www.FiltaPlc.com
Registered in England. Company Number 10095071
Registered Office:
The Locks
Hilmorton
Rugby
Warwickshire
CV21 4PP
Tel: +44 1788 550100
Email: Enquiries@FiltaPlc.com
Annual Report
& Accounts 2016
F
l
i
l
t
a
G
r
o
u
p
H
o
d
n
g
s
p
c
A
n
n
u
a
i
l
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
6
About Filta
Filta Group Holdings plc is a multi-service B2B provider
to commercial kitchens, primarily operating in the UK
and US.
The Company has over 180 Franchise Owners, and
teams of corporate vans, providing services to over 5,000
restaurants and other commercial kitchens every week.
Filta has an impressive underlying blue chip customer
base, a high level of recurring revenue and a strong
dividend commitment.
Index
Overview
3
4
Highlights
Chairman’s Statement
Major Markets
Services
The Franchise Model
Business Model
Strategy and Operations
7
8
9
10
11 Our Market
12
13 Chief Executive’s Operating Review
16 Chief Financial Officer’s Review
Principal Risks and Uncertainties
19
Strategy
Governance
22
24
25
28 Directors’ Remuneration Report
31 Directors’ Report
Corporate Social Responsibility Report
Board of Directors
Corporate Governance Statement
Financial Statements
34
Independent Auditor’s Report to the
Members of Filta Group Holdings PLC
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Parent Company Statement of Financial Position
Parent Company Statement of Changes in Equity
Parent Company Statement of Cash Flows
Notes to the Financial Statements
36
37
38
39
40
41
42
43
59 Corporate Information
Further information and investor updates
can be found on our website at
www.FiltaPlc.com
Nominated Advisor and Broker:
Cenkos Securities plc
6.7.8. Tokenhouse Yard
London, EC2R 7AS
Auditors:
Crowe Clark Whitehill LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Corporate Information
Directors:
Timothy (Tim) John Worlledge Non-Executive Chairman
Jason Charles Sayers Chief Executive Officer
Brian Joseph Hogan Finance Director
Victor Clewes Executive Director
Jlubomir (Roscoe) Urosevic Executive Director
Roy Charles Sayers Non-Executive Director
Graham Jeffrey Woolfman Non-Executive Director
Secretary:
Brian Hogan
Registered Office:
The Locks
Hillmorton, Rugby
Warwickshire
CV21 4PP
Company Number:
Registered in England with Company Number 10095071
Bankers:
HSBC Bank PLC
6th Floor, 165 Fleet Street
London, EC4A 2DY
Solicitors:
Howard Kennedy LLP
No. 1 London Bridge
London, SE1 9BG
Registrar:
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Designed and produced by
london@blackandcallow.com
www.blackandcallow.com
020 3794 1720
2
59
Highlights
Operational Highlights
Group revenue up 27% to £10.1m
Fryer Management revenue, primarily recurring in nature, grew £1.7m
or 38%
Underlying operating profit increased to £1.15m, a 4% increase over
prior year1
Deferred income balance grew by £1.0m to £2.7m
£4.4m of cash on hand to fund strategic growth initiatives
Financial Highlights
Revenue
£10.1m +27%
Gross Profit
£4.4m +19%
Revenue
£m
10.1
7.9
6.6
Gross profit
£m
4.4
3.7
2.9
2015 £7.9m
2015 £3.7m
Adjusted Underlying Profit*
Adjusted Underlying Profit*
£2.1m +31%
£m
2.1
1.6
0.8
2015 £1.6m
Deferred Income Balance
Deferred Income Balance
£2.7m +58%
£m
2.7
1.7
1.3
2015 £1.7m
*Adjusted Underlying Profit excludes special bonuses paid prior to IPO and AIM admission costs and is adjusted to
include change in deferred revenue.
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014
3
Financial StatementsGovernance OverviewStrategy and Operations
Chairman’s Statement
£10.1m
Group Revenue +27%
2015: £7.9m
£1.1m
Group Underlying Operating Profit1 +4%
2015: £1.1m
(1.51)p
Basic and Fully Diluted Earnings Per Share
2015: 1.39p
5.05p
Underlying Earnings Per Share1
2015: 5.08p
Full Year 2016 Operating Revenue
26%
12%
£10.1m
62%
■ Franchise Development
■ Fryer Management
■ Company Owned
4
■ FiltaDrain
■ Filter Refrigeration
■ Filta-Seal
11
7
31
2016
2015
2014
Introduction
I am delighted to be able to report in this, our
first Annual Report and Accounts since our
admission to AIM in November last year, that
we have experienced continued strong trading
in our cornerstone fryer management business
and seen good progress with our newer
service offerings.
After 13 years of developing the businesses
in both the USA and the UK, the time was
right to put in place the corporate structure
and funding to enable the Group to pursue
its growth ambitions over the coming
years. Accordingly, we consolidated the
businesses under common ownership and
raised £4.3 million by way of a placing of new
shares, which, after repayment of Director’s
Loan’s, provided £3.7 million for investment
in new products and additional staff and for
expansion into new geographies.
Results
Underlying Operating Profit1 for the year
ended 31 December 2016 was £1,147,123
(2015: £1,105,991). There were non-recurring
costs, being special bonuses paid to
shareholder-directors prior to admission to
AIM of £679,936 (2015 – £656,000) and AIM
admission costs of £580,603 (2015: Nil), which,
together with finance costs of £104,828 (2015:
£73,721) resulted in a reported loss before tax
of £218,244 (2015: profit £376,270) and a loss
after tax of £342,581 (2015: profit £302,210) on
revenue of £10,075,239 (2015 – £7,925,272).
The underlying operating profit includes
£521,213 (2015 – £412,219) which was released
from deferred income, having been accrued
in previous years. However, we also generated
revenue of £1,483,120 (2015 – £864,603)
which has been added to deferred income
and will be released to profit in future years.
The Board believes that, in addition to the
underlying profit, the resulting increase in
the deferred income of £961,907 (2015 –
£452,304) represents an important indicator of
performance. In particular, it provides visibility
of future reportable profits and is reflected by
cash flow generation, as is evidenced by the
cash generated from operations before non-
recurring items (Note 25) of £1,300,296 (2015
– £1,221,913) in the year. The total amount
standing to the credit of the deferred income
account at the year-end was £2,711,358 (2015
– £1,749,451).
After investment in property, the payments
to shareholder-directors referred to above,
finance costs and the receipt of the listing
proceeds of £3,717,946, net of costs, the cash
balance at 31 December 2016 was £4,392,350
(2015: £978,939).
A strong franchise development performance
has seen us increase our Franchise Owner
base from 167 to 182 and the number of
MFUs (mobile filtration units) from 300 to 339,
further strengthening our platform for growth
in future years. Additionally, we continued to
see good growth in both our company owned
operations, Fita-Seal and Filta Refrigeration,
1
Underlying Profit excludes amounts relating to the costs of the Initial Public Offering and Pre-IPO shareholder
bonuses.
experiencing 14% and 30% revenue
improvement, respectively.
Strategy and Development
The Fryer Management Services division is the
cornerstone of our business and we continue
to seek to grow this area both by securing new
franchisees and by increasing the numbers of
customers serviced by our franchisees through
higher penetration of the NCAs (National and
Centralized Accounts) market.
In addition, we are increasing the range of
services that our franchisees are able to offer
customers, including, particularly, FiltaBio
and FiltaCool. In the last six months we have
launched FiltaDrain, a weekly-applied drain
cleaning service, through Franchise Owners in
the USA and directly through Company-owned
operations in the UK.
In December 2016, we formed a company
in Canada to develop a similar offering to
that being provided in the USA. We are now
actively seeking suitable Franchise Owners and
plan to launch the first operation during the
first half of 2017, with others to follow later in
the year.
Dividends
At 31 December 2016, the distributable
reserves account was in deficit and we were
unable to propose a dividend in respect of
2016. However, we announced in January 2017
that we had cancelled our share premium
account and utilised the balance to eliminate
the deficit on the distributable reserves
account, enabling dividends to become
payable.
Accordingly, notwithstanding that the
Company had been a quoted company for
only two months of last year, the Board intends
to pay a first interim dividend for 2017, in lieu
of a dividend for 2016, during the first half of
this year.
A second interim dividend will be paid
following the publication of the interim
accounts and it is intended that this will
represent approximately one third of the
total dividend expected to be paid or
recommended in respect of 2017.
Current trading and outlook
Whilst there is some economic and political
uncertainty in both of our principal operating
regions, our business has not been greatly
affected by the uncertainties and we believe
that this is likely to remain the case.
Our growth has been driven by a significant
level of repeat income from Fryer
Management. In addition, during the last
12 months, we secured 23 new franchises
and commissioned 39 new MFUs, all of which
will enhance our royalties in the current and
future years. We have already secured 6 new
franchisees this year and are confident interest
from new applicants so to join our business
remains strong.
At the start of this year Fita-Seal experienced
a significant pickup in activity over the start of
last year and we expect to see this business
continue to grow through the current year. Its
revenues are substantially improved over the
same period last year. In addition, whilst our
FiltaDrain business is still young, the take-up
by both franchisees and customers has been
very encouraging, causing us to believe that
this is a business with good potential.
We have had a positive start to the year and
your Board is confident of another year of
strong growth.
Management, staff and Franchise Owners
The Group would not be able to achieve its
success without the considerable efforts of
our management and staff and I thank them
for their hard work and commitment both in
the last year and in the years leading to the
admission to AIM.
I also take this opportunity to recognize the
importance of our Franchise Owners, whose
own performance and client commitment is
critical to our success and reputation.
Finally, our Business Model and Strategy is
contained on pages 7 to 12. It was approved
by the Board on 31 March 2017.
Tim Worlledge
Chairman
31 March 2017
Caption: Donec auctor leo ac
5
Financial StatementsGovernance OverviewStrategy and Operations Major Markets
Services
The Franchise Model
Business Model
7
8
9
10
11 Our Market
12
13 Chief Executive’s Operating Review
16 Chief Financial Officer’s Review
Principal Risks and Uncertainties
19
Strategy
Chairman’s Statement
Strategy and
Operations
6
6
Strategy and Operations
Major Markets
Filta operates principally in the USA and the UK, providing a range of commercial kitchen
related services through franchise networks and Company-owned operations.
USA
Number of vans
300 Franchise Operated
UK
Number of vans
41 Franchise Operated
21 Company Owned
Business growth drivers:
• New Franchise Sales (new territories)
• Existing Franchise Owners growth
• National Accounts
• New services and products offered
through Franchise Network
Corporate HQ in Orlando, Florida, USA
• Principally a franchise network business
Franchisees mostly multi-unit
operators
Exclusive rights to defined area
• All services provided through Filta
Franchise Network
Fryer management is principal service
Ancillary services include FiltaBio
waste oil collection, FiltaGold new oil
supply and FiltaDrain kitchen drain
solution
• Revenues generated mainly from
franchise sales, franchise services, oil
resales
Business growth drivers:
• Expansion of existing Company-owned
services
• Development of additional related
services
• Increased focus on national accounts
Corporate HQ in Rugby, England
• Franchise network business and
company-owned operations
• Franchise network business:
Franchisees mostly single unit
operators
Services are solely fryer management
• Company-owned Operations:
Fita-Seal, replacement of refrigeration
seals
Filta Refrigeration, installation, repair
and maintenance of refrigeration and
aircon units
FiltaDrain, kitchen drain solution
• Revenues derived principally from
FiltaFry, Fita-Seal and Filta Refrigeration.
7
Financial StatementsGovernanceStrategy and Operations Overview Strategy and Operations
Services
One customer – multi-services
Fryer Management – The FiltaFry Service
FiltaFry, our unique Fryer Management
service, is the cornerstone of the Group’s
activities and service offering in both
the USA and the UK. It provides an
effective, hygienic and economic service
for commercial kitchens, cleaning fryers,
reducing cooking oil costs and disposing of
waste cooking oil.
• FiltaFry provides a total fryer
management service, including the
on-site micro-filtration, removal and
replacement of cooking oil.
• 5,000+ restaurant and food service
customers receive FiltaFry services on a
weekly basis.
• Franchisees operate a total of 341 MFUs
(Mobile Filtration Unit) of which 300 are in
the USA and 41 in the UK.
Fita-Seal
Fita-Seal operates in the UK and is a
patented system for replacing damaged or
perished refrigerator and freezer door seals
on-site in a cost and time effective manner.
Specifically, the system allows engineers,
using patented on board equipment and
materials to replace a seal in one visit,
producing cost and time savings for its
clients, who would otherwise experience
ordering and fitting delays following an
initial engineer’s visit. The benefit of this
service, apart from avoiding the disruption
that multiple engineer visits causes, is
the energy cost saving and avoidance of
longer-running food hygiene risks.
Filta Refrigeration
Filta’s experience in the refrigeration
business led to the maintenance and
installation services for commercial
refrigeration units. There is a need for
refrigeration units to be serviced regularly
and, when breakdown occurs, the customer
needs it to be repaired quickly. Thus, where
a good customer relationship has already
been established, that same customer is
often inclined to use the same provider for
related services if they are available.
FiltaDrain
FiltaDrain is a “fats, oil and grease” (FOG)
management system. It is an eco-friendly,
enzyme based, chemical solution which is
used to prevent the build-up of grease in
drains.
In the UK, this solution is delivered through
automated drip systems that are serviced
every 3 months by the Fita-Seal engineers
as a Company-provided service.
In the US, it is currently sold by the
Franchise Owners as a spray service on a
pay-per-use basis.
Fryer
Management
First Time
Seal
Replacement
FiltaFry
Fita-Seal
Refrigeration
FiltaDrain
HVAC
Installation &
Service
Enzyme
FOG
Management
8
The Franchise Model
Our Fryer Management service is provided
through a network of Franchise Owners,
who operate under 10 year franchise
licences in the US and under 5 year
franchise licences in the UK.
Filta, as the Franchisor, owns the intellectual
property (“IP”) comprised in the equipment
and systems and, through its Franchise
Model, allows its Franchise Owners to make
use of that IP and of the FiltaFry name in
providing the Fryer Management Service to
its customers.
There are two key components to the
creation of a successful franchise:
• The quality of the franchisee and
• The provision by the franchisor of
constant advice and support to the
franchisee as he first establishes and then
develops the business
Filta takes a great deal of time in selecting
its franchisees, who undergo an extensive
interviewing and assessment process
before being awarded a franchise. Care is
taken to establish that the applicant has the
necessary funds, drive and enthusiasm to
run and build the business.
Franchise
Selection
Finance
Programs
Business
Planning
IT
Development
Technician
Recruitment
Support
Franchise
Owners
Training
Launch &
Support
Key Account
Acquisition &
Maintenance
Dedicated
Inside Sales
Support
9
Financial StatementsGovernanceStrategy and Operations Overview Strategy and Operations
Business Model
There are three key components of revenue generation in the Group and each of these is important, not just to revenues, but in providing
the platform for growth in the future.
1 – Franchise Development
2 – Fryer Management Services
• New Franchise Owners and territories
• Territory Fee and Opening Package Fee paid by franchisee
• 10 Year Franchise Agreements (5yr UK) with annual royalties
• Key objective is continuing improvement of our Franchise Owner quality to
provide a platform for growth as they add units, take on new territories and
enhance our brand and reputation
• All services are provided by or through Franchise Owners
• Franchisees pay a fixed royalty per MFU
• All products are provided by Filta, generating additional margin
• Franchise Owners’ customer growth drives additional Filta revenues at little or no
resource cost to Filta, providing increasing revenue visibility (2016 – repeat revenues at
90%+)
• Key objective is growth of franchisees’ revenue, driving predictable Group
revenues at increasing marginal profit
3 – Company Owned Operations (UK Only at this stage)
• Fita-Seal provides an essential service to customers and has a high level of visibility
• Filta Refrigeration fills a gap in the market with an additional service to Fita-Seal and
other customers
• FiltaDrain provides a service under contract to commercial kitchens, often already
FiltaFry customers
• Key objective is to build repeat revenues, providing high revenue visibility
maintenance contract customers
Repeat Revenues Underpinned by Growing Royalty Income
Most the Group’s revenues (62%) are earned by way of royalties and other income from an existing customer base which requires
continuing and regular service. It provides strong cash flow and, together with a large deferred revenue position, provides good revenue
visibility into future years.
Blue Chip Client Base
The Group has a broad client base in both the USA and the UK with clients ranging from small single outlet enterprises to a large number
of blue chip clients with multi-outlets and national coverage including major supermarket groups, national pub chains and restaurant
chains. The high quality and breadth of the client base helps to mitigate the risks of exposure to any single business or organisation.
10
Our Market
Target Markets
Filta’s products and services are suitable for catering establishments throughout the UK and US. We have identified a number of
commercial business sectors and public organisations which we believe to represent our principal target markets:
Sector
Restaurants
No. of
Establishments
UK
72,000
US
630,000
Supermarkets
8,000
37,000
Universities & Colleges
106
2,000
Sports Stadiums
50
1,000
Hospitals
Casinos
Contract Caterers
5,600
500
50,000
Fryers
Fridges, Seals &
Drains
Core to Filta’s business in
both the US and UK.
Multi-unit organisations and therefore
potentially attractive customers
Most have fryers, all have many seals
and refrigeration units. Mostly accessed
through Contract Caterers.
Only stadiums with over 5,000 capacity.
Filta services over 275 US stadiums.
Mostly accessed through Contract
Caterers.
Casinos can have many restaurants and
most provide fried food.
Whether outside contract or provision of
on-site staff, provide valuable access to
many sectors.
Some
Some
Most
All
Some
All
Some
All
All
All
All
All
All
All
FiltaDrain
FiltaDrain is the newest addition to our
stable of commercial kitchen services and,
although still in its infancy, we believe that
it has the potential, also, to develop into a
long-term generator of repeat revenues as
a Company-owned business in the UK and
to provide meaningful incremental income
for our franchisees and ourselves in the
USA.
Fryer Management
The target market for Fryer Management is
any commercial kitchen with two or more
deep fryers. There are around 258,000
eating out venues in the UK alone (source:
Horizon FS Ltd), of which Management
estimates that a total of 80,000 sites would
benefit from the FiltaFry service.
The US market is over 8x the size of the UK,
reflecting both population (roughly 5x the
size of the UK) and higher consumption
of fried food. US restaurant sales alone
are estimated at $783bn in 2016, having
grown in each of the last 7 years. Data from
the USDA (United States Department of
Agriculture) shows food consumption out
of home within the US - the two largest
segments of which are Full Service and
Fast Food restaurants - is near equal to US
food consumption in home. Management
estimates that over 650,000 target
foodservice businesses in the US would
benefit from the FiltaFry service.
Filta’s current Fryer management Services
client base represents market penetration
of under 1% in the US and 2% in the UK.
Fita-Seal
Fita-Seal has the same target customer
base as Filta’s fryer management business,
being commercial kitchen operators.
Management has a key target customer list
for Fita-Seal, to many of which it already
provides services. Management estimates
that this target customer list alone has
over 400,000 seals that require regular
replacement. Based on the Company’s
current service rate, Fita-Seal is achieving
only 4% penetration of this list and around
1% of the UK market.
Filta Refrigeration
Filta Refrigeration is a traditional Heating
& Ventilating Contractors Association
(HVCA) installation and repair company.
The refrigeration industry has two attractive
niches which are targeted by Filta:
• Air conditioning; and
• Commercial refrigeration.
Each market is estimated by management
to be worth c£0.7bn and so represents a
total target market of £1.4bn. Although
this business is still being developed, we
believe that it has the potential to be a
long-term generator of repeat revenues,
principally from annual maintenance and
repair contracts.
11
Financial StatementsGovernanceStrategy and Operations Overview Strategy and Operations
Strategy
Our objective is to deliver sustainable, predictable and profitable growth founded upon the following strategic operational pillars:
1.
Recruit the best Franchise
Owners possible
2.
Drive and support the growth
of the Franchise Owners
3.
Grow key and national
accounts
4.
Increase our range of products
and services
5.
Attract and develop the best
people
6.
Increase the use of technology
to improve our offering
12
Chief Executive’s Operating Review
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
y
a
n
d
O
p
e
r
a
t
i
o
n
s
November last year saw our successful
admission to AIM and I am very pleased
to report that the Group delivered record
results with underlying operating profit
of £1.15m, an increase of 4% over the
previous year. Our business model is such
that we start each year with higher revenue
visibility than the prior year, and 2016 was
no exception.
The Fryer Management segment, our
principal activity, exhibited 38% revenue
growth. This was supported by both
organic and new franchise development
which, in turn, enlarges the platform for
further growth in Fryer Management
Services revenue. We also experienced
23% revenue growth in our Company
Owned Operations, Fita-Seal and Filta
Refrigeration.
Franchise Development
2016 was a strong year with a combined
36 new franchise and territory sales which
contributed £1.2m revenue in the year and
added £1.0m to the Deferred Revenue
account.
Leads continued to come from the
traditional franchise portal sites but we have
also begun to deal with business brokers,
who are, increasingly, being used by
aspiring franchisees to help them find the
best franchise to purchase. We contracted
with a network of business brokers in
2016 and have found that their leads were
high quality, accounting for 22% of Filta’s
franchise sales. We believe that this can be
an important avenue for new business in
the coming years as brokers can help drive
both the quality and quantity of candidates
that come to us.
2016 was also a good year for franchise
resales with 9 Filta Franchise Owners
selling their businesses, many for record
values. Filta is entitled to a fee from the
vendor on any resale and resales also
provide an opportunity to strengthen the
franchise network and, with the higher
quality of candidates being generated
by the business broker network, we are
encouraged by the potential for the future.
Fryer Management Services
Our Franchise Network is the showpiece
of our business – our success reflects its
success. We are committed to providing
the franchisees with the necessary support
to give them the best chance of success.
Our Annual Franchise Conference in
Orlando, Florida is the centrepiece event
for Franchise Owners, with 100 attendees in
2016. Our team put together a spectacular
event with three days of speakers, events,
awards, round-table discussions and
dinners, which has the four-fold objective of
providing a forum for our Franchise Owners
to meet and discuss experiences with each
other, receiving feed-back from Owners,
provide training updates and performance
incentives by way of performance awards.
One of our strategic objectives is to
encourage multi-unit franchisees, which
helps to allay financial risk and to provide
Owners with higher investment returns. At
our 2016 conference, we recognized one
Franchise Owner who had achieved $1m in
revenue for the previous year. In 2017, we
acknowledged four Franchise Owners who
had over $1m of revenue in 2016.
Our US Franchise Network generated $29m
in revenues from their customers in 2016
(2015 – $22m), a 32% rise. Network revenue
represents the best indicator of the Filta
brands growing strength in the market.
In supporting our Franchise Owners, we
endeavour to lower as many barriers to
growth as possible for them with programs
such as:
• Inside Sales – our Inside Sales Team,
rightly referred to as the “growth engine
room”, has daily contact with Franchise
Owners and helps them win new
customers and upsell new products to
existing customers. The team excelled
again in 2016.
• National Accounts – we continue to
grow our National Account customer
base with contracts being signed with
five new accounts including two contract
caterers, a national hotel chain, a
national restaurant chain and a chain of
convenience stores.
• Waste oil – 6K – as the volumes of waste
cooking oil collected by our network
continues to grow, we have put in place
a program of upgrading the facilities
of Franchise Owners to allow them to
increase their storage capacities to 6,000
gallons (22 metric tonnes) of waste oil at
one time. This improves the economics
for Filta by reducing the collection
costs as well as improving the revenue
potential because we are able to sell
larger loads at better prices. In the last 18
months, we have upgraded 29 facilities
in the US to this 6k capacity, putting
in place the building blocks for future
growth.
• Tech recruitment – with 341 trucks on
the road at year end and growing quickly,
hiring and keeping good Technicians
is the lifeblood of our Franchisees’
businesses. To help our franchisees in
managing this resource, Filta recruited
a full-time recruiter in 2016 based in
the Orlando Corporate Office, who is
dedicated to finding the best Technicians
for our Franchise Owners. Since her
appointment in April 2016, she has
placed over 100 Technicians for our
Franchise Owners.
In the US, we have been trialling the
FiltaDrain drain dosing service to existing
customers through 15 Franchise Owners. It
was officially launched at the 2017 Franchise
Conference and will add further repeat
revenues for Franchise Owners and Filta in
the coming years.
Company Owned Operations
Our Company Owned operations, Fita-
Seal and Filta Refrigeration, operating
exclusively in the U.K., both experienced
double digit growth rates. Each of them
achieved sufficient market penetration
to encourage us to believe that these
businesses can make significant
contributions in the future.
In seeking to develop sales and to grow
our customer base, the focus has been on
securing more key accounts which will both
provide higher revenues and also increase
the cross-selling opportunities.
13
Financial StatementsGovernance
Chief Executive’s Operating Review
Current Trading & Outlook
We have had a good start to 2017.
• Franchise Development remains strong
in the US.
• We established Filta Canada and
attended the Toronto Franchise Show as
a first step to launching in Canada during
2017.
• The year commenced with significantly
higher revenue visibility on the Fryer
Management side.
• We have signed and started a Fita-Seal
contract with a major national U.K. pub
chain with over 1.700 sites.
Jason Sayers
Chief Executive Officer
31 March 2017
Fita-Seal is not being sub-franchised in
these markets. The Master License Holders
will run Fita-Seal as company-owned
operations, like the UK.
People
We are fortunate to have a very committed
work force, many of whom have worked for
the Group for well over 10 years. They have
been a key component to our success in
that period both through their hard work
and dedication to the brand and by the
strong relationships they’ve developed with
customers and franchise owners alike.
There was a key hire in 2016, Brian Hogan
CFO, who has fitted in well and enabled
us to take the next steps in driving the
development of the business. Brian was
hired in March and is based out of the
Orlando office. He is responsible for all
financial planning and reporting. Further
details about him are contained in the
summary of directors on page 24.
Market Conditions
Despite the various economic and political
uncertainties that persisted in both the
US and the UK through much of 2016, we
experienced a steady level of enquiries
from potential Franchise Owners, with
many good quality candidates coming
forward. We see no reason for this to
change, particularly in view of the likely
encouragements to business under the new
administration in the US.
The market for all Filta’s services, in both
the UK and US, remained constant through
the year and we believe that with the
ever-increasing health and safety and food
hygiene requirements, the demand for our
services is unlikely to become any less.
Fita-Seal
The number of seals fitted grew by 12%
while we realized a 14% increase in revenue.
Additionally, as seal volumes grow we see
increased efficiency of our vans, which is a
positive contributor to gross margin. We
expect to see this continue into 2017.
Some key contracts signed towards the end
of 2016 should drive further growth into
next year.
Filta Refrigeration
Filta Refrigeration has enjoyed continuous,
steady growth since it was first established
in 2013, earning the loyalty and respect
of an impressive blue chip client base.
The company’s success in the market
is attributable to several important
competitive advantages including, quality
reactive repairs and PPM strategies,
enhanced by prestigious cold room and
air-conditioning installations.
Revenue increased by 30% to £1.6m in
2016, with a mix of 68% maintenance
contracts and 32% installation.
International
FiltaFry
We have three good FiltaFry partners in
Benelux, Germany and South Africa, which
started in 2013, 2014 and 2015 respectively.
These Master License Holders either sub-
franchise (Benelux and Germany) or run
FiltaFry as company owned operations
(South Africa).
Whilst Filta generated some fees for
the sale of the territories, the ongoing
royalties take time to develop. We have not
budgeted for significant near-term growth
in this area.
Fita-Seal
With the steady growth of Fita-Seal in
the UK, and the international patent
applications, the Master License Holders
in Germany and South Africa purchased
the rights to run Fita-Seal in their markets
in 2016. They will commence operations
of these businesses in 2017. There were
some small up-front fees for the equipment
and territories but the real value is in the
long-term royalty stream of 5% of revenue
being paid to Filta, we anticipate that these
markets may take some time to develop.
14
Operational Performance
& KPIs
The key performance indicators for our
Fryer Management Services are:-
1 – Franchise Development
Franchise Sales
US
UK
• The number of new franchisees and
territories that we are able to add each
year
• The number of operating MFU’s in the
19
25
15
Group
4
9
7
and for our Company-owned services:
2 – Fryer Management
• The number of seals that we fit each year
MFU’s at the year end
• The value of Filta Refrigeration work
performed
Our performance against each of these
indicators is summarized in the charts:
23
Franchise Sales
341
MFUs at y/e
21k
Seals Replaced
2016
2015
2014
2016
2015
2014
US
UK
300
250
210
41
39
39
3 – Company Owned Operations
Seals Replaced
21,345
19,089
14,528
Value of Filta Refrigeration work
1,606,552
1,240,279
1,026,360
2016
2015
2014
2016
2015
2014
We will seek modest growth in the
numbers of franchisees, ensuring that we
preserve the quality of our network, and
augment this with the sale of additional
territories to existing franchisees
Each additional MFU has a direct impact
on revenues as it increases the earning
capacity of franchisees. New MFU’s are
commissioned both when a new franchisee
is recruited and to enable the expansion of
existing franchises.
The number of seal repairs should increase
as we secure additional customers as,
typically, the number of times that a
refrigerator seal requires replacement is
fairly constant from year to year.
Filta Refrigeration work is a combination of
contracted service and maintenance work,
and bespoke installations performed for
customers.
15
Financial StatementsGovernanceStrategy and Operations Overview
Chief Financial Officer’s Review
Our recurring revenue business model delivered robust growth in 2016 driven by increased revenues in our fryer management and
company owned segments. Additionally, our underlying operating profit grew 4% to £1.15m, up from £1.11m in 2015 as displayed below.
This, in addition to a £1.0m increase in our deferred income account, reflects strong new and organic franchise growth.
Revenue
Group revenue for the financial year grew 27% to £10.1m (2015: £7.9m).
Revenue from our U.S. operations accounted for 58% of Group revenue (2015: 52%) with the remaining 42% (2015: 48%) delivered by
our U.K. operations. We experienced strong growth across three of our four revenue segments. While we experienced a slight revenue
shortfall in franchise development, actual transaction volumes were relatively flat but impacted by a shift to more organic growth on the
sale of new territories to existing franchisees. This resulted in more revenue being deferred than a traditional new franchise sale.
The growth in the recurring revenue streams of Fryer Management, Fita-Seal and Filta Refrigeration were significant with each
experiencing double digit sales increases. Fryer Management continues to be the leading driver of the business contributing £6.2m
(2015: £4.5m) on higher royalty and waste oil revenue while Filta Refrigeration, on higher job count, contributed £1.6m (2015: £1.2m) and
Fita-Seal saw an 12% increase in seals fitted resulting in revenue growing to over £1.0m (2015: £0.9m).
Underlying Operating Profit
Underlying operating profit was £1.15m (2015: £1.11m). While we experienced significant gross profit improvement it was driven largely
by higher sales volume, this being partially offset as we experienced some reduced margin impact from the mix of revenue across our
reporting segments. We had a substantial increase in waste oil sales where margins range from 18% to 22% against our overall group
gross margin of 44%.
We have deferred a total of £1.5m of revenue, of which £0.2m relates to opening package fees for franchises started in the first quarter of
2017, and will therefore be accounted for in that year, and £1.3m relates to territory fees on new franchises and will be recognised over
10 years. The reported revenue includes £0.5m released from deferred income and there is therefore a net increase in deferred revenue of
£1.0m during the year.
Underlying operating profit reconciliation
Underlying operating profit has been arrived at as follows
(Loss)/profit before tax
Non-recurring items (IPO costs and pre-IPO bonuses to directors and shareholders)
Finance costs
Underlying operating profit
2016
£
(218,244)
1,260,539
104,828
1,147,123
2015
£
376,270
656,000
73,721
1,105,991
Non-recurring items
The non-recurring costs for 2016 were £1.3m (2015: £0.7m) which relate to AIM admission costs of £0.6m and pre-IPO bonuses of £0.7m
paid to Jason Sayers and Victor Clewes, the principal shareholders prior to IPO (included in Directors’ emoluments on page 29). In
addition, £0.3m of additional admission costs were charged to equity.
Deferred Revenue
Deferred Revenue represents franchise fees collected but not yet recognised in reported revenue . When we sell new franchises two
separate fees are generated.
1.
The “Opening Package Fee”, which is paid for the tangible goods and training provided to a new franchisee.
2.
The “Territory Fee” , which is paid for the right to operate in an exclusive territory throughout the period of the franchise.
Under our revenue recognition policy, in accordance with IFRS accounting rules:
1.
The Opening Package Fee is recognized immediately as revenue upon the commencement of the franchise.
2.
The Territory Fee is deferred and recognized on a straight line basis over the term of the franchise (10 years in the US or 5 years in the
UK).
We consider that the internal performance of the business is best measured by recognizing this Territory Fee when all obligations have
been met (on launch) because the full cash payment has been received up front and there are no further costs to be incurred, the revenue
and costs are therefore fully aligned.
16
In order to reflect this approach, we use the “Adjusted EBITDA”, which adds the change in deferred revenue to reported EBITDA, as the
metric by which we measure and manage internal performance.
The following chart shows the components of the change in deferred revenue in 2016.
£1,749,452
£521,213
£1,263,423
£219,696
£961,906
£2,711,358
➞
Deferred
Revenue
Added
➞
Change in
Deferred
Revenue
Deferred
Revenue
Balance
Deferred
Revenue
Balance
➞➞
Deferred
Revenue
Released
Deferred
Revenue
Added
Franchise Territory
Fees recognized
to the P&L from
Balance Sheet
New Sales of
Franchise Territories
during current
period added to
the Balance Sheet
Start of
Current Period
Q4 2016 Delayed
Starts added to the
Balance Sheet
Amount in the
“Adjusted” section of
the current period’s
financial results
End of Current
Period
At the end of 2016, the deferred income account totalled £2.7m, of which £219,696 related to opening package fees as described above
and the balance related to territory fees. This is due to be recognized as income over the next 10 years as follows:
£400,881
£374,036
£365,414
£354,879
£329,164
£284,597
£240,423
£190,472
£118,612
£52,880
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
17
Financial StatementsGovernanceStrategy and Operations Overview Chief Financial Officer’s Review
Results for the year
The loss before tax was £0.2m (2015 – profit of £0.4m).
Taxation
We manage all taxes, both direct and indirect, to ensure that we pay the appropriate amount of tax in each country while ensuring that we
respect the applicable tax legislation and utilise, where appropriate, any legislative reliefs available. This tax strategy is reviewed, regularly
monitored and endorsed by the Board. Despite the loss at the Group level we generated profits at the subsidiary level in both the U.S.
and the U.K. The effective tax rates were 35% in the U.S. and 20% in the U.K. and the total tax charge was £0.1m (2015: £0.1m).
Earnings per share
The underlying earnings per share for the year were 5.05p (2015: 5.08p) while the net loss in the year of £0.3m resulted in a proforma basic
and fully diluted loss per share of 1.51p (2015: proforma earnings per share of 1.39p).
Dividends
It was indicated in our Admission Document that it was the Board’s intention to declare a maiden dividend in respect of 2016. To
enable the payment of a dividend, the Company applied to the Court to cancel the balance standing on the share premium account
on the Existing and New Ordinary Shares thereby creating a pool of reserves to be available to pay dividends. The Court approved our
application on 18 January 2017. The Board intends to pay a first interim dividend to its shareholders in the first half of 2017, in lieu of the
2016 dividend.
Cash flow
The Group is highly cash generative. The net cash inflow from operating activities before non-recurring items (note 25) in 2016 was £1.3m
(2015: £1.2m) as the Group continues to generate strong operating cash inflows. The cash outflow from investing activities was £0.2m
(2015: outflow £0.2m) due principally to the acquisition of software. The share issue net of share placing costs accounted for £3.7m of cash
inflow from financing activities and £0.1m of financing costs were incurred.
Liquidity
At the year end the Group had cash balances of £4.4m (2015: £1.0m) and outstanding borrowings of £1.2m (2015: £1.6m).
Brian Hogan
Chief Financial Officer
31 March 2017
18
Principal Risks and Uncertainties
Organizational risks
Risk
Failure to attract new franchisees in line with the strategic targets
may prevent the Group from achieving its operating targets
How we manage the risk
In the USA, which represents approximately 80% of the franchised
operations, we have an increasing number of franchisees who
are multi-unit operators, a trend which we are endeavouring to
develop. Thus, there is an increasing number of our new MFUs
(mobile filtration units) which are being taken up by existing
franchisees.
The failure of a major franchisee may lead to a loss of revenue and/
or a bad debt
We now have 182 franchisees and this is increasing each year,
with no franchisee accounting for more than 1% of the Group’s
revenues, thus mitigating our business risk.
Brand or reputational damage may be caused by the actions of
either franchisees or the company’s own employees
We provide detailed initial training for all new franchisees and
their operators. There are also refresher training programmes to
ensure that all franchisees are fully cognisant of all procedures to
be followed.
Undue influence by a major shareholder on the Company and its
Board may lead to decisions or actions which are not in the best
interests of the business
There is a majority of the Board who are not associated with those
members of the Board who are considered to be a concert party
and whose obligations to act in the best interests of shareholders
as a whole are unfettered.
O
v
e
r
v
i
e
w
S
t
r
a
t
e
g
y
a
n
d
O
p
e
r
a
t
i
o
n
s
Operational risks
Risk
An incident involving an employee or franchisee in the operation of
an MFU may result in a fatal or serious injury
How we manage the risk
We provide regular and comprehensive training to employees
and franchisees in the operation of MFU’s and other equipment
supplied or used in the Group’s business and the procedures are
reviewed regularly to ensure the highest safety levels.
A failure of the information or accounting systems employed by the
Group or a cyber-attack or data security breach may cause a loss of
vital information or render the Group unable to maintain adequate
accounting records
The Group has employed the same information system for several
years with a strong reputation and has proved to be highly reliable.
It has recently upgraded its accounting system to a “state-of-the-
art” system which also has a good reputation and is used by many
major organisations.
The loss of key people may compromise the Group’s or any part of
the Group’s ability to operate effectively.
We have widely spread knowledge of the Group’s operational
systems and procedures, thereby ensuring that there is not over-
dependence on any single person. We also have continuous
monitoring systems for the identification and progress with new
business opportunities, ensuring that there is a broad knowledge of
such opportunities.
19
Financial StatementsGovernance
Principal Risk and Uncertainties
Financial Risks
Risk
A significant fall in the value of the US Dollar (which accounts for
more than 70% of the Group’s earnings) against £ sterling may have
an adverse impact on the Group
How we manage the risk
The Group’s activities are such that, the US Dollar costs are covered
by US Dollar revenues and, similarly, sterling costs are covered by
sterling revenues. Furthermore, any third party debt is able to be
serviced by earnings in the currency of the debt and secured by
appropriately denominated assets.
Strategic Risks
Risk
Competition from new entrants to the market may create margin
pressure or loss of customers
How we manage the risk
We have established a market-leading position amongst the
third party providers of our services and we continually seek to
improve our service offering to ensure that we have the best option
available.
Change in consumer tastes or habits, as a result, for example, of
pressures from health watchdogs, may result in less demand for
fryers.
The demand for fried food has always been and continues to be
enormous. We consider that the services that we provide help to
mitigate the health risks of eating fried foods.
Improved fryers technology may reduce/resolve deterioration of
the oil and which may therefore require less frequent filtering and
replacement.
Whilst the technologies may improve, there will always be
deterioration of the oil and, therefore, a need for filtering and
replacement. The Board believes that any improvements in
technology will simply drive standards to a higher required level.
Franchisees may seek to impose commercial leverage on the
Group, resulting in reduced margins and profitability
We devote a great deal of resource to protecting and assisting our
franchisees, thereby building a strong bond of trust. We believe
that, for as long as we provide the best option and the opportunity
for franchisees to achieve success, there would be little reason for
them to seek commercial advantage.
20
Governance
Board of Directors
22 Corporate Social Responsibility Report
24
25 Corporate Governance Statement
28 Directors’ Remuneration Report
31 Directors’ Report
21
21
Financial StatementsGovernance OverviewStrategy and Operations Corporate Social Responsibility Report
1.7m lts
Fuel Saved
500 mt
Plastic Saved
23.7k mt
Carbon Offset
The whole concept of FiltaFry was built
around sustainability. That, combined
with its commitment to the community,
demonstrates Filta’s social responsibility.
Environment
Filta services over 5,000 customers every
week and to date has recycled almost
¼ million metric tonnes (‘mt‘) of oil! Filta
has been helping the environment before
“environmentally friendly” was called
“being green.”
To support Filta customer’s sustainability
initiatives, measurable / quantifiable
Environmental Impact Reports™, detailing
their contribution to the environment are
provided directly to customers on a regular
basis. For samples go to www.gofilta.com/
go_green
We believe it is our responsibility to
contribute to the environment. We’re
constantly in search of ways to be green
internally and externally. We also every
day, continue to do our part to preserve
the environment. Every product and service
we offer goes through rigorous testing to
ensure we are increasing sustainability while
saving our customers money. We believe
it’s our responsibility to keep customers
aware of what they can do to contribute.
Environmental Impact Facts
FiltaFry
In 2016, FiltaFry customers saved over
7,000 mt of fry oil.
Using the Environmental Impact Report
app, available to all Franchise Owners, we
calculate that this equates to the following
savings for the environment due to the oil
being reused:
Fertilizer
Lime
Petrol & Diesel
Plastic
Cardboard
Carbon offset
530 mt
4,500 mt
1.7m lts
500 mt
330 mt
9,200 mt
FiltaBio
In 2016, Filta collected 5,500 mt of waste
oil from customers which was converted to
biodiesel. The environmental savings for
using biodiesel in place of diesel are shown
below:
Carbon Monoxide
(Greenhouse Gas)
Carbon Dioxide
(Greenhouse Gas)
40 mt
14,500 mt
7,280
971
208
5,824
777
Fryertown Grille
123 Main Street, Fryertown, OK
12/01/2016 -
11/30/2017
7,280 pounds
5,824 pounds
13.9
9.8
15.6
582.4
4,963.7
249.6
166.4
156.2
55.5
17.5
91.8
10.1
810.0
4,662.1
233
3.9
4.4
43.2
3.4
15,802.5
790
Fryertown Grille
12/01/2016 - 11/30/2017
416 LBS
20,508 LBS
598 LBS
1,023 TREES
22
Quick facts
on Filta and
Oceans of
Hope:
• First participated in the May
2014 New Smyrna Beach,
FL surf event
• Sponsored or participated in 9
events since 2014
• 405 participant athletes with
limited mobility experienced
adaptive surfing since 2014
• “Mavericks” level sponsorship
2016
• FiltaCares Campaign to
continue support through 2017
Community
Since 2014, Filta has sponsored The
Oceans of Hope Foundation with corporate
volunteers and through ongoing charitable
giving. Our Filta Corporate Office staff was
inspired by the organization through our
own Inside Sales Rep, Danny Paltjon. For
those who do not know Danny’s story, on
May 1, 2003, he sustained a serious spinal
cord injury while playing in a Men’s softball
game. An avid outdoorsman and athlete, he
was unprepared to face his “new life” limited
to a wheelchair. After years of therapy,
Danny sought to recapture his adventurous
spirit and realized anything is possible with
determination and the help of others.
In light of this, Danny started a non-profit
organization called Oceans of Hope
Foundation. It was established to offer
individuals who are physically or mentally
challenged the opportunity to get into
the ocean water and experience the joy of
riding ocean waves. The mission statement
of Oceans of Hope is simple: To provide
safe, secure and competent support of
access to outdoor recreation resources
for those who are physically or mentally
challenged, which will instill a sense of
personal self-confidence, self-reliance
and hope.
Today, FiltaCares continues the corporate
commitment. As a “Mavericks” level
corporate sponsor our financial support and
continued participation will aid The Oceans
of Hope Foundation to unlock barriers that
exist for individuals who have difficulty
traversing the world of sun, sand, wind,
and water by introducing individuals with
limited mobility to adaptive surfing. See
www.gofilta.com/company/filta-cares.
S
t
r
a
t
e
g
y
a
n
d
O
p
e
r
a
t
i
o
n
s
G
o
v
e
r
n
a
n
c
e
23
Financial Statements Overview
Board of Directors
Tim Worlledge
Non-Executive Chairman
Tim is a Director of Evolution Securities China with 30 years’ experience in financial services. Tim is a former
Director of the Quoted Companies Alliance and Head of Corporate Finance at Evolution Group and Williams de
Broe.
Jason Sayers
Chief Executive Officer
Jason founded Filta in the UK in 1996 and has been the driving force for the business. Jason moved to Florida in
2003 to successfully grow the US business. Jason has a degree in European Business System and Major Systems
Analysis.
Brian Hogan
Finance Director
Brian is a senior financial executive with 30 years’ experience including roles as the Corporate Controller at
Andersen Distribution and Vice President of Finance Amkor Technologies (based in Asia). Since 1995 Brian has
held various North American Vice President and Chief Financial Officer roles, most recently as Chief Financial
Officer at Canada-based private equity firm Cobalt Capital Inc. Brian has a degree in Accounting, an MBA and
Certified Public Accountant (inactive).
Victor Clewes
Executive Director
Victor is a former land and property buyer for CCHA Housing Association, founded Emerson Richards estate
agency and financial services (1987) and consequently in 2000 the first high street mortgage broking chain, The
Mortgage Advice Shops, which were franchised throughout the UK. Victor joined Filta at inception as Managing
Director (1996) to develop the franchise business model and has steered the US operation to date as Chairman.
Jlubomir Urosevic
Executive Director
Jlubomir joined FiltaFry Ltd as Commercial Director (1999), becoming Managing Director of the UK operations
(2000). Jlubomir has overseen the FiltaFry UK franchise network, developed the internal franchise network and
has introduced Fita-Seal and Filta-Refrigeration services to the business. Jlubomir was formerly a Midlands Area
Manager and Regional Developer Wales & South West for TNT, co-developing the successful TNT overnight
business.
Graham Woolfman
Non-Executive Director
Graham is a Fellow of the Institute of Chartered Accountants in England & Wales and previous partner and head
of Corporate Finance at Levy Gee. Graham has over 25 years’ experience advising growth businesses and was
a founder Director of Gateway VCT plc. Graham is currently Managing Director of Intrust Corporate Finance
Limited.
Roy Sayers
Non-Executive Director
Roy was appointed Non-Executive Director of Filta Group UK in 2000 serving the company from that date. RS
has a background in civil engineering and property development, founding, operating and running his own
companies in both sectors for many years.
24
Corporate Governance Statement
O
v
e
r
v
i
e
w
G
o
v
e
r
n
a
n
c
e
Compliance
As the company is listed on the AIM Market of the London Stock Exchange, it is not required to comply with the provisions of the UK
Corporate Governance Code (the “Code”). However, the Directors recognise the value and importance of meeting the principles of good
corporate governance and the Company complies, as appropriate with the provisions of the Corporate Governance Guidelines for Smaller
Quoted Companies, published by the Quoted Companies Alliance. This part of the Report describes how Filta has complied with the
Guidelines since 4 November 2016, when it was admitted to AIM, and the corporate governance arrangements that are in place.
The Board
At the date of this Report, the Board has seven members, whose biographies are set out on page 24 and whose roles are set out below:
Director’s Name
Position(s)
Tim Worlledge
Jason Sayers
Brian Hogan
Victor Clewes
Jlubomir Urosevic
Roy Sayers
Graham Woolfman
Non-Executive Chairman – member of Audit Committee and Chairman of Remuneration Committee
Executive Director – Group Chief Executive Officer
Executive Director – Group Chief Financial Officer
Executive Director
Executive Director
Non-Executive Director – member of Audit Committee and of Remuneration Committee
Non-Executive Director – Chairman of Audit Committee and member of Remuneration Committee.
Responsibilities
The Board, as a whole, is responsible for the overall management of the Group and for its strategic direction, including approval of the
Group’s strategy, its annual business plans and budgets, the interim and full year financial statements and reports, any dividend proposals,
the accounting policies, major capital projects, any investments or disposals, its succession plans and the monitoring of financial
performance against budget and forecast and the formulation of the Group’s risk appetite including the identification, assessment and
monitoring of Filta’s principal risks. In accordance with best practice, Filta has adopted a policy of Matters Reserved for the Board. These
are reviewed annually and any items not included within the policy (such as responsibility for implementing the Board’s strategy and
day-to-day management of the business) are delegated to the management team.
The Chairman’s principal responsibilities are to ensure that the Company and its Board are acting in the best interests of shareholders. His
leadership of the Board is undertaken in a manner which ensures that the Board retains integrity and effectiveness.
The Group Chief Executive Officer has, through powers delegated by the Board, the responsibility for leadership of the management
team in the execution of the Group’s strategies and policies and for the day-to-day management of the business.
The Board has regular contact with its advisers to ensure that it is aware of changes in normal corporate governance procedures and
requirements and that the Group is, at all times, compliant with applicable rules and regulations. The Company holds appropriate
insurance cover in respect of possible legal action against its Directors.
Non-Executive Directors and Independence
The Directors are satisfied that the balance of Executive and Non-Executive Directors is appropriate and that no individual or group may
dominate the Board’s decisions. The Non-Executive Directors, together, have a range of experience which enables them to provide the
necessary guidance, oversight and advice to enable the Board to operate effectively.
Tim Worlledge and Graham Woolfman, Chairman and Non-Executive Director, are considered to be independent of management. Roy
Sayers, as a significant shareholder and being related to the Group Chief Executive, is not considered to be independent.
The Chairman and the Non-Executive Directors have letters of appointment, which set out their duties and responsibilities. They are
not eligible to participate in incentive arrangements or to receive pension provision. The following table shows details of their terms of
appointment for the Non-Executive Directors in place at the date of this Report:
Director
Tim Worlledge
Roy Sayers
Graham Woolfman
Date Current Term Commenced
Expected Expiry Date of Current Term
04/11/2016
04/11/2016
04/11/2016
03/11/2019
03/11/2019
03/11/2019
25
Financial StatementsStrategy and Operations
Corporate Governance Statement
All Directors may receive independent professional advice at Filta’s expense, if necessary, for the performance of their duties. This is in
addition to the access every Director has to the Company Secretary and his team. The Company Secretary is responsible for advising the
Board on all matters of corporate governance, ensuring that all Board procedures are followed and facilitating training.
There is a programme of regular reviews of performance and developing best practice in matters such as employment, health and
safety, environmental and social and community interests (including human rights and ethical issues). Filta believes that Corporate Social
Responsibility is necessary to support responsibly-grounded business decision making that considers the broad impact of corporate
actions on people, communities, and the environment. Accordingly, the Board takes account of the significance of environmental, social
and governance matters (ESG) when making decisions.
The Board has adopted principles of good boardroom practice which set out procedures on how Directors are given accurate, timely
and clear information and how they can seek and obtain information or advice necessary for them to discharge their duties and these
arrangements are reviewed annually as part of the Board’s evaluation process referred to above.
Under the Companies Act 2006, a director must avoid a situation where he/she has, or can have, a direct or indirect interest that conflicts,
or possibly may conflict, with the Company’s interest. The Companies Act 2006 allows directors of public companies to authorise conflicts
and potential conflicts where appropriate and where the articles of association (“Articles”) contain a provision to this effect, as Filta’s
Articles do. Accordingly, the Board has adopted procedures for the Directors to report any potential or actual conflict to the Board
for their authorisation where appropriate. Each Director is aware of the requirement to seek approval of the Board for any new conflict
situations, as they may arise. The process of reviewing conflicts disclosed, and authorisations given, will be repeated both annually and
following the appointment of any new Director. Any conflicts or potential conflicts considered by the Board and any authorisations given
are recorded in the Board minutes and in a register of Director’s conflicts which is maintained by the Company Secretary.
Attendance at Board and Committee meetings
The Board would normally meet 10 times in each year and there would, additionally, normally be 2 meetings of the Audit Committee and
2 meetings of the Remuneration Committee at the appropriate times of the year. The Board held one Board Meeting during the period
from its listing up to the end of the year; this meeting was attended by all of the Directors.
No Remuneration Committee meetings were required or held as the Directors’ remuneration had been fixed immediately prior to listing.
There was one meeting of the Audit Committee during the two months that Filta was listed on AIM up to 31 December 2016.
Appointment and Resignation of Directors
Jason Sayers and Roy Sayers were appointed as Directors on 31 March 2016, upon the formation of the Company and the remaining
Directors were appointed on 10 June 2016.
There have not been any resignations or appointment of new directors since the Company’s listing in November. At the forthcoming
AGM, Jason Sayers will be retiring by rotation under the Articles of Association and he will be standing for reappointment. In addition, all
of Tim Worlledge, Graham Woolfman, Brian Hogan, Jlubomir Urosevic and Victor Clewes, who were appointed by the Board, will also be
retiring and standing for reappointment.
Board Committees
The Board has delegated specific responsibilities to two standing committees of the Board: Audit and Remuneration. The membership
of these committees and a summary of their main duties under their Terms of Reference are set out below. The full Terms of Reference
may be viewed on the Group’s website (www.filtaplc.com). The Terms of Reference for each of the Committees were set at the time of the
admission to AIM but they are reviewed continuously to ensure continued compliance with best practice.
The Board has elected not to establish a Nominations Committee, preferring instead that the Board should, itself, deal with such matters,
including succession planning and the balance of the Board.
Audit Committee
The Chairman of the Audit Committee is Graham Woolfman, FCA, and the other members of the committee are Tim Worlledge, FCA,
and Roy Sayers. There was one meeting of the Audit Committee during the two months that Filta was listed on AIM up to 31 December
2016. The Committee’s agendas are planned to ensure all the Committee’s duties are discharged in a timely manner in accordance with
its terms of reference. The Group’s external auditors and Executive Directors attend the Committee’s meetings by invitation and the
Committee ensures that the auditors also have an opportunity to speak to the Committee in the absence of management.
26
Remuneration Committee
The Chairman of the Remuneration Committee is Tim Worlledge and the other members of the committee are Roy Sayers and Graham
Woolfman.
The Committee did not hold any meetings in the period to 31 December 2016 but has held one meeting since that date.
A Remuneration Report from the Chairman of the Remuneration Committee is set out on pages 28 to 30.
Relations with shareholders
Filta places a great deal of importance on communication with its stakeholders and is committed to establishing constructive relationships
with investors and potential investors in order to assist it in developing an understanding of the views of its shareholders.
Filta maintains a dialogue with shareholders through formal meetings such as the AGM and through presentations to institutional
shareholders, typically by the Group Chief Executive and the Group Finance Officer, following the full year and interim results. A main
purpose of such meetings is to appreciate better shareholders’ views and expectations and to enhance investors’ understanding of the
Company’s strategy and how that strategy is to be implemented. The views of the shareholders expressed during these meetings are
reported to the Board, ensuring that all members of the Board understand the views of major shareholders.
Information on the Investor Relations section of the Group’s website (www.filtaplc.com) is kept updated and contains details of relevant
developments, regulatory announcements, financial reports and results presentations.
Model Code
Filta complies with a code on securities dealings in relation to its Ordinary Shares which is consistent with the Model Code published in
the Listing Rules. This code applies to the Directors and relevant employees of Filta and is reviewed regularly to ensure its compliance with
normal practice.
Takeover Directive
The Group has addressed the matters required to be addressed by the Takeover Directive which was implemented in the UK in
accordance with statutory provisions in Part 28 of the Companies Act 2006 in the Directors’ Report. Please refer to the Directors’ Report of
the Directors for further details.
S
t
r
a
t
e
g
y
a
n
d
O
p
e
r
a
t
i
o
n
s
G
o
v
e
r
n
a
n
c
e
27
Financial Statements Overview
Directors' Remuneration Report
The Directors present their Remuneration Report for the period ended 31 December 2016.
Committee
Details of the Remuneration Committee’s composition are contained in the Corporate Governance Report on page 27. There were no
meetings of the Committee during 2016. The terms of reference of the Committee are available from the Company Secretary or the
Group’s website at: www.filtaplc.com
Company’s policy on remuneration of Directors
The Board recognises that the Directors’ remuneration is of legitimate concern to shareholders and is committed to following current best
practice.
The Remuneration Committee has responsibility for determining, within agreed terms of reference, the Group’s policy on the
remuneration of senior executives and specific remuneration packages for Executive Directors including pension payments and
compensation rights. It is also responsible for making recommendations for grants of options under the Share Option Plan.
The remuneration of Non-Executive Directors is a matter for the Board. It comprises fees in connection with their services provided to the
Group, to the Board and to Board Committees.
No Director may be party to the approval process of their own remuneration.
The main components of their remuneration are:
Basic salary or fees
The basic salary or fees for each Director are determined by the Remuneration Committee, taking into account the performance of the
individual and information, where available, on the rates of salary for similar posts in comparable businesses. The salaries and fees paid to
the Directors in the 2 month period following Admission were £119,761 and it is estimated that in a full year these would be the equivalent
to approximately £720,000 if prorated.
Annual bonus
Bonuses were paid to Directors of £0.7m (2015: £0.7m) prior to Admission. There have not been any bonuses paid to Directors in respect
of the period since Admission.
Pension
There were not any contributions made by the Group to Directors’ pension plans during the year.
Share options
The Company is currently planning on instituting a Share Option Plan, in 2017, and therefore there were no options in issue to Directors
in 2016. It is intended that options will be issued under the Plan during the 4 week period following the announcement of the results for
the year ended 31 December 2016. However, due to the size of their existing beneficial holdings, Jason Sayers and Victor Clewes are not
permitted to participate in the Share Option Plan. The Non-Executive Directors are also not permitted to participate in the Plan.
Taxable benefits
Four of the Directors are provided with company cars and two with Company-paid medical insurance but, apart from these benefits, none
of the Directors receives any other taxable benefits.
28
Directors’ emoluments
The Directors’ emoluments during the period are set out below:
Executive Directors
Jason Sayers
Brian Hogan
Victor Clewes
Jlubomir Urosevic
Non-Executive Directors
Tim Worlledge
Roy Sayers
Graham Woolfman
Total
Salary/Fees
£
Bonus
£
Pension
£
Benefits
£
Total
£
2015 Total
£
184,515
76,881
184,515
85,000
5,833
5,000
5,000
546,745
339,968
18,452
339,968
–
–
–
–
698,388
–
–
–
–
–
–
–
–
14,814
3,791
4,765
16,159
–
12,333
–
51,861
539,298
99,124
529,248
101,159
5,833
17,333
5,000
1,296,994
439,467
–
429,418
101,159
–
–
–
970,044
Company’s policy on contracts of service
The Executive Directors have service contracts whose notice periods may not exceed 12 months in length. Their service contracts do not
contain any provisions which provide for pre-determined compensation on termination which exceeds 12 months’ salary and benefits.
Non-Executive Directors are appointed under letters of appointment which may be terminated on 3 months’ notice. Details of notice
periods for each of the Directors under their contracts of service or letters of appointment are:
Date of appointment
Notice period
Executive Directors
Jason Sayers
Brian Hogan
Victor Clewes
Jlubomir Urosevic
Non-Executive Directors
Tim Worlledge
Roy Sayers
Graham Woolfman
26 October 2016
26 October 2016
26 October 2016
26 October 2016
26 October 2016
26 October 2016
26 October 2016
6 months
6 months
6 months
6 months
3 months
3 months
3 months
Directors’ interests
The interests and beneficial interests of the Directors in the shares of the Company at 31 December 2016 are set out below:
O
v
e
r
v
i
e
w
G
o
v
e
r
n
a
n
c
e
Executive Directors
Jason Sayers
Brian Hogan
Victor Clewes
Jlubomir Urosevic
Non-Executive Directors
Tim Worlledge
Roy Sayers
Graham Woolfman
No of Shares
No of Share options
11,614,680*
4,558,750
1,309,690
30,000
9,688,720*
18,000
–
–
–
–
–
–
–
*
includes 7,926,560 shares held by The Meredian Settlement Trust. Roy Sayers is the settlor and a trustee of the Trust. Jason Sayers is a life tenant and he and Mrs. Dawn Sayers, wife
of Roy Sayers, are the beneficiaries of the Trust.
29
Financial StatementsStrategy and Operations
Directors' Remuneration Report
Consideration of Shareholder Views
The Remuneration Committee considers feedback received from shareholders during any meetings or otherwise from time to time,
when undertaking the Group’s annual review of its Policy. In addition, the Remuneration Committee will seek to engage directly with
institutional shareholders and their representative bodies should any material changes be made to the Policy.
Consideration of Employment Conditions elsewhere in the Group
The Remuneration Committee considers any general basic salary increase for the broader employee population when determining the
annual salary increases for the Executive Directors. The Remuneration Committee did not consult with other employees with regard to
remuneration of the Executive Directors.
On behalf of the Board
Tim Worlledge
Chairman
31 March 2017
30
Directors' Report
O
v
e
r
v
i
e
w
G
o
v
e
r
n
a
n
c
e
Introduction
The Directors present their report and the audited financial statements for the period ended 31 December 2016.
Principal Activity
The Strategic Report, which is set out on pages 7 to 19 provides a comprehensive review of the development, performance and future
prospects of the business for the year ended 31 December 2016 including a description of the Company’s strategy, business models and
business overview.
Results and Dividends
The loss for the year was £0.3m (2015: profit of £0.3m). Further details are set out on Page 36. No dividend has been paid or proposed for
the year or in the prior years
Annual General Meeting
The Annual General Meeting of the Company will take place on 1 June 2017 at The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP,
commencing at 11:00 a.m. Details of the resolutions and voting procedures are set out in the Notice of Annual General Meeting which was
sent to shareholders on 8 May 2017.
Directors
The names of the Directors who served during the period were:
Executive directors
Jason Sayers
Brian Hogan
Victor Clewes
Jlubomir Urosevic
Non-Executive Directors
Tim Worlledge
Roy Sayers
Graham Woolfman
Appointed
31 March 2016
10 June 2016
10 June 2016
10 June 2016
10 June 2016
31 March 2016
10 June 2016
The profiles of the Directors of the Company serving at the date of issue of this report are set out on page 24.
No Director during the year had a material interest in any contract of significance to which either the Company or any of its subsidiaries
were a party.
Substantial Interests
As at 31 December 2016, the shareholders of the Company holding interests amounting to 3% or more of the ordinary share capital of the
Company were as follows:
Shareholder Name
Meredian Settlement Trust *
Victor Clewes
Jason Sayers
Roy Sayers
Jlubomir Urosevic
Livingbridge VC LLP
Ennismore Fund Management Limited
Miton Group
Blackrock, Inc
Number of ordinary shares
Percentage of issued
ordinary shares
7,926,560
4,558,750
3,688,120
1,762,160
1,309,690
2,644,000
1,538,480
964,520
850,000
29.4
16.9
13.7
6.5
4.9
9.8
5.7
3.6
3.2
*
Roy Sayers is the settlor and a trustee of the Meredian Settlement Trust. Jason Sayers is a life tenant and he and Mrs. Dawn Sayers, wife of Roy Sayers, are the beneficiaries of the
Trust.
The percentage of the ordinary shares that are not held in public hands is 71.6%.
31
Financial StatementsStrategy and Operations
Directors' Report
There are no restrictions on the transfer of Filta Group Holdings plc’s AIM-listed securities.
Filta Group Holdings plc has not applied or agreed to have any of its securities (including its AIM-listed securities) admitted or traded on
any other exchanges or trading platforms.
Political Contributions
It is the Group’s policy not to make political donations, accordingly there were no political donations made during the year (2015 – £ nil).
Going Concern
The Directors have prepared the financial statements on the going concern basis, full details of which are set out in note 2 to the financial
statements.
Independent Auditors
Our auditor, Crowe Clark Whitehill LLP has indicated its willingness to continue in office as auditors of the Company. In accordance with
section 489 of the Companies Act 2006, the Board has decided to re-appoint Crowe Clark Whitehill LLP as auditors and a resolution
concerning their re-appointment will be tabled to the members at the forthcoming Annual General Meeting.
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Annual Report and the 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
elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the EU.
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 EU have been followed, subject to any material departures disclosed and explained in
the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company 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 to 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 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 Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are disclosed on pages 24 and page 25 and who were in office on the date of approval
of these financial statements have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is
unaware. Each of the Directors has confirmed that they have taken all the steps that they ought to have taken as Directors in order to make
themselves aware of any relevant audit information and to establish that it has been communicated to the auditor.
Approval
The Report of the Directors’ was approved by the Board on 31 March 2017 and signed on its behalf by:
Brian Hogan
Company Secretary
31 March 2017
32
Financial
Statements
34
36
37
38
39
40
41
Independent Auditor’s Report to the Members
of Filta Group Holdings PLC
Consolidated Statement of Comprehensive
Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Parent Company Statement of Financial
Position
Parent Company Statement of Changes in
Equity
Parent Company Statement of Cash Flow
Notes to the Financial Statements
42
43
59 Corporate Information
33
Independent Auditor’s Report to the Members of
Filta Group Holdings PLC
year ended 31 December 2016
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF FILTA GROUP HOLDINGS PLC
We have audited the financial statements of Filta Group Holdings Plc for the year ended 31 December 2016, which comprise the
Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Cash
Flows, Consolidated Statement of Changes in Equity and the Parent Company Statement of Financial Position, Parent Company
Statement of Changes in Equity, Parent Company Statement of Cash Flows and the related notes.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRS) 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 we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Report, 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.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and the Parent Company’s affairs as at 31 December 2016
and of the Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the Directors’ Report and Strategic Report have been prepared in accordance with applicable legal requirements.
34
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the financial 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
Leo Malkin (Senior Statutory Auditor)
For and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
St Bride’s House
10 Salisbury Square
London EC4Y 8EH
31 March 2017
35
Financial StatementsGovernance OverviewStrategy and Operations Consolidated Statement of Comprehensive Income
year ended 31 December 2016
Revenue
Cost of sales
Gross profit
Other income
Distribution costs
Administrative expenses
Underlying operating profit
Costs of IPO
Pre-IPO bonus to shareholders
(Loss)/profit from operations
Finance costs
(Loss)/profit before tax
Income tax expense
Net (loss)/profit attributable to owners
Other comprehensive income
Exchange differences on translation of foreign operations
Total other comprehensive income for the year
(Loss)/profit and total comprehensive income for the year
Proforma basic and fully diluted earnings per share – pence
Underlying earnings per share – pence
The (loss)/profit from operations for the year arises from continuing operations.
2016
£
10,075,239
(5,668,787)
4,406,452
25,186
(80,283)
(4,464,771)
1,147,123
(580,603)
(679,936)
(113,416)
(104,828)
(218,244)
(124,337)
(342,581)
Pro forma
2015
£
7,925,272
(4,207,619)
3,717,653
36,177
(83,799)
(3,220,040)
1,105,991
–
(656,000)
449,991
(73,721)
376,270
(74,060)
302,210
(185,557)
(185,557)
(528,138)
(45,372)
(45,372)
256,838
(1.51)
5.05
1.39
5.08
Notes
5
6
9
10
12
12
36
Consolidated Statement of Financial Position
year ended 31 December 2016
Notes
2016
£
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Amounts due from related parties
Deposits
Trade receivables
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Borrowings
Amounts due to directors
Deferred income
Non-current liabilities
Borrowings
Deferred income
Total liabilities
Equity
Share capital
Share premium
Accumulated losses
Translation reserve
Other reserves
Total equity
Total equity and liabilities
Pro forma
2015
£
1,120,913
520,439
89,665
169,612
1,762
214,819
2,117,210
1,591,210
299,379
978,939
2,869,528
4,986,738
1,725,676
597,167
1,522,377
194,216
4,039,436
1,190,651
755,965
166,624
–
2,572
379,405
2,495,217
1,960,693
376,015
4,392,350
6,729,058
9,224,275
1,989,885
103,812
–
400,881
2,494,578
15
11
14
27
16
17
18
19
20
20
1,050,992
2,310,477
3,361,469
5,856,047
1,000,771
1,555,235
2,556,006
6,595,442
12,22
22
23
2,695,266
3,480,191
(2,256,539)
(260,403)
(290,287)
3,368,228
9,224,275
–
–
(1,913,958)
(74,846)
380,100
(1,608,704)
4,986,738
The financial statements were approved and authorised for issue by the board on 31 March 2017 and were signed on its behalf by:
Brian Hogan
Chief Financial Officer
37
Financial StatementsGovernance OverviewStrategy and Operations
Consolidated Statement of Changes in Equity
year ended 31 December 2016
Share
Capital
£
–
–
–
–
–
–
Share
Premium
£
–
–
Other
Reserves
£
–
–
Merger
Reserve
£
380,100
–
Foreign
Exchange
Reserve
£
(29,474)
–
Retained
Earnings
£
(2,216,168)
302,210
Total
Equity
£
(1,865,542)
302,210
–
–
–
–
–
–
–
–
–
380,100
(45,372)
(45,372)
(74,846) (1,913,958) (1,608,704)
–
380,100
–
(74,846)
–
(1,913,958)
(342,581)
(1,608,704)
(342,581)
–
519,050
–
–
2,176,216
2,695,266
–
3,789,064
(308,873)
–
–
3,480,191
–
–
–
49,400
–
49,400
–
–
–
–
(719,787)
(339,687)
(185,557)
–
–
–
–
(185,557)
4,308,114
(308,873)
49,400
1,456,429
(260,403) (2,256,539) (3,368,228)
–
–
–
–
–
Balance at 1 January 2015
Profit for the year
Foreign exchange translation
differences
Balance at 31 December 2015
Balance at 1 January 2016
Loss for the year
Foreign exchange translation
differences
Issue of share capital (note 22)
Share issue expenses
Share based payments (note 22)
Group reconstruction (note 22)
Balance at 31 December 2016
38
Consolidated Statement of Cash Flows
year ended 31 December 2016
Operating activities
(Loss)/profit before tax
Adjustments for non-cash operating transactions:
Finance costs
Depreciation
Amortization
Loss on disposal of tangible fixed assets
Share based payment charge
Movements in working capital:
Increase in trade and other receivables
(Decrease) / increase in trade and other payables
Decrease in inventories
Increase in deferred revenue
Taxes paid
Net cash flow from operations
Investing activities
Purchase of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Purchase of other intangible assets
Net cash used in investing activities
Financing activities
Proceeds/(repayment) of borrowings
Net proceeds from issue of share capital
Interest paid
Net cash from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Exchange differences on cash and cash equivalents
Cash and cash equivalents, end of year
2016
£
Pro forma
2015
£
(218,244)
376,270
104,828
118,855
63,177
–
49,400
118,016
(964,536)
134,951
(76,636)
827,962
–
39,757
(43,269)
–
(153,716)
(196,985)
(146,065)
3,999,241
(104,828)
3,748,348
3,591,120
978,939
(177,709)
4,392,350
15
15
18
18
73,721
90,257
53,866
8,920
–
603,034
(254,865)
(130,641)
(49,550)
452,304
(54,369)
565,913
(179,923)
64,138
(60,271)
(176,056)
290,953
–
(69,961)
220,992
610,849
452,121
(84,031)
978,939
39
Financial StatementsGovernance OverviewStrategy and Operations
Parent Company Statement of Financial Position
year ended 31 December 2016
Assets
Non-current assets
Investments in subsidiaries
Amount due from related parties
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Total liabilities
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity
Total equity and liabilities
Notes
2016
£
13
16
18
22
22
23
2,176,216
674,573
2,850,789
25,808
3,048,174
3,073,982
5,924,771
4,074
4,074
2,695,266
3,480,191
49,400
(304,160)
5,920,697
5,924,771
The financial statements were approved and authorised for issue by the board on 31 March 2017 and were signed on its behalf by:
Brian Hogan
Chief Financial Officer
40
Parent Company Statement of Changes in Equity
year ended 31 December 2016
On incorporation
Issue of share capital (note 22)
Share issue expenses
Loss for the year
Share based payment (note 23)
Balance at 31 December 2016
Share
Capital
£
–
2,695,266
–
–
–
2,695,266
Share
Premium
£
–
3,789,065
(308,874)
–
–
3,480,191
Other
reserve
£
–
–
–
–
49,400
49,400
Retained
Earnings
£
–
–
–
(304,160)
–
(304,160)
Total
Equity
£
–
6,484,331
(308,874)
(304,160)
49,400
5,920,697
41
Financial StatementsGovernance OverviewStrategy and Operations Parent Company Statement of Cash Flows
year ended 31 December 2016
Operating activities
Loss before tax
Movements in working capital:
Increase in trade and other receivables
Increase in trade and other payables
Share based payment charge
Net cash from operations
Investing activities
Decrease in borrowings
Net cash used in investing activities
Financing activities
Proceeds from issue of share capital, net of costs
Net cash from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of year
2016
£
(304,160)
(25,808)
4,074
49,400
(276,494)
(674,573)
(674,573)
3,999,241
3,999,241
3,048,174
–
3,048,174
42
Notes to the Financial Statements
year ended 31 December 2016
1. General Information
Filta Group Holdings plc was incorporated in England and Wales on 31 March 2016.
The Company has its primary listing on the AIM market of the London Stock Exchange. The Company acts as the holding company
of a group of subsidiaries that are involved in the franchising of on-site environmental kitchen solutions to restaurants, catering
establishments and institutional kitchens. The services include microfiltration of cooking oil, fryer cleaning, temperature calibration,
waste oil disposal and specially designed filters for refrigeration units and coolers. The Filta Group sells franchises and operates in the
UK and the United States. Additionally, the Company operates two direct sale businesses including refrigeration seal replacement and
the installation, repair and maintenance of refrigeration and aircon units. Further details of the Company’s subsidiaries are provided in
Note 13.
2. Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) as adopted for use in the European Union including interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC), and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The consolidated financial statements have been prepared under the historical cost convention except for financial instruments that
have been measured at fair value through profit and loss. The presentational and functional currency of the Company is Pounds
Sterling, which is the currency of the primary economic environment in which the Group operates.
Group reconstruction
Filta Group Holdings plc entered into an agreement to acquire the entire issued share capital of each of The Filta Group Limited and
The Filta Group, Inc. on 26 October 2016 from Cookband Limited for nil consideration. The reorganisation was effected by way of
share for share exchanges whereby each of The Filta Group Limited and The Filta Group, Inc. became wholly-owned subsidiaries (the
“Subsidiaries”) of Filta Group Holdings plc as it is currently constituted.
The directors consider the substance of the acquisition of the Subsidiaries by Filta Group Holdings plc is that of a combination of
entities under common control and therefore it fell outside the scope of IFRS 3 (revised 2008).
In accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, in developing an appropriate accounting
policy, the Directors have considered the pronouncements of other standard setting bodies and specifically looked to accounting
principles generally accepted in the United Kingdom (“UK GAAP”) for guidance (FRS 102) which does not conflict with IFRS and reflects
the economic substance of the transaction.
Under UK GAAP, the assets and liabilities of both entities are recorded at book value, not fair value. Intangible assets and contingent
liabilities are recognised only to the extent that they were recognised by the legal acquirer in accordance within applicable IFRS.
No goodwill is recognised, any expenses of the combination are written off immediately to the income statement and comparative
amounts, if applicable, are restated as if the combination had taken place at the beginning of the earliest accounting period presented.
Therefore, although the Group reconstruction completed in October 2016, and Filta Group Holdings plc was incorporated on 31 March
2016, the consolidated financial statements are presented as if the Group structure has always been in place, including the activity from
incorporation of the Group’s principal subsidiaries. All entities had the same management as well as controlling shareholders. The
comparative amounts as at 31 December 2015 and for the period then ended comprise the combined activities of the Subsidiaries and
are prepared on a pro forma basis.
The Directors have decided that it is appropriate to reflect the combination using merger accounting principles as a group
reconstruction under FRS 102 in order to give a true and fair view. No fair value adjustments have been made as a result of the
combination.
The consolidated financial statements comprise the financial information of the Company and its subsidiaries (the “Group”) made
up to the end of the reporting period. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. The consolidated financial
statements present the results of the Company and its subsidiaries and joint arrangements as if they formed a single entity. Inter-
company transactions and balances between group companies are therefore eliminated in full. The financial information of subsidiaries
is included in the Group’s financial statements from the date that control commences until the date that control ceases.
43
Financial StatementsGovernance OverviewStrategy and Operations Notes to the Financial Statements continued.
year ended 31 December 2016
2. Basis of preparation (continued)
Going concern
The Directors have at the time of approving the financial statements, a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern
basis of accounting in preparing the financial statements.
Parent Company
The parent company has taken advantage of s.408 of the Companies Act 2016 not to publish the parent company profit and loss
account.
3. Summary of principal accounting policies
The principal accounting policies of Filta Group Holdings plc and its subsidiaries are set out below. These policies have been
consistently applied unless otherwise stated.
3.1 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in Pounds Sterling, which is also the functional currency of the parent company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
form the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or
loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the
transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when
fair value was determined.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than Pounds
Sterling are translated into Pounds Sterling upon consolidation. The functional currency of the entities in the Group has remained
unchanged during the reporting period.
On consolidation, assets and liabilities have been translated into Pounds Sterling at the closing rate at the reporting date. Income and
expenses have been translated into Pounds Sterling at the average rate over the reporting period. Exchange difference are charged/
credited to other comprehensive income and recognised in the currency translation reserve in equity.
3.2 Segment reporting
The results of operating segments are reported in a manner consistent with internal reporting. The Group has four operating segments.
In identifying these operating segments, management follows the Group’s service lines representing its main products and services.
Further details of segment reporting are provided in Note 5.
3.3 Revenue
The Filta Group recognises revenue depending on the substance and legal form of the contract with its customers. Revenue is
recognised once a legally binding contract between the Filta Group and its customers has been established and the delivery of the
product or service has been completed.
Revenues are accrued or deferred based on the length of time through the contract and consistently applied across all customers and
contracts. All amounts are stated exclusive of VAT and other sales taxes and trade discounts.
The Filta Group executes franchise agreements for each franchise area which set out the terms of the arrangement with the franchisee.
These agreements require the franchisee to pay an initial, non-refundable franchise fee and royalties based upon the number of
filtration machines operating in each franchise area.
44
3. Summary of principal accounting policies (continued)
The franchise fee consists of two distinct components:
• the opening package; and
• the territory fee
The revenue associated with the opening package is recognised when substantially all initial services required by the franchise
agreement are performed, which is generally upon the completion of training of the franchisee. Therefore, there is no deferral of this
revenue unless the training period spans the year-end.
The territory fee represents the exclusive right to operate in a designated territory for a stated length of time. The territory fee is
deferred over the length of the franchise agreement and released to the combined statements of comprehensive income on a straight-
line basis.
Royalty income is recognised as earned with an appropriate provision for estimated uncollectible amounts, which is included in
operating expenses.
Supplies and other revenues are recognised when the product or service is delivered or shipped to customers. Provision for discounts
and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period in which the
related sales are recorded.
3.4 Investments in subsidiaries
Investments in subsidiaries are valued at cost less provision for any impairment, and an impairment review is carried out annually by the
directors.
3.5 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. All repair and maintenance expenses are recognised in profit
or loss when incurred.
After initial recognition, property, plant and equipment is stated at cost less accumulated depreciation and any accumulated
impairment loss.
All items of property, plant and equipment are depreciated to write off the cost of the assets over their estimated useful lives as follows:
Freehold property
Plant and machinery
Motor vehicles
Fixtures and fittings
Annual rate
2%
10-15%
25%
20%
The estimated useful life and depreciation method are reviewed, and adjusted as appropriate, at each reporting date. Fully
depreciated assets are retained in the financial statements until they are no longer in use.
3.6 Intangible assets – computer software
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Directly attributable costs are capitalised as part of the software product include external third party costs.
Computer software is depreciated over its expected useful life of 3 years.
3.7 Impairment of tangible and intangible assets
At each reporting end date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any).
3.8 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original
maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities.
45
Financial StatementsGovernance OverviewStrategy and Operations Notes to the Financial Statements continued.
year ended 31 December 2016
3. Summary of principal accounting policies (continued)
3.9 Financial assets
The Group has only a single category of financial assets, being loans and receivables.
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial assets
are initially recognised at fair value, plus transaction costs. Derecognition of financial assets occurs when the rights to receive cashflows
from the instruments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An
assessment for impairment is undertaken, at the least, at each reporting date.
Interest and other cash flows resulting from holding financial assets are recognised in the Consolidated Income Statement when
receivable. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the
receivables. Loans and receivables are subsequently measured at amortised cost using the effective interest rate method, less provision
for impairment.
Any change in their value through impairment or reversal of impairment is recognised in the Consolidated Income Statement. A
provision against trade receivables is made when objective evidence is received that the Group will not be able to collect all amounts
due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest
rate.
3.10 Financial liabilities
Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the Group becomes a party
to the contractual provisions of the instrument. All interest-related charges are recognised as an expense in “finance costs” in the
Consolidated Income Statement. Loan notes are raised for support of long-term funding of the Group’s operations. The financial
liability arising on the loan notes is carried at amortised cost.
Finance charges and direct issue costs are charged to the Consolidated Income Statement on an accruals basis using the effective
interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which
they arise.
3.11 Equity
Equity comprises the following:
• “Share capital” represents the nominal value of equity shares.
• “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of
expenses of the share issue.
• “Other reserves” represent the equity element in the form of share warrants, contained in the financial instrument issued to Cenkos
Securities plc on 4 November 2016, until such share warrants are exercised.
• “Retained earnings” represents retained profits and accumulated losses.
• “Merger reserve” arises on business combination (Note 2).
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
3.12 Taxation
The income tax expense for the year comprises current and deferred tax.
Current tax
The charge for current taxation is the tax currently payable based on taxable profit for the year. Taxable profit differs from net profit as
reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end
date.
46
3. Summary of principal accounting policies (continued)
Deferred tax
Deferred tax is provided using the liability method on differences between the carrying amounts of assets and liabilities in the
consolidated balance sheet and the tax bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction
which is not a business combination and at the time of the transaction affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised
based on tax rates that have been enacted or substantively enacted by the reporting end date. Deferred tax is charged or credited
in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity. Deferred tax arising from a business combination is included in the resulting goodwill or excess
of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business
combination costs.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and
the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
3.13 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessees. All other leases are classified as operating leases.
Rentals payable under operating leases, less any lease incentives received, are charged to income on a straight-line basis over the term
of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits
from the lease asset are consumed.
3.14 Non-recurring costs
Items which are material either because of their size or their nature, and which are non-recurring, are highlighted separately on the
face of the statement of comprehensive income. The separate reporting of non-recurring items helps provide a better picture of the
Group’s underlying performance. Items which may be included within the non-recurring category include:
• Costs associated with the Group’s listing on AIM;
• Excess compensation paid prior to the Group’s listing on AIM; and
• Other particularly significant or unusual items.
Non-recurring items are highlighted separately in the statement of comprehensive income as the Directors believe that they need to
be considered separately to gain an understanding of the underlying profitability of the trading businesses.
3.15 Critical accounting judgments and key sources of estimation uncertainty
Estimates and judgements are continually evaluated by the Directors and management and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates
and judgements that affect the application of the Group accounting policies and disclosures, and have a significant risk of causing a
material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below:
Revenue recognition
Judgement applied in respect of recognition of revenue is significant in the recognition of new franchise sales where a portion of the
revenue generated is deferred and recognized over the life of the franchise agreement.
The Board discussed and reviewed these areas with management before concluding that the Group’s revenue for the year has been
appropriately recognised.
47
Financial StatementsGovernance OverviewStrategy and Operations Notes to the Financial Statements continued.
year ended 31 December 2016
3. Summary of principal accounting policies (continued)
Bad and doubtful debts
Recoverability of trade receivables is a key area of focus given the material nature of these balances and the working capital needs of
the Group. The profile of the Group’s trade receivables covers balances from a considerable number of customers. Management must
therefore apply judgement in determining the amount of provision required for possible non-collection of bad or doubtful debts. This
is performed on a case-by-case basis across the Group taking into account differences between countries and service lines.
The Group assessed the appropriateness of the provisioning by considering the level and ageing of debtors and the consistency of
provisioning assumptions year-on-year and past experience of bad debt exposure. They concluded that the level of provisioning and
carrying value of trade receivables is appropriate.
Taxation
Judgement is required when determining the provision for taxes as the tax treatment of some transactions cannot be finally
determined until a formal resolution has been reached with the tax authorities. Tax benefits are not recognised unless it is probable
that the benefit will be obtained. Tax provisions are made if it is expected that a liability will arise. The Group reviews each significant
tax liability or benefit to assess the appropriate accounting treatment.
4. Adoption of new and revised international financial reporting standards
a number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some
cases have not yet been adopted by the EU.
The Directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Group
in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments and IFRS 15 may have
an impact on revenue recognition and related disclosures. At this point it is not practicable for the directors to provide a reasonable
estimate of the effect of IFRS 9 and IFRS 15 as their detailed review of these standards is still ongoing.
5. Segment analysis
Operating segments have been identified on the basis of internal reports about components of the Group that are regularly reviewed
by the chief operating decision maker (which takes the form of the Board of Directors), in order to allocate resources to the segment
and to assess its performance.
The Directors consider that the Group currently has four reportable segments: the marketing and execution related to Franchise
Development; provision of services and supplies to the fryer management sector; servicing the refrigerator seal replacement market;
and the provision of design, installation and services provided to the refrigeration and cold stores market. The Group also has two
geographic segments: UK and USA.
Revenue and non-current assets by origin of geographical segment for all entities in the Group is as follows:
Revenue
UK
USA
Total
Non-current assets
UK
USA
Total
48
2016
£
4,187,226
5,888,013
10,075,239
2016
£
510,854
1,984,363
2,495,217
2015
£
3,594,188
4,331,084
7,925,272
2015
£
547,240
1,569,970
2,117,210
5. Segment analysis (continued)
Product and services revenue analysis
Revenue
Franchise Development
Fryer Management
Fita-Seal
Filta Refrigeration
Total
2016
£
1,235,983
6,217,772
1,014,932
1,606,552
10,075,239
2015
£
1,294,100
4,502,485
888,408
1,240,279
7,925,272
Management measures revenues by reference to the Group’s core services and products and related services, which underpin such
income.
No customer has accounted for more than 10% of total revenue during the periods presented. Assets and liabilities are not fully
allocated to the individual categories as such information is not provided to the chief operating decision maker.
6. (Loss)/profit from operations
(Loss)/profit from operations has been arrived at after charging/(crediting):
Inventory recognized as an expense
Depreciation of property, plant and equipment
– owned assets
– held under finance leases
Amortization of intangibles (included with administrative expenses)
Loss on disposal of plant and equipment
Staff costs, including directors (Note 7)
Bad debt expense
Fees payable to the company’s auditor for their audit of the financial statements
Fees payable to the company’s auditor for other services to the Group
Foreign exchange gains
Operating lease rentals
– Property
– Other assets
7. Staff costs
Gross salaries
Social security costs
Pension contributions
Other staff benefits
The average number of employees of the Group during the year was as follows:
Directors
Staff
Administration
Customer Services/Network Support
Business Development/Marketing
Sales
Other
2016
£
5,668,787
64,007
54,848
63,177
–
3,079,535
8,528
39,500
122,500
(61,395)
2015
£
4,207,620
57,909
32,348
53,866
8,920
2,441,063
57,215
–
–
(16,462)
13,459
101,414
45,285
82,252
2016
£
2,892,534
106,150
2,391
78,460
3,079,535
2015
£
2,291,404
81,194
–
68,465
2,441,063
2016
7
12
12
8
4
19
62
2015
3
11
10
8
4
17
53
49
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued.
year ended 31 December 2016
8. Remuneration of key management personnel
Remuneration for qualifying services
Details of directors’ remuneration are provided in the Remuneration Report.
9. Finance costs
Bank and other loans
Hire purchase and finance lease charges
10. Income tax expense
Corporation Tax
Charge for the year
Deferred tax
Origination and reversal of temporary differences
Total tax charge
Reconciliation of corporation taxation
(Loss)/profit before tax
Tax at domestic rates applicable
Expenses disallowed for tax
Loss relief
Losses carried forward
Overseas taxes
Other differences
Total current tax
Deferred tax
Origination and reversal of timing differences
Total tax expense
2016
£
1,296,994
1,296,994
2015
£
970,044
970,044
2016
£
98,142
6,686
104,828
2015
£
68,182
5,539
73,721
2016
£
2015
£
289,305
2,802
(164,968)
124,337
71,258
74,060
2016
£
(218,244)
(42,994)
112,509
(32,067)
–
251,857
–
289,305
2015
£
376,270
64,975
41,869
(86,301)
3,615
–
(21,356)
2,802
(164,968)
124,337
71,258
74,060
The Filta Group’s effective tax rate for the year ended 31 December 2016 was 19.7% (2015: 19.7%). The effective rate is an
amalgamation of UK and US rates for the periods reported. The change from year to year has been particularly affected by the
availability of loss reliefs and recognition of deferred tax assets.
The Filta Group has tax losses of approximately £667,480 (£817,000 at 31 December 2015) to carry forward against future profits. The
tax value of such losses amounted to £133,496 (31 December 2015: £163,400). The UK tax losses have no expiry date and a deferred tax
asset of £133,496 (31 December 2015: £163,000) has been recognised in respect of them.
US tax losses expire after 20 years if not utilised and a deferred tax asset of £nil (31 December 2015: £15,000) has been recognised.
50
11. Deferred tax assets
The movement in the Group’s deferred tax asset during the year is as follows:
At start of year
(Credit) / charge for the year
Foreign exchange differences
At end of year
2016
£
520,439
164,968
70,558
755,965
2015
£
590,611
(71,258)
1,086
520,439
The deferred tax balances relate to temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial information as summarised below.
Tax losses
Impairment provisions
Deferred revenue
Others
At end of year
12. Earnings per share
Weighted average number of shares
Underlying operating profit
Underlying Earnings per share
(Loss)/profit attributable to owners of the Company
Basic and fully diluted earnings per share *
* The issue of options in 2016, as described in Note 23, are antidilutive.
13. Investments in subsidiaries
Cost at the beginning of the year
Additions
Cost at end of year
133,496
–
596,134
26,335
755,965
178,530
11,933
324,036
5,940
520,439
2016
22,700,716
1,147,123
5.05p
(342,581)
(1.51) p
2015
21,762,160
1,105,991
5.08p
302,210
1.39p
2016
£
–
2,176,216
2,176,216
2015
£
–
–
The subsidiaries of Filta Group Holdings plc, all of which are included in the consolidated Annual Financial Statements, are as follows:
Company
The Filta Group Limited
The Filta Group Incorporated
Filta Refrigeration Limited
FiltaFry Limited
Bio Depot Limited
Filta Seal Limited
Registered
office
United Kingdom
United States
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Class
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Proportion held
by group
2016
100%
100%
100%
100%
100%
100%
Proportion held
by group
2015
0%
0%
0%
0%
0%
0%
Nature of business
Environmental Services
Environmental Services
Support Services
Support Services
Dormant
Dormant
51
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued.
year ended 31 December 2016
14. Intangible assets
Cost
Balance at 1 January 2016
Addition, internally developed
Foreign exchange
Balance at 31 December 2016
Amortisation and impairment
Balance at 1 January 2016
Amortisation
Foreign exchange
Balance at 31 December 2016
Net book value at 31 December 2016
Cost
Balance at 1 January 2015
Addition, internally developed
Foreign exchange
Balance at 31 December 2015
Amortisation and impairment
Balance at 1 January 2015
Amortisation
Foreign exchange
Balance at 31 December 2015
Net book value
15. Property, plant and equipment
Details of the Group’s property, plant and equipment and their carrying amounts are as follows:
Cost
At 1 January 2016
Additions
Foreign exchange
At 31 December 2016
Depreciation
At 1 January 2016
Depreciation charge
Foreign exchange
At 31 December 2016
Net Book Values
At 31 December 2016
At 31 December 2015
Freehold
Property
£
Fixture and
Fittings
& Equipment
£
1,393,678
247,107
1,640,785
494,281
43,445
103,287
641,013
999,771
899,397
79,765
7,362
5,968
93,095
79,765
2,741
6,023
88,529
4,566
–
Plant and
Machinery
£
156,505
20,668
6,459
183,632
76,449
17,212
5,505
99,166
84,465
80,055
Computer
Software
£
218,351
128,097
44,902
391,350
128,686
63,177
32,863
224,726
166,624
150,433
60,271
7,647
218,351
69,628
53,866
5,192
128,686
89,665
Motor
Vehicles
£
198,260
15,239
1,144
214,643
56,801
55,456
538
112,795
Total
£
218,351
128,097
44,902
391,350
128,686
63,177
32,863
224,726
166,624
150,433
60,271
7,647
218,351
69,628
53,866
5,192
128,686
89.665
Total
£
1,828,208
43,269
260,678
2,132,155
707,296
118,855
115,353
941,504
101,849
141,461
1,190,651
1,120,913
Certain of the property, plant and equipment listed above are held as security against bank facilities referred to in note 20.
52
16. Trade and other receivables
Trade and other receivables consist of the following:
Group
Trade receivables
Prepayments and other receivables
2016
£
1,647,665
313,028
1,960,693
2015
£
1,528,020
63,190
1,591,210
Accounts receivable include amounts that the Filta Group has agreed may be settled over extended repayment terms. Accounts
receivable subject to these extended repayment terms totalled £227,727 and £256,035 respectively, at 31 December 2016 and 2015.
The amount due from related parties in the parent company of £674,573 is repayable after more than twelve months.
Other than the debts described above, the Filta Group’s normal credit terms range between 30 and 90 days.
In assessing the recoverability of these debts, the Directors have given due consideration to all pertinent information relating to
the ability of the customers to settle. If an account balance is deemed uncollectible, the account is impaired in full. If an account is
potentially uncollectible, the Filta Group makes an impairment provision for such amounts. The impairment provision was £10,302 at
31 December 2016 (31 December 2015: £57,365).
Movement in the allowance for doubtful debt:
At start of year
Impairment loss recognized
Amounts written off as uncollectable
Foreign exchange differences
At end of year
17. Inventories
Finished goods
Total
UK
£
5,488
4,814
–
–
10,302
2016
US
£
51,877
–
(62,545)
10,668
–
Total
£
57,365
4,814
(62,545)
10,668
10,302
UK
£
80,315
650
(75,477)
–
5,488
2015
US
£
–
51,877
–
51,877
Total
£
80,315
52,527
(75,477)
–
57,365
2016
£
376,015
376,015
2015
£
299,379
299,379
Inventories primarily consists of filtration machines and filters and are stated at the lower of cost (on a first-in, first-out basis) and net
realisable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net
realisable value.
18. Cash and cash equivalents
Group
Cash at bank and in hand
Company
Cash at bank and in hand
2016
£
2015
£
4,392,350
978,939
3,048,174
–
53
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued.
year ended 31 December 2016
19. Trade and other payables
Trade payables
Amount due to related parties
Taxes and social security
Accruals and other payables
Analysis of trade and other payables
These are classified as short term and are expected to be settled within 12 months from the reporting date.
20. Loans and other borrowings
Total
Bank loans
Note payable to related party
Hire purchase and finance leases
Current
Bank loans
Note payable to related party
Hire purchase and finance leases
Non current
Bank loans
Hire purchase and finance leases
21. Operating lease commitments
The amounts of future minimum lease payments under non-cancellable operating leases are as follows:
Minimum lease payments due:
Within 1 year
1 to 5 years
Total
54
2016
£
1,178,105
–
360,120
451,660
1,989,885
2015
£
1,033,802
206,408
98,814
386,652
1,725,676
2016
£
2015
£
1,037,022
–
117,782
1,154,804
955,615
501,553
140,770
1,597,938
2016
£
2015
£
65,530
–
38,282
103,812
60,031
501,553
35,583
597,167
2016
£
2015
£
971,492
79,500
1,050,992
895,584
105,187
1,000,771
2016
£
8,554
11,305
19,859
2015
£
13,614
16,471
30,085
22. Share capital
The share capital of Filta Group Holdings plc consists of fully paid ordinary shares with a nominal value of 10 pence. All shares are
equally eligible to receive dividends and the repayment of capital and represent one vote.
Allotted and fully paid
Share for share exchange
Share issue
Share buyback
Issued under share option scheme
Total shares in issue at 31 December
2016
Number
2015
£
Number
21,762,161
5,190,499
–
–
26,952,660
2,176,216
519,050
–
–
2,695,266
–
–
–
–
–
£
–
–
–
–
–
On incorporation, the issued share capital of the Company was £1 comprising one Ordinary Share of £1.00. The Ordinary Share was
issued, credited as fully paid, to Jason Sayers as the subscriber to the memorandum of association of the Company. The Company
does not have an authorised share capital.
On 26 October 2016, the Company acquired the entire issued share capital of Cookband Limited in consideration of the issue, credited
as fully paid, of 2,176,215 Ordinary Shares of £1 each to the then shareholders in Cookband Limited.
On 26 October 2016, the Company acquired the entire issued share capital of The Filta Group Inc. and The Filta Group, Inc. from
Cookband Limited for nil consideration. By resolution of the members passed on 26 October 2016, each of the Ordinary Shares of
£1 each in the capital of the Company was sub-divided into 10 New Ordinary Shares of 10 pence each.
On 27 October 2016, pursuant to a share placing, 5,190,499 shares of 10 pence were issued at a price of 83 pence, giving rise to a share
premium, net of issuance costs, of £3,480,191.
23. Other reserves
Group
Merger reserve
Share based payment reserve
Company
Share based payment reserve
2016
£
2015
£
(339,687)
49,400
(290,287)
380,100
–
380,100
49,400
–
Merger reserve
The directors consider the substance of the acquisition of the Subsidiaries by Filta Group Holdings plc is that of a combination of
entities under common control and therefore it fell outside the scope of IFRS 3 (revised 2008).
Share based payment reserve
The Company entered into a share option agreement (“Option Deed”) with Cenkos Securities plc (“Option Holder”), its nominated
advisor and broker, whereby the Company has granted to the Option Holder the right, exercisable at any time during the Option
Period, to subscribe for all, or some, of the Option Shares (180,000 ordinary shares) at the Option Price of 83 pence per Option Share,
subject to the terms and conditions of the Option Deed. The Option Period means the period of 3 years from date of Admission unless
last day fall under closed period then the Option Period shall be extended 90 business days from the end of the closed period. The
right to exercise the Option shall be exercisable during the Option Period by delivery of the Option Deed and a notice of exercise at
which point the Company will have 10 days to allot the number of Ordinary Shares in respect of which the Option has been exercised.
55
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued.
year ended 31 December 2016
24. Financial instruments
Risk Management objectives and policies
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Filta Group’s
competitiveness and flexibility. Further details regarding these policies are set out below.
Management reviews its monthly reports through which it assesses the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
Market risk management
Management do not consider the company exposed to interest rate or inflation risks significant enough to have a material effect on the
profitability of the company.
Foreign currency sensitivity
The Filta Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than Pounds
Sterling. The currency giving rise to this risk is primarily the US Dollar. Foreign currency risk is monitored closely on an ongoing basis to
ensure that the net exposure is at an acceptable level.
A majority of the Filta Group’s financial assets and liabilities are held in Dollars and movements in the exchange rate against Sterling
has an impact on both the results for the year and equity.
The Filta Group maintains a natural hedge whenever possible, by matching the cash inflows (revenue streams) and cash outflows in
foreign currencies.
Interest rate sensitivity
The group is exposed to changes in market interest rates through bank borrowings at variable interest rates. The exposure to interest
rates for the Group is considered immaterial.
The following table illustrates the sensitivity of profit and equity to a reasonably possible change interest rates of +/- 1%.
31 December 2016
31 December 2015
Profit for the year
Equity
£
+1%
10,370
9,544
£
-1%
(10,370)
(9,544)
£
+1%
10,370
9,544
£
-1%
(10,370)
(9,544)
Credit risk management:
The Filta Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and other receivables. The
Filta Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an
ongoing basis. For other financial assets (including cash and bank balances), the Filta Group minimizes credit risk by dealing exclusively
with high credit rating counterparties.
As the Filta Group does not hold any collateral, the maximum exposure to credit risk is represented by the carrying amount of the
financial assets as at the end of each reporting period.
Liquidity risk management:
The Filta Group currently holds cash balances to provide funding for normal trading activity. The Filta Group also has access to both
short-term and long-term borrowings to finance capital expenditure requirements. Trade and other payables are monitored as part of
normal management routine.
56
24. Financial instruments (continued)
Categories of financial instruments:
The table below sets out the Group’s IAS39 classification of each of its financial assets and liabilities at 31 December 2016. All amounts
are stated at their carrying value.
Financial Assets
Loans and receivables:
Cash and cash equivalents
Trade and other receivables (excluding prepayments)
Due from related parties
Deposits
Financial Liabilities
Trade and other payables
Deferred Income
Borrowings
Amounts due to directors
25. Underlying cash flow from operations
(Loss)/profit before tax
Adjustments for non-cash operating transactions
Movements in working capital
Impact of non-recurring items on operating cash flow
26. Retirement benefit schemes
2016
£
2015
£
4,392,350
2,169,130
–
2,572
6,564,052
1,989,885
2,711,358
1,154,804
–
5,856,047
978,939
1,770,053
169,612
1,762
2,920,366
1,725,676
1,749,451
1,597,938
1,522,377
6,595,442
2016
£
2015
£
(218,244)
336,260
(78,259)
1,260,539
1,300,296
376,270
226,764
(37,121)
656,000
1,221,913
Defined contribution scheme
Since October 2016 the Group has operated a defined contribution retirement benefit scheme for all eligible employees in its U.K.
subsidiary. The assets of the scheme are held separately from those of the group in funds under the control of the trustee. The
subsidiary is required to contribute 1% of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the
Group with respect to the retirement benefit scheme is to make the specified contributions.
The total cost charged to income of £2,391 (2015: nil) represents contributions payable to the scheme by the Group at specified rates.
As at 31 December 2016, there were no contributions due with respect of the current reporting period.
57
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued.
year ended 31 December 2016
27. Related party transactions
Remuneration of Directors and other transactions
The remuneration, interests and related party transactions with the directors of Filta Group Holdings plc and its subsidiaries (the
“Directors”) who are considered to be the key management personnel of the entity, are disclosed in Note 8.
Directors loan accounts
The following amounts were due from the directors at the end of each reporting period:
• Mr. R C Sayers: £77,236 as at 31 December 2016 (2015: Due to £1,462,595)
• Mr. J Urosevic: £nil as at 31 December 2016 (2015: Due to £59,782)
All amounts are unsecured, interest-free and repayable on demand. The amounts are classified within current assets or current liabilities
under Other Receivables or Amounts due to directors.
Franchise rights
In 2012, The Filta Group, Inc. granted franchise rights for a prescribed territory to Roxanna Holdings Inc. Roxanna Holdings Inc., a
company owned by Jason Sayers and Victor Clewes, directors of The Filta Group, Inc.
The rights were then assigned to EKS North Atlantic LLC, which is 50% owned by Roxanna Holdings and 50% by an unrelated 3rd
party. During 2016, the related franchise operator purchased £10,165 of equipment and supplies from the company (2015: £8,571). The
amounts are classified within trade receivables.
Amounts due to related parties – management fees
For the twelve months ended 31 December 2016, management fees of £736,170 are included in administrative expense
(2015: £660,840) for services provided to The Filta Group, Inc. by Roxanna Holdings, Inc. At 31 December 2016, £nil of this total was
payable to the related party (2015: £206,408). These amounts are classified within trade payables.
Notes payable to related party
From 2013 to 2015, the Filta Group, Inc. entered into notes totaling £501,553, bearing interest at 1.5% with a related party. The notes
were to mature in December 2016 through 2018. In 2016, the Company repaid the notes in full.
These amounts are classified within borrowings and had a balance of £nil at 31 December 2016 (2015: £501,553).
Interest paid on these loans amounted to £8,533 at 31 December 2016 (2015: £0).
28. Post balance sheet events
The Company completed a reduction of capital, whereby the entire amount standing to the credit of the Company’s share premium
account has been cancelled to create distributable reserves (the “Reduction of Capital”). The Reduction of Capital was formally
approved by the High Court of Justice, Chancery Division, and the High Court order was filed with the Registrar of Companies on
18 January 2017. Following the Reduction of Capital, the issued share capital of the Company remains at 26,952,660 ordinary shares
of £0.10 each. The distributable reserves created by the Reduction of Capital and after eliminating the previous deficit amounted to
£3,078,825. The purpose of the Reduction of Capital is to create distributable reserves to support the Board’s dividend policy.
58
About Filta
Filta Group Holdings plc is a multi-service B2B provider
to commercial kitchens, primarily operating in the UK
and US.
The Company has over 180 Franchise Owners, and
teams of corporate vans, providing services to over 5,000
restaurants and other commercial kitchens every week.
Filta has an impressive underlying blue chip customer
base, a high level of recurring revenue and a strong
dividend commitment.
Index
Overview
3
4
Highlights
Chairman’s Statement
Major Markets
Services
The Franchise Model
Business Model
Strategy and Operations
7
8
9
10
11 Our Market
12
13 Chief Executive’s Operating Review
16 Chief Financial Officer’s Review
Principal Risks and Uncertainties
19
Strategy
Governance
22
24
25
28 Directors’ Remuneration Report
31 Directors’ Report
Corporate Social Responsibility Report
Board of Directors
Corporate Governance Statement
Financial Statements
34
Independent Auditor’s Report to the
Members of Filta Group Holdings PLC
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Parent Company Statement of Financial Position
Parent Company Statement of Changes in Equity
Parent Company Statement of Cash Flows
Notes to the Financial Statements
36
37
38
39
40
41
42
43
59 Corporate Information
Further information and investor updates
can be found on our website at
www.FiltaPlc.com
Nominated Advisor and Broker:
Cenkos Securities plc
6.7.8. Tokenhouse Yard
London, EC2R 7AS
Auditors:
Crowe Clark Whitehill LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Corporate Information
Directors:
Timothy (Tim) John Worlledge Non-Executive Chairman
Jason Charles Sayers Chief Executive Officer
Brian Joseph Hogan Finance Director
Victor Clewes Executive Director
Jlubomir (Roscoe) Urosevic Executive Director
Roy Charles Sayers Non-Executive Director
Graham Jeffrey Woolfman Non-Executive Director
Secretary:
Brian Hogan
Registered Office:
The Locks
Hillmorton, Rugby
Warwickshire
CV21 4PP
Company Number:
Registered in England with Company Number 10095071
Bankers:
HSBC Bank PLC
6th Floor, 165 Fleet Street
London, EC4A 2DY
Solicitors:
Howard Kennedy LLP
No. 1 London Bridge
London, SE1 9BG
Registrar:
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Designed and produced by
london@blackandcallow.com
www.blackandcallow.com
020 3794 1720
2
59
www.FiltaPlc.com
Registered in England. Company Number 10095071
Registered Office:
The Locks
Hilmorton
Rugby
Warwickshire
CV21 4PP
Tel: +44 1788 550100
Email: Enquiries@FiltaPlc.com
Annual Report
& Accounts 2016
F
l
i
l
t
a
G
r
o
u
p
H
o
d
n
g
s
p
c
A
n
n
u
a
i
l
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
6