2016 chelverton equity partners Annual Report CEPS PLC Registered address: 11 Laura Place Bath BA2 4BL T 01225 483030 www.cepsplc.com Incorporated in England & Wales 00507461 CEPS PLC Company number 00507461 Contents Chairman’s Statement Strategic Report Directors’ Report Corporate Governance Independent Auditors’ Report Consolidated Statement of Comprehensive Income Consolidated and Company Statements of Financial Position Consolidated and Company Statements of Cash Flows Consolidated and Company Statements of Changes in Equity Notes to the Financial Statements Notice of Meeting Group Information page 3 6 7 9 11 13 14 15 16 18 56 59 1 2 CEPS PLC Chairman’s Statement Review of the period I am pleased to report that the stronger companies within the Group continue to make excellent progress. An analysis of the performance by company in 2016 is set out in the Operational Review below. In the 2015 Chairman’s Statement I reported that three of the Group companies were facing operational challenges. During 2016, these companies have taken the necessary steps towards recovery. However, such steps have inevitably incurred further costs and, so, increased their losses in the year. We are hopeful that these companies are, as a result of the actions taken, moving forward and will continue to do so over the next twelve months. Our intention is to continue to support them during this period of transition. It is worth highlighting that as a result of our annual goodwill impairment review we have reduced the value of the goodwill in Sunline by £611,000 reflecting the fact that the business lost money in the year. In addition, we have had to write-off half the deferred tax asset in Davies Odell, amounting to £219,000. Although these adjustments have had no cash impact, they have clearly had a major impact on the trading results of the Group. Aford Awards, Friedman’s and Hickton Consultants have performed solidly in the year and there is strong value being created at these companies. In the past year there has been considerable coverage of the EU Referendum in June, the consequent fallout and conjecture about Article 50 and the Brexit terms, the change of leaders in all but one of the political parties, the unexpected election of President Trump and the continuing issues in the European Union, including the ongoing problems in Portugal, Spain, Italy and Greece and now, in turn, the UK election in a few weeks. These events have all caused uncertainty which typically leads to action being deferred. The immediate impact on CEPS was limited to an increase in the cost of purchasing products from overseas in Aford Awards and Davies Odell. Longer term there may be an issue in respect of being able to hire enough people to fill the various roles throughout the Group companies. As an aside, each company has a brief to consider any capital expenditure that can be made to reduce labour costs, improve efficiency and quality. At CEPS we are taking the view that life will go on and that, in common with the view of Lord Mervyn King, the previous Governor of the Bank of England, in 30 years it will not be possible to pinpoint the exact moment of Brexit on a chart of the long term growth of the UK. Group revenue at £24.32m for the year (2015: £18.23m) was up by 33% whilst operating profit grew by 10% to £536,000 from £486,000. Profit before tax was down at £146,000 (2015: £256,000) before the exceptional goodwill impairment charge of £611,000. Group costs were lower than last year at £308,000, but 2015 central costs included a £79,000 write-off of historic goodwill. If this is excluded, Group costs are marginally up by £17,000 as compared to £291,000 in 2015. The post-tax loss was £913,000 (2015: profit £57,000). Earnings per share on a basic and diluted basis were (11.83p) (2015: (3.65p)). In the year there was an improvement in cash generated from operations amounting to £1,113,000 (2015: £889,000), but there was a net decrease in cash and cash equivalents of £67,000 (2015: net increase of £206,000). Year-end cash and cash equivalents (excluding bank overdrafts) were £840,000 (2015: £854,000). Financial review Operational review Aford Awards Aford Awards continued to make good progress in the year and produced record profits which, coupled with the acquisition of a small business in Littlehampton, has broadened and expanded the business. Additional space has been rented to manage this growth and to improve efficiency. 3 Operational review continued CEPS PLC Chairman’s Statement continued CEM Press Once we took full control of CEM Press it became clear there was a need to change aspects of the management team and to enhance the sales team. Whilst there have been no significant sales wins as yet, considerable efforts have been made to reposition the company in the market place and we are very hopeful of this being evidenced in the second half of 2017. Davies Odell The company was badly affected by the precipitous decline in the value of Sterling after the Referendum as much of the company’s product is purchased is in Dollars and Euros. Prices have since been increased and marginally profitable products have been removed from the range, so that having lost money last year the company is now optimistic that the current year, 2017, will be much improved. In addition, some excellent manufacturing contracts have been won as the current Sterling/Dollar rate makes UK produced product very price competitive. Continued efficiency gains are being achieved with further reductions in the head count, with no reduction in output. Friedman’s Friedman’s has had another record year with the online business-to-consumer business, Funkifabrics, showing a real step forward in monthly sales and profitability. The company is planning to move to much larger premises in order to have the space and power to develop a new range of printed textile products, with a view to significantly increasing the size of the company over the next three years. Hickton Consultants Hickton Consultants had a very pleasing first year under CEPS’ ownership in which the company exceeded expectations. Further strong growth is budgeted for in the current year and the company is currently on track. Additionally, and always part of the plan when the business was acquired, the company is looking to acquire other businesses in what is a very fragmented market segment. Sunline Having promised much at this stage last year, the business badly disappointed. The Fulfilment and Marketing Services divisions both reduced losses in line with expectations. The major disappointment was the loss incurred by the Polywrap division in the final quarter of the year. A radical change has been made to the operational approach of the business and in the first three months of the current year the results have been very pleasing. It now appears that the investment of two years ago is finally beginning to pay dividends. This investment was based on the reduction in labour costs, which certainly did not occur in the busy “golden” quarter of last year. The real test as to whether the full recovery has been achieved in this business will not be known until December of this year. However, we are much encouraged by the weekly labour reports showing a significant reduction in labour costs. The Fulfilment division is growing very rapidly and will become a major profit contributor in the future. Dividend A dividend is not proposed at this time (2015:£nil). 4 CEPS PLC Chairman’s Statement continued Power to issue and purchase shares People Outlook The Company will be convening its Annual General Meeting to be held on 12 June 2017. Among other resolutions to be proposed, the Board will seek authority to allot shares equating to 111% of its present issued ordinary share capital in line with the requirements of our acquisition strategy. The Board is most grateful for the diligent efforts of all the Group’s employees in 2016. As I write this report I currently feel that all businesses are moving in the right direction, appear under a lot more control than in the past and that all the changes and efforts of the past six months are beginning to produce good results. It is our intention to support all our companies and to this end we have secured a £1m loan from a third party in April 2017. The new loan is designed to provide a highly flexible facility to address the possibility of cash demands over the next year and for the purpose of acquisition funding. In the latest equity placing at the end of January CEPS raised £1.27m and I was happy to invest the maximum I was allowed to at 30% of the issue. I remain completely convinced that the Group is on the right track and that the continuing hard work by many people in the companies will become clearer and the real value of the Group will then be evidenced. David Horner Chairman 2 May 2017 5 Review of the business CEPS PLC Strategic Report The directors present their Strategic Report on the Group for the year ended 31 December 2016. The principal activities of CEPS PLC are that of an industrial holding company, acquiring majority stakes in stable, profitable and steadily growing entrepreneurial companies. The activities of the Company’s trading subsidiaries are described in note 17 to the accounts. Segmental analysis is given in note 4 to the accounts. A review of the business and its prospects are set out in the Chairman’s Statement on pages 3 to 5. The Group’s internal reporting system enables the Board to assess the strategic direction of the Group against agreed targets. The table below shows the most important key performance indicators used by the Group: 2016) 2015) Revenue Segmental result (EBITDA) (Loss)/profit before tax (Loss)/profit after tax Total equity Net debt (total borrowings less cash) Gearing ratio (net debt/total equity) £24,320,000) £1,322,000) (£465,000) (£913,000) £4,203,000) £3,055,000) 73%) £18,229,000) £1,280,000) £256,000) £57,000) £5,061,000) £1,760,000) 35%) The Chairman has commented on the main key performance indicators in his Statement on pages 3 to 5. The Board also monitors matters relating to health and safety and the environment and reviews them at its regular meetings. The risks to the business arising from changes to the trading environment and employee retention and training are also regularly monitored and reviewed. The Board operates a continuous process for identifying, evaluating and managing risk. The internal controls seek to minimise the impact of identified risks, as explained in the Corporate Governance statement on pages 9 and 10. The key risks the Board seeks to mitigate are: competition, dependence on key personnel and the supply chain. Competition – while the Group’s trade is differentiated, there is still significant pricing pressure and the barriers to entry are relatively low. As a result there is the risk that competitors could emerge to challenge the products offered by the Group. This could result, over time, in price competition and margin pressure. In order to mitigate this pressure, local management seek to hold regular discussions with customers and actively monitor the market for changes in competitors’ prices. Dependence on key personnel – the Group’s performance is largely dependent on its subsidiary staff and managers. The success of the Group will continue to be dependent on the expertise and experience of the directors and the management team, and the loss of personnel could still have an adverse effect on the Group. This risk is mitigated by ensuring that key personnel are suitably incentivised and contractually bound. Supply chain – the differentiated nature of the Group’s trade means that it is exposed to a reliance on a small number of suppliers. The Group mitigates this risk through effective supplier selection and procurement practices. See note 2 for an assessment of the financial risks. Future developments A review of the business and its prospects are set out in the Chairman’s Statement on pages 3 to 5. By order of the Board V E Langford Company Secretary 2 May 2017 6 Directors CEPS PLC Directors’ Report The directors have pleasure in submitting their report and the audited consolidated financial statements of the Group for the year ended 31 December 2016. Certain information required by the Companies Act 2006 relating to information to be provided in the Directors' Report is set out in the Chairman's Statement and Strategic Report and includes: principal activity, review of the business and principal risks and uncertainties. The directors of the Company who were in office during the year and up to the date of signing the financial statements were as follows: D A Horner (57) is an executive director and Chairman. He qualified as a Chartered Accountant in 1985 with Touche Ross & Co. In 1986 he joined 3i Corporate Finance Limited. In 1997 he set up Chelverton Asset Management Limited which specialises in managing portfolios of investments in private companies and small to medium size public companies. He set up and manages Chelverton Growth Trust Plc, manages the Small Companies Dividend Trust Plc and is a director of a number of private companies. In 2013 he resigned his membership of the Institute of Chartered Accountants in England and Wales, as his career is now fully involved in fund management. V E Langford (55) is Group Finance Director. She is a Chartered Accountant and is also the Company Secretary of CEPS PLC. G C Martin (72) is a non-executive director. He is a Chartered Accountant who was previously Finance Director and Company Secretary of the Group. M D Pollard (57) is a non-executive director. He qualified as a chartered accountant with Ernst & Young in 1983, was an analyst in two stockbroking companies and then worked as a fund manager. He is now actively involved in advising a number of private companies. The directors retiring by rotation in accordance with Articles 71 and 72 are D A Horner and G C Martin who, being eligible, offer themselves for re-election. M D Pollard's appointment as a non-executive director will be ratified at the Annual General Meeting on 12 June 2017. The Company purchased and maintained throughout the financial year and up to the date of this report, Directors’ and Officers’ liability insurance in respect of itself and its directors. Significant shareholdings In addition to directors’ shareholdings shown on page 33, the following shareholders held more than 3% of the Company’s ordinary shares at 2 May 2017: Chelverton Growth Trust Plc Hubwise Nominees Limited* Walbrook Nominees Limited* Praxis Trustees Limited* Nigel Cobby Lynchwood Nominees Ltd Shares 2,802,000 1,143,333 626,667 500,000 459,523 312,500 % 21.2 8.7 4.7 3.8 3.5 2.4 * These holdings (combined totalling 2,270,000 shares, 17.2% holding) are held by Mark Thistlethwayte and his family. Mr Thistlethwayte holds personally and on behalf of his children 1,680,000 shares, 12.7%. Rosemary Thistlethwayte holds 590,000 shares, 4.5%. Financial and treasury policy The Group finances its operations by a combination of retained profits, management of working capital, bank overdraft and debtor backed working capital facilities and medium- term loans. The disclosures for financial instruments are made in note 22a to the accounts on page 51. For further details of Group financial risk and management thereof see note 2 on pages 25 to 27. No dividend is recommended for the period (2015: £nil). 7 CEPS PLC Directors’ Report continued Disclosure of information to auditors So far as each director is aware, there is no relevant information of which the Company’s auditors are unaware. Relevant information is defined as ‘information needed by the Company’s auditors in connection with preparing their report’. Each director has taken all the steps (such as making enquiries of other directors and the auditors and any other steps required by the director’s duty to exercise due care, skill and diligence) that he/she ought to have taken in his/her duty as a director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. Independent auditors PKF Littlejohn LLP are willing to continue in office and a resolution proposing their re-appointment will be submitted to the Annual General Meeting. Going concern At the time of approving the financial statements the directors consider that it is appropriate to adopt the going concern basis of preparation. The directors have considered the impact of the current economic environment on the Company's and Group’s future cash flows and their ability to meet liabilities as they fall due, being a period of not less than 12 months from the date of approving the financial statements. The directors have also considered compliance with future banking covenants, and the borrowings structure of the Group. In addition the Company has secured a £1m third party loan for the Group's working capital requirements over the next 12 months. Statement of directors’ responsibilities The directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: – select suitable accounting policies and then apply them consistently; – make judgements and accounting estimates that are reasonable and prudent; – state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; – prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company and the Group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Company is compliant with the AIM Rule 26 regarding the Company's website. By order of the Board V E Langford Company Secretary 2 May 2017 8 CEPS PLC Corporate Governance The Board Audit committee The Corporate Governance Report has been included voluntarily. The Board is committed to high standards of corporate governance and recognises that it is accountable to shareholders for good governance. The Company’s corporate governance procedures define the duties and constitution of the Board and the various Board committees and, as appropriate, specify responsibilities and level of responsibility. The principal procedures are summarised below: The Board comprises the Chairman, the Finance Director and two non-executive directors. Further details of the Board members are given in the Directors’ Report on pages 7 and 8. All directors are subject to retirement by rotation and re-election by the shareholders in accordance with the Articles of Association. The Board meets regularly, at least six times a year and with additional meetings being arranged when necessary. The Company seeks constructive dialogue with institutional and private shareholders through direct contact and through the opportunity for all shareholders to attend and ask questions at the Annual General Meeting. This committee comprises G C Martin (Chair) and M D Pollard. The audit committee is responsible for the appointment of the external auditors, agreeing the nature and scope of the audit and reviewing and making recommendations to the Board on matters related to the issue of financial information to the public. It assists all directors in discharging their responsibility to ensure that accounting records are adequate and that the financial statements give a true and fair view. Nomination committee This committee is comprised of D A Horner (Chair) and M D Pollard. It is responsible for making recommendations to the Board on any appointment to the Board. Remuneration committee This committee is comprised of M D Pollard (Chair) and G C Martin. The remuneration committee sets the remuneration and other terms of employment of executive directors. Remuneration levels are set by reference to individual performance, experience and market conditions with a view to providing a package appropriate for the responsibilities involved. Directors’ contracts are designed to provide the assurance of continuity which the Company desires. There are no provisions for pre-determined compensation on termination. Pensions for directors were based on salary alone and were provided by the Company defined contribution scheme and defined benefits scheme. Contributions were paid to these schemes in accordance with independent actuarial recommendations or funding rates determined by the remuneration committee as appropriate to the type of scheme. From 2010 no benefits have accrued to directors under these schemes. Non-executive directors have no service contracts and no pension contributions are made on their behalf. Full details of directors’ remuneration and benefits are given in note 7 to the financial statements on page 33. 9 CEPS PLC Corporate Governance continued AIM compliance committee Internal financial control In accordance with AIM Rule 31 the Company is required to have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules; seek advice from its nominated adviser (‘Nomad’) regarding its compliance with the AIM Rules whenever appropriate and take that advice into account; provide the Company’s Nomad with any information it requests in order for the Nomad to carry out its responsibilities under the AIM Rules for Companies and the AIM Rules for Nominated Advisers; ensure that each of the Company’s directors accepts full responsibility, collectively and individually, for compliance with the AIM Rules; and ensure that each director discloses without delay all information which the Company needs in order to comply with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the director or could with reasonable diligence be ascertained by the director. In order to ensure that these obligations are being discharged, the Board has established a committee of the Board (the ‘AIM committee’), chaired by V E Langford. Having reviewed relevant Board papers, and met with the Company’s Executive Board and the Nomad to ensure that such is the case, the AIM committee is satisfied that the Company’s obligations under AIM Rule 31 have been satisfied during the year under review. The Board has overall responsibility for the system of internal financial control which is designed with regard to the size of the Company to provide reasonable, but not absolute, assurance against material misstatement or loss. The Board reviews the effectiveness of the internal controls and has concluded that the internal financial control environment is appropriate, with no significant matters noted. The organisational structure of the Group gives clear management responsibilities in relation to internal financial control. Financial risks are controlled through clearly laid down authorisation levels. There is an annual budget which is approved by the directors. The results are reported monthly and compared to the budget. The audit committee receives a report from the external auditors annually. 10 CEPS PLC Independent Auditors’ Report to the members of CEPS PLC We have audited the Group and parent Company financial statements (the ‘financial statements’) of CEPS PLC for the year ended 31 December 2016 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Cash Flows and the Consolidated and Company Statements of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law we do not accept or assume responsibility to anyone, other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. As explained more fully in the statement of directors’ responsibilities, set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Chairman’s Statement, Strategic Report, Directors’ Report and Corporate Governance Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us during the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Respective responsibilities of directors and auditors Scope of the audit of the financial instruments 11 CEPS PLC Independent Auditors’ Report to the members of CEPS PLC continued Opinion on financial statements In our opinion: – the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2016 and of the Group’s loss and Group's and parent Company's cash flows for the year then ended; – the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; – the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and – the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Chairman’s Statement, Directors’ Report, Strategic Report and Corporate Governance Report for the financial year for which the financial statements are prepared is consistent with the financial statements and have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: – adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or – the parent Company financial statements are not in agreement with the accounting records and returns; or – certain disclosures of directors’ remuneration specified by law are not made; or – we have not received all the information and explanations we require for our audit. Joseph Archer (Senior Statutory Auditor) for and on behalf of PKF Littlejohn LLP Statutory Auditor 1 Westferry Circus, Canary Wharf, London E14 4HD 2 May 2017 12 CEPS PLC Year ended 31 December 2016 Consolidated Statement of Comprehensive Income Notes 4 5 9 9 17 10 8 Revenue) Cost of sales) Gross profit) Administration expenses Operating profit Goodwill impairment Adjusted operating (loss)/profit Analysis of adjusted operating (loss)/profit CCTrading CCGoodwill impairment CCGroup costs Finance income Finance costs Loss on disposal of investment Share of profit of associate Profit on disposal of associate (Loss)/profit before tax Taxation (Loss)/profit for the year from continuing operations Other comprehensive loss: Items that will not be reclassified to profit or loss Actuarial loss on defined benefit pension plans Items that may be subsequently reclassified to profit or loss Other comprehensive loss for the year, net of tax Total comprehensive loss for the year (Loss)/income attributable to: Owners of the parent Non-controlling interest Total comprehensive (loss)/income attributable to: Owners of the parent Non-controlling interest 2016) £’000) 24,320) (19,465) ) 4,855) (4,319) ) 536) 2015) £’000) 18,229) (15,035) ) 3,194) (2,708) ) 486) (611) ) (75) 844) (611) (308) ) (75) 26) (416) –) –) –) ) (465) (448) ) (913) ) (80) ) –) ) (80) ) (993) ) (1,132) 219) ) (913) ) (1,212) 219) ) (993) ) –) ) 486) 856) –) (370) ) 486) 8) (121) (150) 21) 12) ) 256) (199) ) 57) ) (68) ) –) ) (68) ) (11) ) (275) 332) ) 57) ) (343) 332) ) (11) ) Earnings per share CCbasic and diluted 12 (11.83)p) ) (3.65)p) ) The notes on pages 18 to 55 form part of the financial statements. 13 CEPS PLC As at 31 December 2016 Consolidated and Company Statements of Financial Position Company number 00507461 Group 2016) £’000) 2015) £’000) Company 2016) £’000) 2015) £’000) Notes Assets Equity Liabilities Non-current assets Property, plant and equipment 14 16 Intangible assets 17 Investments in subsidiaries 17 Investment in associate 23 Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents CC(excluding bank overdrafts) 28 18 19 Total assets Capital and reserves attributable to owners of the parent Called up share capital Share premium Retained earnings 25 Non-controlling interest in equity Total equity Non-current liabilities Borrowings Deferred tax liability Provisions for liabilities CCand charges Current liabilities Borrowings Trade and other payables Current tax liabilities Provisions for liabilities CCand charges Total liabilities Total equity and liabilities 21 23 24 21 20 24 2,419) 5,738) –) –) 220) ) 8,377) ) 2,020) 3,701) 840) ) 6,561) ) 14,938) ) 957) 3,943) (1,924) ) 2,976) 1,227) ) 4,203) ) 2,600) 80) 50) ) 2,730) ) 3,838) 3,934) 171) 62) ) 8,005) ) 10,735) ) 14,938) ) 2,122) 4,652) –)) –)) 440)) ) 7,214)) ) 2,030) 3,155) 854) ) 6,039) ) 13,253) ) 957) 3,943) (712) ) 4,188) 873) ) 5,061) ) 2,275) 77) 55) ) 2,407) ) 2,319) 3,359) 107) –) ) 5,785) ) 8,192) ) 13,253) ) –) –) 3,629) –) –) ) 3,629) ) –) 535) 21) ) 556) ) 4,185) ) 957) 3,995) (1,640) ) 3,312) –) ) 3,312) ) –) –) –) ) –) ) 740) 133) –) –) ) 873) ) 873) ) 4,185) ) –) –) 2,959) –) –) ) 2,959) ) –) 132) 270) ) 402) ) 3,361) ) 957) 3,995) (1,800) ) 3,152) –) ) 3,152) ) –) –) –) ) –) ) –) 209) –) –) ) 209) ) 209) ) 3,361) ) The profit within the parent financial statements for the year was £160,000 (2015: loss £478,000). The notes on pages 18 to 55 form part of the financial statements. The financial statements on pages 13 to 55 were approved by the Board of Directors on 2 May 2017 and signed on its behalf by D A Horner Director 14 CEPS PLC Year ended 31 December 2016 Consolidated and Company Statements of Cash Flows Group Company Cash flows from operating activities Cash generated from/(used in) operations Income tax paid Income tax received Interest paid Net cash generated from/(used in) CCoperations Cash flows from investing activities Acquisition of subsidiary net of CCcash acquired Purchase of property, plant and CCequipment Proceeds from sale of assets Purchase of intangibles Repayment of loan stock Loan to a subsidiary Disposal of property, plant and CCequipment Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from/(repayment of) borrowings Cash generated from/(used in) operations Proceeds from share issue net of CCissue costs Dividend paid to non-controlling interest Share issue net of costs Repayment of capital element CCof finance leases Net cash generated from/(used in) CCfinancing activities Net (decrease)/increase in cash CCand cash equivalents Cash and cash equivalents at the CCbeginning of the year Cash and cash equivalents CCat the end of the year (note 28) (Loss)/profit before income tax Adjustments for: CCDepreciation and amortisation CCIntangible assets written off CCAmounts written-off in relation to CCCCa subsidiary undertaking CCProfit of associate CCLoss on disposal of property, CCCCplant and equipment CCNet finance costs CCChanges in working capital: CCDecrease in inventories CC(Increase)/decrease in trade CCCCand other receivables CCIncrease/(decrease) in trade CCCCand other payables CCIncrease/(decrease) in provisions Cash generated from/(used in) operations 2016) £’000) 1,113) (236) –) (416) ) 461) ) (188) (899) –) (33) –) –) –) 26) ) (1,094) ) 1,067) –) (180) –) (321) ) 566) ) (67) 111) ) 44) ) (465) 478) 611) –) –) –) 390) 10) 2015) £’000) 889) (59) 8) (18) ) 820) ) (267) (205) 12) (35) –) –) 295) –) ) (200) ) (1,306) –) (180) 1,245) (173) ) (414) ) 206) (95) ) 111) ) 256) 503) –) –) (21) 138) 113) 165) (546) (112) 578) 57) ) 1,113) ) (93) (60) ) 889) ) 2016) £’000) (402) –) –) (66) ) (468) ) (669) –) –) –) –) (75) –) 223) ) (521) ) 740) –) –) –) –) ) 740) ) (249) 270) ) 21) ) (451) –) 611) –) –) –) (157) –) (329) (76) –) ) (402) ) 2015) £’000) 57) –) –) (42) ) 15) ) (270) –) –) –) –) (60) –) 67) ) (263) ) (800) 1,245) –) –) –) ) 445) ) 197) 73) ) 270) ) (478) –) 79) 298) –) 150) (25) –) (8) 41) –) ) 57) ) The notes on pages 18 to 55 form part of the financial statements. 15 CEPS PLC Year ended 31 December 2016 Consolidated and Company Statements of Changes in Equity ) Share) Retained) Share capital) premium) earnings) £'000) £'000) £'000) Attributable to owners) Non-) of the) controlling) interest) parent) £'000) £'000) Total) equity) £'000) Group At 1 January 2015 541) ) 3,114) ) (281) ) 3,374) ) 694) ) 4,068) ) Other comprehensive income: CCre-measurement of post CCemployee benefit obligations (Loss)/profit for the year Total comprehensive CC(loss)/income for the year Proceeds from shares issued CCnet of expenses Total contributions by owners CCof the parent recognised CCin equity Dividend paid to CCnon-controlling interest Total distributions recognised CCdirectly in equity Changes in ownership CCinterest in an associate Acquisition of a subsidiary Total changes in ownership CCinterest that do not result CCin a loss of control Total transactions with owners CCrecognised directly in equity At 31 December 2015 Actuarial loss (Loss)/profit for the year Total comprehensive CC(loss)/income for the year Dividend paid to CCnon-controlling interest Total distributions recognised CCdirectly in equity Acquisition of a subsidiary –) –) ) –) ) 416) ) 416) ) –) ) –) ) –) –) ) –) ) –) ) –) –) ) –) ) 829) ) 829) ) –) ) –) ) –) –) ) –) ) –) ) 957) ) 3,943) ) –) –) ) –) ) –) ) –) ) –) ) –) –) ) –) ) –) ) –) ) –) ) (68) (275) ) (343) ) –) ) –) ) –) ) –) ) (88) –) ) (88) ) (88) ) (68) (275) ) (343) ) 1,245) ) 1,245) ) –) ) –) ) (88) –) ) (88) ) (88) ) (712) ) (80) (1,132) ) 4,188) ) (80) (1,132) ) (1,212) ) (1,212) ) –) ) –) ) –) ) –) ) –) ) –) ) –) 332) ) 332) ) (68) 57) ) (11) ) –) ) –) ) 1,245) ) 1,245) ) (180) ) (180) ) –) 27) ) 27) ) (153) ) 873) ) –) 219) ) 219) ) (180) ) (180) ) 315) ) (180) ) (180) ) (88) 27) ) (61) ) (241) ) 5,061) ) (80) (913) ) (993) ) (180) ) (180) ) 315) ) At 31 December 2016 957) ) 3,943) ) (1,924) ) 2,976) ) 1,227) ) 4,203) ) The notes on pages 18 to 55 form part of the financial statements. 16 CEPS PLC Year ended 31 December 2016 Consolidated and Company Statements of Changes in Equity continued ) Share capital) £'000) Company At 1 January 2015 Loss for the year and total CCcomprehensive loss Proceeds from shares issued CCnet of costs At 31 December 2015 Profit for the year and total CCcomprehensive income At 31 December 2016 541) ) –) 416) ) 957) ) –) 957) ) Share) premium) £'000) 3,166) ) Retained) earnings) £'000) (1,322) ) Total) equity) £'000) 2,385) ) –) (478) (478) 829) ) 3,995) ) –) ) (1,800) ) –) 160) 3,995) ) (1,640) ) 1,245) ) 3,152) ) 160)) 3,312) ) The notes on pages 18 to 55 form part of the financial statements. 17 1. Accounting policies CEPS PLC 31 December 2016 Notes to the Financial Statements CEPS PLC (the ‘Company’) is a company incorporated and domiciled in England and Wales. The Company is a public limited company, which is listed on the AIM market of the London Stock Exchange. The address of the registered office is 11 Laura Place, Bath BA2 4BL. The principal activities of the Company are that of an industrial holding company, acquiring stakes in stable, profitable and steadily growing entrepreneurial companies. The activities of the Company's trading subsidiaries are described in note 17. Segmental analysis is given in note 4. The financial statements are presented in British Pounds Sterling (£), the currency of the primary economic environment in which the Group's activities are operated and are reported in £’000. The Group comprises CEPS PLC and its subsidiary companies as set out in note 17. The registered number of the Company is 00507461. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied throughout the year, unless otherwise stated. Basis of preparation These financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (‘IFRS’), IFRIC interpretations and the Companies Act 2006 as applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention. The Group's business activities and financial position likely to affect its future development, performance and position are set out in the front end of the report. The directors have carried out a detailed assessment of going concern as part of the financial reporting process and, having conducted a full review of the updated business plan, budgets and associated commitments at the year end, have concluded that the Group has adequate financial resources to continue in operational existence for at least 12 months from the date of the signing of these financial statements and, therefore, continue to adopt the going concern basis in the preparation of these accounts. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3. The Company has taken advantage of the exemption under the Companies Act 2006 not to present its own Statement of Comprehensive Income. Information about the Company result for the year is given in note 13. At the date of authorisation of these financial statements, the following standards and relevant interpretations, which have not been applied in these financial statements, were in issue but not yet effective, and have not been early adopted by the Group: Standards issued but not yet effective: IAS 7 (Amendments), Disclosure initiative IAS 12 (Amendments), Recognition of Deferred Tax IFRS 15, Revenue from Contracts with Customers IFRS 16, Leases 18 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 1. Accounting policies 1. continued Amendments to IFRS 2, Classification and Measurement of Share-based Payment Transactions Amendments to IFRS 4, Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' Annual Improvements to IFRS Standards 2014-2016 Cycle IFRIC Interpretation of 22 Foreign Currency Transactions and Advance Consideration Amendments to IAS 40, Transfers of Investment Property Whilst the directors do not anticipate the adoption of these standards and interpretation in future reporting periods will have a material impact on the Group’s financial statements, based on their initial assessment, they have yet to complete their full assessment in relation to the impact of IFRS 15. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries (the ‘Group’). The financial statements of the subsidiaries are prepared for the same reporting year as the parent Company using consistent accounting policies. Control is achieved where the Group is exposed, or has rights, to variable returns from its involvement with the investee entity and has the ability to affect these returns through its power over the investee. Control is lost when the Group no longer has rights to variable returns from its involvement with an investee entity and no longer has the ability to affect those returns as it no longer has power over the investee. When control is lost the subsidiaries are de-recognised and no longer consolidated. The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal, as appropriate. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non- controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the Consolidated Statement of Comprehensive Income. Investments in subsidiaries are accounted for at cost less impairment. Acquisition related costs are expressed as incurred. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. 19 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 1. Accounting policies 1. continued Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions; that is, as transactions with owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. Associates Associates are all entities over which the Group has significant influence, but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition. The Group’s share of post-acquisition profits or losses is recognised in the Consolidated Statement of Comprehensive Income and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group's financial statements only to the extent of unrelated investor's interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Segmental reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, the Board, and used to assess performance. Information is given for all operating segments where discrete financial information is available. Revenue recognition Revenue is recognised when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met. The Company bases its estimate of return on historical results, taking into account the customer type, transaction type and the specifics of each arrangement. The revenues of Aford Awards, Friedman’s and Davies Odell arise from the fair values received or receivable for goods sold which are recognised on despatch and exclude VAT. The revenues of CEM Press and Sunline arise from the fair value received or receivable for services provided which is recognised on completion of the service and excludes VAT. 20 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 1. Accounting policies 1. continued Property, plant and equipment Property, plant and equipment is stated at initial cost, less accumulated depreciation and impairment losses. Cost includes the original price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is calculated on an appropriate basis over the deemed useful economic life of an asset and is applied to the cost less any residual value. The asset classes are depreciated over the following periods (the useful life, the residual value and the depreciation method are assessed annually): Plant and machinery, tools and moulds: Between five and 10 years, over the period of the contract, or between 15% to 25% on a reducing balance basis Motor vehicles: Leasehold property improvements: Five years straight line, or 25% reducing balance Over the term of the lease on a straight line basis. The residual values and useful lives are reviewed and adjusted if appropriate at each date of the Statement of Financial Position. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within administration expenses in the Consolidated Statement of Comprehensive Income. Intangible assets a) Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree over the fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets acquired, the difference is recognised directly in equity. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to appropriate cash generating units (those expected to benefit from the business combination) and is not amortised, but is tested for impairment at the operating segment level. b) Customer lists Customer lists acquired in a business combination are recognised at fair value at the acquisition date. They are considered to have an indefinite useful life and impairment reviews are undertaken annually or if changes in circumstances indicate a potential impairment. c) Computer software and websites Computer software and costs incurred in the development of websites are stated at cost less accumulated amortisation. Non-integral computer software purchases are capitalised at cost. These costs are amortised over their estimated useful lives (between three and 10 years). Costs associated with implementing or maintaining computer software programmes are recognised as an expense as incurred. Costs incurred in the development of new websites are capitalised only where the cost can be directly attributed to developing the website to operate in the manner intended by management and only to the extent of the future economic benefits expected from its use. These costs are amortised over their useful lives (between three and five years). Costs associated with maintaining websites are recognised as an expense as incurred. 21 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 1. Accounting policies 1. continued Impairment of intangible assets and property, plant and equipment Intangible assets that have an indefinite useful life are not subject to amortisation, but are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash- generating units). Any impairment losses relating to goodwill are not reversed. Investments Investments in subsidiaries and associates are stated at cost, which reflects the fair value of the consideration paid. The investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Inventories Inventories are valued at the lower of cost and net realisable value. Raw materials are valued on a first in first out basis at net invoice values charged by suppliers. The value of work in progress and finished goods includes the direct cost of materials and labour together with an appropriate proportion of factory overheads, where applicable. Provision is made against the value of inventory, where relevant, to reduce the carrying value of slow moving, obsolete and defective inventory to its net realisable value. Current and deferred taxation The tax charge for the year comprises current and deferred tax. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statement of financial position in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the date of the statement of financial position and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be generated enabling the utilisation of the temporary timing differences. Foreign currencies The results are recorded in British Pounds Sterling which is deemed to be the functional currency of the Group, the Company and all its subsidiaries. Foreign currency transactions are expressed in Sterling at the rates of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are translated at the rates of exchange ruling at the date of the statement of financial position. Differences arising from changes in exchange rates during the year are taken to the Consolidated Statement of Comprehensive Income. 22 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 1. Accounting policies 1. continued Pensions The Group operates a defined benefit pension scheme for the benefit of some of its former employees, the assets of which are held separately from those of the Group in independently administered funds. Pension scheme assets are measured using market value. Pension scheme liabilities are measured using the projected unit actuarial method and are discounted at the current rate of return on a high quality corporate bond of equivalent terms and currency to the liability. The increase in the present value of the liabilities of the Group’s defined benefit pension schemes expected to arise from employee service in the period is charged to operating profit. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the Consolidated Statement of Comprehensive Income. Pension schemes’ surpluses, only to the extent that they are considered recoverable, are recognised in full and presented on the face of the Statement of Financial Position. Defined benefit pension costs are recognised in the Consolidated Statement of Comprehensive Income. Contributions to the defined contribution schemes are charged to the Consolidated Statement of Comprehensive Income as incurred. The Group has no further payment obligations once contributions have been paid. Operating leases Leases in which a significant proportion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. The annual costs of operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight line basis over the lease term. Hire purchase leases For leases where a significant portion of the risks and rewards of ownership is obtained or where legal title is to pass to the Group, the assets are capitalised at the lower of cost of the fair value of the asset or the present value of the minimum lease payments in the Statement of Financial Position and depreciated over the expected useful economic life. The interest element of the rental obligation is charged to the Consolidated Statement of Comprehensive Income over the period of the lease and represents a constant proportion of the balance of capital repayment outstanding. Non-controlling interest Non-controlling interests represent the interest of shareholders in subsidiaries which are not wholly owned by the Group. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Further details on provisions recognised are disclosed in note 24. Share capital Ordinary shares are classified as equity while redeemable preference shares are classified as liabilities. 23 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 1. Accounting policies 1. continued Financial instruments The Group and Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on the Statement of Financial Position at fair value when the Group and Company becomes a party to the contractual provisions of the instrument. a) Loans and receivables Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the carrying amount of the asset and its estimated future cash flow. The carrying amount of the asset is reduced through the use of a bad debt provision and the amount of the loss is recognised in the Consolidated Statement of Comprehensive Income within cost of sales. When a trade receivable is uncollectible it is written off against the bad debt provision. Subsequent recoveries of amounts previously written off are credited against cost of sales in the Consolidated Statement of Comprehensive Income. Cash and cash equivalents include cash in hand, short-term bank deposits held at call and bank overdrafts. Bank overdrafts are shown in current liabilities as borrowings. All are carried at cost in the Statement of Financial Position. b) Trade payables Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Trade payables includes trade payables, other payables and accruals. c) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred, and subsequently stated at amortised cost using the effective interest method. Borrowings include bank overdrafts, bank loans, other loans, trade receivables backed working capital facilities and hire purchase obligations. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the date of the Statement of Financial Position. 24 2. Financial risk 2. management CEPS PLC 31 December 2016 Notes to the Financial Statements continued 2.1 Financial risk factors The Group and Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group and Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out by local management under policies approved by the Board of Directors. a) Market risk i) Foreign exchange risk The Group undertakes transactions internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro and US Dollar and Sterling. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities. Management has a policy to require Group companies to manage their foreign exchange risk against their functional currency. The policy is to match as far as possible through the normal course of trade the level of sales and purchases in foreign currencies and, where applicable, to enter forward foreign exchange contracts as hedges of foreign exchange risk on specific assets, liabilities or future transactions. ii) Cash flow and fair value interest rate risk 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 long-term borrowings. 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. Group policy is to maintain an appropriate balance between borrowings expressed in fixed rates and those at variable rates. All of the Group’s borrowings are denominated in Sterling. The strategy of CEPS PLC is as far as possible to use the assets of businesses in which it makes investments to secure the necessary borrowings for those investments. b) Credit risk The Group is exposed to the credit risk inherent in non-payment by either its customers or the counterparties of its financial instruments. The Group utilises credit insurance policies to mitigate its risk from some of its trading exposure, especially in overseas markets, and in all cases seeks satisfactory references and the best possible terms of payment. It mitigates its exposure on financial instruments by only using instruments from banks and financial institutions with a minimum rating of ‘A-1+’. c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and having available an adequate amount of committed credit facilities. Management monitors rolling forecasts of the Group’s available liquidity on the basis of expected future cash flows. Forecasts are generated in the first instance at local level in the operating subsidiaries of the Group. 25 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 2. Financial risk 2. management continued 2.1 Financial risk factors continued The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. At 31 December 2016 Trade and other payables Other loans Bank overdrafts Trade receivables backed CCworking capital facilities Hire purchase obligations At 31 December 2015 Trade and other payables Others loans Bank overdrafts Trade receivables backed CCworking capital facilities Hire purchase obligations Less than 1 year £’000 Between 1 and 2 years £’000 Between 2 and 5 years £’000 Over 5 years £’000 3,934 1,399 796 1,262 444 7,835 3,359 293 743 948 335 – 987 – – 349 – 897 – – 475 1,336 1,372 – 971 – – 399 – 716 – – 351 5,678 1,370 1,067 – – – – – – – – – – – – 26 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 2. Financial risk 2. management continued 2.2 Capital risk management The Group’s objectives when managing capital (being the equity and reserves of the Group) are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may pay dividends to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio measures net debt as a proportion of total equity as shown in the Statement of Financial Position. Net debt is calculated as total borrowings less cash and cash equivalents. The gearing ratios at 31 December 2016 and 2015 were as follows: Total borrowings Less: cash and cash equivalents Net debt Total equity Gearing ratio 2016) £’000) 3,895) (840) ) 3,055) ) 4,203) ) 73%) 2015) £’000) 2,614) (854) ) 1,760) ) 5,061) ) 35%) In order to provide a more meaningful gearing ratio, total borrowings have been revised to be the sum of bank borrowings, hire purchase obligations and third pary debt, excluding loan notes used to finance the Group's acquisitions. The prior year comparatives have also been revised. 2.3 Fair value estimation The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of the financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current interest rate. The fair values of all financial assets and liabilities approximate to their carrying values. 27 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 3. Critical accounting 3. assumptions, judgements 3. and estimates a) Impairment of intangible assets (including goodwill) The Group tests annually whether intangible assets (including goodwill) have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of the cash-generating units have been determined based on value-in-use calculations. The calculations require the use of estimates (note 16). b) Deferred tax assets Certain subsidiaries of the Group (principally Davies Odell) have accelerated capital allowances and brought forward tax losses. Deferred tax assets have been recognised in respect of the brought-forward tax losses. The recognition of the assets reflects management’s estimate of the recoverable amounts in respect of these items. See note 23 for further details. c) Retirement benefit liabilities One subsidiary of the Group operates a defined benefits pension scheme. The scheme is subject to triennial actuarial valuation and the Group commissions an independent qualified actuary to update to each financial year end the previous triennial result. The results of this update are included in the financial statements. In reaching the annually updated results management makes assumptions and estimates. These assumptions and estimates are made advisedly, but are not any guarantee of the performance of the scheme or of the outcome of each triennial review. See note 8 for further details. d) Acquisitions During the year the Group acquired Hickton Holdings Limited (see note 15). Management has made estimates concerning the intangible assets arising on acquisition as well as the fair value of the assets and liabilities at the acquisition date. 4. Segmental analysis The Chief Operating Decision-Maker (‘CODM’) of the Group is its Board. Each operating segment regularly reports its performance to the Board which, based on those reports, allocates resources to and assesses the performance of those operating segments. The operating segments set out below are the only level for which discrete information is available or utilised by the CODM. Operating segments and their principal activities are as follows: Aford Awards, a sports trophy and engraving company; CEM Press, a manufacturer of fabric and wallpaper pattern books, swatches and shade cards; Davies Odell, a manufacturer and distributor of protection equipment, matting and footwear components; Friedman’s, a convertor and distributor of specialist Lycra; Hickton Consultants, a provider of clerk of works services to the construction industry; Sunline, a supplier of services to the direct mail market. Group costs, costs incurred at Head Office level to support the activities of the Group. The United Kingdom is the main country of operation from which the Group derives its revenue and operating profit and is the principal location of the assets and liabilities of the Group. The Group information provided below, therefore, also represents the geographical segmental analysis. Of the £24,320,000 (2015: £18,229,000) revenue £21,666,000 (2015: £15,884,000) is derived from UK customers with the remaining £2,654,000 (2015: £2,345,000) being derived from a number of overseas countries, none of which is material in isolation. All assets and liabilities are held in the United Kingdom. 28 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 4. Segmental analysis 2. continued The Board assesses the performance of each operating segment by a measure of adjusted earnings before interest, tax, Group costs, depreciation and amortisation (EBITDA). Other information provided to the Board is measured in a manner consistent with that in the financial statements. Aford) Awards) 2016) £’000) 1,596) ) CEM) Press) 2016) £’000) Davies) Odell)Friedman’s) Hickton) 2016) 2016) 2016) £’000) £’000) £’000) Sunline) 2016) £’000) Total) 2016) £’000) 2,954) ) 4,317) ) 4,555) ) 2,961) ) 7,937) 24,320) ) ) 298) ) (149) ) (10) ) 887) ) 386) ) (90) ) 1,322) ) (478) (611) (308) (390) ) (465) (448) ) (913) ) Davies) Odell)Friedman’s) 2015) 2015) £’000) £’000) Hickton) 2015) £’000) Sunline) 2015) £’000) Total) 2015) £’000) Aford) Awards) 2015) £’000) 1,468) ) CEM) Press) 2015) £’000) 654) ) 4,971) ) 4,221) ) 273) ) (49) ) (73) ) 925) ) –) ) –) ) 6,915) 18,229) ) ) 204) ) 1,280) ) (424) (370) (113) (138) 21) ) 256) (199) ) 57) ) i) Results by segment Revenue Segmental result (EBITDA) Depreciation and CCamortisation CCcharge Goodwill impairment Group costs Net finance costs Loss before taxation Taxation Loss for the year Revenue Segmental result CC(EBITDA) before CCexceptional costs Depreciation and CCamortisation CCcharge Group costs Net finance costs Loss on step CCacquisition Share of investment CCaccounted for CCusing the equity CCmethod Profit before taxation Taxation ) Profit for the year 29 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 4. Segmental analysis 2. continued ii) Assets and liabilities by segment as at 31 December Segment assets 2016) £’000) 2015) £’000) 30) 1,465) 2,422) 1,919) 3,549) 2,431) 3,122) ) 275) 1,393) 2,645) 2,147) 3,408) –) 3,385) ) 14,938) 13,253) ) ) Segment liabilities Segment net assets 2016) £’000) 2015) £’000) (873) (430) (1,924) (1,353) (915) (1,220) (4,020) ) (10,735) ) (178) (489) (2,031) (1,256) (1,031) –) (3,207) ) (8,192) ) 2016) £’000) (843) 1,035) 498) 566) 2,634) 1,211) (898) ) 4,203) ) 2015) £’000) 97) 904) 614) 891) 2,377) –) 178) ) 5,061) ) CEPS Group Aford Awards CEM Press Davies Odell Friedman’s Hickton Sunline Total – Group 30 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 5. Operating profit Operating profit is stated after charging/(crediting): Profit on disposal of property, plant and equipment Exchange loss/(gain) Other operating lease rentals on land and buildings and CCon plant and machinery Fees payable to the Company's auditors Fees payable to the Company's auditor for the audit of the CCCompany's annual accounts Fees payable to the Company's auditor and its associates CCfor other services: CCAudit of the accounts of subsidiaries Taxation compliance services Total fees ) Expenses by nature Change in stocks of finished goods and work in progress Raw materials and consumables Employee benefit expenses Depreciation and amortisation Operating lease payments Other expenses 2016) £’000) (1) 69) 708) ) 2016) £’000) 21) 47) ) 68) 17) ) 85) ) 2015) £’000) (1) (9) 558) ) 2015) £’000) 36) 36) ) 72) 15) ) 87) ) 2016) £’000) 2015) £’000) 33) 8,812) 7,577) 478) 708) 6,131) ) 23,739) ) (133) 7,639) 5,718) 424) 558) 3,537) ) 17,743) ) 31 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 6. Employees The average monthly number of persons employed by the Group during the year was: Management and administration Production and sales The aggregate costs of these persons were: Wages and salaries Social security costs Other pension costs (note 8) 2016) Number) 2015) Number) 79) 224) ) 303) ) 2016) £’000) 6,930) 535) 112) ) 7,577) ) 62) 210) ) 272) ) 2015) £’000) 5,205) 427) 86) ) 5,718) ) Key management personnel are deemed to be members of the Board and their compensation is shown in note 7. The average monthly number of persons employed by the Company during the year was: Management and administration 2016) Number) 2015) Number) 4) ) 4) ) 32 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 7. Directors’ emoluments 7. and interests The aggregate remuneration of the directors was: Short-term employee benefits 2016) £’000) 2015) £’000) 125) ) 115) ) The remuneration of the Chairman, D A Horner, and of the other directors who served during the year was: D A Horner V E Langford G C Martin R T Organ M D Pollard Salaries and fees 2016) £’000) 2015) £’000) 24) 64) 18) 9) 10) ) 125) ) 21) 53) 17) 21) –) ) 112) ) ) G C Martin has a pension secured in the Group defined benefits scheme from which he is currently drawing. He is not accruing any further additional benefit under this pension scheme. Of those directors who remain in office at the year end, their beneficial interests, including those of their families, in shares of the Group were: D A Horner V E Langford G C Martin M D Pollard at 31 December 2016 shares at 31 December 2015 shares 2,863,672 41,667 10,000 500,000 2,863,672 41,667 10,000 500,000 D A Horner's shareholding at 31 December 2016 includes 669,500 shares held by Colinette Holdings Limited, a company that is wholly owned by Chelverton Asset Management Holdings Limited. D A Horner and his family have a 56% interest in Chelverton Asset Management Holdings Limited. Mark Pollard is the beneficial owner of 333,333 CEPS shares and he also has investment authority over a further 166,667 CEPS shares owned by his mother, Mrs C Pollard. The register of directors’ interests, which is open to inspection, contains full details of directors’ shareholdings. 33 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 8. Pension costs The Group operates a number of defined contribution schemes. The assets of the schemes are held in independently administered funds. The pension cost charge represents contributions payable to the funds and amounted to £112,000 (2015: £86,000). At 31 December 2016 £nil (2015: £nil) of pension contributions remain outstanding. The Group also operates a defined benefits scheme. The scheme was closed to new members in 1988. The assets of the scheme are held separately from those of the Group in a deposit administration contract underwritten by an insurance company. Contributions to the scheme are determined by a qualified external actuary on the basis of triennial valuations using, for accrued service, the ‘projected unit’ method and, for future service, the ‘attained age’ method. The most recent actuarial valuation was at 1 July 2013 and the main actuarial assumptions were investment returns of 3.8% before retirement and 3.3% after retirement. The valuation showed that the total value of the scheme assets was £3,621,000 and that the level of funding on an ongoing basis is 88%. At 1 October 2014 the Group agreed a recovery plan of £4,550 per month, an amount intended to restore a 100% funding level over ten years. The Group commissioned an independent qualified actuary to update to 31 December 2016 the results of the actuarial valuation at 1 July 2013. The results of the update are as follows: Assumptions at 31 December Interest rate for discounting liabilities Expected return on plan assets RPI price inflation CPI price inflation Pensions increase Mortality Current and future pensioners Life expectancies (years) For a 65 year old male For a 65 year old female For a 65 year old male, currently aged 45 For a 65 year old female, currently aged 45 2016)) 2015)) 2.60%) 5.50%) 3.30%) 2.60%) 3.20%) 3.70%) 5.50%) 2.90%) 2.20%) 2.90%) PCA00) year of birth) long cohort) PCA00) year of birth) long cohort) 23.3) 24.6) 24.7) 25.4) 23.2) 24.6) 24.6) 25.3) The independent actuary estimates that a 0.1% decrease in the discount rate would change the value of scheme liabilities by approximately £69,000. The expected return on plan assets has been determined by the current rate of return on the plan, less allowances for future uncertainties on the plan and an allowance for costs to be incurred in administering the plan. The following amounts were measured in accordance with the requirements of IAS 19: Amounts recognised in the statement of financial position are as follows: Fair value of plan assets Present value of defined benefit obligation Actuarial surplus not recognised Net surplus 2016) £’000) 2015) £’000) 4,065) (3,894) (171) ) –) ) 3,740) (3,053) (687) ) –) ) 34 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 8. Pension costs continued The actuarial surplus arising on the defined benefit pension scheme has not been recognised as the Group does not have an unconditional right to refunds of surpluses arising in the scheme. 2016) £’000) 2015) £’000) Pension scheme finance income recognised in the Consolidated Statement of Comprehensive Income Interest on obligation Interest income on plan assets Pension scheme finance income Consolidated Statement of Comprehensive Income Experience loss Financial assumption (loss)/gain Mortality assumption gain Actuarial (loss)/gain Experience gains on assets Movement in actuarial surplus not recognised Total loss Movement in Statement of Financial Position for the year Net pension liability at the start of the year Employer’s pension cost Consolidated Statement of Comprehensive Income Employer contributions Net pension liability at the end of the year Reconciliation of the defined benefit obligation Defined benefit obligation at the start of the year Interest cost Actuarial loss/(gain) Benefits paid Defined benefit obligation at the end of the year Reconciliation of plan assets Fair value of plan assets at the start of the year Expected return on plan assets Experience gains on assets Employer contributions Non investment expenses Benefits and expenses paid Fair value of plan assets at the end of the year 35 (112) 138) ) 26) ) –) (789) –) ) (789) 193) 516) ) (80) ) –) 20) (80) 60) ) –) ) 3,053) 112) 789) (60) ) 3,894) ) 3,740) 138) 193) 60) (6) (60) ) 4,065) ) (106) 114) ) 8) ) –) 150) –) ) 150) 278) (496) ) (68) ) –) 8) (68) 60) ) –) ) 3,157) 106) (150) (60) ) 3,053) ) 3,348) 114) 278) 60) –) (60) ) 3,740) ) CEPS PLC 31 December 2016 Notes to the Financial Statements continued 8. Pension costs continued Asset categories at the end of the year Equities Bonds Property Cash 2016) 2015) 46.7%) 42.9%) 7.6%) 2.9%) 42.0%) 44.4%) 7.6%) 6.0%) Amounts for the current and previous four years are as follows: Plan assets Defined benefit obligation Actuarial surplus not recognised Deficit in scheme Actuarial (losses)/gain on CCliabilities due to assumptions Experience gains on assets Movement in actuarial surplus CCnot recognised Total losses recognised CCfor the year Cumulative amount of gains CCand losses recognised in the CCConsolidated Statement of CCComprehensive Income 2016) £’000) 2015) £’000) 2014) £’000) 2013) £’000) 2012) £’000) 4,065) (3,894) (171) ) –) ) 3,740) (3,053) (687) ) –) ) (789) 193) 516) ) (80) ) 150) 278) (496) ) (68) ) (210) ) (130) ) 3,348) (3,157) (191) ) –) ) (234) 157) (10) ) (87) ) (62) ) 3,039) (2,858) (181) ) –) ) (79) 99) (105) ) (85) ) 2,801) (2,725) (76) ) –) ) (191) 149) (41) ) (83) ) 25) ) 110) ) 9. Net finance costs Pension scheme finance income (note 8) Total finance income Interest payable on bank loans and overdrafts Interest payable on other loans net of write-back Amortisation of finance cost Finance lease costs Total finance costs Net finance costs 2016) £’000) 2015) £’000) 26) ) 26) ) 78) 268) 14) 56) ) 416) ) 390) ) 8) ) 8) ) 69) (51) –) 103) ) 121) ) 113) ) 36 10. Taxation CEPS PLC 31 December 2016 Notes to the Financial Statements continued Analysis of taxation in the year: Current tax Tax in respect of current year Tax in respect of prior years Total current tax Deferred tax Tax in respect of prior years Total deferred tax Total tax charge Deferred tax charged to the Consolidated Statement CCof Changes in Equity 2016) £’000) 2015) £’000) 215) 14) ) 229) ) 219) ) 219) ) 448) ) –) ) 111) –) ) 111) ) 88) ) 88) ) 199) ) –) ) The tax assessed for the year is higher (2015: lower) than the standard rate of corporation tax in the UK (20%) (2015: 21.25%). Factors affecting current tax: (Loss)/profit before taxation (Loss)/profit multiplied by the standard rate of UK tax CCof 20% (2015: 20.25%) Effects of: Permanent differences Prior year adjustment, current tax Prior year adjustment, deferred tax Total tax charge (465) ) (93) 308) 14) 219) ) 448) ) 256) ) 52) 147) –) –) ) 199) ) The standard rate of corporation tax in the UK changed to 20% with effect from 1 April 2015. Accordingly, the Group’s profits for this accounting year are taxed at an effective rate of 20%. Reductions in the United Kingdom corporation tax rate to 19% (effective from 1 April 2017) and 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. This will reduce the Group’s future current tax charge accordingly. The deferred tax balance has been calculated based on the rate of 20%. 37 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 11. Dividends No ordinary dividends have been paid or proposed for the year (2015: £nil). 12. Earnings per share Basic earnings per share is calculated on the loss for the year after taxation attributable to the owners of the parent of £1,132,000 (2015: loss £275,000) and on 9,573,822 (2015: 7,530,443) ordinary shares, being the weighted number in issue during the year. No adjustment is required for dilution in either year as there are no items that would have a dilutive impact on earnings per share. 13. Profit of the 13. holding company Of the Group loss for the year a profit of £160,000 (2015: loss £478,000) is dealt with in the financial statements of CEPS PLC. The directors have taken advantage of the exemption available under section 408 of the Companies Act 2006 and not presented the results for the Company alone. 38 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 14. Property, plant and 14. equipment 14. Group Cost at 1 January 2015 Additions at cost Assets acquired on purchase CCof a subsidiary Disposals at 31 December 2015 Additions at cost Assets acquired on purchase CCof a subsidiary Disposals at 31 December 2016 Accumulated depreciation at 1 January 2015 Charge for the year at 31 December 2015 Assets acquired on purchase CCof a subsidiary Adjustment Charge for the year Disposals at 31 December 2016 Net book amount at 31 December 2016 at 31 December 2015 Plant,) Leasehold) machinery,) tools and) moulds) £’000) property) improvements) £’000) Motor) vehicles) £’000) 137) 1) –) –) ) 138) 20) 20) –) ) 178) ) 85) 11) ) 96) 20) –) 9) –) ) 125) ) 53) ) 42) ) 5,146) 183) 330) (2) ) 5,657) 727) 128) (46) ) 6,466) ) 3,264) 381) ) 3,645) 105) 1) 440) (42) ) 4,149) ) 2,317) ) 2,012) ) 145) 21) –) –) ) 166) 4) –) (15) ) 155) ) 80) 18) ) 98) –) 1) 17) (10) ) 106) ) 49) ) 68) ) ) Total) £’000) 5,428) 205) 330) (2) ) 5,961) 751) 148) (61) ) 6,799) ) 3,429) 410) ) 3,839) 125) 2) 466) (52) ) 4,380) ) 2,419) ) 2,122) ) At the year end, assets held under hire purchase contracts and capitalised as plant, machinery, tools and moulds have a net book value of £1,679,000 (2015: £1,453,000) and an accumulated depreciation balance of £1,961,000 (2015: £1,699,000). The depreciation has been charged to cost of sales in the Consolidated Statement of Comprehensive Income. 14. Company Throughout 2015 and 2016 the Company held no property, plant and equipment. 39 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 15. Business combinations Acquisition in 2016 On 1 February 2016 CEPS announced that it had acquired 54.97% of the issued share capital of a newly incorporated company, Hickton Holdings Limited (formerly RAM (1003) Limited) for an investment of £670,000 made up of 54,973 ordinary shares for £55,000 and £615,000 Shareholder Loan Notes with an 8% interest rate. Hickton Holdings Limited was formed to acquire 100% of Hickton Consultants Limited, a leading provider of clerk of works services to the construction industry, providing a quality assurance resource on larger value projects across the UK, with customers ranging from end-user clients, architects, project management firms and contractors. The business was established in 1991 and is based in Elsecar, South Yorkshire. In order to finance the acquisition, CEPS received a loan from a third party for £690,000. The loan carried interest at 10% pa and was repayable in accordance with the terms of the loan agreement. The acquisition has been accounted for using the acquisition method of accounting. After the alignment of accounting policies and other adjustments to the valuation of assets and liabilities to reflect their fair value at acquisition, the fair value of net assets acquired was £698,000. The goodwill of £1,679,000 arising from the acquisition is attributable to the people acquired. The Group incurred acquisition-related costs of £45,000 for legal expenses. These have been included in administrative expenses in the Consolidated Statement of Comprehensive Income. The following table shows the fair value of assets and liabilities included in the consolidated Financial Statements at the date of acquisition. Identifiable assets Property, plant and equipment Cash and cash equivalents Trade and other receivables Trade and other payables Deferred tax liabilities Net assets acquired Purchase price consideration CC(cash £592,000, equity £55,000 and loan stock £1,416,000) Total identifiable net assets Non-controlling interests on acquisition Goodwill Analysis of cash flows on acquisition Cash paid Less: net cash acquired with subsidiary Net cash flow on acquisition 40 Fair Value) £’000) 23) 404) 680) (405) (4) ) 698) ) 2,063) (698) 314) ) 1,679) ) 592) (404) ) 188) ) CEPS PLC 31 December 2016 Notes to the Financial Statements continued 16. Intangible assets 15. Group Goodwill) Customer lists) £’000) £’000) Other) £’000) Total) £’000) Cost at 1 January 2015 Acquisition Additions at cost Disposals at 31 December 2015 Acquisition Additions at cost at 31 December 2016 Accumulated amortisation and impairment at 1 January 2015 Amortisation charge Impairment Disposals at 31 December 2015 Adjustment Amortisation charge Impairment at 31 December 2016 Net book amount at 31 December 2016 at 31 December 2015 5,878) 858) –) –) ) 6,736) 1,679) –) ) 8,415) ) 2,621) –) 79) –) ) 2,700) –) –) 611) ) 3,311) ) 5,104) ) 4,036) ) –) 577) –) –) ) 577) –) 13) ) 590) ) –) –) –) –) ) –) –) 1) –) ) 1) ) 589) ) 577)) ) 80) ) 1) 79) ) 80) ) –) ) 96) –) 35) (62) ) 69) –) 20) ) 89) ) 68) 14) –) (52) ) 30) 3) 11) –) ) 44) ) 45) ) 39) ) 17) ) 17) –) ) 17) ) –) ) 5,974) 1,435) 35) (62) ) 7,382) 1,679) 33) ) 9,094) ) 2,689) 14) 79) (52) ) 2,730) 3) 12) 611) ) 3,356) ) 5,738) ) 4,652) ) 97) ) 18) 79) ) 97) ) –) ) 15. Company Cost at 1 January 2015, 31 December 2015 and 31 December 2016 ) Accumulated amortisation at 1 January 2015 Impairment at 31 December 2015 and 31 December 2016 Net book amount at 31 December 2015 and 31 December 2016 41 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 16. Intangible assets 16. continued Goodwill is not amortised under IFRS, but is subject to impairment testing either annually or on the occurrence of a triggering event. Impairment charges are included in administration expenses and disclosed as an exceptional cost. Customer lists are not amortised, but are subject to annual impairment reviews. Other intangibles relate to computer software, website costs and licences and are amortised over their estimated economic lives. The annual amortisation charge is expensed to cost of sales in the Consolidated Statement of Comprehensive Income. Impairment tests for goodwill The Group tests goodwill and intangible assets arising on the acquisition of a subsidiary (customer lists) annually for impairment or more frequently if there are indications that goodwill or customer lists may be impaired. For the purpose of impairment testing, goodwill is allocated to the Group’s cash generating units (CGUs) on a business segment basis: at 1 January 2015 Acquisition of subsidiary: CCGoodwill CCCustomer lists Amortisation charge at 31 December 2015 Acquisition of subsidiary Additions – customer list Amortisation charge Impairment at 31 December 2016 Aford) Awards) £’000) 1,039) –) –) –) ) 1,039) –) 13) (1) –) ) 1,051) ) CEM) Press) Friedman's) £’000) £’000) Hickton) £’000) Sunline) £’000) Total) £’000) –) 1,529) –) 689) 3,257) 858) 577) –) ) 1,435) –) –) –) –) ) 1,435) ) –) –) (1) ) 1,528) –) –) –) –) ) 1,528) ) –) –) –) ) –) 1,679) –) –) –) ) 1,679) ) –) –) (78) ) 611) –) –) –) (611) ) –) ) 858) 577) (79) ) 4,613) 1,679) 13) (1) (611) ) 5,693) ) The recoverable amount of a CGU is based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five year period. Cash flows beyond five years are assumed to be constant. A discount rate of 10.85% (2015: 12.23%), representing the estimated pre-tax cost of capital, has been applied to these projections. The key assumptions used in the value-in-use calculations are as follows: Aford Awards CEM Press Friedman's Hickton Sunline Revenue growth 2015) %) 2016) %) 1.0) 1.0) 3.0) 1.0) 2.0) 3.0) 2.0) 3.0) –) 3.0) Gross margin 2016) %) 32.4) 38.7) 42.0) 37.0) 33.0) 2015) %) 38.1) 41.0) 34.1) –) 39.2) Long-term growth 2015) %) 2016) %) 1.0) 1.0) 2.0) –) 1.0) 2.0) 2.0) 2.0) –) 2.0) Management has determined the budgeted revenue growth and gross margins based on past performance and their expectations of market developments in the future. Long- term growth rates are based on the lower of the UK long-term growth rate and management's general expectations for the relevant CGU. 42 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 16. Intangible assets 16. continued In respect of Aford Awards, CEM Press, Friedman's and Hickton Consultants the value- in-use calculation gives rise to sufficient headroom such that reasonable changes in the key assumptions do not eliminate the headroom. At December 2016 an impairment charge of £611,000 was taken against the carrying value of goodwill related to Sunline. This reflected the challenging economic and trading environment of the direct mail market in which the business was operating. 17. Investments 14. Group Cost and net book amount at 1 January Share of net profit in associate Deemed disposal as a result CCof step acquisition at 31 December Shares) in Group) subsidiaries) £’000) Investments in associate 2015) £’000) 2016) £’000) –) –) –) ) –) ) Loans) to Group) 568) 21) (589) ) –) ) Total) subsidiaries)in subsidiaries) £’000) investments) Investments) in associate) £’000) £’000) Total) investments) £’000) 14. Company Cost and net book amount at 1 January 2015 Disposal Acquisition at 31 December 2015 744) 1,550) 2,294) 500) 2,794) –) 73) ) 817) –) 592) –) 665) ) 2,142) ) 2,959) (500) –) ) –) (500) 665) 2,959) Acquisition 55) ) 872) ) at 31 December 2016 670) ) 3,629) ) Of the loans to Group subsidiaries £592,000 is represented by 7% loan stock repayable in instalments between October 2018 and September 2021 and £850,000 by 5% loan stock originally repayable in instalments between April 2009 and February 2012. In both cases repayments will only be requested when surplus cash is available. 615) ) 2,757) ) 670) ) 3,629) ) –) ) –) ) 43 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 17. Investments continued Investments in subsidiary companies are stated at cost. A list of subsidiary undertakings, all of which have been included in the consolidation, is given below. Name of subsidiary, principal activity and registered address Aford Awards (Holdings) Limited CCHolding company for Aford Awards Limited CC11 Laura Place, Bath BA2 4BL Aford Awards Limited CCSuppliers of trophies and awards CCand engraving specialists CCGrange House, The Green, Bearsted, CCMaidstone, Kent ME14 4DZ CemTeal Limited CCHolding company for CEM Press CCHoldings Limited CC11 Laura Place, Bath BA2 4BL CEM Press Holdings Limited CCHolding company for CEM Group Limited CC11 Laura Place, Bath BA2 4BL CEM Group Limited CCHolding company for C.E.M. Press Limited CCTeal Close, Victoria Business Park, CCNetherfield, Nottingham NG24 2PE C.E.M. Press Limited CCDesign and compilation of fabric, wallpaper CCand carpet sample books CCTeal Close, Victoria Business Park, CCNetherfield, Nottingham NG24 2PE * Proportion of* ownership* interests* Wholly or non-wholly owned subsidiary Place of operation England 70%* Non-wholly England 73%* Non-wholly England 73%* Non-wholly England 71%* Non-wholly England 71%* Non-wholly England 71%* Non-wholly Davies Odell Limited CCManufacturer and distributor of protection CCequipment, matting and footwear components CC11 Laura Place, Bath BA2 4BL Signature Fabrics Limited CCHolding company for Friedman's Limited CCSunaco House, Unit 2, Bletchley Road, CCHeaton Mersey Industrial Estate, CCStockport SK4 3EF Friedman’s Limited CCConversion and distribution of specialist Lycra CCSunaco House, Unit 2, Bletchley Road, CCHeaton Mersey Industrial Estate, CCStockport SK4 3EF Hickton Holdings Limited CCHolding company for Hickton Consultants Limited CC51 Church Street, Elsecar, Barnsley, CCSouth Yorkshire S74 8HT England 85%* Non-wholly England 55%* Non-wholly England 55%* Non-wholly England 55%* Non-wholly 44 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 17. Investments continued Name of subsidiary, principal activity and registered address Hickton Consultants Limited CCClerk of Works specialists CCAmber Court, 51 Church Street, Elsecar, CCBarnsley, South Yorkshire S74 8HT * Proportion of* Place of ownership* interests* operation Wholly or non-wholly owned subsidiary England 55%* Non-wholly Sunline Direct Mail (Holdings) Limited CCHolding company for Sunline Direct Mail Limited CC11 Laura Place, Bath BA2 4BL Sunline Direct Mail Limited CCSupplier of services to the direct mail market CCCotton Way, Weldon Road Industrial Estate, CCLoughborough, Leicestershire LE11 5FJ England 80%* Non-wholly England 80%* Non-wholly Davies & Co (Kettering) Limited CCDormant company CC11 Laura Place, Bath BA2 4BL Phillips Rubber Limited CCDormant company CC11 Laura Place, Bath BA2 4BL Farmat Limited CCDormant company CC11 Laura Place, Bath BA2 4BL Davies and Company Limited CCDormant company CC11 Laura Place, Bath BA2 4BL England 85%* Non-wholly England 85%* Non-wholly England 85%* Non-wholly England 85%* Non-wholly Details of non-wholly owned subsidiaries that have a material non-controlling interest are disclosed below: Statement of Financial Position Signature Fabrics Group 2015) £’000) 2016) £’000) Hickton Holdings Group 2015) £’000) 2016) £’000) 1,875) (907) ) 968) ) 1,674) (8) ) 1,666) ) 2,634) ) 1,737) (976) ) 761) ) 143) (55) ) 88) ) 849) ) 737) (365) ) 372) ) 1,694) (855) ) 839) ) 1,211) ) –) –) ) –) ) –) –) ) –) ) –) ) As at 31 December Current Assets Liabilities Total current net assets Non-current Assets Liabilities Total non-current net assets Net assets 45 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 17. Investments continued Statement of Comprehensive Income Signature Fabrics Group 2015) £’000) 2016) £’000) Hickton Holdings Group 2015) £’000) 2016) £’000) For year ended 31 December Revenue Profit before income tax Income tax expense Post-tax profit from continuing operations Total comprehensive income Total comprehensive income allocated CCto non-controlling interests Dividends paid CCto non-controlling interests 4,555) 813) (160) 653) ) 653) ) 294) 180) 4,221) 835) (157) 678) ) 678) ) 305) 180) 2,961) 280) (61) 219) ) 219) ) 98) –) –) –) –) –) ) –) ) –) –) Summarised cash flows Signature Fabrics Group 2015) £’000) 2016) £’000) Hickton Holdings Group 2015) £’000) 2016) £’000) Cash flows from operating activities Cash generated from operations Interest paid Income tax paid Net cash generated CCfrom operating activities Net cash used in investing activities Net cash used in financing activities Net increase in cash and cash equivalents and bank overdrafts Cash, cash equivalents and bank CCoverdrafts at beginning of year Cash, cash equivalents and bank CCoverdrafts at end of year 736) (3) (166) ) 567) ) (44) (432) ) 91) ) 465) ) 556) ) 534) (4) (61) ) 469) ) (25) (67) ) 377) ) 88) ) 465) ) 465) (132) (64) ) 269) ) (233) 100) ) 136) ) –) ) 136) ) –) –) –) ) –)) ) –) –) ) –) ) –) ) –) ) There are no restrictions on the cash flows of the Group arising as a result of the non-controlling interests within Group subsidiaries. 18. Inventories Raw materials and consumables Work in progress Finished goods and goods for resale Group Company 2016) £’000) 664) 12) 1,344) ) 2,020) ) 2015) £’000) 707) 24) 1,299) ) 2,030) ) 2016) £’000) 2015) £’000) –) –) –) ) –) ) –) –) –) ) –) ) The cost of inventories recognised as an expense and included in cost of sales amounted to £8,812,000 (2015: £7,639,000). 46 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 19. Trade and other 18. receivables Trade receivables less: provision for impairment CCof trade receivables Trade receivables – net Amount due from subsidiary CCcompanies Other receivables Prepayments and accrued income Group Company 2016) £’000) 2015) £’000) 2016) £’000) 2015) £’000) 3,137) 2,658) (17) ) 3,120) –) 195) 386) ) 3,701) ) (9) ) 2,649) –) 110) 396) ) 3,155) ) –) –) ) –) 526) –) 9) ) 535) ) –) –) ) –) 127) –) 5) ) 132) ) As at 31 December 2016, trade receivables of £2,917,000 (2015: £1,658,000) were fully performing. Trade receivables that are less than three months past due are not considered impaired. As of 31 December 2016, trade receivables of £210,000 (2015: £925,000) were past due, but not impaired. These relate to a number of independent customers for whom there is no recent history of default. At 31 December 2016 trade receivables of £218,000 (2015: £75,000) were impaired. A significant portion of the receivables is expected to be recovered and a provision of £17,000 (2015: £9,000) has been made for non-recovery. The individually impaired receivables mainly relate to customers who are in unexpectedly difficult economic situations. The ageing of these receivables is as follows: 3 to 6 months Over 6 months 2016) £’000) 209) 9) ) 218) ) 2015) £’000) 63) 12) ) 75) ) ) ) ) ) ) ) ) ) ) ) ) ) ) The carrying amounts of the Group trade and other receivables are denominated in the following currencies: Sterling Euro US $ 2016) £’000) 3,005) 121) 11) ) 3,137) ) 2015) £’000) 2,562) 82) 14) ) 2,658) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 47 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 19. Trade and other 18. receivables continued Movements in the Group provision for impairment of trade receivables are as follows: At 1 January Provision for receivables impairment Receivables written off during the year At 31 December 2016) £’000) 2015) £’000) 9) 8) –) ) 17) ) 30) 6) (27) ) 9) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) The creation and release of provisions for impaired receivables have been included in cost of sales in the Consolidated Statement of Comprehensive Income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets. The Group does not hold any collateral as security. The maximum exposure to credit risk at the reporting date is the carrying value of each class of trade and other receivables. 20. Trade and other 18. payables Trade payables Other tax and social security Other payables Accruals and deferred income Group Company 2016) £’000) 2,203) 765) 251) 715) ) 3,934) ) 2015) £’000) 2,042) 740) 31) 546) ) 3,359) ) 2016) £’000) –) 4) 17) 112) ) 133) ) 2015) £’000) –) –) –) 209) ) 209) ) 48 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 21. Borrowings Group Company Non-current: Other loans Hire purchase obligations Current: Bank overdraft Trade receivables backed working CCcapital facilities Other loans Hire purchase obligations Total borrowings 2016) £’000) 1,884) 716) ) 2,600) ) 2015) £’000) 1,687) 588) ) 2,275) ) 796) 743) 1,262) 1,399) 381) ) 3,838) ) 6,438) ) 948) 293) 335) ) 2,319) ) 4,594) ) 2016) £’000) 2015) £’000) –) –) ) –) ) –) –) 740) –) ) 740) ) 740) ) –) –) ) –) ) –) –) –) –) ) –) ) –) ) Bank borrowings and overdrafts are secured by fixed and floating charges over the assets of the subsidiary to which they relate. Trade receivable backed working capital facilities are secured by the trade receivable to which they relate. All borrowings are denominated in Sterling. At 31 December 2016 the analysis of the security of bank borrowings and overdrafts and trade receivables backed working capital facilities was as follows: Secured on the assets of CEM Press Davies Odell Sunline By fixed and) floating charges) £’000) By trade) receivables) £’000) 137) 585) 74) ) 796) ) –) 346) 916) ) 1,262) ) Total) £’000) 137) 931) 990) ) 2,058) ) At 31 December 2015 the analysis of the security of bank borrowings and overdrafts and trade receivables backed working capital facilities was as follows: Secured on the assets of CEM Press Davies Odell Sunline By fixed and) floating charges) £’000) By trade) receivables) £’000) 189) 554) –) ) 743) ) –) 307) 641) ) 948) ) Total) £’000) 189) 861) 641) ) 1,691) ) 49 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 21. Borrowings continued The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the dates of the Statement of Financial Position are as follows: Within one year Between one and two years Between two and five years 2016) Bank) Hire purchase) £’000) £’000) 381) 2,058) 300) –) 416) –) ) ) 1,097) 2,058) ) ) 2015) Bank) Hire purchase) £’000) £’000) 335) 1,691) 324) –) 264) –) ) ) 923) 1,691) ) ) The fair value of non-current borrowings equals their carrying amount, as the impact of discounting is not significant. There is no material difference between the carrying book value and the fair value of the finance lease obligations. £396,000 of other loans represent preference shares of £130,000, loan stock of £200,000 subscribed by non-controlling interests and loan stock of £66,000 issued to non- controlling interests in settlement of deferred consideration. Preference shares carry a dividend of 5% pa (reduced from 15%) and loan stock interest of 5% pa (reduced from 15%) and were repayable in quarterly instalments over three years commencing in April 2009. However, repayment has been deferred until at least 2017. The preference shares and loan stock are held by the non-controlling interest and are in Sunline Direct Mail (Holdings) Limited. Other loans also include £771,000 of 4% Investor Loan Notes, £223,000 of 7% Vendor Loan Notes and £108,000 of 7% Shareholder Loan Notes in CemTeal. 50% (£386,000) of the Investor Loan Notes are repayable at the end of September 2017 and the other 50% (£385,000) at the end of September 2018. CEPS has guaranteed the repayment of the Investor Loan Notes if CemTeal has insufficient cash available to do so. The Vendor Loan Notes and Shareholder Loan Notes will be repaid in instalments by CemTeal between October 2018 and September 2021, subject to cash availability. The minimum lease payments under hire purchase agreements fall due as follows: Not more than one year Between one and two years Between two and five years Finance charge Present value of hire purchase agreement liabilities) 2016) £’000) 444) 349) 475) ) 1,268) (171) ) 1,097) ) 2015) £’000) 335) 399) 351) ) 1,085) (162) ) 923) ) The carrying amounts of the Group’s borrowings are denominated in Sterling. Trade receivables backed working capital facilities are available to the Group and are subject to renegotiation on an annual basis. The Group has no bank loan facilities available for draw down. 50 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 22a. Financial instruments 21a. by category The accounting policies for financial instruments have been applied to the line items below: Group 31 December 2016 Assets as per Statement of Financial Position Trade and other receivables (excluding prepayments and accrued income) Cash and cash equivalents Total Liabilities at amortised cost as per Statement of Financial Position Bank borrowings (excluding hire purchase obligations) Hire purchase obligations Trade and other payables (excluding statutory liabilities) Other loans Total Group 31 December 2015 Assets as per Statement of Financial Position Trade and other receivables (excluding prepayments and accrued income) Cash and cash equivalents Total Loans and) receivables) £’000) 3,315) 840) ) 4,155) ) Other financial) )liabilities) )£’000) 2,058) 1,097) 3,284) 3,283) ) 9,722) ) Loans and) receivables) £’000) 2,759) 854) ) 3,613) ) Liabilities at amortised cost as per Statement of Financial Position Bank borrowings (excluding hire purchase obligations) Hire purchase obligations Trade and other payables (excluding statutory liabilities) Other loans Other financial) liabilities) £’000) 1,691) 923) 2,619) 1,980) ) 7,213) ) The Company’s assets in both the current and prior year are categorised as cash and cash equivalents and receivables. The Company’s liabilities are categorised as other financial liabilities at amortised cost. Total 51 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 22b. Credit quality of 21b. financial assets The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Trade and other receivables are analysed between: Group CEPS Group Aford Awards CEM Press Davies Odell Friedman’s Hickton Sunline ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 2016) £’000) 8) 120) 543) 653) 459) 602) 1,316) ) 3,701) ) 2015) £’000) 5) 112) 692) 604) 470) –) 1,272) ) 3,155) ) The Group has a customer base which is for the most part stable, long standing and well known to the businesses. Credit and credit terms are negotiated with these customers taking into account their trading history with the Group and their payment record. New customers are only given credit after taking references or making trade and agency enquiries. Management does not believe there to be a credit exposure beyond that for which provision has already been made. The Company cash and cash equivalents includes £840,000 (2015: £854,000) which is on account with differing financial institutions and is readily available. The external credit rating as assessed by Standard & Poor’s for short-term funds for each of the institutions is A-1+. 23. Deferred tax The following are the major deferred tax assets and liabilities recognised by the Group, and the movement thereon, during the current and prior years. ) ) Losses) £’000) Other) Accelerated) capital) timing) allowances) differences) £’000) £’000) At 1 January 2015, asset Debit to the Consolidated Statement CCof Comprehensive Income at 31 December 2015, asset/(liability) (Debit)/credit to the Consolidated Statement CCof Comprehensive Income at 31 December 2016, asset/(liability) 432) (30) ) 402) (220) ) 182) ) 13) (43) ) (30) –) ) (30) ) 6) (15) ) (9) (3) ) (12) ) Total) £’000) 451) (88) ) 363) (223) ) 140) ) The deferred income tax is split in the Consolidated Statement of Financial Position between a deferred tax asset of £220,000 (2015: £440,000) and a deferred tax liability of £80,000 (2015: £77,000). These are shown net in the table above. Deferred income tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. 52 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 24. Provisions for 23. liabilities and charges At 1 January 2015 and 31 December 2015 Additions in year At 31 December 2016 These amounts are expected to be settled as follows: Current Non-current Dilapidations) £’000) 55) ) 57) ) 112) ) 2015) £’000) –) 55) ) 55) ) 2016) £’000) 62) 50) ) 112) ) Dilapidations Dilapidation provisions are carried against the costs anticipated on termination of property leases. The leases to which the non-current element relates are currently due to terminate in 2022. 25. Share capital and 25. premium ) At 1 January 2015 Shares issued Transaction costs at 31 December 2015 and 31 December 2016 Number) of shares) 5,407,155) 4,166,667) –) ) 9,573,822) ) Share) capital) £’000) Share) premium) £’000) 541) 416) –) ) 957) ) 3,114) 834) (5) ) 3,943) ) Total) £’000) 3,655) 1,250) (5) ) 4,900) ) 53 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 26. Operating lease 26. commitments The Group leases various offices, warehouses and light industrial premises under non- cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The future aggregate minimum lease payments under non-cancellable operating leases are: 27. Related party 26. transactions 28. Cash and cash 26. equivalents Land and buildings: CCwithin one year CCwithin two to five years CCafter more than five years 2016) £’000) 741) 1,739) 370) ) 2,850) ) 2015) £’000) 615) 2,304) 506) ) 3,425) ) During the year the Company entered into the following transactions with its subsidiaries. Aford) Awards) (Holdings)) Limited) £’000) ) CemTeal) Limited) £’000) Davies) Odell) Limited) £’000) ) Signature) Sunline) Hickton) Direct Mail) (Holdings)) Limited) £’000) Fabrics) Consultants) Limited) Limited) £’000) £’000) Receipt of equity CCshare dividend – 2016 – 2015 Receipt of preference CCshare dividend – 2016 – 2015 Receipt/(write-back) CCof loan note interest – 2016 – 2015 Receipt of management CCcharge income – 2016 – 2015 Amount owed to CCthe Company – 31 December 2016 – 31 December 2015 –) –) –) –) 56) 56) 20) 20) –) –) –) –) 44) 10) –) –) –) –) –) –) 6) –) 220) 220) –) –) –) –) 15) 15) 30) 30) –) –) –) –) 45) –) 11) –) –) –) 26) –) 43) (298) 15) 15) 700) 700) 839) 567) 174) 74) –) –) 623) –) 950) 892) The Company is under the control of its shareholders and not any one party. Directors' remuneration is shown in note 7 on page 33. Group Company 2016) £’000) 840) (796) ) 44) ) 2015) £’000) 854) (743) ) 111) ) 2016) £’000) 21) –) ) 21) ) 2015) £’000) 270) –) ) 270) ) Cash at bank and in hand Bank overdrafts repayable on demand Net cash at bank 54 CEPS PLC 31 December 2016 Notes to the Financial Statements continued 29. Events after the 29. reporting period Equity placing On 26 January 2017 the Company successfully placed 3,626,118 new ordinary shares at a price of 35 pence per share to raise £1,269,141.30 (before expenses) with institutional and private investors. The placing's proceeds were used to repay a loan entered into at the time of the acquisition of Hickton Holdings Limited (formerly RAM1003 Limited) and for general working capital purposes. Following the issue of the placing shares, the enlarged issued share capital of the Company comprised 13,199,940 ordinary shares of 10 pence each. Increase in CemTeal Limited shareholding On 21 February 2017 the Company announced that it had increased its shareholding in its subsidiary CemTeal Limited through the purchase of 7,000 shares for a total consideration of £7,000. The Company's shareholding in CemTeal and its wholly-owned subsidiary C.E.M. Press Limited has, therefore, increased from 73% to 80%. Third party loan On 25 April the Company secured a third party loan for £1m, payable in two tranches of £500,00 each on 2 May 2017 and 15 September 2017, repayable in full by 30 June 2018 and incurring interest at 10% per annum. 55 CEPS PLC Company number 00507461 Notice of Meeting Annual General Meeting Notice is hereby given that the Annual General Meeting of CEPS PLC (the ‘Company’) will be held at 11 Laura Place, Bath BA2 4BL on Monday 12 June 2017 at 11.30am for the following purposes: To consider and, if thought fit, to pass the following resolutions, of which resolutions numbered 1 to 7 will be proposed as ordinary resolutions and resolutions numbered 8 and 9 as special resolutions. 1 2 3 4 5 6 7 8 To receive, consider and adopt the Company’s annual accounts for the financial year ended 31 December 2016 together with the Directors’ Report and Auditors’ Report on those accounts. To re-elect D A Horner as a director. To re-elect G C Martin as a non-executive director. To ratify the appointment of M D Pollard as a non-executive director. To re-appoint PKF Littlejohn LLP, Chartered Accountants and Statutory Auditors, as auditors of the Company to hold office from conclusion of the meeting to the conclusion of the next meeting at which the accounts are to be laid. To authorise the directors to agree the auditors’ remuneration. THAT, in substitution for any existing authority subsisting at the date of this resolution to the extent unused, the directors be generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 (the ‘Act’) to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £1,465,000, such authority to expire at the commencement of the next Annual General Meeting held after the date of the passing of this resolution, but so that the Company may, before the expiry of such period, make an offer or agreement which would or might require equity securities to be allotted after the expiry of such period and the directors may allot equity securities pursuant to such an offer or agreement as if the authority had not expired. THAT subject to and conditional on the passing of resolution number 6 and in substitution for any existing authority subsisting at the date of this resolution to the extent unused, the directors be empowered, pursuant to section 570 of the Act, to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred by resolution number 6 as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities: 8.1 in connection with an offer of such securities by way of rights issue (as defined below); For the purposes of this resolution, ‘rights issue’ means an offer of equity securities to holders of ordinary shares in the capital of the Company on the register on a record date fixed by the directors in proportion as nearly as may be to the respective numbers of ordinary shares held by them, but subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with any treasury shares, fractional entitlements or legal or practical issues arising under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory or any other matter. 56 Annual General Meeting continued CEPS PLC Company number 00507461 Notice of Meeting continued 8 continued 8.2 otherwise than pursuant to sub-paragraph 8.1 above up to an aggregate nominal amount of £1,465,000 (such shares representing approximately 111% of the Company’s issued ordinary capital as at the date of this notice), and shall expire at the commencement of the next Annual General Meeting held after the date of the passing of this resolution, save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of any such offer or agreement as if the power had not expired. 9 THAT the Company be generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Act) of ordinary shares of 10 pence each in the capital of the Company on such terms as the directors think fit, provided that: 9.1 the maximum number of ordinary shares hereby authorised to be purchased is limited to an aggregate of 1,319,994 (such shares representing approximately 10% of the Company’s issued ordinary capital as at the date of this notice); 9.2 the minimum price, exclusive of any expenses, which may be paid for an ordinary share is 10 pence; 9.3 the maximum price, exclusive of any expenses, which may be paid for each ordinary share is an amount equal to the higher of: (a) 105 per cent of the average of the middle market quotations for an ordinary share, as derived from the London Stock Exchange Daily Official List, for the five business days immediately preceding the day on which the ordinary share is purchased; and (b) the amount stipulated by Article 5(1) of the Buy-back and Stabilisation Regulation 2003; and 9.4 the authority hereby conferred shall, unless previously revoked and varied, expire at the commencement of the next Annual General Meeting held after the date of the passing of the resolution (except in relation to the purchase of ordinary shares the contract for which was concluded before the expiry of this authority and which will or may be executed wholly or partly after such expiry). On behalf of the Board V E Langford Company Secretary 2 May 2017 Registered office: 11 Laura Place, Bath BA2 4BL Registered in England and Wales with number 00507461 57 CEPS PLC Company number 00507461 Notice of Meeting continued Annual General Meeting continued Notes 1. A member entitled to attend and vote is entitled to appoint proxy(ies) to attend, speak and vote instead of him. A member may appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to different shares. A proxy need not be a member of the Company. 2. In order to be valid an appointment of proxy, and any power of attorney or other authority under which it is executed (or a duly certified copy of any such power or authority) must be deposited at the office of the Registrars of the Company, Share Registrars at The Courtyard, 17 West Street, Farnham GU9 7DR not less than 48 hours, excluding any part of a day that is not a working day, before the time for holding the meeting. A proxy form is enclosed. The appointment of a proxy will not prevent a shareholder from subsequently attending and voting at the meeting in person. 3. Under Regulation 41 of the Uncertificated Securities Regulations 2001, only those shareholders whose names are on the register of members of the Company as at 11.30am on Thursday 8 June 2017 or, if the meeting is adjourned, shareholders entered on the Company’s register of members not later than 48 hours before the time fixed for the adjourned meeting are entitled to attend and vote at the meeting in respect of the shares registered in their names at that time. Subsequent changes to the register shall be disregarded in determining the rights of any person to attend and vote at the meeting. 58 Directors Secretary and registered office Operating locations CEPS PLC Group Information D A Horner, Non-executive Chairman V E Langford, Group Finance G C Martin, Non-executive M D Pollard, Non-executive V E Langford 11 Laura Place, Bath BA2 4BL Company number 00507461 www.cepsplc.com Aford Awards Limited Grange House, Bearsted Green Business Centre, Maidstone, Kent ME14 4DF telephone 01622 738711, fax 01622 630051 email orders@afordawards.co.uk; www.afordawards.co.uk C.E.M. Press Limited Teal Close, Victoria Business Park, Netherfield, Nottingham NG24 2PE telephone 0115 961 3581 email info@cemgroup.co.uk; www.cemgroup.co.uk Davies Odell Limited Portland Road, Rushden, Northants NN10 0DJ telephone 01933 410818, fax 01933 315976 email info@daviesodell.co.uk; www.forcefieldbodyarmour.com email info@davieskett.co.uk; www.equimat.co.uk Friedman’s Limited Sunaco House, Unit 2, Bletchley Road, Stockport SK4 3EF telephone 0161 975 9002, fax 0161 975 9003 email sales@friedmans.co.uk; www.friedmans.co.uk; www.funkifabrics.com Hickton Consultants Limited 51 Church Street, Elsecar, Barnsley, South Yorkshire S74 8HT telephone 01226 743959 email info@hickton.co.uk; www.hickton.co.uk Sunline Direct Mail Limited Cotton Way, Weldon Road Industrial Estate, Loughborough LE11 5FJ telephone 01509 263434, fax 01509 264225 email enquiries@sunlinedirect.co.uk; www.sunlinesolutions.com Registrars and share transfer office Share Registrars Limited The Courtyard, 17 West Street, Farnham GU9 7DR telephone 01252 821390, lines are open 9.00am to 5.30pm Monday to Friday Share price information The day-to-day movement of the share price on the London Stock Exchange can be found on the Company’s website and at www.londonstockexchange.com (code CEPS) Independent auditors PKF Littlejohn LLP 1 Westferry Circus, Canary Wharf, London E14 4HD Solicitors Roxburgh Milkins Limited Merchants House North, Wapping Road, Bristol BS1 4RW Nominated adviser and broker Cairn Financial Advisers LLP Cheyne House, Crown Court, 62-63 Cheapside, London EC2V 6AX 59
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