TIDMFLTA
RNS Number : 9451V
Filta Group Holdings PLC
20 April 2021
Filta Group Holdings plc
("Filta", the "Company" or the "Group")
Full year audited results for the financial year ended 31
December 2020
Financial Highlights
-- Group Revenue fell 34% to GBP16.4m (2019: GBP24.9m) reflecting impact of COVID-19.
o Revenue declined 31% and 38% in US and UK respectively
o Despite impact of lockdowns, gained 935 and 750 new customers
in FY20 in the US and UK respectively, positioning Filta well as
business ramps up
o Recurring revenue remained at over 70% of Group Revenue
-- Gross margins grew to 42.2% (2019: 40.7%) as prior year
efficiency improvements continued to take hold.
-- Adjusted EBITDA* of GBP1.1m (2019: GBP3.2m) reflects a robust
core customer base and a strong and swift response to a significant
adverse impact on the Group's markets.
-- Profit before tax, excluding non-cash charges (amortisation,
depreciation and share based payments) remained positive at GBP0.6m
(2019: 2.6m).
-- Cash at year end of GBP4.2m (2019: GBP2.9m) resulting in net
debt of GBP1.6m (2019: GBP2.1m) inclusive of GBP1.1m (2019:
GBP1.2m) of lease liabilities.
-- The Board is not recommending the payment of a final dividend
as it considers it prudent to continue to conserve cash until the
trading recovery has gathered more momentum.
*Adjusted for non-recurring items being acquisition related
costs, share based payments.
Jason Sayers, CEO, commented:
" Despite the challenges of the pandemic, I am very pleased to
report on the excellent progress made across the Group during 2020.
As outlined in previous updates, we implemented measures early on
during the pandemic to improve efficiencies and preserve cash.
These measures have proven successful, returning an increase in
gross margins to 42.2%. Similarly, during the period, we gained 935
and 750 new customers in the US and UK respectively, providing us
with a robust position from which to grow as we exit the lockdown
phases.
"As lockdown restrictions continue to ease and vaccine
programmes are rolled out successfully, particularly in the US and
the UK, current business levels have moved past 70% of that
pre-COVID-19, with the majority of our largest US and UK customers
still to reopen, indicating that demand for Filta's services is
poised to increase further. In accordance with this, we have moved
our focus back onto the Group's core service offerings, following
the success of the FiltaShield service, which we launched in April
2020 to help customers open as safely, as normally and as quickly
as possible.
"With COVID-19 still causing levels of uncertainty, we are
continuing to carefully monitor developments in our markets and
will manage our activities accordingly. Where possible we have
sought ways to aid our customers in their efforts to reopen, and
this has in turn improved relations with existing customers. The
strength of our brand and the relations with customers has proven
invaluable during this time, providing us with further confidence
in the resilience of the Group.
"Our long-term focus remains on growing the business both
organically and through acquisitions of high margin, repeat revenue
businesses in the grease management market. With the Group now much
more efficient and with a strong pipeline of sales in place, I
believe the outlook is very promising as we exit these challenging
times."
19(th) April 2021
Enquiries:
Filta Group Holdings plc Tel: +1 407 996 5550
Jason Sayers, Chief Executive Officer
Brian Hogan, Chief Financial Officer
Cenkos Securities plc (NOMAD and Broker) Tel: +44 20 7397 8900
Stephen Keys, Camilla Hume
Yellow Jersey PR Tel: +44 7747 788 221
Charles Goodwin
Joe Burgess
Henry Wilkinson
CHAIRMAN'S STATEMENT
Introduction
The Group, in common with many businesses around the world and,
particularly those involved in or dependent upon the restaurant,
leisure and entertainment industries, has endured a very
challenging time over the last year. The impact of COVID-19
resulted in a 34% decline in revenue against the prior year as many
of our customers were forced to suspend business for long periods
during 2020.
The sudden fall in business levels during March 2020 was
particularly frustrating because, in the early part of the year, we
were enjoying strong revenue growth and significantly better
operating margins as a result of the profit improvement actions
implemented in the UK in the last quarter of 2019.
However, following the introduction of social distancing
lockdowns towards the end of Q1, our focus moved to cash
preservation in order to ensure that we would be able to ride out a
worldwide economic downturn, the duration of which was, at that
time, impossible to predict with any certainty. Whilst some
uncertainties still remain and there are likely to be more bumps in
the road, there are good reasons to look forward with optimism and
we are in a position to do this because we have preserved our cash
and protected our balance sheet over the last 12 months. We also
took the opportunity, during the period of reduced activity, to
identify additional and complementary service offerings and ways to
further improve delivery of our services and we are now seeing the
benefits come through.
Results
Revenue was down by GBP8.5m, or 34%, at GBP16.4m (2019:
GBP24.9m), although a 28% reduction in operating costs to GBP17.0m
(2019: GBP23.7m) enabled us to deliver an operating loss of
GBP0.6m, GBP1.8m down on the previous year (2019: GBP1.2m profit),
and a loss before tax of GBP0.9m (2019: GBP0.9m profit).
Adjusted EBITDA, which we regard as the best financial measure
of underlying performance as it is struck before one-off and
non-cash charges, including acquisition and restructuring costs,
depreciation, amortisation and share-based payments, was GBP1.1m
(2019: GBP3.2m), representing a profit margin of 6.4% (2019: 12.7%)
and reflecting the fact that the fixed costs were, in a year of
reduced revenue, 44% of total operating costs (2019: 38%).
We finished the year with net borrowings of GBP1.6m (2019:
GBP2.1m), including GBP1.1m of lease liabilities (2019: GBP1.2m),
and with a gross cash balance of GBP4.2m (2019: GBP2.9m). At the
year end, the Group had a further GBP0.4m of available funding
through its unutilised overdraft facility. The increase in cash
resources was a direct result of applying strict cash controls,
including agreeing salary reductions with staff and management, the
deferral of non-essential spend and taking advantage of government
support schemes. During the year we received funding under the UK
furlough schemes, which helped us to fund staff wages during the
worst affected periods and enabled the principal business
activities to operate on a cash neutral basis through the year. We
also drew down GBP1.2m of funding under the UK Coronavirus Business
Interruption Loan Scheme ("CBILS") and a further GBP0.2m under the
US Payroll Protection Program ("PPP").
Strategy
The Group's business platform has comprised a mix of franchised
and Company-owned operations offering services to the commercial
kitchen sector. Fryer Management (FiltaFry), which is a maintenance
service delivering repeat revenues, has been the core of our
franchised activities for several years and in the UK in recent
years we have developed a number of Company-owned activities,
including refrigeration seal replacement (FiltaSeal); fat, oil and
grease control and collection (FiltaFOG); drain maintenance
(FiltaDrain); and pump installation and maintenance (FiltaPump),
all of which have a strong repeat service pattern.
We believe that all of these services are both complementary to
each other and offer strong growth opportunities, as well as
providing good revenue visibility and stability. This has been
borne out by the fact that despite the almost complete close down
of a large proportion of our customers' activities at various times
during the year, we were still able to generate sufficient revenue
to maintain a cash neutral trading position.
However, we continue to seek other complementary activities to
add to our portfolio of services aimed at both our existing
commercial kitchens market and at potential new markets. During the
year we launched FiltaVent, which installs and maintains kitchen
air venting systems, and FiltaShield to provide bacterial cleaning
services to both eating establishments and other premises which are
required to ensure that they are bacteria-free.
We launched the FiltaFOG Cyclone, a grease interceptor that has
been very well received by our customers in the UK. In a further
development designed to improve the execution efficiency, we have
begun to utilise our franchise network to deliver FiltaFOG services
in areas where we do not have adequate in-house technician
coverage. In the US, we have had encouraging success in rolling out
our Fryer Management service to healthcare and supermarket
customers.
Environmental, Social and Governance
The Board, as a whole, has overall responsibility for
environmental, social and governance matters and we recognise our
duty to stakeholders to operate the business in an ethical and
responsible manner. We are committed to developing our
environmental and social responsibility agenda, recognising that it
can play a major part in leading and influencing all of our people
and operations.
Our corporate culture defines who we are, what we stand for and
how we do business, and it is integral to the success of the Group.
Our strong reputation has been built on the solid foundation of an
ethical culture, underpinned by a well-defined and effective system
of governance. We are committed to equal opportunities and an
entirely non-discriminatory working environment where everyone is
treated with dignity and respect and we strive to create an
inspiring working environment where everyone is engaged and
motivated.
The Board has always taken its environmental impact very
seriously and is continuously seeking ways in which its services
and actions can help to protect and improve the environment. The
Group's core services support our customers ongoing efforts to
reduce their energy, oil, and water usage and, in turn, we continue
to invest in energy efficient capital equipment and improved
operational processes in order to reduce our wastage. These ongoing
efforts have, unquestionably, reduced both our customers' and our
environmental impact over the years whilst improving our
productivity. Our approach is to work through education,
communication and direct action.
Current trading and outlook
Lockdown restrictions were in place in the UK through the first
quarter of the current financial year and in North America, many of
our major customers, such as stadia, universities and corporate
dining, are not yet re-opened. Notwithstanding this, the upward
trend in business levels that we saw in the second half of 2020 has
continued into the current year, with the numbers of new customers
in both of our markets being particularly encouraging.
We have already sold 3 franchises in the US this year and have a
strong pipeline of potential franchisees seeking to join the
network, a trend which we expect to continue as the economy
gradually recovers. Fryer management, which remained profitable and
cash generative throughout 2020, is now operating at 78% of its
pre- COVID levels and its major stadia and university customers
have not yet re-opened.
In the UK, all of our core activities are trading very
satisfactorily with some significant new business having been added
to the Site services activities. We are also pleased to have had an
incredibly positive reaction from customers to the new FiltaFOG
Cyclone. In addition, we are deriving increasing revenues from
FiltaShield, which was started in response to the need for
bacterial cleaning services to combat COVID-19.
Our business in Europe, where the lockdowns are more widespread
than in the UK, is operating on a "care and maintenance" basis but,
nonetheless, has completed 1 franchise sale and is receiving a
great deal of interest from potential franchisees, which is an
encouraging sign for the future.
With the lockdown restrictions expected to be lifted further
over the next 2 to 3 months and with the vaccination programmes
progressing well in the UK and US, the Board is confident that the
progress that we have seen in the first quarter will continue
through the year and, moreover, that the Group is emerging from a
highly challenging time much stronger operationally and in robust
financial health.
Dividends
During the last year, in its efforts to preserve cash resources,
the Board has asked its employees to take salary reductions, has
made use of support grants and loans provided by the government and
has adopted a policy of deferring non-essential spend. Moreover,
whilst there has been a significant improvement in trading levels
in recent months and the general health and economic outlook is
promising, there remain uncertainties as to when we will be fully
free from the impact of COVID-19.
The Board considers that, given this background and
circumstances, it would not be appropriate to pay a dividend in
respect of the year ended 31 December 2020. However, the Board
recognises that dividends are an important element of shareholder
returns and would like to reassure shareholders that, provided the
progress that has been made in the first quarter of the year
continues, it fully expects to be able to resume the payment of
dividends in respect of 2021.
Management, Staff, and Franchise Owners
The organisational culture remains a focus of our governance
principles. We feel an honest, open, and collaborative culture is
important to the Group's future success and the Board, and senior
management are aware of their influence in fostering the proper
culture. The welfare and skills development of our staff are also a
priority.
I thank all our employees for their continuing hard work and
commitment to the Group and would like to recognise their part in
helping the Group to manage its way through a particularly
challenging time.
Similarly, our franchise owners and their performance,
professionalism and client commitment are critical to our own
reputation and success. We thank them for their support over the
last year and, working together, we look forward to helping them to
return to their pre-COVID state.
Tim Worlledge
Chairman
19 April 2021
OPERATIONS REVIEW
Introduction
2020 was certainly a challenging year for the hospitality sector
that we service. The fact that we ended the year with adjusted
EBITDA of GBP1.1m and cash positive, demonstrates the strength of
our business model and the commitment of the people that we have at
Filta.
The first two months were setting us up for a highly successful
year; North America was showing 20% year on year growth; the UK had
not only experienced growth but also improved its margins; and we
had strong franchise growth in Germany.
Then in March the picture changed with COVID-19 leading to
severe lockdowns in all our markets which resulted in the closing
of the vast majority of our customers.
In the third quarter the lockdowns started to lift, and revenues
began to come back. Restaurants became creative with take-out and
delivery options, supermarkets and hospitals were busier than ever,
although catering at universities, stadiums and business dining
have yet to reopen. Since then, the situation in each of the
markets we operate in has been different with lockdowns and
openings coming at varying times.
Despite all of this, Filta remained focused on helping our
customers through the worst times and we adapted our business model
to cope with the new world, which stands us in good stead as the
vaccine roll out programs in the UK and US offer hope for all our
customers to fully reopen their venues.
Our long-term focus remains on growing the business, both
organically and through acquisitions of high margin, repeat revenue
businesses.
North America
As mentioned above, the first part of the year saw strong growth
with network revenue growing to an annualised run rate of over
$60m. The severe lockdowns initiated in Q2 were followed by vastly
different levels of business in different parts of the continent.
Some states like Florida opened up fully in Q3 and have not shut
since whilst others, such as California and New York, have remained
closed and are only, now, just reopening.
Overall, despite the extensive shutdowns, trading in North
America remained relatively robust with total revenue of GBP7.8m in
2020 (2019: GBP11.3m)
Network revenue, being the total revenue of our US-based
franchisees for all services provided to their customers ,
represents the best indicator of how COVID-19 effected the
business. The US franchise network generated $37m (GBP29m) of
revenues in 2020 (2019: $51m/GBP40m), a decrease of 28%.
The franchise network is both the showpiece and the cornerstone
of our business - our franchisees connect us to our markets and our
performance reflects their performance. We are committed to
providing the franchisees with the necessary support to give them
the best chance of success.
Although much of the royalty is fixed per Mobile Filtration Unit
('MFU') that the franchisees own, we took the decision, in order to
support our franchise base, to link the royalty paid to each
franchisee's revenue during the COVID-19 period. This resulted in a
fall in revenue contributed by Fryer Management Services in North
America to GBP7.0m (2019: GBP10.1m). At the height of the lockdown,
Fryer Management Services revenue fell to approximately 50% of the
previous year but by the end of the year we were back up to c.70%
of prior year revenue and, more encouragingly, c.20% of that
revenue was derived from new customers that were added since the
start of the COVID-related lockdowns.
We constantly seek to increase our franchise base, but the
majority of our own revenue growth comes from the growth of our
existing franchise owners. One of our strategic objectives is to
encourage multi-MFU franchisees, which both allays financial risk
and provides owners with higher investment returns.
We continue to take on new franchise owners for unallocated
territories and to upgrade existing franchises. Our strategy is to
recruit owners and to upgrade underperforming territories by
seeking new franchisees (resales) who have the ambition and
business acumen to expand their market, thereby enlarging the
platform for Filta's own Fryer Management repeat revenues to
increase year after year. In 2020 we recruited 6 new Franchise
Owners (2019:7) and achieved 4 resales (2019:4).
Mainland Europe
Whilst our business in mainland Europe, which is also
principally a franchised offering, only accounts for 3% of total
Group revenue it achieved 2 new franchise sales (2019:7) despite
lockdowns during the year whilst its revenue of GBP0.5m (2019:
GBP0.5m) remained flat year on year.
The business is at an early stage and the growth comes,
principally, from adding new franchisees. With the 2 added in 2020,
it took us to 16 in Europe, albeit that they have mostly suspended
trading, currently.
The start to the new year has been slow with continued lockdown
restrictions imposed across the continent. Despite the economic
uncertainty, we continued to receive interest from potential
franchisees and, indeed, have seen 1 new sale and 1 resale through
March. Accordingly, we expect to see further growth in the latter
part of the year once our customers can re-open their
businesses
with nearer to full capacity and we will support our franchisees
by helping to add key accounts.
There is still future growth potential in mainland Europe, but
we have reduced overhead (three full-time staff members) and have
minimised our financial exposure until the lockdowns end, customers
reopen and we can, once again, seek to expand the business.
UK
In the UK, we provide Fryer Management services through a
franchise network but the majority of the revenue is derived from
Company-owned activities, Equipment Sales & Installation and
Site Services, whose revenues totalled GBP7.6m (2019:
GBP11.7m).
Our strategy is to develop a range of complementary services
which provide health and safety advantages, improve efficiency or
reduce operational costs to commercial kitchens. Usually, all of
these benefits accrue to customers whilst allowing them to meet any
compliance regulations in place.
Fryer Management
Fryer Management revenue fell to GBP0.6m (2019: GBP1.4m). The
majority of franchise owners in the UK remain single unit operators
and we anticipate the work to come back as the economy reopens.
Equipment Sales & Installation
Total equipment sales and installation revenue was GBP1.4m in
2020 (2019: GBP2.8m). With limited capital investment occurring, we
had anticipated this revenue segment to drop further but the
introduction of Filta's new ground-breaking grease recovery unit,
the FiltaFOG Cyclone, helped drive fourth quarter sales which have
remained strong into 2021. The FiltaFOG Cyclone produces better oil
separation at a lower operating cost than any other product on the
market today.
Site Services
Site Services, which comprise our planned maintenance and other
recurring revenues, saw its revenue drop 30% to GBP6.2m (2019:
GBP8.9m).
All of the activities in this category have a common theme in
being the provision of maintenance services, a large portion of
which is planned and therefore has clear visibility, and the
remainder of which are reactive but also have a high level of
predictability because of their recurring nature. As sites continue
to reopen in the UK, this segment should recover quickly.
A selection of our UK Franchisees are now performing FOG
servicing. This is a direction that is going to be expanded over
the coming years, moving this side of the business to a more
capital light model.
We have continued to add new sites during the year, positioning
us well once the lockdowns are lifted in the UK and the sector
returns to relative normalcy.
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
both through their hard work and dedication to the brand and by the
strong relationships that they have developed with customers and
franchise owners alike.
2020 was a challenging year, not only for the business, but on a
personal front for many of our staff members as working from home
became the new norm. I really would like to thank all of our valued
staff members, in all our markets, who stepped up and helped the
business adapt to the changing situations. It has certainly brought
everybody closer as a team and will stand us in good stead for the
future.
In North America, the management team remains stable with Tom
Dunn, Chief Executive Officer North America, continuing to run the
day to day business, enabling us to continue executing on our
plans. Regular communication with franchisees through webinars
helped everybody to stay positive and has put us in a great
position coming into the recovery.
In the UK, we appointed Brian Riordan as Managing Director in
October. Brian brings to Filta over 30 years' experience of working
across food services and facilities management, sales and
marketing, retail, and hotels. Most recently, Brian was the
Managing Director for Aramark UK. Prior to Aramark, Brian spent
several years as an Operations Director at Compass Group, the
largest contract foodservice company in the world, and at Marriott
Hotels, both in the US and Europe.
Jos van Aalst, Managing Director of Filta's mainland Europe
business, continues to oversee the business in Europe and deftly
managed lockdowns across multiple countries whilst remaining in
contact with existing and prospective franchisees. He has us well
positioned for an H2 recovery.
Company culture is the outcome of a Company's values,
expectations and environment. We are dedicating a significant
amount of our time as senior leaders of the organisation to
building, refining and nurturing our culture so that it is clearly
understood by everyone working for us currently and is easily
transferrable to new hires.
Market Conditions
Our fortunes are substantially dependent on many of the
businesses that have been most affected by the coronavirus
pandemic; restaurants, pubs, hotels, sporting venues, colleges, and
other places for social gathering. It has therefore been inevitable
that we would see a significant fall in activity and revenues,
which has generally been the case throughout our operations.
Macro-economic conditions always tend to trump any micro
conditions that a company can bring to the table. As such, most of
our customer base was significantly affected in each of our
markets.
Despite the COVID-related lockdowns, the US economy shrank just
3.5% in 2020. In March of this year, the US enacted new legislation
that will inject a further $1.9 trillion into the economy. This
follows on the $3.5 trillion previously spent in 2020. That is over
$15,000 per person and, unsurprisingly, personal savings rates are
at their highest levels in history. The vaccine roll-out has been a
huge success with current projections estimating the US will have
vaccinated 75% of the population within next 3 months. As many
states now re-open, our sector is recovering quickly, and the OECD
predicts US GDP growth of 6.5% for 2021. We are well positioned to
take advantage of the economic resurgence that our industry is
predicted to experience later this year and beyond.
The UK experienced more excessive lockdowns which resulted in a
GDP decline of 9.9% in 2020. These lockdowns, and the corresponding
economic decline, had an especially adverse impact on the Group's
restaurant and pub customers. The government's response was to
inject over GBP200 billion into the economy which has led to
household savings rates doubling. Like the US, the success of the
vaccine programme has been impressive and the reopening of the
leisure sector, now taking place, will hopefully lead to a quick
recovery. OECD predicts UK GDP growth of 5.1% in 2021 and we are
well positioned to capitalise on this with improved sales teams,
customer relationships and operations.
Mainland Europe (primarily Germany where we operate), is behind
on their vaccine roll-out, but will no doubt catch up later this
year, enabling their economies also to bounce back.
In addition to the post COVID-19 recovery, we believe that with
the ever-increasing health, safety and food hygiene requirements
the demand for our services will be undiminished when more normal
circumstances return.
Current Trading & Outlook
Whilst the COVID-19 pandemic has had a significant impact on the
Group in the short term, we remain confident in our medium and
long-term growth prospects. The road maps announced in each of our
operating locations illustrate how lockdowns and restrictions will
begin to be lifted over the coming months as further significant
progress is being made with the ongoing vaccination process.
We continue to take proactive actions to adapt our operations to
ensure the Group can thrive and is well placed for the recovery. We
continue to execute at pace and are confident in our ability to be
agile and respond to increasing volumes from our customers as our
end market segments begin to re-open and recover.
We will continue to focus on our strategy whilst delivering
outstanding levels of service to our customers. This, combined with
our existing scale, ability to flex costs and focus on operational
excellence make us confident that we will be able to take advantage
of growth opportunities as they arise and to increase returns to
shareholders over time.
Jason Sayers
Chief Executive Officer
19 April 2021
FINANCIAL REVIEW
Summary
-- Group revenue of GBP16.4m (2019: GBP24.9m)
-- Gross profit margins improved to 42.2% (2019: 40.8%)
-- Adjusted EBITDA of GBP1.1m (2019: GBP3.2m)
-- Loss before tax of GBP0.9m (2019: profit before tax GBP0.9m)
-- Basic loss per share of 3.46p (2019: basic earnings per share 1.39p)
Revenue
As anticipated, our 2020 results reflect the dramatic impact
that COVID-19 has had on the Group. Following a strong start to the
year, with organic revenue in the first two months pre-pandemic up
3.2%, total revenue for the year to 31 December 2020 reduced to
GBP16.4m (2019: GBP24.9m). We
experienced significant disruption in our two biggest
geographical markets of the UK and North America with turnover down
38% and 31% respectively. However, across the Group, we directly
serviced c.800 new customers contributing c.GBP1.2m of revenue
during the year.
Gross Profit
Gross profit was GBP6.9m (2019: GBP10.2m) impacted by the lower
volume. However, spending controls and FY19 efficiency improvements
have led to an increase in gross margin to 42.2% (2019: 40.7%).
Following a return to normal conditions we believe there is room
for further
improvement in margins which, combined with our strong market
presence will lead to improved gross profit.
Adjusted EBITDA
Adjusted EBITDA fell to GBP1.1m (2019: GBP3.2m) with an Adjusted
EBITDA margin of 6.4% (2019: 12.7%). Despite reduced spending in
the current year, the adjusted overhead base as a percentage of
revenue is up from the prior year due to the significant volume
decline.
Adjusted EBITDA reconciliation
Adjusted EBITDA has been arrived
at as follows:
2020 2019
GBP GBP
Profit before tax (866,231) 936,284
Acquisition, legal and restructuring
costs 187,465 296,410
Share-based payments 85,067 261,631
Depreciation and amortisation 1,370,258 1,396,932
Finance costs, net 277,010 271,314
-------------------------------------- ---------- ----------
Adjusted EBITDA 1,053,569 3,162,571
Alternative Performance Measures
In addition to IFRS performance measures directly observable in
the financial statements, additional performance measures (Adjusted
EBITDA, Network Revenue and Cash Earnings Per Share) 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 payment expense, net of cash settled outlays, for all
services provided to customers and is an important measure of our
growth in the markets we serve. Network Revenue represents the
total revenue earned by our US franchise network. Cash Earnings Per
Share is defined as basic earnings per share before depreciation,
amortisation and share based payment expense, net of cash settled
outlays.
Deferred Income
Group revenue for the year ended 31 December 2020 includes
GBP0.7m (2019: GBP0.7m) which was released from brought forward
deferred income during the year. We generated a further GBP0.5m of
deferred revenue relating to territory fees on both new and
existing franchises which will be recognised over the life of the
franchise agreements. The deferred revenue balance, which declined
by GBP0.3m to GBP2.7m, was also negatively impacted by the foreign
exchange effect of a weakening dollar which had a GBP0.1m effect on
the year-end balance.
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 Group's net tax charge for the year
ended 31 December 2020 was GBP0.1m (2019: GBP0.5m) principally due
to tax payable in the US of GBP0.4m (2019: GBP0.6m) on statutory
profits offset by changes in the Group's deferred tax assets and
liabilities. These generated a deferred tax credit of GBP0.3m
(2019: GBP0.1m) due to an increase in the deferred tax asset
related to the carry forward of UK tax losses and to the unwinding
of the deferred tax liability on acquisition related intangible
assets .
Earnings per share
The basic and diluted loss per share for the year were 3.46p
(2019: 1.39p earnings per share).
Cash and Liquidity
COVID-19 initially had a significant impact on the Group's cash
generation, but cash preservation measures, aggressive cash
collection efforts and utilisation of government programs helped
preserve liquidity. The Group generated cash from operations of
GBP1.7m (2019: GBP0.8m) reducing to GBP1.3m (2019: GBP0.3m) after
the payment of taxes. Cash used in investing activities of GBP0.3m
was significantly lower than in 2019 (GBP2.2m), which included a
prior year acquisition related payment of GBP1.8m, as we reduced
our capital spending by 37%.The Group's financing activities
generated cash of GBP0.5m (2019: GBP1.9m cash used) as the inflow
of GBP1.2m from the Coronavirus Business Interruption Loan Scheme
more than offset the debt servicing requirements of GBP0.8m (2019:
GBP1.4m), whilst the Group's decision to forego dividend payments
contributed GBP0.6m of the improvement. Overall, the Group realised
benefits of GBP1.0m from government furlough schemes and an
additional GBP0.5m from the UK VAT deferral program.
At the year end the Group had cash balances of GBP4.2m (2019:
GBP2.9m) and outstanding borrowings of GBP4.7m (2019: GBP3.8m) ex.
Lease liabilities, resulting in a 41% decline in its net debt
position to GBP0.5m (2019: GBP0.9m). The Group's available cash and
unutilised overdraft facility stood at GBP4.6m (2019: GBP3.2m).
The Group has, with strong cash management, support from our
banking partners and access to government funding, built a stronger
cash position than existed before the start of COVID-19. The Board
believes that its strong financial platform leaves it well placed
to trade through 2022, even if there are more COVID-related
setbacks, and to implement its growth strategy over the coming
years.
Brian Hogan
Chief Financial Officer
19 April 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes 2020 2019
GBP GBP
Revenue 5 16,401,621 24,922,526
Cost of sales (9,484,035) (14,756,297)
-------------- -------------
Gross profit 6,917,586 10,166,229
Other income 76,922 191,404
Distribution costs (87,824) (203,344)
Administrative costs (7,495,905) (8,946,691)
-------------- -------------
Operating (loss)/profit (589,221) 1,207,598
Analysed as:
Adjusted EBITDA 1,053,569 3,162,571
Acquisition and restructuring related
costs 6 (187,465) (296,410)
Depreciation and amortisation 15,16,17 (1,370,258) (1,396,932)
Share based payment expense, net
of cash settled 32 (85,067) (261,631)
--------------------------------------------- --------- -------------- -------------
(589,221) 1,207,598
--------------------------------------------- --------- -------------- -------------
Finance income 5,041 6,945
Finance costs 9,17 (282,051) (278,259)
-------------- -------------
(Loss)/profit before tax (866,231) 936,284
Income tax expense 10 (139,748) (532,418)
(Loss)/profit after tax (1,005,979) 403,866
Net (loss)/profit attributable to
owners (1,005,979) 403,866
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translation
of foreign operations (168,192) (149,110)
Total other comprehensive loss for
the year (168,192) (149,110)
(Loss)/profit and total comprehensive
income for the year (1,174,171) 254,756
============== =============
(Loss)/earnings per share
- Basic (pence) 12 (3.46) 1.39
* Diluted (pence) 12 (3.46) 1.39
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes 2020 2019
GBP GBP
Non-current assets
Property, plant and equipment 16 1,251,656 1,336,110
Right of use asset 17 1,041,726 1,270,479
Deferred tax assets 11 796,414 678,497
Intangible assets 15 5,836,360 6,514,954
Goodwill 15 1,639,523 1,639,523
Deposits 11,398 5,272
Contract acquisition costs 19 419,913 415,663
Trade receivables 18 264,274 411,732
----------- -----------
11,261,264 12,272,230
----------- -----------
Current assets
Inventories 20 1,604,451 1,759,955
Trade and other receivables 18 2,325,678 4,064,811
Contract acquisition costs 19 72,958 57,426
Cash and cash equivalents 21 4,208,498 2,891,014
----------- -----------
8,211,585 8,773,206
----------- -----------
Total assets 19,472,849 21,045,436
=========== ===========
Current liabilities
Trade and other payables 22 2,289,889 3,260,885
Borrowings 23 1,076,927 792,672
Lease Liability 24 319,480 332,974
Deferred income 26 592,065 534,066
----------- -----------
4,278,361 4,920,597
----------- -----------
Non-current liabilities
Deferred tax liability 1,027,498 1,159,121
Borrowings 23 3,647,088 2,976,887
Lease Liability 24 770,119 882,447
Deferred income 26 2,086,565 2,496,173
----------- -----------
7,531,270 7,514,628
----------- -----------
Total liabilities 11,809,631 12,435,225
----------- -----------
Equity
Share capital 28 2,909,816 2,908,535
Share premium 28 3,679,085 3,659,204
Other reserves 29 233,431 27,415
Translation reserve (701,267) (533,075)
Retained profits 1,542,153 2,548,132
Total equity 7,663,218 8,610,211
----------- -----------
Total equity and liabilities 19,472,849 21,045,436
=========== ===========
The financial statements were approved and authorised for issue
by the Board on 19 April 2021 and were signed on its behalf by:
____________________
Brian Hogan, Chief Financial Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Translation
Share Share Other Merger Exchange Retained Total
Capital Premium Reserves Reserve Reserve Earnings Equity
GBP GBP GBP GBP GBP GBP GBP
Balance at 31
December 2018 2,891,863 3,372,351 329,634 (339,687) (383,965) 2,711,352 8,581,548
Adjustment on
initial application
of IFRS 16 net
of tax - - - - - (8,971) (8,971)
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
At 1 January 2019
restated 2,891,863 3,372,351 329,634 (339,687) (383,965) 2,702,381 8,572,577
--------------------------
Profit for the
year 403,866 403,866
Foreign exchange
translation differences - - - - (149,110) - (149,110)
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
Total comprehensive
income - - - - (149,110) 403,866 254,756
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
Dividends paid
(note 14) - - - - - (558,115) (558,115)
Issue of share
capital (note
28) 16,672 286,853 - - - - 303,525
Equity consideration
paid - - (250,000) - - - (250,000)
Share based payments
(note 29/32) - - 287,468 - - - 287,468
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
Balance at 31
December 2019 2,908,535 3,659,204 367,102 (339,687) (533,075) 2,548,132 8,610,211
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
Balance at 31
December 2019 2,908,535 3,659,204 367,102 (339,687) (533,075) 2,548,132 8,610,211
Loss for the year (1,005,979) (1,005,979)
Foreign exchange
translation differences - - - - (168,192) - (168,192)
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
Total comprehensive
income - - - - (168,192) (1,005,979) (1,174,171)
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
Dividends paid - - - - - - -
(note 14)
Issue of share
capital (note
28) 1,281 19,881 - - - - 21,162
Share based payments
(note 29/32) - - 206,016 - - - 206,016
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
Balance at 31
December 2020 2,909,816 3,679,085 573,118 (339,687) (701,267) 1,542,153 7,663,218
-------------------------- ---------- ---------- ---------- ---------- ------------ ------------ ------------
During the year 12,809 shares (2019: 166,725) were issued as
part of the contingent consideration related to our acquisitions in
2018.
CONSOLIDATED STATEMENT OF CASH FLOWS
Notes 2020 2019
GBP GBP
Operating activities
Profit before taxation for
the year (866,231) 936,284
Adjustments for non-cash operating
transactions:
Finance costs 9,17 277,010 271,314
Depreciation 16 172,560 216,677
Amortisation of intangible
assets 15 867,269 857,992
Depreciation of right of use
assets 17 330,429 322,262
(Gain)/loss on disposal of
tangible fixed assets (12,215) (10,739)
Share based payment charge 29,32 85,067 283,215
------------ ------------
853,889 2,877,005
------------ ------------
Movements in working capital:
Decrease in trade and other
receivables 1,606,223 271,249
Increase in contract acquisition
costs (19,018) (78,814)
Decrease in trade and other
payables (795,266) (1,080,879)
Decrease in cash settled share
option liability - (21,584)
Increase in proceeds from government 226,481 -
grants
Decrease/(increase) in inventories 155,505 (538,301)
Decrease in deferred revenue (351,609) (629,680)
------------ ------------
Cash flow from operations 1,676,205 798,996
------------ ------------
Taxes paid (393,249) (485,798)
------------ ------------
Net cash flow from operations 1,282,956 313,198
------------ ------------
Investing activities
Purchase of property, plant
and equipment 16 (100,166) (288,251)
Proceeds from disposals of
property, plant and equipment 13,831 39,697
Deferred consideration on subsidiary
acquisition 25 - (1,800,293)
Purchase of other intangible
assets 15 (194,985) (176,538)
Net cash used in investing
activities (281,320) (2,225,385)
------------ ------------
Financing activities
Repayment of borrowings (302,538) (876,272)
Net proceeds from borrowings 23 1,200,000 -
Payment of lease liabilities (231,005) (291,656)
Net proceeds from issue of
share capital 21,162 31,525
Dividends paid to shareholders 14 - (558,115)
Interest paid 9 (232,463) (226,826)
Net cash from/(used in) financing
activities 455,156 (1,921,344)
------------ ------------
Net change in cash and cash
equivalents 1,456,792 (3,833,531)
Cash and cash equivalents,
beginning of the year 21 2,891,014 6,789,968
Exchange differences on cash
and cash equivalents (139,308) (65,423)
------------ ------------
Cash and cash equivalents,
end of year 21 4,208,498 2,891,014
------------ ------------
Parent company statement of financial position
Notes 2020 2019
GBP GBP
Assets
Non-current assets
Investments in subsidiaries 13 8,765,743 8,765,743
Intangible assets 1,401 1,275
Amount due from subsidiaries 18 3,172,036 3,188,966
11,939,180 11,955,984
----------- -----------
Current assets
Trade and other receivables 83,541 161,041
Amount due from subsidiaries 18 72,229 600,246
Cash and cash equivalents 21 51,856 109,089
----------- -----------
207,626 870,376
----------- -----------
Total assets 12,146,806 12,826,360
=========== ===========
Current liabilities
Trade and other payables 22 21,485 44,016
Borrowings 23 942,763 786,049
Amount due to subsidiaries 622,748 522,534
----------- -----------
1,586,996 1,352,599
----------- -----------
Non-current liabilities
Borrowings 23 2,385,526 2,746,541
----------- -----------
2,385,526 2,746,541
----------- -----------
Total liabilities 3,972,522 4,099,140
----------- -----------
Equity
Share capital 28 2,909,816 2,908,535
Share premium 28 3,679,085 3,659,204
Other reserves 29 573,118 367,102
Retained earnings 1,012,265 1,792,379
Total equity 8,174,284 8,727,220
Total equity and liabilities 12,146,806 12,826,360
=========== ===========
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 2020 is GBP780,114 (2019:Profit GBP370,426).
The financial statements were approved and authorised for issue
by the Board on 19 April 2021 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
Balance at 1 January
2019 2,891,863 3,372,351 329,634 1,980,068 8,573,916
Loss for the year - - - 370,426 370,426
------------------------ ---------- ---------- ---------- ---------- ----------
Total comprehensive
income 370,426 370,426
------------------------ ---------- ---------- ---------- ---------- ----------
Dividends paid (note
14) - - - (558,115) (558,115)
Issue of share capital
(note 28) 16,672 286,853 - - 303,525
Share based payments
(note 29/32) - - 287,468 - 287,468
Equity consideration
paid - - (250,000) - (250,000)
------------------------ ---------- ---------- ---------- ---------- ----------
Balance at 31 December
2019 2,908,535 3,659,204 367,102 1,792,379 8,727,220
------------------------ ---------- ---------- ---------- ---------- ----------
Balance at 1 January
2020 2,908,535 3,659,204 367,102 1,792,379 8,727,220
Loss for the year - - - (780,114) (780,114)
------------------------ ---------- ---------- -------- ---------- ----------
Total comprehensive
income (780,114) (780,114)
------------------------ ---------- ---------- -------- ---------- ----------
Dividends paid (note - - - - -
14)
Issue of share capital
(note 28) 1,281 19,881 - - 21,162
Share based payments
(note 29/32) - - 206,016 - 206,016
Equity consideration - - - - -
paid
------------------------ ---------- ---------- -------- ---------- ----------
Balance at 31 December
2020 2,909,816 3,679,085 573,118 1,012,265 8,174,284
------------------------ ---------- ---------- -------- ---------- ----------
During the year 12,809 shares (2019: 166,725) were issued of
which Nil (2019: 32,500) were issued for cash (2019: GBP31,525) and
the balance of shares were issued as part of the contingent
consideration related to our acquisition in 2018.
PARENT COMPANY STATEMENT OF CASH FLOWS
2020 2019
GBP GBP
Operating activities
Profit before tax (757,640) 466,270
Adjustments for non-cash operating
transactions:
Finance costs 168,745 194,997
Amortisation 854 308
Shared based payment charge 191,004 283,215
---------- ----------------
(397,037) 944,790
---------- ----------------
Movements in working capital:
Decrease/(increase) in trade and
other receivables 466,739 (537,790)
Increase/(decrease) in trade and
other payables 129,657 (7,471)
Net cash from operations 199,359 399,529
---------- ----------------
Investing activities
(Decrease)/increase in advances
to subsidiaries 96,273 (1,242,853)
(Increase)/decrease in investment
in subsidiary - 117,339
Deferred consideration on subsidiary
acquisition - (1,800,293)
Purchase of other intangible assets (980) (1,583)
---------- ----------------
Net cash used in investing activities 95,293 (2,927,390)
---------- ----------------
Financing activities
Repayment of borrowings (246,154) (800,000)
Proceeds from issue of share capital,
net of costs 21,162 31,525
Proceeds from borrowings, net
of costs - 500,000
Dividends paid to shareholders - (558,115)
Interest paid (126,893) (153,145)
---------- ----------------
Net cash (used in)/from financing
activities (351,885) (979,735)
---------- ----------------
Net change in cash and cash equivalents (57,233) (3,507,596)
Cash and cash equivalents, beginning
of the year 109,089 3,616,685
---------- ----------------
Cash and cash equivalents, end
of year 51,856 109,089
---------- ----------------
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 13.
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.
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.
Where a subsidiary undertaking is sold, the profit or loss on
disposal is calculated as the difference between the aggregate of
the fair value of the consideration received and the carrying
amount of the assets and liabilities of the subsidiary on the date
of disposal less any transaction costs relating to the disposal.
Cash received on disposal of businesses is shown within investing
activities in the Consolidated cash flow statement, net of cash and
cash equivalents disposed of and transaction costs.
All intercompany transactions and balances between Group
entities, including unrealised profits arising from them, are
eliminated upon consolidation.
Going concern
The Group has reacted quickly and decisively to the COVID-19
pandemic, implementing a range of prudent cost management and cash
preservation actions, securing additional funding facilities,
revising bank covenants and taking advantage of government programs
to protect the business from any potential adverse impact.
Notwithstanding all of these actions, there continues to be
uncertainty surrounding the resolution of the pandemic and the
impact on the wider economy.
The current and plausible future impact of COVID-19 and the
related macroeconomic environment on the Group's activities and
performance has been considered by the Board in preparing its going
concern assessment. The Group has prepared a base case scenario,
reflecting an initial set of assumptions around financial
projections and trading performance, together with various, more
pessimistic, expectations for market developments over the
remainder of 2021 and 2022 to reflect subdued trading conditions.
The specific assumptions used within the base case scenario, with
regard to the assumed dates for the staged reopening of
hospitality, follow those set out within the UK Government's
recently announced four-step roadmap for the easing of restrictions
across England. It is assumed that arrangements within the Group's
other geographies will follow a similar roadmap.
The Board is required to assess going concern at each reporting
period. These assessments are significantly more difficult given
the uncertainties about the impact of COVID-19, the extent and
duration of social distancing measures and the impact on the
markets in which the Group operates. The level of judgment to be
applied has therefore increased considerably. The Directors have
considered three main factors in reaching their conclusions on
going concern, as set out below.
1) Cash Flows and Sensitivity Analysis
In assessing going concern, the Directors considered a variety
of scenarios in the context of the COVID-19 pandemic. These
scenarios are designed to stress test liquidity and covenant
compliance. EBITDA used within the scenarios is that used for bank
covenant purposes. The three most relevant scenarios, in ascending
order of severity, reviewed to test going concern are as
follows:
Base Case Scenario
This scenario assumes that those markets that the Group operates
in, and which are yet to open, will gradually begin to reopen
during the second quarter. April assumes a modest increase in
current volumes, based on the planned reopening of restaurants,
pubs and outdoor hospitality whilst May assumes a more stepped
increase as a result of the planned reopening of indoor hospitality
(UK pubs and restaurants), stadiums and arenas at partial
occupancy. By June 2021, this scenario assumes that volumes have
reached c. 80% of normalised levels and stays there through Q2.
Volumes increase in Q3, reaching a maximum of c. 90% of normalised
volumes by September 2021 with modest decreases thereafter due to
seasonality to reach c.85% of normalised volumes for the year.
Further monthly increases are then assumed throughout 2022 that
will result in a c.10% revenue growth over our pre-COVID
levels.
10% Revenue decline off Base Case
In this scenario the gradual recovery to the Group's markets
assumed within the Base Case is delayed by an additional month, a
result that would not enable a return to our normalised monthly
levels in 2021, reaching c.77% of normalised volumes for the year.
Revenue in, and beyond, the final quarter of 2021 is then
consistent with that assumed in the Base Case, reflective of a
successful vaccine rollout and pent-up consumer demand.
20% Revenue decline off Base Case
This scenario largely mirrors that within the 'Delay in Lifting
of Restrictions Scenario' above, however, it effectively assumes a
full quarter delay in recovery which subdues volumes further.
2) Covenants
As previously announced, the Group negotiated waivers of testing
on its banking covenants up to and including until the June 2021
covenant test date. From September 2021, the Group will be expected
to submit to its originally agreed upon covenant testing
requirements. In all three scenarios detailed above, the financial
projections indicate that the Group would remain in compliance with
the financial covenants in its bank facilities. A decline in
underlying EBITDA in excess of that contemplated in the scenarios
would need to persist throughout the period for a covenant breach
to occur. Whilst the Q1 2022 Cash Flow Cover under the 20% revenue
decline scenario is met it does so with little margin for further
decline. All other covenants, under each scenario, are met with
reasonable margin to absorb further downside.
The Group also has a number of mitigating actions within its
control (not all of which were included in the scenarios) including
balance sheet management, further reducing levels of discretionary
spend and rationalising its overhead base in order to be able to
meet the covenant tests.
3) Liquidity
The Group finished the year ended 31 December 2020 with GBP4.2m
in cash and a further unutilised GBP0.4m overdraft facility. Under
each of the above scenarios, the Group maintains a sufficient level
of cash to fully support its ongoing requirements through the
measurement period and beyond.
Going Concern Statement
After considering the current financial scenarios, the severe
but plausible sensitivities and the facilities available to the
Group and Company, the Directors have a reasonable expectation that
the Group and Company have adequate resources for their operational
needs, will remain in compliance with the financial covenants set
out in the bank facility agreement and will continue in operation
for at least the
next 12 months from the date of approving both the Group and
Company financial statements. As a
consequence, and having reassessed the principal risks and
uncertainties, the Directors considered it appropriate to adopt the
going concern basis in preparing the Group and Company 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
from 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 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
For the year ended 31 December 2020 the Group used the five-step
model as prescribed under IFRS 15 on the Group's revenue
transactions. This included the identification of the contract,
identification of the performance obligations under same,
determination of the transaction price, allocation of the
transaction price to performance obligations and recognition of
revenue. The point of recognition
arises when the Group satisfies a performance obligation by
transferring control of a promised good or service to the customer,
which could occur over time or at a point in time.
Revenue represents the amount of consideration to which the
Group expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected on
behalf of third parties.
Revenue from goods and services provided to customers not
invoiced at the reporting date is recognised as accrued income
within trade and other receivables.
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
Each of these revenue streams are defined in the franchise
agreement and support the treatment under our accounting
policy.
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 ar franchisee and a third party, it is
the Group's 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 Contract acquisition costs
The incremental costs to directly obtain a contract with a
customer are capitalised and recognised within contract assets
where management expects to recover those costs. Costs to obtain a
contract that would have been incurred regardless of whether the
contract was obtained are recognised as an expense in the period
where incurred. Contract assets are subsequently amortised over the
period consistent with the Group's transfer of the related goods or
services to the customer.
The costs capitalised include sales commission paid to employees
and broker fees paid to third parties where payment is identified
as relating directly to the sale of a territory license and
initially recognised upon the signing of a customer contract. The
costs are amortised over the contract life. Management
is required to determine the recoverability of contract related
assets at each reporting date. An
impairment exists if the carrying amount of any asset exceeds
the amount of consideration the Group expects to receive in
exchange for providing the associated goods and services, less the
remaining costs
that relate directly to providing those goods and services under
the relevant contract. An impairment is recognised immediately
where such losses are forecast.
The movement in the contract asset balance in the period
therefore represents additional payments made, subsequent
amortisation and any required impairment.
3.5 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.
3.6 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 losses.
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.
3.7 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 IFRS
9, 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.
3.8 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 - 5 to 10 years
Customer contracts - 5 to 10 years
Supply contracts - 15 years
Reacquired Rights - 6.75 years
Software development - 3 years
Those costs associated with maintaining computer software
programmes are recognised as an expense as incurred.
3.9 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).
3.10 Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is based on the first in, first out principal and
comprise direct materials and, where applicable, direct labour
costs and overheads that have been incurred in bringing the
inventories to their present location and condition. Net realisable
value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling
and distribution. A provision is made, where necessary, in all
inventory categories for obsolete, slow moving, and defective
items.
3.11 Financial instruments
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
relevant financial instrument. The accounting policy for financial
instruments is as follows:
Financial assets
(i) 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. For the purpose of the
Consolidated Statement of Cash Flows, cash and cash equivalents
consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
(ii) Trade and other receivables
Trade receivables are recognised initially at the invoice amount
and subsequently measured at amortised cost, less provision for
impairment.
Under IFRS 9, the Group elected to use the simplified approach
to measure the loss allowance at an amount equal to lifetime
expected credit losses for trade receivables and contract assets
that result from transactions that are within the scope of IFRS 15,
irrespective of whether they contain a significant financing
component or not.
IFRS 9 requires the Group to consider forward looking
information and the probability of default when calculating
expected credit losses. The measurement of expected credit losses
reflects an unbiased and probability weighted amount that is
determined by evaluating the range of possible outcomes as well as
incorporating the time value of money. The Group considers
reasonable and supportable customer-specific and market information
about past events, current conditions and forecasts of future
economic conditions when measuring expected credit losses.
The amount of the provision is the difference between the
carrying amount and the present value of estimated future cash
flows of the asset, discounted, where material, at the original
effective interest rate. The carrying amount of the asset is
reduced through the use of an allowance account, and the amount of
the loss is recognised in the Income Statement within
'administrative costs'. When a trade receivable is uncollectable,
it is written off against the allowance account for trade
receivables. Subsequent recoveries of amounts previously written
off are credited against 'administrative costs' in the Income
Statement.
Financial liabilities
(i) Trade and other payables
Trade payables are not interest-bearing and are initially
measured at fair value. Subsequent to initial recognition these
liabilities are measured at amortised cost. The Group has contract
liabilities in the form of deferred income which arises from
consideration received in advance of the satisfaction of
performance obligations.
(ii) Borrowings
Interest-bearing loans and overdrafts are initially measured at
fair value, net of direct issue costs. These financial liabilities
are subsequently measured at amortised cost using the effective
interest method, with interest expense recognised over the period
of the relevant liabilities.
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 29 and 32 for additional
information on these instruments.
-- "Retained earnings" represents retained profits and
accumulated losses.
-- "Merger reserve" arose on the reverse takeover of the Group
in October 2016.
Equity instruments issued by the company are recorded at the
proceeds received, net of direct issue costs.
3.13 Share-based payments
(I) Equity-settled share-based payments
Equity-settled share-based payments are measured at the fair
value of the awards based on the market value of the shares at the
grant date. Fair value excludes the effect of non-market-based
vesting conditions. The fair value is charged to the consolidated
statement of income and credited to retained earnings on a
straight-line basis over the period the estimated awards are
expected to vest.
At each reporting date, the Company revises its estimate of the
number of equity instruments expected to vest as a result of the
effect of non-market-based vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in the
consolidated statement of income such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
retained earnings.
(II) Cash-settled share-based payments
For cash-settled share-based payments, a liability is initially
recognised at fair value based on the estimated number of awards
that are expected to vest, adjusting for market based performance
conditions. Subsequently, at each reporting period until the
liability is settled, it is remeasured to fair value with any
changes in fair value recognised in the consolidated statement of
income.
3.14 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.
3.15 Leases
The Group adopted IFRS 16 Leases effective 1 January 2019. The
Group leases various properties, equipment, and vehicles. Contracts
typically cover fixed periods between one and 10 years and may
contain extension options as described below. Lease terms are
negotiated on an individual basis and include a wide variety of
different terms and conditions.
Leases are booked as a right-of-use asset and as a corresponding
lease liability at the date at which the leased asset is available
for use by the Group. Each lease payment is apportioned between the
reduction of the outstanding lease liability and finance cost. The
finance cost is charged to profit or loss over the lease period to
produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life or the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities are valued at
the net present value of the future lease payments, which includes
fixed lease payments, variable lease payments based on indexes and
rates, residual value guarantees, purchase options and termination
penalties. Lease payments are discounted using the interest rate
implicit in the lease, or if that rate cannot be determined, the
Group's incremental borrowing rate.
Right-of-use assets are measured at cost, comprising the amount
of the initial lease liability adjusted by any lease payments made
at or before the commencement date of the lease, any lease
incentives received, initial direct costs and any estimated
restoration costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are identified as
leases with a term of 12 months or less. Low-value assets comprise
general office equipment.
3.16 Government Grants
Grants are accounted for under the accruals model as permitted
by IAS 20. Grants are recognised in profit or loss statement in the
same period as the related expenditure. This includes the
Government Coronavirus Job Retention Scheme ('Furlough') and the US
Payroll Protection Program ('PPP').
3.17 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 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.
3.18 Critical accounting judgments and key sources of estimation uncertainty
Revenue recognition (Judgement)
Under IFRS 15, revenue recognition is based on the principle
that revenue is recognised when control of a good or service
transfers to a customer. Revenue is measured based on the
consideration specified in a contract with a customer and is
recognised when a customer obtains control of the services. The
Group's franchise contracts are defined as having two distinct
performance obligations, the Opening Package and the Territory
Fee.
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 GBP2,678,630 (2019: GBP3,030,239). The revenue
recognised in respect of the opening package and the apportioned
territory fee in the current year was GBP1,086,248 (2019:
GBP1,381,567).
Recoverability of trade receivables (Judgement and
estimates)
The Group provides credit to customers and as a result there is
an associated risk that the customer may not be able to pay
outstanding balances.
Under IFRS 9 the Group uses an allowance matrix to measure
Expected Credit Loss (ECL) of trade receivables from customers.
Loss rates are calculated based on the probability of a receivable
progressing through successive chains of non-payment to write-off.
The rates are calculated at a business unit level which reflects
the risks associated with geographic region, age mix of customer
relationship and type of product purchased.
IFRS 16 "Leases" (Judgement)
Where the Group has an option to extend or terminate a lease,
management uses its judgement to determine whether such an option
would be reasonably certain to be exercised. Management considers
all facts and circumstances, including past practice and costs that
would be incurred if an option were to be exercised, to help them
determine the lease term. Management have also applied judgements
in assessing the discount rate, which are based on the incremental
borrowing rate. Such judgements could impact lease terms and
associated lease liabilities. The Group has availed of the
practical expedient available on transition to IFRS 16 not to
reassess whether a contract is or contains a lease. Accordingly,
the definition of a lease in accordance with IAS 17 and the
guidance in IFRIC 4 will continue to be applied to those leases
entered into or modified before 1 January 2019.
Going concern (Judgement and estimates)
Since the COVID-19 pandemic began management has endeavored to
understand the uncertainties associated with this unprecedented
event, to quantify its impact on the future of the business and
assess whether these uncertainties would cast doubt on the Group's
ability to continue as a going concern. Given the improved but
ongoing degree of uncertainty management has relied on its
knowledge of its customers, the markets they operate in and the
anticipated impact and duration of government restrictions that
have been instituted globally to stem the transmission of the
virus. To address this uncertainty, management completed a three
year forecast that estimated the impact on the Group's revenue,
profits and current and future cash resources under a best case and
plausible downside scenarios. Significant judgment was required in
preparing these forecasts including but not limited to;
-- Duration of government restrictions - As of the date of this
report, governments in our two primary markets of the United
Kingdom and North America have been more definitive regarding the
timing and nature of their plans to loosen restrictions as they
anticipate a phased reopening of the economy over the coming
months. Management has used its judgement to estimate how and when
its customers will ramp up through the spring and summer and
ultimately through year end. As we have outlined in Note 2 "Going
Concern", we have assumed various degrees of recovery in our
scenario testing none of which are assumed to return us to our
pre-COVID normalised run rates.
-- Government support - The Group has taken advantage of
government support programs put in place by in each of our
operating locations. This principally consists of the employee
furlough scheme and the Coronavirus Business Interruption Loan
Scheme in the UK and the Paycheck Protection Program offered in the
US. Whilst it is estimated that the furlough program saves
c.GBP0.1m per month, management has used the best information
available to it and its judgement, where needed, to anticipate the
duration of the furlough program, the changing resource
requirements throughout the forecast period and how and when
employees will be transitioned off of furlough as customers begin
to ramp up. The Group has been successful in accessing both a UK
CBILS loan and two tranches of the US Paycheck Protection
loan/grant in the amounts of GBP1.2m and GBP0.4m respectively each
of which are factored into the forecast.
-- Liquidity and Banking - At year end the Group's available
cash and unutilised overdraft facility totalled GBP4.6m and the
forecast assumed the same starting point. Within each of the
considered scenarios the Group maintains sufficient cash to meet
all its obligations. The Group also has in place appropriate
amendments to the covenants through June 2021.
Management has used its best judgement to forecast its cash
requirements and cash availability in order t o assess whether the
Group is able to continue as a going concern for at least, but not
limited to, 12 months from the reporting date and in each scenario
the Group maintains sufficient levels of cash and unutilised
overdraft to support the business through FY22.
Impairment (Judgement and estimates)
The Group is required to review assets for objective evidence of
impairment. It does this on the basis of a review of the budget and
rolling forecasts, which by their nature are based on a series of
assumptions and estimates. The Group has performed impairment tests
on those cash generating units which contain goodwill, and on any
assets where there are indicators of impairment. The key
assumptions associated with these reviews are detailed in Note
15.
Taxation (Judgement and estimates)
The Group is subject to income tax in numerous jurisdictions.
Significant judgement is required in determining the worldwide
provision for income taxes. There are many transactions for which
the ultimate tax determination is uncertain. The Group recognises
liabilities based on estimates of whether additional taxes will be
due. Once it has been concluded that a liability needs to be
recognised, the liability is measured based on the tax laws that
have been enacted or substantially enacted at the end of the
reporting period. The amount shown for current taxation includes an
estimate for tax uncertainties and is based on the Directors' best
probability weighted estimate of the probable outflow of economic
resources that will be required to settle the liability. Where the
final tax outcome of these matters is different from the amounts
that were initially estimated, such differences will impact the
income tax and deferred tax provisions in the period in which such
determination is made.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which
the unused tax losses and unused tax credits can be utilised. The
Group estimates the most probable amount of future taxable profits,
using assumptions consistent with those employed in impairment
calculations, and taking into consideration applicable tax
legislation in the relevant jurisdiction. These calculations also
require the use of estimates.
4. ADOPTION OF REVISED STANDARDS EFFECTIVE DURING 2020
A number of new amendments to standards are effective for annual
periods beginning after 1 January
2020 and earlier application is permitted; however, the Group
has not early adopted them in preparing these consolidated
financial statements. These are not expected to have a significant
impact on adoption.
5. SEGMENT ANALYSIS
In January 2019, following the acquisition of Watbio Holdings
Ltd ("Watbio"), the Group began to make a number of changes to its
organisational structure and management system consistent with its
integration of Watbio. With these changes, the Group has updated
its reportable segments. There continues to be four reportable
segments as follows:
The Site Service's segment includes the legacy Seal replacement
service as well as capabilities in providing preventive maintenance
and reactive services in the markets that it serves. The Equipment
Sales & Installation segment represents the provision of
design, sale and installation solutions. The Franchise Development
and Fryer Management segments remain unchanged. The Group also has
three geographic segments: United Kingdom, North America and
Europe.
Previously reported segment information has been recast, as
applicable, for all periods presented to reflect the changes in the
Company's reportable segments.
The segments represent components of the Company for which
separate financial information is available that is utilised on a
regular basis by the chief operating decision maker (which takes
the form of the Board of Directors), in determining how to allocate
resources and evaluate performance. The segments are determined
based on several factors, including client base, homogeneity of
products, technology, delivery channels and similar economic
characteristics.
Revenue and non-current assets by origin of geographical segment
for all entities in the Group are as follows:
Revenue
2020 2019
GBP GBP
North America 7,762,771 11,302,537
U.K. 8,154,425 13,124,702
Europe 484,425 495,287
Total 16,401,621 24,922,526
----------- -----------
Non-current assets
2020 2019
GBP GBP
North America 1,882,302 2,009,411
U.K. 8,972,757 9,643,205
Europe 406,205 619,614
----------- -----------
Total 11,261,264 12,272,230
----------- -----------
Revenue
2020 2019
GBP GBP
Franchise Development 1,038,287 1,494,674
Fryer Management 7,812,833 11,716,594
Equipment Sales & Installation 1,377,210 2,792,685
Site Services 6,173,291 8,918,573
----------- -------------
Total 16,401,621 24,922,526
----------- -------------
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 revenue segments as such
information is not provided to the chief operating decision
maker.
Operating segment performance for the year ended 31 December
2020:
Equipment
Franchise Sales &
Development Fryer Management Installation Site Service Total
GBPm GBPm GBPm GBPm GBPm
Sales to
external
customers 1.0 7.8 1.4 6.2 16.4
Adjusted
EBITDA 0.4 0.8 (0.1) 0.0 1.1
-------------------------- -------------------------- -------------------------- -------------------------- --------------------------
Acquisition
and legal
costs - (0.0) (0.0) (0.1) (0.2)
Share based
payments 0.0 0.1 (0.0) (0.2) (0.1)
Depreciation
and
amortisation (0.1) (0.7) (0.1) (0.5) (1.4)
Operating loss 0.3 0.2 (0.3) (0.7) (0.6)
-------------------------- -------------------------- -------------------------- -------------------------- --------------------------
Net finance
costs (0.0) (0.1) (0.0) (0.1) (0.3)
Loss before
taxation 0.3 0.0 (0.3) (0.8) (0.9)
-------------------------- -------------------------- -------------------------- -------------------------- --------------------------
Taxation (0.1)
Other
comprehensive
income (0.2)
Loss and total
comprehensive
income (1.2)
--------------------------
Operating segment performance for the year ended 31 December
2019:
Equipment
Franchise Sales &
Development Fryer Management Installation Site Service Total
GBPm GBPm GBPm GBPm GBPm
Sales to
external
customers 1.5 11.7 2.8 8.9 24.9
Adjusted
EBITDA 0.7 1.8 0.2 0.5 3.2
-------------------------- -------------------------- -------------------------- -------------------------- ----------------------------------
Acquisition
and legal
costs - - (0.1) (0.3) (0.3)
Share based
payments (0.0) (0.1) (0.0) (0.1) (0.3)
Depreciation
and
amortisation (0.1) (0.7) (0.2) (0.5) (1.4)
Operating
profit 0.6 1.0 (0.1) (0.4) 1.2
-------------------------- -------------------------- -------------------------- -------------------------- ----------------------------------
Net finance
costs (0.0) (0.1) (0.0) (0.1) (0.3)
Profit before
taxation 0.6 0.9 (0.1) (0.4) 0.9
-------------------------- -------------------------- -------------------------- -------------------------- ----------------------------------
Taxation (0.5)
Other
comprehensive
income (0.1)
Profit and
total
comprehensive
income 0.3
----------------------------------
6. Operating profit and adjusted EBITDA
The following have been included in arriving at operating
profit and adjusted EBITDA:
2020 2019
GBP GBP
Depreciation of property, plant and equipment
(note 16) 172,560 216,677
Amortisation of intangible assets (note 15) 867,269 857,992
Depreciation of right of use assets 330,429 322,263
Gain on disposal of plant and equipment (12,215) (10,739)
Staff costs, including Directors (note 7) 4,972,012 7,137,774
Receipts from Government Grants (959,117) -
Share based payment 85,067 283,215
Cost of acquisition - 60,448
Recovery on contingent consideration (note 25) - (138,942)
Restructuring 187,465 374,904
Foreign exchange gains 67,156 83,975
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 annual
accounts 90,582 66,413
Fees payable to the Company's Auditor and their
associates for other services: 4,630 -
The audit of the Company's subsidiaries pursuant
to legislation 39,074 39,666
Tax and other services 40,567 66,299
-------------------------- ---------------------------------
Total auditors' remuneration 174,853 172,378
-------------------------- ---------------------------------
Lease rental expense on low value and/or short
term leases 3,402 10,178
-------------------------- ------------------------------
During the period, the Group benefited from EUR0.7m of
government grants in the form of the Job Retention Scheme in the
UK. In addition, the subsidiaries also benefitted from personnel
cost reductions for a total amount of EUR1.0m due to Government
assistances around the world. In accordance with accounting policy,
this credit is included in the Income Statement over the same
period as the staff costs for which it compensates. Additionally,
GBP0.5m of VAT payments have been deferred to 2021.
Exceptional items consist of the following:
2020 2019
GBP GBP
Acquisition related - 60,448
Recovery on contingent consideration - (138,942)
Restructuring 121,682 374,904
COVID-19 customer provision 62,287 -
Legal and professional 3,496 -
187,465 296,410
7. STAFF COSTS
2020 2019
GBP GBP
Gross salaries 5,121,236 6,005,194
Social security costs 507,689 601,968
Pension contributions 76,528 93,725
Share based payment charge 85,067 283,215
Other staff benefits 140,609 153,672
----------- -------------
5,931,129 7,137,774
(959,117) -
Government support 4,972,012 7,137,774
----------- -------------
The average number of employees of the Group during
the year was as follows:
2020 2019
No. No.
Directors 8 8
Staff
Administration 26 34
Customer Services/Network Support 30 25
Business Development/Marketing 4 6
Sales 14 9
Other 62 86
----------- -----------
144 168
----------- -----------
8. REMUNERATION OF KEY MANAGEMENT PERSONNEL
2020 2019
GBP GBP
Remuneration for qualifying services 671,262 658,845
-------------- ----------------
671,262 658,845
-------------- ----------------
Details of Directors' remuneration are provided in the
Remuneration Report.
9. FINANCE COSTS
2020 2019
GBP GBP
Bank and other loans 231,639 234,604
Finance fees 50,412 43,655
-------------- ------------
282,051 278,259
-------------- ------------
10. INCOME TAX EXPENSE
2020 2019
GBP GBP
Corporation Tax
Charge for the year 410,434 604,458
Deferred tax
Origination and reversal of temporary differences (270,686) (72,040)
Total tax charge 139,748 532,418
---------- -------------
Reconciliation of corporation taxation:
2020 2019
GBP GBP
(Loss)/profit before tax (866,231) 929,432
------------ ----------
Tax calculated at the domestic tax rate of 19%
(2019: 19%) (164,584) 176,592
Tax effects of:
Income not subject to tax (49,900) (20,689)
Expenses not deductible for tax purposes - 194,999
Tax deductions not recognised as an expense (91,765) (58,150)
Tax losses in the year for which no deferred
tax is recognised - 57,909
Other timing differences 167,794 14,306
Withholding tax payable on intercompany dividend - 53,393
Adjustments in respect to prior years - (78,178)
Impact of overseas tax rates 255,728 149,785
Release of deferred tax on share options 22,475 42,451
Total 139,748 532,418
------------ ----------
The Filta Group's effective tax rate for the year ended 31
December 2020 was (16.1%) (2019: 57.3%). The effective rate is an
amalgamation of mainly UK (19%), US (28%) and Canadian (27.6%)
rates for the periods reported. The change from prior year has been
particularly affected by the geographic mix of profits for the year
and the inability to offset US and Canadian pre-tax profits with UK
losses.
The Filta Group has tax losses of approximately GBP1,462,379
(2019: GBP749,447) to carry forward against future profits. The UK
tax losses have no expiry date and a deferred tax asset of
GBP277,852 (2019: GBP110,731) has been recognised in respect of
them.
There are no other available tax losses in the Group.
11. DEFERRED TAX ASSETS / LIABILITIES
The movement in the Group's deferred tax asset
during the year is as follows:
2020 2019
GBP GBP
At start of year 678,497 754,728
Movement for the year 137,166 (59,183)
Foreign exchange differences (19,249) (17,048)
--------- ---------
At end of year 796,414 678,497
--------- ---------
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.
2020 2019
GBP GBP
Tax losses 277,852 110,731
Deferred revenue 518,562 545,291
Other - 22,475
-------- --------
At end of year 796,414 678,497
-------- --------
The movement in the Group's deferred tax liability during the
year is as follows:
2020 2019
GBP GBP
At start of year 1,159,121 1,291,31
Credit for the year (131,623) (132,197)
---------- ----------
At end of year 1,027,498 1,159,121
---------- ----------
12. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit
attributable to equity shareholders of the company by the weighted
average number of shares in issue during the year.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares to take account of all
dilutive potential ordinary shares and adjusting the profit
attributable, if applicable, to account for any tax consequences
that might arise from conversion of those shares.
2020 2019
Earnings attributable to equity holders of
the company (1,005,979) 403,866
------------ -----------
Weighted average number of shares 29,097,146 29,041,697
Effect of dilutive share options and awards - 104,870
------------ -----------
Weighted average number of shares for dilutive
earnings 29,097,146 29,146,567
Earnings per share
Basic (3.46) 1.39
Diluted (3.46) 1.39
13. INVESTMENT IN SUBSIDIARIES
The subsidiaries of Filta Group Holdings plc are as follows:
2020 2019
ownership ownership
Company Class interest interest Nature of business
The Filta Group Limited Ordinary 100% 100% Environmental Services
The Filta Group Incorporated Ordinary 100% 100% Environmental Services
Filta Refrigeration
Limited Ordinary 100% 100% Discontinued
FiltaFry Limited Ordinary 100% 100% Dormant
Bio Depot Limited Ordinary 100% 100% Dormant
FitaSeal Limited Ordinary 100% 100% Dormant
Filta Environmental
Canada, Limited Ordinary 100% 100% Environmental Services
Filta Europe B.V. Ordinary 100% 100% Environmental Services
FiltaFry Deutschland
GmbH Ordinary 100% 100% Environmental Services
Watbio Holdings Limited Ordinary 100% 100% Environmental Services
Watbio Limited Ordinary 100% 100% Environmental Services
Watling Hope Installations
Limited Ordinary 100% 100% Environmental Services
Environmental Biotech
Limited Ordinary 100% 100% Environmental Services
M&M Asset Maintenance Ordinary 100% 100% Environmental 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 Canada 27(th) floor, P.O. Box 49123,
Limited 595 Burrard Street, Vancouver,
British Columbia, V7X 1J2 Canada
-------------------------------------
Filta Europe B.V. Debbeshoek 14B, 7071XK Ulft,
Netherlands
-------------------------------------
FiltaFry Deutschland GmbH Pliniusstraße 8, 48488
Emsbüren, Germany
-------------------------------------
14. DIVIDS
2020 2019
GBP GBP
Distributions to equity holders in the year
:
Final dividend for the year ended 31 December
2019 of Nil (2018:0.92p per share) - 267,286
Interim dividend for the year ended 31 December
2020 of Nil (2019: 1.00p per share) - 290,829
- 558,115
------------------------------------ ----------
The Board has not recommended a final dividend
for the year ended 31 December 2020 - -
------------------------------------ ----------
15. INTANGIBLE ASSETS
Computer Customer Customer Supply
Software Goodwill Relationships Contracts Contract Total
GBP GBP GBP GBP GBP GBP
--------- ---------- -------------- --------------- ---------- ----------
Cost
Balance at 1
January
2020 719,320 1,639,523 3,963,737 2,489,489 724,481 9,536,550
Additions 194,985 - - - - 194,985
Foreign
exchange (21,917) - - - - (21,917)
--------- ---------- -------------- --------------- ---------- ----------
Balance at 31
December
2020 892,388 1,639,523 3,963,737 2,489,489 724,481 9,709,618
Amortisation
and
impairmen t
Balance at 1
January
2020 507,804 - 525,348 300,623 48,298 1,382,073
Amortisation 124,392 - 430,995 263,584 48,298 867,269
Foreign
exchange (20,857) - - 5,250 (15,607)
--------- ---------- -------------- --------------- ---------- ----------
Balance at 31
December
2020 611,339 - 956,343 569,457 96,596 2,233,735
--------- ---------- -------------- --------------- ---------- ----------
Net book
value at
31 December
2020 281,049 1,639,523 3,007,394 1,920,032 627,885 7,475,883
========= ========== ============== =============== ========== ==========
Computer Customer Customer Supply
Software Goodwill Relationships Contracts Contract Total
GBP GBP GBP GBP GBP GBP
--------- ---------- -------------- --------------- ---------- -------------
Cost
Balance at 1
January
2019 542,782 1,639,523 3,963,737 2,489,489 724,481 9.360.012
Additions 194,245 - - - - 194.245
Foreign
exchange (17,707) - - - - (17,707)
--------- ---------- -------------- --------------- ---------- -------------
Balance at 31
December
2019 719,320 1,639,523 3,963,737 2,489,489 724,481 9,536,550
Amortisation
and
impairmen t
Balance at 1
January
2019 398,963 - 94,353 40,741 - 534,057
Amortisation 115,687 - 430,995 263,012 48,298 857,992
Foreign
exchange (6,846) - - (3,130) (9,976)
--------- ---------- -------------- --------------- ---------- ----------
Balance at 31
December
2019 507,804 - 525,348 300,623 48,298 1,382,073
--------- ---------- -------------- --------------- ---------- ----------
Net book
value at
31 December
2019 211,516 1,639,523 3,438,389 2,188,866 676,183 8,154,477
========= ========== ============== =============== ========== ==========
Intangible assets are valued separately for each acquisition and
the primary method of valuation used is the discounted cash flow
method. The majority of acquired intangibles are amortised using an
amortisation profile based on the projected cash flows underlying
the acquisition date valuation of the intangible asset. The Group
keeps the expected pattern of consumption under review.
Impairment tests for goodwill and intangibles
The Group is obliged to test goodwill and other intangibles with
indefinite useful lives for impairment, at least annually, or at
any time if there are indications that these 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's to
which the goodwill has been attributed and their carrying value are
summarised below.
2020 2019
GBP GBP
Franchise development 90,946 90,946
---------- ----------
Equipment sales &
installation 369,297 369,297
---------- ----------
Site service 1,179,280 1,179,280
---------- ----------
Total 1,639,523 1,639,523
---------- ----------
The recoverable amount of a CGU is primarily determined based on
value-in-use calculations. These calculations use pre-tax cash flow
projections based on annual financial budgets which are approved by
the Board and the same as used in the Group's going concern
assessment. Income and costs within
the budget are derived on a detailed, 'bottom up' basis - all
income streams and cost lines are considered and appropriate
growth, or decline, rates are assumed for each, all of which are
then reviewed, challenged and stress tested, firstly by senior
management and ultimately by the Board.
Income and cost growth forecasts are risk adjusted to reflect
specific risks facing each CGU and take into account the markets in
which they operate. Cash flows beyond the three year budgeted
period are extrapolated using an estimated 3% growth rate into
perpetuity. The growth rate does not exceed the long-term average
growth rate for the markets in which the CGU's operate. Further,
other than as included in the financial budgets, it is assumed that
there are no material adverse changes in legislation that would
affect the forecast cash flows.
The pre-tax discount rate used within the recoverable amount
calculations was 10.18% (2019: 8.11%) and is based upon the
weighted average cost of capital reflecting specific principal
risks and uncertainties. The discount rate takes into account,
amongst other things, the risk free rate of return, the market risk
premium and beta factor reflecting the average Beta for the Group.
The same discount rate has been used for each CGU as the principal
risks and uncertainties associated with the Group, as highlighted
on pages 20 to 23, would also impact each CGU in a similar manner.
The Board acknowledge that there are additional factors that could
impact the risk profile of each CGU. These additional factors were
considered by way of sensitivity analysis performed as part of the
annual
impairment tests. The level of impairment recognised is
predominantly dependent upon judgments used in arriving at future
growth rates and the discount rate applied to cash flow
projections. Key drivers to future growth rates are dependent on
the Group's ability to maintain and grow income streams whilst
effectively managing operating costs. The level of headroom may
change if different growth rate assumptions or a different pre-tax
discount rate were used in the cash flow projections. Where the
value-in-use calculations suggest an impairment, the Board would
consider alternative use values prior to realising any impairment,
being the fair value less costs to dispose.
A sensitivity analysis has been performed and the Board have
concluded that no reasonably foreseeable change in the key
assumptions would result in an impairment of the goodwill. In
particular, a 5% increase in the discount rate or a 5% decrease in
the terminal value growth rate would not result in impairment.
16. 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 2020 1,567,860 161,327 436,294 168,835 2,334,316
Additions 7,060 36,660 50,724 5,722 100,166
Disposals - (988) (3,300) (52,305) (56,593)
Foreign exchange (49,715) 2,343 (2,443) (1,370) (51,185)
---------- ------------ ---------- ---------- ----------
At 31 December 2020 1,525,205 199,342 481,275 120,882 2,326,704
---------- ------------ ---------- ---------- ----------
Depreciation
At 1 January 2020 711,396 76,537 155,133 55,140 998,206
Depreciation charge 40,178 40,428 68,595 23,359 172,560
Disposals - (546) (3,300) (51,130) (54,976)
Foreign exchange (29,538) (8,058) (2,512) (634) (40,742)
---------- ------------ ---------- ---------- ----------
At 31 December 2020 722,036 108,361 217,916 26,735 1,075,048
---------- ------------ ---------- ---------- ----------
Net Book Values
At 31 December 2020 803,169 90,981 263,359 94,147 1,251,656
---------- ------------ ---------- ---------- ----------
Cost
At 1 January 2019 1,618,452 179,986 299,723 477,947 2,576,108
IFRS 16 transition (287,396) (287,396)
Additions 1,674 49,137 233,490 3,950 288,251
Disposals (10,640) (64,989) (94,999) (24,351) (194,979)
Foreign exchange (41,626) (2,807) (1,920) (1,315) (47,668)
---------- ------------ ---------- ---------- ----------
At 31 December 2019 1,567,860 161,327 436,294 168,835 2,334,316
Depreciation
At 1 January 2019 704,960 115,070 140,871 122,027 1,082,928
IFRS 16 transition - - - (77,068) (77,068)
Depreciation charge 45,561 28,732 113,483 28,901 216,677
Disposals (10,468) (63,566) (94,785) (17,174) (185,993)
Foreign exchange (28,657) (3,699) (4,436) (1,546) (38,338)
---------- ------------ ---------- ---------- ----------
At 31 December 2019 711,396 76,537 155,133 55,140 998,206
---------- ------------ ---------- ---------- ----------
Net Book Values
At 31 December 2019 856,464 84,790 281,161 113,695 1,336,110
---------- ------------ ---------- ---------- ----------
Certain of the property, plant and equipment listed above are
held as security against bank facilities referred to in note
23.
17. RIGHT OF USE ASSETS
Land and Plant and
buildings equipment Motor vehicles Total
Cost GBP GBP GBP GBP
At 1 January 2019 535,485 1,525 309,063 846,073
Additions - 3,169 912,596 915,765
Disposals (175,677) - (44,704) (220,381)
At 31 December
2019 359,808 4,694 1,176,955 1,541,457
------------------- --------------------- --------------------- --------------------- ---------------------
Additions 12,980 - 99,688 112,667
Disposals (20,232) - (100,237) (120,469)
Foreign exchange 2,177 (170) 237 2,245
At 31 December
2020 354,733 4,525 1,176,643 1,535,900
------------------- --------------------- --------------------- --------------------- ---------------------
Depreciation
At 1 January 2019 - - - -
Charge for the
year (125,714) (75) (196,473) (322,262)
Disposals 38,329 - 11,994 50,323
Foreign exchange - - 961 961
At 31 December
2019 (87,384) (75) (183,519) (270,978)
------------------- --------------------- --------------------- --------------------- ---------------------
Charge for the
year (84,378) (862) (245,189) (330,429)
Disposals 20,232 - 88,111 108,343
Foreign exchange (594) 3 (519) (1,111)
At 31 December
2020 (152,124) (934) (341,116) (494,174)
------------------- --------------------- --------------------- --------------------- ---------------------
Net book value
At 31 December
2020 202,608 3,591 835,527 1,041,726
------------------- --------------------- --------------------- --------------------- ---------------------
At 31 December
2019 272,423 4,620 993,436 1,270,479
At 1 January 2019 535,485 1,525 309,063 846,073
------------------- --------------------- --------------------- --------------------- ---------------------
2020 2019
GBP GBP
Depreciation expense on right of use
assets 330,429 322,262
Interest expense on lease
liabilities 50,412 43,655
18. TRADE AND OTHER RECEIVABLES
Trade and other receivables consist of the following:
Total 2020 2019
GBP GBP
Trade receivables, gross 2,248,013 3,591,379
Impairment allowance (208,278) (83,262)
---------- ----------
Trade receivables, net 2,039,735 3,508,117
Prepayments and other receivables 258,937 402,206
Franchise payment plans, net 291,280 566,220
---------- ----------
2,589,952 4,476,543
---------- ----------
Current 2020 2019
GBP GBP
Trade receivables 1,962,842 3,508,117
Prepayments and other receivables 258,937 402,206
Franchise payment plans, net 103,899 154,488
---------- ----------
2,325,678 4,064,811
---------- ----------
Non-current 2020 2019
GBP GBP
Trade receivables 76,893 -
Franchise payment plans, net 187,381 411,732
---------- ----------
264,274 411,732
---------- ----------
Trade and other receivables 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 GBP3.2m consist
of GBP1.5m of loans to subsidiaries to fund debt repayment and
acquisitions and is repayable after more than twelve months while
the balance of GBP1.7m is for 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.
The Group applies a simplified approach to measure the loss
allowance for trade receivables classified at amortised cost, using
the lifetime expected loss provision. The expected credit loss on
trade receivables is estimated using a provision matrix by
reference to past default experience and credit rating, adjusted as
appropriate for current observable data. The following table
details the risk profile of trade receivables based on the Group's
provision matrix.
Trade receivables - days past
due
------------------------------------------------------------------
Not
past 31 - 60 -
31 December 2020 due < 30 60 90 > 90 Total
------------------ -------------- -------------- --------------- --------------- ---------------- -----------
Gross carrying
amount 328,141 565,174 386,660 149,822 724,428 2,154,225
Weighted average
expected credit
loss rate 1.1% 1.4% 2.4% 9.4% 24.0% 9.7%
------------------ -------------- -------------- --------------- --------------- ---------------- -----------
Expected credit
loss 3,610 7,630 9,154 14,111 173,773 208,278
------------------ -------------- -------------- --------------- --------------- ---------------- -----------
Trade receivables - days past
due
-------------- ------------------------------------------------------------------
Not
past 31 - 60 -
31 December 2019 due < 30 60 90 > 90 Total
------------------ -------------- -------------- --------------- --------------- ---------------- -----------
Gross carrying
amount 2,115,940 534,788 273,355 140,802 526,494 3,591,379
Weighted average
expected credit
loss rate 0.8% 1.8% 4.2% 6.1% 6.8% 2.3%
------------------ -------------- -------------- --------------- --------------- ---------------- -----------
Expected credit
loss 17,826 9,698 11,421 8,624 35,693 83,262
------------------ -------------- -------------- --------------- --------------- ---------------- -----------
Movement in the expected credit loss:
2020 2019
GBP GBP
At beginning of year 83,262 184,022
Impairment loss recognised 135,290 (18,353)
Utilised (10,274) (84,407)
At end of year 208,278 83,262
---------
19. CONTRACT ACQUISITION COSTS
The Group capitalises incremental costs to obtain contracts with
customers where it is expected these costs will be recoverable.
Incremental costs to obtain contracts with customers are considered
those which would not have been incurred if the contract had not
been obtained. For the Group, these costs relate primarily to third
party broker fees. The Group has elected to use the practical
expedient as allowable by IFRS 15 whereby such costs will be
expensed as incurred where the expected amortisation period is one
year or less. Where the amortisation period is greater than one
year, these costs are amortised over the contract term on a
systematic basis consistent with the transfer of the underlying
goods and services within the contract to which these costs relate,
which will generally be on a rateable basis. Expense recognised in
2020 was GBP86,256 (2019: GBP76,845) whilst
Impairment of capitalised contract costs was GBPnil in 2020
(2019: GBPnil).
The amount of capitalised contract cost expected to be recovered
after more than one year is GBP0.4m (2019: GBP0.4m).
20. INVENTORIES
2020 2019
GBP GBP
Finished goods 1,604,451 1,759,955
Total 1,604,451 1,759,955
Inventories primarily consists of filtration machines, filters,
grease recovery units and parts 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. There are no material stock provisions at either
period end. No material amounts have been written-off in either
year ended 31 December 2020 or 31 December 2019 within the income
statement of the Company. GBP2.9m of inventories were recognised as
an expense within the year (2019: GBP4.1m).
21. CASH AND CASH EQUIVALENTS
Group 2020 2019
GBP GBP
Cash at bank and in hand 4,208,498 2,891,014
Company
Cash at bank and in hand 51,856 109,089
22 . TRADE AND OTHER PAYABLES
2020 2019
Group GBP GBP
Trade payables 1,294,512 2,555,860
Taxes and social security 531,763 194,199
Accruals and other payables 463,614 510,826
2,289,889 3,260,885
Company Trade payables 16,933 39,272
Taxes and social security 4,552 4,744
Accruals and other payables - -
-------
21,485 44,016
-------
Analysis of trade and other payables
These are classified as short term and are expected to be settled
within 12 months.
23. LOANS AND OTHER BORROWINGS Group 2020 2019
GBP GBP
Total
Bank loans 4,674,378 3,722,617
Related party loans 49,637 46,942
---------- ----------
4,724,015 3,769,559
Current
Bank loans 1,076,927 792,672
1,076,927 792,672
Non-current
Bank loans 3,597,451 2,929,945
Related party loans 49,637 46,942
----------
3,647,088 2,976,887
----------
Company 2020 2019
GBP GBP
Total
Bank loans 3,328,289 3,532,590
----------- ----------
3,328,289 3,532,590
Current
Bank loans 942,763 786,049
942,763 786,049
Non-current
Bank loans 2,385,526 2,746,541
2,385,526 2,746,541
The bank loans are comprised of a GBP4,000,000 term loan
(GBP2,828,289 net of debt issuance costs), which carries a variable
interest rate of Libor plus 3% and is repayable in equal
instalments of GBP246,154 per quarter, a $905,785 US Dollar
denominated mortgage loan (GBP646,089), which carries an interest
rate of 4.5% and matures in 2024 and a GBP1,200,000 Coronavirus
Business Interruption Loan which carries a variable interest rate
of 3.99% over the Bank of England base rate and is repayable in
equal instalments of GBP20,000 per month.
24. LEASE LIABILITIES
Details of the Group' Lease Liabilities are as follows:
Group 2020 2019
GBP GBP
Total
Leases 1,089,599 1,215,421
---------- ----------
1,089,599 1,215,421
---------- ----------
Current
Leases 319,480 332,974
319,480 332,974
Non-current
Leases 770,119 882,447
770,119 882,447
25. CONTINGENT CONSIDERATION
As part of the business combinations completed by the Group in
2018 certain contingent consideration formed the basis of the total
consideration reported.
Filtafry Deutschland GmbH
On 6 February 2020, pursuant to a share purchase agreement
between the Company and FiltaFry Deutschland GmbH, 12,809 shares of
10 pence each were issued to Chesskin Beheer B.V. at a price of
165.2 pence each, giving rise to a share premium of GBP19,881.
On 6 February 2019, pursuant to a share purchase agreement
between the Company and FiltaFry Deutschland GmbH, 9,225 shares,
calculated based on an average share price of 236p and an exchange
rate of 0.8694, were issued to the Seller.
Watbio Holdings Limited
Contingent consideration of GBP1,954,611 to be satisfied by the
following:
Final EBITDA payment GBP1,440,455
Retention debt payment GBP 264,156
Consideration shares GBP 250,000
On 22 March 2019, 125,000 ordinary shares priced at 200p were
issued to the sellers to satisfy the consideration shares due. On
28 March 2019, a payment of GBP1,440,455 was remitted to the
Sellers to satisfy the final EBITDA payment consideration. On 30
June 2019, a payment of GBP125,314 was remitted to the Sellers and
represented a full and final payment of the retention debt. The
remaining amount of GBP138,942 was recognised in income in the
period. This has been included in other income in the profit and
loss accounts and has been deducted when calculating the adjusted
EBITDA.
26. DEFERRED INCOME
Deferred income relates to certain performance obligations from
franchise sales that are deferred over the life of the franchise
agreement. The deferral period is 10 years in North America and 5
years in the UK and mainland Europe and revenue is recognised
equally over the deferral period.
Movements in Deferred income are as follows:
1 Jan 2020 New franchise Utilisation Foreign 31 Dec
agreements exchange 2020
GBP GBP GBP GBP GBP
Deferred income 3,030,239 467,775 (736,374) (83,010) 2,678,630
Current 592,065
Non-current 2,086,565
Total 2,678,630
27. RECONCILIATION OF MOVEMENTS IN NET DEBT
1 January Cash flows Acquisition Non-cash changes 31 December
2020 2020
Foreign Fair value
exchange changes
movements
GBP GBP GBP GBP GBP GBP
Long term
borrowings 3,769,559 (284,178) 1,200,000 38,634 4,724,015
Lease
liabilities 1,215,421 (231,005) 100,952 4,231 - 1,089,599
Total 4,984,980 (515,183) 1,300,952 42,865 - 5,813,614
1 January Cash flows Acquisition Non-cash changes 31 December
2019 2019
Foreign Fair value
exchange changes
movements
GBP GBP GBP GBP GBP GBP
Long term
borrowings 4,581,505 (832,434) - 20,488 3,769,559
Lease
liabilities 168,448 (32,588) 251,561 - 828,000 1,215,421
Total 4,749,953 (865,022) 251,561 20,488 828,000 4,984,980
28. 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.
2020 2019
Number GBP Number GBP
Allotted and fully paid
Total shares in issue at
1 January 29,085,355 2,908,535 28,918,630 2,891,863
Issue of ordinary shares 12,809 1,281 134,225 13,422
Issued under share option
scheme - - 32,500 3,250
Total shares in issue at
31 December 29,098,164 2,909,816 29,085,355 2,908,535
On 6 February 2019, pursuant to a share purchase agreement
between the Company and FiltaFry Deutschland GmbH, 9,225 shares of
10 pence each were issued to Chesskin Beheer B.V. at a price of
238.5 pence each, giving rise to a share premium of GBP21,078.
On 22 March 2019, pursuant to a share purchase agreement between
the Company and Watbio Holdings Limited, 125,000 shares of 10 pence
each were issued to the sellers at a price of 200 pence, giving
rise to a share premium of GBP237,500, to partially satisfy share
consideration due as part of the total consideration paid for the
business.
Between 3 June 2019 and 3 October 2019 certain employees
exercised their rights under the Company's EMI Share Option Scheme
and 32,500 shares of 10 pence each were issued to satisfy the
exercise. These shares were priced at a range of 177 pence to 224
pence and gave rise to a share premium of GBP28,275.
On 6 February 2020, pursuant to a share purchase agreement
between the Company and FiltaFry Deutschland GmbH, 12,809 shares of
10 pence each were issued to Chesskin Beheer B.V. at a price of
165.2 pence each, giving rise to a share premium of GBP19,881.
29. OTHER RESERVES
Group 2020 2019
GBP GBP
Merger reserve (339,687) (339,687)
Share based payment reserve 573,118 367,102
---------- ----------
233,431 27,415
---------- ----------
Company
Share based payment reserve 573,118 367,102
---------- ----------
573,118 367,102
---------- ----------
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 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. Subsequent options were granted on 16 October 2017, 11
January 2019, 15 May 2019, 18 November 2019 and 15 July 2020 all
with similar vesting schedules to the original grants. The total
charge recognised for share-based payments in respect of employee
services received for the year ended 31 December 2020 was GBP85,067
(2019: GBP287,468).
30. 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.
Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to meet their financial obligations as they
arise while maximising the return to shareholders.
The capital structure of the Group consists of cash and cash
equivalents and equity attributable to equity holders of the
Parent, comprising issued capital, reserves and retained earnings,
and long and medium-term debt facilities. Term loans are used to
finance long-term investment such as acquisitions. Overdrafts are
used to manage short-term cash requirements and minimise interest
costs. The Group's financing facilities contain the usual financial
covenants including maximum leverage, minimum interest cover and
minimum operating cash flow. The Group has been provided waivers
from its bank through 30 June 2021.
The Group's dividend policy is to provide sustainable dividends
to shareholders, consistent with the Group's earnings growth to
attract long-term investors and to align shareholders returns on
their investment in tandem with the Group's growth. The payment and
amount of any dividends or distributions to shareholders is at the
discretion of the Board, and subject to shareholder approval.
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 in rate Effect on profit Effect on
before tax equity
GBP GBP
USD +10% (161,369) 298,412
USD -10% 197,228 (364,725)
CAD +10% (2,092) 12,492
CAD -10% 13,390 (15,268)
EUR +10% 13,446 (38,218)
EUR -10% (16,435) 46,710
Interest rate sensitivity
The interest rate sensitivity has been determined based on the
exposure at the reporting date. For floating rate liabilities, the
analysis is prepared assuming the amount of liability outstanding
at the reporting date was outstanding for the full year. All
financial liabilities, other than financing liabilities, are
interest free.
The following table analyses interest bearing loans, borrowings,
and lease liabilities by fixed and floating mix.
2020 2019
GBP GBP
Floating LIBOR 2,828,289 3,032,590
Floating Base 1,200,000 -
Fixed 1,785,325 1,952,390
Total 5,813,614 4,984,980
As the Group has no significant interest-bearing assets, the
Group's income and operating cash flows are substantially
independent of changes in market interest rates. The Group's
interest rate risk arises from its borrowings, chiefly its floating
GBP LIBOR term debt. Borrowings issued at variable rates expose the
Group to cash flow interest rate risk. Borrowings issued at fixed
rates expose the Group to fair value interest rate risk.
An increase or decrease of 100 basis points in each of the
applicable rates would impact reported after-tax profit by GBP0.04m
(2019: GBP0.03m) and equity by GBP0.04m (2019: GBP0.03m).
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 classification of each of
its financial assets and liabilities at 31 December 2020 All
amounts are stated at their carrying value.
2020 2019
GBP GBP
Financial Assets
At amortised cost:
Cash and cash equivalents 4,208,498 2,891,014
Trade and other receivables (excluding prepayments) 2,341,916 4,084,963
Deposits 11,398 5,272
6,561,812 6,981,249
Financial Liabilities
Trade and other payables (excluding taxes) 1,758,127 3,066,685
Borrowings 4,724,015 3,769,559
6,482,142 6,836,244
The table below summarises the maturity profile (representing
undiscounted contractual cash flows) of the Group's financial
liabilities:
At 31 December Less than 3 to 12 1 to 5 Over 5
2020 3 months months years years Total
GBP GBP GBP GBP GBP
Trade and other
payables 1,708,679 20,288 29,160 - 1,758,127
Expected future
interest payments 11,942 178,930 300,510 1,861 493,243
Borrowings 5,492 1,071,435 3,507,088 140,000 4,724,015
Total 1,726,113 1,270,653 3,836,758 141,861 6,975,385
At 31 December Less than 3 to 12 1 to 5 Over 5
2019 3 months months years years Total
GBP GBP GBP GBP GBP
Trade and other
payables 3,019,615 16,817 30,253 - 3,066,685
Expected future
interest payments 34,150 158,510 316,725 - 509,385
Borrowings 5,559 787,113 2,976,887 - 3,769,559
Total 3,059,324 962,440 3,323,864 - 7,345,628
31. 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 2% 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 GBP76,528 (2019: GBP93,725)
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.
32. SHARE OPTION SCHEME
The Company maintains an EMI 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 2,285,000 ordinary shares, equivalent to 7.9% 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, which have not
previously vested, will meet the vesting conditions between 2021
and 2024 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 (SARs). The SARs 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 SARs the
same reward value as if the SARs were share options. The qualifying
conditions and timing of vesting are identical to those within the
share option scheme for UK employees. All SARs are settled in cash
when exercised. A total of 800,000 SARs have 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.
As at 31 December 2020, a total of 1,690,000 (2019: 1,690,000)
were outstanding, having a range of exercise prices from 0.97p to
2.30p (2019: 0.97p to 2.30p) and a weighted average exercise price
of 1.60p (2019:1.76p). These outstanding awards have a weighted
average contractual life of 8.13 years (2019: 8.59 years).
Certain of the share options and share acquisition rights
contain performance conditions which must be met in order to vest.
The performance condition for each holder, relate to targets for
annual EBITDA growth.
Movement in the number of share options outstanding during the
year, including grant dates and grant price were as follows:
Share acquisition
Share Options rights Total
Outstanding
at 1
January
2020 1,175,000 515,000 1,690,000
Granted on
15 July
2020
(0.970p) 300,000 132,500 432,500
Total
granted
during
the year 300,000 132,500 432,500
Exercised
during the
year - - -
Total
exercised
during
the year - - -
Forfeited
during the
year
(0.970p) (15,000) (20,000) (35,000)
Forfeited
during the
year
(1.74p) - - -
Forfeited
during the
year
(2.15p) (195,000) (22,500) (217,500)
Forfeited
during the
year
(2.30p) (15,000) - (15,000)
Forfeited
during the
year
(1.46p) (120,000) (15,000) (135,000)
Forfeited
during the
year
(0.965p) (22,500) (7,500) (30,000)
Total
forfeited
during
the year (367,500) (65,000) (432,500)
Total
Outstanding
at
31 December
2020 1,107,500 582,500 1,690,000
Exercisable
at 31
December
2020 67,500 115,000 182,500
During the year, the Company recognised total expense of
GBP85,067 (2019: GBP283,215) related to the fair value of the
share-based payment arrangements. This included GBP206,016 (2019:
GBP303,360) related to equity-settled share options and
(GBP120,949) (2019: (GBP20,145) from cash-settled SARs. The SARs
liability at 31 December 2020 was GBP187,347 (2019: GBP284,117).
The Group's share price at 31 December 2020 is lower than grant
price on the outstanding options issued and, as a result, there is
no deferred tax asset recongnised.
These amounts were determined using the Black Scholes model,
with the following assumptions for each type of award granted:
Stock Options
Weighted average fair value 86.01p
Weighted average exercise price 164.7p
Expected life of option (years) 8.3
Risk free rate 1.75%
Dividend yield 0.0%
Volatility 51.9%
Share Appreciation Rights
Weighted average fair value 52.54p
Weighted average exercise price 149.5p
Expected life of option (years) 7.8
Risk free rate 1.56%
Dividend yield 0.0%
Volatility 54.2%
33. 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. There are no other
transactions with directors.
Notes payable to related party
On 31 January 2018, Filtafry Deutschland GmbH entered into notes
totaling GBP48,201, bearing interest at 2.5%, with companies which
held the master licenses acquired in the acquisition. The managing
director of FiltaFry Deutschland GmbH is the sole director of one
of these companies. The notes mature on 31 January 2023 and include
the right to repay early without penalty. These amounts are
classified within borrowings.
Interest accrued on the notes amounted to GBP1,241 at 31
December 2020 (2019: GBP1,071).
34. EVENTS AFTER THE REPORTING DATE
On 4 February 2021, following application through our incumbent
bank HSBC, we received a second PPP loan through the U.S. Small
Business Administration in the amount of $288,605. The loan is
intended to be used to cover payroll costs and other eligible
expenses for a period of up to 24 weeks from receipt of the loan
proceeds. There is a stipulation in the loan agreement allowing the
borrower to apply for loan forgiveness on a prorated basis up to
100% of the loan value. The borrower must show that at least 60% of
the loan was used to retain and compensate employees and that the
average full time equivalent employee count was not reduced over a
prescribed period. We anticipate that we will be making a request
for full forgiveness of the loan, however, at this time it is too
early to determine the amount and outcome of that request. The loan
term, for any residual value of the loan not forgiven, is 5 years
and begins 12 months from receipt of the loan at an interest rate
of 1%.
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END
FR SFLFIUEFSEIL
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April 20, 2021 02:00 ET (06:00 GMT)
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