Information  X 
Enter a valid email address

Conviviality Retail (CVR)

  Print      Mail a friend

Monday 14 July, 2014

Conviviality Retail

Preliminary Results

RNS Number : 1645M
Conviviality Retail PLC
14 July 2014
 



 

 

 

Conviviality Retail Plc

 

 

PRELIMINARY RESULTS

 

Conviviality Retail Plc,("Conviviality" or "the Group"), a wholesale and retail supplier of beers, wines, spirits, tobacco, grocery and confectionery, announces its Preliminary results for the 52 week period ended 27 April 2014.

 

FULL YEAR HIGHLIGHTS

 

Financial

·      Group profit before tax (excluding exceptional items) increased by 31.5% to £9.3 million (2013: £7.1million)

·      EBITDA1 (excluding exceptional items and share based payment charges) was £12.4 million (2013: £12.6 million)

·      Revenue at £355.7 million (2013: £371.8 million) in line with store rationalisation programme

·      Like for like retail sales2 were up 0.05% in the year

·      Average retail sales2 per store were £16,054 up by 3.0% year on year

·      Gross profit margin increased by 0.7ppts to 9.2% (2013: 8.5%)

·      Franchisee average margin improvement 0.5ppts

·      Franchisee profit per store increased 10%

·      Franchisees awarded 1.2 million shares worth £5,700 per Franchisee

·      Like for like retail sales for Wine Rack improved by 1.4% in the second half under Group ownership

·      Debt free with net cash balance of £10.0 million

·      Proposed final dividend of 6p bringing the total for the year to 8p per share

 

Non-Financial

·      Improved levels of engagement with Franchisees, employees and suppliers

·      Quality of the business improved by removing underperforming stores and acquiring Wine Rack.

·      427 number of Franchisees (2013: 461)Bargain Booze brand refresh underway with 182 stores already benefiting from new fascia

·      Wine Rack acquisition and integration completed with encouraging levels of sales improvement

·      Immediately post year end, 31 Rhythm and Booze stores acquired

·      Wine participation increased by 1.2ppts of total sales

 

 

Commenting on the results, Diana Hunter, Chief Executive Officer of Conviviality, said

 

"These are strong results achieved during a period of significant change for our business and we are making good progress to deliver our strategy.  We are seeing the benefits of a stronger relationship with our Franchise partners, and many of our Franchisees have seen their profits improve as a result. We have a significant opportunity ahead and we are confident that the foundations we have put in place this year  will deliver further improvements for our Company, our Franchise partners and investors."

 

14 July 2014

 

1EBITDA excluding exceptional items and share based payment charges is calculated as profit before tax of £4,825,000 (2013: £6,578,000), adding back interest of £700,000 (2013: £3,734,000), depreciation of £1,753,000 (2013: £1,704,000), amortisation of £28,000 (2013: £Nil), exceptional items of £4,481,000 (2013: £499,000) and share based payment charges of £638,000 (2013: £67,000). 

 

2The statutory revenue of Conviviality Retail is the aggregate of wholesale sales and sales by corporately owned stores to consumers. Retail sales represent the total sales to consumers by Franchisees and corporately owned stores. This is an important indicator of business performance.

 

 

 

 

Enquiries:


 

Conviviality Retail Plc

Tel: 01270 614 700

Diana Hunter, Chief Executive Officer

Andrew Humphreys, Chief Financial Officer


 

Zeus Capital (Nominated Adviser and Joint Broker)

Nick Cowles/Andrew Jones (Corporate Finance)

Tel: 0161 831 1512

John Goold (Corporate Broking)

Tel: 020 7533 7727

 

Panmure Gordon (Joint Broker)

Tel: 020 7886 2500

Andrew Godber/Masie Rose Atkinson


 

Instinctif Partners

Tel: 020 7457 2020

Matthew Smallwood

Justine Warren

 

 

 

 

CHAIRMAN'S STATEMENT

 

 

This year has been a landmark for the business, the successful Initial Public Offering (IPO) in July 2013 providing a more strategic platform for the Group's development, an appropriate capital structure and importantly aligning the Group and its franchisees through the franchisee incentive scheme. The response to the float has been positive, demonstrating confidence in the business model and the team's ability to drive a sustainable and profitable future for all our stakeholders.

 

We believe that our results as a listed company reflect delivery of the strategy and actions we set out clearly in the admission document. Our trading performance has been in line with our expectations, we have made acquisitions and there exist strong opportunities for future growth.

 

We are pleased to announce that the Board is proposing a final dividend of 6 pence per share, making a full year dividend of 8 pence per share.

 

I joined the Board as a Non-executive Director for the float in July 2013 and was delighted to step up to become Chairman in January, to succeed Roger Pedder, who retired from the Board in January 2014. In January 2014, we welcomed two new Non-executive Directors, Steve Wilson and Martin Newman, who bring a wealth of relevant experience, and who are actively contributing to the Board and to the business.

 

Following seven years in the business Keith Webb, Franchisee Director, resigned from the Board today for personal reasons.  Keith will remain in the business until 29 August 2014. The Board would like to thank Keith for his contribution to Conviviality and  wishes him well for the future.

 

The strength of our business is in its people and I would like to thank, on behalf of the Board, all of our Franchise partners and everyone working in the business for their passion and commitment that is driving our success.

 

 

 

David Adams

Chairman

11 July 2014

 

 

 

 

STRATEGIC REPORT

 

Chief Executive Officer's Statement

 

Overview

Over the last year we have been focused on building a long term and sustainable future for our Franchise partners who work with the Group, for our employees who work for the Group and our shareholders. In a period of confirmed uncertainty for high street retailers we have focused on delivering against our aim of being the UK's best value off licence and convenience retailer. We have been working on a programme to deliver substantial change to the business, and we have made good progress in achieving these strategic objectives. The Group is committed to building and maintaining strong relationships with its Franchisee partners and growing the number of stores in its portfolio.  Central to this is an incentivised and motivated Franchisee base.

 

Results

Profit before tax and exceptional items increased £2.2 million to £9.3 million demonstrating the benefit of our new capital structure.  First year earnings per share are 12.5 pence prior to exceptional items.

 

We are pleased to report profit slightly ahead of market expectations with EBITDA at £12.4 million against £12.6 million last year. We have improved the quality of the business through a managed rationalisation of the store portfolio and the acquisition of 22 Wine Rack stores generating turnover of £356 million, an increase of £20,000 per store. Gross profit margin increased 0.7ppts helping EBITDA improve to 3.5% of sales from 3.4% last year.

 

Post IPO the Group is debt free.  Following the acquisition and integration of 22 Wine Rack shops and seven corporate stores, the Group ended the year with net cash balances of £10.0 million.  Immediately post year end we further strengthened the store portfolio by investing £1.8 million to acquire 31 Rhythm and Booze stores.

 

Strategy - To strengthen the relationship with our franchisees to drive sustainable and profitable growth

The first steps toward achieving our aims were to create greater alignment between those who work with and for the Group and introduce a more stable and long term capital structure. Becoming a public company enabled us to create equity to distribute to our Franchisees to give them a stake in the Group for the first time. This is the first scheme of this type, unrivalled in the market and offering free shares based on commitment to our brand standards. Franchisees are very aware of the growth in value of these shares (over 60%) and are keen to be rewarded for their part in the Group's success. The full allocation to Franchisees is expected to be 1.2 million shares. A total of 351 Franchisees achieved the required minimum standards to receive awards and 130 were granted the maximum award. New Franchisees receive share awards on their first anniversary and the scheme is becoming increasingly attractive to potential Franchisees.

 

We have made significant strides in the first year maintaining a level like for like performance against a tough competitive backdrop. We have recognised the need to drive increased levels of footfall, to ensure our brands are front of customers minds through clear and confident marketing, and ensuring our prices are competitive (promotions over 11% cheaper than the multiples), whilst still offering opportunities to up sell and create further margin opportunities. We have a new advertising campaign to emphasise to customers the great value we offer. We have continued to develop our capability in events and expect to improve our proposition in the year ahead as was evident during Easter and Christmas, when Bargain Booze stores achieved like for like improvements of 2.2% and 2.8% respectively.

 

Franchisee margin has also seen a consistent improvement every week and has improved on average by 0.3% year to date. Not all Franchisees have benefited at the same level and this is a key indicator of the varying performance across the business. With better management information to support Franchisees, more store visits to improve best practice and opportunities to discuss ideas, we expect more Franchisees to benefit. Franchisees also gain from an over rider scheme which rewards Franchisees quarterly for improving their wholesale sales. This scheme has paid out £365,000 in cash benefit to Franchisees this year, which is equivalent to 0.2% of margin improvement in the second half of the year. Overall Franchisees have seen the equivalent of 0.5ppts improvement in their margin versus the prior year.

 

Strategy - To attract quality new recruits and incentivise growth from within

On Admission we identified that we would undertake a managed reduction of stores to improve the quality of our estate and store standards thereby making the Group more attractive to new recruits. We are also focusing on helping our existing Franchisees to maximise sales and profit in their catchment areas.

 

During the year 62 stores closed, the majority of which occurred during the first half. The impact on turnover was £15.7 million. We opened fewer new stores than planned and closed the year with 595 stores, 11 fewer than our stated aim. However, it has been encouraging to record that our average weekly sales per store have increased by £430. We expect this to improve further in the year ahead. We have concluded the bulk of our store closure programme and anticipate a lower number in the current year.

 

In May, we welcomed North East Convenience Stores to our Franchisee group as they acquired stores in Longbenton and South Shields. The North East is an area where we have identified further growth opportunities and this is a key step forward in our approach to the recruitment of high quality Franchisees. We have also continued our push into the South with new store openings in Ramsgate, Stevenage, Broxbourne and Leighton Buzzard.

 

We are currently working with 25 existing Franchisees who wish to open more stores with us and our more targeted approach to site finding will support them in securing successful openings.

 

This represents a key shift in the momentum for growth and new store openings and the introduction of additional Franchisees will remain a priority.

 

Strategy - To strengthen the Bargain Booze brand, driving awareness and broadening its appeal to attract new shoppers

The High Street is a challenging place to trade and we have to keep the brand vibrant and relevant to our customers. With Operation Spring Clean, we will uniquely invest in every Franchisee's fascia and at the same time, collect accurate space data which is critical to us driving the next step change in margin improvement through mix. Our analysis of the performance of our existing estate has identified that there is further headroom for growth in many of our catchments. We will be working with our Franchisees to determine how to drive further sales in their catchments.

 

Strategy - To build greater capability and credibility in wine to attract new customer groups

Our appointment of Susan McCraith, Master of Wine, has enabled us to build our credentials in wine and drive greater recognition for all of the brands in our wine offer. The wine category now accounts for a 1.2ppts increase sales participation and will as a result, drive more margin benefit for the Group and its Franchisees.

 

Strategy - To undertake strategic acquisitions to drive long term value

The acquisition of 22 Wine Rack stores and its website on 30 August 2013 significantly increased our credibility and capability in wine, accelerated our expansion into the south and provided a new fascia for growth.

 

The performance of Wine Rack during the Christmas and Easter trading periods was particularly pleasing with 21.8% and 6.4% like for like sales growth respectively. We are confident that customers are starting to recognise the improvements in the offer and value for money. Our new design Wine Rack store at West Byfleet has been received positively by customers and suppliers and we expect to roll-out this new design to further new stores. We have been pleased with the integration of the business and the progress being made to drive improved performance, and during the second half of the year sales improved by 1.4% and 23 new suppliers have started working with us. The Wine Rack proposition as a wine and spirits specialist on the high street offers our Franchisees another complementary fascia to operate alongside the Bargain Booze proposition.

 

The successful acquisition of Wine Rack was followed by the acquisition of 31 Rhythm and Booze stores during May and June 2014.  The majority of the acquired stores are located in Yorkshire and Lincolnshire, which strengthens our presence in these areas with 6 of the 31 stores converting to the Wine Rack fascia. For the year ended 31 December 2013, the 31 stores acquired generated revenues of £16.6 million and net profits of £0.1 million. We are delighted with the acquisition of these stores and their teams, and the opportunity for growth they bring to the Group.

 

Strategy - To expand into new territories using a mix of fascias and formats

Having taken proactive steps to learn the lessons of the past approach to recruitment, we are creating a more robust site assessment and forecasting model, to use with both existing and potential new Franchisees. Through our analysis we have identified priority locations for growth for both Bargain Booze and Wine Rack fascias in the North East, Yorkshire and the South.

 

Outlook

The year ahead will see us start to reap the benefits of the acquisition of Wine Rack and the Rhythm and Booze stores, improve Wine Rack's on line presence, develop Click and Collect and a Bargain Booze App, trial a new larger format store and update the fascias across our existing estate through Operation Spring Clean.

 

Good progress has been made and more is ahead of us. We worked through the first part of our financial year as a private company, and transitioned to public from 31 July 2013. The impact of the change to a public company has been positive, although this created a pipeline lag in our new store openings as Franchisees begin to understand the opportunities that our change programme presents to them, in terms of additional rewards and a more resilient structure to the business. It has only been in the last quarter that we have seen the full benefit with our pipeline of new openings increasing.  As we look ahead to the new financial year we will continue to build on this strong start to growth and continue to build on consumer enthusiasm for our brands.

 

We have a significant opportunity ahead of us and we are confident that the firm platform that we have put in place will deliver further improvements for our Company and its Franchise partners.

 

 

 

 

Diana Hunter

Chief Executive Officer

11 July 2014

 

 

 

 

Financial Review

 

Group profit before tax excluding exceptional items increased by £2.2 million to £9.3 million driven by an improvement in gross margin, strong cost control and a reduction in financing costs following the financial restructure at IPO. This was partly offset by an investment of £0.4 million in Franchisee engagement coupled with a reduction in revenue as we improved the quality of the business by removing underperforming stores.

 

After reflecting exceptional costs of £4.5 million, primarily relating to the IPO, Group profit before tax was £4.8 million (2013: £6.6 million). EBITDA was £12.4 million (2013: £12.6 million) and increased to 3.5% of sales (2013: 3.4%) as gross profit margin improved and costs were tightly controlled.

 

Revenue at £355.7 million (2013: £371.8 million) declined by 4.3% primarily due to a reduction in store numbers to 595 (2013: 616) and the inclusion of retrospective discounts on wholesale sale invoices.  This change in wholesale pricing gave a cash flow benefit to Franchisees and reduced revenue by 1.6% but had no impact on profit.

 

Retail sales represent total sales to consumers. For the 52 weeks to 27 April 2014 retail sales were £506.7 million (2013: £531.8 million), a decline of 4.7%, due to the managed reduction of underperforming stores offset by new store openings and the acquisition of Wine Rack.

 

Like for like retail sales were in line with last year and average sales per store increased 3.0% reflecting an increase in the quality of the stores.

 

Wine Rack sales from the date of acquisition on 30 August 2013 to 27 April 2014 were £7.6 million with like for like retail sales in the second half up 1.4%.  Wine Rack contributed £0.1 million to Group profit before tax for the year.

 

Gross profit strengthened by 0.7 ppts to 9.2% (2013: 8.5%) as the number of company owned stores increased. The change in wholesale pricing, as a result of the inclusion of retrospective discounts on wholesale invoices, added 0.1ppts to gross profit margin.

 

Franchisee gross margin improved by 0.3ppts. In addition, Franchisees received over rider payments, for achieving wholesale sales targets, of £365,000 in the second half.  This is the equivalent of 0.2ppts of gross profit margin or, on average, an annual incremental contribution of £1,289 per franchise store.

 

Operating expenses before exceptional items increased to £22.7 million (2013: £20.9 million) primarily due to an increase in costs of £2.3 million relating to company owned stores and an investment of £0.6 million in connection with the Franchisee and employee share based incentive plans.

 

The exceptional items, totalling £4.5 million (2013: £0.5 million) are comprised of £3.7 million costs associated with the IPO, £0.3 million costs arising on the acquisition of Wine Rack and Rhythm & Booze, and £0.4 million relating to other re-organisation costs.

 

The business now benefits from a debt free financial structure, with positive operating cash flow, resulting in a net cash balance of £10.0 million as at the year end.

 

The Group implemented a new financial structure as part of the IPO resulting in the full settlement of senior debt and all loan notes totalling £37.3 million. These results include interest charges against the  loan notes of £0.7 million incurred between 1 May 2013 and 31 July 2013 which will not repeat in future periods.

 

The effective rate of corporation tax for the year was 27.2% (2013: 27.5%) which compares with the main rate of 22.85% (2013: 23.9%). The Group has a number of non-deductible expenses for tax purposes primarily relating to legal costs. The Group has also re-calculated deferred tax balance to be in line with the new lower corporation tax rate of 21.0% which was effective from April 2014.

 

Earnings per share is 6.1 pence (5.7 pence diluted) and at 12.5 pence (11.6 pence diluted) on a pre exceptional basis, with the prior year comparative impacted by the change in financial structure as part of the IPO.

 

A final dividend of 6p per share is proposed today for shareholders on the register on 19 September 2014 payable on 17 October 2014 post the Annual General Meeting (AGM).

 

 

 

Andrew Humphreys

Chief Financial Officer

11 July 2014

 

 

 

 

CONSOLIDATED INCOME STATEMENT

For the 52 weeks ended 27 April 2014


 

 

 

 

Note

Before exceptional items

2014

£000

 

Exceptional items

2014

£000

 

 

Total

2014

£000

Before
exceptional items

2013

£000

 

Exceptional items

2013

£000

 

 

Total

2013

£000

Continuing operations








Revenue


355,718

-

355,718

371,783

-

371,783

Cost of sales


(322,968)

-

(322,968)

(340,124)

-

(340,124)

Gross profit


32,750

-

32,750

31,659

-

31,659

Operating expenses

4

(22,744)

(3,869)

(26,613)

(20,880)

(499)

(21,379)

Operating profit

4

10,006

(3,869)

6,137

10,779

(499)

10,280

Finance income

6

29

-

29

32

-

32

Finance costs

6

(729)

(612)

(1,341)

(3,734)

-

(3,734)

Profit before income tax


9,306

(4,481)

4,825

7,077

(499)

6,578

Income tax expense

7

(2,120)

807

(1,313)

(1,810)

-

(1,810)

Profit for the financial period


7,186

(3,674)

3,512

5,267

(499)

4,768









Earnings per ordinary share








- Basic

8



6.1p



15.1p

- Diluted

8



5.7p



14.9p

 

The results for the financial period are derived from continuing operations.

There were no elements of other comprehensive income for any of the financial periods above other than those included in the consolidated income statements and therefore no statement of comprehensive income has been presented.

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 27 April 2014

 

Non-current assets


Note



2014
 £000



2013
 £000

Property, plant and equipment

10

3,397

3,171

Goodwill

11

35,510

34,483

Intangible assets

12

810

-

Deferred taxation asset

20

1,117

2,156

Total non-current assets


40,834

39,810

Current assets




Assets held for sale

13

150

-

Inventories

14

11,778

13,455

Trade and other receivables

15

31,685

29,983

Cash and cash equivalents

16

9,974

12,299

Total current assets


53,587

55,737

Total assets


94,421

95,547

Current liabilities




Trade and other payables

17

(43,733)

(47,729)

Borrowings

18

-

(2,439)

Current taxation payable


(837)

(668)

Total current liabilities


(44,570)

(50,836)

Non-current liabilities




Borrowings

18

-

(33,596)

Total liabilities


(44,570)

(84,432)





Net assets


49,851

11,115

Shareholders' equity




Share capital

21

57

9

Share premium

22

34,020

904

Share based payment and other reserves

22

956

(17)

Retained earnings


14,818

10,219

Total equity


49,851

11,115





 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 52 weeks ended 27 April 2014

 


Note

 

 

Share
capital

 

 

Share
 premium

Share based payment
 and other reserves reserves

 

 

Retained
earnings

Total equity



£000

£000

£000

£000

£000

Balance at 30 April 2012


9

904

-

6,451

7,364

Profit for the financial period


-

-

-

4,768

4,768

Total comprehensive income for the period


9

904

-

11,219

12,132

Transactions with owners:







Dividends

9

-

-

-

(1,000)

(1,000)

Acquisition of shares for EBT

22

-

-

(84)

-

(84)

Share-based payment charge

5

-

-

67

-

67

Total transactions with owners


-

-

(17)

(1,000)

(1,017)

Balance at 28 April 2013


9

904

(17)

10,219

11,115

Profit for the financial period


-

-

-

3,512

3,512

Total comprehensive income for the period


-

-

-

3,512

3,512

Transactions with owners:







Issue of new deferred shares

21

41

(41)

-

-

-

Issue of new ordinary shares

21

7

33,157

-

-

33,164

Transfer of share-based
payment charge

22

-

-

(2,379)

2,379

-

Dividends

9

-

-

-

(1,292)

(1,292)

Acquisition of shares for EBT

22

-

-

(10)

-

(10)

Disposal of shares from EBT


-

-

36

-

36

Share-based payment charge

28

-

-

2,945

-

2,945

Deferred tax on share-based payment charge

20

-

-

381

-

381

Total transactions with owners


48

33,116

973

1,087

35,224

Balance at 27 April 2014


57

34,020

956

14,818

49,851








 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 52 weeks ended 27 April 2014

 

Cash flows from operating activities

Note

2014
 £000

 

2013
 £000

Cash generated from operations

23

5,998

24,253

Interest paid


(84)

(3,429)

Income tax received/(paid)


42

(2,347)

Net cash generated from operating activities


5,956

18,477

Cash flows from investing activities




Purchases of property, plant and equipment

10

(1,548)

(1,624)

Proceeds from sale of property, plant and equipment (PPE)


134

66

Interest received


29

32

Purchase of subsidiary undertaking (net of cash acquired)

29

(1,456)

-

Purchase of other business combinations

29

(457)

-

Net cash used in investing activities


(3,298)

(1,526)

Cash flows from financing activities




Dividends paid

9

(1,292)

(1,000)

Repayments of borrowings


(37,310)

(4,185)

Proceeds from sale of shares on IPO


33,164

-

Proceeds from sale of shares held by EBT


465

-

Purchase of shares for EBT

22

(10)

(84)

Net cash used in financing activities


(4,983)

(5,269)

Net (decrease)/increase in cash and cash equivalents


(2,325)

11,682

Cash and cash equivalents at beginning of the period

16

12,299

617

Cash and cash equivalents at the end of the period

16

9,974

12,299





 

 

NOTES TO THE PRELIMINARY RESULTS

1.      General Information

This preliminary financial information does not constitute statutory accounts for the Group for the financial periods ended 27 April 2014 and 28 April 2013, but has been derived from those accounts. Statutory accounts for the financial period ended 27 April 2014 will be delivered following the Company's annual general meeting.  The auditors have reported on those accounts and their reports were unqualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

The financial information included in this announcement has been computed in accordance with International Financial Reporting Standards ("IFRS"), however, this announcement in itself does not contain sufficient information to comply with IFRS. The accounting policies used in preparation of this preliminary announcement have remained unchanged from those set out in the AIM Admission Document dated 18 July 2013. They are also consistent with those in the full financial statements which have yet to be published, and are extracted in note 2 below.

 

2.      Accounting Policies

The principal accounting policies applied in the preparation of the consolidated financial information are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.

Basis of preparation

The Consolidated Financial Statements for the 52 weeks ended 27 April 2014 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial information has been prepared on a going concern basis and under the historical cost convention.

The first consolidated financial statements which were prepared under IFRS as adopted by the European Union, are the Historical Financial Information included within the AIM Admission Document. A copy of these financial statements can be obtained from the Group's website   www.convivialityretail.co.uk. The date of transition to IFRS was 1 May 2010, and disclosures concerning the transition from UK GAAP to IFRS are detailed in note 28 of the AIM Admission Document. Therefore, the consolidated financial statements for the 52 weeks ended 27 April 2014 do not constitute the first IFRS financial statements of the Group, and accordingly no associated disclosures are provided.

 

The Directors have prepared cash flow forecasts for the period until April 2015. Based on these, the Directors confirm that there are sufficient cash reserves to fund the business for the period under review, and believe that the Group is well placed to manage its business risk successfully. For this reason they continue to adopt the going concern basis in preparing the financial statements.

Basis of consolidation

The financial information comprises a consolidation of the financial information of Conviviality Retail Plc and all its subsidiaries. The financial period ends of all Group entities are coterminous.

 

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated except to the extent they provide evidence of impairment of the asset transferred.

 

The Group operates an employee benefit trust ('EBT') and a franchisee incentive trust ('FIT') for the purposes of acquiring shares to fund share awards made to employees and franchisees respectively. The assets and liabilities of these trusts have been included in the consolidated financial information. The cost of purchasing own shares held by the EBT and FIT are accounted for in other reserves.

 

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of 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.

 

Identifiable assets acquired and liabilities and contingent liabilities assumed are recognised at the fair values at the acquisition date.

 

The excess of the consideration transferred over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary, the difference is recognised directly in the income statement.

 

Critical accounting estimates and assumptions

The preparation of financial information in conformity with IFRSs requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual events ultimately may differ from those estimates.

 

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The Group makes certain estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial information are considered to relate to:

(a)      Carrying value of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units ('CGU') to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate present value. The estimation of the timing and value of underlying projected cash flows and selection of appropriate discount rates involves management judgment. Subsequent changes to these estimates or judgments may impact the carrying value of the goodwill, which at 27 April 2014 was £35,510,000 (note 11).

(b)      Impairment of trade receivables

The assessments undertaken in recognising provisions and contingencies have been made in accordance with IAS 39. A provision for the impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all outstanding amounts in full due to the receivables being classified as 'bad' or there are indications that the collection is 'doubtful'. The amount of any loss is recognised in the income statement within operating costs. Subsequent recoveries of amounts previously written off are credited against operating costs in the income statement. The carrying value of trade receivables at 27 April 2014 is £30,808,000 and the associated provision is £1,629,000 (note 15).

(c)      Share options

The estimation of share-based payment costs requires the selection of an appropriate valuation model, consideration as to the inputs necessary for the valuation model chosen, and the estimation of the number of awards that will ultimately vest. The key assumptions are on expected life of share options, volatility of shares, the risk free yield to maturity and expected dividend yield. The total charge for equity and cash settled share based payments for the financial year was £3,433,000 (note 28).

 

 

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of operating segments, has been identified as the Executive Directors.

Foreign currency translation

(a)    Functional and presentation currency

Items included in the financial information of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial information is presented in Sterling, which is the Company's and subsidiaries' functional and presentation currency.

(b)    Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the exchange ruling at that date. Foreign exchange gains and losses arising on translation are recognised in the income statement for the period.

 

Revenue

Revenue is in respect of wholesale and retail distribution in the UK, and is recognised when the significant risks and benefits of ownership of the product has been transferred to the buyer. Revenue is the total amount receivable by the Group for goods supplied, excluding VAT and trade discounts.

Wholesale revenue is recognised on dispatch of the product from the warehouse.

Retail revenue is recognised at the point of sale to the buyer, which is when goods are delivered to the customer.

Cost of sales

Cost of sales represent the cost to the Group of the product sold. It consists of all external costs incurred in procuring goods for resale and delivering them to the distribution warehouses, as well as any adjustments to inventory.

Operating costs

Operating costs consists of distribution costs, administrative expenses, head office costs, and the costs associated with running corporately owned stores.

Property, plant and equipment

Items of property, plant and equipment are stated at historic purchase cost less accumulated depreciation and any provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset into working condition for its intended use.

Depreciation is provided at the following annual rates in order to write off each asset on a systematic basis over its estimated useful life. No depreciation is provided on land.

Leasehold buildings                       shorter of lease term and 50 years

Plant and equipment                      3 to 10 years

Motor vehicle                                 18 months

The assets' residual values and useful lives are reviewed and adjusted if appropriate at each reporting date.

Intangible assets

(a)    Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired, and is carried at cost less accumulated impairment losses.

 

Goodwill is allocated to CGUs for the purpose of impairment testing. A CGU is identified at the lowest aggregation of assets that generate largely independent cash inflows, and that which is looked at by management for monitoring and managing the business. The Group's two CGUs, are Bargain Booze and Wine Rack.

 

If the recoverable amount of the CGU is less than the carrying amount, an impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rate on the basis of the carrying amount of each asset in the unit. Any impairment is recognised immediately in the income statement and is not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date.

(b)    Other intangible assets

Intangible assets are carried at cost less accumulated amortisation and any impairment losses. Intangible assets arising on acquisition of subsidiaries are recognised separately from goodwill if the fair value of these assets can be identified separately and measured reliably.

 

Amortisation is calculated on a straight-line basis over the estimated useful life of the intangible asset. The useful life of the Group's intangible asset is 20 years, with a residual value of £Nil.

 

Impairment reviews are carried out if events or changes in circumstances indicate that the carrying value of an asset may be impaired. An impairment loss is recognised in the income statement when the asset's carrying value exceeds its recoverable amount. Its recoverable amount is the higher of an asset's fair value less costs to sell and value in use.  Impairment losses are not reversed.

 

Assets held for sale

Non-current assets are classified as held for sale if the carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, management is committed to a sale plan, the asset is available for immediate sale in its present condition and the sale is expected to be completed within one year from the date of classification. These assets are measured at the lower of carrying value and fair value less costs to sell.

 

Inventory

Inventory comprises goods held for resale which are valued at the lower of cost and net realisable value. Cost is calculated using the first in, first out method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Provision is made for slow moving and obsolete stock if required.

 

Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all outstanding amounts in full due to the receivables being classified as 'bad' or there are indications that collection is 'doubtful'.

 

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within operating costs. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating costs in the income statement.

 

Other receivables are non-interest bearing and are recognised initially at fair value and subsequently at amortised cost.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks.

Trade and other payables

Trade payables are obligations to pay for goods and services which have been acquired in the commercial operations of the Group. Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Dividends

Interim dividends on ordinary shares are recognised in equity in the period in which they are paid. Final dividends on ordinary shares are recognised when they have been approved either at the AGM or by the Board of Directors.

 

Leases

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership to the Group. All other leases are classified as operating leases.

Operating leases

Assets leased under operating leases are not recorded on the statement of financial position. Rental payments are charged directly to the income statement on a straight line basis over the lease term. Any lease incentives, primarily up-front cash payments or rent-free periods, are capitalised and spread over the period of the lease term.

 

Taxation

The tax expense for the period comprises of current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in other comprehensive income or in equity. In this case, the tax is recognised directly in other comprehensive income or in equity.

(a)      Current taxation

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted by the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(b)      Deferred taxation

Deferred tax is recognised using the statement of financial position liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amount in the historical financial information. Deferred tax is calculated at the tax rates that have been enacted or substantively enacted by reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date.

Deferred tax assets and liabilities are offset against each other when there is a legally enforceable right to set off current assets against current liabilities and it is the intention to settle these on a net basis.

Pension costs

The Group operates a stakeholder defined contribution pension scheme. None of the Group's employees have joined the stakeholder pension scheme and consequently there are no contributions recognised as an employee benefit expense.

Exceptional items

The Group treats certain items which are considered to be one-off and not representative of the underlying trading of the Group as exceptional in nature.

The Directors apply judgment in assessing the particular items, which by virtue of their scale and nature, should be classified as exceptional items. The Directors consider that separate disclosure of these items is relevant to an understanding of the Groups' financial performance.

Share based payments

The Group issues equity and cash settled share-based payments to certain employees and Franchisees. Equity settled share based payments are measured at fair value, excluding the effect of non-market based vesting conditions, at the date of grant. The fair value determined at the grant date, is expensed on a straight line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

 

Fair value is measured using a Black-Scholes pricing model. The expected useful life used in the models has been adjusted, based on management's best estimate, for the effects of exercise restrictions and behavioural considerations.

 

For cash settled share based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

 

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;

·      'Share based payment and other reserves' incorporates purchase of own shares, movement in the Group's EBT and FIT, and the IFRS 2 "Share-based payment" charge for the year.

·      'Retained earnings' represents cumulative retained earnings.

New standards and interpretations

At the date of authorisation of the financial information, the following standards and interpretations were in issue but not yet effective, and have not been early adopted by the Group:

●       IFRS 10, "Consolidated Financial Statements" (effective 1 January 2013)

●       IFRS 11, "Joint Arrangements" (effective 1 January 2013)

●       IFRS 12, "Disclosures of Interests in Other Entities" (effective 1 January 2013)

●       IAS 27 (revised), "Separate Financial Statements" (effective 1 January 2013)

●       IAS 28 (revised), "Investments in Associates and Joint Ventures" (effective 1 January 2013)

●       IFRIC Interpretation 21 "Levies" (effective 1 January 2014);

●       Transition Guidance - Amendments to IFRS10, IFRS11 and IFRS12 (effective 1 January 2013)

●       Investment Entities - Amendments to IFRS10, IFRS12 and IAS 27 (effective 1 January 2014)

●       "Offsetting financial assets and financial liabilities", Amendments to IAS 32  (effective 1 January 2014)

●       "Recoverable Amount Disclosures for Non-Financial Assets", Amendments to IAS 36 (effective 1 January 2014);

●       Novation of Derivatives and Continuation of Hedge Accounting, Amendments to IAS 39 (effective 1 January 2014);

 

† EU endorsed effective from 1 January 2014.

 

The adoption of these standards and interpretations is not expected to have a material impact on the Group in the period they are applied.

3.      Segment Information

The Group's activities consist of the wholesale and retail distribution of beers, wines, spirits, tobacco, grocery and confectionery within the United Kingdom. The Executive Directors of the Board are considered to be the chief operating decision maker (CODM). The business is managed as one entity, and activities are not split into any further regional or product subdivisions in the internal management reporting, as any such split would not provide the Group's management with meaningful information. Consequently, all activities relate to this one segment.

 

The CODM manages the business using EBITDA pre-exceptional and share based payment costs. The table below provides a reconciliation from this figure, to the reported profit before tax in the consolidated income statement

 



2014
 £000

2013
 £000





EBITDA


12,425

12,582

Depreciation


(1,753)

(1,704)

Amortisation


(28)

-

Non-exceptional share based payment charge


(638)

(67)

Exceptional costs (note 4b)


(3,869)

(499)

Net finance expense


(700)

(3,734)

Exceptional finance expense (note 6)


(612)

-

Profit before income tax


4,825

6,578

 

No individual customer accounts for 10% or more of the Group's revenue in either 2014 or 2013.

 

4.      Operating Profit

(a) Operating profit is arrived at after charging


Note

2014
 £000

2013
 £000





Distribution


6,255

6,524

Depreciation of property, plant and equipment

10

1,753

1,704

Amortisation of intangible assets

12

28

-

Loss on disposal of property, plant and equipment


8

24

Operating lease payments




- Land and buildings


1,360

1,030

- Plant and machinery


400

388

Share based payment expense (non-exceptional)

28

638

67

Exceptional items

4(b)

3,869

499

 

(b) Exceptional costs

The exceptional costs which are recognised within operating costs, are analysed below:

 



2014
 £000

2013
 £000





Costs associated with the IPO


3,086

-

Costs associated with acquisitions


344

-

Other non-recurring events and projects


439

499

Total exceptional items


3,869

499

 

The costs associated with the IPO consist of the fair value of the executive share options vesting on IPO (£1,936,000), NIC payable on these options (£462,000), the fair value of the warrant issued to Zeus as described in the AIM admission document dated 18 July 2013 (£397,000), costs associated with IPO that were not met by the previous shareholders (£720,000) and a one-off gain on sale of shares held by the EBT of £429,000.

 

Costs associated with acquisitions include £178,000 incurred in respect of the purchase of L.C.L. Enterprises Limited (Wine Rack) and £166,000 in respect of the trade and assets purchase of 26 stores from R N B Stores Limited. Further details of these transactions are included in notes 29 and 30 respectively.

 

Other non-recurring events and projects of £439,000 (2013: £499,000) relate to professional and consultancy charges arising from one-off transactional activity, and restructuring and reorganisation costs following an exercise to create efficiencies and streamline processes.

 (c) Auditor remuneration

During the period the Group obtained the following services from the Company's auditor:


2014
 £000

2013
 £000




Fees payable to the Company's auditor for the audit of the consolidated and company financial statements

40

17

Fees payable to the Company's auditor for other services



- Audit of the accounts of any associate of the company

-

10

- Audit-related assurance services

4

-

- Taxation compliance services

11

4

- Services relating to corporate finance transactions

102

-

- Other assurance services

41

-

Total fees payable to the Company's auditors

198

31

5.      Employee Costs

(a) Employee benefits expense

 



2014

2013



£000

£000





Wages and salaries


7,263

6,082

Social security costs


904

643

Social security costs on share-based payment charge (note 28)

488

-

Share-based payment charge (note 28)


2,123

67

Compensation for loss of office


857

-

Employee benefit expenses included in operating profit

11,635

6,792

 

 

The average monthly number of people (including Executive Directors) employed by the Group during the period was:



2014

2013



Number

Number

Directors


6

9

Administration


61

47

Marketing, selling and distribution


143

149

Retail staff


143

18



353

223

 

(b) Directors' remuneration

The remuneration of the Directors comprise:



 2014
 £000

2013
 £000

Salaries, fees and other short-term employee benefits


1,254

1,303

Compensation for loss of office


653

-

Payment in lieu of pension contribution


53

-

Total salaries and other short term employment benefits


1,960

1,303





Share-based payments charge (operating expenses)


179

67

Share-based payment charge (exceptional items)


1,916

-

Gains on exercise of share options


1,085

-



5,140

1,370

The highest paid Director's compensation is as follows:






2014

2013



£000

£000





Salaries, fees and other short-term employee benefits


563

332

 

 

6.      Finance Income and Expense



2014

2013



£000

£000

Finance income




Bank interest receivable


29

32

Total finance income


29

32





Finance expense




On invoice discounting facility


12

-

On bank loans


54

285

Amortisation of deferred arrangement costs


-

102

On loan notes


663

3,347

Non-exceptional finance expense


729

3,734

Exceptional finance expense


612

-

Total finance expense


1,341

3,734

Exceptional finance expenses include one off charges arising on early resettlement of borrowings as part of the IPO.

7.      Income Tax Expense

 

 

 

     Current tax




2014
 £000

 2013
 £000

Current tax on profits for the period



55

2,161

Adjustment in respect of prior periods



-

(307)

Total current tax



55

1,854

Deferred tax:





Origination and reversal of temporary differences



1,183

(136)

Changes in taxation rate



75

92

Total deferred tax (note 20)



1,258

(44)

Income tax expense



1,313

1,810

 

The tax charge differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

 



2014
 £000

2013
 £000

Profit before tax                                                              


4,825

6,578

Profit on ordinary activities multiplied by rate of corporation tax in the UK of 22.85% (2013: 23.9%)


1,103

1,572

Tax effects of:




- Expenses not deductible for tax purposes


152

157

- Differences between capital allowances and depreciation


16

146

- Temporary differences


(33)

(128)

- Changes in taxation rate


75

92

- Utilisation of losses


-

278

- Adjustment in respect of prior periods


-

(307)

Tax charge


1,313

1,810

 

Factors that may affect future tax charges

During the 52 weeks ended 27 April 2014, as a result of the change in the UK main corporation tax rate from 23% to 21% (2013: 24% to 23%) that was substantively enacted on 2 July 2013 and that is effective from 1 April 2014, the relevant deferred tax balances have been re-measured.

 

 

8.      Earnings Per Ordinary Share

 

On 8 July 2013, each A ordinary Share and each B ordinary Share was sub-divided into 36.77614821 ordinary Shares resulting in a total of 33,536,098 ordinary Shares. During the year, an additional 33,176,922 ordinary shares were issued (note 21).

 

The earnings per share calculations for the 52 weeks ended 27 April 2013 have been restated to reflect the share restructuring.

 



2014

2013

Profit attributable to ordinary shareholders (£000)

3,512

4,768

Basic earnings per share (pence)


6.1

15.1

Diluted earnings per share (pence)


5.7

14.9

 

Basic and diluted earnings per share are calculated by dividing the profit for the period attributable to equity holders by the weighted average number of shares.

 



2014
Number

 

2013

Number

Basic weighted average


57,285,762

31,520,579

Diluted weighted average


62,118,389

32,020,404

 

The difference between the basic and diluted average number of shares represents the dilutive effect of share options and warrants in existence. The weighted average number of shares can be reconciled to the weighted average number of shares including dilutive shares as follows:

 



2014
Number

 

2013

Number

Basic weighted average shares


57,285,762

31,520,579

Diluted effect of




- Exceptional employee share incentive plans, resulting from IPO

2,331,357

499,825

- Warrant granted to Zeus Capital (note 28)

839,902

-

- Employee share incentive plan


733,938

-

- Franchisee share incentive plan


927,430

-

Total dilutive effect of share incentive plans

4,832,627

499,825




Diluted weighted average number of shares

62,118,389

32,020,404

 

Adjusted earnings per share

Although not presented on the face of the Income statement, the adjusted earnings per share, profit after tax, but before exceptional items, is calculated below:

 



2014

2013

Profit after tax before exceptional items attributable to ordinary shareholders  (£000s)

7,186

5,267

Adjusted Basic earnings per share (pence)

12.5

16.7

Adjusted Diluted earnings per share (pence)

11.6

16.4

 

Adjusted basic and diluted earnings per share are calculated by dividing the profit after tax but before exceptional items by the weighted average number of shares, which is the same as disclosed in the table above.

 

 

9.      Dividends

 

Amounts recognised as distributions to ordinary shareholders in the period comprise:

 


2014

2013


£000

£000




Interim dividend for 2013 of 110 pence per A and B ordinary share

-

1,000

Interim dividend for 2014 of 2 pence per ordinary share

1,334

-

Less amounts received by the Employee Benefit Trust

(42)

-


1,292

1,000

The 2014 final proposed dividend of £4,002,000 (six pence per share) has not been accrued as it had not been approved by the period end.

 

10.    Property, Plant and Equipment

 


Leasehold land and buildings £000

Plant and

equipment

£000

Motor vehicle

£000

Total

£000

Cost





At 30 April 2012

302

7,866

11

8,179

Additions

-

1,624

-

1,624

Disposals

-

(512)

-

(512)

At 28 April 2013

302

8,978

11

9,291

Acquisitions through business combinations (note 29)

596

390

11

997

Additions

-

1,501

47

1,548

Disposals

(2)

(874)

-

(876)

At 27 April 2014

896

9,995

69

10,960

Depreciation





At 30 April 2012

155

4,672

11

4,838

Charge for the period

25

1,679

-

1,704

Disposals

-

(422)

-

(422)

At 28 April 2013

180

5,929

11

6,120

Acquisitions through business combinations (note 29)

209

214

1

424

Charge for the period

64

1,667

22

1,753

Disposals

(1)

(733)

-

(734)

At 27 April 2014

452

7,077

34

7,563

Net book value





At 27 April 2014

444

2,918

35

3,397

At 28 April 2013

122

3,049

-

3,171



 

11.    Goodwill


Total

£000

Cost and net book value


At 30 April 2012 and 28 April 2013

34,483

Acquisitions through business combinations (note 29)

1,177

Transferred to assets held for sale (note 13)

(150)

At 27 April 2014

35,510

Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination or are established as a result of the business combination. The carrying amount of goodwill has been allocated as follows:

 


£000



Bargain Booze

34,790

Wine Rack

720

Goodwill has an indefinite useful life and is subject to annual impairment testing. The recoverable amounts of the CGUs are determined from value-in-use calculations. The value in use is the present value of the pre-tax cash flow projections. The key assumptions used in determining value in use are growth rates and the discount rate.

Cash flow projections are based on the most recent financial budgets approved by management for one year. Subsequent cash flows are extrapolated using an estimated annual growth rate for a further nine years and terminal growth rates of 0% are then applied to perpetuity. These rates are below the average growth rate for the industry. The rate used to discount the projected cash flows, being a pre-tax risk-adjusted discount rate, is 8%. Risk factors are similar in each of the Group's CGUs.

 

The result of this review was that no impairment is required in respect of the carrying values of the goodwill. The Group has conducted a sensitivity analysis on the impairment test of each CGU's carrying value including reducing sales levels and increasing the discount rate. At 27 April 2014, no reasonably expected change in the key assumptions would give rise to an impairment charge for either CGU, and the assumptions accordingly, are not sensitive.

 

12.    Intangible Assets


£000

Cost


At 30 April 2012 and 28 April 2013

-

Acquisitions through business combinations (note 29)

838

At 27 April 2014

838



Amortisation


At 30 April 2012 and 28 April 2013

-

Charge for the year

28

At 27 April 2014

28



Net book value


At 27 April 2014

810

At 28 April 2013

-

Acquired brands are initially recognised at their fair value on acquisition and amortised over 20 years.

 

13.    Assets Held for Sale



2014

2013



£000

£000





Transferred from goodwill (note 11)


150

-

Assets held for sale relates to a number of corporately owned stores which, at 27 April 2014, were being actively marketed to potential franchisees.  These assets have subsequently been disposed arising in a gain to the Group.

14.    Inventories



2014

2013



£000

£000





Goods for resale


11,778

13,455

No security has been granted over inventories. The Group operates a bonded warehouse and as such the majority of the licensed stock held is under bond and valued excluding duty. The duty payable when sold will be £5,766,000 (2013: £3,384,000).

The cost of inventories recognised as an expense and included in cost of sales amounts to £322,968,000 (2013: £340,124,000).

15.    Trade and Other Receivables


2014

2013


£000

£000

Trade receivables

30,808

30,115

Less: provision for impairment of trade receivables

(1,629)

(1,453)

Net trade receivables

29,179

28,662

Other debtors

80

5

Prepayments and accrued income

2,426

1,316


31,685

29,983

The difference between the carrying value and fair value of all receivables is not considered to be material. As of 27 April 2014, trade receivables of £808,000 (2013: £1,363,000) were past due but not impaired. These relate to customers and Franchisees for which there is no recent history of default. All of the past due but not impaired receivables have been outstanding for less than six months.

 

Movements on the Group provision for impairment of trade receivables are as follows:

 



2014

2013



£000

£000

Opening


1,453

1,148

Provision for receivables impairment


1,140

1,246

Receivables written off as uncollectable


(964)

(941)

Closing


1,629

1,453

 

Provisions are estimated based upon past default experience and management's assessment of the current economic environment. The creation and release of receivables is charged/(credited) to operating expenses in the income statement. Trade receivables consist of a large number of Franchisees for whom there is no significant history of default. The credit risk of the Franchisees is assessed by taking account of their financial positions, past experiences and other relevant factors. Individual Franchisee credit limits are imposed based on these factors. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. In the event of a default in payment by a franchisee, the Group may recover unpaid inventory held in the franchisee's store.

16.    Cash and Cash Equivalents


2014

2013


£000

£000

Cash at bank and in hand

9,974

12,299

17.    Trade and Other Payables

 


2014

2013


£000

£000

Trade payables

37,039

41,378

Social security and other taxes

1,424

1,606

Accruals and deferred income

5,270

4,745


43,733

47,729

 

Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 35 days (2013: 38 days). The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

 

The Group entered into a receivables finance facility agreement dated 18 July 2013 Under this agreement the Group can sell any debts owed to Bargain Booze Limited by its customers who have purchased goods or services from Bargain Booze Limited. The maximum facility available is 80% of the allowable trade receivables up to £17,000,000. At 27 April 2014, the amount drawn down under this facility was £Nil (2013: £Nil).

The discount margin for the funding of debts is 1.45%. There is a non-utilisation fee of 0.2% of the available facility from time to time, payable during the minimum period of the facility, being 36 months from the date of the agreement.

The Group has also put in place bank-issued guarantees for the benefit of certain suppliers amounting to £13,500,000 at 27 April 2014 (2013: £13,500,000). The arrangement fee was 0.75% of the facility limit and commission is payable on the maximum liability under each guarantee issued at the rate of 1% per annum.

 

All amounts outstanding under both facilities are secured by debentures over certain assets of the Group.

18.    Borrowings

Non-current

2014
 £000

2013
 £000

Bank loans

-

3,049

Less: deferred arrangement fees

-

(358)


-

2,691

Loan notes

-

30,905


-

33,596

Current



Bank loans

-

2,439




Total borrowings

-

36,035

 

All borrowings were repaid on 31 July 2013, as part of the IPO. Up to this date the bank loan bore an interest rate of 3.5%. above LIBOR and was repayable in quarterly installments, and the loan notes bore an interest rate of 9% with no determined repayment schedule.

 

19.    Financial Risk Management and Financial Instruments

 

The Group's activities expose it to a variety of financial risks. The main financial risks faced by the Group relate to the risk of default by counter-parties to financial transactions and the availability of funds to meet business needs. These risks are managed as described below.

The Group's risk management is coordinated at its headquarters, in close cooperation with the board of Directors, and focuses on actively securing the Group's short to medium-term cash flows by minimising the exposure to financial risks.

The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed are described below.

(a) Credit risk

The Group's principal assets subject to credit risk are cash deposits, cash and trade receivables. The credit risk associated with cash is limited. The principal credit risk arises from non-recovery of trade receivables. In order to manage credit risk, the franchise agreement states collection by direct debit, and credit limits are set for customers based on a combination of payment history and third party credit references. Credit limits are reviewed by the credit controller on a regular basis in conjunction with debt ageing and collection history.

 

(b) Market risk

The Group finances its operations through a mixture of retained profits, ordinary shares, and an invoice discounting facility. At 27 April 2014, the drawdown on the invoice discounting facility was £Nil.

 

  (c)   Interest rate risk

Until 31 July 2013, the Group also financed its operations through long term borrowings, resulting in exposure to interest rate risk. Borrowings issued at variable rates exposed the Group to cash flow interest rate risk which was partially offset by cash held at variable rates. Borrowings issued at fixed rates exposed the Group to fair value interest rate risk. Following repayment of the borrowings, the Group has no significant interest rate risk.

 

The interest rate exposure of financial assets and liabilities of the Group is shown below.

 

2014

Fixed

Floating

Zero

Total


£000

£000

£000

£000

Financial assets





Cash and short-term deposits

-

9,974

-

9,974

Trade and other receivables

-

-

29,179

29,179

Financial liabilities





Trade and other payables

-

-

(37,039)

(37,039)

Total

-

9,974

(7,860)

2,114






2013

Fixed

Floating

Zero

Total


£000

£000

£000

£000

Financial assets





Cash and short-term deposits

-

12,299

-

12,299

Trade and other receivables

-

-

28,662

28,662

Financial liabilities





Trade and other payables

-

-

(41,378)

(41,378)

Bank loans

-

(5,488)

-

(5,488)

Loan notes

(30,905)

-

-

(30,905)


(30,905)

6,811

(12,716)

(36,810)






The Group had the following available undrawn facilities:


2014

2013




£000

Against trade receivables



16,645

13,338

(d)   Foreign exchange risk

The Group is exposed to a negligible element of foreign exchange risk, with only a limited number of supplies from abroad and all sales made in the UK.

(e)    Liquidity risk

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash safely and profitably. The Group monitors its cash resources through short, medium and long-term cash forecasting, against available facilities. Short-term flexibility is achieved by the use of an invoice discounting facility, the details of which are set out in the table above. The maturity of borrowings is set out in note 18. All of the Group's other financial liabilities are due within one year.

Capital risk management

The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to shareholders through optimising the debt and equity balance. The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the Company comprising issued capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group's capital is not restricted. Management may seek additional external borrowings to fund the future investment and growth of the Group.

 

In addition the Group has entered into a receivables finance facility agreement under which the maximum facility available is £17,000,000. The Group draws down on this facility from time to time as required to support short term working capital movements. The amount drawn down at 27 April 2014 is £Nil (2013: £Nil).

 

Fair values

Financial instruments utilised by the Group during the 52 week periods ended 27 April 2014 and 28 April 2013, together with information regarding the methods and assumptions used to calculate fair values, can be summarised as follows:

Current assets and liabilities

Financial instruments included within current assets and liabilities, excluding cash and borrowings, are generally short-term in nature and accordingly their fair values approximate to their book values.

 

Borrowings and cash

The carrying values of cash and short-term borrowings approximate to their fair values because of the short-term maturity of these instruments.

Fair values of financial assets and financial liabilities

Set out below is a comparison by category of the carrying values and fair values of all the Group's financial assets and financial liabilities.


2014

2013

Carrying amount and fair value

£000

£000

Financial assets



Cash and short-term deposits

9,974

12,299

Trade and other receivables

32,802

32,139


42,776

44,438

Financial liabilities



Trade and other payables

(44,570)

(48,397)

Bank loans

-

(5,488)

Loan notes

-

(30,905)


(44,570)

(84,790)

The fair value of trade receivables and payables is considered to be equal to the carrying values of these items due to their short-term nature. All other financial assets and liabilities are carried at amortised cost. Cash is held with counterparties with a credit rating of A and BBB+.

 

20.    Deferred Taxation Asset




£000

At 1 May 2012



2,112

Credited to the income statement



44

At 28 April 2013



2,156

Charged to the income statement (note 7)



(1,258)

Credited to equity



381

Arising on acquisition of subsidiary (note 29)



(162)

At 27 April 2014



1,117

:




The deferred tax asset is made up as follows:


2014

2013



£000

£000





Accelerated capital allowances


308

292

Other temporary differences


809

1,864



1,117

2,156

The recoverability of the deferred tax asset is dependent on future taxable profits in excess of those arising from the reversal of deferred tax liabilities. The deferred tax asset has been recognised to the extent that it is considered to be recoverable based on forecasts for future periods. At 27 April 2014, the value of the unrecognised deferred tax asset is £Nil (2013: £Nil).

21.    Share Capital


2014

2013


£000

£000

Authorised, allocated, called up and fully paid



686,112 A ordinary shares of £0.01 each

-

7

225,786 B ordinary shares of £0.01 each

-

2

66,713,020 ordinary shares of £0.0002 each

13

-

217,508,802 deferred shares of £0.0002 each

44

-

Total

57

9

 

On 8 July 2013, each A ordinary share and each B ordinary share was sub-divided into 36.77614821 £0.0002 ordinary shares, (rounded up in respect of each shareholder's aggregate holding). On the same date, a further 33,163,902 £0.0002 ordinary shares were issued for £1 each resulting in a total of 66,700,000 £0.0002 ordinary shares.

 

On 8 July 2013, each A ordinary share and each B ordinary share was sub-divided into 13.22385179 £0.0002 deferred shares (rounded down in respect of each shareholder's aggregate holding). On the same date, a further 205,000,000 £0.0002 deferred shares were issued at par, funded from the Company's un-distributable reserves, resulting in a total of 217,058,802 £0.002 deferred shares.

 

Holders of deferred shares do not have any right to receive notice of any general meeting or to attend, speak or vote at any general meeting of the Company. No dividend shall arise on deferred shares save for a cumulative fixed rate dividend of 0.000001% per annum of the nominal value of the deferred shares. On a return of capital on a winding up, holders of deferred shares shall receive only an amount equal to each deferred share's nominal value after all other shares have received £1,000,000 and deferred shares shall have no other rights to participate in the assets or profits of the Company. The Company may redeem or purchase all or any of the deferred shares for an aggregate sum equal to the accrued, but unpaid dividend due on such shares and any Director may execute any transfer of such deferred shares on behalf of the holders of such deferred shares.

 

The A and B ordinary shares held equal voting rights and ranked pari passu in all respects other than in respect of dividends where the A ordinary shareholders were entitled to receive, under certain circumstances, a participating dividend in priority to the B ordinary shareholders. Details of dividends paid in respect of these shares in the 52 weeks to 28 April 2013 are disclosed in note 9.

 

The Company entered into a block listing arrangement with AIM in respect of the notification to AIM of allotments of 15,000 new ordinary shares of £0.0002 each in the capital of the Company to satisfy the requirement to allot matching shares at the time of purchase of partnership shares for the Bargain Booze Share Incentive Plan (note 28). In this regard, the following issues occurred during the year

 

 

Date

Number



22 November 2013

2,030

23 December 2013

2,199

22 January 2014

2,022

24 February 2014

2,147

24 March 2014

2,396

22 April 2014

2,226


13,020

 

22.    Other Reserves


Share premium

£000

Share based payment and other reserves

At 30 April 2012

904

-

Share-based payment charge

-

67

Acquisition of shares for the EBT

-

(84)

At 28 April 2013

904

(17)

Share-based payment charge (note 28)

-

2,945

Deferred tax on share-based payment charge (note 20)


381

Transfer of share-based payment charge for vested options

-

(2,379)

Acquisition of shares for the EBT

-

(10)

Disposal of shares from EBT

-

36

Issue of new deferred shares (note 21)

(41)

-

Premium arising on shares issued in the period (note 21)

33,157

-

At 27 April 2014

34,020

956

 

Included within the Group operations is Bargain Booze EBT Trustees Limited (the EBT). The EBT purchases shares to fund the share option schemes. At 27 April 2014, the Trust held 2,129,176 ordinary shares (2013: 84,405 B ordinary shares, restated to 3,104,091 ordinary shares) with a cost of £58,107 (2013: £84,405). During the 52 weeks ended 27 April 2014 the Trust purchased 9,119 B ordinary shares at a cost of £10,000 (subsequently re-designated as 335,361 ordinary shares), and 13,020 ordinary shares at a cost of £26. The trust sold shares with a cost of £36,322.

23.    Cash Generated From Operations



2014
 £000

2013

 £000

Profit before tax including acquisitions


4,825

6,578

Adjustments for:




- Depreciation


1,753

1,704

- Amortisation


28

-

- Loss on sale of property, plant & equipment


8

24

- Gain on sale of shares held by EBT


(429)

-

- Equity settled share options charge (note 28)


2,945

67

- Net finance costs (note 6)


1,312

3,702

- Decrease in inventories


2,722

785

- (Increase)/decrease in trade and other receivables


(1,342)

1,613

- (Decrease)/increase in trade and other payables


(6,002)

9,780

- Costs associated with acquisition of subsidiary (note 29)


178

-

Cash generated from operations


5,998

24,253

 

The operating cash flows include an exceptional outflow of £439,000 in the 52 weeks ended 27 April 2014 (2013: £499,000) which relates to professional and consultancy charges arising from transactional activity and other one-off projects. There is a further £720,000 (2013: £Nil) of one-off exceptional costs incurred on IPO included within operating cash flows.

24.    Contingencies

The Group had guarantees in place with HMRC amounting to £Nil (2013: £125,000).

25.    Commitments Under Operating Leases

At the reporting date the Group had the following future aggregate minimum lease payments under non-cancellable operating leases:

        



Land and buildings


Other



2014

2013


2014

2013



£000

£000


£000

£000

Within 1 year


1,681

1,048


290

317

Between 2 and 5 years inclusive

4,440

2,928


409

208

After 5 years


2,738

1,291


-

-

Total


8,859

5,267


699

525

There are no significant obligations or incentives attached to any of the Group's lease agreements.

26.    Capital Commitments

At 27 April 2014, amounts contracted for but not provided in the consolidated financial statements for the acquisition of property, plant and equipment amounted to £519,000 (2013: £Nil).

27.    Pension Commitments

The company operates a stakeholder pension scheme. None of the Group's employees have joined the stakeholder pension scheme and consequently there are no contributions recognised as an employee benefit expense or any amount accrued at each of the 52 week periods ended 27 April 2014 and 28 April 2013. Following the introduction of auto-enrolment in respect of employee participation in pension schemes, the Group commenced making contributions to employee pension schemes from 1 June 2014.

28.    Share Based Payments

The Group makes equity settled share awards to senior executives, employees and Franchisees under three different share option plans. An accrual has been made for national insurance due on exercise of share options and treated as a cash settled share based payment. In addition an equity settled share based payment charge has been recognised in respect of a share warrant granted to Zeus Capital which vested on successful admission to AIM. Furter details of the three plans are provided below. The amounts recognised in respect of these schemes is as follows:

 


2014

2013

Non-exceptional

Exceptional

Total

Total


£000

£000

£000

£000






Equity settled share based payment




ESOP

186

1,936

2,122

67

SIP

1

-

1

-

FIP

425

-

425

-

Warrant to Zeus Capital

-

397

397

-

Total equity settled share based payment

612

2,333

2,945

67






Cash settled share based payment





National insurance on ESOP

26

462

488

-






Total share based payment charge

638

2,795

3,433

67

 

 

(a)  Bargain Booze Unapproved Employee Share Option Plan 2013 (ESOP)

Under the ESOP, the share options are awarded at a price which is determined by the Board but is not less than the market value of the shares as at the date of grant. The awards granted on 26 February 2013 vested on successful admission to AIM. All subsequent grants become exercisable between three and ten years after grant and upon the achievement of performance criteria in relation to EBITDA targets. All options lapse on the day immediately after the expiry date to the extent they have not been exercised. Options are forfeited if the employee leaves the Company in the first three years following grant. The following table provides details of all existing grants under the ESOP.

 

Date of grant

Subscription price
 (pence)

Performance conditions

 

Earliest
 exercise date

 

 

Expiry date






26/02/2013

2.7

 achieving  IPO

31/07/2013

25/02/2023

31/07/2013

100

2014  to 2016 aggregate EBITDA of £38.2m

31/07/2016

30/07/2023

04/11/2013

100

2014  to 2016 aggregate EBITDA of £38.2m

04/11/2016

03/11/2023

03/03/2014

187

2014  to 2016 aggregate EBITDA of £38.2m

03/03/2017

02/03/2024

 

The tables below summarises the movement on share options in the period:

 


2014

2013


 

Share
 options

Weighted average exercise price

 

Share
 options

Weighted average exercise price


(number)

(pence)

(number)

(pence)






Outstanding at the beginning of the period

77,511

100

-

-

Redesignated shares*

2,773,046

3

-

-

Granted

2,730,052

103

77,511

100

Exercised

(881,874)

3

-

-

Forfeited

(76,198)

100

-

-

Outstanding at the end of the period

4,622,537

60

77,511

100






Exercisable at end of the period

1,968,683


-


Exercise price

2.7 pence


-







Weighted average remaining contractual life

8.82 years


9.82 years


 

*On 8 July 2013 each ordinary Share was sub-divided into 36.77614821 ordinary Shares (note 21).

 

The weighted average share price at the date of exercise for share options exercised during the period was 127 pence.

Equity settled share based payments are measured at fair value at the date of grant. The fair value determined at the date of grant is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value for the ESOP is measured by use of a Black-Scholes model.  The inputs into the option pricing model are provided below:


2014

2013

Grant date

31/07/2013

04/11/2013

03/03/2014

26/02/2013

Exercise price

100

100

187

2.7 pence

Expected volatility

39%

39%

39%

40%

Expected life

5 years

5 years

5 years

5 years

Expected dividend yield

6.2%

4.9%

4.3%

8.0%

Risk-free interest rate

1.25%

1.52%

1.74%

0.91%

 

The weighted average fair value of options granted during the period in relation to the ESOP was 34.7p.

 

Due to the short period of share trading activity, expected volatility was determined by reference to the historical volatility of the share price of comparable listed companies over the previous five years. The volatility of the companies share price on each date of grant was calculated as the average of annualised standard deviations of daily continuously compounded returns on the stock, calculated over five years back from the date of the grant.

 

The risk-free rate is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity equal to the life of the option.

 

The expected life of each option is equal to the vesting period plus a two year exercise period.

 

(b)   Bargain Booze Share Incentive Plan 2013

The Group operates a Share Incentive Plan (SIP), approved by HMRC on 14 October 2013, approved by the Board on 11 October 2013 and commenced 1 November 2013.  All UK resident tax-paying employees of Conviviality and its participating subsidiaries are eligible to participate in the SIP subject to completing a minimum qualifying period of service of six months.

 

Under the SIP, the Group can:

(a)          give 10% of salary, up to £3,000 worth of free shares in each tax year to an employee ("Free Shares");

(b)          offer an employee the opportunity of buying up to £1,500 of shares a year ("Partnership Shares");

(c)          give an employee a matching share for each Partnership Share bought ("Matching Shares"). Each employee must complete three years service before these shares are awarded; and

(d)          in addition to buying up to £1,500 of Partnership Shares each year, allow employees to purchase more shares ("Dividend Shares") using dividends received on Free Shares, Partnership Shares and Matching Shares up to percentage limits set by the Company.

 

Awards of "Matching Shares" under this scheme are at £Nil cost and therefore their fair value is equal to the share price on the date of issue, at the time when each grant is allocated. If a person ceases to be an employee prior to this date, the "Matching Shares" will be forfeited. Details of all "Matching Share" grants in the year are below. none of which are exercisable at the period end:

 




Number of options

Date of grant

Fair value at grant

Exercise date

Opening

Granted

Closing


Pence





22/11/2013

163

22/11/2016

-

2,030

2,030

23/12/2013

168

23/12/2016

-

2,199

2,199

22/01/2014

184

22/01/2017

-

2,022

2,022

24/02/2014

190

24/02/2017

-

2,147

2,147

24/03/2014

160

24/03/2017

-

2,396

2,396

22/04/2014

168

22/04/2017

-

2,226

2,226




-

13,020

13,020







Weighted average share price (pence)

-

172

172

 

(c)  Franchisee incentive plan (FIP)

The FIP is intended to provide a pool of the issued ordinary shares as awards to Franchisees subject to the achievement of performance conditions and then at the discretion of the Board. There are four categories of proposed award all of which are subject to approval, at the discretion of the Board, at the end of the third year of measurement, being September 2016.

 

●        Part 1 - Store Standards Incentive Plan - All Franchisees could be entitled to one third of their maximum allocation on passing each of three annual store audits.

●        Part 2 - Group EBITDA Target - Awards may be made, at the discretion of the Board, based on Group EBITDA targets over a three year period and will be shared between all stores equally.

●        Part 3 - Individual Franchisee Performance Awards - Annual awards may be made subject to the achievement by a store of certain key performance indicators.

●        Part 4 - New Franchisee Incentives - this Part will cover up to 5% of the FIP pool - the award may be made, at the discretion of the Board, three years after passing a store audit.

The shares are transferred to the Franchisees for no payment. If a person ceases to be a Franchisee prior to the vesting of any award, that award will lapse entirely. The awards are subject to Board approval in September 2016, therefore the service period commences prior to the grant date. Therefore, the fair value of each grant is calculated as the best estimate of the share price on the date of grant, being the year end share price.

 





Number of options

Date of grant (subject to Board approval)

Start

of vesting

 period

Estimated

fair value

(pence)

Exercise date

Opening

Granted

Closing








30/09/2016

31/07/2013

166

30/09/2016

-

1,239,970

1,239,970

 

 

(d)  Warrants

On 18 July 2013, the Company issued warrants to Zeus Capital giving them the right to subscribe to 1,334,000 shares for £1, conditional on successful admission to AIM, exercisable from 31/07/2014 to 31/07/2023. Management consider this to be a share based payment and have fair valued the options using a Black-Scholes model. The inputs into the Black Scholes model are as follows:

 

Grant date

26/02/2013

Exercise price

100

Expected volatility

40%

Expected life

5 years

Expected dividend yield

8.0%

Risk-free interest rate

0.91%

 

Upon admission to AIM a share based payment charge of £397,000 was recognised within exceptional costs.

 

29.    Business Combinations

On 30 August 2013, the company entered into an agreement to acquire the entire issued share capital of L. C. L. Enterprises Limited now trading as Wine Rack Limited ("Wine Rack"), for a total consideration of £1.65 million in cash.  Wine Rack is a retailer of wine, spirits, tobacco and related products, and operated 22 stores, predominantly in Greater London.  This acquisition is consistent with the Group's ongoing strategy of increasing focus on its wine offering as well as penetrating further into the South of England from its heartland in the North West.

The following table summarises the consideration paid for Wine Rack, and the amount of assets acquired and liabilities assumed recognised at the acquisition date.

 


 

Book value

Fair value Adjustment

Fair value


£000

£000

£000





Property, plant and equipment

623

(50)

573

Intangible assets (note 12)

-

838

838

Intellectual property rights

16

(16)

-

Inventories

1,045

-

1,045

Trade and other receivables

360

-

360

Cash and cash equivalents

372

-

372

Trade and other payables

(1,994)

(30)

(2,024)

Current tax payable

(72)

-

(72)

Deferred tax liability

-

(162)

(162)

Total identifiable net assets

350

580

930





Goodwill


720





Total consideration satisfied by cash



1,650





Cash flow




Cash consideration



1,650

Cash acquired with subsidiary



(372)

Acquisition costs (expensed to exceptional operating costs)


178




1,456

Significant adjustments made to the fair value of assets acquired include the value of the acquired Wine Rack brand which has been recognised within intangible assets (note 12), and recognition of the deferred tax liability thereon (note 20).

The goodwill arising on the acquisition of the business represents the premium paid to acquire Wine Rack. The acquisition strengthens the existing business by expanding the geographical location and creates significant opportunities for cross-selling, and other synergies.

Acquisition costs of £178,000 have been charged to exceptional items in the consolidated income statement for the period (note 4).

From the date of acquisition, Wine Rack has contributed revenue of £7.6 million and £0.1 million to profit before tax to the Group's results. If the acquisition had taken place at the beginning of the financial period, it is estimated that the Group revenue for the period would have been £359,118,000 and total Group operating profit would have been £6,236,000.

 

In addition to the acquisition set out above, the Group has also completed a number of individual smaller store acquisitions for a total cash consideration of £457,000, all of which has been recognised as goodwill.

30.    Events Occurring After the Reporting Date

On 16 May 2014, the Group acquired 26 stores from R N B Stores Limited (Rhythm and Booze) a subsidiary of Bibby Retail Services Limited, for a total consideration of £1.65 million in cash, of which £0.2 million is deferred consideration. On 27 June 2014, the Group acquired a further five stores from Rhythm and Booze for a total consideration of £0.2 million.  For the year ended 31 December 2013, the 31 acquired stores generated revenues of £16.6 million and net profits of £0.1 million.

 

Due to the proximity of the acquisition to the reporting date, the initial accounting for this transaction is incomplete, and consequently details of the amounts of assets and liabilities acquired are not disclosed within this announcement.

31.    Subsidiary Audit Exemption

Under section 479A of the Companies Act 2006, the Group is claiming exemption from audit for the subsidiary companies listed below:

 

Company name

Company number

Conviviality Stores Ltd (formerly Bargain Booze Group Limited)

05501974

Bargain Booze Limited

01801597

Bargain Booze EBT Trustees Limited

04451429

Wine Rack Limited (formerly L.C.L. Enterprises Limited)

06880288

32.    Related Parties

Until 31 July 2013, the Group and Company were controlled by certain funds managed by ECI Partners LLP, by virtue of its shareholding and voting rights in Conviviality Retail Plc. A former Director of the Group, T D Raffle, also had a material interest as a Director of that company.

The following transactions were carried out with related parties:

(a)    Loans to/from related parties

The Group had loan notes due to ECI Partners LLP for which the Group was charged interest on an arm's length basis amounting to £662,769 for the period ended 27 April 2014 (2013: £1,941,000). The liability outstanding as at 28 April 2013 in relation to the loan notes payable to ECI Partners LLP amounted to £16,935,000, plus capitalised interest of £13,970. All amounts were repaid on Admission to AIM.

(b)   Purchase of goods and services

In the period ended 27 April 2014, the Group was charged a management fee in relation to Director's fees for J A Hayhurst of £4,776 (2013: £25,191) from ECI Ventures Limited. The accrual as at 27 April 2014 for this charge was £Nil (2013: £2,000).

(c)    Dividends

During the period ended 27 April 2014, a dividend of £Nil (2013: £752,399) was paid to ECI Venture Nominees Limited.

(d)   Key management personnel

Key management comprises the Executive and Non-Executive Directors. Information on their emoluments is provided in note 5.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR GGUWUMUPCGMG

a d v e r t i s e m e n t