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 2017
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About Filta
Filta Group Holdings plc is a multi-service B2B provider
to commercial kitchens, primarily operating in the UK,
North America and now Mainland Europe.
The Company has over 180 Franchise Owners, and
teams of corporate vans, providing services to over 6,000
commercial kitchens and restaurants every week.
Filta has an impressive blue chip customer base that
underlies a recurring revenue, cash generative business
model that supports a strong dividend commitment.
Index
Overview
1
2
Highlights
Chairman’s Statement
Major Markets
Services
The Franchise Model
Business Model
Strategy and Operations
6
8
9
10
11 Our Market
12
14 Chief Executive’s Operating Review
18 Chief Financial Officer’s Review
Principal Risks and Uncertainties
21
Strategy
Governance
24
26
27
30 Directors’ Remuneration Report
33 Directors’ Report
Corporate Social Responsibility Report
Board of Directors
Corporate Governance Statement
Financial Statements
39
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
42
43
44
45
46
47
48
49
71 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
71
Highlights
Financial Highlights - continuing operations
Revenue
£11.5m +36%
Gross Profit
£5.7m +41%
Adjusted EBITDA*
£2.1m +77%
Deferred Income Balance
£2.9m +8%
Revenue
£m
11.5
8.5
6.7
Gross profit
£m
5.7
4.0
3.4
Adjusted EBITA*
£m
2.1
1.2
1.0
2016 £8.5m
2016 £4.0m
2016 £1.2m
Deferred Income Balance
£m
2.9
2.7
1.7
2016 £2.7m
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
*Adjusted EBITDA is a non-statutory measure that represents earnings before interest, taxation, depreciation and amortization adjusted for
non-recurring items and share based payments.
Operational Highlights
•
Net increase in Franchise Owner base to 184.
•
•
•
•
o
Number of MFUs (mobile filtration units) increased from 341 to 394.
Fryer Management revenue, primary recurring in nature, grew 36% to £8.4m.
Robust revenue growth in our Company Owned Operations FiltaSeal and FiltaGMG.
Management continued to execute on its strategy of focusing on high margin, recurring service
offerings which, in turn, resulted in the following key events:
o Aug 2017 First franchise in Canada;
o
o
o
Aug 2017 Acquisition of Grease Management Limited;
Jan 2018 Exit from Refrigeration; and
Jan 2018 Buy-in of German master franchise.
1
Financial StatementsGovernance OverviewStrategy and Operations
Chairman’s Statement
£11.5m
Group Revenue +36%
2016: £8.5m
£2.1m
Adjusted EBITDA +77%
2016: £1.2m
2.90p
Basic Earnings Per Share
2016: (1.89)p
2.87p
Diluted Earnings Per Share
2016: (1.89)p
Full Year 2017 Operating Revenue
15%
12%
£11.5m
73%
■ Franchise Development
■ Fryer Management
■ Company Owned
2
■ FiltaDrain
■ Filter Refrigeration
■ Filta-Seal
11
7
31
2016
2015
2014
Introduction
I am pleased to report that 2017, our
first full year as an AIM-listed company,
was another year of growth for all of
our core businesses and one in which
we won some important new clients
in both our main territories, launched
operations in Canada and made a small
but commercially significant acquisition in
the UK. On 4 January 2018, we completed
the sale of Filta Refrigeration, a business
which we regarded as peripheral to our
mainstream activities, as we focus our
strategic development on businesses with
high margins and low working capital
requirements. We have also, since the year
end, bought in the FiltaFry master franchise
in Germany and will use its existing
franchise base to commence the roll out of
our North American model into mainland
Europe.
These financial results contain financial
information on both the Continuing
Operations of the Company and,
separately, the Discontinued Operations of
the Company being Filta Refrigeration.
Results
Total profit before tax of the Group for
the year ended 31 December 2017 was
£1.7m (2016: loss of £0.2m) on revenue up
by 34% at £13.5m (2016: £10.1m), whilst
the adjusted EBITDA was £2.2m (2016:
£1.3m), an increase of 67% over 2016. The
Continuing Operations recorded a profit
before tax for the year of £1.6m (2016: loss
of £0.3m) on revenue up by 36% at £11.5m
(2016: £8.5m), whilst the adjusted EBITDA
was £2.1m (2016: £1.2m), an increase of 77%
over 2016. The Discontinued Operations
contributed a net trading profit of £0.03m
(2016: £0.1m) on revenue of £1.9m (2016:
£1.6m).
In addition to increasing adjusted EBITDA,
the Group increased Deferred Revenue by
a further £0.2m to £2.9m, despite a £0.3m
negative impact from a weakened dollar.
During the second half of the year the
Group incurred £0.1m of legal and other
costs related primarily to the acquisition
of Grease Management Limited (now
‘FiltaGMG’) and accounted for a £0.1m
charge in relation to options issued under
the Company’s Share Scheme, resulting in
a full year profit from operations of £1.7m
(2016: loss of £0.2m).
A one-off tax charge of £0.3m was taken
at year end, to revalue our deferred tax
position, due to the recent reduction in
the US corporation tax rate. This gave rise
to an inflated tax charge, leading to an
attributable profit for the year of £0.8m
(2016 – loss of £0.3m). There is no cash
impact from the deferred tax charge and
we will see it being reflected in reduced
actual tax charges and payments beginning
in 2018.
Performance of Continuing Businesses
The £0.9m increase in adjusted EBITDA
resulted from strong performances in all
areas of our business and was achieved on
the basis of higher turnover and improved
gross profit margins.
We have seen a net increase in our
Franchise Owner base to 184, the number
of allocated territories increased by 49 to
347, and a 16% increase in the number of
MFUs (mobile filtration units) from 341 to
394, further strengthening our platform
for growth in future years and reflecting
the level of organic growth we are
experiencing.
Revenues and profits from Fryer
Management Services increased by 36%
and 33% respectively and, during the year,
we commenced operations in Canada,
where our first franchisee began trading
in August and now has four MFU’s in
operation.
The Company-owned activities have also
had a good year. FiltaSeal, has enjoyed
revenue growth of some 31% and, with
the increased efficiency that flows from
better utilisation, improved profit margins.
Similarly, FiltaDrain, renamed FiltaGMG
following the acquisition of Grease
Management Limited, has seen its customer
base expand and contributed £0.4m in the
first four months of our ownership at higher
than anticipated profit margins.
Strategic Developments
We took a small but important step
into the increasingly in-demand drain-
maintenance and grease management
space with the acquisition, in August, of
Grease Management Limited. FiltaGMG
augments our existing drain services and
enables us to offer a broader range of drain
maintenance options to customers. Since
the year-end, as referred to above we have
completed the sale of our refrigeration
and air-conditioning business, which
contributed lower margins than our other
activities and was not a business in which
we saw opportunities for growth at the
same rate as are available elsewhere.
We have also taken a significant step
towards building our franchise business in
mainland Europe by buying in the master
franchise for Germany in January 2018.
FiltaFry GmbH will be developed along the
same lines as our North American business
with the aim being to establish a strong
foothold in Germany before extending into
neighbouring European countries.
The franchising of FiltaFry services will
continue to be the cornerstone of our
business wherever we operate but we
believe that there are a number of related
or ancillary services which, depending
on the territories concerned may be
more suitable to run as directly owned
businesses. We therefore envisage pursuing
an Infill strategy to acquire and develop
3
Financial StatementsGovernance OverviewStrategy and Operations Management, staff and Franchise
Owners
The Board much appreciates the
considerable efforts of our management
and staff. I welcome to the Group those
who have joined us during the year and I
thank all our employees for their continuing
hard work and commitment to the Group.
I also take this opportunity to recognise our
Franchise Owners, whose own performance
and client commitment is critical to our
success and reputation.
Tim Worlledge
Chairman
16 April 2018
Chairman’s Statement
additional service offerings, which, typically,
will require only modest capital investment,
will be complementary to our existing
activities and will contribute to earnings as
well as improving return on capital.
Dividends
We have a stated policy to distribute one
third of annual earnings by way of dividends
to shareholders in respect of each year.
However, the Board considers that the
one-off, non-cash, deferred tax charge has
caused a significant distortion to the profits
generated during the year and believes that
it is appropriate to maintain the dividend at
the same level as that paid in respect of the
first half of the year.
The Board is therefore proposing a final
dividend of 0.65 pence per share, which
together with the second interim dividend
of 0.65 pence paid on 29 September 2017
makes a total dividend of 1.30 pence per
share in respect of the year and represents
45% of the reported earnings. The
proposed final dividend, if approved by
shareholders, will be paid on 7 June 2018 to
shareholders on the register at the close of
business on 25 May 2018.
Current trading and outlook
We saw growth in all our core businesses in
2017 and this has continued into 2018. We
have secured 4 new franchisees, allocated
6 further territories and added 10 MFU’s in
the year to date, all of which will contribute
to additional revenues from Fryer
Management Services through the year.
Our FiltaSeal activity in the first quarter was
8% up on the same period last year and the
newly formed FiltaGMG is continuing to
gain new clients, thus increasing the repeat
revenue base.
With the additional business that we
expect to derive from our new European
operations and the encouraging progress in
Canada, your Board is therefore confident
of achieving further growth through the
remainder of the year.
4
Strategy and
Operations
Company & Major Markets
Services & Franchise Model
Business Model
6
8
10
11 Our Market
12
14 Chief Executive’s Operating Review
18 Chief Financial Officer’s Review
Principal Risks and Uncertainties
21
Strategy
5
5
Financial StatementsGovernanceStrategy and Operations Overview Strategy and Operations
Major Markets
Filta operates principally in North America, the UK, and now Germany, providing a range of commercial kitchen related services
through franchise networks and Company-owned operations.
Filta Group
Holdings Plc
N. America
UK
Mainland Europe
North America
Number of vans
351 Franchise Operated
6
Business growth drivers:
• New Franchise Sales (new territories)
• Existing Franchise Owners growing and
adding MFUs
• 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, FiltaCool moisture absorbing
panels for coolers and FiltaDrain
kitchen drain solution
• Revenues generated mainly from
franchise sales, franchise services, oil
resales
UK
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:
FiltaSeal, replacement of refrigeration seals
FiltaGMG, kitchen drain solution
• Revenues derived principally from FiltaFry, FiltaSeal
and FiltaGMG.
Number of vans
43 Franchise Operated
15 Company Owned
Mainland Europe (Germany)
Business growth drivers:
• New Franchise Sales (new territories)
• Existing Franchise Owners growing and adding
MFUs
• National Accounts
• New services and products offered through
Franchise Network
• Plan to adapt US model in Germany before
expanding into surrounding countries.
Corporate HQ in Debbeshoek, The Netherlands
• Principally a franchise network business
Franchisees both single and 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
Revenues generated mainly from franchise sales,
franchise services, oil resales
7
Number of vans
7 Franchise Operated
Following acquisition of FiltaFry Deutschland GmbH in Jan 2018
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 North
America, the UK and Germany. It provides
an effective, hygienic and economic service
for commercial kitchens, cleaning fryers,
reducing cooking oil costs and disposing of
waste cooking oil.
• FiltaFry provides a total fryer
management service, including the
on-site micro-filtration, removal and
replacement of cooking oil.
• 6,000+ restaurant and food service
customers receive FiltaFry services on a
weekly basis.
• Fryer Management also includes
supplemental services provided by our
Franchise Owners to customers such as
FiltaCool and FiltaDrain.
• Franchisees operate a total of 394 MFUs
of which 349 are in the USA, 2 in Canada
and 43 in the UK.
FiltaSeal
FiltaSeal service is sold in the UK and is a
patented system for replacing damaged or
perished refrigerator and freezer door seals
on-site in a cost and time effective manner.
Specifically, the system allows engineers,
using patented on-board equipment and
materials, to replace a seal in one visit,
producing cost and time savings for its
clients, who would otherwise experience
ordering and fitting delays following an
initial engineer’s visit. The benefit of this
service, apart from avoiding the disruption
that multiple engineer visits cause, is
the energy cost saving and avoidance of
longer-running food hygiene risks.
FiltaGMG
FiltaGMG is a UK-wide provider of drain-
related services including live bacteria
drain dosing and the installation and
servicing of Grease Recovery Units. Over
75% of FiltaGMG’s revenue is recurring in
nature, with work typically being carried out
quarterly under scheduled maintenance
programmes.
Fryer
Management
Single visit
Seal
Replacement
FiltaFry
FiltaSeal
FiltaGMG
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 North America and under 5-year
franchise licences in the UK and Germany.
Filta, as the Franchisor, owns the intellectual
property (“IP”) comprised in the equipment
and systems and, through its Franchise
Model, allows its Franchise Owners to make
use of that IP and of the FiltaFry name in
providing the Fryer Management Service to
its customers.
There are two key components to the
creation of a successful franchise:
• The quality of the franchisee and
• The provision by the franchisor of
constant advice and support to the
franchisee as he first establishes and then
develops the business
Filta takes a great deal of time in selecting
its franchisees, who undergo an extensive
interviewing and assessment process
before being awarded a franchise. Care is
taken to establish that the applicant has the
necessary funds, drive and enthusiasm to
run and build the business.
Typically, in North America, Franchisees are
likely to develop into multi-van operations,
while, in the UK, they more often remain
as single unit operators. Germany is being
developed as a multi-unit operator model.
As the Franchisees grow their businesses,
both by increasing their customer base
and by adding extra units, they receive
extensive support from Filta. Filta believes
that this high level of support is critical to
the success of its Franchise Owners.
Filta considers that its role is to bring down
barriers, identify opportunities, pass on
experience and, above all, help to set up all
the normal business practices and systems
that are needed in young businesses.
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 and Germany) with annual royalties
• Key objective is continuing improvement of our Franchise Owner quality to
provide a platform for growth as they add units, take on new territories and
enhance our brand and reputation
• All services are provided by or through Franchise Owners
• Franchisees pay a fixed royalty per MFU
• All products are provided by Filta, generating additional margin
• Franchise Owners’ customer growth drives additional Filta revenues at little or no
resource cost to Filta, providing increasing revenue visibility (2017 – repeat revenues at
92%)
• Key objective is growth of franchisees’ revenue, driving predictable Group
revenues at increasing marginal profit
3 – Company Owned Operations (UK Only)
• FiltaSeal provides an essential service to customers with a high level of visibility
• FiltaGMG provides a service under contract to commercial kitchens, often already
FiltaSeal customers
• Key objective is to build repeat revenues, from high revenue-visibility maintenance
contract customers
Repeat Revenues Underpinned by Growing Royalty Income
A significant proportion (82%) of the Group’s revenue is of a recurring nature and derives from the existing customer base, which requires
continuing and reliable services. These revenues include royalties and other income from Fryer Management, revenue from FiltaSeal and
from non-installation services by FiltaGMG, which have the common feature of being regular periodic services. This provides strong cash
flow and, with the growing amount of deferred revenue, good visibility into future years.
Blue Chip Client Base
The Group has a broad client base in North America, the UK and Germany with clients ranging from small single outlet enterprises to
many blue-chip clients with multi outlets and national coverage including major supermarket groups, national pub chains and restaurant
chains. The high quality and breadth of the client base helps to mitigate the risks of exposure to any single business or organisation.
10
Our Market
Target Markets
Filta’s products and services are suitable for catering establishments throughout North America, the UK and mainland Europe. We have
identified a number of commercial business sectors and public organisations which we believe to represent our principal target markets:
Sector
No. of Establishments
Fryers
Seals & Drains
Restaurants
North America
630,000
UK
72,000
Germany
165,000
Supermarkets
37,000
8,000
25,000
Universities & Colleges
2,000
106
100
Sports Stadiums
1,000
50
100
Hospitals
Casinos
5,600
500
1,900
50
Contract Caterers
50,000
13,000
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 300 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
FiltaGMG
Operating in the UK only, FiltaGMG is also
a long-term generator of repeat revenues
from all of the market segments listed
above. It is estimated that Filta currently has
under 1% of the UK market.
FiltaSeal
FiltaSeal has the same core customer base
as Filta’s Fryer Management business,
being commercial kitchen operators.
The key target customers for FiltaSeal,
are many of those to which the Group
already provides services. Management
estimates that this customer list alone has
over 400,000 seals that require regular
replacement. Based on the Company’s
current service rate, FiltaSeal is achieving
only 5% customer penetration of its list and
around 1% of the UK market.
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 North American market is over 10x 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 $799B for
2017, having grown in each of the last 8
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 800,000
target foodservice businesses in North
America would benefit from the FiltaFry
service.
Filta’s current Fryer Management Services
client base represents market penetration
of under 2% in North America and 2% in
the UK.
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
Franchised
Company Operated
North America
Europe
UK
UK
Expand through
Franchise Sales &
Additional MFUs
Prove Model in
Germany then expand
into adjacent countries
Expand through
Franchise Sales &
Additional MFUs
Organic Growth
Organic Growth &
Acquisitions
Growth Opportunities
North America
The Fryer Management Services segment is the cornerstone of our business and we continue to seek to grow this area both by securing
new franchisees and by increasing the numbers of customers serviced by our franchisees through higher penetration of the NCA (National
and Centralised Accounts) market. This in turn drives royalty and other repeat revenue growth.
In addition, we are increasing the range of services that our franchisees offer customers, including FiltaDrain, a weekly-applied drain
cleansing service.
UK
We continue to support our Fryer Management franchisees and to grow the Company Owned Operations, FiltaSeal and FiltaGMG,
through gaining key accounts.
Germany
With the recent expansion into Germany, the plan is to spend 2018 perfecting the same model that we have developed in North America.
Growth in Germany will come from both the sale of new franchises and by helping our acquired franchisees to expand.
New Markets
Once we have proven the model in Germany, the plan is to expand further within mainland Europe in the coming years using the resource
base in Filta’s offices in the Netherlands.
13
Financial StatementsGovernanceStrategy and Operations Overview Chief Executive’s Operating Review
Introduction
I am very pleased to report that the Group’s
continuing businesses delivered strong
results with an operating profit of £1.7m,
adjusted EBITDA of £2.1m, an increase
of 77% over the previous year, and profit
before tax of £1.6m. Equally important,
we have increased our deferred revenue
balance and, therefore, go into 2018 with
higher revenue visibility than at the start of
2017.
Fryer Management Services, our principal
activity, exhibited a 36% increase in
revenue, driven by both organic growth
and new franchise development which, in
turn, enlarges the platform for increasing
Fryer Management Services revenue in the
future. We also experienced robust revenue
growth in our Company Owned Operations
due to strong performances from,
particularly, FiltaSeal, whose revenues were
up 31%, and FiltaGMG since the acquisition
of Grease Management Limited.
In addition to continuing the growth of
our existing franchise and Company-
owned businesses, the Group’s strategy
is to expand our Fryer Management
activities into new geographies, to seek
complementary activities to add to our
portfolio of services and to continually strive
for improved margins and return on our
capital. The pursuit of this strategy led to
several key events during the year:
• In August we launched FiltaFry in
Canada with our first Franchise Owner,
in Woodstock Ontario, already operating
four (two at 31 December 2017) MFUs
and strong interest from potential
franchisees to start up elsewhere.
• In August we acquired Grease
Management Limited, a drain
management business with an
established client base and, historically,
regular income. This expands Filta’s UK
Company-owned services to include
higher margin drain management
activities which can be offered in addition
to those already being provided.
• On 4 January 2018, the Group completed
the sale of Filta Refrigeration Limited,
its refrigeration and air-conditioning
installation and maintenance business.
Whilst a profitable business, Filta
Refrigeration did not fit the Group’s
business ideal of being a fast-turnaround,
high margin service offering
• Post year-end, Filta bought-in FiltaFry
GmbH, its master licence in Germany and
it is intended that this business, which
is already established with 6 franchisees
and 7 MFU’s, will provide the platform for
expansion in Europe using Filta’s North
America franchise model.
Franchise Development
During the year we accounted for a total
of 51 new franchise and territory sales.
These contributed £1.3m of Franchise
Development revenue in the year whilst
we added £0.2m to the Deferred Revenue
balance to be carried forward to future
accounting periods.
Our strategy is to recruit quality Franchise
Owners, who have the ambition and
business ability to expand their franchises,
thereby enlarging the platform for Filta’s
own Fryer Management repeat revenues
to increase year after year. With Filta now
operating in many key markets in the US,
we have increasingly used business brokers,
who are particularly useful in targeting
markets in which we need additional
coverage. Sales through brokers accounted
for 43% of Filta’s new franchise sales.
With this increasing coverage in the US,
we will see a reduction in the number of
available territories for sale which will result
in a decrease of new franchise sales in the
US over the coming years. However, it is
anticipated that our expansion into Canada,
where we expect to have 12-15 multi-unit
Franchise Owners in the next few years, and
Europe will ensure that the franchise base
continues to grow.
As our franchise base grows, we are
experiencing an increased demand and
opportunity for franchise resales with
10 Filta Franchise Owners selling their
businesses during 2017, from which we
generated fees of £0.1m. We expect resale
transactions to grow in value and number
in the coming years, which will not only
generate increasing fees but will also
provide opportunities to strengthen the
franchise network.
Fryer Management Services
Fryer Management Services contributed
£8.4m of revenues in the year (2016:
£6.2m). Our Franchise Network is both
the showpiece and the cornerstone of our
business – our franchisees connect us to
our markets and our performance reflects
their performances. We are committed to
providing the franchisees with the necessary
support to give them the best chance of
success.
One of our strategic objectives is to
encourage multi-unit franchisees, which
helps to allay financial risk and to provide
Owners with higher investment returns. In
2017, our highest grossing Franchise Owner
achieved over $2m (£1.5m) in revenue and
six (2016: four) Franchise Owners recorded
over $1m (£0.8m) of revenue.
Network revenue, defined as the total
revenue of our U.S. based franchisees for all
services provided to customers, represents
the best indicator of the Filta brands
growing strength in the market. Our U.S.
franchise network generated $36m (£28m)
of revenues in 2017 (2016: $29m/£21m).
In supporting our Franchise Owners, we
endeavour to lower as many barriers as
possible for them with programs such as:
• Inside Sales – our Inside Sales Team,
which is our “growth engine”, has daily
contact with franchise owners and helps
them win new customers and upsell new
products to existing customers. The team
excelled again in 2017.
• Tech recruitment – with 394 trucks on
the road at year end and growing quickly,
hiring and keeping good technicians
is the lifeblood of our franchisees’
businesses. To help them in managing
this resource, Filta expanded the service
to assist in the recruitment and retention
of technicians.
• National Accounts – we continue to
grow our national account customer base
with new contracts being signed and
greater penetration being driven within
existing contracts.
• Waste oil – 6K – as the volumes of waste
cooking oil collected by our network
continues to grow, we have put in place
14
and implementing new operational
systems. The integration was relatively
straightforward, and the results have fully
justified our enthusiasm for expansion into
this market. It is our aim to grow this activity
through organic growth and further in-fill
acquisitions.
Germany
Post year-end we announced that we
had bought in FiltaFry GmbH, our master
licence holder for FiltaFry in Germany
owned by Jos van Aalst, which had six
franchisees with seven MFU’s operating at
that date. Traditionally, Filta has engaged
directly with licence holders in the UK and
North America but sold master licences
for other countries in the world. Although
this brought in up-front licence fees and
allowed us to achieve a broader reach
without imposing undue strain on the
management resources, it limited the long-
term earnings potential for the Group and
relied upon the skills of the master-licensee
to develop the markets outside the UK and
North America.
Jos van Aalst has held the master-licence
for Germany since late 2014 and we have
been impressed with the speed with which
he has developed the business in Germany.
Aware that he had also had past successes
in building other brands across Europe,
we developed, with him, a plan to expand
our FiltaFry business across key markets in
Europe using the successful Filta franchise
model employed in the US. In order to
do this and to give the venture a starting
platform, we decided to buy in the German
business from Mr van Aalst and to appoint
him as our managing director of European
operations.
With Jos van Aalst in place as Managing
Director of Filta’s European business, the
plan is to spend 2018 putting the building
blocks in place for the franchise support
model in Germany before replicating the
US model by expanding the business into
adjacent countries with multi-unit franchise
owners in the years to come. This will be
a long-term project with at least the first
12 months to be focussed on developing
the German business and refining the
model as needs be for the wider European
market. This should be making a positive
contribution for the current financial year.
International
In 2017, we sold the FiltaFry master-license
for Eire, which adds to our successful
FiltaFry partners in Benelux and South
Africa, both of whom are expanding.
Although we plan to expand across much
of mainland Europe with the US franchise
model, we still plan to award Master
Licenses in countries where we feel it would
be best to have a local Master Franchise
Owner develop the market.
Filta Refrigeration
On 4 January 2018, we completed the
sale of Filta Refrigeration and exited the
refrigeration business to enable us to
concentrate resources on our higher margin
businesses FiltaFry, FiltaSeal and FiltaGMG.
a program of upgrading the facilities
of franchise owners to allow them to
increase their storage capacities to 6,000
gallons (22 metric tonnes) of waste oil at
one time. This improves the economics
for Filta by reducing the collection costs
as well as the revenue potential because
we are able to sell larger loads at better
prices. In the last 12 months, we have
upgraded a further 21 facilities in the US
to this 6k capacity, giving a total of 51
such facilities.
Company Owned Operations
(UK)
FiltaSeal
Revenue from FiltaSeal was £1.3m (2016:
£1.0m), reflecting the fact that the number
of seals fitted grew by 35%, achieved
without the need for additional vans. The
increased efficiency of our vans has resulted
in a positive contribution to gross margin
and, although we are now approaching
optimal utilisation, we expect to see this
trend continue into 2018.
FiltaGMG
Revenues from FiltaGMG in the four
months since the acquisition of Grease
Management Limited were £0.4m. In 2016
we recognised that there was a developing
demand, driven by both legislation and
commercial efficiency benefits, for the
provision of preventative drain maintenance
to commercial kitchens. We therefore
started supplying and servicing auto-
dosing drip systems to keep drains clear
for commercial kitchens and it quickly
became clear that there was a far greater
opportunity if we could broaden our
services to include the maintenance of
grease recovery units. This is a highly
fragmented, but growing, market and
so in August 2017 we acquired Grease
Management Limited, a company with a
strong reputation and a well-established
client base in this area of activity. Moreover,
it was located just 30 minutes from our
offices in Rugby and has been well known
to us for many years.
With a solid customer base and
experienced team, Grease Management
Limited was integrated into our existing
FiltaDrain business to create FiltaGMG,
sharing the existing call-centre resources
15
Financial StatementsGovernanceStrategy and Operations Overview Chief Executive’s Operating Review
People
Good people are key to any business
and we continue to build a great team at
Filta, many of whom have worked for the
Group for well over 10 years. They have
been a key component to our success in
that period both through their hard work
and dedication to the brand and by the
strong relationships they’ve developed with
customers and franchise owners alike. In the
US, the management team is very stable
with Tom Dunn, Chief Operating Officer,
continuing to run the day to day business,
enabling us to continue executing on our
plans.
In the UK, we significantly strengthened
the management team; Alan Richards was
hired as Accounts Manager in August,
Alastair Anderson joined as Head of Sales
in November, Debbie Sarson-Lowe was
promoted from Operations Director to
Managing Director in January 2018 with
Roscoe Urosevic moving into a Corporate
Development role. He will focus on
identifying suitable acquisition targets and
will assist with the management of our
expansion into Europe. This experienced
team can drive the UK business forward.
With the expansion into Europe, we gained
Jos van Aalst whose experience was key
in our decision to replicate our US model
there. We have also recently added Frank
Hartong, an ex-Compass executive, to run
the sales department in Germany as we
endeavour to develop business for our
Franchise Owners.
One of the aims of taking Filta public was
the ability to offer all employees share
options in the business (SAR’s in the US),
helping align all goals and giving everybody
the opportunity to share in the long-term
success of the business. I am pleased to
say that we put such a scheme in place and
issued options to all staff in May 2017.
Systems
We are continually improving our systems,
with the most notable development in 2017
being the implementation of NetSuite to
handle the accounting and reporting for
the Group. NetSuite provides real-time
financial information to our businesses
around the world with its multi-company,
multi-book, multi-currency functionality,
while also allowing our operational systems
to integrate directly, thereby streamlining
efficiencies and ensuring accuracy.
Market Conditions
Despite the economic and political
uncertainties that persisted in both
the US and the UK through much of
2017, we experienced a steady level of
enquiries from potential franchise owners,
with many superior quality candidates
coming forward. We see no reason for
this to change, particularly in view of
the strong U.S. economy. Moreover, the
Canadian operation is up and running
and we are already seeing a strong level
of interest, which will help to maintain
our progress on the North American
continent as the number of available U.S.
territories diminishes. With this and the
commencement of the German operation
we are excited by the prospect of further
progress in the year ahead.
The market for each of Filta’s services in the
UK and US, remained steady throughout
the year and we believe that with the ever-
increasing health, safety and food hygiene
requirements, the demand for our services
is likely to remain constant.
Current Trading & Outlook
In 2017 we continued to build our franchise
base and took several strategic steps,
including the entry into Canada and the
acquisition of Grease Management Limited.
This has been followed, more recently, by
the purchase of FiltaFry GmbH, all of which
laid the ground for further growth and
improved margins in the years ahead.
Early 2018 has seen the benefit of these
actions with further growth in Fryer
Management revenues, the recurring
revenue engine, while FiltaSeal volumes
have experienced a good start to the year.
We continue to integrate FiltaGMG and
we anticipate an acceleration in revenue
and profitability as it builds its client base
through the year.
Franchise Development remains important
to the growth of Fryer Management
revenues. We have continued to add new
franchises, territories and MFU’s to our
franchise platform through the first quarter
16
and are encouraged by the strength of the
new business pipeline.
Finally, we are already seeing an
improvement in our gross margins because
of the strategic moves outlined above and
we expect this trend to continue through
the year.
Jason Sayers, CEO, commented:
“In 2017 we continued to build our
franchise base and took several strategic
steps, including the entry into Canada and
the acquisition of Grease Management
Limited. This has been followed, more
recently, by the purchase of FiltaFry
Deutschland GmbH, all of which laid the
ground for further growth and improved
margins in the years ahead.
Early 2018 has seen the benefit of these
actions with further growth in Fryer
Management revenues, the recurring
revenue engine, while FiltaSeal volumes
have experienced a good start to the year.
We continue to integrate FiltaGMG and
we anticipate an acceleration in revenue
and profitability as it builds its client base
through the year.
Franchise Development remains important
to the growth of Fryer Management
revenues. We have continued to add new
franchises, territories and MFU’s to our
franchise platform through the first quarter
and are encouraged by the strength of the
new business pipeline.
Finally, we are already seeing a modest
improvement in our gross margins as a
result of the strategic moves outlined
above and we expect this trend to
continue through the year.”
Jason Sayers
Chief Executive Officer
16 April 2018
Operational Performance
& KPIs
The key performance indicators for our
Fryer Management Services are:-
1 – Franchise Development
Franchise Sales
North America
UK
• The number of new franchisees and
territories that we are able to add each
year
• The number of operating MFU’s in the
Group
15
25
19
25
5
4
9
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 number of GMG service jobs each
North America
UK
year
Our performance against each of these
indicators is summarized in the charts:
20
Franchise Sales
394
MFUs at y/e
29,000
Seals Replaced
2017
2016
2015
2017
2016
2015
351
300
250
43
41
39
3 – Company Owned Operations
Seals Replaced
28,906
21,345
19,089
FiltaGMG Jobs Performed
1,067
1,240,279
1,026,360
2017
2016
2015
2017
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.
FiltaGMG jobs represent the number
of individual jobs performed at sites for
the FiltaGMG services. Typically a site is
serviced every quarter.
17
Financial StatementsGovernanceStrategy and Operations Overview
Chief Financial Officer’s Review
Summary
• Group revenue, from continuing operations, increased 36% to £11.5m (2016: £8.5m)
• Fryer Management revenue, primarily recurring in nature, grew 36% to £8.4m (2016: £6.2m)
• Profit before tax was £1.6m (2016: loss of £0.3m)
• Adjusted EBITDA, from continuing operations, was up 77% to £2.1m (2016: £1.2m)
• Deferred income balance grew by £0.2m (£0.5m in constant currency) to £2.9m
• Basic earnings per share from continuing operations was 2.90p (2016: loss per share 1.89p)
Revenue
Group revenue from continuing operations grew 36% to £11.5m (2016: £8.5m).
Revenue, from our continuing operations, in North America was £8.3m, 72% of Group revenue (2016: £5.9m, 70%) while the U.K. delivered
£3.2m of revenue, 28% (2016: £2.6m, 30%).
The 36% increase in revenue was a result of robust growth across each of our core service offerings of Franchise Development, Fryer
Management, FiltaSeal and the newly-formed FiltaGMG, following the acquisition of Grease Management Limited in August.
Fryer Management Services continues to be the key driver of the business contributing £8.4m of revenue (2016: £6.2m) on higher royalty,
national account and waste oil revenues while FiltaSeal experienced a 31% increase in revenue growing to more than £1.3m (2016: £1.0m).
We are encouraged by the opportunity that FiltaGMG provides - it has a well-established client base and delivered £0.4m of revenue in
the 4 months following its acquisition in late August 2017. The Franchise Development activities also finished the year solidly, up 9%, while
maintaining a strong pipeline entering the new year.
Adjusted EBITDA
Adjusted EBITDA increased 77% to £2.1m (2016: £1.2m) at a significantly higher adjusted EBITDA margin of 18.3% (2016: 14.1%), reflecting
utilisation efficiencies brought about by delivering a 36% increase in revenue on an adjusted overhead base that was constant as a percent
of sales and supported by our strategy to focus on the provision of higher margin service offerings, including the Grease Management
Limited acquisition. Gross profit margins were up to 49.2% (2016: 47.5%).
Adjusted EBITDA reconciliation
Adjusted EBITDA has been arrived at as follows:
Profit/(loss) before tax
Acquisition, legal and IPO related costs
Share-based payments
Depreciation and amortisation
Finance costs
Adjusted EBITDA
2017
£
2016
£
1,607,727
120,280
87,082
209,912
90,952
2,115,953
(328,991)
1,260,539
-
182,032
79,738
1,193,318
Alternative Performance Measures
In addition to performance measures (IFRS) directly observable in the financial statements, additional performance measures (Adjusted
EBITDA, Network Revenue and EBITDA to Cash Conversion) are used internally by management to assess performance. Management
believes that these measures provide useful information as they are used to evaluate performance of business units, to analyse trends in
cash-based operating expenses, to establish operational goals and allocate resources. Adjusted EBITDA is defined as earnings before
interest, taxes, depreciation, amortisation, exceptional costs and share based franchisees for all services provided to customers and
is a meaningful measure of our growth in the markets we serve. EBITDA to cash conversion is an important metric for management
as it measures both the efficiency of the Group to convert profits into cash and the effectiveness of our cash management activities.
It is calculated by dividing EBITDA by net cash flow from operations (measured by earnings before interest, taxes, depreciation and
amortisation divided by net cash flow from operations per the consolidated statement of cash flows).
Deferred Revenue
Group revenue for the year ended 31 December 2017 includes £0.6m (2016: £0.5m) which was released from brought forward deferred
income during the year and we generated a further £1.0m of deferred revenue, of which £0.1m relates to opening package fees for
franchises that will start in 2018, and will therefore be recognised in that year, and £0.9m relates to territory fees on both new and existing
18
franchises and will be recognised over the life of the franchise agreement. The deferred revenue balance grew by £0.2m to £2.9m but was
impacted by the foreign exchange effect of a weakening dollar which had a £0.3m negative effect on the year-end balance.
The following chart shows the components of the change in deferred revenue in 2017.
£2,711,358
-£565,829
£876,312
£155,894
-£240,408
£225,969
£2,937,327
Deferred
Revenue
Added
Foreign
Exchange
Change in
Deferred
Revenue
Deferred
Revenue
Balance
Deferred
Revenue
Balance
Deferred
Revenue
Released
Deferred
Revenue
Added
Start of
Current Period
Franchise Territory
Fees recognized
to the P&L from
Balance Sheet
New Sales
of Franchise
Territories during
current period
added to the
Balance Sheet
Q4 2017 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 2017, the deferred income account totalled £2.9m, and will be recognized as income over the next 10 years as follows:
£426,533
£419,278
£412,441
£397,440
£347,916
£307,425
£260,079
£190,266
£123,936
£52,008
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
19
Financial StatementsGovernanceStrategy and Operations Overview Chief Financial Officer’s Review
Discontinued Operations
Following an agreement to sell certain assets of the Group subsidiary, Filta Refrigeration Limited, the transaction was completed
on 4 January 2018 and the Group has exited its refrigeration business. The results of Filta Refrigeration are therefore disclosed as a
discontinued operation and will not make any measurable contribution to the Group’s future earnings. In 2017, Filta Refrigeration
contributed a net profit of £0.03m (2016: £0.1m).
The tax impact of discontinued operations is £Nil (2016: £Nil).
Acquisitions
On 22 August 2017, we acquired Grease Management Limited, a provider of drain-related services in the UK, for a total consideration of
£1.2m. This business contributed £0.4m to group revenue and £0.2m to the group’s adjusted EBITDA during 2017.
Taxation
We manage all taxes, both direct and indirect, to ensure that we pay the appropriate amount of tax in each country while ensuring that we
respect the applicable tax legislation and utilise, where appropriate, any legislative reliefs available. This tax strategy is reviewed, regularly
monitored and endorsed by the Board. The effective tax rates on income were 38% in the U.S. and 19.3% in the U.K. The U.S. federal
corporate income tax rate has reduced from 35% to 21% following the substantive enactment of US tax reform on 22 December 2017. This
necessitated a re-measurement of the existing US deferred tax position in the period to 31 December 2017. As a result, the current year
expense includes a non-cash tax accounting charge of £0.3m. Accordingly, the tax expense for the year was £0.8m (2016: £0.1m).
Earnings per share
The basic earnings per share for the year, from continuing operations, is 2.90p (2016: loss per share of 1.89p) while the basic and diluted
earnings per share, from continuing and discontinued operations, is 2.99p (2016: loss per share of 1.89p). However, both earnings per
share measures were significantly impacted by the effects of the £0.3m deferred tax charge related to the change in the U.S. tax rate.
Cash flows and cash balance
The Group is establishing a consistent record of cash generation with an EBITDA to cash conversion rate of 71%. Cash conversion
measures our success in converting operating profit (measured by earnings before interest, tax, depreciation and amortisation (‘EBITDA’)
to cash and reflects both the quality of our earnings and the effectiveness of our cash management activities. The net cash inflow from
operations before certain acquisition and legal costs (note 29 to the financial statements) in 2017 was £1.5m (2016: £1.3m). The main cash
outflows related to the acquisition of Grease Management Limited £1.2m (2016: £Nil), cash taxes £0.5m (2016: £0.3) and dividends £0.2m
(2016: £Nil).
At the year end the Group had cash balances of £4.0m (2016: £4.4m) and outstanding borrowings of £1.1m (2016: £1.2m).
Brian Hogan
Chief Financial Officer
16 April 2018
20
Principal Risks and Uncertainties
The board has carried out an assessment of the principal risks facing the business, which are seen to be as follows:
Risk
How we manage the risk
Change in risk
during the year
Comment
Organisational risks
Failure to attract new franchisees in line with
the strategic targets may prevent the Group
from achieving its operating targets
The failure of a major franchisee may lead to
a loss of revenue and/or a bad debt
Brand or reputational damage may be
caused by the actions of either franchisees
or the company’s own employees
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
Operational risks
incident
An
involving an employee or
franchisee in the operation of an MFU may
result in a fatal or serious injury
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 USA, which
represents
In
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
which are being taken up by existing
franchisees.
We now have 184 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.
franchisees and
initial training
We provide detailed
for all new
their
operators. There are also refresher
training programmes to ensure that
all franchisees are fully cognisant of all
procedures to be followed.
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.
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.
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.
No change in risk
➔
Strong pipeline in both the
U.S. and Canada in place.
No change in risk
➔
The composition of our
franchise base continues to
diversify.
No change in risk
➔
Management
focuses on
positive brand awareness
through
and
strongly monitors its results.
training
No change in risk
➔
The risk has not changed
year. The
the
during
composition has
Board
remained
constant with
strong oversight from the
independent directors.
No change in risk
➔
The risk has not changed
during the year. The risk is
monitored both internally
and through third party
inspections.
Decrease in risk
➔
Our conversion to a new
cloud-based,
global,
accounting
platform
supported by a tier one
provider has enhanced
reliability and data integrity.
Additionally, we undertake
a periodic review process to
ensure we have adequate IT
security measures in place.
21
Financial StatementsGovernance OverviewStrategy and Operations Principal Risks and Uncertainties
Risk
How we manage the risk
The loss of key people may compromise the
Group’s or any part of the Group’s ability to
operate effectively.
Failure
to comply with new GDPR
requirements in the U.K. and mainland
Europe.
Financial Risks
A significant fall in the value of the US Dollar
(which accounts for approximately 70% of
the Group’s earnings) against £ sterling may
have an adverse impact on the Group
Strategic Risks
Competition from new entrants to the
market may create margin pressure or loss
of customers
Change in consumer tastes or habits, as a
result, for example, of pressures from health
watchdogs, may result in less demand for
fryers.
Improved fryer technology may reduce/
resolve deterioration of
the oil and
therefore require less frequent filtering and
replacement.
Franchisees may seek to impose commercial
leverage on the Group, resulting in reduced
margins and profitability
22
thereby ensuring
We have widely spread knowledge of
the Group’s operational systems and
procedures,
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.
We have undergone
a detailed
assessment of the readiness of the
business and an action plan is being
developed with
support of
appropriate external advisors.
the
Change in risk
during the year
No change in risk
➔
Comment
We have done considerable
work this year to improve
for talent
our processes
retention
management,
and succession planning.
New risk
➔
have
We
assigned
dedicated resources and
are working with an external
consultant to ensure we are
in compliance.
No change in 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.
While the uncertainty of the
risk has changed slightly
this year we do not see a
material effect. The risk
is monitored on a regular
basis against both in-house
and external mitigation
options.
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.
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.
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.
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.
No change in risk
➔
We have not witnessed any
significant change in our
competitive landscape.
No change in risk
➔
The risk has not changed
during the year.
No change in risk
➔
changes
The Group is continually
reviewing
in
and works
technology
collectively
its
suppliers to ensure we fully
understand future changes.
with
No change in risk
➔
franchise
base
Our
to grow and
continues
diversify which helps us
ameliorate any potential
risk.
Principal Risks and Uncertainties
Governance
Board of Directors
24 Corporate Social Responsibility Report
26
27 Corporate Governance Statement
30 Directors’ Remuneration Report
33 Directors’ Report
23
23
Financial StatementsGovernance OverviewStrategy and Operations Corporate Social Responsibility Report
2.1m lts
Fuel Saved
600 mt
Plastic Saved
28.4k 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 6,000 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 2017, FiltaFry customers saved over
8,500 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
640 mt
5,500 mt
2.1m lts
600 mt
400 mt
11,100 mt
FiltaBio
In 2017, Filta collected 7,700 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)
48 mt
17,500 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
2424
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.
Quick facts
on Filta and
Oceans of
Hope:
• First participated in the May
2014 New Smyrna Beach,
FL surf event
• Sponsored or participated in
13 events since 2014
• 405 participant athletes with
limited mobility experienced
adaptive surfing since 2014
• “Mavericks” level sponsorship
2016 and 2017
• 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.
25
Financial Statements OverviewStrategy and OperationsGovernanceHEAD_0 1st line 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 in 1999 as Commercial Director, becoming Managing Director of the UK operations
in 2000 and currently serves in the role of Corporate Development Director for the UK. Jlubomir has overseen the
FiltaFry UK franchise network, developed the internal franchise network and has introduced FiltaSeal and FiltaGMG
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 s/b previously 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.
2626
Corporate Governance Statement
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 have chosen to follow the provisions of the Corporate Governance Code for small and mid-sized quoted
Companies, published by the Quoted Companies Alliance (the ‘QCA Code’).
Adoption of the QCA Code is not mandatory and therefore this report does not seek to follow the ‘comply or explain’ approach with
respect to each departure from the Code. This part of the Report describes how Filta complies with the Guidelines set out in the QCA
Code 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 26 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 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
2727
Financial Statements OverviewStrategy and OperationsGovernance
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. 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.
Attendance at Board and Committee meetings
Supported by the Company Secretary, the Board has ten scheduled meetings per year and its agendas are set to focus on strategy
and key decisions and to enable proper monitoring and oversight of the business to be undertaken. There is a schedule of matters
which are reserved for the Board and documentation in place to clarify the nature and extent of delegations. In particular, the division
of responsibility between the Chairman, who is responsible for leading the Board and its governance of the Company, and the Chief
Executive Officer, who is responsible for management of the business and delivery of the Company’s strategy, is clear.
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.
At the forthcoming AGM, Roy Sayers and Brian Hogan will be retiring by rotation under the Articles of Association and standing for
reappointment.
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 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, is 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.
Financial Risk Management
The Group and the Company are exposed, through its operations, to the following risks:
• Market risk
• Foreign currency risk
• Interest rate risk
• Credit risk
• Liquidity risk
In common with all other businesses, the Group and the Company are exposed to risks that arise from their use of financial instruments.
Further quantitative information in respect of these risks is presented in note 28 to the financial statements.
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 ongoing compliance with best practice and in response to amendments to
FRC guidance.
28
HEAD_0 1st line 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 Board has established an Audit Committee comprising the Company’s three Non-Executive Directors, which is chaired by Graham
Woolfman, FCA, who has recent and relevant financial experience, both as a result of his formal qualifications and his roles elsewhere.
The Committee is responsible for oversight of the Company’s financial statements, risk management, audit and auditor relationship, and
internal controls and procedures. The Audit Committee, supported by the Company Secretary, plans appropriately on an annual basis
to enable it to discharge its duties as set out in 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.
Remuneration Committee
The Board has also established a Remuneration Committee to oversee remuneration policy and determine the remuneration and benefits
of the Company’s Executive Directors as well as other terms relevant to their appointment. This Committee also comprises the Company’s
three Non-Executive Directors and is chaired by Tim Worlledge. A Remuneration Report from the Chairman of the Remuneration
Committee is set out on pages 25 to 27.
Board Attendance
The Directors of the Company are committed to sound governance of the business and each devotes sufficient time to ensure this
happens. The table below sets out attendance statistics for each Director at Board, Special, and where relevant, Committee meetings held
during the financial year.
Director
Tim Worlledge
Graham Woolfman
Roy Sayers
Jason Sayers
Victor Clewes
Jlubomir Urosevic
Brian Hogan
Board attendance
13 meetings held
Audit Committee
attendance
3 meetings held
Remuneration
Committee
attendance
2 meetings held
13
13
13
13
13
13
13
3
3
3
-
-
-
-
2
2
2
-
-
-
-
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.
Securities Dealing Code
Filta has adopted a code on securities dealings in relation to its Ordinary Shares and related securities which is compliant with AIM rule 21
and the EU Market Abuse Regulation. This code applies to Directors and relevant employees of Filta.
29
Financial Statements OverviewStrategy and OperationsGovernanceHEAD_0 1st line Directors’ Remuneration Report
The Directors present their Remuneration Report for the year ended 31 December 2017.
Committee
Details of the Remuneration Committee’s composition and responsibilities are set out in the Corporate Governance Statement on pages
27 to 29. During the year ended 31 December 2017, the committee met twice. 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.
Annual bonus
Bonuses paid to Directors in 2017 were £0.02m (2016 pre-admission: £0.7m).
Pension
There were no contributions made by the Group to Directors’ pension plans during the year.
Share options plans
Upon the recommendation of the Committee, the Board established the Filta Group Holdings Enterprise Management Incentive Plan
(‘EMI’ or ‘The Plan’) and it has offered options to all qualifying U.K. employees. Additionally, all qualifying U.S. employees were awarded
Share Acquisition Rights (‘SAR’s’) which follow the structure of the EMI Plan to provide holders of SAR’s the same reward value as if the
SAR’s were share options. The Plan includes both time and performance-based criteria.
Due to the size of their existing beneficial holdings, Jason Sayers, Victor Clewes and Jlubomir Urosevic are not permitted to participate in
the Share Option Plan. The Non-Executive Directors are also not permitted to participate in the Plan. Brian Hogan, who has been awarded
SAR’s, is the only director currently participating in the Company’s share options plans.
Taxable benefits
Four of the Directors are provided with company cars and three with company paid medical insurance but, apart from these benefits, none
of the Directors receives any other taxable benefits.
3030
Directors’ emoluments
The Directors’ emoluments during the year 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
£
193,698
96,849
193,698
85,000
35,000
30,000
30,000
664,245
–
19,370
–
–
–
–
–
19,370
–
–
–
–
–
–
–
–
23,963
4,017
11,850
6,769
–
2,453
–
49,052
2017
Total
£
217,661
120,236
205,548
91,769
35,000
32,453
30,000
723,667
2016 Total
£
539,298
99,124
529,248
101,159
5,833
17,333
5,000
1,296,994
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:
Executive Directors
Jason Sayers
Brian Hogan
Victor Clewes
Jlubomir Urosevic
Non-Executive Directors
Tim Worlledge
Roy Sayers
Graham Woolfman
Date of contract
26 October 2016
26 October 2016
26 October 2016
26 October 2016
26 October 2016
26 October 2016
26 October 2016
Notice period
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 2017 are set out below:
No of Shares
No of Share options/SAR’s
Executive Directors
Jason Sayers *
Brian Hogan
Victor Clewes
Jlubomir Urosevic
Non-Executive Directors
Tim Worlledge
Roy Sayers *
Graham Woolfman
11,614,680
–
4,558,750
1,309,690
30,000
9,688,720
18,000
–
90,000
–
–
–
–
–
*
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.
31
Financial Statements OverviewStrategy and OperationsGovernanceHEAD_0 1st line
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.
32
HEAD_0 1st line Directors’ Report
The Directors present their report and the audited financial statements for the year ended 31 December 2017.
Principal Activity
The Strategic Report, which is set out on pages 6 to 13 provides a comprehensive review of the development, performance and future
prospects of the business for the year ended 31 December 2017 including a description of the Company’s strategy, business models and
business overview.
Results and Dividends
The profit for the year was £0.8m (2016: loss of £0.3m). Further details are set out on Page 40. First and second interim dividends of 0.19p
and 0.65p respectively were paid during the year. The Board has proposed a final dividend for the year, subject to approval at the Annual
General Meeting, of 0.65p. No dividend was paid in the prior year.
Annual General Meeting
The Annual General Meeting of the Company will take place on 5 June 2018 at The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP,
commencing at 10:00 a.m. Details of the resolutions and voting procedures are set out in the Notice of Annual General Meeting which is
being posted to shareholders and can be found on the Company’s website.
Directors
The names of the Directors who served during the year 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 26.
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.
Share Capital
The Company’s issued share capital comprises a single class, which is divided into ordinary shares of 10 pence each, details of which are
set out in Note 26 of the financial statements. All the Company’s issued ordinary shares are fully paid up and rank equally in all respects.
As at 31 December 2017, there were 27,132,660 ordinary shares in issue. The rights and obligations attached to these shares are detailed
in the Articles of Association of the Company, copies of which can be obtained from the Companies House in the UK, or by writing to the
Company Secretary, at the registered office of the Company.
3333
Financial Statements OverviewStrategy and OperationsGovernance
Directors’ Report
Substantial Interests
As at 31 December 2017, 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
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
850,000
29.2
16.8
13.6
6.5
4.8
9.7
5.7
3.1
*
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 71.1%.
There are no restrictions on the transfer of Filta Group Holdings plc’s AIM securities.
Filta Group Holdings plc has not applied or agreed to have any of its securities (including its AIM securities) admitted to 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 (2016 – £ 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 auditor 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 auditor and a resolution
concerning its re-appointment will be tabled to the members at the forthcoming Annual General Meeting.
Post Year-End Developments
On 4 January 2018, the Group announced the sale of its subsidiary, Filta Refrigeration Limited. Additionally, on 31 January 2018 the Group
announced the acquisition of FiltaFry Deutschland GmbH, the company which owns the master franchise licence for Filtafry in Germany.
Review of the Business
The Group is required to set out a fair review of the business and future developments of the Group during the financial year ended
31 December 2017 and the position of the Group at the year end.
This information can be found in the Chairman’s Statement on pages 2 to 4, the Chief Executive Officer’s Review on pages 14 to 17 and
the Chief Financial Officer’s Review on pages 18 through 20.
Financial Risk Management
Details are set out in the Corporate Governance Report and in note 28 to the financial statements.
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.
34
HEAD_0 1st line 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, which includes compliance with AIM Rule
26; the work carried out by the auditor does not involve the consideration of these matters and, accordingly, the auditor accepts no
responsibility for any changes that may have occurred in the accounts since they were initially presented on the 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 page 26 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 16 April 2018 and signed on its behalf by:
Brian Hogan
Chief Financial Officer
16 April 2018
35
Financial Statements OverviewStrategy and OperationsGovernanceHEAD_0 1st line Financial
Statements
39
42
43
44
45
46
47
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
48
49
72 Corporate Information
36
Independent Auditor’s Report to the Members of
Filta Group Holdings PLC
year ended 31 December 2017
Opinion
We have audited the financial statements of Filta Group Holding plc (the “parent company”) and its subsidiaries (the “group”) for the
year ended 31 December 2017, which comprise:
• the group statement of comprehensive income for the year ended 31 December 2017;
• the group and parent company statements of financial position as at 31 December 2017;
• the group and parent company statements of cash flows for the year then ended;
• the group and parent company statements of changes in equity for the year then ended; and
• the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December
2017 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our
report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
• The directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• The directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve
months from the date when the financial statements are authorised for issue.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be
expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our
testing and to evaluate the impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the group financial statements as a whole to be £90,000
based on a percentage of profit before tax.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial
statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and
our evaluation of the specific risk of each audit area having regard to the internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and
directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £5,000. Errors below that threshold would also be
reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
37
Financial StatementsGovernance OverviewStrategy and Operations Independent Auditor’s Report to the Members of
Filta Group Holdings PLC
year ended 31 December 2017
Overview of the scope of our audit
The finance functions of the parent company and its UK subsidiaries are based in the US and UK, respectively.
A member firm of Crowe Horwath International network in the US (the ‘component auditor’) undertook a full scope audit of Filta Group
Inc., under our direction. Filta Group Inc., accounts for approximately 80% of the group’s profit before tax and 75% of the group’s
revenue.
We were involved in the audit of Filta Group Inc., from the planning stage through to completion. This involved a combination of
conference call meetings, detailed working paper review and meetings and discussions with the audit committee. We reviewed a
complete set of working papers for Filta Group Inc. and challenged the findings of the component auditor and discussed matters with
management. Our audit of the group’s UK operations was performed at the UK headquarters in Rugby. The consolidation and annual
report are prepared by management in the US and we audited these through regular conference call meetings with management, the
use of a file sharing platform and challenging management’s assumptions and conclusions throughout the audit.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter
Revenue recognition
Revenue is recognised in accordance with
the accounting policy set out in the financial
statements. The accounting policy contains a
number of judgements in respect of franchise
sales where a portion of the revenue generated
is deferred and recognised over the term of the
franchise agreement.
Acquisition of Grease Management Limited
Grease Management Limited (‘GMG’) was
acquired by the group in August 2017 for a total
consideration of £1,150,000 in cash. Management
has performed a valuation of the net assets
acquired and identified intangible assets of
£374,000 and residual goodwill of £631,000. The
valuation of intangible assets contains a number of
key judgments.
How the scope of our audit addressed the key audit matter
Our audit procedures consisted of the following:
• Substantive testing of a sample of transactions throughout the year to
determine whether the company’s accounting policy on revenue recognition
had been correctly applied.
• Testing a sample of transactions from the point of origin to the financial
statements, covering royalty income, franchising and other revenues.
• Testing the deferred revenue balance in the financial statements to assess if
this is fairly stated.
• Performing a series of procedures to determine if revenue has been
recognised in the correct accounting period.
• Assessing the appropriateness of the related disclosures in the financial
statements.
Our audit procedures consisted of the following:
• Obtaining management’s detailed valuation report and challenged the
assumptions used to calculate the intangible assets, namely the discount rate,
customer attrition rate and growth rate.
• Comparing the resulting allocation of the purchase price to expectations.
• Assessing the appropriateness of the related disclosures in the financial
statements.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not
designed to enable us to express an opinion on these matters individually and we express no such opinion.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
38
required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to
do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have
formed.
Leo Malkin (Senior Statutory Auditor)
for and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
London
16 April 2018
39
Financial StatementsGovernance OverviewStrategy and Operations Consolidated Statement of Comprehensive Income
year ended 31 December 2017
Continuing Operations
Revenue
Cost of sales
Gross profit
Other income
Distribution costs
Administrative costs
Operating Profit/(loss)
Analysed as:
Adjusted EBITDA
Acquisition, legal and IPO costs
Depreciation and amortisation
Share based payments
Finance costs
Profit/(loss) before tax
Income tax expense
Profit/(loss) from continuing operations
Discontinued operations
Profit from discontinued operations
Net profit/(loss) attributable to owners
Other comprehensive income
Exchange differences on translation of foreign operations
Total other comprehensive income for the year
Profit/(loss) and total comprehensive income for the year
Earnings/(loss) per share
From continuing operations
– Basic (pence)
– Diluted (pence)
From continuing and discontinued operations
– Basic (pence)
– Diluted (pence)
Notes
5
6
17,18
31
9
10
2017
£
2016
£
11,547,299
(5,870,449)
5,676,850
38,377
(124,690)
(3,891,858)
1,698,679
2,115,953
(120,280)
(209,912)
(87,082)
1,698,679
(90,952)
1,607,727
(824,268)
783,459
8,468,687
(4,449,246)
4,019,441
25,186
(80,283)
(4,213,597)
(249,253)
1,193,318
(1,260,539)
(182,032)
–
(249,253)
(79,738)
(328,991)
(100,755)
(429,746)
32,858
816,317
87,165
(342,581)
(94,174)
(94,174)
722,143
(185,557)
(185,557)
(528,138)
13
13
13
13
2.90
2.87
3.03
2.99
(1.89)
(1.89)
(1.51)
(1.51)
40
Consolidated Statement of Financial Postion
year ended 31 December 2017
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Goodwill
Deposits
Trade receivables
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Assets classified as held for sale
Total assets
Current liabilities
Trade and other payables
Borrowings
Deferred income
Non-current liabilities
Deferred tax liability
Borrowings
Deferred income
Non-current liabilities classified as held for sale
Total liabilities
Equity
Share capital
Share premium
Retained profits/(accumulated losses)
Translation reserve
Other reserves
Total equity
Total equity and liabilities
Notes
12,18
11
17
17
19
19
20
21
12
22
23
23
12
26
26
27
2017
£
2016
£
1,216,388
652,131
484,821
631,380
2,344
302,163
3,289,227
2,506,060
437,716
4,031,174
6,974,950
74,372
10,338,549
1,190,651
755,965
166,624
–
2,572
379,405
2,495,217
1,960,693
288,350
4,392,350
6,641,393
87,665
9,224,275
2,142,906
107,786
532,682
2,783,374
1,989,885
103,812
400,881
2,494,578
95,185
931,765
2,404,645
3,431,595
66,425
6,281,394
–
1,017,506
2,310,477
3,327,983
33,486
5,856,047
2,713,266
131,400
1,862,967
(354,577)
(295,901)
4,057,155
10,338,549
2,695,266
3,480,191
(2,256,539)
(260,403)
(290,287)
3,368,228
9,224,275
The financial statements were approved and authorised for issue by the board on 16 April 2018 and were signed on its behalf by:
Brian Hogan,
Chief Financial Officer
41
Financial StatementsGovernance OverviewStrategy and Operations
Consolidated Statement of Changes in Equity
year ended 31 December 2017
Share
Capital
£
–
–
Share
Premium
£
–
–
Other
Reserves
£
–
–
Merger
Reserve
£
380,100
–
–
–
519,050
–
–
–
3,789,064
(308,873)
–
–
–
–
–
–
–
–
Foreign
Exchange
Reserve
£
(74,846)
–
(185,557)
(185,557)
–
–
Retained
Earnings
£
(1,913,958)
(342,581)
Total
Equity
£
(1,608,704)
(342,581)
–
(342,581)
–
–
(185,557)
(528,138)
4,308,114
(308,873)
–
–
2,176,216
2,695,266
–
–
–
3,480,191
–
49,400
–
49,400
–
–
(719,787)
(339,687)
–
–
–
49,400
49,400
1,456,429
(260,403) (2,256,539) 3,368,228
–
–
–
2,695,266
–
3,480,191
–
49,400
–
(339,687)
–
(260,403) (2,256,539) 3,368,228
816,317
816,317
–
–
–
–
18,000
–
–
–
2,713,266
–
–
–
131,400
–
(3,480,191)
–
131,400
–
–
–
–
(49,400)
–
43,786
43,786
–
–
–
–
–
–
–
(339,687)
(94,174)
(94,174)
–
–
–
–
–
–
816,317
(226,402)
–
49,400
3,480,191
–
(354,577) 1,862,967
(94,174)
722,143
(226,402)
149,400
–
–
43,786
4,057,155
Balance at 1 January 2016
Loss for the year
Foreign exchange translation
differences
Total comprehensive income
Issue of share capital (note 26)
Share issue expenses
Share premium reduction (note
26)
Share based payments (note 27)
Group reconstruction (note 26)
Balance at 31 December 2016
Balance at 1 January 2017
Profit for the year
Foreign exchange translation
differences
Total comprehensive income
Dividends paid (note 16)
Issue of share capital (note 26)
Transfer between reserves
Share premium reduction (note 26)
Share based payments (note 27)
Balance at 31 December 2017
42
Consolidated Statement of Cash Flows
year ended 31 December 2017
Operating activities
Profit/(loss) before taxation for the year
Adjustments for non-cash operating transactions:
Finance costs
Depreciation
Amortisation
Gain on disposal of tangible fixed assets
Share based payment charge
Movements in working capital:
Increase in trade and other receivables
Increase in trade and other payables
Increase in inventories
Increase in deferred revenue
Cash flow from operations
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 subsidiary undertakings, net of cash acquired
Purchase of other intangible assets
Net cash used in investing activities
Financing activities
Repayment of borrowings
Net proceeds from issue of share capital
Dividends paid to shareholders
Interest paid
Net cash (used in)/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
Notes
2017
£
2016
£
1,640,585
(218,244)
9
18
17
27
18
15
15
16
16
9
21
21
90,952
109,911
100,001
9,992
87,082
2,038,523
(526,864)
210,973
(106,743)
225,969
1,841,858
(510,187)
1,331,671
(112,941)
24,836
(1,137,901)
(55,480)
(1,281,486)
(47,058)
149,400
(226,402)
(90,952)
(215,012)
(164,827)
4,392,350
(196,349)
4,031,174
79,738
118,855
63,177
–
49,400
92,926
(964,536)
160,041
(76,636)
827,962
39,757
–
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
43
Financial StatementsGovernance OverviewStrategy and Operations
Parent Company Statement of Financial Position
year ended 31 December 2017
Assets
Non-current assets
Investments in subsidiaries
Amount due from subsidiaries
Current assets
Trade and other receivables
Amount due from subsidiaries
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
2017
£
2016
£
14
19
18
21
26
26
27
2,293,426
1,704,716
3,998,142
25,802
438,496
1,162,035
1,626,333
5,624,475
2,176,216
674,573
2,850,789
25,808
–
3,048,174
3,073,982
5,924,771
61,653
61,653
4,074
4,074
2,713,266
131,400
43,785
2,674,371
5,562,822
5,624,475
2,695,266
3,480,191
49,400
(304,160)
5,920,697
5,924,771
No statement of comprehensive income is presented by the company as permitted by section 408 of the Companies Act. The loss
dealt within the financial statements of the parent Company for the year ended 31 December 2017 is £324,658 (2016: £304,160).
The financial statements were approved and authorised for issue by the board on 16 April 2018 and were signed on its behalf by:
Brian Hogan,
Chief Financial Officer
44
Parent Company Statement of Changes in Equity
year ended 31 December 2017
On incorporation
Issue of share capital (note 26)
Share issue expenses
Loss for the year
Share based payment (note 27)
Balance at 31 December 2016
Balance at 1 January 2017
Loss for the year
Dividends paid (note 16)
Issue of share capital (note 26)
Transfer between reserves
Share premium reduction (note 26)
Share based payments (note 27)
Balance at 31 December 2017
Share
Capital
£
–
2,695,266
–
–
–
2,695,266
2,695,266
–
–
18,000
–
–
–
2,713,266
Share
Premium
£
–
3,789,065
(308,874)
–
–
3,480,191
3,480,191
–
–
131,400
–
(3,480,191)
–
131,400
Other
reserve
£
–
–
–
–
49,400
49,400
49,400
–
–
–
(49,400)
43,785
43,785
Retained
Earnings
£
–
–
–
(304,160)
–
(304,160)
(304,160)
(324,658)
(226,402)
–
49,400
3,480,191
–
2,674,371
Total
Equity
£
–
6,484,331
(308,874)
(304,160)
49,400
5,920,697
5,920,697
(324,558)
(226,402)
149,400
–
–
43,785
5,562,822
45
Financial StatementsGovernance OverviewStrategy and Operations
Parent Company Statement of Cash Flows
year ended 31 December 2017
Operating activities
Loss before tax
Movements in working capital:
Decrease/(Increase) in trade and other receivables
Increase in trade and other payables
Share based payment charge
Net cash used in operations
Investing activities
Advances to subsidiaries
Net cash used in investing activities
Financing activities
Proceeds from issue of share capital, net of costs
Increase in investment in subsidiary
Dividends paid to shareholders
Net cash (used in)/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
2017
£
2016
£
(324,658)
(304,160)
6
14,282
87,082
(223,288)
(25,808)
4,074
49,400
(276,494)
(1,468,539)
(1,468,539)
(674,573)
(674,573)
149,300
(117,210)
(226,402)
(194,312)
(1,886,139)
3,048,174
1,162,035
3,999,241
–
3,999,241
3,048,174
–
3,048,174
46
Notes to the Financial Statements
year ended 31 December 2017
1. General information
Filta Group Holdings plc was incorporated in England and Wales on 31 March 2016. Its registered office is at The Locks, Hillmorton,
Rugby, Warwickshire, England, CV21 4PP.
The Company is listed on the AIM market of the London Stock Exchange. The Company acts as the holding company of a group of
subsidiaries that are involved in the franchising of on-site environmental kitchen solutions to restaurants, catering establishments and
institutional kitchens. The services include microfiltration of cooking oil, fryer cleaning, temperature calibration, waste oil disposal
and specially designed filters for refrigeration units and coolers. The Filta Group sells franchises and operates in the UK, the United
States and Canada. Additionally, the Company operates two direct sale businesses including refrigeration seal replacement and
the installation, repair and maintenance of drain dosing and grease recovery units. Further details of the Company’s subsidiaries are
provided in Note 14.
2. Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use
in the European Union including interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), and
with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared under the historical cost convention except for financial instruments that
have been measured at fair value through profit and loss.
The presentational and functional currency of the Company is Pounds Sterling. The functional currency of the subsidiaries is
determined by the primary economic environment in which they operate.
Group reconstruction in prior year
Filta Group Holdings plc entered into an agreement to acquire the entire issued share capital of each of The Filta Group Limited and
The Filta Group, Inc. on 26 October 2016 from Cookband Limited for Nil consideration. The reorganisation was affected by way of
share for share exchanges whereby each of The Filta Group Limited and The Filta Group, Inc. became wholly-owned subsidiaries (the
“Subsidiaries”) of Filta Group Holdings plc as it is currently constituted.
The directors consider the substance of the acquisition of the Subsidiaries by Filta Group Holdings plc is that of a combination of
entities under common control and therefore it fell outside the scope of IFRS 3 (revised 2008).
In accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, in developing an appropriate accounting
policy, the Directors have considered the pronouncements of other standard setting bodies and specifically looked to accounting
principles generally accepted in the United Kingdom (“UK GAAP”) for guidance (FRS 102) which does not conflict with IFRS and reflects
the economic substance of the transaction.
Under UK GAAP, the assets and liabilities of both entities are recorded at book value, not fair value. Intangible assets and contingent
liabilities are recognised only to the extent that they were recognised by the legal acquirer in accordance within applicable IFRS.
No goodwill is recognised, any expenses of the combination are written off immediately to the income statement and comparative
amounts, if applicable, are restated as if the combination had taken place at the beginning of the earliest accounting period presented.
Therefore, although the Group reconstruction completed in October 2016, and Filta Group Holdings plc was incorporated on 31 March
2016, the consolidated financial statements are presented as if the Group structure has always been in place, including the activity from
incorporation of the Group’s principal subsidiaries. All entities had the same management as well as controlling shareholders.
The Directors have decided that it is appropriate to reflect the combination using merger accounting principles as a group
reconstruction under FRS 102 in order to give a true and fair view. No fair value adjustments have been made as a result of the
combination.
4747
Financial StatementsGovernance OverviewStrategy and Operations Notes to the Financial Statements continued
year ended 31 December 2017
2. Basis of preparation (continued)
Basis of consolidation
The consolidated financial statements comprise the financial information of the Company and its subsidiaries (the “Group”) made up
to the end of the reporting period.
The consolidated financial statements present the results of the Company and its subsidiaries and joint arrangements as if they formed
a single entity. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control,
and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and
operating policies of the investee to obtain benefit from its activities and is achieved through direct or indirect ownership of voting
rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement. Where necessary, adjustments
are made to the financial statements of subsidiaries to align with the Group accounting policies. All intercompany transactions and
balances between Group entities, including unrealised profits arising from them, are eliminated upon consolidation.
Going concern
The Directors have at the time of approving the financial statements, a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern
basis of accounting in preparing the financial statements.
Parent Company
The parent company has taken advantage of s.408 of the Companies Act 2016 not to publish the parent company profit and loss
account.
3. Summary of principal accounting policies
The principal accounting policies of Filta Group Holdings plc and its subsidiaries are set out below. These policies have been
consistently applied unless otherwise stated.
3.1 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in Pounds Sterling, which is also the functional currency of the parent company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
form the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or
loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the
transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when
fair value was determined.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than Pounds
Sterling are translated into Pounds Sterling upon consolidation. The functional currency of the entities in the Group has remained
unchanged during the reporting period.
On consolidation, assets and liabilities have been translated into Pounds Sterling at the closing rate at the reporting date. Income and
expenses have been translated into Pounds Sterling at the average rate, as an approximation of rates on the dates of the transactions
over the reporting period. Exchange difference are charged/credited to other comprehensive income and recognised in the currency
translation reserve in equity.
3.2 Segment reporting
The results of operating segments are reported in a manner consistent with internal reporting.
The Group has four operating segments. In identifying these operating segments, management follows the Group’s service lines
representing its main products and services. Further details of segment reporting are provided in Note 5.
4848
3. Summary of principal accounting policies (continued)
3.3 Revenue
The Filta Group executes franchise agreements for each franchise area which set out the terms of the arrangement with the franchisee.
These agreements require the franchisee to pay an initial, non-refundable franchise fee and royalties based upon the number of
filtration machines operating in each franchise area.
The franchise fee consists of two distinct components:
• the opening package; and
• the territory fee
The revenue associated with the opening package is recognised when substantially all initial services required by the franchise
agreement are performed, which is generally upon the completion of training of the franchisee. Therefore, there is no deferral of this
revenue unless the training period spans the year-end.
The territory fee represents the exclusive right to operate in a designated territory for a stated length of time. The territory fee is
deferred over the length of the franchise agreement and released to the combined statements of comprehensive income on a straight-
line basis.
In circumstances where franchise territories are resold, on an arm’s length basis, between our franchisee and a third party, it is our
policy to continue to recognise the deferred revenue over the life of the original franchise agreement. Should there be an additional
opening package, or territory sale, as part of the resale, these components will follow the aforementioned revenue recognition process
under the new franchise agreement policy.
Royalty income is recognised as earned with an appropriate provision for estimated uncollectible amounts, which is included in
operating expenses.
Supplies and other revenues are recognised when the product or service is delivered or shipped to customers. Provision for discounts
and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period in which the
related sales are recorded.
3.4 Investments in subsidiaries
Investments in subsidiaries are valued at cost less provision for any impairment, and an impairment review is carried out annually by the
directors.
3.5 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. All repair and maintenance expenses are recognised in profit
or loss when incurred.
After initial recognition, property, plant and equipment is stated at cost less accumulated depreciation and any accumulated
impairment loss.
All items of property, plant and equipment are depreciated to write off the cost of the assets over their estimated useful lives as follows:
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 Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of
the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the group
in exchange for control of the acquiree. Acquisition costs are expenses and included in Administrative expenses. The acquiree’s
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their fair value at the
acquisition date.
4949
Financial StatementsGovernance OverviewStrategy and Operations Notes to the Financial Statements continued
year ended 31 December 2017
3. Summary of principal accounting policies (continued)
any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent
changes to the fair value of any contingent consideration deemed to be an asset or liability will be recognised in accordance with IAS
39, either in profit or loss or in other comprehensive income.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of cost of the business
combination over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If,
after reassessment, the group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities
exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. It is reviewed for impairment at least
annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of
the Group’s cash generating units (or groups of cash generating units) that are expected to benefit from the combination, irrespective
of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which goodwill is
allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. On
disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
3.7 Intangible assets
Intangible assets identified in a business combination are capitalised at fair value as at the date of the acquisition and their costs
are amortised over a straight-line basis over their expected useful lives. Software and development expenditure is capitalised as an
intangible asset if the asset created can be identified, if it is probable that the asset created will generate future economic benefits
and if the development cost of the asset can be measured reliably. Amortisation expense is charged to administrative expenses in the
income statement on a straight-line basis over its useful life. The expected useful lives of the assets are as follows:
Customer relationships
Customer contracts
Software development
– over 5 years
– over 5 years
– over 3 years
Those costs associated with maintaining computer software programmes are recognised as an expense as incurred.
3.8 Impairment of tangible and intangible assets
At each reporting end date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any).
3.9 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original
maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities.
3.10 Financial assets
The Group has only a single category of financial assets, being loans and receivables.
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial assets
are initially recognised at fair value, plus transaction costs. Derecognition of financial assets occurs when the rights to receive cashflows
from the instruments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An
assessment for impairment is undertaken, at the least, at each reporting date.
Interest and other cash flows resulting from holding financial assets are recognised in the Consolidated Income Statement when
receivable. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the
receivables. Loans and receivables are subsequently measured at amortised cost using the effective interest rate method, less provision
for impairment.
Any change in their value through impairment or reversal of impairment is recognised in the Consolidated Income Statement. A
provision against trade receivables is made when objective evidence is received that the Group will not be able to collect all amounts
due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest
rate.
5050
3. Summary of principal accounting policies (continued)
3.11 Financial liabilities
Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the Group becomes a party
to the contractual provisions of the instrument. All interest-related charges are recognised as an expense in “finance costs” in the
Consolidated Income Statement. Loan notes are raised for support of long-term funding of the Group’s operations. The financial
liability arising on the loan notes is carried at amortised cost.
Finance charges and direct issue costs are charged to the Consolidated Income Statement on an accruals basis using the effective
interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which
they arise.
3.12 Equity
Equity comprises the following:
• “Share capital” represents the nominal value of equity shares.
• “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of
expenses of the share issue.
• “Other reserves” represent the equity element in the form of share options and warrants, see notes 27 and 31 for additional
information on these instruments.
• “Retained earnings” represents retained profits and accumulated losses.
• “Merger reserve” arises on business combination (Note 2).
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
3.13 Taxation
The income tax expense for the year comprises current and deferred tax.
Current tax
The charge for current taxation is the tax currently payable based on taxable profit for the year. Taxable profit differs from net profit as
reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end
date.
Deferred tax
Deferred tax is provided using the liability method on differences between the carrying amounts of assets and liabilities in the
consolidated balance sheet and the tax bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction
which is not a business combination and at the time of the transaction affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised
based on tax rates that have been enacted or substantively enacted by the reporting end date. Deferred tax is charged or credited
in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity. Deferred tax arising from a business combination is included in the resulting goodwill or excess
of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business
combination costs.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and
the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
5151
Financial StatementsGovernance OverviewStrategy and Operations Notes to the Financial Statements continued
year ended 31 December 2017
3. Summary of principal accounting policies (continued)
3.14 leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessees. All other leases are classified as operating leases.
Rentals payable under operating leases, less any lease incentives received, are charged to income on a straight-line basis over the term
of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits
from the lease asset are consumed.
3.15 Adjusted EBITDA
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, exceptional items and share based payment
expense. The separate reporting of these items helps provide a better picture of the Group’s underlying performance. Items which may
be included within this category include:
• Costs associated with the Group’s listing on AIM;
• Excess compensation paid prior to the Group’s listing on AIM;
• Costs associated with acquisitions; and
• Other particularly significant or unusual items.
Adjusted EBITDA is presented separately in the statement of comprehensive income as the Directors believe that it needs to be
considered separately to gain an understanding of the underlying profitability of the trading businesses.
3.16 Critical accounting judgments and key sources of estimation uncertainty
Revenue recognition
As outlined in note 3.3, the Group generates revenue from a range of contractual arrangements.
A degree of judgement arises with respect to the recognition of revenue on initial franchise fees, giving rise to estimation uncertainty.
Management reviews on a regular basis the allocation within an initial franchise fee between the opening package and the territory
fee. Whereas the opening package fee is recognised, as explained in note 3.3, generally upon the completion of the training of the
franchisee, the portion related to the territory fee is deferred and recognised over the life of the franchise agreement. The total amount
currently in deferred income in this respect amounts to £2,937,327 (2016: £2,711,358). The revenue recognised in respect of the opening
package and the apportioned territory fee in the current year was £1,348,193 (2016: £1,235,983).
The Group is furthermore reviewing this application as disclosed further in note 4 with the upcoming implementation of IFRS 15.
Business combinations
Where the Group undertakes business combinations, the cost of acquisition is allocated to identifiable net assets and contingent
liabilities acquired and assumed by reference to their estimated fair values at the time of acquisition. The remaining amount is recorded
as goodwill. The valuation of identifiable net assets involves an element of judgement related to projected results. Fair values that are
stated as provisional are not finalised at the reporting date and final fair values may be determined that are materially different from the
provisional values stated.
In undertaking this assessment, the Group has performed a valuation of the intangible fixed assets acquired, on the excess earnings
method, being customer relationships and customer contracts. In performing this assessment, it has obtained a third-party assessment
of the fair values of these intangibles, based on the expected cashflows arising from the existing customer relationships at the time of
acquisition, discounted for depletion in contract revenue. An unchanged revenue profile would have estimated the fair value of the
customer relationships and customer contracts to be £346,210 and £28,071 respectively.
Furthermore, an additional source of estimation uncertainty arises on the assessment of goodwill impairment. Further disclosure in
included in note 17.
Bad and doubtful debts
Recoverability of trade receivables is a key area of focus given the material nature of these balances and the working capital needs of
the Group. The profile of the Group’s trade receivables covers balances from a considerable number of customers. Management must
therefore apply judgement in determining the amount of provision required for possible non-collection of bad or doubtful debts. This
is performed on a case-by-case basis across the Group considering differences between countries and service lines.
5252
3. Summary of principal accounting policies (continued)
The Group assessed the appropriateness of the provisioning by considering the level and ageing of debtors and the consistency of
provisioning assumptions year-on-year and past experience of bad debt exposure. They concluded that the level of provisioning and
carrying value of trade receivables is appropriate.
Taxation
Judgement is required when determining the provision for taxes as the tax treatment of some transactions cannot be finally
determined until a formal resolution has been reached with the tax authorities. Tax benefits are not recognised unless it is probable
that the benefit will be obtained. Tax provisions are made if it is expected that a liability will arise. The Group reviews each significant
tax liability or benefit to assess the appropriate accounting treatment.
4. Adoption of new and revised standards
The following standards are effective for this financial year but have not had significant impact on the reported financial performance or
position of the Group:
• Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations;
• Amendments to IAS 1 Disclosure Initiative;
• Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation; and
• Amendments to IAS 27 Equity Method in Separate Financial Statements.
New standards and interpretations not applied.
At the date of the approval of these financial statements, the following standards and interpretations that are relevant to the Group,
which have not been applied in these financial statements, were in issue but not yet effective.
International Financial Reporting Standards (IFRS’s)
Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
Effective for period
beginning on or after
1 January 2018
1 January 2018
1 January 2018
1 January 2019
The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of
the Group in future periods, with the possible exception of those noted below:
• IFRS 9 Financial Instruments replaces IAS 39, covering the classification, measurement and derecognition of financial assets and
financial liabilities, together with a new hedge accounting model and the new expected credit loss model for calculating impairment.
Impairment
Previously under IAS 39, impairment or credit losses are only recognised when a credit loss event occurs (‘incurred loss model’). Under
IFRS 9, the new impairment requirements are based on expected credit losses (‘expected credit loss model’). Expected credit losses
(ECLs) are an estimate of credit losses over the life of a financial instrument and are recognised as a loss allowance or provision.
The main difference between the two accounting standards is that the new standard (IFRS 9) requires a recognition of credit loss
allowances on initial recognition of financial assets, whereas previously under IAS 39, impairment is recognised at a later stage, when
a credit loss event has occurred. The full impact of IFRS 9 is currently under review, including the practical application of the principles
of the standards. Additionally, without foresight into the type, amount and specifics of those financial assets at the next financial
statement date, it is not practical to provide a reasonable estimate of the financial effects until this review is complete.
• IFRS 15 introduces a new five-step approach to the timing of revenue recognition based on performance obligations in customer
contracts and is effective for periods beginning on or after 1 January 2018. Based on a preliminary review by the Board, it has been
determined that IFRS 15 may have an impact on revenue recognition and related disclosures. Management is completing the review
and is developing appropriate systems, internal controls, policies and procedures necessary to collect information for the purposes of
accounting and disclosure under IFRS15.
5353
Financial StatementsGovernance OverviewStrategy and Operations Notes to the Financial Statements continued
year ended 31 December 2017
4. Adoption of new and revised standards (continued)
Management’s review of the impact of IFRS 15 will be concluded in the second quarter. The key impact identified to date is:
• Financing Component – Under IFRS 15 when determining the contract price an entity must consider the existence of a significant
financing component in the contract. Where one exists, the company shall adjust the promised amount of consideration for the
effects of the time value of money if the timing of payments agreed to by the parties to the contract exceeds one year. The Group
does, in certain situations, provide for extended payment terms to its franchisees. This change could affect both; (i) the amount of
revenue recognised under the contract; and (ii) the recognition of interest income to be realized over the period of the extended
terms.
5. Segment analysis
Operating segments have been identified on the basis of internal reports about components of the Group that are regularly reviewed
by the chief operating decision maker (which takes the form of the Board of Directors), in order to allocate resources to the segment
and to assess its performance.
The Directors consider that the Group currently has four reportable segments: the marketing and execution related to Franchise
Development; provision of services and supplies to the fryer management sector; servicing the refrigerator seal replacement market;
and the provision of design, installation and services provided to the refrigeration and cold stores market. The Group also has two
geographic segments: U.K. and North America.
Revenue and non-current assets by origin of geographical segment for all entities in the Group is as follows:
Revenue
U.K.
North America
Total continuing operations
Discontinued operations
Total
Non-current assets
U.K.
North America
Total
Product and services revenue analysis
Revenue
Franchise Development
Fryer Management
FiltaSeal
FiltaGMG
Total continuing operations
Discontinued operations
Total
2017
£
3,197,973
8,349,325
11,547,299
2016
£
2,580,674
5,888,013
8,468,687
1,937,440
13,484,739
1,606,502
10,075,239
2017
£
1,544,785
1,673,329
3,218,114
2016
£
510,854
1,984,363
2,495,217
2017
£
1,348,193
8,434,262
1,327,835
437,008
11,547,299
2016
£
1,235,983
6,217,772
1,014,932
–
8,468,687
1,937,440
13,484,739
1,606,552
10,075,239
Management measures revenues by reference to the Group’s core services and products and related services, which underpin such
income. No customer has accounted for more than 10% of total revenue during the periods presented. Assets and liabilities are not
fully allocated to the individual categories as such information is not provided to the chief operating decision maker.
5454
5. Segment analysis (continued)
Operating segment performance for the year ended 31 December 2017:
Sales to external customers
Adjusted EBITDA
Acquisition, legal and IPO costs
Share based payments
Depreciation and amortisation
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit from discontinued operations
Other comprehensive income
Profit and total comprehensive income
Franchise
Development
£m
1.3
0.3
(0.0)
(0.0)
(0.0)
0.2
(0.0)
0.2
Fryer
Management
£m
8.4
1.5
(0.1)
(0.1)
(0.2)
1.2
(0.1)
1.1
Operating segment performance for the year ended 31 December 2016:
Sales to external customers
Adjusted EBITDA
Acquisition, legal and IPO costs
Share based payments
Depreciation and amortization
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit from discontinued operations
Other comprehensive income
Profit and total comprehensive income
Franchise
Development
£m
1.2
0.2
(0.2)
–
(0.0)
(0.0)
(0.0)
(0.1)
Fryer
Management
£m
6.3
1.0
(0.9)
–
(0.1)
(0.1)
(0.1)
(0.1)
FiltaSeal
£m
1.3
0.2
(0.0)
(0.0)
(0.0)
0.2
(0.0)
0.2
FiltaSeal
£m
1.0
0.1
(0.2)
–
(0.0)
(0.1)
(0.0)
(0.2)
FiltaGMG
£m
0.4
0.1
(0.0)
(0.0)
(0.0)
0.1
(0.0)
0.1
FiltaGMG
£m
–
–
–
–
–
–
–
–
Total
£m
11.5
2.1
(0.1)
(0.1)
(0.2)
1.7
(0.1)
1.6
(0.8)
0.0
(0.1)
0.7
Total
£m
8.5
1.2
(1.3)
–
(0.2)
(0.2)
(0.1)
(0.3)
(0.1)
0.1
(0.2)
(0.5)
6. Operating profit and adjusted EBITDA
The following have been included in arriving at operating profit and adjusted EBITDA:
Depreciation of property, plant and equipment (note 17)
Amortisation of intangible assets (note 16)
Profit on disposal of plant and equipment
Staff costs, including directors (Note 7)
Cost of acquisition
Foreign exchange gains/(losses)
Profit before tax is stated after charging:
Auditors remuneration
Fees payable to the company’s auditor and their associates for the audit of the company’s financial
statements
Subsidiary audit fees
Fees payable to the company’s auditor for other services to the Group
Total auditors remuneration
Inventory expensed
Operating lease rental expense
2017
£
109,911
100,001
9,992
2,993,670
34,000
(22,238)
2016
£
118,855
63,177
–
3,079,535
–
(62,038)
61,920
–
–
61,920
5,870,449
24,399
39,500
23,638
122,500
185,638
4,449,246
13,459
5555
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued
year ended 31 December 2017
6. Operating profit and adjusted EBITDA (continued)
Exceptional items consist of the following:
Acquisition related
Legal and professional
Costs of IPO
Pre-IPO bonus to shareholders
2017
£
65,402
54,878
–
–
120,280
2016
£
580,603
679,936
1,260,539
Acquisition related costs are primarily attributable to the Grease Management Limited acquisition while the legal and professional
costs relate primarily to the cancellation of the share premium, share option scheme and staffing.
7. Staff costs
Gross salaries
Social security costs
Pension contributions
Share based payment charge
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
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
5656
2017
£
2,602,507
195,084
9,062
87,082
99,935
2,993,670
2016
£
2,859,320
139,364
2,391
–
78,460
3,079,535
2017
No.
7
10
11
6
7
26
67
2016
No.
7
12
12
8
4
19
62
2017
£
732,667
732,667
2016
£
1,296,994
1,294,994
2017
£
78,452
12,500
90,952
2016
£
72,891
6,847
79,738
10. Income tax expense
Corporation Tax
Charge for the year
Deferred tax
Origination and reversal of temporary differences
Tax charge related to change in U.S. tax rate
Total tax charge
Reconciliation of corporation taxation:
Profit/(loss) before tax on continuing operations
Tax at domestic rates applicable
Expenses disallowed for tax
Loss relief
Overseas taxes
Total current tax
Deferred tax
Origination and reversal of timing differences
Total tax expense
2017
£
2016
£
775,151
265,723
215,878
264,995
824,268
(164,968)
100,755
2017
£
1,607,727
310,934
19,690
(42,959)
487,486
775,151
2016
£
(328,991)
(64,811)
110,744
(32,067)
251,857
265,723
49,117
824,268
(164,968)
100,755
The Filta Group’s effective tax rate for the year ended 31 December 2017 was 51.3% (2016: 19.7%). The effective rate is an
amalgamation of UK, US and Canadian rates for the periods reported. The change from year to year has been particularly affected by
the non-recurring/non-cash tax charge related to the revaluation of U.S. deferred tax assets due to the U.S. rate reduction, availability
of loss reliefs and recognition of deferred tax assets and liabilities. The effective tax rate excluding the tax charge on the U.S. rate
reduction is 35.1%.
The Filta Group has tax losses of approximately £516,227 (2016: £667,480) to carry forward against future profits. The tax value of
such losses amounted to £98,083 (2016: £133,496). The UK tax losses have no expiry date and a deferred tax asset of £124,249 (2016:
£133,496) has been recognised in respect of them.
The U.S. subsidiary has no available tax losses.
11. Deferred tax assets / liabilities
The movement in the Group’s deferred tax asset during the year is as follows:
At start of year
Addition for the year
Charge related to reduction in U.S. tax rate
Foreign exchange differences
At end of year
2017
£
755,965
210,735
(264,995)
(49,574)
652,131
2016
£
520,439
164,968
70,558
755,965
The deferred tax balances relate to temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial information as summarised below.
Tax losses
Deferred revenue
Others
At end of year
2017
£
124,249
524,658
3,224
652,131
2016
£
133,496
596,134
26,335
755,965
5757
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued
year ended 31 December 2017
11. Deferred tax assets / liabilities (continued)
The movement in the Group’s deferred tax liability during the year is as follows:
At start of year
Acquired with subsidiaries
Intangible Assets acquired in business combination
(Credit) / charge for the year
At end of year
12. Discontinued operations
2017
£
–
29,215
71,113
(5,143)
95,185
2016
£
–
–
–
–
–
In December 2017, the Group agreed terms to sell its Filta Refrigeration business to Scotia Cooling Solutions Ltd (‘Scotia’). The deal
completed on 4 January 2018.
Consideration for the disposal is a combination of £0.1m cash and Scotia agreed to take on all employees and to novate and/or
refinance certain Filta Refrigeration vehicles.
The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:
Revenues
Expenses
Profit before tax
Income tax expense
Net profit attributable to discontinued operations
2017
£
1,937,101
(1,868,489)
68,612
(35,754)
32,858
2016
£
1,606,552
(1,495,805)
110,747
(23,582)
87,165
Certain assets and liabilities of the operation have been classified as a disposal group held for sale and presented separately on the
balance sheet.
The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:
Property, plant and equipment
Inventories
Total classified as held for sale
Total liabilities associated with assets held for sale (borrowings)
Net assets of disposal group
13. Earnings per share
Basic weighted average number of shares
Dilutive effect of share options and awards
Diluted weighted average number of shares
2017
£
25,114
49,258
74,372
66,425
7,947
2017
26,971,892
288,081
27,259,973
2016
22,700,716
–
22,700,716
5858
14. Investments in subsidiaries
Cost at the beginning of the year
Additions
Cost at end of year
2017
£
2,176,216
117,210
2,293,426
2016
£
–
2,176,216
2,176,216
The subsidiaries of Filta Group Holdings plc, all of which are included in the consolidated Annual Financial Statements, are as follows:
Company
The Filta Group Limited
The Filta Group Incorporated
Filta Refrigeration Limited
FiltaFry Limited
Bio Depot Limited
Filta Seal Limited
Filta Environmental Canada Limited
Class
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2017
ownership interest
100%
100%
100%
100%
100%
100%
100%
2016 ownership
interest
100%
100%
100%
100%
100%
100%
–
Nature of business
Environmental Services
Environmental Services
Discontinued
Support Services
Dormant
Dormant
Environmental Services
The registered office of all subsidiaries is The Locks, Hillmorton, Rugby, Warwickshire, CV21 4PP, apart from the following:
Company
The Filta Group Incorporated
Filta Environmental Canada
Limited
15. Business combinations
Registered Office address
7075 Kingspointe Parkway, Suite 1, Orlando, Florida 32819 United States
27th floor, P.O. Box 49123, 595 Burrard Street, Vancouver, British Columbia, V7X 1J2
Canada
On 21 August 2017, the Group acquired 100 per cent of the voting equity interests of Grease Management Limited, a company whose
principal activity is that of a provider of drain related services including live bacteria drain dosing and the installation and servicing of
grease recovery units. The acquisition will broaden the product offering of Filta’s specialist grease and drain management business,
FiltaDrain, and provide additional sales opportunities by the cross-selling of its services into FiltaGMG’s customer base and vice versa.
Details of the provisional fair values of the identifiable assets and liabilities acquired, purchase consideration and goodwill are as
follows:
Customer relationships (intangible asset)
Customer contracts (intangible asset)
Property, plant and equipment
Inventory
Trade and other receivables
Cash
Trade and other payables
Deferred tax liability
Total provisional fair value
Consideration paid in cash
Goodwill
Book value
£
–
–
135,440
54,089
307,425
12,729
(264,386)
(29,215)
216,082
Adjustment
£
346,210
28,071
–
–
–
–
–
(71,113)
303,168
Fair value
£
346,210
28,071
135,440
54,089
307,425
12,729
(264,386)
(100,328)
519,250
1,150,630
631,380
The provisional fair values include the recognition of intangible assets related to the value of Grease Management’s customer
relationships and customer contracts. Both assets will be amortised over a 5-year period with a full year’s amortisation recorded in the
current year.
Regarding the acquired Trade and other receivables in the transaction of £307,425, the amount estimated to be potentially
uncollectible at the acquisition date was £21,508. At 31 December 2017, £15,991 of this balance had been collected.
5959
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued
year ended 31 December 2017
15. Business combinations (continued)
Deferred tax has been calculated on the value of the intangible assets acquired at a corporation tax rate of 19% and a corresponding
amount recognised as goodwill. The amount recognised as goodwill will not be deductible for tax purposes.
Acquisition costs relating to this transaction totalled £34,000 and are disclosed within the statement of comprehensive income.
Since the acquisition date, Grease Management Limited has contributed £413,000 to Group revenues and profit of £121,000 to Group
income. If the acquisition had occurred on 1 January 2017, Group revenue would have increased by £1,263,000 and Group income for
the period would have increased by £252,000.
The net cash sum expended on the acquisition is as follows:
Cash paid as consideration on acquisition
Less cash acquired on acquisition
Net cash movement
16. Dividends
Distributions to equity holders in the year:
First interim dividend, in lieu of 2016, for the year ended 31 December 2017 of 0.19p per share
Second interim dividend for the year ended 31 December 2017 of 0.65p per share
Proposed final dividend for the year ended 31 December 2017 of 0.65p per share
2017
£
1,150,630
(12,729)
1,137,901
2017
£
2016
£
51,210
175,192
226,402
176,362
–
–
–
–
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a
liability in these financial statements.
17. Intangible assets
Cost
Balance at 1 January 2017
Additions
Foreign exchange
Balance at 31 December 2017
Amortisation and impairment
Balance at 1 January 2017
Amortisation
Foreign exchange
Balance at 31 December 2017
Net book value at 31 December 2017
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
6060
Computer
Software
£
Goodwill
£
Customer
Relationships
£
Customer
Contracts
£
Total
£
391,350
55,480
(34,713)
412,117
224,726
72,930
(23,150)
274,506
137,611
218,351
128,097
44,902
391,350
128,686
63,177
32,863
224,726
166,624
–
631,380
–
631,380
–
–
–
–
631,380
–
346,210
–
346,210
–
25,110
–
25,110
321,100
–
28,071
–
28,071
–
1,961
–
1,961
26,110
391,350
1,061,141
(34,713)
1,417,778
224,726
100,001
(23,150)
301,577
1,116,201
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
218,351
128,097
44,092
391,350
128,686
63,177
32,863
224,726
166,624
17. Intangible assets (continued)
The Group is obliged to test goodwill and indefinite life intangible assets for impairment, at least annually, or at any time if there are
indications that the goodwill or indefinite life assets might be impaired.
In order to perform this test, management is required to compare the carrying value of the relevant cash generating unit (‘CGU’)
including the goodwill with its recoverable amount. The CGU to which the goodwill has been attributed is FiltaGMG.
The recoverable amount of the CGU is determined through the completion of a value in use calculation. The key assumptions for the
calculation are discount rates, gross margin and expected changes in future cash flows of the CGU. The pre-tax rates used to discount
the forecast cash flows from CGUs was 9.7% derived from the Company’s post-tax Weighted Average Cost of Capital, which was 8.8%
at 31 December 2017, and adjusted for the risks specific to the market in which the CGU operates.
All CGUs have the same access to the group’s treasury functions and borrowing lines to fund their operations. The growth rate of the
Filta GMG segment is estimated to be 5% pa., and the EBIT used is 25%, derived from the most recent one-year financial budgets
approved by the Board, extrapolated for four future years by the expected growth rate applicable to the CGU with a terminal value
using an inflationary growth rate assumption of 3%.
A sensitivity analysis has been performed and the Directors have concluded that no reasonably foreseeable change in the key
assumptions would result in an impairment of the goodwill. In particular, a 1% increase in the discount rate or a 1% decrease in the
terminal value growth rate would not result in material impairment.
18. Property, plant and equipment
Details of the Group’s property, plant and equipment and their carrying amounts are as follows:
Cost
At 1 January 2017
Additions
Acquired with subsidiaries
Reclassification to assets held for sale
Disposals
Foreign exchange
At 31 December 2017
Depreciation
At 1 January 2017
Depreciation charge
Reclassification to assets held for sale
Disposals
Foreign exchange
At 31 December 2017
Net Book Values
At 31 December 2017
At 31 December 2016
Freehold
Property
£
Fixture and
Fittings
& Equipment
£
Plant and
Machinery
£
Motor
Vehicles
£
Total
£
1,640,785
4,496
2,815
–
–
(128,506)
1,519,590
641,013
39,202
–
–
(56,551)
623,664
895,926
999,771
93,095
16,394
5,349
–
–
(3,388)
111,450
88,529
12,096
–
–
(3,417)
97,208
14,242
4,566
183,632
13,285
5,567
–
(820)
(3,608)
198,056
99,166
9,175
–
(367)
(3,016)
104,958
214,643
78,766
121,709
(84,825)
(83,150)
(594)
246,549
112,795
49,437
(59,711)
(68,759)
(335)
33,427
2,132,155
112,941
135,440
(84,825)
(83,970)
(136,096)
2,075,645
941,504
109,911
(59,711)
(69,127)
(63,320)
859,257
93,098
84,465
213,122
101,849
1,216,388
1,190,651
Certain of the property, plant and equipment listed above are held as security against bank facilities referred to in note 23.
The net book value of vehicles held under finance lease was £0.2m.
6161
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued
year ended 31 December 2017
19. Trade and other receivables
Trade and other receivables consist of the following:
Total
Trade receivables
Prepayments and other receivables
Franchise payment plans
Current
Trade receivables
Prepayments and other receivables
Franchise payment plans
Non-current
Trade receivables
Prepayments and other receivables
Franchise payment plans
2017
£
2016
£
2,028,107
395,677
384,439
2,808,223
1,647,665
313,028
379,405
2,340,098
2017
£
2016
£
1,984,569
395,677
125,814
2,506,060
1,647,665
313,028
99,232
2,059,925
2017
£
2016
£
43,538
–
258,625
302,163
–
–
280,173
280,173
Accounts receivable include amounts that the Filta Group has agreed may be settled over extended repayment terms.
The amount due from related parties in the parent company of £2.1m consist of £1.7m of loans to subsidiaries to fund debt repayment
and acquisitions and is repayable after more than twelve months while the balance of £0.4m is comprised of £0.1 of management
service charges and £0.3m of funding of normal working capital requirements. The loans to subsidiaries bear interest at commercial
rates. All amounts are eliminated on the Group Consolidated Statement of Financial Position.
Other than the debts described above, the Filta Group’s normal credit terms range between 30 and 90 days.
In assessing the recoverability of these debts, the Directors have given due consideration to all pertinent information relating to
the ability of the customers to settle. If an account balance is deemed uncollectible, the account is impaired in full. If an account is
potentially uncollectible, the Group makes an impairment provision for such amounts. The impairment provision was £56,255 at 31
December 2017 (31 December 2016: £10,302).
Movement in the allowance for doubtful debt:
At start of year
Impairment loss recognised
Amounts written off as uncollectable
Foreign exchange differences
At end of year
UK
£
10,302
24,884
(7,271)
–
27,915
2017
US
£
–
28,340
–
–
28,340
Total
£
10,302
53,224
(7,271)
–
56,255
UK
£
5488
4,814
–
–
10,302
2016
US
£
51,877
–
(62,545)
10,668
–
Total
£
57,365
4,814
(62,545)
10,668
10,302
6262
20. Inventories
Finished goods
Inventory included in assets held for sale
Total
2017
£
486,974
(49,258)
437,716
2016
£
376,015
(87,665)
288,350
Inventories primarily consists of filtration machines and filters and are stated at the lower of cost (on a first-in, first-out basis) and net
realisable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net
realisable value.
21. Cash and cash equivalents
Group
Cash at bank and in hand
Company
Cash at bank and in hand
22. Trade and other payables
Trade payables
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.
23. Loans and other borrowings
Total
Bank loans
Hire purchase and finance leases
Current
Bank loans
Hire purchase and finance leases
Non-current
Bank loans
Hire purchase and finance leases
2017
£
2016
£
4,031,174
4,392,350
1,162,035
3,048,174
2017
£
846,564
804,922
491,420
2,142,906
2016
£
1,178,105
360,120
451,660
1,989,885
2017
£
2016
£
928,236
111,315
1,039,551
1,037,022
84,296
1,121,318
2017
£
2016
£
64,102
43,684
107,786
2017
£
864,134
67,631
931,765
65,530
38,282
103,812
2016
£
971,492
46,014
1,017,506
6363
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued
year ended 31 December 2017
24. 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
25. Reconciliation of movements in net debt
2017
£
2016
£
10,687
2,360
13,047
8,554
11,305
19,859
1 January
2017
£
1,037,022
–
84,296
1,121,318
Cash flows
£
(36,585)
–
(10,473)
(47,058)
Non-cash changes
Foreign exchange
movements
£
(72,200)
–
(72,200)
Acquisition
£
–
37,492
37,492
Fair value
changes
£
–
–
31 December
2017
£
928,236
–
111,315
1,039,551
Long term borrowings
Short term borrowings
Lease liabilities
Total
26. Share capital
The share capital of Filta Group Holdings plc consists of fully paid ordinary shares with a nominal value of 10 pence. All shares are
equally eligible to receive dividends and the repayment of capital and represent one vote.
Allotted and fully paid
Total shares in issue at 1 January
Share for share exchange
Issue of ordinary shares
Share buyback
Issued under share option scheme
Total shares in issue at 31 December
2017
Number
2016
£
Number
£
26,952,660
2,695,266
180,000
–
–
27,132,660
18,000
–
–
2,713,266
–
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.
The Company, as contemplated in its admission document, completed a reduction of capital, whereby the entire amount standing to
the credit of the Company’s share premium account was cancelled to create distributable reserves (the “Reduction of Capital”). The
Reduction of Capital was formally approved by the High Court of Justice, Chancery Division, and the High Court order was filed with
the Registrar of Companies on 18 January 2017. The purpose of the Reduction in Capital was to create distributable reserves to support
the Board’s dividend policy.
On 22 November 2017, pursuant to a share option agreement with Cenkos Securities plc (“Option Holder”), 180,000 shares of 10 pence
each were exercised, and issued, to the Option Holder at a price of 83 pence each, giving rise to a share premium of £131,400.
6464
27. Other reserves
Group
Merger reserve
Share based payment reserve
Company
Share based payment reserve
2017
£
2016
£
(339,687)
43,785
(295,901)
(339,687)
49,400
(290,287)
43,785
49,400
Merger reserve
The directors consider the substance of the acquisition of the Subsidiaries by Filta Group Holdings plc is that of a combination of
entities under common control and therefore it fell outside the scope of IFRS 3 (revised 2008).
Share based payment reserve
The Company entered into a share option agreement (“Option Deed”) with Cenkos Securities plc (“Option Holder”), its nominated
advisor and broker, whereby the Company has granted to the Option Holder the right, exercisable at any time during the Option
Period, to subscribe for all, or some, of the Option Shares (180,000 ordinary shares) at the Option Price of 83 pence per Option Share,
subject to the terms and conditions of the Option Deed. Pursuant to this share option agreement the Option Holder exercised and
subscribed for all 180,000 ordinary shares which were issued on 22 November 2017. As a result, the share-based payment reserve of
£49,400 was charged to Retained Earnings in the current year.
The Company established the Filta Group Holdings Enterprise Management Incentive Scheme in 2017 to award U.K. employees with
equity settled share options. The options were granted on 5 May 2017 and vest equally over a three-year period beginning on 5 May
2019. The total charge recognised for share-based payments in respect of employee services received for the year ended 31 December
2017 was £43,785 (2016: £Nil).
28. Financial instruments
Risk Management objectives and policies
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Filta Group’s
competitiveness and flexibility. Further details regarding these policies are set out below.
Management reviews its monthly reports through which it assesses the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
Market risk management
Management do not consider the company exposed to interest rate or inflation risks significant enough to have a material effect on the
profitability of the company.
Foreign currency sensitivity
The Filta Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than Pounds
Sterling. The currency giving rise to this risk is primarily the US Dollar. Foreign currency risk is monitored closely on an ongoing basis to
ensure that the net exposure is at an acceptable level.
A majority of the Filta Group’s financial assets and liabilities are held in Dollars and movements in the exchange rate against Sterling
has an impact on both the results for the year and equity. The Filta Group maintains a natural hedge whenever possible, by matching
the cash inflows (revenue streams) and cash outflows in foreign currencies.
6565
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued
year ended 31 December 2017
28. Financial instruments (continued)
The following table demonstrates the sensitivity to a reasonably possible change in sterling against the US Dollar and Canadian Dollar
with all other variables held constant.
USD
USD
CAD
CAD
Change in rate
+10%
–10%
+10%
-10%
Effect on profit
before tax
£
(138,791)
169,633
(1,608)
(1,965)
Effect on equity
£
10,283
(12,568)
(11,920)
14,569
Interest rate sensitivity
The interest rate sensitivity has been determined based on the exposure at the balance sheet date. For floating rate liabilities, the
analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the full year. All
financial liabilities, other than financing liabilities, are interest free.
If interest rates had been 1% higher/lower and all other variables were held constant, the group’s profit after tax for the year ended
31 December 2017 and reserves would decrease/increase by £0.009m (2016: £0.01m).
Credit risk management:
The Filta Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and other receivables. The
Filta Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an
ongoing basis. For other financial assets (including cash and bank balances), the Filta Group minimises credit risk by dealing exclusively
with high credit rating counterparties.
As the Filta Group does not hold any collateral, the maximum exposure to credit risk is represented by the carrying amount of the
financial assets as at the end of each reporting period.
Liquidity risk management:
The Filta Group currently holds cash balances to provide funding for normal trading activity. The Filta Group also has access to both
short-term and long-term borrowings to finance capital expenditure requirements. Trade and other payables are monitored as part of
normal management routine.
Categories of financial instruments:
The table below sets out the Group’s IAS39 classification of each of its financial assets and liabilities at 31 December 2017. All amounts
are stated at their carrying value.
Financial Assets
Loans and receivables:
Cash and cash equivalents
Trade and other receivables (excluding prepayments)
Deposits
Financial Liabilities
Trade and other payables
Deferred Income
Borrowings
6666
2017
£
2016
£
4,031,174
2,451,072
2,344
6,484,590
4,392,350
2,169,130
2,572
6,564,052
2,142,906
2,937,327
1,105,976
6,186,209
1,989,885
2,711,358
1,154,804
5,856,047
28. Financial instruments (continued)
The table below summarises the maturity profile (representing undiscounted contractual cash flows) of the Group’s financial liabilities:
At 31 December 2017
Trade and other payables
Deferred income
Borrowings
Total
At 31 December 2016
Trade and other payables
Deferred income
Borrowings
Total
Less than
3 months
£
3 to 12
months
£
1 to 5
years
£
Over 5
years
£
Total
£
2,095,601
71,089
21,828
2,188,518
16,038
355,445
109,140
480,622
31,267
1,884,502
809,815
2,725,585
–
626,291
165,193
791,484
2,142,906
2,937,327
1,105,976
6,186,209
Less than
3 months
£
3 to 12
months
£
1 to 5
years
£
Over 5
years
£
Total
£
1,886,028
66,814
17,302
1,970,144
32,217
334,068
86,510
452,795
71,639
1,708,091
724,998
2,504,727
602,386
325,994
928,380
1,989,885
2,711,358
1,154,804
5,856,047
29. Adjusted cash flow from operations *
Profit/(loss) before tax
Adjustments for non-cash operating transactions
Movements in working capital
Impact of items on operating cash flow – Note 3.15
* Adjusted cash flow from operations includes the addition of items disclosed in Note 3.15.
30. Retirement benefit schemes
2017
£
1,607,727
387,500
(646,531)
120,280
1,468,976
2016
£
(328,991)
447,007
(78,259)
1,260,539
1,300,296
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 £9,062 (2016: £2,391) represents contributions payable to the scheme by the Group at specified
rates. Any contributions unpaid at the balance sheet date are included as an accrual at that date. The Group has no further payment
obligations once the contributions have been paid.
6767
Financial StatementsGovernance OverviewStrategy and Operations
Notes to the Financial Statements continued
year ended 31 December 2017
31. Share option scheme
The Company has, on 5 May 2017 (“Grant Date”), introduced a Share Option Scheme to incentivise executives and employees of
Filta Group Holdings and its subsidiaries. For U.K. employees, Options have been awarded over a total of 442,500 ordinary shares,
equivalent to 1.6% of the Company’s current issued share capital. The options vest, subject to the satisfaction of certain conditions,
over a period of 4 years from the date of grant. All options issued will meet the vesting conditions between 2019 and 2021 and are
exercisable at any time after vesting and within 10 years from the grant date.
Additionally, all qualifying U.S. employees have been awarded share acquisition rights (SAR’s). The SAR’s are conditional bonuses
whose value will be calculated by reference to the amount by which the price of the Company’s ordinary shares has risen above the
base price at the date of exercise, thus providing holders of SAR’s the same reward value as if the SAR’s were share options. The
qualifying conditions and timing of vesting are identical to those within the share option scheme for UK employees. All SAR’s are
settled in cash when exercised. A total of 360,000 SAR’s has been awarded.
In the ordinary course of business, an option will normally only be exercisable to the extent it has fully vested, and any applicable non-
market performance conditions have been satisfied or waived. Options shall lapse to the extent unexercised on the tenth anniversary of
the date of grant or such earlier date as specified by the Board at the date of grant.
Movement in the number of share options outstanding during the year, including grant dates and grant price were as follows:
Outstanding at 1 January 2017
Granted on 5 May 2017 (0.97p)
Granted on 16 October 2017 (1.74p)
Total granted during the year
Forfeited during the year (0.97p)
Forfeited during the year (1.74p)
Total forfeited during the year
Outstanding at 31 December 2017 (0.97p)
Outstanding at 31 December 2017 1.74p)
Total Outstanding 31 December 2017
Exercisable at 31 December 2017
Share
options
–
345,000
97,500
442,500
(157,500)
(52,500)
(210,000)
187,500
45,000
232,500
–
Share
acquisition|
rights
–
360,000
360,000
(30,000)
–
(30,000)
330,000
–
330,000
–
Total
–
705,000
97,500
802,500
(187,500)
(52,500)
(240,000)
517,500
45,000
562,500
–
During the year ended 31 December 2017, the Company issued share options with fair value of £267,776. During the year, the
Company recognised an expense of £87,082 related to the fair value of the share-based payment arrangements (2016: £Nil); this was
determined using the Black Scholes model, with the following assumptions:
2017
133.4p
97.0p
0.59%
0.9%
55.05%
Weighted average share price
Exercise price
Risk free rate
Dividend yield
Volatility
6868
32. Related party transactions
Remuneration of Directors and other transactions
The remuneration, interests and related party transactions with the directors of Filta Group Holdings plc and its subsidiaries (the
“Directors”) who are considered to be the key management personnel of the entity, are disclosed in Note 8.
Directors loan accounts
The following amounts were due from the directors at the end of each reporting period:
• Mr. R C Sayers: Nil as at 31 December 2017 (2016: £77,236)
All amounts are unsecured, interest-free and repayable on demand. The amounts are classified within current liabilities under ‘Amounts
due to directors.’
Franchise rights
In 2012, The Filta Group, Inc. granted franchise rights for a prescribed territory to Roxanna Holdings Inc. Roxanna Holdings Inc., a
company owned by Jason Sayers and Victor Clewes, directors of The Filta Group, Inc.
The rights were then assigned to EKS North Atlantic LLC, which is 50% owned by Roxanna Holdings and 50% by an unrelated 3rd party.
During 2017, the related franchise operator purchased £Nil of equipment and supplies from the company (2016: £10,165). The amounts
are classified within trade receivables.
On 16 January 2017 the franchise rights were sold by the related party entity to a non-related third party.
Amounts due to related parties – management fees
For the twelve months ended 31 December 2017, management fees of £Nil are included in administrative expense (2016: £736,170) for
services provided to The Filta Group, Inc. by Roxanna Holdings, Inc. At 31 December 2017 and 2016, £Nil of this total was payable to
the related party.
Notes payable to related party
From 2013 to 2015, the Filta Group, Inc. entered into notes totaling £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 2017 (2016: £Nil).
Interest paid on these loans amounted to £Nil at 31 December 2017 (2016: £8,533).
33. Events after the reporting date
On 4 January 2018, the Group announced the sale of its Filta Refrigeration subsidiary for cash and other considerations and further
conveyed their intention to exit the refrigeration and HVAC market. The Board believes that the disposal of the refrigeration business is
an important strategic step in allowing the Group to focus on its higher margin and higher growth businesses.
On 31 January 2018 the Group announced the acquisition of FiltaFry Deutschland GmbH, the company which owns the master
franchise license for Filtafry in Germany. The Group paid initial consideration of €0.2m (£0.2m) satisfied by a mix of cash and shares.
There is also a deferred consideration component of €0.1m (£0.1m) to be satisfied by the issue of Filta shares in two equal installments
following on at the end of years one and two.
There are no other matters that occurred between the reporting date and the date of approval of these financial statements that the
Directors believe are necessary to draw attention to.
6969
Financial StatementsGovernance OverviewStrategy and Operations Notes
7070
About Filta
Filta Group Holdings plc is a multi-service B2B provider
to commercial kitchens, primarily operating in the UK,
North America and now Mainland Europe.
The Company has over 180 Franchise Owners, and
teams of corporate vans, providing services to over 6,000
commercial kitchens and restaurants every week.
Filta has an impressive blue chip customer base that
underlies a recurring revenue, cash generative business
model that supports a strong dividend commitment.
Index
Overview
1
2
Highlights
Chairman’s Statement
Major Markets
Services
The Franchise Model
Business Model
Strategy and Operations
6
8
9
10
11 Our Market
12
14 Chief Executive’s Operating Review
18 Chief Financial Officer’s Review
Principal Risks and Uncertainties
21
Strategy
Governance
24
26
27
30 Directors’ Remuneration Report
33 Directors’ Report
Corporate Social Responsibility Report
Board of Directors
Corporate Governance Statement
Financial Statements
39
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
42
43
44
45
46
47
48
49
71 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
71
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 2017
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