TIDMFLTA
RNS Number : 0962L
Filta Group Holdings PLC
17 April 2018
Filta Group Holdings plc
("Filta", the "Company" or the "Group")
Full year audited results for the financial year ended 31
December 2017
Financial Highlights
-- Total revenue (including Continuing and Discontinued
Operations) increased 34% to GBP13.5m (2015: GBP10.1m).
-- Revenue from Continuing Operations increased 36% to GBP11.5m (2016: GBP8.5m).
-- Recurring Revenue Fryer Management segment grew 36% to GBP8.4m (2016: GBP6.2m).
-- Adjusted EBITDA* from Continuing and Discontinued operations
up 67% to GBP2.2m (2016: GBP1.3m) and up 77% to GBP2.1m (2016:
GBP1.2m) from Continuing operations.
-- Increase in total deferred revenue balance of GBP0.2m to
GBP2.9m, despite GBP0.3m negative impact of weakened dollar.
-- Revenue from FiltaSeal up 31% to GBP1.3m whilst FiltaGMG
contributed GBP0.4m of revenue since its acquisition in late
August.
-- GBP4.0m of cash at year end to fund strategic growth initiatives.
-- Proposed final dividend of 0.65 pence per share, which
together with the second interim dividend of 0.65 pence, makes a
total dividend for the year of 1.30 pence per share.
*Adjusted for non-recurring items being acquisition, legal, IPO
(2016) costs and share based payments as well as finance costs,
taxes, depreciation and amortization.
Operational Highlights
-- Net increase in Franchise Owner base to 184, the number of
allocated territories increased by 49 to 347, and a 16% increase in
the number of MFUs (mobile filtration units) from 341 to 394.
-- Highest grossing Franchise Owner achieved over $2m (GBP1.5m)
in revenue and six (2016 - four) Franchise Owners recorded revenue
over $1m (GBP0.8m).
-- Significant growth in fryer management services driven by
organic growth and new franchise development which, in turn,
enlarges the platform for increasing Fryer Management Services.
-- Robust revenue growth in our Company Owned Operations due to
strong performances from, particularly, FiltaSeal whose revenues
were up 31% and, since the acquisition of Grease Management Group,
FiltaGMG.
-- Execution of strategy to expand Fryer Management activities
into new geographies ,to add complementary activities and improve
operating margins, with a number of key events:
- Launch of FiltaFry in Canada;
- Acquisition of Grease Management Ltd, a drain management
business, enabling the expansion of Filta's UK Company-owned
services to include higher margin drain management activities;
- Sale of Filta Refrigeration Limited, the Company's
refrigeration and air-conditioning installation and maintenance
business; and,
- Acquisition of FiltaFry Deutschland GmbH, being the Filta
German master licence in Germany, providing a platform for
franchise expansion in Europe.
Jason Sayers, CEO, commented:
"In 2017 we continued to build our franchise base and took
several strategic steps, including the entry into Canada and the
acquisition of Grease Management Limited. This has been followed,
more recently, by the purchase of FiltaFry Deutschland GmbH, all of
which laid the ground for further growth and improved margins in
the years ahead.
Early 2018 has seen the benefit of these actions with further
growth in Fryer Management revenues, the recurring revenue engine,
while FiltaSeal volumes have experienced a good start to the year.
We continue to integrate FiltaGMG and we anticipate an acceleration
in revenue and profitability as it builds its client base through
the year.
Franchise Development remains important to the growth of Fryer
Management revenues. We have continued to add new franchises,
territories and MFU's to our franchise platform through the first
quarter and are encouraged by the strength of the new business
pipeline.
Finally, we are already seeing a modest improvement in our gross
margins as a result of the strategic moves outlined above and we
expect this trend to continue through the year."
16(th) April 2018
Enquiries:
Filta Group Holdings plc
Jason Sayers Tel: 01788 550100
Cenkos Securities plc (NOMAD and Broker)
Bobbie Hilliam Tel: 020 7397 8900
Harry Hargreaves
CHAIRMANS STATEMENT
Introduction
I am pleased to report that 2017, our first full year as an
AIM-listed company, was another year of growth for all of our core
businesses and one in which we won some important new clients in
both our main territories, launched operations in Canada and made a
small but commercially significant acquisition in the UK. On 4
January 2018, we completed the sale of Filta Refrigeration, a
business which we regarded as peripheral to our mainstream
activities, as we focus our strategic development on businesses
with high margins and low working capital requirements. We have
also, since the year end, bought in the FiltaFry master franchise
in Germany and will use its existing franchise base to commence the
roll out of our North American model into mainland Europe.
These financial results contain financial information on both
the Continuing Operations of the Company and, separately, the
Discontinued Operations of the Company being Filta
Refrigeration.
Results
Total profit before tax of the Group for the year ended 31
December 2017 was GBP1.7m (2016: loss of GBP0.2m) on revenue up by
34% at GBP13.5m (2016: GBP10.1m), whilst the adjusted EBITDA was
GBP2.2m (2016: GBP1.3m), an increase of 67% over 2016. The
Continuing Operations recorded a profit before tax for the year of
GBP1.6m (2016: loss of GBP0.3m) on revenue up by 36% at GBP11.5m
(2016: GBP8.5m), whilst the adjusted EBITDA was GBP2.1m (2016:
GBP1.2m), an increase of 77% over 2016. The Discontinued Operations
contributed a net trading profit of GBP0.03m (2016: GBP0.1m) on
revenue of GBP1.9m (2016: GBP1.6m).
In addition to increasing adjusted EBITDA, the Group increased
Deferred Revenue by a further GBP0.2m to GBP2.9m, despite a GBP0.3m
negative impact from a weakened dollar.
During the second half of the year the Group incurred GBP0.1m of
legal and other costs related primarily to the acquisition of
Grease Management Limited (now 'FiltaGMG') and accounted for a
GBP0.1m charge in relation to options issued under the Company's
Share Scheme, resulting in a full year profit from operations of
GBP1.7m (2016: loss of GBP0.2m).
A one-off tax charge of GBP0.3m was taken at year end, to
revalue our deferred tax position, due to the recent reduction in
the US corporation tax rate. This gave rise to an inflated tax
charge, leading to an attributable profit for the year of GBP0.8m
(2016 - loss of GBP0.3m). There is no cash impact from the deferred
tax charge and we will see it being reflected in reduced actual tax
charges and payments beginning in 2018.
Performance of Continuing Businesses
The GBP0.9m increase in adjusted EBITDA resulted from strong
performances in all areas of our business and was achieved on the
basis of higher turnover and improved gross profit margins.
We have seen a net increase in our Franchise Owner base to 184,
the number of allocated territories increased by 49 to 347, and a
16% increase in the number of MFUs (mobile filtration units) from
341 to 394, further strengthening our platform for growth in future
years and reflecting the level of organic growth we are
experiencing.
Revenues and profits from Fryer Management Services increased by
36% and 33% respectively and, during the year, we commenced
operations in Canada, where our first franchisee began trading in
August and now has four MFU's in operation.
The Company-owned activities have also had a good year.
FiltaSeal, has enjoyed revenue growth of some 31% and, with the
increased efficiency that flows from better utilisation, improved
profit margins. Similarly, FiltaDrain, renamed FiltaGMG following
the acquisition of Grease Management Limited, has seen its customer
base expand and contributed GBP0.4m in the first four months of our
ownership at higher than anticipated profit margins.
Strategic Developments
We took a small but important step into the increasingly
in-demand drain-maintenance and grease management space with the
acquisition, in August, of Grease Management Limited. FiltaGMG
augments our existing drain services and enables us to offer a
broader range of drain maintenance options to customers. Since the
year-end, as referred to above we have completed the sale of our
refrigeration and air-conditioning business, which contributed
lower margins than our other activities and was not a business in
which we saw opportunities for growth at the same rate as are
available elsewhere.
We have also taken a significant step towards building our
franchise business in mainland Europe by buying in the master
franchise for Germany in January 2018. FiltaFry GmbH will be
developed along the same lines as our North American business with
the aim being to establish a strong foothold in Germany before
extending into neighbouring European countries.
The franchising of FiltaFry services will continue to be the
cornerstone of our business wherever we operate but we believe that
there are a number of related or ancillary services which,
depending on the territories concerned may be more suitable to run
as directly owned businesses. We therefore envisage pursuing an
Infill strategy to acquire and develop additional service
offerings, which, typically, will require only modest capital
investment, will be complementary to our existing activities and
will contribute to earnings as well as improving return on
capital.
Dividends
We have a stated policy to distribute one third of annual
earnings by way of dividends to shareholders in respect of each
year. However, the Board considers that the one-off, non-cash,
deferred tax charge has caused a significant distortion to the
profits generated during the year and believes that it is
appropriate to maintain the dividend at the same level as that paid
in respect of the first half of the year.
The Board is therefore proposing a final dividend of 0.65 pence
per share, which together with the second interim dividend of 0.65
pence paid on 29 September 2017 makes a total dividend of 1.30
pence per share in respect of the year and represents 45% of the
reported earnings. The proposed final dividend, if approved by
shareholders, will be paid on 7 June 2018 to shareholders on the
register at the close of business on 25 May 2018.
Current trading and outlook
We saw growth in all our core businesses in 2017 and this has
continued into 2018. We have secured 4 new franchisees, allocated 6
further territories and added 10 MFU's in the year to date, all of
which will contribute to additional revenues from Fryer Management
Services through the year. Our FiltaSeal activity in the first
quarter was 8% up on the same period last year and the newly formed
FiltaGMG is continuing to gain new clients, thus increasing the
repeat revenue base.
With the additional business that we expect to derive from our
new European operations and the encouraging progress in Canada,
your Board is therefore confident of achieving further growth
through the remainder of the year.
Management, staff and Franchise Owners
The Board much appreciates the considerable efforts of our
management and staff. I welcome to the Group those who have joined
us during the year and I thank all our employees for their
continuing hard work and commitment to the Group.
I also take this opportunity to recognise our Franchise Owners,
whose own performance and client commitment is critical to our
success and reputation.
Tim Worlledge
Chairman
16 April 2018
OPERATIONS REVIEW
Introduction
I am very pleased to report that the Group's continuing
businesses delivered strong results with an operating profit of
GBP1.7m, adjusted EBITDA of GBP2.1m, an increase of 77% over the
previous year, and profit before tax of GBP1.6m. Equally important,
we have increased our deferred revenue balance and, therefore, go
into 2018 with higher revenue visibility than at the start of
2017.
Fryer Management Services, our principal activity, exhibited a
36% increase in revenue, driven by both organic growth and new
franchise development which, in turn, enlarges the platform for
increasing Fryer Management Services revenue in the future. We also
experienced robust revenue growth in our Company Owned Operations
due to strong performances from, particularly, FiltaSeal, whose
revenues were up 31%, and FiltaGMG since the acquisition of Grease
Management Limited.
In addition to continuing the growth of our existing franchise
and Company-owned businesses, the Group's strategy is to expand our
Fryer Management activities into new geographies, to seek
complementary activities to add to our portfolio of services and to
continually strive for improved margins and return on our capital.
The pursuit of this strategy led to several key events during the
year:
-- In August we launched FiltaFry in Canada with our first
Franchise Owner, in Woodstock Ontario, already operating four (two
at 31 December 2017) MFUs and strong interest from potential
franchisees to start up elsewhere.
-- In August we acquired Grease Management Limited, a drain
management business with an established client base and,
historically, regular income. This expands Filta's UK Company-owned
services to include higher margin drain management activities which
can be offered in addition to those already being provided.
-- On 4 January 2018, the Group completed the sale of Filta
Refrigeration Limited, its refrigeration and air-conditioning
installation and maintenance business. Whilst a profitable
business, Filta Refrigeration did not fit the Group's business
ideal of being a fast-turnaround, high margin service offering
-- Post year-end, Filta bought-in FiltaFry GmbH, its master
licence in Germany and it is intended that this business, which is
already established with 6 franchisees and 7 MFU's, will provide
the platform for expansion in Europe using Filta's North America
franchise model.
Franchise Development
During the year we accounted for a total of 51 new franchise and
territory sales. These contributed GBP1.3m of Franchise Development
revenue in the year whilst we added GBP0.2m to the Deferred Revenue
balance to be carried forward to future accounting periods.
Our strategy is to recruit quality Franchise Owners, who have
the ambition and business ability to expand their franchises,
thereby enlarging the platform for Filta's own Fryer Management
repeat revenues to increase year after year. With Filta now
operating in many key markets in the US, we have increasingly used
business brokers, who are particularly useful in targeting markets
in which we need additional coverage. Sales through brokers
accounted for 43% of Filta's new franchise sales.
With this increasing coverage in the US, we will see a reduction
in the number of available territories for sale which will result
in a decrease of new franchise sales in the US over the coming
years. However, it is anticipated that our expansion into Canada,
where we expect to have 12-15 multi-unit Franchise Owners in the
next few years, and Europe will ensure that the franchise base
continues to grow.
As our franchise base grows, we are experiencing an increased
demand and opportunity for franchise resales with 10 Filta
Franchise Owners selling their businesses during 2017, from which
we generated fees of GBP0.1m. We expect resale transactions to grow
in value and number in the coming years, which will not only
generate increasing fees but will also provide opportunities to
strengthen the franchise network.
Fryer Management Services
Fryer Management Services contributed GBP8.4m of revenues in the
year (2016: GBP6.2m). Our Franchise Network is both the showpiece
and the cornerstone of our business - our franchisees connect us to
our markets and our performance reflects their performances. We are
committed to providing the franchisees with the necessary support
to give them the best chance of success.
One of our strategic objectives is to encourage multi-unit
franchisees, which helps to allay financial risk and to provide
Owners with higher investment returns. In 2017, our highest
grossing Franchise Owner achieved over $2m (GBP1.5m) in revenue and
six (2016: four) Franchise Owners recorded over $1m (GBP0.8m) of
revenue.
Network revenue, defined as the total revenue of our U.S. based
franchisees for all services provided to customers, represents the
best indicator of the Filta brands growing strength in the market.
Our U.S. franchise network generated $36m (GBP28m) of revenues in
2017 (2016: $29m/GBP21m).
In supporting our Franchise Owners, we endeavour to lower as
many barriers as possible for them with programs such as:
-- Inside Sales - our Inside Sales Team, which is our "growth
engine", has daily contact with franchise owners and helps them win
new customers and upsell new products to existing customers. The
team excelled again in 2017.
-- Tech recruitment - with 394 trucks on the road at year end
and growing quickly, hiring and keeping good technicians is the
lifeblood of our franchisees' businesses. To help them in managing
this resource, Filta expanded the service to assist in the
recruitment and retention of technicians.
-- National Accounts - we continue to grow our national account
customer base with new contracts being signed and greater
penetration being driven within existing contracts.
-- Waste oil - 6K - as the volumes of waste cooking oil
collected by our network continues to grow, we have put in place a
program of upgrading the facilities of franchise owners to allow
them to increase their storage capacities to 6,000 gallons (22
metric tonnes) of waste oil at one time. This improves the
economics for Filta by reducing the collection costs as well as the
revenue potential because we are able to sell larger loads at
better prices. In the last 12 months, we have upgraded a further 21
facilities in the US to this 6k capacity, giving a total of 51 such
facilities.
Company Owned Operations (UK)
FiltaSeal
Revenue from FiltaSeal was GBP1.3m (2016: GBP1.0m), reflecting
the fact that the number of seals fitted grew by 35%, achieved
without the need for additional vans. The increased efficiency of
our vans has resulted in a positive contribution to gross margin
and, although we are now approaching optimal utilisation, we expect
to see this trend continue into 2018.
FiltaGMG
Revenues from FiltaGMG in the four months since the acquisition
of Grease Management Limited were GBP0.4m. In 2016 we recognised
that there was a developing demand, driven by both legislation and
commercial efficiency benefits, for the provision of preventative
drain maintenance to commercial kitchens. We therefore started
supplying and servicing auto-dosing drip systems to keep drains
clear for commercial kitchens and it quickly became clear that
there was a far greater opportunity if we could broaden our
services to include the maintenance of grease recovery units. This
is a highly fragmented, but growing, market and so in August 2017
we acquired Grease Management Limited, a company with a strong
reputation and a well-established client base in this area of
activity. Moreover, it was located just 30 minutes from our offices
in Rugby and has been well known to us for many years.
With a solid customer base and experienced team, Grease
Management Limited was integrated into our existing FiltaDrain
business to create FiltaGMG, sharing the existing call-centre
resources and implementing new operational systems. The integration
was relatively straightforward, and the results have fully
justified our enthusiasm for expansion into this market. It is our
aim to grow this activity through organic growth and further
in-fill acquisitions.
Germany
Post year-end we announced that we had bought in FiltaFry GmbH,
our master licence holder for FiltaFry in Germany owned by Jos van
Aalst, which had six franchisees with seven MFU's operating at that
date. Traditionally, Filta has engaged directly with licence
holders in the UK and North America but sold master licences for
other countries in the world. Although this brought in up-front
licence fees and allowed us to achieve a broader reach without
imposing undue strain on the management resources, it limited the
long-term earnings potential for the Group and relied upon the
skills of the master-licensee to develop the markets outside the UK
and North America.
Jos van Aalst has held the master-licence for Germany since late
2014 and we have been impressed with the speed with which he has
developed the business in Germany. Aware that he had also had past
successes in building other brands across Europe, we developed,
with him, a plan to expand our FiltaFry business across key markets
in Europe using the successful Filta franchise model employed in
the US. In order to do this and to give the venture a starting
platform, we decided to buy in the German business from Mr van
Aalst and to appoint him as our managing director of European
operations.
With Jos van Aalst in place as Managing Director of Filta's
European business, the plan is to spend 2018 putting the building
blocks in place for the franchise support model in Germany before
replicating the US model by expanding the business into adjacent
countries with multi-unit franchise owners in the years to come.
This will be a long-term project with at least the first 12 months
to be focussed on developing the German business and refining the
model as needs be for the wider European market. This should be
making a positive contribution for the current financial year.
International
In 2017, we sold the FiltaFry master-license for Eire, which
adds to our successful FiltaFry partners in Benelux and South
Africa, both of whom are expanding.
Although we plan to expand across much of mainland Europe with
the US franchise model, we still plan to award Master Licenses in
countries where we feel it would be best to have a local Master
Franchise Owner develop the market.
Filta Refrigeration
On 4 January 2018, we completed the sale of Filta Refrigeration
and exited the refrigeration business to enable us to concentrate
resources on our higher margin businesses FiltaFry, FiltaSeal and
FiltaGMG.
People
Good people are key to any business and we continue to build a
great team at Filta, many of whom have worked for the Group for
well over 10 years. They have been a key component to our success
in that period both through their hard work and dedication to the
brand and by the strong relationships they've developed with
customers and franchise owners alike. In the US, the management
team is very stable with Tom Dunn, Chief Operating Officer,
continuing to run the day to day business, enabling us to continue
executing on our plans.
In the UK, we significantly strengthened the management team;
Alan Richards was hired as Accounts Manager in August, Alastair
Anderson joined as Head of Sales in November, Debbie Sarson-Lowe
was promoted from Operations Director to Managing Director in
January 2018 with Roscoe Urosevic moving into a Corporate
Development role. He will focus on identifying suitable acquisition
targets and will assist with the management of our expansion into
Europe. This experienced team can drive the UK business
forward.
With the expansion into Europe, we gained Jos van Aalst whose
experience was key in our decision to replicate our US model there.
We have also recently added Frank Hartong, an ex-Compass executive,
to run the sales department in Germany as we endeavour to develop
business for our Franchise Owners.
One of the aims of taking Filta public was the ability to offer
all employees share options in the business (SAR's in the US),
helping align all goals and giving everybody the opportunity to
share in the long-term success of the business. I am pleased to say
that we put such a scheme in place and issued options to all staff
in May 2017.
Systems
We are continually improving our systems, with the most notable
development in 2017 being the implementation of NetSuite to handle
the accounting and reporting for the Group. NetSuite provides
real-time financial information to our businesses around the world
with its multi-company, multi-book, multi-currency functionality,
while also allowing our operational systems to integrate directly,
thereby streamlining efficiencies and ensuring accuracy.
Market Conditions
Despite the economic and political uncertainties that persisted
in both the US and the UK through much of 2017, we experienced a
steady level of enquiries from potential franchise owners, with
many superior quality candidates coming forward. We see no reason
for this to change, particularly in view of the strong U.S.
economy. Moreover, the Canadian operation is up and running and we
are already seeing a strong level of interest, which will help to
maintain our progress on the North American continent as the number
of available U.S. territories diminishes. With this and the
commencement of the German operation we are excited by the prospect
of further progress in the year ahead.
The market for each of Filta's services in the UK and US,
remained steady throughout the year and we believe that with the
ever-increasing health, safety and food hygiene requirements, the
demand for our services is likely to remain constant.
Current Trading & Outlook
In 2017 we continued to build our franchise base and took
several strategic steps, including the entry into Canada and the
acquisition of Grease Management Limited. This has been followed,
more recently, by the purchase of FiltaFry GmbH, all of which laid
the ground for further growth and improved margins in the years
ahead.
Early 2018 has seen the benefit of these actions with further
growth in Fryer Management revenues, the recurring revenue engine,
while FiltaSeal volumes have experienced a good start to the year.
We continue to integrate FiltaGMG and we anticipate an acceleration
in revenue and profitability as it builds its client base through
the year.
Franchise Development remains important to the growth of Fryer
Management revenues. We have continued to add new franchises,
territories and MFU's to our franchise platform through the first
quarter and are encouraged by the strength of the new business
pipeline.
Finally, we are already seeing an improvement in our gross
margins because of the strategic moves outlined above and we expect
this trend to continue through the year.
Jason Sayers
Chief Executive Officer
16 April 2018
FINANCIAL REVIEW
Summary
-- Group revenue, from continuing operations, increased 36% to
GBP11.5m (2016: GBP8.5m)
-- Fryer Management revenue, primarily recurring in nature, grew
36% to GBP8.4m (2016: GBP6.2m)
-- Profit before tax was GBP1.6m (2016: loss of GBP0.3m)
-- Adjusted EBITDA, from continuing operations, was up 77% to
GBP2.1m (2016: GBP1.2m)
-- Deferred income balance grew by GBP0.2m (GBP0.5m in constant
currency) to GBP2.9m
-- Basic earnings per share from continuing operations was 2.90p
(2016: loss per share 1.89p)
Revenue
Group revenue from continuing operations grew 36% to GBP11.5m
(2016: GBP8.5m).
Revenue, from our continuing operations, in North America was
GBP8.3m, 72% of Group revenue (2016: GBP5.9m, 70%) while the U.K.
delivered GBP3.2m of revenue, 28% (2016: GBP2.6m, 30%).
The 36% increase in revenue was a result of robust growth across
each of our core service offerings of Franchise Development, Fryer
Management, FiltaSeal and the newly-formed FiltaGMG, following the
acquisition of Grease Management Limited in August.
Fryer Management Services continues to be the key driver of the
business contributing GBP8.4m of revenue (2016: GBP6.2m) on higher
royalty, national account and waste oil revenues while FiltaSeal
experienced a 31% increase in revenue growing to more than GBP1.3m
(2016: GBP1.0m). We are encouraged by the opportunity that FiltaGMG
provides - it has a well-established client base and delivered
GBP0.4m of revenue in the 4 months following its acquisition in
late August 2017. The Franchise Development activities also
finished the year solidly, up 9%, while maintaining a strong
pipeline entering the new year.
Adjusted EBITDA
Adjusted EBITDA increased 77% to GBP2.1m (2016: GBP1.2m) at a
significantly higher adjusted EBITDA margin of 18.3% (2016: 14.1%),
reflecting utilisation efficiencies brought about by delivering a
36% increase in revenue on an adjusted overhead base that was
constant as a percent of sales and supported by our strategy to
focus on the provision of higher margin service offerings,
including the Grease Management Limited acquisition. Gross profit
margins were up to 49.2% (2016: 47.5%).
Adjusted EBITDA reconciliation
Adjusted EBITDA has been
arrived at as follows:
2017 2016
GBP GBP
Profit/(loss) before tax 1,607,727 (328,991)
Acquisition, legal and
IPO related costs 120,280 1,260,539
Share-based payments 87,082 -
Depreciation and amortisation 209,912 182,032
Finance costs 90,952 79,738
------------------------------- ---------- ----------
Adjusted EBITDA 2,115,953 1,193,318
Alternative Performance Measures
In addition to performance measures (IFRS) directly observable
in the financial statements, additional performance measures
(Adjusted EBITDA, Network Revenue and EBITDA to Cash Conversion)
are used internally by management to assess performance. Management
believes that these measures provide useful information as they are
used to evaluate performance of business units, to analyse trends
in cash-based operating expenses, to establish operational goals
and allocate resources. Adjusted EBITDA is defined as earnings
before interest, taxes, depreciation, amortisation, exceptional
costs and share based franchisees for all services provided to
customers and is a meaningful measure of our growth in the markets
we serve. EBITDA to cash conversion is an important metric for
management as it measures both the efficiency of the Group to
convert profits into cash and the effectiveness of our cash
management activities. It is calculated by dividing EBITDA by net
cash flow from operations (measured by earnings before interest,
taxes, depreciation and amortisation divided by net cash flow from
operations per the consolidated statement of cash flows).
Deferred Revenue
Group revenue for the year ended 31 December 2017 includes
GBP0.6m (2016: GBP0.5m) which was released from brought forward
deferred income during the year and we generated a further GBP1.0m
of deferred revenue, of which GBP0.1m relates to opening package
fees for franchises that will start in 2018, and will therefore be
recognised in that year, and GBP0.9m relates to territory fees on
both new and existing franchises and will be recognised over the
life of the franchise agreement. The deferred revenue balance grew
by GBP0.2m to GBP2.9m but was impacted by the foreign exchange
effect of a weakening dollar which had a GBP0.3m negative effect on
the year-end balance.
Discontinued Operations
Following an agreement to sell certain assets of the Group
subsidiary, Filta Refrigeration Limited, the transaction was
completed on 4 January 2018, and the Group has exited its
refrigeration business. The results of Filta Refrigeration are
therefore disclosed as a discontinued operation and will not make
any measurable contribution to the Group's future earnings. In
2017, Filta Refrigeration contributed a net profit of GBP0.03m
(2016: GBP0.1m).
The tax impact of discontinued operations is GBPNil (2016:
GBPNil).
Acquisitions
On 22 August 2017, we acquired Grease Management Limited, a
provider of drain-related services in the UK, for a total
consideration of GBP1.2m. This business contributed GBP0.4m to
group revenue and GBP0.2m to the group's adjusted EBITDA during
2017.
Taxation
We manage all taxes, both direct and indirect, to ensure that we
pay the appropriate amount of tax in each country while ensuring
that we respect the applicable tax legislation and utilise, where
appropriate, any legislative reliefs available. This tax strategy
is reviewed, regularly monitored and endorsed by the Board. The
effective tax rates on income were 38% in the U.S. and 19.3% in the
U.K. The U.S. federal corporate income tax rate has reduced from
35% to 21% following the substantive enactment of US tax reform on
22 December 2017. This necessitated a re-measurement of the
existing US deferred tax position in the period to 31 December
2017. As a result, the current year expense includes a non-cash tax
accounting charge of GBP0.3m. Accordingly, the tax expense for the
year was GBP0.8m (2016: GBP0.1m).
Earnings per share
The basic earnings per share for the year, from continuing
operations, is 2.90p (2016: loss per share of 1.89p) while the
basic and diluted earnings per share, from continuing and
discontinued operations, is 2.99p (2016: loss per share of 1.89p).
However, both earnings per share measures were significantly
impacted by the effects of the GBP0.3m deferred tax charge related
to the change in the U.S. tax rate.
Cash flows and cash balance
The Group is establishing a consistent record of cash generation
with an EBITDA to cash conversion rate of 71%. Cash conversion
measures our success in converting operating profit (measured
by
earnings before interest, tax, depreciation and amortisation
('EBITDA') to cash and reflects both the quality of our earnings
and the effectiveness of our cash management activities. The net
cash inflow from operations before certain acquisition and legal
costs (note 29 to the financial statements) in 2017 was GBP1.5m
(2016: GBP1.3m). The main cash outflows related to the acquisition
of Grease Management Limited GBP1.2m (2016: GBPNil), cash taxes
GBP0.5m (2016: GBP0.3) and dividends GBP0.2m (2016: GBPNil).
At the year end the Group had cash balances of GBP4.0m (2016:
GBP4.4m) and outstanding borrowings of GBP1.1m (2016: GBP1.2m).
Brian Hogan
Chief Financial Officer
16 April 2018
BUSINESS MODEL & STRATEGY
Filta operates principally in North America, the UK, and now
Germany, providing a range of commercial kitchen related services
through franchise networks and Company-owned operations.
Region 1 - North America (USA & Canada)
Corporate HQ in Orlando, Florida, USA
-- Principally a franchise network business
o Franchisees mostly multi-unit operators
o Exclusive rights to defined area
-- All services provided through Filta Franchise Network
o Fryer management is principal service
o Ancillary services include FiltaBio waste oil collection,
FiltaCool, FiltaGold new oil supply and FiltaDrain kitchen drain
solution
-- Revenues generated mainly from franchise sales, franchise services, oil resales
-- Business growth drivers:
o New Franchise Sales & Resales
o Existing Franchise Owners expanding
o National Accounts
o New services and products offered through Franchise
Network
Region 2 - UK
Corporate HQ in Rugby, England
-- Franchise network business and company-owned operations
-- Franchise network business:
o Franchisees mostly single unit operators
o Services are solely fryer management
-- Company-owned Operations:
o FiltaSeal, replacement of refrigeration seals
o FiltaGMG, kitchen drain solution
-- Revenues derived principally from FiltaFry, FiltaSeal and FiltaGMG.
-- Business growth drivers:
o Expanding existing Company-owned services
o Development of additional related services
o Increased focus on national accounts
Region 3 - Mainland Europe (currently Germany)
Corporate HQ in Debbeshoek, the Netherlands
-- Principally a franchise network business
o Franchisees both single and multi-unit operators
o Exclusive rights to defined area
-- All services provided through Filta Franchise Network
o Fryer management is principal service
o Ancillary services include FiltaBio waste oil collection,
FiltaGold new oil supply
-- Revenues generated mainly from franchise sales, franchise services, oil resales
-- Business growth drivers:
o New Franchise Sales
o Existing Franchise Owners expanding
-- Plan to adapt North America model in Germany before expanding into surrounding countries.
Services
One customer - multi-services
-- FiltaFry - Fryer Management
-- FiltaSeal - First Time Seal Replacement
-- FiltaGMG - Fats Oil and Grease Drain Management
Fryer Management - The FiltaFry Service
FiltaFry, our unique Fryer Management service, is the
cornerstone of the Group's activities and service offering in North
America, the UK and Germany. It provides an effective, hygienic and
economic service for commercial kitchens, cleaning fryers, reducing
cooking oil costs and disposing of waste cooking oil.
-- FiltaFry provides a total fryer management service, including
the on-site micro-filtration, removal and replacement of cooking
oil.
-- 5,000+ restaurant and food service customers receive FiltaFry services on a weekly basis.
-- Fryer Management also includes supplemental services provided
by our Franchise Owners to customers such as FiltaCool and
FiltaDrain.
-- Franchisees operate a total of 394 MFUs of which 349 are in
the USA, 2 in Canada and 43 in the UK.
FiltaSeal
FiltaSeal service is sold in the UK and is a patented system for
replacing damaged or perished refrigerator and freezer door seals
on-site in a cost and time effective manner. Specifically, the
system allows engineers, using patented on-board equipment and
materials, to replace a seal in one visit, producing cost and time
savings for its clients, who would otherwise experience ordering
and fitting delays following an initial engineer's visit. The
benefit of this service, apart from avoiding the disruption that
multiple engineer visits cause, is the energy cost saving and
avoidance of longer-running food hygiene risks.
FiltaGMG
FiltaGMG is a UK-wide provider of drain-related services
including live bacteria drain dosing and the installation and
servicing of Grease Recovery Units. Over 75% of FiltaGMG's revenue
is recurring in nature, with work typically being carried out
quarterly under scheduled maintenance programmes.
The Franchise Model
Our Fryer Management service is provided through a network of
Franchise Owners, who operate under 10-year franchise licences in
North America and under 5-year franchise licences in the UK and
Germany.
Filta, as the Franchisor, owns the intellectual property ("IP")
comprised in the equipment and systems and, through its Franchise
Model, allows its Franchise Owners to make use of that IP and of
the
FiltaFry name in providing the Fryer Management Service to its
customers.
There are two key components to the creation of a successful
franchise:
-- The quality of the franchisee and
-- The provision by the franchisor of constant advice and
support to the franchisee as he first establishes and then develops
the business
Filta takes a great deal of time in selecting its franchisees,
who undergo an extensive interviewing and assessment process before
being awarded a franchise. Care is taken to establish that the
applicant has the necessary funds, drive and enthusiasm to run and
build the business.
Typically, in North America, Franchisees are likely to develop
into multi-van operations, while, in the UK, they more often remain
as single unit operators. Germany is being developed as a
multi-unit operator model.
As the Franchisees grow their businesses, both by increasing
their customer base and by adding extra units, they receive
extensive support from Filta. Filta believes that this high level
of support is critical to the success of its Franchise Owners.
Filta considers that its role is to bring down barriers,
identify opportunities, pass on experience and, above all, help to
set up all the normal business practices and systems that are
needed in young businesses.
Business Model
There are three key components of revenue generation in the
Group and each of these is important, not just to revenues, but in
providing the platform for growth in the future.
1 - Franchise Development
-- New Franchise Owners and territories
-- Territory Fee and Opening Package Fee paid by franchisee
-- 10 Year Franchise Agreements (5yr UK and Germany) with annual royalties
-- Key objective is continuing improvement of our Franchise
Owner quality to provide a platform for growth as they add units,
take on new territories and enhance our brand and reputation
2 - Fryer Management Services
-- All services are provided by or through Franchise Owners
-- Franchisees pay a fixed royalty per MFU
-- All products are provided by Filta, generating additional margin
-- Franchise Owners' customer growth drives additional Filta
revenues at little or no resource cost to Filta, providing
increasing revenue visibility (2017 - repeat revenues at 92%)
-- Key objective is growth of franchisees' revenue, driving
predictable Group revenues at increasing marginal profit
3 - Company Owned Operations (UK Only)
-- FiltaSeal provides an essential service to customers with a high level of visibility
-- FiltaGMG provides a service under contract to commercial
kitchens, often already FiltaSeal customers
-- Key objective is to build repeat revenues, providing high
revenue-visibility maintenance contract customers
Repeat Revenues Underpinned by Growing Royalty Income
A significant base of the Group's total revenues (82%) are
earned by way of royalties and other income from an existing
customer base which requires continuing and regular service. It
provides strong cash flow and, together with a large deferred
revenue position, provides good revenue visibility into future
years. Repeat revenue measures those revenues earned from existing
customers, which are recurring in nature, and consist of our Fryer
Management revenue, FiltaSeal revenue and non-installation related
FiltaGMG revenue. The 82% measures these revenues over our total
reported revenue.
Blue Chip Client Base
The Group has a broad client base in North America, the UK and
Germany with clients ranging from small single outlet enterprises
to many blue-chip clients with multi outlets and national coverage
including major supermarket groups, national pub chains and
restaurant chains. The high quality and breadth of the client base
helps to mitigate the risks of exposure to any single business or
organisation.
Strategy
Our objective is to deliver sustainable, predictable and
profitable growth founded upon the following strategic operational
pillars:
1. Recruit the best Franchise Owners possible
2. Drive and support the growth of the Franchise Owners
3. Grow key and national accounts
4. Increase our range of products and services
5. Attract and develop the best people
6. Increase the use of technology to improve our offering
Growth Opportunities
North America
The Fryer Management Services segment is the cornerstone of our
business and we continue to seek to grow this area both by securing
new franchisees and by increasing the numbers of customers serviced
by our franchisees through higher penetration of the NCA (National
and Centralised Accounts) market. This in turn drives royalty and
other repeat revenue growth.
In addition, we are increasing the range of services that our
franchisees offer customers, including FiltaDrain, a weekly-applied
drain cleansing service.
UK
We continue to support our Fryer Management franchisees and to
grow the Company Owned Operations, FiltaSeal and FiltaGMG, through
gaining key accounts.
Germany
With the recent expansion into Germany, the plan is to spend
2018 perfecting the same model that we have developed in North
America. Growth in Germany will come from both the sale of new
franchises and by helping our acquired franchisees to expand.
New Markets
Once we have proven the model in Germany, the plan is to expand
further within mainland Europe in the coming years using the
resource base in Filta's offices in the Netherlands.
KPIs
We focus intently on a group of key performance indicators that
drive our success.
-- Sale of new franchises
-- Sale of new territories to existing franchise base
-- The number of MFU's in the field
-- National Account penetration
-- Number of seals fitted
-- Adjusted EBITDA
-- Cash flow
-- Deferred revenue
Brian Hogan
Chief Financial Officer
16 April 2018
PRINCIPAL RISKS AND UNCERTAINTIES
The board has carried out an assessment of the principal risks
facing the business, which are seen to be as follows:
Risk How we manage the Change in Comment
risk risk during
the year
----------------------- ------------------------------ ------------- -------------------
Organisational
risks
----------------------- ------------------------------ ------------- -------------------
Failure to In the USA, which No change Strong pipeline
attract new represents approximately in risk in both
franchisees 80% of the franchised the U.S.
in line with operations, we have and Canada
the strategic an increasing number in place.
targets may of franchisees who
prevent the are multi-unit operators,
Group from a trend which we
achieving are endeavouring
its operating to develop. Thus,
targets there is an increasing
number of our new
MFUs which are being
taken up by existing
franchisees.
----------------------- ------------------------------ ------------- -------------------
The failure We now have 184 No change The composition
of a major franchisees, and in risk of our franchise
franchisee this is increasing base continues
may lead to each year, with to diversify.
a loss of no franchisee accounting
revenue and/or for more than 1%
a bad debt of the Group's revenues,
thus mitigating
our business risk.
----------------------- ------------------------------ ------------- -------------------
Brand or reputational We provide detailed No change Management
damage may initial training in risk focuses
be caused for all new franchisees on positive
by the actions and their operators. brand awareness
of either There are also refresher through
franchisees training programmes training
or the company's to ensure that all and strongly
own employees franchisees are monitors
fully cognisant its results.
of all procedures
to be followed.
----------------------- ------------------------------ ------------- -------------------
Undue influence There is a majority No change The risk
by a major of the Board who in risk has not
shareholder are not associated changed
on the Company with those members during the
and its Board of the Board who year. The
may lead to are considered to Board composition
decisions be a concert party has remained
or actions and whose obligations constant
which are to act in the best with strong
not in the interests of shareholders oversight
best interests as a whole are unfettered. from the
of the business independent
directors.
----------------------- ------------------------------ ------------- -------------------
Operational
risks
----------------------- ------------------------------ ------------- -------------------
An incident We provide regular No change The risk
involving and comprehensive in risk has not
an employee training to employees changed
or franchisee and franchisees during the
in the operation in the operation year. The
of an MFU of MFU's and other risk is
may result equipment supplied monitored
in a fatal or used in the Group's both internally
or serious business and the and through
injury procedures are reviewed third party
regularly to ensure inspections.
the highest safety
levels.
----------------------- ------------------------------ ------------- -------------------
A failure The Group has employed Decrease Our conversion
of the information the same information in risk to a new
or accounting system for several global,
systems employed years with a strong cloud-based,
by the Group reputation and has accounting
or a cyber-attack proved to be highly platform
or data security reliable. It has supported
breach may recently upgraded by a tier
cause a loss its accounting system one provider
of vital information to a "state-of-the-art" has enhanced
or render system which also reliability
the Group has a good reputation and data
unable to and is used by many integrity.
maintain adequate major organisations. Additionally,
accounting we undertake
records a periodic
review process
to ensure
we have
adequate
IT security
measures
in place.
----------------------- ------------------------------ ------------- -------------------
The loss of We have widely spread No change We have
key people knowledge of the in risk done considerable
may compromise Group's operational work this
the Group's systems and procedures, year to
or any part thereby ensuring improve
of the Group's that there is not our processes
ability to over-dependence for talent
operate effectively. on any single person. management,
We also have continuous retention
monitoring systems and succession
for the identification planning.
and progress with
new business opportunities,
ensuring that there
is a broad knowledge
of such opportunities.
----------------------- ------------------------------ ------------- -------------------
Failure to We have undergone New risk We have
comply with a detailed assessment assigned
new GDPR requirements of the readiness dedicated
in the U.K. of the business resources
and mainland and an action plan and are
Europe. is being developed working
with the support with an
of appropriate external external
advisors. consultant
to ensure
we are in
compliance.
----------------------- ------------------------------ ------------- -------------------
Financial
Risks
----------------------- ------------------------------ ------------- -------------------
A significant The Group's activities No change While the
fall in the are such that, the in risk uncertainty
value of the US Dollar costs of the risk
US Dollar are covered by US has changed
(which accounts Dollar revenues slightly
for approximately and, similarly, this year
70% of the sterling costs are we do not
Group's earnings) covered by sterling see a material
against GBP revenues. Furthermore, effect.
sterling may any third-party The risk
have an adverse debt is able to is monitored
impact on be serviced by earnings on a regular
the Group in the currency basis against
of the debt and both in-house
secured by appropriately and external
denominated assets. mitigation
options.
----------------------- ------------------------------ ------------- -------------------
Strategic
Risks
----------------------- ------------------------------ ------------- -------------------
Competition We have established No change We have
from new entrants a market-leading in risk not witnessed
to the market position amongst any significant
may create the third-party change in
margin pressure providers of our our competitive
or loss of services and we landscape.
customers continually seek
to improve our service
offering to ensure
that we have the
best option available.
----------------------- ------------------------------ ------------- -------------------
Change in The demand for fried No change The risk
consumer tastes food has always in risk has not
or habits, been and continues changed
as a result, to be enormous. during the
for example, We consider that year.
of pressures the services that
from health we provide help
watchdogs, to mitigate the
may result health risks of
in less demand eating fried foods.
for fryers.
----------------------- ------------------------------ ------------- -------------------
Improved fryer Whilst the technologies No change The Group
technology may improve, there in risk is continually
may reduce/resolve will always be deterioration reviewing
deterioration of the oil and, changes
of the oil therefore, a need in technology
and therefore for filtering and and works
require less replacement. The collectively
frequent filtering Board believes that with its
and replacement. any improvements suppliers
in technology will to ensure
simply drive standards we fully
to a higher required understand
level. future changes.
----------------------- ------------------------------ ------------- -------------------
Franchisees We devote a great No change Our franchise
may seek to deal of resource in risk base continues
impose commercial to protecting and to grow
leverage on assisting our franchisees, and diversify
the Group, thereby building which helps
resulting a strong bond of us ameliorate
in reduced trust. We believe any potential
margins and that, for as long risk.
profitability as we provide the
best option and
the opportunity
for franchisees
to achieve success,
there would be little
reason for them
to seek commercial
advantage.
----------------------- ------------------------------ ------------- -------------------
INDEPENT AUDITOR'S REPORT
Opinion
We have audited the financial statements of Filta Group Holding
plc (the "parent company") and its subsidiaries (the "group") for
the year ended 31 December 2017, which comprise:
-- the group statement of comprehensive income for the year ended 31 December 2017;
-- the group and parent company statements of financial position as at 31 December 2017;
-- the group and parent company statements of cash flows for the year then ended;
-- the group and parent company statements of changes in equity for the year then ended; and
-- the notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs as at 31
December 2017 and of the group's profit for the year then
ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
as applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (UK) require us to report to you when:
-- The directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- The directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group's or the parent company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of
materiality. An item is considered material if it could reasonably
be expected to change the economic decisions of a user of the
financial statements. We used the concept of materiality to both
focus our testing and to evaluate the impact of misstatements
identified.
Based on our professional judgement, we determined overall
materiality for the group financial statements as a whole to be
GBP90,000 based on a percentage of profit before tax.
We use a different level of materiality ('performance
materiality') to determine the extent of our testing for the audit
of the financial statements. Performance materiality is set based
on the audit materiality as adjusted for the judgements made as to
the entity risk and our evaluation of the specific risk of each
audit area having regard to the internal control environment.
Where considered appropriate performance materiality may be
reduced to a lower level, such as, for related party transactions
and directors' remuneration.
We agreed with the Audit Committee to report to it all
identified errors in excess of GBP5,000. Errors below that
threshold would also be reported to it if, in our opinion as
auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
The finance functions of the parent company and its UK
subsidiaries are based in the US and UK, respectively.
A member firm of Crowe Horwath International network in the US
(the 'component auditor') undertook a full scope audit of Filta
Group Inc., under our direction. Filta Group Inc., accounts for
approximately 80% of the group's profit before tax and 75% of the
group's revenue.
We were involved in the audit of Filta Group Inc., from the
planning stage through to completion. This involved a combination
of conference call meetings, detailed working paper review and
meetings and discussions with the audit committee. We reviewed a
complete set of working papers for Filta Group Inc. and challenged
the findings of the component auditor and discussed matters with
management. Our audit of the group's UK operations was performed at
the UK headquarters in Rugby. The consolidation and annual report
are prepared by management in the US and we audited these through
regular conference call meetings with management, the use of a file
sharing platform and challenging management's assumptions and
conclusions throughout the audit.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
This is not a complete list of all risks identified by our
audit.
Key audit matter How the scope of our audit
addressed the key audit matter
=========================== ==============================================================
Revenue recognition
Revenue is recognised Our audit procedures consisted
in accordance with of the following:
the accounting policy
set out in the financial * Substantive testing of a sample of transactions
statements. The throughout the year to determine whether the
accounting policy company's accounting policy on revenue recognition
contains a number had been correctly applied.
of judgements in
respect of franchise
sales where a portion * Testing a sample of transactions from the point of
of the revenue generated origin to the financial statements, covering royalty
is deferred and income, franchising and other revenues.
recognised over
the term of the
franchise agreement. * Testing the deferred revenue balance in the financial
statements to assess if this is fairly stated.
* Performing a series of procedures to determine if
revenue has been recognised in the correct accounting
period.
* Assessing the appropriateness of the related
disclosures in the financial statements.
=========================== ==============================================================
Acquisition of Grease
Management Limited
Our audit procedures consisted
Grease Management of the following:
Limited ('GMG')
was acquired by * Obtaining management's detailed valuation report and
the group in August challenged the assumptions used to calculate the
2017 for a total intangible assets, namely the discount rate, customer
consideration of attrition rate and growth rate.
GBP1,150,000 in
cash. Management
has performed a * Comparing the resulting allocation of the purchase
valuation of the price to expectations.
net assets acquired
and identified intangible
assets of GBP374,000 * Assessing the appropriateness of the related
and residual goodwill disclosures in the financial statements.
of GBP631,000. The
valuation of intangible
assets contains
a number of key
judgments.
=========================== ==============================================================
Our audit procedures in relation to these matters were designed
in the context of our audit opinion as a whole. They were not
designed to enable us to express an opinion on these matters
individually and we express no such opinion.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our
audit
-- the information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group and the
parent company and their environment obtained in the course of the
audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial
statements
As explained more fully in the directors' responsibilities
statement the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group's and parent company's ability
to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Leo Malkin (Senior Statutory Auditor)
for and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
London
16 April 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes 2017 2016
GBP GBP
Continuing Operations
Revenue 5 11,547,299 8,468,687
Cost of sales (5,870,449) (4,449,246)
------------ ------------
Gross profit 5,676,850 4,019,441
Other income 38,377 25,186
Distribution costs (124,690) (80,283)
Administrative costs (3,891,858) (4,213,597)
------------ ------------
Operating Profit/(loss) 1,698,679 (249,253)
Analysed as:
Adjusted EBITDA 2,115,953 1,193,318
Acquisition, legal and IPO
costs 6 (120,280) (1,260,539)
Depreciation and amortisation 17,18 (209,912) (182,032)
Share based payments 31 (87,082) -
------------------------------------ ------ ------------ ------------
1,698,679 (249,253)
------------------------------------ ------ ------------ ------------
Finance costs 9 (90,952) (79,738)
------------ ------------
Profit/(loss) before tax 1,607,727 (328,991)
Income tax expense 10 (824,268) (100,755)
Profit/(loss) from continuing
operations 783,459 (429,746)
Discontinued operations
Profit from discontinued
operations 32,858 87,165
Net profit/(loss) attributable
to owners 816,317 (342,581)
Other comprehensive income
Exchange differences on
translation of foreign operations (94,174) (185,557)
------------ ------------
Total other comprehensive
income for the year (94,174) (185,557)
Profit/(loss) and total
comprehensive income for
the year 722,143 (528,138)
============ ============
Earnings/(loss) per share
From continuing operations
* Basic (pence) 13 2.90 (1.89)
* Diluted (pence) 13 2.87 (1.89)
From continuing and discontinued
operations
* Basic (pence) 13 3.03 (1.51)
* Diluted (pence) 13 2.99 (1.51)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes 2017 2016
GBP GBP
Non-current assets
Property, plant and equipment 12,18 1,216,388 1,190,651
Deferred tax assets 11 652,131 755,965
Intangible assets 17 484,821 166,624
Goodwill 17 631,380 -
Deposits 2,344 2,572
Trade receivables 19 302,163 379,405
----------- ------------
3,289,227 2,495,217
----------- ------------
Current assets
Trade and other receivables 19 2,506,060 1,960,693
Inventories 20 437,716 288,350
Cash and cash equivalents 21 4,031,174 4,392,350
----------- ------------
6,974,950 6,641,393
----------- ------------
Assets classified as held
for sale 12 74,372 87,665
Total assets 10,338,549 9,224,275
=========== ============
Current liabilities
Trade and other payables 22 2,142,906 1,989,885
Borrowings 23 107,786 103,812
Deferred income 532,682 400,881
----------- ------------
2,783,374 2,494,578
----------- ------------
Non-current liabilities
Deferred tax liability 95,185 -
Borrowings 23 931,765 1,017,506
Deferred income 2,404,645 2,310,477
----------- ------------
3,431,595 3,327,983
Non-current liabilities classified
as held for sale 12 66,425 33,486
----------- ------------
Total liabilities 6,281,394 5,856,047
----------- ------------
Equity
Share capital 26 2,713,266 2,695,266
Share premium 26 131,400 3,480,191
Retained profits/(accumulated
losses) 1,862,967 (2,256,539)
Translation reserve (354,577) (260,403)
Other reserves 27 (295,901) (290,287)
----------- ------------
Total equity 4,057,155 3,368,228
----------- ------------
Total equity and liabilities 10,338,549 9,224,275
=========== ============
The financial statements were approved and authorised for issue
by the board on 16 April 2018 and were signed on its behalf by:
________________________
Brian Hogan, Chief Financial Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
Share Share Other Merger Exchange Retained Total
Capital Premium Reserves Reserve Reserve Earnings Equity
GBP GBP GBP GBP GBP GBP GBP
Balance at
1 January
2016 - - - 380,100 (74,846) (1,913,958) (1,608,704)
Loss for the
year - - - - - (342,581) (342,581)
Foreign exchange
translation
differences - - - - (185,557) - (185,557)
------------ -------------- --------- ------------ ------------ ------------ ------------
Total comprehensive
income - - - - (185,557) (342,581) (528,138)
------------ -------------- --------- ------------ ------------ ------------ ------------
Issue of share
capital (note
26) 519,050 3,789,064 - - - - 4,308,114
Share issue
expenses - (308,873) - - - - (308,873)
Share premium
reduction
(note 26) - - - - - - 49,400
Share based
payments (note
27) - - 49,400 - - - 49,400
Group reconstruction
(note 26) 2,176,216 - - (719,787) - - 1,456,429
------------ -------------- --------- ------------ ------------ ------------ ------------
Balance at
31 December
2016 2,695,266 3,480,191 49,400 (339,687) (260,403) (2,256,539) 3,368,228
------------ -------------- --------- ------------ ------------ ------------ ------------
Balance at
1 January
2017 2,695,266 3,480,191 49,400 (339,687) (260,403) (2,256,539) 3,368,228
Profit for
the year - - - - - 816,317 816,317
Foreign exchange
translation
differences - - - - (94,174) - (94,174)
------------ -------------- --------- ------------ ------------ ------------ ------------
Total comprehensive
income - - - - (94,174) 816,317 722,143
------------ -------------- --------- ------------ ------------ ------------ ------------
Dividends
paid (note
16) - - - - - (226,402) (226,402)
Issue of share
capital (note
26) 18,000 131,400 - - - - 149,400
Transfer between
reserves - - (49,400) - - 49,400 -
Share premium
reduction
(note 26) - (3,480,191) - - - 3,480,191 -
Share based
payments (note
27) - - 43,786 - - - 43,786
Balance at
31 December
2017 2,713,266 131,400 43,786 (339,687) (354,577) 1,862,967 4,057,155
------------ -------------- --------- ------------ ------------ ------------ ------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Notes 2017 2016
GBP GBP
Operating activities
Profit/(loss) before
taxation for the year 1,640,585 (218,244)
Adjustments for non-cash
operating transactions:
Finance costs 9 90,952 79,738
Depreciation 18 109,911 118,855
Amortisation 17 100,001 63,177
Gain on disposal of 9,992 -
tangible fixed assets
Share based payment
charge 27 87,082 49,400
------------ ------------
2,038,523 92,926
------------ ------------
Movements in working
capital:
Increase in trade and
other receivables (526,864) (964,536)
Increase in trade and
other payables 210,973 160,041
Increase in inventories (106,743) (76,636)
Increase in deferred
revenue 225,969 827,962
------------ ------------
Cash flow from operations 1,841,858 39,757
------------ ------------
Taxes paid (510,187) -
------------ ------------
Net cash flow from
operations 1,331,671 39,757
------------ ------------
Investing activities
Purchase of property,
plant and equipment 18 (112,941) (43,269)
Proceeds from disposals
of property, plant
and equipment 15 24,836 -
Purchase of subsidiary
undertakings, net of
cash acquired 15 (1,137,901) -
Purchase of other intangible
assets 16 (55,480) (153,716)
Net cash used in investing
activities (1,281,486) (196,985)
------------ ------------
Financing activities
Repayment of borrowings (47,058) (146,065)
Net proceeds from issue
of share capital 149,400 3,999,241
Dividends paid to shareholders 16 (226,402) -
Interest paid 9 (90,952) (104,828)
Net cash (used in)/from
financing activities (215,012) 3,748,348
------------ ------------
Net change in cash
and cash equivalents (164,827) 3,591,120
Cash and cash equivalents,
beginning of the year 21 4,392,350 978,939
Exchange differences
on cash and cash equivalents (196,349) (177,709)
------------ ------------
Cash and cash equivalents,
end of year 21 4,031,174 4,392,350
------------ ------------
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
Notes 2017 2016
GBP GBP
Assets
Non-current assets
Investments in
subsidiaries 14 2,293,426 2,176,216
Amount due from
subsidiaries 19 1,704,716 674,573
---------- ----------
3,998,142 2,850,789
---------- ----------
Current assets
Trade and other
receivables 25,802 25,808
Amount due from
subsidiaries 18 438,496 -
Cash and cash equivalents 21 1,162,035 3,048,174
---------- ----------
1,626,333 3,073,982
---------- ----------
Total assets 5,624,475 5,924,771
========== ==========
Current liabilities
Trade and other
payables 61,653 4,074
---------- ----------
Total liabilities 61,653 4,074
---------- ----------
Equity
Share capital 26 2,713,266 2,695,266
Share premium 26 131,400 3,480,191
Other reserves 27 43,785 49,400
Retained earnings 2,674,371 (304,160)
Total equity 5,562,822 5,920,697
Total equity and
liabilities 5,624,475 5,924,771
========== ==========
No statement of comprehensive income is presented by the company
as permitted by section 408 of the Companies Act. The loss dealt
within the financial statements of the parent Company for the year
ended 31 December 2017 is GBP324,658 (2016: GBP304,160).
The financial statements were approved and authorised for issue
by the board on 16 April 2018 and were signed on its behalf by:
____________________
Brian Hogan, Chief Financial Officer
PARENT COMPANY STATEMENT OF CHANGES IN
EQUITY
Share Share Other Retained Total
Capital Premium reserve Earnings Equity
GBP GBP GBP GBP GBP
On incorporation - - - - -
Issue of share
capital (note
26) 2,695,266 3,789,065 - - 6,484,331
Share issue
expenses - (308,874) - - (308,874)
Loss for the
year - - - (304,160) (304,160)
Share based
payment (note
27) - - 49,400 - 49,400
Balance at 31
December 2016 2,695,266 3,480,191 49,400 (304,160) 5,920,697
------------ ------------ --------- ---------- ------------
Balance at 1
January 2017 2,695,266 3,480,191 49,400 (304,160) 5,920,697
Loss for the
year - - - (324,658) (324,558)
Dividends paid
(note 16) - - - (226,402) (226,402)
Issue of share
capital (note
26) 18,000 131,400 - - 149,400
Transfer between
reserves - - (49,400) 49,400 -
Share premium
reduction (note
26) - (3,480,191) 3,480,191 -
Share based
payments (note
27) - - 43,785 - 43,785
Balance at 31
December 2017 2,713,266 131,400 43,785 2,674,371 5,562,822
---------- ------------ --------- ---------- ----------
PARENT COMPANY STATEMENT OF CASH FLOWS
2017 2016
GBP GBP
Operating activities
Loss before tax (324,658) (304,160)
Movements in working
capital:
Decrease/(Increase)
in trade and other
receivables 6 (25,808)
Increase in trade
and other payables 14,282 4,074
Share based payment
charge 87,082 49,400
------------ ---------------
Net cash used in operations (223,288) (276,494)
------------ ---------------
Investing activities
Advances to subsidiaries (1,468,539) (674,573)
------------
Net cash used in investing
activities (1,468,539) (674,573)
------------ ---------------
Financing activities
Proceeds from issue
of share capital,
net of costs 149,300 3,999,241
Increase in investment
in subsidiary (117,210)
Dividends paid to (226,402) -
shareholders
------------ ---------------
Net cash (used in)/from
financing activities (194,312) 3,999,241
------------ ---------------
Net change in cash
and cash equivalents (1,886,139) 3,048,174
Cash and cash equivalents, 3,048,174 -
beginning of the year
------------
Cash and cash equivalents,
end of year 1,162,035 3,048,174
------------ ---------------
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Filta Group Holdings plc was incorporated in England and Wales
on 31 March 2016. Its registered office is at The Locks,
Hillmorton, Rugby, Warwickshire, England, CV21 4PP.
The Company is listed on the AIM market of the London Stock
Exchange. The Company acts as the holding company of a group of
subsidiaries that are involved in the franchising of on-site
environmental kitchen solutions to restaurants, catering
establishments and institutional kitchens. The services include
microfiltration of cooking oil, fryer cleaning, temperature
calibration, waste oil disposal and specially designed filters for
refrigeration units and coolers. The Filta Group sells franchises
and operates in the UK, the United States and Canada. Additionally,
the Company operates two direct sale businesses including
refrigeration seal replacement and the installation, repair and
maintenance of drain dosing and grease recovery units. Further
details of the Company's subsidiaries are provided in Note 14.
2. BASIS OF PREPARATION
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted for
use in the European Union including interpretations issued by the
International Financial Reporting Interpretations Committee
(IFRIC), and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS.
The consolidated financial statements have been prepared under
the historical cost convention except for financial instruments
that have been measured at fair value through profit and loss.
The presentational and functional currency of the Company is
Pounds Sterling. The functional currency of the subsidiaries is
determined by the primary economic environment in which they
operate.
Group reconstruction in prior year
Filta Group Holdings plc entered into an agreement to acquire
the entire issued share capital of each of The Filta Group Limited
and The Filta Group, Inc. on 26 October 2016 from Cookband Limited
for Nil consideration. The reorganisation was affected by way of
share for share exchanges whereby each of The Filta Group Limited
and The Filta Group, Inc. became wholly-owned subsidiaries (the
"Subsidiaries") of Filta Group Holdings plc as it is currently
constituted.
The directors consider the substance of the acquisition of the
Subsidiaries by Filta Group Holdings plc is that of a combination
of entities under common control and therefore it fell outside the
scope of IFRS 3 (revised 2008).
In accordance with IAS 8 - Accounting Policies, Changes in
Accounting Estimates and Errors, in developing an appropriate
accounting policy, the Directors have considered the pronouncements
of other standard setting bodies and specifically looked to
accounting principles generally accepted in the United Kingdom ("UK
GAAP") for guidance (FRS 102) which does not conflict with IFRS and
reflects the economic substance of the transaction.
Under UK GAAP, the assets and liabilities of both entities are
recorded at book value, not fair value. Intangible assets and
contingent liabilities are recognised only to the extent that they
were recognised by the legal acquirer in accordance within
applicable IFRS. No goodwill is recognised, any expenses of the
combination are written off immediately to the income statement and
comparative amounts, if applicable, are restated as if the
combination had taken place at the beginning of the earliest
accounting period presented.
Therefore, although the Group reconstruction completed in
October 2016, and Filta Group Holdings plc was incorporated on 31
March 2016, the consolidated financial statements are presented as
if the Group structure has always been in place, including the
activity from incorporation of the Group's principal subsidiaries.
All entities had the same management as well as controlling
shareholders.
The Directors have decided that it is appropriate to reflect the
combination using merger accounting principles as a group
reconstruction under FRS 102 in order to give a true and fair view.
No fair value adjustments have been made as a result of the
combination.
Basis of consolidation
The consolidated financial statements comprise the financial
information of the Company and its subsidiaries (the "Group") made
up to the end of the reporting period.
The consolidated financial statements present the results of the
Company and its subsidiaries and joint arrangements as if they
formed a single entity. 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. Control comprises the power to govern the financial
and operating policies of the investee to obtain benefit from its
activities and is achieved through direct or indirect ownership of
voting rights; currently exercisable or convertible potential
voting rights; or by way of contractual agreement. Where necessary,
adjustments are made to the financial statements of subsidiaries to
align with the Group accounting policies. All intercompany
transactions and balances between Group entities, including
unrealised profits arising from them, are eliminated upon
consolidation.
Going concern
The Directors have at the time of approving the financial
statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for
the foreseeable future and therefore continue to adopt the going
concern basis of accounting in preparing the financial
statements.
Parent Company
The parent company has taken advantage of s.408 of the Companies
Act 2016 not to publish
the parent company profit and loss account.
3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies of Filta Group Holdings plc
and its subsidiaries are set out below. These policies have been
consistently applied unless otherwise stated.
3.1 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in Pounds
Sterling, which is also the functional currency of the parent
company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional
currency of the respective Group entity, using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains
and losses resulting from the settlement of such transactions and
form the remeasurement of monetary items denominated in foreign
currency at year-end exchange rates are recognised in profit or
loss.
Non-monetary items are not retranslated at year-end and are
measured at historical cost (translated using the exchange rates at
the transaction date), except for non-monetary items measured at
fair value which are translated using the exchange rates at the
date when fair value was determined.
Foreign operations
In the Group's financial statements, all assets, liabilities and
transactions of Group entities with a functional currency other
than Pounds Sterling are translated into Pounds Sterling upon
consolidation. The functional currency of the entities in the Group
has remained unchanged during the reporting period.
On consolidation, assets and liabilities have been translated
into Pounds Sterling at the closing rate at the reporting date.
Income and expenses have been translated into Pounds Sterling at
the average rate, as an approximation of rates on the dates of the
transactions over the reporting period. Exchange difference are
charged/credited to other comprehensive income and recognised in
the currency translation reserve in equity.
3.2 Segment reporting
The results of operating segments are reported in a manner
consistent with internal reporting.
The Group has four operating segments. In identifying these
operating segments, management follows the Group's service lines
representing its main products and services. Further details of
segment reporting are provided in Note 5.
3.3 Revenue
The Filta Group executes franchise agreements for each franchise
area which set out the terms of the arrangement with the
franchisee.
These agreements require the franchisee to pay an initial,
non-refundable franchise fee and royalties based upon the number of
filtration machines operating in each franchise area.
The franchise fee consists of two distinct components:
-- the opening package; and
-- the territory fee
The revenue associated with the opening package is recognised
when substantially all initial services required by the franchise
agreement are performed, which is generally upon the completion of
training of the franchisee. Therefore, there is no deferral of this
revenue unless the training period spans the year-end.
The territory fee represents the exclusive right to operate in a
designated territory for a stated length of time. The territory fee
is deferred over the length of the franchise agreement and released
to the combined statements of comprehensive income on a
straight-line basis.
In circumstances where franchise territories are resold, on an
arm's length basis, between our franchisee and a third party, it is
our policy to continue to recognise the deferred revenue over the
life of the original franchise agreement. Should there be an
additional opening package, or territory sale, as part of the
resale, these components will follow the aforementioned revenue
recognition process under the new franchise agreement policy.
Royalty income is recognised as earned with an appropriate
provision for estimated uncollectible amounts, which is included in
operating expenses.
Supplies and other revenues are recognised when the product or
service is delivered or shipped to customers. Provision for
discounts and rebates to customers, estimated returns and
allowances, and other adjustments are provided for in the same
period in which the related sales are recorded.
3.4 Investments in subsidiaries
Investments in subsidiaries are valued at cost less provision
for any impairment, and an impairment review is carried out
annually by the directors.
3.5 Property, plant and equipment
All items of property, plant and equipment are initially
recorded at cost. All repair and maintenance expenses are
recognised in profit or loss when incurred.
After initial recognition, property, plant and equipment is
stated at cost less accumulated depreciation and any accumulated
impairment loss.
All items of property, plant and equipment are depreciated to
write off the cost of the assets over their estimated useful lives
as follows:
Annual rate
Freehold property 2%
Plant and machinery 10-15%
Motor vehicles 25%
Fixtures and fittings 20%
The estimated useful life and depreciation method are reviewed,
and adjusted as appropriate, at each reporting date. Fully
depreciated assets are retained in the financial statements until
they are no longer in use.
3.6 Business combinations and goodwill
Business combinations are accounted for using the acquisition
method. The cost of the acquisition is measured at 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. Acquisition
costs are expenses and included in Administrative expenses. The
acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition are recognised
at their fair value at the acquisition date.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of any contingent
consideration deemed to be an asset or liability will be recognised
in accordance with IAS 39, either in profit or loss or in other
comprehensive income.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of 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, after reassessment, the group's
interest in the net fair value of the acquiree's identifiable
assets, liabilities and contingent liabilities exceeds the cost of
the business combination, the excess is recognised immediately in
profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. It is reviewed for impairment at
least annually. Any impairment is recognised immediately in profit
or loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to
each of the Group's cash generating units (or groups of cash
generating units) that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of
the acquiree are assigned to those units. Each unit or group of
units to which goodwill is allocated represents the lowest level
within the entity at which the goodwill is monitored for internal
management purposes. On disposal of a subsidiary the attributable
amount of goodwill is included in the determination of the profit
or loss on disposal.
3.7 Intangible assets
Intangible assets identified in a business combination are
capitalised at fair value as at the date of the acquisition and
their costs are amortised over a straight-line basis over their
expected useful lives. Software and development expenditure is
capitalised as an intangible asset if the asset created can be
identified, if it is probable that the asset created will generate
future economic benefits and if the development cost of the asset
can be measured reliably. Amortisation expense is charged to
administrative expenses in the income statement on a straight-line
basis over its useful life. The expected useful lives of the assets
are as follows:
Customer relationships - over 5 years
Customer contracts - over 5 years
Software development - over 3 years
Those costs associated with maintaining computer software
programmes are recognised as an expense as incurred.
3.8 Impairment of tangible and intangible assets
At each reporting end date, the Company 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).
3.9 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short-term liquid investments with original
maturities of three months or less. Bank overdrafts are shown
within borrowings in current liabilities.
3.10 Financial assets
The Group has only a single category of financial assets, being
loans and receivables.
All financial assets are recognised when the Group becomes a
party to the contractual provisions of the instrument. All
financial assets are initially recognised at fair value, plus
transaction costs. Derecognition of financial assets occurs when
the rights to receive cashflows from the instruments expire or are
transferred and substantially all of the risks and rewards of
ownership have been transferred. An assessment for impairment is
undertaken, at the least, at each reporting date.
Interest and other cash flows resulting from holding financial
assets are recognised in the Consolidated Income Statement when
receivable. Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market. They arise when the Group provides money, goods
or services directly to a debtor with no intention of trading the
receivables. Loans and receivables are subsequently measured at
amortised cost using the effective interest rate method, less
provision for impairment.
Any change in their value through impairment or reversal of
impairment is recognised in the Consolidated Income Statement. A
provision against trade receivables is made when objective evidence
is received that the Group will not be able to collect all amounts
due to it in accordance with the original terms of those
receivables. The amount of the write-down is determined as the
difference between the asset's carrying amount and the present
value of estimated future cash flows, discounted at the original
effective interest rate.
3.11 Financial liabilities
Financial liabilities are obligations to pay cash or other
financial instruments and are recognised when the Group becomes a
party to the contractual provisions of the instrument. All
interest-related charges are recognised as an expense in "finance
costs" in the Consolidated Income Statement. Loan notes are raised
for support of long-term funding of the Group's operations. The
financial liability arising on the loan notes is carried at
amortised cost.
Finance charges and direct issue costs are charged to the
Consolidated Income Statement on an accruals basis using the
effective interest method and are added to the carrying amount of
the instrument to the extent that they are not settled in the
period in which they arise.
3.12 Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of equity shares.
-- "Share premium" represents the excess over nominal value of
the fair value of consideration received for equity shares, net of
expenses of the share issue.
-- "Other reserves" represent the equity element in the form of
share options and warrants, see notes 27 and 31 for additional
information on these instruments.
-- "Retained earnings" represents retained profits and accumulated losses.
-- "Merger reserve" arises on business combination (Note 2).
Equity instruments issued by the company are recorded at the
proceeds received, net of direct issue costs.
3.13 Taxation
The income tax expense for the year comprises current and
deferred tax.
Current tax
The charge for current taxation is the tax currently payable
based on taxable profit for the year. Taxable profit differs from
net profit as reported in the consolidated statement of
comprehensive income because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the
reporting end date.
Deferred tax
Deferred tax is provided using the liability method on
differences between the carrying amounts of assets and liabilities
in the consolidated balance sheet and the tax bases used in the
computation of taxable profit. 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 deferred tax
assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition of
other assets and liabilities in a transaction which is not a
business combination and at the time of the transaction affects
neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
reporting end 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 calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset is
realised based on tax rates that have been enacted or substantively
enacted by the reporting end date. Deferred tax is charged or
credited in the statement of comprehensive income, except when it
relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax
arising from a business combination is included in the resulting
goodwill or excess of the acquirer's interest in the net fair value
of the acquiree's identifiable assets, liabilities and contingent
liabilities over the business combination costs.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority.
3.14 Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessees. All other leases are classified as
operating leases.
Rentals payable under operating leases, less any lease
incentives received, are charged to income on a straight-line basis
over the term of the relevant lease except where another more
systematic basis is more representative of the time pattern in
which economic benefits from the lease asset are consumed.
3.15 Adjusted EBITDA
Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation, amortisation, exceptional items and share based
payment expense. The separate reporting of these items helps
provide a better picture of the Group's underlying performance.
Items which may be included within this category include:
-- Costs associated with the Group's listing on AIM;
-- Excess compensation paid prior to the Group's listing on AIM;
-- Costs associated with acquisitions; and
-- Other particularly significant or unusual items.
Adjusted EBITDA is presented separately in the statement of
comprehensive income as the Directors believe that it needs to be
considered separately to gain an understanding of the underlying
profitability of the trading businesses.
3.16 Critical accounting judgments and key sources of estimation uncertainty
Revenue recognition
As outlined in note 3.3, the Group generates revenue from a
range of contractual arrangements.
A degree of judgement arises with respect to the recognition of
revenue on initial franchise fees, giving rise to estimation
uncertainty. Management reviews on a regular basis the allocation
within an initial franchise fee between the opening package and the
territory fee. Whereas the opening package fee is recognised, as
explained in note 3.3, generally upon the completion of the
training of the franchisee, the portion related to the territory
fee is deferred and recognised over the life of the franchise
agreement. The total amount currently in deferred income in this
respect amounts to GBP2,937,327 (2016: GBP2,711,358). The revenue
recognised in respect of the opening package and the apportioned
territory fee in the current year was GBP1,348,193 (2016:
GBP1,235,983).
The Group is furthermore reviewing this application as disclosed
further in note 4 with the upcoming implementation of IFRS 15.
Business combinations
Where the Group undertakes business combinations, the cost of
acquisition is allocated to identifiable net assets and contingent
liabilities acquired and assumed by reference to their estimated
fair values at the time of acquisition. The remaining amount is
recorded as goodwill. The valuation of identifiable net assets
involves an element of judgement related to projected results. Fair
values that are stated as provisional are not finalised at the
reporting date and final fair values may be determined that are
materially different from the provisional values stated.
In undertaking this assessment, the Group has performed a
valuation of the intangible fixed assets acquired, on the excess
earnings method, being customer relationships and customer
contracts. In performing this assessment, it has obtained a
third-party assessment of the fair values of these intangibles,
based on the expected cashflows arising from the existing customer
relationships at the time of acquisition, discounted for depletion
in contract revenue. An unchanged revenue profile would have
estimated the fair value of the customer relationships and customer
contracts to be GBP346,210 and GBP28,071 respectively.
Furthermore, an additional source of estimation uncertainty
arises on the assessment of goodwill impairment. Further disclosure
in included in note 17.
Bad and doubtful debts
Recoverability of trade receivables is a key area of focus given
the material nature of these balances and the working capital needs
of the Group. The profile of the Group's trade receivables covers
balances from a considerable number of customers. Management must
therefore apply judgement in determining the amount of provision
required for possible non-collection of bad or doubtful debts. This
is performed on a case-by-case basis across the Group considering
differences between countries and service lines.
The Group assessed the appropriateness of the provisioning by
considering the level and ageing of debtors and the consistency of
provisioning assumptions year-on-year and past experience of bad
debt exposure. They concluded that the level of provisioning and
carrying value of trade receivables is appropriate.
Taxation
Judgement is required when determining the provision for taxes
as the tax treatment of some transactions cannot be finally
determined until a formal resolution has been reached with the tax
authorities. Tax benefits are not recognised unless it is probable
that the benefit will be obtained. Tax provisions are made if it is
expected that a liability will arise. The Group reviews each
significant tax liability or benefit to assess the appropriate
accounting treatment.
4. ADOPTION OF NEW AND REVISED STANDARDS
The following standards are effective for this financial year
but have not had significant impact on the reported financial
performance or position of the Group:
-- Amendments to IFRS 11 Accounting for Acquisitions of
Interests in Joint Operations;
-- Amendments to IAS 1 Disclosure Initiative;
-- Amendments to IAS 16 and IAS 38 Clarification of Acceptable
Methods of Depreciation and Amortisation; and
-- Amendments to IAS 27 Equity Method in Separate Financial
Statements.
New standards and interpretations not applied.
At the date of the approval of these financial statements, the
following standards and interpretations that are relevant to the
Group, which have not been applied in these financial statements,
were in issue but not yet effective.
International Financial Reporting Effective
Standards (IFRS's) for period
beginning
on or after
Amendments to IFRS 2 Classification 1 January
and Measurement of Share-based Payment 2018
Transactions
IFRS 9 Financial Instruments: Classification 1 January
and Measurement 2018
IFRS 15 Revenue from Contracts with 1 January
Customers 2018
IFRS 16 Leases 1 January
2019
The Directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
statements of the Group in future periods, with the possible
exception of those noted below:
-- IFRS 9 Financial Instruments replaces IAS 39, covering the
classification, measurement and derecognition of financial assets
and financial liabilities, together with a new hedge accounting
model and the new expected credit loss model for calculating
impairment.
Impairment
Previously under IAS 39, impairment or credit losses are only
recognised when a credit loss event occurs ('incurred loss model').
Under IFRS 9, the new impairment requirements are based on expected
credit losses ('expected credit loss model'). Expected credit
losses (ECLs) are an estimate of credit losses over the life of a
financial instrument and are recognised as a loss allowance or
provision.
The main difference between the two accounting standards is that
the new standard (IFRS 9) requires a recognition of credit loss
allowances on initial recognition of financial assets, whereas
previously under IAS 39, impairment is recognised at a later stage,
when a credit loss event has occurred. The full impact of IFRS 9 is
currently under review, including the practical application of the
principles of the standards. Additionally, without foresight into
the type, amount and specifics of those financial assets at the
next financial statement date, it is not practical to provide a
reasonable estimate of the financial effects until this review is
complete.
-- IFRS 15 introduces a new five-step approach to the timing of
revenue recognition based on performance obligations in customer
contracts and is effective for periods beginning on or after 1
January 2018. Based on a preliminary review by the Board, it has
been determined that IFRS 15 may have an impact on revenue
recognition and related disclosures. Management is completing the
review and is developing appropriate systems, internal controls,
policies and procedures necessary to collect information for the
purposes of accounting and disclosure under IFRS15.
Management's review of the impact of IFRS 15 will be concluded
in the second quarter. The key impact identified to date is:
-- Financing Component - Under IFRS 15 when determining the
contract price an entity must consider the existence of a
significant financing component in the contract. Where one exists,
the company shall adjust the promised amount of consideration for
the effects of the time value of money if the timing of payments
agreed to by the parties to the contract exceeds one year. The
Group does, in certain situations, provide for extended payment
terms to its franchisees. This change could affect both; (i) the
amount of revenue recognised under the contract; and (ii) the
recognition of interest income to be realized over the period of
the extended terms.
5. SEGMENT ANALYSIS
Operating segments have been identified on the basis of internal
reports about components of the Group that are regularly reviewed
by the chief operating decision maker (which takes the form of the
Board of Directors), in order to allocate resources to the segment
and to assess its performance.
The Directors consider that the Group currently has four
reportable segments: the marketing and execution related to
Franchise Development; provision of services and supplies to the
fryer management sector; servicing the refrigerator seal
replacement market; and the provision of design, installation and
services provided to the refrigeration and cold stores market. The
Group also has two geographic segments: U.K. and North America.
Revenue and non-current assets by origin of geographical segment
for all entities in the Group is as follows:
Revenue
2017 2016
GBP GBP
U.K. 3,197,973 2,580,674
North America 8,349,325 5,888,013
Total continuing operations 11,547,299 8,468,687
Discontinued operations 1,937,440 1,606,502
----------- -----------
Total 13,484,739 10,075,239
Non-current assets
2017 2016
GBP GBP
U.K. 1,544,785 510,854
North America 1,673,329 1,984,363
----------- -----------
Total 3,218,114 2,495,217
----------- -----------
Product and services revenue analysis
Revenue
2017 2016
GBP GBP
Franchise Development 1,348,193 1,235,983
Fryer Management 8,434,262 6,217,772
FiltaSeal 1,327,835 1,014,932
FiltaGMG 437,008 -
----------- -----------
Total continuing operations 11,547,299 8,468,687
Discontinued operations 1,937,440 1,606,552
----------- -----------
Total 13,484,739 10,075,239
----------- -----------
Management measures revenues by reference to the Group's core
services and products and related services, which underpin such
income. No customer has accounted for more than 10% of total
revenue during the periods presented. Assets and liabilities are
not fully allocated to the individual categories as such
information is not provided to the chief operating decision
maker.
Operating segment performance for the year ended 31 December
2017:
Franchise Fryer
Development Management FiltaSeal FiltaGMG Total
GBPm GBPm GBPm GBPm GBPm
Sales to
external
customers 1.3 8.4 1.3 0.4 11.5
Adjusted
EBITDA 0.3 1.5 0.2 0.1 2.1
------------------------- ------------------------- ------------------------- ------------------------- --------------------------
Acquisition,
legal and IPO
costs (0.0) (0.1) (0.0) (0.0) (0.1)
Share based
payments (0.0) (0.1) (0.0) (0.0) (0.1)
Depreciation
and
amortisation (0.0) (0.2) (0.0) (0.0) (0.2)
Operating
profit 0.2 1.2 0.2 0.1 1.7
------------------------- ------------------------- ------------------------- ------------------------- --------------------------
Net finance
costs (0.0) (0.1) (0.0) (0.0) (0.1)
Profit before
taxation 0.2 1.1 0.2 0.1 1.6
------------------------- ------------------------- ------------------------- ------------------------- --------------------------
Taxation (0.8)
Profit from
discontinued
operations 0.0
Other
comprehensive
income (0.1)
Profit and
total
comprehensive
income 0.7
--------------------------
Operating segment performance for the year ended 31 December
2016:
Franchise Fryer
Development Management FiltaSeal FiltaGMG Total
GBPm GBPm GBPm GBPm GBPm
Sales to
external
customers 1.2 6.3 1.0 - 8.5
Adjusted
EBITDA 0.2 1.0 0.1 - 1.2
------------------------- ------------------------- ------------------------- ---------------------- ----------------
Acquisition,
legal and IPO
costs (0.2) (0.9) (0.2) - (1.3)
Share based
payments - - - - -
Depreciation
and
amortization (0.0) (0.1) (0.0) - (0.2)
Operating
profit (0.0) (0.1) (0.1) - (0.2)
------------------------- ------------------------- ------------------------- ---------------------- ----------------
Net finance
costs (0.0) (0.1) (0.0) - (0.1)
Profit before
taxation (0.1) (0.1) (0.2) - (0.3)
------------------------- ------------------------- ------------------------- ---------------------- ----------------
Taxation (0.1)
Profit from
discontinued
operations 0.1
Other
comprehensive
income (0.2)
Profit and
total
comprehensive
income (0.5)
----------------
6. Operating profit and adjusted EBITDA
The following have been included in arriving
at operating profit and adjusted EBITDA:
2017 2016
GBP GBP
Depreciation of property, plant and
equipment (note 17) 109,911 118,855
Amortisation of intangible assets (note
16) 100,001 63,177
Profit on disposal of plant and equipment 9,992 -
Staff costs, including directors (Note
7) 2,993,670 3,079,535
Cost of acquisition 34,000 -
Foreign exchange gains/(losses) (22,238) (62,038)
Profit before tax is stated after charging:
Auditors remuneration
Fees payable to the company's auditor
and their associates for the audit
of the company's financial statements 61,920 39,500
Subsidiary audit fees - 23,638
Fees payable to the company's auditor
for other services to the
Group - 122,500
---------- --------------
Total auditors remuneration 61,920 185,638
---------- --------------
Inventory expensed 5,870,449 4,449,246
Operating lease rental expense 24,399 13,459
Exceptional items consist of the following:
2017 2016
GBP GBP
Acquisition related 65,402
Legal and professional 54,878
Costs of IPO - 580,603
Pre-IPO bonus to shareholders - 679,936
-------- ----------
120,280 1,260,539
-------- ----------
Acquisition related costs are primarily attributable to the
Grease Management Limited acquisition while the legal and
professional costs relate primarily to the cancellation of the
share premium, share option scheme and staffing.
7. STAFF COSTS
2017 2016
GBP GBP
Gross salaries 2,602,507 2,859,320
Social security costs 195,084 139,364
Pension contributions 9,062 2,391
Share based payment charge 87,082 -
Other staff benefits 99,935 78,460
---------- ----------
2,993,670 3,079,535
---------- ----------
The average number of employees of the
Group during the year was as follows:
2017 2016
No. No.
Directors 7 7
Staff
Administration 10 12
Customer Services/Network Support 11 12
Business Development/Marketing 6 8
Sales 7 4
Other 26 19
---------- ----------
67 62
---------- ----------
8. REMUNERATION OF KEY MANAGEMENT PERSONNEL
2017 2016
GBP GBP
Remuneration for qualifying services 732,667 1,296,994
-------- ----------
732,667 1,294,994
-------- ----------
Details of directors' remuneration
are provided in the Remuneration Report.
9. FINANCE COSTS
2017 2016
GBP GBP
Bank and other loans 78,452 72,891
Hire purchase and finance lease charges 12,500 6,847
---------- ----------
90,952 79,738
---------- ----------
10. INCOME TAX EXPENSE
2017 2016
GBP GBP
Corporation Tax
Charge for the year 775,151 265,723
Deferred tax
Origination and reversal of temporary
differences (215,878) (164,968)
Tax charge related to change in U.S.
tax rate 264,995
---------- ----------
Total tax charge 824,268 100,755
---------- ----------
Reconciliation of corporation taxation:
2017 2016
GBP GBP
----------
Profit/(loss) before tax on continuing
operations 1,607,727 (328,991)
---------- ----------
Tax at domestic rates applicable 310,934 (64,811)
Expenses disallowed for tax 19,690 110,744
Loss relief (42,959) (32,067)
Overseas taxes 487,486 251,857
Total current tax 775,151 265,723
Deferred tax
Origination and reversal of timing
differences 49,117 (164,968)
---------- ----------
Total tax expense 824,268 100,755
---------- ----------
The Filta Group's effective tax rate for the year ended 31
December 2017 was 51.3% (2016: 19.7%). The effective rate is an
amalgamation of UK, US and Canadian rates for the periods reported.
The change from year to year has been particularly affected by the
non-recurring/non-cash tax charge related to the revaluation of
U.S. deferred tax assets due to the U.S. rate reduction,
availability of loss reliefs and recognition of deferred tax assets
and liabilities. The effective tax rate excluding the tax charge on
the U.S. rate reduction is 35.1%.
The Filta Group has tax losses of approximately GBP516,227
(2016: GBP667,480) to carry forward against future profits. The tax
value of such losses amounted to GBP98,083 (2016: GBP133,496). The
UK tax losses have no expiry date and a deferred tax asset of
GBP124,249 (2016: GBP133,496) has been recognised in respect of
them.
The U.S. subsidiary has no available tax losses.
11. DEFERRED TAX ASSETS / LIABILITIES
The movement in the Group's
deferred tax asset during the
year is as follows:
2017 2016
GBP GBP
At start of year 755,965 520,439
Addition for the year 210,735 164,968
Charge related to reduction
in U.S. tax rate (264,995)
Foreign exchange differences (49,574) 70,558
---------- --------
At end of year 652,131 755,965
---------- --------
The deferred tax balances relate to temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial information as summarised
below.
2017 2016
GBP GBP
Tax losses 124,249 133,496
Deferred revenue 524,658 596,134
Others 3,224 26,335
-------- --------
At end of year 652,131 755,965
-------- --------
The movement in the Group's deferred tax liability during the
year is as follows:
2017 2016
GBP GBP
At start of year - -
Acquired with subsidiaries 29,215 -
Intangible Assets acquired in 71,113 -
business combination
(Credit) / charge for the year (5,143) -
At end of year 95,185 -
---------- -----
12. Discontinued operations
In December 2017, the Group agreed terms to sell its Filta
Refrigeration business to Scotia Cooling Solutions Ltd ('Scotia').
The deal completed on 4 January 2018.
Consideration for the disposal is a combination of GBP0.1m cash
and Scotia agreed to take on all employees and to novate and/or
refinance certain Filta Refrigeration vehicles.
The results of the discontinued operations, which have been
included in the consolidated income statement, were as follows:
2017 2016
GBP GBP
Revenues 1,937,101 1,606,552
Expenses (1,868,489) (1,495,805)
------------ ------------
Profit before tax 68,612 110,747
Income tax expense (35,754) (23,582)
------------ ------------
Net profit attributable to
discontinued operations 32,858 87,165
------------ ------------
Certain assets and liabilities of the operation have been
classified as a disposal group held for sale and presented
separately on the balance sheet.
The major classes of assets and liabilities comprising the
operations classified as held for sale are as follows:
2017
GBP
Property, plant and equipment 25,114
Inventories 49,258
-------
Total classified as held for sale 74,372
Total liabilities associated with
assets held for sale (borrowings) 66,425
-------
Net assets of disposal group 7,947
-------
13. EARNINGS PER SHARE
2017 2016
Basic weighted average number of
shares 26,971,892 22,700,716
Dilutive effect of share options 288,081 -
and awards
----------- -----------
Diluted weighted average number of
shares 27,259,973 22,700,716
14. INVESTMENTS IN SUBSIDIARIES
2017 2016
GBP GBP
Cost at the beginning of the year 2,176,216 -
Additions 117,210 2,176,216
------------------- ----------
Cost at end of year 2,293,426 2,176,216
------------------- ----------
The subsidiaries of Filta Group Holdings plc,
all of which are included in the consolidated
Annual Financial Statements, are as follows:
Company Class 2017 2016 ownership Nature of business
ownership interest
interest
The Filta Environmental
Group Limited Ordinary 100% 100% Services
The Filta Environmental
Group Incorporated Ordinary 100% 100% Services
Filta Refrigeration
Limited Ordinary 100% 100% Discontinued
FiltaFry
Limited Ordinary 100% 100% Support Services
Bio Depot
Limited Ordinary 100% 100% Dormant
Filta Seal
Limited Ordinary 100% 100% Dormant
Filta Environmental Ordinary 100% - Environmental
Canada Limited Services
The registered office of all subsidiaries is The Locks,
Hillmorton, Rugby, Warwickshire, CV21 4PP, apart from the
following:
Company Registered Office address
The Filta Group Incorporated 7075 Kingspointe Parkway,
Suite 1, Orlando, Florida
32819 United States
Filta Environmental 27(th) floor, P.O. Box
Canada Limited 49123, 595 Burrard Street,
Vancouver, British Columbia,
V7X 1J2 Canada
15. BUSINESS COMBINATIONS
On 21 August 2017, the Group acquired 100 per cent of the voting
equity interests of Grease Management Limited, a company whose
principal activity is that of a provider of drain related services
including live bacteria drain dosing and the installation and
servicing of grease recovery units. The acquisition will broaden
the product offering of Filta's specialist grease and drain
management business, FiltaDrain, and provide additional sales
opportunities by the cross-selling of its services into FiltaGMG's
customer base and vice versa.
Details of the provisional fair values of the identifiable
assets and liabilities acquired, purchase consideration and
goodwill are as follows:
Book Adjustment Fair value
value GBP GBP
GBP
Customer relationships
(intangible asset) - 346,210 346,210
Customer contracts (intangible
asset) - 28,071 28,071
Property, plant and
equipment 135,440 - 135,440
Inventory 54,089 - 54,089
Trade and other receivables 307,425 - 307,425
Cash 12,729 - 12,729
Trade and other payables (264,386) - (264,386)
Deferred tax liability (29,215) (71,113) (100,328)
---------- ----------- -----------
Total provisional fair
value 216,082 303,168 519,250
---------- ----------- -----------
Consideration paid in
cash 1,150,630
-----------
Goodwill 631,380
-----------
The provisional fair values include the recognition of
intangible assets related to the value of Grease Management's
customer relationships and customer contracts. Both assets will be
amortised over a 5-year period with a full year's amortisation
recorded in the current year.
Regarding the acquired Trade and other receivables in the
transaction of GBP307,425, the amount estimated to be potentially
uncollectible at the acquisition date was GBP21,508. At 31 December
2017, GBP15,991 of this balance had been collected.
Deferred tax has been calculated on the value of the intangible
assets acquired at a corporation tax rate of 19% and a
corresponding amount recognised as goodwill. The amount recognised
as goodwill will not be deductible for tax purposes.
Acquisition costs relating to this transaction totalled
GBP34,000 and are disclosed within the statement of comprehensive
income.
Since the acquisition date, Grease Management Limited has
contributed GBP413,000 to Group revenues and profit of GBP121,000
to Group income. If the acquisition had occurred on 1 January 2017,
Group revenue would have increased by GBP1,263,000 and Group income
for the period would have increased by GBP252,000.
The net cash sum expended on the acquisition is as follows:
2017
GBP
Cash paid as consideration on acquisition 1,150,630
Less cash acquired on acquisition (12,729)
----------
Net cash movement 1,137,901
----------
16. DIVIDS
2017 2016
GBP GBP
Distributions to equity holders
in the year:
First interim dividend, in lieu 51,210 -
of 2016, for the year ended 31
December 2017 of 0.19p per share
Second interim dividend for the 175,192 -
year ended 31 December 2017 of
0.65p per share
----------------- -----------
226,402 -
----------------- -----------
Proposed final dividend for the 176,362 -
year ended 31 December 2017 of
0.65p per share
----------------- -----------
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
17. INTANGIBLE ASSETS
Computer Customer Customer
Software Goodwill Relationships Contracts Total
GBP GBP GBP GBP GBP
Cost
Balance at 1 January
2017 391,350 - - - 391,350
Additions 55,480 631,380 346,210 28,071 1,061,141
Foreign exchange (34,713) - - - (34,713)
---------- ----------- --------------- --------------- ----------
Balance at 31
December 2017 412,117 631,380 346,210 28,071 1,417,778
---------- ----------- --------------- --------------- ----------
Amortisation and
impairment
Balance at 1 January
2017 224,726 - - - 224,726
Amortisation 72,930 - 25,110 1,961 100,001
Foreign exchange (23,150) - - - (23,150)
---------- ----------- --------------- --------------- ----------
Balance at 31
December 2017 274,506 - 25,110 1,961 301,577
---------- ----------- --------------- --------------- ----------
Net book value
at 31 December
2017 137,611 631,380 321,100 26,110 1,116,201
========== =========== =============== =============== ==========
Cost
Balance at 1 January
2016 218,351 - - - 218,351
Addition, internally
developed 128,097 - - - 128,097
Foreign exchange 44,902 - - - 44,092
---------- ----------- --------------- --------------- ----------
Balance at 31
December 2016 391,350 - - - 391,350
Amortisation and
impairment
Balance at 1 January
2016 128,686 - - - 128,686
Amortisation 63,177 - - - 63,177
Foreign exchange 32,863 - - - 32,863
---------- ----------- --------------- --------------- ----------
Balance at 31
December 2016 224,726 - - 224,726
---------- ----------- --------------- --------------- ----------
Net book value
at 31 December
2016 166,624 - - - 166,624
========== =========== =============== =============== ============
The Group is obliged to test goodwill and indefinite life
intangible assets for impairment, at least annually, or at any time
if there are indications that the goodwill or indefinite life
assets might be impaired.
In order to perform this test, management is required to compare
the carrying value of the relevant cash generating unit ('CGU')
including the goodwill with its recoverable amount. The CGU to
which the goodwill has been attributed is FiltaGMG.
The recoverable amount of the CGU is determined through the
completion of a value in use calculation. The key assumptions for
the calculation are discount rates, gross margin and expected
changes in future cash flows of the CGU. The pre-tax rates used to
discount the forecast cash flows from CGUs was 9.7% derived from
the Company's post-tax Weighted Average Cost of Capital, which was
8.8% at 31 December 2017, and adjusted for the risks specific to
the market in which the CGU operates.
All CGUs have the same access to the group's treasury functions
and borrowing lines to fund their operations. The growth rate of
the Filta GMG segment is estimated to be 5% pa., and the EBIT used
is 25%, derived from the most recent one-year financial budgets
approved by the Board, extrapolated for four future years by the
expected growth rate applicable to the CGU with a terminal value
using an inflationary growth rate assumption of 3%.
A sensitivity analysis has been performed and the Directors have
concluded that no reasonably foreseeable change in the key
assumptions would result in an impairment of the goodwill. In
particular, a 1% increase in the discount rate or a 1% decrease in
the terminal value growth rate would not result in material
impairment.
18. PROPERTY, PLANT AND EQUIPMENT
Details of the Group's property, plant and equipment and their
carrying amounts are as follows:
Fixture Plant
and and
Fittings Machinery Motor Total
Freehold & Equipment Vehicles
Property
GBP GBP GBP GBP GBP
Cost
At 1 January 2017 1,640,785 93,095 183,632 214,643 2,132,155
Additions 4,496 16,394 13,285 78,766 112,941
Acquired with
subsidiaries 2,815 5,349 5,567 121,709 135,440
---------- ------------ ---------- --------- ----------
Reclassification
to assets held
for sale - - - (84,825) (84,825)
---------- ------------ ---------- --------- ----------
Disposals - - (820) (83,150) (83,970)
---------- ------------ ---------- --------- ----------
Foreign exchange (128,506) (3,388) (3,608) (594) (136,096)
---------- ------------ ---------- --------- ----------
At 31 December
2017 1,519,590 111,450 198,056 246,549 2,075,645
---------- ------------ ---------- --------- ----------
Depreciation
At 1 January 2017 641,013 88,529 99,166 112,795 941,504
Depreciation charge 39,202 12,096 9,175 49,437 109,911
Reclassification
to assets held
for sale - - - (59,711) (59,711)
---------- ------------ ---------- --------- ----------
Disposals - - (367) (68,759) (69,127)
---------- ------------ ---------- --------- ----------
Foreign exchange (56,551) (3,417) (3,016) (335) (63,320)
---------- ------------ ---------- --------- ----------
At 31 December
2017 623,664 97,208 104,958 33,427 859,257
---------- ------------ ---------- --------- ----------
Net Book Values
At 31 December
2017 895,926 14,242 93,098 213,122 1,216,388
---------- ------------ ---------- --------- ----------
At 31 December
2016 999,771 4,566 84,465 101,849 1,190,651
---------- ------------ ---------- --------- ----------
Certain of the property, plant and equipment listed above are
held as security against bank facilities referred to in note
23.
The net book value of vehicles held under finance lease was
GBP0.2m.
19. TRADE AND OTHER RECEIVABLES
Trade and other receivables consist of the following:
Total 2017 2016
GBP GBP
Trade receivables 2,028,107 1,647,665
Prepayments and other receivables 395,677 313,028
Franchise payment plans 384,439 379,405
---------- ----------
2,808,223 2,340,098
---------- ----------
Current 2017 2016
GBP GBP
Trade receivables 1,984,569 1,647,665
Prepayments and other receivables 395,677 313,028
Franchise payment plans 125,814 99,232
---------- ----------
2,506,060 2,059,925
---------- ----------
Non-current 2017 2016
GBP GBP
Trade receivables 43,538 -
Prepayments and other receivables - -
Franchise payment plans 258,625 280,173
-------- --------
302,163 280,173
-------- --------
Accounts receivable include amounts that the Filta Group has
agreed may be settled over extended repayment terms.
The amount due from related parties in the parent company of
GBP2.1m consist of GBP1.7m of loans to subsidiaries to fund debt
repayment and acquisitions and is repayable after more than twelve
months while the balance of GBP0.4m is comprised of GBP0.1 of
management service charges and GBP0.3m of funding of normal working
capital requirements. The loans to subsidiaries bear interest at
commercial rates. All amounts are eliminated on the Group
Consolidated Statement of Financial Position.
Other than the debts described above, the Filta Group's normal
credit terms range between 30 and 90 days.
In assessing the recoverability of these debts, the Directors
have given due consideration to all pertinent information relating
to the ability of the customers to settle. If an account balance is
deemed uncollectible, the account is impaired in full. If an
account is potentially uncollectible, the Group makes an impairment
provision for such amounts. The impairment provision was GBP56,255
at 31 December 2017 (31 December 2016: GBP10,302).
Movement in the allowance for doubtful debt:
2017 2016
UK US Total UK US Total
GBP GBP GBP GBP GBP GBP
At start
of year 10,302 - 10,302 5488 51,877 57,365
Impairment
loss recognised 24,884 28,340 53,224 4,814 - 4,814
Amounts
written
off as uncollectable (7,271) - (7,271) - (62,545) (62,545)
Foreign
exchange
differences - - - - 10,668 10,668
-------- ------- -------- ------- --------- ---------
At end of
year 27,915 28,340 56,255 10,302 - 10,302
======== ======= ======== ======= ========= =========
20. INVENTORIES
2017 2016
GBP GBP
Finished goods 486,974 376,015
Inventory included in assets held
for sale (49,258) (87,665)
--------- ---------
Total 437,716 288,350
--------- ---------
Inventories primarily consists of filtration machines and
filters and are stated at the lower of cost (on a first-in,
first-out basis) and net realisable value. Appropriate
consideration is given to obsolescence, excessive levels,
deterioration, and other factors in evaluating net realisable
value.
21. CASH AND CASH EQUIVALENTS
Group 2017 2016
GBP GBP
---------- ----------
Cash at bank and in hand 4,031,174 4,392,350
---------- ----------
Company
---------- ----------
Cash at bank and in hand 1,162,035 3,048,174
---------- ----------
22. TRADE AND OTHER PAYABLES
2017 2016
GBP GBP
Trade payables 846,564 1,178,105
Taxes and social security 804,922 360,120
Accruals and other payables 491,420 451,660
---------- ----------
2,142,906 1,989,885
---------- ----------
Analysis of trade and other payables
These are classified as short term and are expected
to be settled within 12 months from the reporting
date.
23. LOANS AND OTHER BORROWINGS 2017 2016
GBP GBP
Total
Bank loans 928,236 1,037,022
Hire purchase and finance leases 111,315 84,296
---------- ----------
1,039,551 1,121,318
---------- ----------
2017 2016
GBP GBP
Current
Bank loans 64,102 65,530
Hire purchase and finance leases 43,684 38,282
-------- --------
107,786 103,812
-------- --------
2017 2016
GBP GBP
Non-current
Bank loans 864,134 971,492
Hire purchase and finance leases 67,631 46,014
-------- ----------
931,765 1,017,506
-------- ----------
24. OPERATING LEASE COMMITMENTS
The amounts of future minimum lease payments under
non-cancellable operating leases are as follows:
2017 2016
GBP GBP
Minimum lease payments due:
Within 1 year 10,687 8,554
1 to 5 years 2,360 11,305
Total 13,047 19,859
------- -------
25. RECONCILIATION OF MOVEMENTS IN NET DEBT
1 January Cash Non-cash changes 31 December
2017 flows 2017
Acquisition Foreign Fair
exchange value
movements changes
GBP GBP GBP GBP GBP GBP
Long term
borrowings 1,037,022 (36,585) (72,200) 928,236
Short term
borrowings - - - - - -
Lease
liabilities 84,296 (10,473) 37,492 111,315
Total 1,121,318 (47,058) 37,492 (72,200) - 1,039,551
26. SHARE CAPITAL
The share capital of Filta Group Holdings plc consists of fully
paid ordinary shares with a nominal value of 10 pence. All shares
are equally eligible to receive dividends and the repayment of
capital and represent one vote.
2017 2016
Number GBP Number GBP
Allotted and fully
paid
Total shares in issue
at 1 January 26,952,660 2,695,266 - -
Share for share exchange 21,762,161 2,176,216
Issue of ordinary shares 180,000 18,000 5,190,499 519,050
Share buyback - - - -
Issued under share - - -
option scheme
----------- ---------- -------------------- ----------
Total shares in issue
at 31 December 27,132,660 2,713,266 26,952,660 2,695,266
----------- ---------- -------------------- ----------
On incorporation, the issued share capital of the Company was
GBP1 comprising one Ordinary Share of GBP1.00. The Ordinary Share
was issued, credited as fully paid, to Jason Sayers as the
subscriber to the memorandum of association of the Company. The
Company does not have an authorised share capital.
On 26 October 2016, the Company acquired the entire issued share
capital of Cookband Limited in consideration of the issue, credited
as fully paid, of 2,176,215 Ordinary Shares of GBP1 each to the
then shareholders in Cookband Limited.
On 26 October 2016, the Company acquired the entire issued share
capital of The Filta Group Inc. and The Filta Group, Inc. from
Cookband Limited for Nil consideration. By resolution of the
members passed on 26 October 2016, each of the Ordinary Shares of
GBP1 each in the capital of the Company was sub-divided into 10 New
Ordinary Shares of 10 pence each.
On 27 October 2016, pursuant to a share placing, 5,190,499
shares of 10 pence were issued at a price of 83 pence, giving rise
to a share premium, net of issuance costs, of GBP3,480,191.
The Company, as contemplated in its admission document,
completed a reduction of capital, whereby the entire amount
standing to the credit of the Company's share premium account was
cancelled to create distributable reserves (the "Reduction of
Capital"). The Reduction of Capital was formally approved by the
High Court of Justice, Chancery Division, and the High Court order
was filed with the Registrar of Companies on 18 January 2017. The
purpose of the Reduction in Capital was to create distributable
reserves to support the Board's dividend policy.
On 22 November 2017, pursuant to a share option agreement with
Cenkos Securities plc ("Option Holder"), 180,000 shares of 10 pence
each were exercised, and issued, to the Option Holder at a price of
83 pence each, giving rise to a share premium of GBP131,400.
27. OTHER RESERVES
Group 2017 2016
GBP GBP
Merger reserve (339,687) (339,687)
Share based payment reserve 43,785 49,400
---------- ----------
(295,901) (290,287)
---------- ----------
Company
Share based payment reserve 43,785 49,400
---------- ----------
Merger reserve
The directors consider the substance of the acquisition of the
Subsidiaries by Filta Group Holdings plc is that of a combination
of entities under common control and therefore it fell outside the
scope of IFRS 3 (revised 2008).
Share based payment reserve
The Company entered into a share option agreement ("Option
Deed") with Cenkos Securities plc ("Option Holder"), its nominated
advisor and broker, whereby the Company has granted to the Option
Holder the right, exercisable at any time during the Option Period,
to subscribe for all, or some, of the Option Shares (180,000
ordinary shares) at the Option Price of 83 pence per Option Share,
subject to the terms and conditions of the Option Deed. Pursuant to
this share option agreement the Option Holder exercised and
subscribed for all 180,000 ordinary shares which were issued on 22
November 2017. As a result, the share-based payment reserve of
GBP49,400 was charged to Retained Earnings in the current year.
The Company established the Filta Group Holdings Enterprise
Management Incentive Scheme in 2017 to award U.K. employees with
equity settled share options. The options were granted on 5 May
2017 and vest equally over a three-year period beginning on 5 May
2019. The total charge recognised for share-based payments in
respect of employee services received for the year ended 31
December 2017 was GBP43,785 (2016: GBPNil).
28. FINANCIAL INSTRUMENTS
Risk Management objectives and policies
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Filta Group's competitiveness and flexibility. Further details
regarding these policies are set out below.
Management reviews its monthly reports through which it assesses
the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
Market risk management
Management do not consider the company exposed to interest rate
or inflation risks significant enough to have a material effect on
the profitability of the company.
Foreign currency sensitivity
The Filta Group is exposed to foreign currency risk on
transactions and balances that are denominated in currencies other
than Pounds Sterling. The currency giving rise to this risk is
primarily the US Dollar. Foreign currency risk is monitored closely
on an ongoing basis to ensure that the net exposure is at an
acceptable level.
A majority of the Filta Group's financial assets and liabilities
are held in Dollars and movements in the exchange rate against
Sterling has an impact on both the results for the year and equity.
The Filta Group maintains a natural hedge whenever possible, by
matching the cash inflows (revenue streams) and cash outflows in
foreign currencies.
The following table demonstrates the sensitivity to a reasonably
possible change in sterling against the US Dollar and Canadian
Dollar with all other variables held constant.
Change Effect Effect
in rate on profit on equity
before GBP
tax
GBP
USD +10% (138,791) 10,283
USD -10% 169,633 (12,568)
CAD +10% (1,608) (11,920)
CAD -10% (1,965) 14,569
Interest rate sensitivity
The interest rate sensitivity has been determined based on the
exposure at the balance sheet date. For floating rate liabilities,
the analysis is prepared assuming the amount of liability
outstanding at the balance sheet date was outstanding for the full
year. All financial liabilities, other than financing liabilities,
are interest free.
If interest rates had been 1% higher/lower and all other
variables were held constant, the group's profit after tax for the
year ended 31 December 2017 and reserves would decrease/increase by
GBP0.009m (2016: GBP0.01m).
Credit risk management:
The Filta Group's exposure to credit risk, or the risk of
counterparties defaulting, arises mainly from trade and other
receivables. The Filta Group manages its exposure to credit risk by
the application of credit approvals, credit limits and monitoring
procedures on an ongoing basis. For other financial assets
(including cash and bank balances), the Filta Group minimises
credit risk by dealing exclusively with high credit rating
counterparties.
As the Filta Group does not hold any collateral, the maximum
exposure to credit risk is represented by the carrying amount of
the financial assets as at the end of each reporting period.
Liquidity risk management:
The Filta Group currently holds cash balances to provide funding
for normal trading activity. The Filta Group also has access to
both short-term and long-term borrowings to finance capital
expenditure requirements. Trade and other payables are monitored as
part of normal management routine.
Categories of financial instruments:
The table below sets out the Group's IAS39 classification of
each of its financial assets and liabilities at 31 December 2017.
All amounts are stated at their carrying value.
2017 2016
GBP GBP
Financial Assets
Loans and receivables:
Cash and cash equivalents 4,031,174 4,392,350
Trade and other receivables (excluding
prepayments) 2,451,072 2,169,130
Deposits 2,344 2,572
---------- ----------
6,484,590 6,564,052
---------- ----------
Financial Liabilities
Trade and other payables 2,142,906 1,989,885
Deferred Income 2,937,327 2,711,358
Borrowings 1,105,976 1,154,804
6,186,209 5,856,047
---------- ----------
The table below summarises the maturity profile (representing
undiscounted contractual cash flows) of the Group's financial
liabilities:
Less
At 31 December than 3 to 1 to Over
2017 3 months 12 months 5 years 5 years Total
GBP GBP GBP GBP GBP
Trade and
other payables 2,095,601 16,038 31,267 - 2,142,906
Deferred
income 71,089 355,445 1,884,502 626,291 2,937,327
Borrowings 21,828 109,140 809,815 165,193 1,105,976
Total 2,188,518 480,622 2,725,585 791,484 6,186,209
-------------- -------------- ------------- --------------- -----------
Less
At 31 December than 3 to 1 to Over
2016 3 months 12 months 5 years 5 years Total
GBP GBP GBP GBP GBP
Trade and
other payables 1,886,028 32,217 71,639 1,989,885
Deferred
income 66,814 334,068 1,708,091 602,386 2,711,358
Borrowings 17,302 86,510 724,998 325,994 1,154,804
Total 1,970,144 452,795 2,504,727 928,380 5,856,047
-------------- -------------- ------------- ----------- -----------
29. ADJUSTED CASH FLOW FROM OPERATIONS (*)
2017 2016
GBP GBP
Profit/(loss) before tax 1,607,727 (328,991)
Adjustments for non-cash operating
transactions 387,500 447,007
Movements in working capital (646,531) (78,259)
Impact of items on operating cash
flow - Note 3.15 120,280 1,260,539
1,468,976 1,300,296
---------- ----------
* Adjusted cash flow from operations includes the addition of
items disclosed in Note 3.15.
30. RETIREMENT BENEFIT SCHEMES
Defined contribution scheme
Since October 2016 the Group has operated a defined contribution
retirement benefit scheme for all eligible employees in its U.K.
subsidiary. The assets of the scheme are held separately from those
of the group in funds under the control of the trustee. The
subsidiary is required to contribute 1% of payroll costs to the
retirement benefit scheme to fund the benefits. The only obligation
of the Group with respect to the retirement benefit scheme is to
make the specified contributions.
The total cost charged to income of GBP9,062 (2016: GBP2,391)
represents contributions payable to the scheme by the Group at
specified rates. Any contributions unpaid at the balance sheet date
are included as an accrual at that date. The Group has no further
payment obligations once the contributions have been paid.
31. SHARE OPTION SCHEME
The Company has, on 5 May 2017 ("Grant Date"), introduced a
Share Option Scheme to incentivise executives and employees of
Filta Group Holdings and its subsidiaries. For U.K. employees,
Options have been awarded over a total of 442,500 ordinary shares,
equivalent to 1.6% of the Company's current issued share capital.
The options vest, subject to the satisfaction of certain
conditions, over a period of 4 years from the date of grant. All
options issued will meet
the vesting conditions between 2019 and 2021 and are exercisable
at any time after vesting and within 10 years from the grant
date.
Additionally, all qualifying U.S. employees have been awarded
share acquisition rights (SAR's). The SAR's are conditional bonuses
whose value will be calculated by reference to the amount by which
the price of the Company's ordinary shares has risen above the base
price at the date of exercise, thus providing holders of SAR's the
same reward value as if the SAR's were share options. The
qualifying conditions and timing of vesting are identical to those
within the share option scheme for UK employees. All SAR's are
settled in cash when exercised. A total of 360,000 SAR's has been
awarded.
In the ordinary course of business, an option will normally only
be exercisable to the extent it has fully vested, and any
applicable non-market performance conditions have been satisfied or
waived. Options shall lapse to the extent unexercised on the tenth
anniversary of the date of grant or such earlier date as specified
by the Board at the date of grant.
Movement in the number of share options outstanding during the
year, including grant dates and grant price were as follows:
Share Share Total
options acquisition
rights
---------------------------- ---------- ------------- ----------
Outstanding at 1 January - -
2017
---------------------------- ---------- ------------- ----------
Granted on 5 May 2017
(0.97p) 345,000 360,000 705,000
Granted on 16 October
2017 (1.74p) 97,500 97,500
---------------------------- ---------- ------------- ----------
Total granted during
the year 442,500 360,000 802,500
---------------------------- ---------- ------------- ----------
Forfeited during the
year (0.97p) (157,500) (30,000) (187,500)
Forfeited during the
year (1.74p) (52,500) (52,500)
---------------------------- ---------- ------------- ----------
Total forfeited during
the year (210,000) (30,000) (240,000)
---------------------------- ---------- ------------- ----------
Outstanding at 31 December
2017 (0.97p) 187,500 330,000 517,500
Outstanding at 31 December
2017 1.74p) 45,000 45,000
---------------------------- ---------- ------------- ----------
Total Outstanding 31
December 2017 232,500 330,000 562,500
---------------------------- ---------- ------------- ----------
Exercisable at 31 December - - -
2017
---------------------------- ---------- ------------- ----------
During the year ended 31 December 2017, the Company issued share
options with fair value of GBP267,776. During the year, the Company
recognised an expense of GBP87,082 related to the fair value of the
share-based payment arrangements (2016: GBPNil); this was
determined using the Black Scholes model, with the following
assumptions:
2017
Weighted average share
price 133.4p
Exercise price 97.0p
Risk free rate 0.59%
Dividend yield 0.9%
Volatility 55.05%
32. RELATED PARTY TRANSACTIONS
Remuneration of Directors and other transactions
The remuneration, interests and related party transactions with
the directors of Filta Group Holdings plc and its subsidiaries (the
"Directors") who are considered to be the key management personnel
of the entity, are disclosed in Note 8.
Directors loan accounts
The following amounts were due from the directors at the end of
each reporting period:
-- Mr. R C Sayers: Nil as at 31 December 2017 (2016:
GBP77,236)
All amounts are unsecured, interest-free and repayable on
demand. The amounts are classified within current liabilities under
'Amounts due to directors.'
Franchise rights
In 2012, The Filta Group, Inc. granted franchise rights for a
prescribed territory to Roxanna Holdings Inc. Roxanna Holdings
Inc., a company owned by Jason Sayers and Victor Clewes, directors
of The Filta Group, Inc.
The rights were then assigned to EKS North Atlantic LLC, which
is 50% owned by Roxanna Holdings and 50% by an unrelated 3rd party.
During 2017, the related franchise operator purchased GBPNil of
equipment and supplies from the company (2016: GBP10,165). The
amounts are classified within trade receivables.
On 16 January 2017 the franchise rights were sold by the related
party entity to a non-related third party.
Amounts due to related parties - management fees
For the twelve months ended 31 December 2017, management fees of
GBPNil are included in administrative expense (2016: GBP736,170)
for services provided to The Filta Group, Inc. by Roxanna Holdings,
Inc. At 31 December 2017 and 2016, GBPNil of this total was payable
to the related party.
Notes payable to related party
From 2013 to 2015, the Filta Group, Inc. entered into notes
totaling GBP501,553, bearing interest at 1.5% with a related party.
The notes were to mature in December 2016 through 2018. In 2016,
the Company repaid the notes in full.
These amounts are classified within borrowings and had a balance
of GBPNil at 31 December 2017 (2016: GBPNil).
Interest paid on these loans amounted to GBPNil at 31 December
2017 (2016: GBP8,533).
33. EVENTS AFTER THE REPORTING DATE
On 4 January 2018, the Group announced the sale of its Filta
Refrigeration subsidiary for cash and other considerations and
further conveyed their intention to exit the refrigeration and HVAC
market. The Board believes that the disposal of the refrigeration
business is an important strategic step in allowing the Group to
focus on its higher margin and higher growth businesses.
On 31 January 2018 the Group announced the acquisition of
FiltaFry Deutschland GmbH, the company which owns the master
franchise license for Filtafry in Germany. The Group paid initial
consideration of EUR0.2m (GBP0.2m) satisfied by a mix of cash and
shares. There is also a deferred consideration component of EUR0.1m
(GBP0.1m) to be satisfied by the issue of Filta shares in two equal
installments following on at the end of years one and two.
There are no other matters that occurred between the reporting
date and the date of approval of these financial statements that
the Directors believe are necessary to draw attention to.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFLFAMFASESL
(END) Dow Jones Newswires
April 17, 2018 02:00 ET (06:00 GMT)
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