWedrop was sold on 31 December 2020 to Mircea Bandean, who was Managing Director of the business. The loss of £0.3 million (2019: loss of £0.5 million) is shown in exceptional costs for 2020.

Divisional ReviewWAREHOUSING & LOGISTICS

REVENUE£44.5m (2019: £47.5m)

SEGMENT PROFIT BEFORE CENTRAL OVERHEAD ALLOCATION£2.6m (2019: £2.9m)

The Logistics division's activities remain focused in Romania and the UK with revenue broadly in line with the prior year.

The Group's Pall-Ex franchise in Romania continues to perform strongly, offering a palletised freight delivery service to any part of the country within 24 hours and handling in excess of 68,000 pallets on average per month in 2020 (2019: 60,000 average pallets per month).

There is a strong pipeline of demand for warehouse space in Romania and having the ability to deliver palletised freight throughout Romania overnight, puts the Pall-Ex business in an enviable position for further growth in the future.

In the UK, the lease for a new purpose built facility in the Port of Southampton has been signed and practical completion is expected to occur in June 2021. The Group has also committed to building a mezzanine level at the facility, which will add a combined 290,000 sq ft of warehousing and will become operational for the peak Q4 period of 2021.

Import Services Limited benefitted from higher volumes in Q4 amongst its customers in the toy sector as it fulfilled a number of internet orders as UK customers stepped away from the High Street following a significant increase in Covid-19 cases.

The warehouse in Braintree experienced some further challenges during 2020, with the loss of a significant client and the substantial expansion of an existing retail customer. During the changeover, management took the opportunity to reconfigure the warehouse which will drive greater future opportunities and allow the Group to increase its e-fulfilment for new and existing customers. There are several potential new clients for the Braintree warehouse, and we look forward to a more successful 2021.

The Beckton warehouse has had a challenging year, with a decline in profit of £0.5 million. The Beckton warehouse is exposed to the UK High Street retail fashion sector, which was one of the industries most impacted by Covid-19. Trading in this business area is likely to remain challenging until Covid-19 restrictions are lifted.

Divisional ReviewTRANSPORT SERVICES

REVENUE£5.7m (2019: £6.2m)

GROSS BILLINGS£126.4m (2019: £142.3m)

SEGMENT PROFIT BEFORE CENTRAL OVERHEAD ALLOCATION£2.3m (2019: £2.5m)

Transport solutions, trading principally under the Affinity brand, provides bundled fuel and toll cards, financial and support services for hauliers in southern Europe. Affinity has been an agent of DKV in Romania since 2002, one of the world's largest fuel card providers and provides the DKV fuel card across the Balkans to a database of approximately 2,000 Eastern European hauliers and over 15,000 trucks.

In addition, Affinity provides a "one stop shop" of transport services including roadside assistance and ferry bookings. Affinity's commercial model fits well within the Group as many of the hauliers who are customers of Affinity also supply haulage services to Delamode a key factor that enables the Group to have a good understanding of its customers and suppliers, which underpins the strategy to provide further financial services such as insurance and leasing. With current driver shortages in Europe, having a supplier base will also become increasingly important for the forwarding division.

Volumes sold to customers (gross billings) decreased in 2020 by 11.2% because of fewer journeys made in Europe due to the Covid-19 pandemic and lower average fuel prices of 13.9%.

Romania remains the largest region for the division representing 72% of total activity, (2019: 84.0%, 2018: 87.2%). The Balkans operation continues to grow leveraging the relationships with the freight forwarding businesses based in Bulgaria and Serbia.

There are several opportunities where Affinity is looking to capitalise on in 2021, including developing the leasing and insurance products tailored specifically for Affinity's existing customer base.

The division's 19 years of experience provides a good platform to expand in new geographical regions, as well as being well placed to further develop its service and product offerings.

CHIEF FINANCIAL OFFICER'S STATEMENT

Mike WilliamsonChief Finance Officer

FINANCIAL REVIEW

Revenue

Group revenue increased in 2020 by £8.0 million (3.7%) to £221.2 million with like for like growth

of £5.5 million and the acquisition of Nidd Transport Limited contributing turnover of £2.5 million

since 5 October 2020.

The Freight Forwarding division delivered £171.0 million (7.2% increase v 2019), the Warehousing

and Logistics division revenue of £44.5 million (6.3% decrease v 2019) and the Transport

Services division delivered £5.7 million (6.9% decrease v 2019).

Segment Profit before Central Overhead Allocation

Segment profit before central overhead allocation and exceptional items increased by 42.6% (£2.0 million) year on year largely driven by increased activity in the freight forwarding division and the sale of the EshopWedrop business, which was loss making and historically reported in the freight forwarding division.

Operating profit in the warehouse and logistics division decreased by £0.3m to £2.6m mainly due

to the reduction in volumes in the UK warehouse business, particularly around those areas exposed

to the UK high street and fashion businesses.

The Transport Services division's operating profit decreased by £0.2m to £2.3m due to a reduction

in the level of trucks moving across European countries and a reduction in diesel prices.

Group Profit before Taxation

Group profit before tax increased in 2020 to £3.9 million (2019 £2.2 million) driven by the freight

forwarding department which more than offset slight reductions in the other two divisions. A

summary of operating profit before central overhead allocation by division is shown below:

Adjusted profit before tax

Earnings per Share 

The total number of ordinary shares at 31 December 2020 was 141.6 million (2019: £136.1 million) The increase reflects the issue of 5.5 million shares in June 2020 for the scrip dividend. Profit after tax attributable to the owners of the parent company of £2.0 million (2019 : £0.8m) provides a basic earnings per share of 1.46p (2019 - 0.60p), an increase of 143.3% (2019 : 82.5% decrease) on 2019. Adjusted profit before tax results in a basic & diluted earnings per share of 3.84p (2019: basic 2.80p, diluted 2.79p) an increase of 37.1% (37.6% diluted) on 2019. (See note 10 of the financial statements).

Financial Resources 

Asset Cover

Cash 

The Group continues to focus on the application of tight cash controls and the need to maintain a reasonable headroom for future contingencies and to manage financing risk. The Board regularly monitors the financing needs of the business through cash flow projections for the following 12 months. These are expected to be achieved for the coming year from existing cash balances, loan facilities and operating cash flows. The Group has sufficient financial resources and a broad spread of business activities. The Directors therefore believe that it is well placed to manage its business risks.

1 Comparatives for 2017 and 2018 have been restated for consistency with the reporting under IFRS 16. Previously, the cashflow for operating leases was reported within net cash from operating activities (2018, £5.9m, 2017 - £2.2m), but are now reported in net cash outflow from financing activities.

Cash generated improved by £0.7m. However, short term loans increased by £1.4m, with the Group having paid £4.4m of deferred consideration on Import Services Limited, Anglia Forwarding Group Limited and Regional Express Limited acquisitions.

Working Capital 

Trade receivables and payables increased at the year-end as did days sales outstanding and days payable outstanding. Revenue in November 2020 was 10.8% up on the prior year, whilst revenues in December were 31.6% ahead of the prior year. The increased demand was fuelled by more online shopping following the closure of non-essential retail in a number of major European countries, and increased volumes relating to BREXIT to ensure supply into post the UK transition deadline with the free trade discussions between the UK and the EU only being concluded in the week of Christmas 2020. Whilst days sales outstanding have increased by 8 days (or 12.1%), this has been more than offset by days payable outstanding increasing by 11 days (or 14.7%).

Administrative Costs Review

Average staff numbers have increased from 1,037 in 2019 to 1,080 in 2020. This is largely due to the acquisitions of Nidd Transport Limited and International Cargo Centre Limited.

Finance Costs

Excluding the IFRS 16 impact of £1.0 million, finance costs were £0.4m compared to £0.6m in the prior year. This is largely as a result of a reduction in the non-cash interest on the deferred consideration payable for the acquisitions made by the Group.

Impairment

The Group carries out its impairment tests annually in November as part of the budget process and all newly acquired entities are also reviewed for impairment at the balance sheet date.

No impairment losses have been recognised during the year.

Financing Facilities

The Group has agreed a new £18 million banking facility with Investec Bank plc in the UK. This consolidates the Group's banking facility which had become fragmented as a result of recent acquisitions. The Group benefits from an increased availability in the confidential invoicing discount facility as well an overall improvement of the financing terms.

The Group continues to review is European facilities to support the Group's CEE operations.

FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2020

The notes form part of these financial statements

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

The notes form part of these financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

The notes form part of these financial statements

The financial statements were approved by the Board of Directors on 12 April 2021 and were signed by:

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020

The notes form part of these financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2020

The notes form part of these financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1. RECONCILIATION OF PROFIT BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

2. ACCOUNTING POLICIES

Description of the business

Xpediator Plc (the "Company") is a public limited company, incorporated in England and Wales, United Kingdom. The registered office is 700 Avenue West, Skyline 120 Great Notley, Braintree, Essex, CM77 7AA and the Company registration number is 10397171.

The consolidated financial statements comprise the financial information of the Company and its subsidiary undertakings (together the "Group"). Detail of the entities of the Group are described in Note 14.

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU issued by the International Accounting Standards Board, under the historical cost convention. Accounting policies have been consistently applied from 2019.

The presentation currency used for the preparation of the financial statements is Pounds Sterling (£), which is the currency of choice of the principal investors of the Group. The amounts are rounded to the nearest thousand, unless otherwise stated.

The preparation of financial statements in conformity with IFRSs requires the use of certain accounting estimates. It also requires the directors to exercise their judgement in the process of applying the Group's accounting policies (see Note 2.1 - Critical accounting estimates and judgements).

Going concern

The Group meets its working capital requirements through the receipt of revenues from the provision of its services in the UK and in CEE, the management of capital and operating expenditure, from the working capital and other borrowing facilities available to it and, from time to time, from the issue of equity capital.

Ultimately the receipt of revenues and charges due to the Group depends on the availability of liquidity for the company's customers and the level of transport and logistics activity in the market.

Covid-19 has impacted our business in many ways. Throughout the pandemic our primary focus has been on the well‑being and safety of our people, customers and suppliers. The Group has traded strongly through this extraordinary period and whilst activities are broadly similar to prior years, the freight forwarding division has been strong throughout. Those area's which are dependent on either traffic volumes (Transport Solutions) or exposed to market conditions with Government restrictions, such as Easy Managed Transport Limited ("EMT")(UK High Street Fashion) or Benfleet Forwarding Limited (with China and Italy being key markets) experienced reduced trading levels in the earlier part of the year. Whilst conditions for fashion retailers in the UK High Street and therefore EMT, remain tough, all other parts of the Group are back to trading ahead of or broadly in-line with pre-pandemic levels.

During the pandemic, the Group identified some good developmental opportunities, whilst challenging and flexing the cost base to meet the demand. In March 2020, the Group took the decision to introduce temporary pay reductions, to reduce costs in areas of reduced activity and suspend certain capital investment projections as the fully extent of the pandemic was initially unknown. By August 2020, the Group had reinstated salaries back to their normal levels and any salary reductions have been repaid in full.

At 31 December 2020 the Group had cash and cash equivalents of £12,720,000 (2019: £11,951,000). The Group also has funding facilities in place, details of which are set out in note 19 of the financial statements, which it does not envisage will be withdrawn.

Having regard to the above, and based on their latest assessment of the budgets and forecasts for the business of the company, the directors consider that there are sufficient funds available to the Group to enable it to meet its liabilities as they fall due for a period of not less than twelve months from the date of approval of the financial statements. The directors therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

Basis of consolidation

The Group financial statements consolidate the financial statements of Xpediator Plc and its subsidiaries drawn up to 31 December each year. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The Company has control over a subsidiary if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The financial statements of subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. Intra-group balances and transactions, including unrealised profits arising from intra-Group transactions, have been eliminated. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Non-controlling interests represent the equity in subsidiaries that is not attributable, directly or indirectly, to Xpediator Plc.

Subsequent to the merger accounting noted below the consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Merger accounting

On 25 May 2017, the Company entered into a share swap agreement with the ultimate beneficiaries of Delamode Group Holdings Limited, whereby 4,000,000 new ordinary shares of £1.00 each were issued to the ultimate beneficiaries of Delamode Group Holdings Limited in exchange for their shares in Delamode Group Holdings Limited in the same proportion as their shareholding in Delamode Group Holdings Limited. The merger method of accounting is used to consolidate the results of Xpediator Plc.

On 8 June 2018, the Company issued 1,727,694 new ordinary shares of £0.05 each as part of the deferred consideration of Easy Managed Transport Limited ("EMT"). On 14 July 2018, the Company issued 3,740,648 new ordinary shares of £0.05 each as part of the acquisition of Import Services Limited. On 31 December 2018, the Company issued 84,951 new ordinary shares of £0.05 each as part of the deferred consideration of Regional Express Limited ("Regional"). On 16 May 2019, the Company issued 1,655,876 shares to the former owners of EMT as part of the payment of the deferred consideration relating to the acquisition of the entire equity of EMT in 2017. On 5 December 2019, the Company issued 89,744 shares to the former owners of Regional as part of the payment of the deferred consideration relating to the acquisition of the entire equity of Regional in 2017. The premium on the fair value in excess of the nominal value of shares issued in consideration of business combinations is credited to the merger reserve.

Revenue

The Group generates revenue in the UK and Europe.

The Group operates a number of diverse businesses and accordingly applies a variety of methods for revenue recognition, based on the principles set out in IFRS 15. The revenue and profits recognised in any reporting period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. In determining the amount of revenue and profits to record, and associated statement of financial position items (such as trade receivables, contract assets and contract liabilities), management is required to review performance obligations within individual contracts. This may involve some judgemental areas (for example within the logistics & warehousing business), where revenue is recorded in advance of invoicing the customer.

Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer. For all contracts, the Group determines if the arrangement with a customer creates enforceable rights and obligations, which is in line with our contractual commitments and industry standard best practice (for example Convention Relative au Contrat de Transport International de Marchansies par la Route or CMR).

For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group's performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group has assessed the period of time principles as follows:

· Customers receives the benefits of the good being moved from the origin to the destination, as another supplier would not need to re-perform the service performed to date (i.e. the goods have been moved partway).

· The customer becomes committed to pay the Group the moment that the goods are despatched and collected.

· The customer accepts that they are liable to pay for the transaction in full although it is the Group's responsibility to ensure that the shipment is in transit before invoicing.

· The customer can usually be invoiced on despatch/export and has an obligation to pay for services despite any problems that may arise in transit.

· The Group would hold any third party liable for any issues that happen in transit that is beyond its reasonable control.

The Group recognises that it acts as both an agent and a principal. The Group is a principal if it responsible for the specified good or service before that good or service is transferred to a customer. The Group is an agent if it is not responsible for arranging for the provision of the specified good or service by another party. In this case, the Group does not control the specified good or service provided by another party before that good or service is transferred to the customer. When the Group acts as an agent, it recognises revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party. The Affinity business (see Affinity section of revenue recognition policy) primarily operates as an agent, and largely recognises only the commission earned as revenue.

Freight Forwarding

Under IFRS 15, freight forwarding revenue is recognised over the period of time based on the principles identified above. Therefore, revenue will consist of freight delivered during the period as well as a proportion of revenue for service delivered that are in process as at the end of the reporting period, which is calculated on a time proportioned basis.

Logistics & Warehousing

Logistics & warehousing revenue is recognised over a period of time. Invoicing varies by contract but is typically in line with work performed. Due to the different contractual arrangements in place, each customer is assessed to determine the amount of work carried out, which has not been invoiced at the date of the Group's reporting period. This revenue is recognised by direct reference to the amount of work carried out to deliver the service and measured relative to cost or over the time period which the warehousing is provided. Judgement is therefore required when determining the appropriate timing and amount of revenue that can be recognised. The revenue from handling of incoming products is recognised when a performance obligation is satisfied, but not invoiced at the reporting date, which is correspondingly accrued on the statement of financial position within contract assets.

Affinity

Revenue is recognised at a point in time only after the performance obligation has been actually been satisfied. Affinity and trucking services revenue largely acts as an agent based on the assessment above, so only commission is recorded as revenue. This largely relates to provision of DKV fuel cards, which enables the customer to purchase fuel, tolls and other services.

In addition, the Affinity business operates as a reseller ferry crossing, where revenue is recorded at a point in time as it is based on the performance obligation being delivered. Revenue for this part of the business is recorded as a principal due to the assessments identified above.

Gross billings (Affinity)

Recoverable disbursements incurred on behalf of our Affinity Division customers based in Romania and the West Balkans include fuel costs, toll charges and breakdown assistance. The gross billings figure is included within the Groups trade payables and receivables but are excluded from consolidated income statement revenue. The gross billing revenue number is a non-statutory measure but is included to make a more meaningful calculation of days sales outstanding and days payable outstanding, so it is important to understand the level of billings going through the sales and purchase ledgers.

Franchise income

Income relating to franchise fees are not recorded as revenues by the Group but are shown as other income. This revenue arises from the sales of services to the franchisees. This income is recognised over a period of time based on when the services have been transferred to the franchisee in accordance with the terms and conditions of the relevant agreements.

Franchise fees comprise of revenue for the initial allocation of the franchise to the respective member, IT support, marketing and the use of the intellectual property.

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets.

The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3: Business Combinations are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

If the cost of the acquisition is less than the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities, the difference is recognised directly in the Consolidated Income Statement.

Associates

The Group obtained operational and management control of International Cargo Centre Limited and as a result this has met the conditions for recognition under IFRS 3: Business Combinations from the 1 January 2020. Previously this was reported as an associate company and equity accounted.

Non-controlling interests

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.

Goodwill

Goodwill arising on the acquisition of a business represents any excess of the fair value of the consideration over the fair value of the identifiable assets and liabilities acquired. The identifiable assets and liabilities acquired are incorporated into the consolidated financial statements at their fair value to the Group.

Goodwill is not amortised but tested for impairment annually. Any impairment is recognised immediately in the consolidated income statement and is not subsequently reversed. On disposal of a business, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Impairment of non-financial assets (excluding inventories and deferred tax assets)

Impairment tests on goodwill with indefinite useful economic lives are undertaken annually in November as part of the Group's budgeting process, except in the year of acquisition when they are tested at the year-end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows; its Cash Generating Units ("CGUs"). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from a business combination that gives rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

Foreign currencies

The financial statements of the Group are presented in its reporting currency of Sterling. The functional currency of each Group entity is the currency of the primary economic environment in which the entity operates.

Transactions in foreign currencies during the period have been converted at the rates of exchange ruling on the date of the transaction. Assets and liabilities denominated in foreign currencies have been translated at the rates of exchange ruling on the reporting date. Any gains or losses arising from these conversions are credited or charged to the Consolidated Income Statement.

On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the translation reserve.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

Financial assets

The Group classifies its financial assets into the categories discussed below, depending on the purpose for which the asset was acquired. The Group only has financial assets classified as held at amortised cost. The financial assets comprise of trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

Cash and cash equivalents includes cash in hand, deposits held with banks, and - for the purpose of the statement of cash flows - bank overdrafts. Bank overdrafts are shown within loans and borrowings in current liabilities on the consolidated statement of financial position, unless there is a right of set-off between bank accounts across the Group. In this instance, the net cash position will be shown.

These assets arise principally from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. Trade receivables are recognised initially at the transaction price and other financial assets are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue. They are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a historical provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within administration costs in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those for which credit risk has increased significantly, lifetime expected credit losses are recognised, unless further information becomes available contrary to the increased credit risk. For those that are determined to be permanently credit impaired, lifetime expected credit losses are recognised.

Capital management

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial investments and financial assets (e.g. accounts receivables, other financial assets) and projected cash flows from operations.

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, invoice discounting and long-term loan finance.

Financial liabilities

The Group classifies its financial liabilities into two categories - other financial liabilities and fair value through profit and loss:

Other financial liabilities

The Group's other financial liabilities include bank loans, confidential invoice discounting facility, trade and other payables and accruals. Bank borrowings are initially recognised at fair value 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 rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

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.

Fair value through profit and loss

This category only comprises of the element of deferred consideration on business combinations, which is contingent on the performance of the acquired businesses. There is no deferred consideration outstanding at this reporting date (2019 - £4,607,000).

Share capital

Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The company's ordinary shares are classified as equity instruments.

Leased assets

IFRS 16 has introduced a single, on-balance sheet accounting model for lessees, eliminating the distinction between operating and finance leases. IFRS 16 has impacted how the Group accounts for leases under IAS 17.

The Group assesses at inception whether the contract is, or contains, a lease. A lease exists if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group assessment includes whether:

· the contract involves the use of an identified asset;

· the Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the contract period; and

· the Group has the right to direct the use of the asset.

At the commencement of a lease, the Group recognises a right-of-use asset along with a corresponding lease liability.

The lease liability is initially measured at the present value of the remaining lease payments, discounted using the individual entities incremental borrowing rate. The lease term comprises the non-cancellable period of the contract, together with periods covered by an option to extend the lease where the Group is reasonably certain to exercise that option based on operational needs and contractual terms. Subsequently, the lease liability is measured at amortised cost by increasing the carrying amount to reflect interest on the lease liability and reducing it by the lease payments made. The lease liability is remeasured when the Group changes its assessment of whether it will exercise an extension or termination option.

Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, lease incentives received and initial direct costs. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability.

The incremental borrowing rate is calculated on a lease by lease basis. The weighted average lessee's borrowing rate applied to the lease liabilities is 3.27% (2019 - 3.42%).

Depreciation is calculated on a straight-line basis over the length of the lease. The Group has elected to apply exemptions for short-term leases and leases for which the underlying asset is of low value. For these leases, payments are charged to the income statement on a straight-line basis over the term of the relevant lease. Right-of-use assets are presented within non-current assets on the face of the statement of financial position, and lease liabilities are shown separately on the statement of financial position in current liabilities and non-current liabilities depending on the maturity of the lease payments.

Under IFRS 16, right-of-use assets will be tested for impairment in accordance with IAS 36 Impairment of Assets. This has replaced the previous requirements to recognise a provision for onerous lease contracts.

Payments associated with short-term leases are recognised on a straight-line basis as an expense in the profit or loss. Short term leases are leases with a lease term of 12 months or less.

Externally acquired intangible assets

Externally acquired intangible assets, other than Goodwill, are initially recognised at cost and subsequently amortised on a straight‑line basis over their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Taxation

The charge for current tax is based on the taxable income for the period. The taxable result for the period differs from the result as reported in the statement of comprehensive income because it excludes items which are not assessable or disallowed and it further excludes items that are taxable and deductible in other years. It is calculated using tax rates that have been enacted or substantially enacted by the statement of financial position date.

Deferred income tax is provided using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes.

Deferred tax assets are recognised only to the extent that future taxable profit will be available such that realisation of the related tax benefits is probable. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/ (assets) are settled/(recovered).

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within provisions.

Freehold land is not depreciated. Depreciation on assets under construction does not commence until they are complete and available for use. Depreciation is provided on all other items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:

Dividends

Dividends are recognised when they become legally payable. In the case of final dividends, this is when approved by the shareholders at the annual general meeting.

Holiday pay accrual

All employees accrue holiday pay during the calendar year, the board encourages all employees to use their full entitlement throughout the year, however in the unlikely case that an employee has untaken holiday pay this is accrued for at the daily salary costs, including costs of employment, such as social security.

Staff pensions

The Group does not operate a pension scheme for its employees however it does make payments to defined contribution pension schemes on behalf of employees in the UK in accordance with auto enrolment legislation. The payments made are recognised as an expense in the period to which they relate.

Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

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 equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to the equity-settled employee benefits reserve.

Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Provisions

The Group has recognised provisions for liabilities of the uncertain timing or amount for leasehold dilapidations. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date, discounted at a pre-tax rate reflecting current market assessments of the time value of money and risks specific to the liability. The provision takes into account the potential that the properties in question may be sublet for some or all of the remaining lease term.

2.1 Critical Accounting Estimates And Judgements

The Group makes certain estimates and assumptions regarding the future. Management also needs to exercise judgement in applying the Group's accounting policies. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

2.1.1 Principal estimates

· Fair value measurement of intangible assets acquired in business combination;

A number of assets and liabilities included in the Group's financial statements require measurement at, and/ or disclosure of, fair value. As there are no easily identifiable valuation methods for intangible assets such as customer relationships and licences, estimation is required in assessing the fair value when accounting for a business combination. The Group recognised Goodwill and associated intangibles before amortisation of £26,928,000 (2019 - £26,733,00). This is disclosed in note 12 and note 30.

· Estimated impairment of goodwill

The Group frequently tests whether goodwill has suffered any impairment. These calculations require the use of estimates, both in arriving at the expected future profitability of the entity and the application of a suitable discount rate in order to calculate the present value of these flows. As the impairment of goodwill is based on a future forecast, the Group has used a level of judgement around key assumptions of future cashflows greater than 12 months. Details of the impairment and sensitivity of cashflows are disclosed in note 12.

· Trade receivables

In accordance with IFRS 9, the Group assesses whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument both due within one year and more than one year as at the reporting date with the risk of a default occurring on the trade receivable as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. The Group has trade receivables less provision for expected credit losses at the year-end of £55,032,000 (2019 - £51,160,000).

· Deferred Tax

Deferred tax assets have been recognised in relation to trading losses generated in the entities, these have been restricted to those instances where it is probable that the assets will be utilised against future trading profits. The Group has recognised a deferred tax asset of £707,000 (2019 - £210,000) and a deferred tax liability of £1,697,000 (2019 - £1,968,000).

3. REVENUE ANALYSIS BY COUNTRY

The table below shows revenue by timing of transfer of goods and services:

3A) REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue is derived from three main divisions: Transport solutions, referred to as Affinity, Freight Forwarding, and Logistics & warehousing, as detailed in note 7.

3B) CONTRACT ASSETS

Contract assets are included within trade and other receivables on the face of the statement of financial position.

By the nature of the Group's invoicing procedures, then the Group does not have any contract liabilities.

3C) NON CURRENT ASSETS BY COUNTRY

4. OTHER OPERATING INCOME

Other operating income arises mainly from sundry services executed by the Group, not being freight forwarding, logistics and warehousing or affinity services. Since this is not considered to be part of the main revenue generating activities, the Group presents this income separately from revenue.

5. OPERATING PROFIT

1 Amortisation charges on the Group's intangible assets are recognised in the administrative expenses line item in the consolidated income statement.

The remuneration paid to Crowe U.K. LLP and its associates; the Group's external auditors is as follows:

6. EMPLOYEE BENEFIT EXPENSES

Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the directors of the Company.

Directors remuneration

Other remuneration comprises of private family medical cover, company car and insurance benefits.

Total remuneration regarding the highest paid Director is as follows:

The average number of employees (including directors) during the year was as follows:

7. SEGMENTAL ANALYSIS

Types of services from which each reportable segment derives its revenues

The Group had three main divisions: Transport Solutions, referred to as Affinity, Freight Forwarding, and Logistics & Warehousing. All revenue is derived from the provision of services.

· Freight Forwarding - This division is the core business and relates to the movement of freight goods across Europe. This division accounts for the largest proportion of the Group's business, generating 77% of its external revenues. (2019 - 75%)

· Affinity - This division is the Transport Solution's arm of the Group. It focuses on the reselling of DKV fuel cards, leasing, ferry crossings and other associated transport related services. This division accounts for 3% of the Group's business in terms of revenue (2019 - 3%)

· Logistics & Warehousing - This division is involved in the warehousing and domestic distribution; it generates 20% of the Group's external revenues in 2020 (2019 - 22%).

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team comprising the Divisional Chief Operating Officers, the Chief Executive Officer and the Chief Financial Officer.

Measurement of operating segment profit or loss

The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with IFRS. Segment assets and liabilities are measured in the same way in the financial statements and they are allocated based on the operations of the segment.

Inter-segment sales are priced at market rates and at arm's length basis, along the same lines as sales to external customers. This policy was applied consistently throughout the current and prior period.

8. NET FINANCE COSTS

9. INCOME TAX

Analysis of tax expense

The reconciling items for the difference between the actual tax charge for the year and the standard rate of corporation tax in UK (the ultimate parent company's tax residency) applied to profits for the year are as follows:

Deferred Tax

The deferred tax asset relates to losses carried forward at the rate of tax in the relevant jurisdiction.

During the year, the Group recognised a deferred tax asset of £497,000 based on UK profits as forecast in the budget period between 2021 and 2023..

In addition, the Group has potential deferred tax assets for trading losses totalling £1,252,000 (2019: £1,257,000) arising from certain subsidiaries across the Group. These assets have not been recognised due to insufficient certainty that the suitable profits will be generated in the foreseeable future.

The deferred tax liabilities relate to liabilities arising as part of the Group's acquisitions.

10. EARNINGS PER SHARE

11. DIVIDENDS

Subject to approval by shareholders, the Group will propose a dividend to shareholders on the register at the close of business on 11 June 2021. The final dividend for 2019 was made by scrip issue of shares.

12. INTANGIBLE ASSETS

Group

The goodwill included in the above note, relates to acquisition of Pallet Express Srl in January 2016, Easy Managed Transport Limited in March 2017, Benfleet Forwarding Limited in October 2017, Regional Express Limited in November 2017, Anglia Forwarding Group Limited in June 2018, Import Services Limited in July 2018, International Cargo Centre Limited in April 2020 and Nidd Transport Limited in October 2020.

The Group disposed of its goodwill and customer related intangible asset in UK Buy on 31 December 2020.

Annual test for impairment

The Group carries out its impairment tests annually in November as part of the budget process and all newly acquired entities are also reviewed for impairment at the reporting date.

Upon acquisition the goodwill and other intangibles are calculated at Cash Generating Unit ("CGU") level, these are then measured based on forecast cash flow projections, the first year of which is based on the CGU's current annual financial budget which has been approved by the board. During the current year, the Directors have reviewed the CGU's to bring this in line with the integration of the Freight Forwarding and Logistics businesses, as well as the internal reporting of these businesses. As a result, the Anglia Forwarding Group Limited, International Cargo Centre Limited and Benfleet Forwarding Limited business will now be assessed as one CGU (collectively known as Delamode Anglia Limited), whilst Import Services Limited and Easy Managed Transport Limited will also be assessed as one CGU (collectively known as Delamode International Logistics Limited). The cash flow projections for years two to five have been derived based on growth rates that are considered to be in line with the market expectations.

The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows.

In determining the future free cash flow, the main drivers have been revenue and Earnings Before Interest and Tax ("EBIT") margins, with margins remaining at expected levels.

The directors have reviewed the future profit and cash flow forecasts for the next five years and applying a discount rate of between 12.0%-14.0% to the cash flow projections when determining the net present value of these cash flows, it believes there is sufficient headroom in the value of the business to not have to impair the goodwill.

Key assumptions used in the impairment calculations are as follows:

The WACC of the Group has been calculated at a rate of between 12.0%-14.0% with each CGU being adjusted to take into consideration a specific Company premium risk factor.

The short term rate growth for each CGU looks into a number of factors including the expected new business or the loss of existing business. These growth rates are based on the internal three year plans submitted by local management and reviewed through a thorough board process during the annual budget cycle.

Sensitivity to changes in key assumptions

The Group has conducted sensitivity analysis on the impairment test of the CGU's classified within continuing operations. The directors believe that there is sufficient headroom in the value of the business to not have to impair the goodwill so accordingly, no impairment provision was recognised in the year (2019 - £nil).

13. PROPERTY, PLANT AND EQUIPMENT