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Xpediator PLC - Final Results

RNS Number : 1133K
Xpediator PLC
20 April 2020
 

20 April 2020

XPEDIATOR PLC

("Xpediator" or "the Company" or "the Group")

Final Results for the Year Ended 31 December 2019

Xpediator Plc, (AIM: XPD) a leading provider of freight management services across the UK and Central and Eastern Europe, is pleased to announce its audited results for the year ended 31 December 2019.

 

2019 Highlights

Strong revenue growth combined with good cash generation

·    Substantial increase in revenues by 19.0% to £213.2 million

·    Like for like revenues increased by 10.4% reflecting good organic growth

·    Delivered ahead of revised expectations with adjusted profit before tax of £5.2m1

·    Improved cash generation with a strong focus on working capital

·    Maintained financial headroom with positive net cash (excluding liabilities arising from the impact of right-of-use assets debt) of £7.0 million, as at 31 December 2019

·    Adjusted earnings per share decreased by 41.7% to 2.80p

·    Final proposed scrip dividend, with the intention to return to cash dividends from the 2020 half year results 

Operational Highlights

·    Freight forwarding revenues increased by 16.6% to £159.6 million with the Baltics and Balkans key areas of strength despite strong prior year comparators

 

·    Pall-Ex franchise in Romania also performed strongly again handling in excess of 730,000 palletised freight (2018: 61,000) a 19.7% increase

 

·    Logistics revenues increased by 32.2% to £47.5 million with increased occupancy in the Romanian Baltics and Balkans key areas of strength despite strong prior year comparators

 

·   Affinity Transport Solutions continued its steady growth performance, delivering £2.5 million of operating profit before central overhead allocation (excluding exceptional items)

 

·    Opening of an office in Shanghai to support the operation of a key contract

Prospects for 2020 & COVID-19 Impact

·    Asset light structure and flexible cost base, enabling the Group to manage the business during the early days of the current COVID-19 crisis

·   Overall demand for transport services and solutions has continued with high demand in most sectors, whilst some areas have seen a slow down due to impacts of COVID-19

·    Trading of the Group in Q1-2020 was broadly in line with management expectations

·    To further protect and manage the business responsibly during this extraordinary period the Board has introduced temporary pay reductions across the business, reduced overheads where appropriate and is minimising capital investment projects. In addition, to conserve cash, the final dividend for 2019 will be structured as a scrip dividend

·    At the same time, the Board is mindful of the opportunities that may arise from the current crisis and is determined the business will be well placed to capitalise

 

Stephen Blyth, Chief Executive Officer of Xpediator, said "2019 saw our revenues increase substantially by 19% to £213.2 million, and helping to end the year with strong cash balances. However, the outbreak of COVID-19 has changed the commercial world, with the duration and ultimate impact of the virus are as yet unknown.  Our objective is to protect our staff and business, and to ensure we are well placed to resume normal operations and potentially capitalise on opportunities when the virus impact subsides. As an asset light business with low fixed overheads we are better placed than some, with demand for our services holding up and in some areas seeing an increase. However, given the current uncertain environment we have taken measures to protect the business by reducing salaries and costs across all entities. The Group continues to seek acquisitions and the current crisis will, we believe, provide many opportunities to reach our target to grow the business over the next few years. Ultimately the Board believes Xpediator is well placed to operate through this crisis and emerge in a good position"

1 Adjusted profit before tax excludes the impact of exceptional costs relating to aborted acquisition costs of £0.19m (2018: £nil), additional contingent deferred consideration on Anglia Group Forwarding Limited of £0.451m (2018: £nil), £0.215m (2018: £nil) relating to additional contingent deferred consideration due on Regional Express acquisition, £nil (2018: £0.318m) relating to acquisition costs, £0.294m (2018: £0.232m) unwind and addback of discount on deferred consideration and £1.407m (2018:  £1.033m) relating to the amortisation on the intangible assets relating to the acquired entities and £0.419m (2018:  £nil) relating to the net consolidated income statement impact following the application of IFRS 16.

Enquiries

Xpediator plc                                                                       Tel: +44 (0)330 043 2395

Stephen Blyth, Chief Executive Officer                                 Email: [email protected]

Robert Ross, Chief Financial Officer

             

Cenkos Securities (Nominated Advisor & Joint Broker)      Tel: +44 (0)20 7397 8900

Max Hartley, Max Gould (Corporate Finance)         

Nick Searle (Sales)    

             

Cantor Fitzgerald Europe (Joint Broker)                             Tel: +44 (0)20 7894 7000

David Foreman, Michael Boot (Corporate Finance) 

Caspar Shand Kydd (Sales)  

             

Novella Communications (Financial Public Relations)       Tel: +44 (0)20 3151 7008

Tim Robertson           

Fergus Young

This announcement has been released by Stephen Blyth, Chief Executive Officer, on behalf of the Company.

 

 

 

Chairman's Statement

2019 has demonstrated the growth in demand for the Group's services. Delivering £213 million of revenues reflects the significant increase in the scale of the business over the last three years when annual revenues were just £73 million. Importantly, expansion has come from a balanced mix of acquisition and organic growth further evidenced in these results with like for like revenues increasing by over 10%.

Adjusted profit before tax was £5.2 million (2018: £7.2 million) which led to adjusted earnings per share of 2.80 pence (2018: 4.80 pence).  Earnings per share on a statutory basis was 0.60 pence (2018: 3.53 pence).

The Group faced some challenges during the first half of 2019 which negatively impacted our profitability. Our e-commerce business was slowed by a disruption caused by a tightening of "know your client rules" following the introduction of GDPR regulations to the distribution chain in Germany and additional marketing spend was required to stimulate the business' recovery. Our UK logistics warehouse in Braintree lost a material client and whilst this customer has been replaced, the warehouse required a reconfiguration. The warehouse is now well placed to support new customers and e-commerce activity, a key growth area for the Group.

Overall, 2019 was a year of investment in people, facilities and processes to position us for future growth. We continue to invest in the Group's IT infrastructure to support the enlarged business. The year saw the establishment of an outsourced IT department in India, the installation of enhanced Group wide cyber security systems and the ongoing development of the digitalisation of the business. A key target for 2020 is for the business to continue its development of the e-forwarding platform, which will enable a large part of the freight forwarding activity to be online by the end of 2020, with resultant overhead savings for the future.

Strategically, Xpediator remains focused on establishing its network of freight management companies across the UK and Europe with a particular expertise in the fast growing Central and Eastern European ("CEE") regions. Recognising the market opportunity, the Group is seeking to exploit the growth across the CEE regions.

The Group continues to have a good pipeline of acquisition opportunities which meet the acquisition criteria of enhancing the Group's geographical capabilities, developing our existing operational locations and extending the Company's international presence in air and sea transportation.

The Group's Brexit team has been working closely with leading transport associations and port authorities to plan ahead. The Group already holds Authorised Economic Operator status which will be critical in being able to support both exporters and importers post Brexit under most forecasted scenarios. As a Group, we are well prepared for Brexit and we see this as an area to grow the profitability of the Group.

Dividend

Subject to approval by shareholders, the Group will propose a final dividend via a scrip issue to shareholders in June 2020. This has been proposed given the current issues around COVID-19 and the objective of conserving cash where possible, but it is expected that the Group's 2020 interim dividend will return to being paid in cash.

Board and management changes

On 8 November 2019, Wim Pauwels and Charles McGurin were appointed as non-executive Directors, following the retirement of Geoff Gillo who stepped down from the role on 6 June 2019. Both Wim and Charles have extensive experience of the transport and logistics industry and have held senior roles running comparable businesses to Xpediator.

On 13 November, following Stuart Howard's resignation on 6 September 2019, the Company confirmed the appointment of Robert Ross as the Chief Financial Officer of the Group. Robert began working for Xpediator on 2 January 2020 having previously been the Finance Director of Europa Worldwide Group. He replaces Richard Myson (who had been acting CFO) who remains with the business moving to become Chief Commercial Officer and joining the Group Operating Board.

COVID-19

As the Group announced on 31 March 2020, the wellbeing and safety of our people, customers and suppliers is Xpediator's first priority. Where possible individuals are working remotely from their homes and we are continuing to operate effectively whilst also taking the appropriate actions to limit the spread of this virus.

So far in 2020, activity levels have remained broadly in line with management expectations, with high demand from some sectors and other areas slowing. In response we have sought to allocate resource to match demand across the business.  While it is hard to make any predictions under these extraordinary circumstances, based on very recent trends, the Board believes that demand for our freight management and warehouse services, both in the UK and Europe will remain sufficiently robust overall but will be more volatile in any given month, and that we have the systems and protocols in place to meet this demand.

We are benefitting from our diverse operations across the UK and Europe which has already helped us offset challenges in some areas with higher activity in other markets. Pall-Ex and European road freight forwarding have been areas of strength together with good levels of warehouse utilisation. That said, operating in this market environment is more complicated involving driver shortages in certain markets, some supply issues, more complex border checks and general cost inflation most of which can be passed to clients.

The Group also has the natural advantage of being an asset light business and does not own a large fleet of trucks. Instead we have low fixed overheads and typically act as a broker to our clients sourcing capacity from the market as it is required. Despite being in a relatively good position, the Board has taken the prudent decision to introduce temporary pay reductions, reduce costs in areas of reduced activity and suspend certain capital investment projects until the crisis has passed.   

Outlook

Notwithstanding COVID-19 the Group has made a solid start to 2020 with revenues slightly up on a like for like basis for the first 3 months of the financial year. This, together with the new client wins achieved in 2019 gives the Board confidence in delivering progress in 2020, subject to the outcome of COVID-19.

However, given current material uncertainties, it is not practical to give longer term guidance at this time until there is greater clarity around the duration and full effects of COVID-19 on our customers, suppliers and our markets.

Alex Borrelli

Non-Executive Chairman

 

 

 

Chief Executive Officer's Statement

I am excited to outline the vision for the development of the Group over the next 5 years. I also report on our results for year ended 31 December 2019, which saw the Group's revenues increase by 19%.

We set out at the beginning of the year with the objective to continue to develop our pan-European service and enhanced digitalised platform to support the transport, storage and local delivery of our global customers goods. To this end, we have been investing in the development of our Group wide IT platforms and team to accelerate our move towards digitalisation. We have also significantly expanded the management team, bringing in highly skilled individuals to support the enlarged business and implement our plans for further expansion. Although this investment has added additional cost to the Group, we are now well positioned and sufficiently resourced, to deliver rapid growth with limited further investment required to reach our stated targets over the next five years.

Demand for freight management in the UK and CEE countries was strong during the year.  Changing consumer trends and economic growth in our core markets, in particular from the CEE region are driving demand and helping us to develop a more comprehensive European network of freight management companies. As a business we are still heavily CEE centric with c58% of the Group's revenue being generated between mainland Europe. 

The financial results achieved in 2019 evidence the progress we have made across all our markets. Of the £213.2 million of revenues generated in 2019, £123.5 million was generated in Europe (2018 £109.0 million) and £89.7 million in the UK (2018 £70.2 million). We remain weighted towards the CEE region on the continent where our experience and infrastructure enable us to win contracts against the larger competitors in our market, and we are very pleased with our evolution in this region.

The business is performing well, growing both organically and through acquisition. Good cash generation during the year reflected a strong focus on working capital and increased financial disciplines. The Group has a solid financial base with the financial headroom to support the Group's future ambitions.

The businesses acquired are being integrated and the process is ongoing to obtain further synergies. Despite the difficulties currently caused by COVID-19 we are poised and ready for further acquisitions and we have strengthened the IT, HR, and finance teams to facilitate more activity.

The opening of the office in Shanghai, China will facilitate the development of activity with the Chinese customers and the major contract win secured in H2 2019.

 

Divisional Review  

Freight forwarding

£159.6m (2018: £136.9 million)
Revenue

£3.4m (2018: £3.00 million)
Operating profit before exceptional item

Freight forwarding services, largely provided under the Delamode brand, specialise in connecting CEE countries with the UK and rest of Europe. In 2019, freight forwarding revenues increased by £22.7 million all of which related to organic revenue and the full year impact of acquisitions from 2018.

Like for like turnover increased by £16.7 million, 12.2% on 2018, driven by new client wins and the expansion of service offerings into new markets. This included the development of consolidation services to Italy from Lithuania as well as increased sea freight activity in Bulgaria.

Freight forwarding revenues across the Baltics and Balkans have continued to grow significantly against strong prior year comparatives, with Delamode Baltics revenue up by £8.9 million and Delamode Bulgaria up by £4.2 million year on year.

The remaining increase in freight forwarding revenues in 2019 was due to full year contributions from acquisitions completed during 2018. Benfleet Forwarding Limited made significant improvements over 2018 with its Far East activity recommencing, generating increased revenue of £6.0 million and additional operating profit of £0.6 million. Anglia Forwarding, also outperformed management expectations in terms of turnover and profit.

We have continued to invest in our cross-border e-commerce project and whilst this is currently loss making (2019: loss of £0.5m), we continue to closely monitor the performance and prospects of the project and particularly in relation to its working capital requirements.

The Regional Express earn-out was completed early in order to invest appropriately for a major contract win on a three-year contract that commenced operations in August 2019.  This has a slow build up in the last quarter of 2019 during the implementation phase and activity levels are expected to ramp up during 2020.

Warehousing & Logistics

£47.5m (2018: £35.9 million)
Revenue

£2.9m (2018: £3.0 million)
Operating profit before exceptional item

The Logistics division's activities remain largely focused in Romania and the UK and revenue increased by £11.6 million in 2019 to £47.5 million.

The Group's Pall-Ex franchise in Romania continues to perform strongly, offering a palletised freight delivery service to any part of the country within 24 hours and handling in excess of 60,000 pallets on average per month in 2019 (2018 50,000 average pallets per month). This level of growth has continued into the first quarter 2020, with approximate growth of 20% compared to the first quarter of 2019.

The development of the new cross dock facility in Sibiu for Pall-Ex and Delamode storage was completed in H1 2019 and has enhanced the service and profit levels. During 2019, management was successful in being awarded significant warehouse contracts in Romania. This resulted in the occupancy of the main 25,000 sqm warehouse facility in Bucharest increasing from 48% in March 2019 to 83% in December 2019.  Whilst the Bucharest facility lost over £500k in 2019, it is expected that this will move towards a breakeven position in 2020.

There is a strong pipeline of demand for warehouse space in Romania and having the ability to deliver palletised freight throughout Romania overnight by our Pall-Ex operations puts the business in an enviable position for further growth in the future.

In the UK, the lease for a new purpose built, 20,000 sqm facility in the Port of Southampton has been signed and the site is expected to become operational in February 2021. This will give the Group almost 70,000 sqm of warehouse space within the UK with aspirations to double the size of the estate by the end of 2022.

The warehouse in Braintree experienced some challenges during 2019, with the loss of a significant client and the substantial expansion of an existing customer. During the change over, management took the opportunity to reconfigure the warehouse which will drive greater future opportunities and allow the Group to increase its e-fulfilment for new and existing customers.

Transport Services

£6.2m (2018: £6.4 million)
Revenue

£142.3m (2018: £139.1million)
Gross Billing

£2.5m (2018: £2.3 million)
Operating profit before exceptional item

Transport solutions, trading principally under the Affinity brand, provides bundled fuel and toll cards, financial and support services for hauliers in southern Europe. Affinity has been an agent of DKV in Romania since 2002, one of the world's largest fuel card providers and provides the DKV fuel card across the Balkans to a database of approximately 2,000 Eastern European hauliers and over 15,000 trucks.

In addition, Affinity provides a "one stop shop" of transport services including roadside assistance and ferry bookings. Affinity's commercial model fits well within the Group as many of the hauliers who are customers of Affinity also supply haulage services to Delamode a key factor that enables the Group to have a good understanding of its customers/suppliers, which underpins the strategy to provide further financial services such as insurance and leasing. With current driver shortages in Europe, having a supplier base will also become increasingly important for the forwarding division.

Volumes sold to customers (gross billings) increased in 2019 by 2.3% despite year on year decreases in average fuel prices of 1.4%. However, revenue decreased slightly due to the Euro/Sterling exchange rate changes, increases in competition within the market and a tightening of the division's credit policy.

Romania remains the largest region for the division and now represents 84% of total activity, (2018: 87.2%, 2017: 89.5%).

Further progress was made towards greater expansion of this division's services outside of Romania and into other East European countries, and Affinity commenced operations in Bulgaria during 2019.

There are several opportunities which the Group can capitalise on in 2020, including further developing the leasing and insurance products tailored specifically for Affinity's existing customer base.

Acquisitions

Our strategy is to act as a consolidator of the highly fragmented freight management market. In the last two years the Group has completed four transactions which have added over 1,200 new customers together with significantly expanding the Group's air and sea freight capabilities.

During 2019, the Group had pursued a major acquisition target in Slovenia which consumed considerable time and expense, and whilst we reached the final two bidders, unfortunately, this was not successful.

During 2019 the Group focused on integrating and bedding in the acquisitions made in 2017 and 2018 which will be completed during 2020. We remain focused on expanding the Group through acquisition and have a pipeline of opportunities that are in varying stages of consideration. Acquisition targets are selected on the basis they will enhance the Group's existing market presence, add further service capabilities particularly in air and sea and benefit significantly from being a part of the wider Xpediator Group, plus be earnings enhancing.

Vision and Strategy

Our Vision

Xpediator is a leading Freight Management provider in a very fragmented and competitive logistics market.

Our vision over the next five years is to maintain our current rate of growth and become a leading international freight management and logistics provider generating revenues in excess of £1 billion.

As a business we want to deliver sustainable solutions to our clients who are at the centre of our service offerings. We are focused on offering our clients the optimal solution for their transport needs with consistently high quality and competitive services.

We also look to ensure our client base is diverse, not just in terms of the number of clients, but also the sectors we service. No single client contributes to more than 2% of Group revenue. As an acquisitive business, one of the areas of focus, when considering acquisition opportunities, is how the opportunity can add to this diversity. Accordingly, strategically selected acquisitions have added to our ability to be able to offer more services to our existing client base as well as attracting new clients.  We are now able to offer even stronger industry-specific solutions for our clients in the retail and fashion, toys and games sector.

As a business our vision is to continue to focus on year on year double digit revenue growth which will be achieved through several areas.

First, continued focus on the provision of high-quality services to the CEE region. This region is experiencing some of the largest GDP growth across Europe and the growth will be generated across all three divisions of the Group.

Second, the expansion of our Logistics facilities in Southampton where we will open a new 20,000 sqm facility in H1 2021.

Third, continued focus on targeted, earnings enhancing acquisitions. Operating in a large, fragmented market results in there being numerous acquisition targets and our strategy is to focus on global freight forwarders and contract logistics providers which are supported by a strong client base with a strong earnings track record.

Finally, operating in a low margin industry, we strive to identify ways in which we can continue to provide high quality services to our clients in a cost-effective way. During 2019 we continued our investment in IT, not only to secure our clients and suppliers data, but also to enhance our online functionality. This will allow us to offer our clients a seamless online solution to make bookings and track their consignments. The digitalisation of these processes will be margin enhancing as we take out overhead costs, whilst ensuring our clients have a competitive, robust solution.

Ultimately, at the heart of the Group's vision is client service, delivered through optimal solutions, whilst being competitively priced and with consistently high levels of customer service.

Outlook

We are currently operating in an extraordinary period. I am proud of the magnificent way everyone across the Group has responded to the crisis and has pulled together to get through this period and ensure we have a business that is able to re-emerge in good health. I would therefore like to thank everyone for their efforts and wish all stakeholders well during this very difficult period. We continue with the stated vision to reach our aspirational goals. In doing so, we will add greater strength and capability to the Group, which in turn will provide greater job security and rewards for our employees, plus enhancing returns for investors.

Stephen Blyth

Chief Executive Officer

 

 

 

Chief Financial Officer Statement

Financial Review 

Revenue

Group revenue increased in 2019 by £34.1 million (19.0%) to £213.2 million. Of this increase, like-for-like growth was £18.6 million whilst the full year effect of acquisitions made in 2018 contributed the remaining £15.5million.

The Freight Forwarding division delivered £159.6 million (16.6% increase v 2018).  Our Warehousing and Logistics division delivered revenue of £47.5 million (32.2% increase v 2018). The Transport Services division delivered £6.2 million (2.9% decrease v 2018).

Group profit before tax

Whilst Group profit before tax decreased in 2019 to £2.2 million (2018: £5.6 million, 2017: £2.4 million), two of the three operating divisions (before central overheads) increased on the prior year:

                                                                                    2019                2018                2017

Freight Forwarding                                                      £3.4m              £3.0m              £2.4m

Warehousing & Logistics                                            £2.9m              £3.0m              £0.9m

Transport Services                                                     £2.5m              £2.3m              £2.0m

 

The increases in profit before tax from the operating divisions was offset by year on year increases in central overheads (£2.4m), exceptional costs (£0.5m), amortisation (£0.4m), accounting adjustments (£0.4m) and interest on deferred consideration (£0.1m).

Adjusted profit before tax

Reconciliation between profit before tax                   

and adjusted profit before tax                                                        2019                       2018                       2017

Profit before tax                                                                                 £2.175m                  £5.616m               £2.436m

Exceptional items (note 30)                                                               £0.856m                  £0.318m               £0.912m

Unwind and addback of discount on deferred consideration         £0.294m                  £0.232m              £0.295m

Amortisation on intangibles (note 12)                                                £1.407m                   £1.033m              £0.330m

Net Income Statement Impact of application of IFRS 16                   £0.419m                               -                           -

Adjusted Profit before tax                                                                   £5.151m                   £7.199m              £3.973m

1 Unwind of discount of deferred consideration = £0.346m plus addback of the release on discount of deferred consideration = £0.052m (see note 10)

Earnings per Share

2019

2018

2017

 

 

 

 

Basic earnings pence per share (profit after tax)

0.60

3.53

1.64

Adjusted earnings pence per share (Adj profit after tax)

2.80

4.80

3.27

 

The total number of ordinary shares at 31 December 2019 was 136.1 million (2018:133.8 million) following the issue of 2.3 million during the year which gave rise to a weighted number of shares of 135.1 million (135.8 million diluted). Profit after tax attributable to the owners of the parent company of £0.8 million provides a basic earnings per share of 0.60p (0.60p diluted) which is an 83.0% (82.5% diluted) decrease on 2018. Adjusted profit before tax results in a basic earnings per share of 2.80p (2.79p diluted) which is a decrease of 41.7% (40.1% diluted) on 2018. (See note 10 of the financial statements)

Group Adjusted Profit before Tax 2019 v 2018

Group operating profit before exceptional items decreased by 27.8% (£1.8 million) year on year fuelled by mix of issues surrounding the e-commerce activity, the warehouse in Braintree and the investment in overheads to accommodate future growth and IT solutions.

The Freight Forwarding division operating profit increased by £0.4 million from 2018 to 2019. Of this, organic growth accounted for £0.2 million and the full year impact of the acquisitions of Anglia Forwarding in June 2018 contributed a further £0.2 million. The loss in the e-commerce activity equated £0.5m for the year, (2018: £0.2 million profit).

The Logistics division operating profit decreased by £0.1 million from 2018 to 2019.

Organic growth decreased by 25.1% (£0.7million loss) year on year, with the full year impact of the Import Services Limited contributing additional revenue of £9.5 million and operating profit of £0.5 million. This was offset by the Braintree warehouse that has undergone a reconfiguration project following the loss of a major customer and is expected to deliver an improved contribution to the Group during 2020.

The Transport Services division under the Affinity brand saw operating profit increase by 10.6% (£0.2 million) from 2018 to 2019. This was achieved through improved overhead controls despite revenues decreasing by £0.2 million year on year.

Financial Resources

Asset Cover

2019

2018

2017

 

 

 

 

Total Assets

£128.9m

£98.8m

£76.4m

Net Assets

£29.0m

£29.1m

£14.8m

Current Ratio

1.01

1.14

1.07

 

Cash

The Group continues to focus on the application of tight cash controls and the need to maintain a reasonable headroom for future contingencies and to manage financing risk. The Board regularly monitors the financing needs of the business through cash flow projections for the following 12 months. These are expected to be achieved for the coming year from existing cash balances, loan facilities and operating cash flows. The Group has sufficient financial resources and a broad spread of business activities. The Directors therefore believe it is well placed to manage its business risks.

 

Cash generated from operations increased by 279.5% from 2018 to £14.2 million reflecting the increased turnover generated as well as improved control of working capital. In addition, as a result of the adoption of IFRS 16, this has resulted in a benefit to net cash from operating activities by £6.5 million.

Cash outflows from investing activities decreased on 2018 levels, (71.5%), due to there being no acquisition in 2019, compared to the acquisition of two subsidiaries in 2018.

Cash from financing activities decreased by 272.7% from 2018 due mainly to lower proceeds from share issues (£6.5 million lower) and re payment of loan and CID balances. In addition, as a result of the adoption of IFRS 16, this has impacted cash from financing activities by £(6.5) million.

Overall, this resulted in an increase of £2.4 million in cash and cash equivalents from 2018 with £12.0 million balance at the end of the year 2019 (23.9% increase v 2018).

Working Capital

 

Whilst both trade receivables and payables increased in the year, this was as a result of the increased activity undertaken by the Group. Trade receivables increased by 1.0% to £60.9 million and trade payables increased by 4.5% to £58.6 million. Despite the increase in trade debtors, debtor days reduced by 9.8% reflecting the continued focus on managing the Group's working capital effectively. Creditor days also decreased but by less than the decrease in debtor days (4.9% year on year) which has reduced the working capital within the Group.

Administrative Costs Review

As the business has continued to develop, both in terms of operations and support functions, combined with the full year impact of the 2018 acquisitions, the average staff numbers have increased from 902 to 1,037. Consequently, Group administrative costs increased from £36.4 million to £50.0 million (37.1%).

1 CID - Confidential Invoicing Discount facility. Funding is secured on the value of invoices raised.

2 Debtor days defined as trade receivables / gross billings * 365

 Creditor days defined as trade payables / cost of sales (gross billings less gross margin) * 365

 

Finance Costs

Excluding the IRFS 16 impact of £1.1 million, finance costs were in line with 2018, at £0.5 million. Improved cash management has resulted in both loans reducing by £0.6 million and lower utilisation from the confidential invoice discounting by £0.6 million.

Called up Share Capital

2.3 million ordinary shares (2018:16.3 million, 2017: 37.4 million) were issued in the year primarily relating to the equity proportion of deferred consideration payable for the acquisition of EMT and Regional Express. Called up share capital at 31 December 2019 was £6.9 million (2018: £6.7 million, 2017: £5.9million). See note 22 of the financial statements.

Impairment

The Group carries out its impairment tests annually in November as part of the budget process and all newly acquired entities are also reviewed for impairment at the balance sheet date.

No impairment losses have been recognised during the year.

Robert Ross

Chief Finance Officer

 

 

FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

 

 

2019

2018

 

Notes

£'000

£'000

Gross billing

7

350,121

312,497

CONTINUING OPERATIONS

 

 

 

Revenue

3

213,247

179,174

Cost of sales

 

(160,643)

(137,490)

GROSS PROFIT

 

52,604

41,684

Other operating income

4

1,193

935

Impairment losses on receivables

5

(836)

(1,053)

Administrative expenses

5

(49,133)

(35,390)

Exceptional items included in administrative expenses above

27

(856)

(318)

 

OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS

 

4,684

6,494

 

OPERATING PROFIT

5

3,828

6,176

Share of loss of equity accounted associate

16

(60)

(78)

Finance costs

8

(1,674)

(582)

Finance income

8

81

100

PROFIT BEFORE INCOME TAX

 

2,175

5,616

Income tax

9

(872)

(885)

PROFIT FOR THE YEAR

 

1,303

4,731

Profit attributable to:

 

 

 

Owners of the parent

 

810

4,421

Non-controlling interests

 

493

310

 

 

1,303

4,731

Earnings per share attributable to the ordinary equity holders of the parent:

 

 

 

Basic earnings pence per share

10

0.60

3.53

Diluted earnings pence per share

10

0.60

3.43

Adjusted basic earnings pence per share

10

2.80

4.80

Adjusted diluted basic earnings pence per share

10

2.79

4.66

The notes form part of these financial statements

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

 

2019

2018

 

£'000

£'000

PROFIT FOR THE YEAR

1,303

4,731

OTHER COMPREHENSIVE INCOME

 

 

Items that may be reclassified to profit or loss:

 

 

Exchange differences on translation of foreign operations

(705)

199

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

598

4,930

Total comprehensive income attributable to:

 

 

Owners of the parent

143

4,612

Non-controlling interests

455

318

 

598

4,930

The notes form part of these financial statements

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

 

 

2019

2018

 

Notes

£'000

£'000

ASSETS

 

 

 

NON-CURRENT ASSET

 

 

 

Intangible assets

12

24,706

24,908

Property, plant and equipment

13

2,516

2,355

Right-of-use assets

25

27,385

                 -

Investments

16

1

61

Trade and other receivables

17

1,050

1,194

Deferred tax

9

210

225

 

 

55,868

28,743

CURRENT ASSETS

 

 

 

Inventories

 

118

58

Trade and other receivables

17

60,927

60,310

Cash and cash equivalents

 

11,951

9,647

 

 

72,996

70,015

TOTAL ASSETS

 

128,864

98,758

 

 

 

2019

2018

 

Notes

£'000

£'000

EQUITY

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

Called up share capital

22

6,854

6,736

Share premium

23

11,987

11,868

Equity reserve

23

16

38

Translation reserve

23

70

737

Merger reserve

23

3,102

2,323

Retained earnings

23

6,094

6,773

Issued share capital and reserves attributable to the owners of the parent

 

28,123

28,475

Non-controlling interests

 

887

586

TOTAL EQUITY

 

29,010

29,061

LIABILITIES

 

 

 

NON-CURRENT LIABILITIES

 

 

 

Deferred consideration

18

-

2,089

Provisions

20

1,674

1,523

Lease liabilities - right-of-use assets

25

21,535

-

Interest bearing loans and borrowings

19

2,275

2,648

Trade and other payables

18

101

-

Deferred tax liability

9

1,968

2,204

 

 

27,553

8,464

CURRENT LIABILITIES

 

 

 

Trade and other payables

18

58,579

56,072

Lease liabilities - right-of-use assets

25

6,392

-

Deferred consideration

18

4,607

1,409

Interest bearing loans and borrowings

19

2,723

3,752

 

 

72,301

61,233

TOTAL LIABILITIES

 

99,854

69,697

TOTAL EQUITY AND LIABILITIES

 

128,864

98,758

The financial statements were approved by the Board of Directors on 17 April 2020 and were signed by:

Stephen Blyth

 

CEO

 

 

 

The notes form part of these financial statements

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

 

 

Share

Share

Equity

Translation

Merger

Retained

 

 

Total

 

 

Capital

Premium

Reserve

Reserve

Reserve

Earnings

Total

NCI

Equity

 

Notes

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Carried forward

31 December 2018

 

6,736

11,868

38

737

2,323

6,773

28,475

586

29,061

Contributions by and distribution to owners

 

 

 

 

 

 

 

 

 

 

Dividends paid

11

-

-

-

-

-

(1,522)

(1,522)

(154)

(1,676)

Share based consideration on acquisition

22

87

-

-

-

779

-

866

-

866

Share option charge

24

-

-

11

-

-

-

11

-

11

Share options exercised

24

31

119

(33)

-

-

33

150

-

150

Total contribution by and distribution to owners

 

6,854

11,987

16

737

3,102

5,284

27,980

432

28,412

Profit for the year

 

-

-

-

-

-

810

810

493

1,303

Exchange differences on translation of foreign operations

 

-

-

-

(667)

-

-

(667)

(38)

(705)

Total comprehensive income for the year

 

-

-

-

(667)

-

810

143

455

598

Balance at
31 December 2019

 

6,854

11,987

16

70

3,102

6,094

28,123

887

29,010

 

 

 

Share

Share

Equity

Translation

Merger

Retained

 

 

Total

 

 

Capital

Premium

Reserve

Reserve

Reserve

Earnings

Total

NCI

Equity

 

Notes

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Carried forward
31 December 2017

 

5,922

5,792

69

546

(1,509)

3,535

14,355

413

14,768

Contributions by and distribution to owners

 

 

 

 

 

 

 

 

 

 

Dividends paid

11

-

-

-

-

-

(1,323)

(1,323)

(145)

(1,468)

Share based consideration on acquisition

22

278

-

-

-

3,832

-

4,110

-

4,110

Share option charge

24

-

-

109

-

-

-

109

-

109

Share options exercised

24

36

-

(140)

-

-

140

36

-

36

Issue of share capital

22

500

6,076

-

-

-

-

6,576

-

6,576

Total contribution by and distribution to owners

 

6,736

11,868

38

546

2,323

2,352

23,863

268

24,131

Profit for the year

 

-

-

-

-

-

4,421

4,421

310

4,731

Exchange differences on translation of foreign operations

 

-

-

-

191

-

-

191

8

199

Total comprehensive income for the year

 

-

-

-

191

-

4,421

4,612

318

4,930

Balance at
31 December 2018

 

6,736

11,868

38

737

2,323

6,773

28,475

586

29,061

The notes form part of these financial statements

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2019

 

 

2019

2018

 

Notes

£'000

£'000

Continuing Operations

 

 

 

Cash flows from operating activities

 

 

 

Cash generated from operations

1

15,803

5,135

Interest paid

 

(909)

(305)

Tax paid

 

(729)

(1,097)

Net cash from operating activities

 

14,165

3,733

Cash flows from investing activities

 

 

 

Purchase of tangible fixed assets

13

(1,321)

(554)

Acquisition of subsidiaries, net of cash acquired

12

-

(6,069)

Purchase of intangible fixed assets

12

(498)

(171)

Cash paid on deferred consideration of acquisition

 

(206)

(315)

Sale of investments

16

-

83

Interest received

8

29

29

Net cash outflow from investing activities

 

(1,996)

(6,997)

Cash flows from financing activities

 

 

 

New loans in year

19

-

908

Loan repayments in year

19

(1,217)

(362)

Share issue (net of share issue costs)

22

150

6,613

Transactions with non-controlling interests

15

(6)

(310)

Dividends paid

11

(1,522)

(1,323)

Repayment on leases

 

(6,546)

-

Non-Controlling interest dividends paid

15

(154)

(145)

Net cash inflow from financing activities

 

(9,295)

5,381

Increase in cash and cash equivalents

 

2,874

2,117

Cash and cash equivalents at beginning of year

 

9,647

7,340

Effect of foreign exchange rate movements

 

(570)

190

Cash and cash equivalents at end of year

 

11,951

9,647

The notes form part of these financial statements

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

1. RECONCILIATION OF PROFIT BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

 

2019

2018

 

£'000

£'000

Profit before income tax before ordinary activities before results of associate

2,235

5.694

Loss of equity accounted associate

(60)

(78)

Depreciation charges

6,990

712

Amortisation charges

1,587

1,105

Loss on disposal of fixed assets

32

13

Finance costs

1,674

582

Finance income

(81)

(100)

Share based payments charge

(11)

109

Impairment of intangible assets

-

1,845

Deferred consideration write back and vendor income on Benfleet Forwarding Limited

-

(2,592)

Deferred consideration charge on Regional Express Limited and Anglia Group Forwarding Limited

666

-

 

13,032

7,290

(Increase) in inventories

(60)

(8)

(Increase) in trade and other receivables

(473)

(6,957)

Increase in trade and other payables

3,153

3,287

Increase in provisions

151

1,523

Cash generated from operations

15,803

5,135

2. ACCOUNTING POLICIES

Description of the business

Xpediator Plc (the "Company") is a public limited company, incorporated in England and Wales, United Kingdom. The registered office is 700 Avenue West, Skyline 120 Great Notley, Braintree, Essex, CM77 7AA and the Company registration number is 10397171.

The consolidated financial statements comprise the financial information of the Company and its subsidiary undertakings (together the "Group"). Detail of the entities of the Group are described in Note 14.

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU issued by the International Accounting Standards Board, under the historical cost convention. Accounting policies have been consistently applied from 2018 except for the introduction of the new standard IFRS 16.

The presentation currency used for the preparation of the financial statements is Pounds Sterling (£), which is the currency of choice of the principal investors of the Group. The amounts are rounded to the nearest thousand, unless otherwise stated.

The preparation of financial statements in conformity with IFRSs requires the use of certain accounting estimates. It also requires the directors to exercise their judgement in the process of applying the Group's accounting policies (see Note 2.3 - Critical accounting estimates and judgements).

Going concern

The Group meets its working capital requirements through the receipt of revenues from the provision of its services in the UK and in CEE, the management of capital and operating expenditure, from the working capital and other borrowing facilities available to it and, from time to time, from the issue of equity capital.

Ultimately the receipt of revenues and charges due to the Group depends on the availability of liquidity for the company's customers and the level of transport and logistics activity in the market. The COVID-19 pandemic has had a significant, immediate impact on the UK and global economies and on the operations and operational funding of participants in international and UK supply chains.

The COVID-19 pandemic has not, to date, had a significant adverse impact on the Group's operations but the directors are aware that if the current situation becomes prolonged then this may change. Further details of the current assessment of the impact on the business are set out in the strategic report. Based on very recent trends, the directors believe that demand for the Group's freight management and warehouse services, both in the UK and CEE will remain robust overall but will be volatile, and that the Group has the systems and protocols in place to meet this demand. At the date of approval of these financial statements it is not clear how long the current circumstances are likely to last and what the long-term impact will be.

At 31 December 2019 the Group had cash and cash equivalents of £11,951,000 (2018: £9,647,000). The Group also has funding facilities in place, details of which are set out in note 19 of the financial statements, which it does not envisage will be withdrawn.

The directors prepare annual budgets and forecasts in order to ensure that they have sufficient liquidity in place in the business. In addition, in response to the rapidly evolving COVID-19 situation, the directors, in formulating the plan and strategy for the future development of the business have considered a period beyond that for which formal budgets and forecasts are prepared and have stress tested the financial projections of the business by applying a number of scenarios including reductions in forecast revenues, delays in collection of receivables, delays in new business pipeline and mitigation or deferral of capital and operational expenditure.

The directors have taken steps to utilise the various support mechanisms instigated by UK and various CEE governments, including the use of the Coronavirus Job Retention Schemes and CEE equivalents (eg Technical Unemployment Process in Romania). The Operating and Executive Board began a process of twice weekly phone calls starting 12 March 2020 where they discuss operational and financial metrics, including regularly review of volume activity and revenue. To further protect and manage the business responsibly during this extraordinary period, the directors have introduced temporary pay reductions, negotiated rent free periods, recruitment freezes and reducing other costs through a strategic review of business overheads, as well as suspending certain capital investment projects.

Having regard to the above, and based on their latest assessment of the budgets and forecasts for the business of the company, the directors consider that there are sufficient funds available to the Group to enable it to meet its liabilities as they fall due for a period of not less than twelve months from the date of approval of the financial statements. The directors therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

Basis of consolidation

The Group financial statements consolidate the financial statements of Xpediator Plc and its subsidiaries drawn up to 31 December each year. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The Company has control over a subsidiary if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The financial statements of subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. Intra-group balances and transactions, including unrealised profits arising from intra-Group transactions, have been eliminated. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Non-controlling interests represent the equity in subsidiaries that is not attributable, directly or indirectly, to Xpediator Plc.

Subsequent to the merger accounting noted below the consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Merger accounting

On 25 May 2017, the Company entered into a share swap agreement with the ultimate beneficiaries of Delamode Group Holdings Limited, whereby 4,000,000 new ordinary shares of £1.00 each were issued to the ultimate beneficiaries of Delamode Group Holdings Limited in exchange for their shares in Delamode Group Holdings Limited in the same proportion as their shareholding in Delamode Group Holdings Limited. The merger method of accounting is used to consolidate the results of Xpediator Plc.

On 8 June 2018, the Company issued 1,727,694 new ordinary shares of £0.05 each as part of the deferred consideration of Easy Managed Transport Limited ("EMT"). The premium on the fair value in excess of the nominal value of shares issued in consideration of business combinations is credited to the merger reserve.

On 14 July 2018, the Company issued 3,740,648 new ordinary shares of £0.05 each as part of the acquisition of Import Services Limited. The premium on the fair value in excess of the nominal value of shares issued in consideration of business combinations is credited to the merger reserve.

On 31 December 2018, the Company issued 84,951 new ordinary shares of £0.05 each as part of the deferred consideration of Regional Express Limited ("Regional"). The premium on the fair value in excess of the nominal value of shares issued in consideration of business combinations is credited to the merger reserve.

On 16 May 2019, the Company issued 1,655,876 shares to the former owners of EMT as part of the payment of the deferred consideration relating to the acquisition of the entire equity of EMT in 2017. The premium on the fair value in excess of the nominal value of shares issued in consideration of business combinations is credited to the merger reserve.

On 5 December 2019, the Company issued 89,744 shares to the former owners of Regional as part of the payment of the deferred consideration relating to the acquisition of the entire equity of Regional in 2017. The premium on the fair value in excess of the nominal value of shares issued in consideration of business combinations is credited to the merger reserve.

Revenue

The Group generates revenue in the UK and Europe.

The Group operates a number of diverse businesses and accordingly applies a variety of methods for revenue recognition, based on the principles set out in IFRS 15. The revenue and profits recognised in any reporting period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. In determining the amount of revenue and profits to record, and associated balance sheet items (such as trade receivables, contract assets and contract liabilities), management is required to review performance obligations within individual contracts. This may involve some judgemental areas (for example within the logistics & warehousing Business), where revenue is recorded in advance of invoicing the customer.

Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer. For all contracts, the Group determines if the arrangement with a customer creates enforceable rights and obligations, which is in line with our contractual commitments and industry standard best practice (for example Convention Relative au Contrat de Transport International de Marchansies par la Route or CMR).

For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group's performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group has assessed the period of time principles as follows:

·          Customers receives the benefits of the good being moved from the origin to the destination, as another supplier would not need to re-perform the service performed to date (ie the goods have been moved partway).

·          The customer becomes committed to pay the Group the moment that the goods are despatched and collected.

·          The customer accepts that they are liable to pay for the transaction in full although it is the Group's responsibility to ensure that the shipment is in transit before invoicing.

·          The customer can usually be invoiced on despatch/export and has an obligation to pay for services despite any problems that may arise in transit.

·          The Group would hold any third party liable for any issues that happen in transit that is beyond its reasonable control.

The Group recognises that it acts as both an agent and a principal. The Group is a principal if it responsible for the specified good or service before that good or service is transferred to a customer. The Group is an agent if it is not responsible for arranging for the provision of the specified good or service by another party. In this case, the Group does not control the specified good or service provided by another party before that good or service is transferred to the customer. When the Group acts as an agent, it recognises revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party. The Affinity business (see Affinity section of revenue recognition policy) primarily operates as an agent, and largely recognises only the commission earned as revenue.

Freight forwarding

Under IFRS 15, freight forwarding revenue is recognised over the period of time based on the principles identified above. Therefore, revenue will consist of freight delivered during the period as well as a proportion of revenue for service delivered that are in process as at the end of the reporting period, which is calculated on a time proportioned basis.

Logistics & warehousing

Logistics & warehousing revenue is recognised over a period of time. Invoicing varies by contract but is typically in line with work performed. Due to the different contractual arrangements in place, each customer is assessed to determine the amount of work carried out, which has not been invoiced at the date of the Group's reporting period. This revenue is recognised by direct reference to the amount of work carried out to deliver the service and measured relative to cost or over the time period which the warehousing is provided. Judgement is therefore required when determining the appropriate timing and amount of revenue that can be recognised. The revenue from handling of incoming products is recognised when a performance obligation is satisfied, but not invoiced at the reporting date, which is correspondingly accrued on the statement of financial position within contract assets.

 

Affinity

Revenue is recognised at a point in time only after the performance obligation has been actually been delivered. Affinity and trucking services revenue largely acts as an agent based on the assessment above, so only commission is recorded as revenue. This largely relates to provision of DKV fuel cards, which enables the customer to purchase fuel, tolls and other services.

In addition, the Affinity business operates as a reseller of ferry crossings, where revenue is recorded at a point in time as it is based on the performance obligation being delivered. Revenue for this part of the business is recorded as a principal due to the assessments identified above.

Gross billings (Affinity)

Recoverable disbursements incurred on behalf of our Affinity Division customers based in Romania and the West Balkans include fuel costs, toll charges and breakdown assistance. The gross billings figure is included within the Groups trade payables and receivables but are excluded from consolidated income statement revenue. The gross billing revenue number is a non-statutory measure but is included to make a more meaningful calculation of days sales outstanding and days payable outstanding, so it is important to understand the level of billings going through the sales and purchase ledgers.

Franchise income

Income relating to franchise fees are not recorded as revenues by the Group but are shown as other income. This revenue arises from the sales of services to the franchisees. This income is recognised over a point in time based on when the services have been transferred to the franchisee in accordance with the terms and conditions of the relevant agreements.

Franchise fees comprise of revenue for the initial allocation of the franchise to the respective member, IT support, marketing and the use of the intellectual property.

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.

The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3: Business Combinations are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

If the cost of the acquisition is less than the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities, the difference is recognised directly in the Consolidated Income Statement.

Associates

Management has applied judgement in determining that International Cargo Centre Limited (ICC) is an associate of the Group. The Group has significant influence by virtue of holding a 40% equity interest which presumes significant influence per IAS 28, together with having one of three directors on the board, while taking into account that the remaining 60% interest is held by one other party.

Non-controlling interests

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.

Goodwill

Goodwill arising on the acquisition of a business represents any excess of the fair value of the consideration over the fair value of the identifiable assets and liabilities acquired. The identifiable assets and liabilities acquired are incorporated into the consolidated financial statements at their fair value to the Group.

Goodwill is not amortised but tested for impairment annually. Any impairment is recognised immediately in the consolidated income statement and is not subsequently reversed. On disposal of a business, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Impairment of non-financial assets (excluding inventories and deferred tax assets)

Impairment tests on goodwill with indefinite useful economic lives are undertaken annually in November as part of the Group's budgeting process, except in the year of acquisition when they are tested at the year-end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

 

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows; its Cash Generating Units ('CGUs'). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from a business combination that gives rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

Foreign currencies

The financial statements of the Group are presented in its reporting currency of Sterling. The functional currency of each Group entity is the currency of the primary economic environment in which the entity operates.

Transactions in foreign currencies during the period have been converted at the rates of exchange ruling on the date of the transaction. Assets and liabilities denominated in foreign currencies have been translated at the rates of exchange ruling on the balance sheet date. Any gains or losses arising from these conversions are credited or charged to the Consolidated Income Statement.

On consolidation, the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the translation reserve.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

Financial assets

The Group classifies its financial assets into the categories discussed below, depending on the purpose for which the asset was acquired. The Group only has financial assets classified as held at amortised cost. The financial assets comprise of trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

Cash and cash equivalents includes cash in hand, deposits held with banks, and - for the purpose of the statement of cash flows - bank overdrafts. Bank overdrafts are shown within loans and borrowings in current liabilities on the consolidated statement of financial position, unless there is a right of set-off between bank accounts across the Group. In this instance, the net cash position will be shown.

These assets arise principally from the provision of goods and services to customers (eg trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. Trade receivables are recognised initially at the transaction price and other financial assets are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue. They are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a historical provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within administration costs in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those for which credit risk has increased significantly, lifetime expected credit losses are recognised, unless further information becomes available contrary to the increased credit risk. For those that are determined to be permanently credit impaired, lifetime expected credit losses are recognised.

Capital management

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial investments and financial assets (e.g. accounts receivables, other financial assets) and projected cash flows from operations.

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, invoice discounting and long term loan finance.

Financial liabilities

The Group classifies its financial liabilities into two categories:

Other financial liabilities

The Group's other financial liabilities include bank loans, confidential invoice discounting facility, trade and other payables and accruals. Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Fair value through profit and loss

This category only comprises of the element of deferred consideration on business combinations, which is contingent on the performance of the acquired businesses. The expected consideration payable is assessed at each balance sheet date with the movement in the expected liability being recorded in the income statement.

Share capital

Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The company's ordinary shares are classified as equity instruments.

Leased assets

During the year, the Group has changed its accounting policy for leases where the group is the lessee. The new policy is set out below and the impact of the change is described in note 2.1.

Until to 31 December 2018, leases of property, plant and equipment where the Group, as lessee, had substantially all the risks and rewards of ownership were classified as finance leases. Finance leases were capitalised at the lease's inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, were included in other short-term and long-term payables.

Leases in which a significant portion of the risks and rewards of ownership were not transferred to the Group as lessee were classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.

Under the new policy, IFRS 16 has introduced a single, on-balance sheet accounting model for lessees, eliminating the distinction between operating and finance leases. IFRS 16 has impacted how the Group accounts for leases under IAS 17. On initial application, the Group has performed the following:

·          Recognised right of use assets and lease liabilities in the consolidated statement of financial position, measured at the present value of future lease payments, discounted using the rate implicit in the lease or the lessee's incremental borrowing rate if this is not stated. These are included within right-of-use assets and lease liabilities respectively;

·          Recognised depreciation of right of use assets and interest on lease liabilities in the consolidated income statement;

·          Separated the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated cash flow statement.

The incremental borrowing rate is calculated on a lease by lease basis. The weighted average lessee's borrowing rate applied to the lease liabilities on 1 January was 3.42%.

Policy applicable from 1 January 2019

For contracts entered into on or after 1 January 2019, the Group assesses at inception whether the contract is, or contains, a lease. A lease exists if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group assessment includes whether:

·          the contract involves the use of an identified asset;

·          the Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the contract period; and

·          the Group has the right to direct the use of the asset.

At the commencement of a lease, the Group recognises a right-of-use asset along with a corresponding lease liability.

The lease liability is initially measured at the present value of the remaining lease payments, discounted using the individual entities incremental borrowing rate. The lease term comprises the non-cancellable period of the contract, together with periods covered by an option to extend the lease where the Group is reasonably certain to exercise that option based on operational needs and contractual terms. Subsequently, the lease liability is measured at amortised cost by increasing the carrying amount to reflect interest on the lease liability, and reducing it by the lease payments made. The lease liability is remeasured when the Group changes its assessment of whether it will exercise an extension or termination option.

Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, lease incentives received and initial direct costs. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability.

Depreciation is calculated on a straight-line basis over the length of the lease. The Group has elected to apply exemptions for short-term leases and leases for which the underlying asset is of low value. For these leases, payments are charged to the income statement on a straight-line basis over the term of the relevant lease. Right-of-use assets are presented within non-current assets on the face of the balance sheet, and lease liabilities are shown separately on the statement of financial position in current liabilities and non-current liabilities depending on the maturity of the lease payments.

Under IFRS 16, right-of-use assets will be tested for impairment in accordance with IAS 36 Impairment of Assets. This has replaced the previous requirements to recognise a provision for onerous lease contracts.

Payments associated with short-term leases are recognised on a straight-line basis as an expense in the profit or loss. Short term leases are leases with a lease term of 12 months or less.

Externally acquired intangible assets

Externally acquired intangible assets, other than Goodwill, are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Intangible asset

Useful economic life

Valuation method

Licences and trademarks

3-25 years

Multiple of historic profits

Customer Related

6-10 Years

Excess Earning Model

Technology Based

5 Years

Replacement Cost

Taxation

The charge for current tax is based on the taxable income for the period. The taxable result for the period differs from the result as reported in the statement of comprehensive income because it excludes items which are not assessable or disallowed and it further excludes items that are taxable and deductible in other years. It is calculated using tax rates that have been enacted or substantially enacted by the statement of financial position date.

Deferred income tax is provided using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes.

Deferred tax assets are recognised only to the extent that future taxable profit will be available such that realisation of the related tax benefits is probable. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/ (assets) are settled/(recovered).

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within provisions.

Freehold land is not depreciated. Depreciation on assets under construction does not commence until they are complete and available for use. Depreciation is provided on all other items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:

Freehold buildings

2%-10% per annum straight line

Fixtures and fittings

20-33% per annum straight line/10% - 25% on reducing balance

Computer equipment

33% per annum straight line/20% - 50% on reducing balance

Motor vehicles

25-33% per annum straight line/20% - 25% on reducing balance

Dividends

Dividends are recognised when they become legally payable. In the case of final dividends, this is when approved by the shareholders at the annual general meeting.

Holiday pay accrual

All employees accrue holiday pay during the calendar year, the board encourages all employees to use their full entitlement throughout the year, however in the unlikely case that an employee has untaken holiday pay this is accrued for at the daily salary costs, including costs of employment, such as social security.

Staff pensions

The Group does not operate a pension scheme for its employees however it does make payments to defined contribution pension schemes on behalf of employees in the UK in accordance with auto enrolment legislation. The payments made are recognised as an expense in the period to which they relate.

Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to the equity-settled employee benefits reserve.

Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Provisions

The Group has recognised provisions for liabilities of the uncertain timing or amount for leasehold dilapidations. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date, discounted at a pre-tax rate reflecting current market assessments of the time value of money and risks specific to the liability. The provision takes into account the potential that the properties in question may be sublet for some or all of the remaining lease term.

2.1 New and amended accounting standards effective during the year

The Group has applied the following standards and amendments for the first time during the annual reporting period commencing 1 January 2019:

IFRS 16: Leases

IFRS 16 'Leases' had an effective date for annual periods beginning on or after 1 January 2019. IFRS 16 results in lessees accounting for most leases within the scope of the Standard in a manner similar to the way in which finance leases are currently accounted for under IAS 17 'Leases'. The Group adopted the Standard modified retrospectively from its mandatory adoption date, but has not restated comparative amounts which were reported under the previous accounting policies.

The details of the changes in accounting policies are described below.

The Group previously classified leases as either operating or finance leases based on an assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the leased asset. Immediately prior to the initial application of IFRS 16, the Group had operating leases related to office premises and equipment and some finance leases for equipment.

Under IFRS 16, most leases previously classified as operating leases under IAS 17 are recognised on the balance sheet as a right-of-use asset along with a corresponding lease liability.

The lease liability is initially measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate. The lease term comprises the non-cancellable period of the contract, together with periods covered by an option to extend the lease where the Group is reasonably certain to exercise that option. Subsequently, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability, and reducing it by the lease payments made. The lease liability is remeasured when the Group changes its assessment of whether it will exercise an extension or termination option.

Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability, plus any initial direct costs, less any lease incentives. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is calculated on a straight-line basis over the length of the lease.

For leases previously classified as finance leases the entity recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.

The Group has elected to apply exemptions for short-term leases and leases for which the underlying asset is of low value. For these leases, payments are charged to the income statement on a straight-line basis over the term of the relevant lease. For the year ended 31 December 2019, payments charged to the income statement related to low value and short-term leases were insignificant.

Right-of-use assets are presented within non-current assets on the face of the statement of financial position and lease liabilities are shown separately on the statement of financial position in current liabilities and non-current liabilities depending on the length of the lease term.

Impact on lessee accounting

The lease liabilities were determined by discounting relevant lease payments at the Group's incremental borrowing rate of between 2% and 3.5%.

 

£'000

Operating lease commitments disclosed at 31 December 2018

33,623

Finance lease commitments disclosed at 31 December 2018

185

Short term leases

(289)

Adjustments as a result of different treatment of extensions/termination options

55

Discounted using weighted average of Group's incremental borrowing rate

(2,465)

Lease liability recognised as at 1 January 2019

31,109

Consolidated Income Statement - For the year ended 31 December 2019, the administrative expenses have decreased by £6,964,000 as the Group previously recognised rental expenses therein. Depreciation and finance costs have increased by £5,955,000 and £1,009,000 respectively as a result of the requirement to capitalise a right-of-use asset and depreciate over the term of the lease.

Consolidated Statement of Financial Position - At 1 January 2019, the Group calculated the lease commitments outstanding and applied the appropriate discount rate to calculate the present value of the lease commitment which are recognised as a liability and a right-of-use assets on the Group statement of financial position. As a result, at the 1 January 2019, the Group recognised both right-of-use assets of £31,024,000 and lease liabilities of £31,109,000.

2.2 Changes in accounting policies

There are no other standards other than that are expected to have a material impact on the Group's financial statements.

2.3 Critical Accounting Estimates And Judgements

The Group makes certain estimates and assumptions regarding the future. Management also needs to exercise judgement in applying the Group's accounting policies. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

2.3.1 Principal estimates

·          Fair value measurement of intangible assets acquired in business combination;

A number of assets and liabilities included in the Group's financial statements require measurement at, and/ or disclosure of, fair value. As there are no easily identifiable valuation methods for intangible assets such as customer relationships and licences, estimation is required in assessing the fair value when accounting for a business combination. The Group recognised Goodwill and associated intangibles before amortisation of £26,733,000 (2018 - £25,743,000). This is disclosed in note 12.

·          Estimated impairment of goodwill

The Group frequently tests whether goodwill has suffered any impairment. These calculations require the use of estimates, both in arriving at the expected future profitability of the entity and the application of a suitable discount rate in order to calculate the present value of these flows. As the impairment of goodwill is based on a future forecast, the Group has used a level of judgement around key assumptions of future cashflows greater than 12 months. Details of the impairment and sensitivity of cashflows are disclosed in note 12.

·          Trade receivables

In accordance with IFRS 9, the Group assesses whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument both due within one year and more than one year as at the reporting date with the risk of a default occurring on the trade receivable as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. The Group has trade receivables less provision for expected credit losses at the year-end of £51,160,000 (2018 - £50,659,000).

·          Deferred Tax

Deferred tax assets have been recognised in relation to trading losses generated in the entities, these have been restricted to those instances where it is probable that taxable profit will be available against which the difference. The Group has recognised a deferred tax asset of £210,000 (2018 - £225,000) and a deferred tax liability of £1,968,000 (2018 - £2,204,000).

2.3.2 Principal judgements

·          Deferred Contingent Consideration

The Group believes that any deferred consideration payable to sellers who continue to be employed is not part of their remuneration package and forms part of the cost of investment. Amounts payable are irrespective of continued employment with the acquired Company or elsewhere within the Group. The classification is further determined based on a number of factors including the breakdown of the acquisition consideration and the level of remuneration payable to selling shareholder. At 31 December 2019, the total deferred consideration of £4,607,000 (2018 - £3,498,000), all of which is due within one year.

·          Valuation of Goodwill for Import Services

The Directors have reviewed the fair value of the goodwill and deferred consideration relating to the acquisition of Import Services Limited in line with IFRS 3 Business Combinations, paragraph 45. Based on the interpretation of the standard, the Directors believe that there is new information available relating to the assumptions used to calculate the consideration payable. As a result of the new information, the Directors have increased the value of Goodwill and Consideration Payable to the vendors of Import Services Limited by £990,000.

3. REVENUE ANALYSIS BY COUNTRY

 

2019

2018

 

£'000

£'000

United Kingdom

89,701

70,210

Lithuania

55,849

47,759

Romania

33,189

31,397

Bulgaria

21,819

17,553

Serbia

6,475

6,813

Other

6,214

5,442

Total revenue

213,247

179,174

The table below shows revenue by timing of transfer of goods and services:

 

3A) REVENUE FROM CONTRACTS WITH CUSTOMERS

 

2019

2018

 

£'000

£'000

Over a period of time

207,080

172,824

At a point in time

6,167

6,350

Total revenue

213,247

179,174

Revenue is derived from three main divisions: Transport solutions, referred to as Affinity, Freight forwarding, and Logistics & warehousing, as detailed in note 7.

3B) CONTRACT ASSETS

 

2019

2018

 

£'000

£'000

At 1 January

2,068

1,273

Cumulative Catch-up

-

182

Excess of revenue recognised during the period

(701)

613

At 31 December

1,367

2,068

Contract assets are included within trade and other receivables on the face of the statement of financial position.

By the nature of the Group's invoicing procedures, then the Group does not have any contract liabilities.

3C) NON CURRENT ASSETS BY COUNTRY

 

2019

2018

 

£'000

£'000

United Kingdom

44,113

24,802

Romania

9,744

3,462

Lithuania

1,005

160

Bulgaria

842

97

Serbia

136

136

Other

28

86

Total non current assets

55,868

28,743

4. OTHER OPERATING INCOME

Other operating income arises mainly from sundry services executed by the Group, not being freight forwarding, logistics and warehousing or affinity services. Since this is not considered to be part of the main revenue generating activities, the Group presents this income separately from revenue.

 

2019

2018

 

£'000

£'000

Recharges to franchise members

1,028

658

Recovery of fines/penalties

24

51

Rental income

65

225

Other

76

1

Total

1,193

935

5. OPERATING PROFIT

 

2019

2018

 

£'000

£'000

Operating profit is stated after charging/(crediting)

 

 

Hire of plant and machinery

694

731

Depreciation - right-of-use assets (note 25)1

5,955

-

Rental payable under operating lease

-

5,877

Depreciation - owned assets (note 13)

1,035

712

Amortisation of intangible assets (note 12)2

1,587

1,105

Impairment of goodwill - Benfleet (note 12)

-

1,845

Deferred consideration write back and vendor income

-

(2,592)

Auditors' remuneration - audit

295

361

Auditors' remuneration - non audit

-

64

Loss on disposal of property, plant and equipment

32

13

Insurance

877

699

Property/Municipal Taxes

1,722

1,090

Legal costs

205

247

Exceptional Items (note 27)

856

318

Bad debt costs (note 17)

836

1,053

Credit provisions on Benfleet vendor income

326

-

Foreign exchange losses

(54)

15

Staff expenses (note 6)

23,892

18,563

IT costs

1,641

623

Other administration expenses

10,070

5,719

Total

49,969

36,443

1          Under IFRS 16 'Leases', which the Group adopted in the current year, payments under operating leases are not charged to the consolidated income statement.

2          Amortisation charges on the Group's intangible assets are recognised in the administrative expenses line item in the consolidated income statement.

The remuneration paid to Crowe U.K. LLP and its associates (2018 - BDO LLP), the Group's external auditors is as follows:

 

2019

2018

 

£'000

£'000

Audit and Audit Related Services

 

 

The audit of the Company and Group financial statements

92

126

The audit of the financial statements of subsidiaries of the Group

193

187

Other assurance services

10

48

Total audit and audit related services

295

361

 

 

2019

2018

 

£'000

£'000

Non-audit services

 

 

Other assurance services

-

19

Services related to corporate finance transactions

-

34

Taxation advice

-

11

Total audit and non-audit related services

-

64

6. EMPLOYEE BENEFIT EXPENSES

 

2019

2018

 

£'000

£'000

Employee benefit expenses (including directors) comprise:

 

 

Wages and salaries

20,397

15,930

Short-term non-monetary benefits

200

126

Share based payments

11

108

Defined contribution pension cost

245

173

Social security contributions and similar taxes

3,039

2,226

Total

23,892

18,563

Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the directors of the Company.

 

2019

2018

 

£'000

£'000

Salary

1,367

1,046

Short-term non-monetary benefits

39

25

Share based payments

11

109

Defined contribution pension cost

20

8

Total

1,437

1,188

Directors remuneration

 

2019

2018

 

£'000

£'000

Salary

552

642

Other remuneration

11

18

Share based payments

25

26

Total

588

686

Other remuneration comprises of private family medical cover, and insurance benefits.

Total remuneration regarding the highest paid Director is as follows:

 

2019

2018

 

£'000

£'000

Total aggregate remuneration

330

331

The average number of employees (including directors) during the year was as follows:

 

2019

2018

Freight forwarding

396

403

Logistics

450

354

Other

191

145

Total

1,037

902

7. SEGMENTAL ANALYSIS

Types of services from which each reportable segment derives its revenues

In 2019 the Group had three main divisions: Transport Solutions, referred to as Affinity, Freight Forwarding, and Logistics & Warehousing. All revenue is derived from the provision of services.

·          Freight Forwarding - This division is the core business and relates to the movement of freight goods across Europe. This division accounts for the largest proportion of the Group's business, generating 75% of its external revenues. (2018 - 76%)

·          Affinity - This division is the Transport Solution's arm of the Group. It focuses on the reselling of DKV fuel cards, leasing, ferry crossings and other associated transport related services. This division accounts for 3% of the Group's business in terms of revenue (2018 - 4%)

·          Logistics & Warehousing - This division is involved in the warehousing and domestic distribution; it generates 22% of the Group's external revenues in 2019 (2018 - 20%).

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team comprising the Divisional Chief Operating Officers, the Chief Executive Officer and the Chief Financial Officer.

Measurement of operating segment profit or loss

The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with IFRS. Segment assets and liabilities are measured in the same way in the financial statements and they are allocated based on the operations of the segment.

Inter-segment sales are priced at market rates and at arm's length basis, along the same lines as sales to external customers. This policy was applied consistently throughout the current and prior period.

 

 

Freight

Logistics &

 

 

 

 

Forwarding

Warehousing

Affinity

Overheads

Total

 

2019

2019

2019

2019

2019

 

£'000

£'000

£'000

£'000

£'000

Gross billings

159,588

48,239

350,121

Less recoverable disbursements

-

-

(136,127)

-

(136,127)

Total revenue

159,588

48,239

6,167

-

213,994

Inter-segmental revenue

-

(747)

-

-

(747)

Total revenue from external customers

159,588

47,492

6,167

-

213,247

Depreciation & amortisation

 

 

 

(excluding right-of-use asset depreciation)

(1,326)

(1,149)

(45)

(102)

(2,622)

Segment profit before central overhead allocation

 

 

 

 

 

(excluding exceptional items)

3,447

2,889

2,534

(4,186)

4,684

Allocation of central overheads

(1,120)

(301)

(47)

1,468

-

Segment profit after central overhead allocation

 

 

 

 

 

(excluding exceptional items)

2,327

2,588

2,487

(2,718)

4,684

Share of loss of equity accounted associate

 

 

 

 

(60)

Net finance costs

 

 

 

 

(1,593)

Exceptional items

 

 

 

 

(856)

Profit before income tax

 

 

 

 

2,175

Total segment assets

57,002

36,502

128,864

Total segment liabilities

57,002

36,502

29,810

5,550

128,864

 

 

 

 

 

 

 

Freight

Logistics &

 

 

 

 

Forwarding

Warehousing

Affinity

Overheads

Total

 

2018

2018

2018

2018

2018

 

£'000

£'000

£'000

£'000

£'000

Gross billings

136,898

36,514

312,497

Less recoverable disbursements

-

-

(132,735)

-

(132,735)

Total revenue

136,898

36,514

6,350

-

179,762

Inter-segmental revenue

-

(588)

-

-

(588)

Total revenue from external customers

136,898

35,926

6,350

-

179,174

Depreciation & amortisation

(714)

(1,023)

(1,817)

Segment profit (excluding exceptional items)

2,971

3,011

2,291

(1,779)

6,494

Share of loss of equity accounted associate

 

 

 

 

(78)

Net finance costs

 

 

 

 

(482)

Exceptional items

 

 

 

 

(318)

Profit before income tax

 

 

 

 

5,616

Total segment assets

40,772

19,310

98,758

Total segment liabilities

40,772

19,310

27,181

11,495

98,758

8. NET FINANCE COSTS

 

2019

2018

 

£'000

£'000

Finance income:

 

 

Deposit account interest

29

29

Release of discount on deferred consideration

-

45

Interest receivable on Benfleet vendor income

52

26

Total finance income

81

100

Finance costs:

 

 

Unwind of discount on deferred consideration

346

277

Bank loan interest

319

299

Right-of-use asset interest

1,009

-

Finance lease interest

-

6

 

1,674

582

Net finance costs

1,593

482

9. INCOME TAX

Analysis of tax expense

 

2019

2018

 

£'000

£'000

Current tax:

 

 

Tax on profits for the year

1,130

1,124

Adjustments in respect of prior periods

(25)

(28)

Total current tax payable

1,105

1,096

Deferred tax credit

(233)

(211)

Total tax expense in consolidated statement of profit or loss

872

885

The reconciling items for the difference between the actual tax charge for the year and the standard rate of corporation tax in UK (the ultimate parent company's tax residency) applied to profits for the year are as follows:

 

2019

2018

 

£'000

£'000

Profit before tax

2,175

5,616

UK tax charge at 19%

-

77

Overseas tax charge

406

692

Expenses not deductible for tax purposes

171

338

Movement in unrecognised deferred tax

326

(118)

Deferred tax asset not previously recognised

-

(29)

Adjustment in respect of prior periods

(25)

(28)

Other

(6)

(47)

Total tax expense

872

885

Deferred Tax

 

2019

2018

Assets - Arising from Trading losses

£'000

£'000

Balance as at 1 January

225

196

Movement in the year as a result of trading

(15)

29

Balance as at 31 December

210

225

 

 

2019

2018

Liabilities

£'000

£'000

Balance as at 1 January

(2,204)

(1,209)

Recognised on the acquisition of subsidiaries (note 30)

-

(1,172)

Release to income statements

248

182

Movement in foreign exchange

(12)

(5)

Balance as at 31 December

(1,968)

(2,204)

The deferred tax asset relates to losses carried forward at the rate of tax in the relevant jurisdiction.

The Group has potential deferred tax assets for trading losses totalling £1,257,000 (2018: £932,000) arising from certain subsidiaries across the Group. These assets have not been recognised due to insufficient certainty that the suitable profits will be generated in the foreseeable future.

The deferred tax liabilities relates to liabilities arising as part of the Group's acquisitions.

10. EARNINGS PER SHARE

 

2019

2018

 

'000

'000

Basic weighted average number of shares

135,147

125,167

Potentially dilutive share options

698

1,650

Deferred consideration on acquisitions

-

1,952

Diluted weighted average number of shares

135,845

128,769

 

 

 

 

£'000

£'000

Profit for the year attributable to owners of the parent company

810

4,421

Earnings pence per share - basic

0.60

3.53

Earnings pence per share - diluted

0.60

3.43

Profit for the year attributable to owners of the parent company

810

4,421

Exceptional items (note 27)

856

318

Amortisation of intangible assets arising from acquisitions (note 12)

1,407

1,033

Unwind of discount in deferred consideration (note 8)

346

277

Additional interest charge due to IFRS16 accounting standard change

419

-

Add back of discount on deferred consideration (note 8)

(52)

(45)

Profit for the year attributable to owners of the parent company excluding exceptional items

3,786

6,004

Earnings pence per share - basic excluding exceptional items

2.80

4.80

Earnings pence per share - diluted excluding exceptional items

2.79

4.66

11. DIVIDENDS

 

2019

2018

 

£'000

£'000

Final dividend of 1.05p (2018:0.84p) per ordinary share

1,141

750

Interim dividend of 0.28p (2018:0.42p) per ordinary shares

381

573

 

Subject to approval by shareholders, the Group will propose a final dividend via a scrip issue to shareholders in June 2020. This has been proposed given the current issues around COVID-19 and the objective of conserving cash where possible, but it is expected that the Group's 2020 interim dividend will return to being paid in cash.

12. INTANGIBLE ASSETS

Group

 

 

 

Customer

Technology

 

 

Licences

Goodwill

Related

Related

Total

COST

£'000

£'000

£'000

£'000

£'000

At 1 January 2019

2,871

13,176

12,057

510

28,614

Additions

498

-

-

-

498

Fair value adjustments

-

990

-

-

990

Disposals

(26)

-

-

-

(26)

Exchange differences

(95)

-

-

-

(95)

At 31 December 2019

3,248

14,166

12,057

510

29,981

AMORTISATION

 

 

 

 

 

At 1 January 2019

498

1,845

1,315

48

3,706

Charge for the year

180

-

1,305

102

1,587

Disposals

(1)

-

-

-

(1)

Exchange differences

(17)

-

-

-

(17)

At 31 December 2019

660

1,845

2,620

150

5,275

NET BOOK VALUE

 

 

 

 

 

At 31 December 2019

2,588

12,321

9,437

360

24,706

At 1 January 2019

2,373

11,331

10,742

462

24,908

 

 

 

 

Customer

Technology

 

 

Licences

Goodwill

Related

Related

Total

COST

£'000

£'000

£'000

£'000

£'000

At 1 January 2018

2,675

7,551

5,689

-

15,915

Additions

171

-

-

-

171

Acquired through business combination

-

5,625

6,387

510

12,522

Transfer between categories

19

-

(19)

-

-

Disposals

(7)

-

-

-

(7)

Exchange differences

13

-

-

-

13

At 31 December 2018

2,871

13,176

12,057

510

28,614

AMORTISATION

 

 

 

 

 

At 1 January 2018

417

-

330

-

747

Charge for the year

72

-

985

48

1,105

Impairment

-

1,845

-

-

1,845

Disposals

(7)

-

-

-

(7)

Exchange differences

16

-

-

-

16

At 31 December 2018

498

1,845

1,315

48

3,706

NET BOOK VALUE

 

 

 

 

 

At 31 December 2018

2,373

11,331

10,742

462

24,908

At 1 January 2018

2,258

7,551

5,359

-

15,168

The goodwill included in the above note, relates to acquisition of Pallet Express Srl in January 2016, UK Buy in January 2017, Easy Managed Transport Limited in March 2017, Benfleet Forwarding Limited in October 2017, Regional Express Limited in November 2017, Anglia Forwarding Group Limited in June 2018 and Import Services Limited in July 2018.

Annual test for impairment

The Group carries out its impairment tests annually in November as part of the budget process and all newly acquired entities are also reviewed for impairment at the consolidated statement of financial position sheet date.

Upon acquisition the goodwill and other intangibles are calculated at Cash Generating Unit ("CGU") level, these are then measured based on forecast cash flow projections, the first year of which is based on the CGU's current annual financial budget which has been approved by the board. The cash flow projections for years two to five have been derived based on growth rates that are considered to be in line with the market expectations.

The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows.

In determining the future free cash flow, the main drivers have been revenue and Earnings Before Interest and Tax ("EBIT") margins, with margins remaining at expected levels.

The directors have reviewed the future profit and cash flow forecasts for the next five years and applying a discount rate of between 12.4%-14.1% to the cash flow projections when determining the net present value of these cash flows, it believes there is sufficient headroom in the value of the business to not have to impair the goodwill, with the exception of Easy Managed Transport Limited and Import Services Limited ("ISL"). Accordingly, no impairment provision was recognised in the year (2018 - £1,845,000).

Key assumptions used in the impairment calculations are as follows:

 

 

Short term

Long Term

 

Impairment

Revenue

Revenue

Entity

WACC %

Growth Rate %

Growth Rates

Pallet Express Srl

12.4

4.8 to 20.7

3.0

Easy Managed Transport Limited

14.1

5.0 to 32.4

3.0

Benfleet Forwarding Limited

13.7

5.0 to 19.2

2.5

Regional Express Limited

13.2

44.6 to 53.3

3.0

Ukbuy / Gerviva Fair

14.1

16.6 to 95.4

5.0

Anglia Group Forwarding Limited

13.2

4.9 to 10.1

2.5

Import Services Limited

12.8

2.5 to 21.7

3.0

The WACC of the Group has been calculated at a rate of between 12.35%-14.12% with each CGU being adjusted to take into consideration a specific Company premium risk factor.

Sensitivity to changes in key assumptions

The Group has conducted sensitivity analysis on the impairment test of the CGU's classified within continuing operations. The directors believe that there is significant headroom on the carrying value of each CGU except for Import Services Limited ("ISL") and Easy Managed Transport Limited ("EMT") CGU's, where their recoverable values were approximately at their carrying value.  Given the headroom in the other CGU's, it would require a significant change in the assumptions for an impairment charge to be considered material and the level of change is considered unlikely. The ISL CGU has a carrying value of £5,953,000 and EMT has a carrying value of £2,258,000 and is based on the following assumptions, the effect of a reasonably possible change in the assumptions as disclosed in the next table:

 

Plan

 

Impact on

Import Services

scenario

Change

Impairment £'000

Long term growth

3.0%

+/- 1%

1,476

(1,203)

Post tax discount rate

12.8%

+/- 1%

2,207

(1,792)

EBIT (£000s)

9,667

-10%

-

(879)

Average EBIT margin

5.3%

+/- 1%

1,837

(1,837)

 

 

 

 

 

 

Plan

 

Impact on

EMT

scenario

Change

Impairment £'000

Factor

 

 

 

 

Long term growth

3.0%

+/- 1%

420

(350)

Post tax discount rate

14.1%

+/- 1%

660

(550)

EBIT (£000s)

5,468

-10%

-

(497)

Average EBIT margin

8.7%

+/- 1%

632

(632)

Import Services Limited

The Directors have reviewed the fair value of the goodwill and deferred consideration relating to the acquisition of ISL in line with IFRS 3 Business Combinations, paragraph 45. Based on the interpretation of the standard, the Directors believe that there is new information available relating to the assumptions used to calculate the consideration payable. As a result of the new information, the Directors have increased the value of goodwill and consideration payable to the vendors of Import Services Limited by £990,000.

The goodwill by CGU is shown below:

 

Value

Subsidiary Acquired

£'000

Pallex Express SRL

722

Easy Managed Transport Limited

2,258

Benfleet Forwarding Limited

1,562

Regional Express Limited

937

UK Buy

227

Anglia Forwarding Group Limited

662

Import Services Limited

5,953

Total

12,321

COVID-19

Subsequent to the year-end and in line with other Covid-19, the Board have reviewed the Impairment assumptions and consider that there is still significant headroom in these forecasts. As a result, no impairment provisions have been recognised.

13. PROPERTY, PLANT AND EQUIPMENT

 

Freehold

Fixtures

Motor

Computer

 

 

property

and fittings

vehicles

equipment

Totals

Group

£'000

£'000

£'000

£'000

£'000

COST

 

 

 

 

 

At 1 January 2019

204

1,895

895

1,919

4,913

Adjustment for change in accounting policy, see note 2.1

-

-

(100)

-

(100)

Restated opening balance

204

1,895

795

1,919

4,813

Additions

75

707

80

459

1,321

Disposals

-

(218)

(88)

(60)

(366)

Exchange differences

(10)

(54)

(28)

17

(75)

At 31 December 2019

269

2,330

759

2,335

5,693

DEPRECIATION

 

 

 

 

 

At 1 January 2019

22

771

567

1,198

2,558

Charge for year

38

536

131

330

1,035

Eliminated on disposal

-

(215)

(85)

(60)

(360)

Exchange differences

-

(14)

(19)

(23)

(56)

At 31 December 2019

60

1,078

594

1,445

3,177

NET BOOK VALUE

 

 

 

 

 

At 31 December 2019

209

1,252

165

890

2,516

At 1 January 2019

182

1,124

328

721

2,355

 

 

 

 

 

 

 

Freehold

Fixtures

Motor

Computer

 

 

property

and fittings

vehicles

equipment

Totals

Group

£'000

£'000

£'000

£'000

£'000

COST

 

 

 

 

 

At 1 January 2018

142

972

840

1,593

3,547

Additions

-

232

79

243

554

Additions acquired with subsidiary

61

708

43

103

915

Disposals

-

(24)

(72)

(28)

(124)

Exchange differences

1

7

5

8

21

At 31 December 2018

204

1,895

895

1,919

4,913

DEPRECIATION

 

 

 

 

 

At 1 January 2018

3

628

499

817

1,947

Charge for year

19

156

131

406

712

Eliminated on disposal

-

(15)

(66)

(30)

(111)

Exchange differences

-

2

3

5

10

At 31 December 2018

22

771

567

1,198

2,558

NET BOOK VALUE

 

 

 

 

 

At 31 December 2018

182

1,124

328

721

2,355

At 1 January 2018

139

344

341

776

1,600

At 31 December 2018, property, plant and equipment included the following amounts where the group was a lease under finance leases.

 

2018

Group

£'000

Leased motor vehicles

 

Cost

160

Accumulated depreciation

(60)

Net book value

100

From 2019 lease assets are presented as a separate line item in the statement of financial position, see note 25.

14. SUBSIDIARIES

The subsidiaries of Xpediator Plc, all of which have been included in these combined financial statements, are as follows:

 

 

 

Proportion of

Proportion of

 

 

 

ownership

ownership

 

Registered

Country of

interest

interest

Name

Office

incorporation

2019

2018

Delamode Holdings Ltd

1

United Kingdom

100%

100%

Delamode Distribution UK Ltd

1

United Kingdom

51%

51%

Delamode Plc

1

United Kingdom

100%

100%

Delamode Property Ltd

1

United Kingdom

100%

100%

EshopWeDrop Limited

1

United Kingdom

100%

100%

Xpediator Services Limited

1

United Kingdom

100%

100%

Easy Managed Transport Limited

1

United Kingdom

100%

100%

Benfleet Forwarding Limited

1

United Kingdom

100%

100%

Regional Express Limited

1

United Kingdom

100%

100%

Import Services Limited

1

United Kingdom

100%

100%

Anglia Forwarding Group Limited

1

United Kingdom

100%

100%

Anglia Forwarding Limited

1

United Kingdom

100%

100%

Traker International Limited

1

United Kingdom

100%

100%

Affinity Transport Solutions Srl

2

Romania

100%

100%

Delamode Moldova Srl

3

Moldova

100%

100%

Delamode Bulgaria EOOD

4

Bulgaria

90%

90%

Delamode Balkans DOO

5

Serbia

100%

100%

Affinity Balkans DOO

6

Montenegro

100%

100%

Delamode Macedonia

7

Macedonia

100%

100%

Delamode Baltics UAB

8

Lithuania

80%

80%

Delamode Estonia OÜ

9

Estonia

80%

80%

Delamode Romania Srl

2

Romania

100%

100%

Affinity Leasing IFN

2

Romania

99.95%

99.95%

EshopweDrop Holdings

10

Malta

100%

100%

EshopweDrop Baltics

8

Lithuania

100%

100%

Delamode Group Limited

10

Malta

100%

100%

Delamode Group Holdings Limited

10

Malta

100%

100%

Pallet Express Srl

11

Romania

100%

100%

Eshop Romania

2

Romania

100%

100%

Pallex Hungary

12

Hungary

100%

100%

Regional Express Gmbh

13

Germany

100%

-

Delamode Group Holdings Limited, Easy Managed Transport Limited, Benfleet Forwarding Limited, Regional Express Limited, Import Services Limited and Anglia Group Forwarding Limited are the only Subsidiaries held directly by Xpediator Plc.

1       700 Avenue West, Skyline 120, Braintree, Essex, CM77 7AA, United Kingdom

2       Bd. Timisoara, nr 111-115 Sector 6, Bucharest, 061327, Romania

3       Bd. Moscova 21/5 of. 1011 MD-2068, Chisinau, Republic of Moldova

4       361 Tsarigradsko Shose Boulevard, 1582, Sofia, Bulgara

5       Bulevar Oslobodenja 113, 11010 Vozdovac, Belgrade, Serbia

6       Dzordza, Vasingtona 51/43, Podgorica, 81000, Montenegro

7       Stefan Jakimov Dedov 14/1 1, 1000 Skopje, Macedonia

8       Eiguliu G, 2 03150, Vilnius, Lithuania

9       Parnu mnt. 139/C-1 11317, Tallinn, Estonia

10     Europa Business Centre, Level 3 - Suite 701, Dun Karn Street Birkirkara BKR 9034, Malta

11     Stefan cel Mare street, no. 193, Sibiu, 550321, Romania

12     1141 Budapest Szuglo utcs 82, Hungary

13     Darmstadter Landstrasse 116, Frankfurt, 60598, Germany

The following companies are exempt from preparing audited accounts under Section 479A of the UK Companies Act 2006 :

Company

Registration

Delamode Property Limited

06895332

EshopWeDrop Ltd

08429573

Traker International Limited

02068943

Xpediator Services Limited

09724594

15. NON-CONTROLLING INTERESTS

Non-controlling interests ("NCI") held in the Group are as follows:

 

2019

2018

Delamode Baltics UAB

20.0%

20.0%

Delamode Estonia OÜ

20.0%

20.0%

Delamode Bulgaria EOOD

10.0%

10.0%

Affinity Leasing IFN

0.05%

0.05%

Delamode Distribution UK Limited

49.0%

49.0%

The summarised financial information in relation to Delamode Bulgaria and Delamode Baltics before intra-Group eliminations, is presented below together with amounts attributable to NCI:

 

 

 

Delamode

Delamode

 

 

 

Bulgaria

Baltics UAB

 

 

 

£'000

£'000

Share capital

 

 

1

6

Reserves

 

 

142

384

Total NCI c/f 2018

 

 

143

390

 

 

 

 

Delamode

Delamode

 

 

 

Bulgaria

Baltics UAB

 

 

 

£'000

£'000

Total NCI b/f 2019

 

 

143

390

Non-controlling interest in results for the year

 

 

76

319

Non-controlling interest in dividends for the year

 

 

(38)

(92)

Non-controlling interest in translation adjustment on opening reserves

 

 

(7)

(4)

Non-controlling interest in translation adjustment on results for the year

 

 

(3)

(26)

Total NCI c/f 2019

 

 

171

587

 

 

 

 

Delamode Bulgaria

Delamode Baltics UAB

 

2019

2018

2019

2018

 

£'000

£'000

£'000

£'000

Revenue

22,467

18,223

56,735

47,875

Cost of sales

(19,801)

(15,925)

(49,718)

(42,018)

Gross profit

2,666

2,298

7,017

5,857

Administrative expenses

(1,823)

(1,443)

(5,224)

(4,798)

Other income

25

17

105

115

Operating profit

868

872

1,898

1,174

Finance costs

(20)

(1)

(16)

(10)

Profit before tax

848

871

1,882

1,164

Tax expense

(86)

(88)

(285)

(172)

Profit after tax

762

783

1,597

992

Profit after tax attributable to non-controlling interests

76

78

319

198

 

 

Delamode Bulgaria

Delamode Baltics UAB

 

2019

2018

2019

2018

For the period to 31 December 2019

£'000

£'000

£'000

£'000

Assets:

 

 

 

 

Non-current trade and receivables

10

9

185

122

Property plant and equipment

985

88

50

60

Inventories

10

3

42

-

Trade and other debtors

4,706

3,640

8,977

8,567

Cash and cash equivalents

904

498

1,632

250

 

6,615

4,238

10,886

8,999

Liabilities:

 

 

 

 

Trade and other payables

3,990

2,762

7,952

7,051

Loans and other borrowings

914

46

-

-

 

4,904

2,808

7,952

7,051

Total net assets

1,711

1,430

2,934

1,948

Accumulated non-controlling interests

171

143

587

390

The NCI of all the other shareholders, that are not 100% owned by the Group are considered to be immaterial.

16. INVESTMENTS

 

Other

Associate

Total

 

Investment

Investment

Investment

COST

£'000

£'000

£'000

At 1 January 2019

1

60

61

Performance of investment

-

(60)

(60)

At 31 December 2019

1

-

1

NET BOOK VALUE

 

 

 

At 31 December 2019

1

-

1

 

 

Other

Associate

Total

 

Investment

Investment

Investment

COST

£'000

£'000

£'000

At 1 January 2018

1

-

1

Additions

-

60

60

At 31 December 2018

1

60

61

NET BOOK VALUE

 

 

 

At 31 December 2018

1

60

61

Investments represent investments in shares in unlisted companies.

Associate Investments

As part of the acquisition of Anglia Group Forwarding Limited made in June 2018, the Group immediately disposed of 60% of the share capital of International Cargo Centre Limited (ICC). As the Group now owns 40% of the voting shares and does not have control over Board decisions, then the Group has accounted for this as an associate.

In 2018, the Group received consideration of £83,000 from the sale and made a profit on disposal of £nil.

The Group's share of the results, assets and liabilities of its share in ICC is as follows:

 

2019

2018

 

£'000

£'000

Revenue

310

188

Loss after tax

(107)

(78)

Non-current assets

18

18

Current assets

120

108

Total assets

138

126

Current liabilities

(282)

(167)

Share of net liabilities

(144)

(41)

The registered office of ICC is Blackwater Close, Fairview Industrial Park, Rainham, Essex, RM13 8UA.

17. TRADE AND OTHER RECEIVABLES

 

2019

2018

Group

£'000

£'000

Current:

 

 

Trade receivables

53,625

53,555

Less: provision for impairment of trade receivables

(2,465)

(2,896)

 

51,160

50,659

Current financial assets

2,689

2,302

Prepayments and contract assets

2,933

2,570

Other receivables

4,145

4,779

Total

60,927

60,310

Non Current

 

 

Trade and other receivables

1,050

1,194

Current financial assets relate to the security deposits held by DKV on behalf of the Group which are refundable on termination of the agreement which can be served giving three month's notice hence they are classed as current assets.

Included with trade debtors is a balance due from Simplu Romania of £232,000 (2018 - £251,000). This debt is guaranteed by the Directors of Delamode Holdings BV (which include Stephen Blyth and Shaun Godfrey), who are a related party to the Xpediator Group.

Included within other receivables due within one year is an amount due of £1,207,000 (2018 - £840,000) from the Vendors of Benfleet Forwarding Limited. In addition, there is a further £599,000 (2018 - £1,155,000) included in trade and other receivables due in more than one year.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.

The expected loss rates are based on the Group's historical credit losses experienced. The historical loss rates are then adjusted for known legal and specific economic factors, including the credit worthiness and ability of the customer to settle the receivable.

The movements in the impairment allowance for trade receivables are as follows:

 

2019

2018

Group

£'000

£'000

At 1 January

2,896

1,498

Increase during the year

1,052

1,311

Acquired from acquisitions

-

623

Impairment losses reversed

(216)

(258)

Receivable written off during the year as uncollectible

(1,267)

(278)

At 31 December

2,465

2,896

At 31 December 2019, the lifetime expected loss provision for trade receivables and contract assets is as follows:

 

 

More than

More than

More than

 

 

 

30 Days

60 Days

90 Days

 

 

Current

Past Due

Past Due

Past Due

Total

 

£'000

£'000

£'000

£'000

£'000

Expected loss rate

0.8%

1.8%

9.8%

53.3%

 

Gross carrying amount

46,999

3,301

1,048

3,644

54,922

Loss provision

357

61

103

1,944

2,465

18. TRADE AND OTHER PAYABLES

 

2019

2018

Group

£'000

£'000

Current:

 

 

Trade and other payables

51,197

47,154

Amounts owed to related parties

20

137

Social security and other taxes

2,410

2,222

Other creditors

3,249

4,610

Deferred Consideration

4,607

1,409

Accruals

1,703

1,949

Total Trade and other payables

63,186

57,481

Non Current

 

 

Deferred Consideration

-

2,089

Trade and other payables

101

-

The deferred consideration of £4,607,000 (2018 - £1,409,000) due within one year relates to the deferred consideration on the acquisitions of Import Services Limited, Regional Express Limited and Anglia Forwarding Group Limited. Of this balance, £nil (2018 - £563,000) is contingent on performance related criteria.

19. BANK AND OTHER LOANS

 

2019

2018

Group

£'000

£'000

Current:

 

 

Commitments in relation to finance leases

-

102

Bank loans

341

626

Invoice discounting facility

2,382

3,024

 

2,723

3,752

Non-current:

 

 

Commitments in relation to finance leases

 

 

Payable 1-2 years

-

56

Payable 2-5 Years

-

27

Loans - 1-2 years

365

315

Loans - 2-5 years

1,107

1,053

Loans due after 5 years repayable by instalments

803

1,197

 

2,275

2,648

The Lloyds bank loan due after 5 years is due to be repaid by November 2026. Interest is being charged at a fixed rate of 6.4% and a variable rate of 1.1% above the Bank of England base rate.

The bank loan is partially guaranteed by the personal assets of some of the Directors and Key Management of the Group.

The book value and fair value of loans and borrowings are as follows:

 

2019

2018

Non-Current

£'000

£'000

Bank borrowings and others

 

 

- Secured

2,275

2,648

- Unsecured

-

-

 

2,275

2,648

Current

 

 

Bank borrowings and others

 

 

- Secured

2,696

3,425

- Unsecured

27

327

 

2,723

3,752

Total loans and borrowings

4,998

6,400

Sterling

4,971

5,978

Other

27

422

Total

4,998

6,400

Bank borrowings and overdrafts are secured by a fixed and floating charge over the Group's assets.

The movements in the bank and other loans are as follows:

 

2019

2018

Group

£'000

£'000

At 1 January

6,400

5,854

New borrowings in the year

-

908

Change of accounting treatment of finance leases following the adoption of IFRS 16

(185)

-

Borrowings repaid during the year

(1,217)

(362)

At 31 December

4,998

6,400

20. PROVISIONS

Other provisions relate to an assessment of dilapidation of leasehold properties. In each instance, management have undertaken surveys to understand the work required to bring the leasehold properties back to their original condition.

All of these provisions are due to be settled in more than one year.

 

2019

2018

 

£'000

£'000

Balance at 1 January

1,523

-

Additions during the year

151

1,523

Balance at 31 December

1,674

1,523

21. FINANCIAL INSTRUMENTS - RISK MANAGEMENT

The Group is exposed through its operations to the following financial risks:

·         Credit risk

·         Fair value or cash flow interest rate risk

·         Foreign exchange risk

·         Other market price risk, and

·         Liquidity risk.

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

·          Trade receivables

·          Cash and cash equivalents

·          Trade and other payables

·          Bank overdrafts

·          Floating-rate bank loans

·          Fixed rate bank loans

·          Bank loan

·          Right of use assets and lease liabilities

Financial instruments by category

Financial assets at amortised costs

 

 

 

 

 

 

 

2019

2018

 

 

 

£'000

£'000

Cash and cash equivalents

 

 

11,951

9,647

Right-of-use assets

 

 

27,385

-

Trade and other receivables

 

 

59,044

58,934

Total financial assets at amortised costs

 

 

98,380

68,581

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

Fair value through profit and loss

Loans and other payables

 

2019

2018

2019

2018

 

£'000

£'000

£'000

£'000

Trade and other payables

-

-

56,270

53,850

Bank loans and Invoice discounting

-

-

4,998

6,400

Right-of-use asset lease liabilities

-

-

27,927

-

Deferred consideration

666

846

3,941

2,652

Total financial liabilities

666

846

93,136

62,902

Financial instruments not measured at fair value

These include cash and cash equivalents, trade and other receivables, trade and other payables, and loans and borrowings. Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, trade and other payables approximates their fair value.

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk) credit risk and liquidity risk. The financial risks relate to the following financial instruments: cash and cash equivalents, trade and other receivables, trade and other payables, and loans and borrowings. The accounting policies with respect to these financial instruments are described above.

Risk management is carried out by the directors under policies, where they identify and evaluate financial risks in close cooperation with the Group's operating units. The directors provide principles for overall risk management.

The reports on the risk management are produced periodically to the key management personnel of the Group.

(a) Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts. Such credit ratings are taken into account by local business practices.

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, the most suitable bank in the local territory is selected.

A significant amount of cash is held with the following institutions:

 

2019*

2019

2018

Cash at bank

Rating

£'000

£'000

Barclays Bank

BBB

2,528

1,117

Lloyds Bank

BBB+

786

1,773

Raiffeisenbank

BBB+

4,110

2,471

RBS

BBB

391

1,135

Swedbank

AA-

1,344

169

HSBC

A

56

353

Bank of Transylvania

BB

470

28

Unicredit Bulbank

BBB

60

267

Hipotekarna Bank

NA

197

512

Other

 

819

624

Total

 

10,761

8,449

*          Based on Standard & Poor Rating

 

2019

2019

2018

Short term deposits

Rating

£'000

£'000

Lloyds Bank

BBB+

1,190

1,198

 

 

 

 

 

 

2019

2018

Reconciliation of cash in bank and deposits to balance sheet

 

£'000

£'000

Cash at bank

 

10,761

8,449

Short term deposits

 

1,190

1,198

Total

 

11,951

9,647

(b) Market risk

(i) Price risk

Certain aspects of the commercial terms relating to the Affinity division are, directly linked to the commodity costs of fuel purchased by their clients at roadside fuelling stations across Europe. As such there is a risk arising from price changes relating to the fuel prices offered at the respective fuelling stations. In order to manage this risk the Group partially hedges the way it charges its commissions.

The table below shows the sensitivity analysis to possible changes in fuel prices to which the Group is exposed at the end of each year, with all other variables remaining constant. This arises due to the commercial arrangements the Affinity division has with its clients, whereby it will generate income in the form of commissions based on the value of fuel purchased by its clients.

 

2019

2018

Petrol price risk effect on net profit sensitivity analysis:

£'000

£'000

Price increased by 10%

179

154

Price decreased by 10%

(179)

(154)

The Group is exposed to the market risk with respect to its operating income which is subject to changes in performance, exchange fluctuations and other market influences both economic and political. The directors manage this risk by reviewing on a regular basis market fluctuations arising on the Group's activities.

(ii) Cash flow and fair value interest rate risk

As the Group has no significant interest-bearing assets, its income and operating cash flows are substantially independent of changes in market interest rates.

The risk associated with interest-bearing debts is mitigated by utilising a mix of fixed and variable interest rate loans, as well as a Confidential Invoice Discounting Facility ("CID").

 

2019

2018

Interest rate risk effect on net profit sensitivity analysis:

£'000

£'000

Interest rates increased by 0.25%

(13)

(15)

Interest rates decreased by 0.25%

13

15

The Group's cash flow and fair value interest rate risk is periodically monitored by the directors. The cash flow and fair value risk policy is approved by the directors.

Receivables and trade and other payables are interest free and have settlement dates within one year.

A sensitivity analysis is normally based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and change in some of the assumptions may be correlated - for example, change in exchange rates and change in market values.

(iii) Foreign exchange risk

Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional currency is not the same as the presentational currency of the Group. Foreign exchange risk also arises when individual companies enter into transactions denominated in a currency other than their functional currency. Certain assets of the Group comprise amounts denominated in foreign currencies. Similarly, the Group has financial liabilities denominated in foreign currency. In general, the Group seeks to maintain the financial assets and financial liabilities in each of the foreign currencies at a reasonably comparable level, thereby providing a natural hedge against foreign exchange risk.

 

 

 

 

MLD

BGN

RSD

HUF

MKD

 

 

GBP

Euro

RON

LEU

LEV

Dinar

Forints

Denar

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 31 December 2019

 

 

 

 

 

 

 

 

 

Financial assets

42,271

41,020

7,288

73

6,207

1,348

2

171

98,380

Financial liabilities

42,247

40,801

3,853

26

4,635

1,409

-

165

93,136

At 31 December 2018

 

 

 

 

 

 

 

 

 

Financial assets

24,868

31,799

6,409

102

3,892

1,297

18

196

68,581

Financial liabilities

22,468

28,478

7,559

47

2,721

1,426

-

203

62,902

An analysis of the Group's exposure to foreign exchange risk, illustrating the impact on the net financial assets of a 10% movement in each of the key currencies to which the Group is exposed, is shown below

 

2019

2018

Foreign currency risk sensitivity analysis:

£'000

£'000

Euro

 

 

Strengthened by 10%

22

332

Weakened by 10%

(22)

(332)

Romanian Lei

 

 

Strengthened by 10%

344

(115)

Weakened by 10%

(344)

115

Moldavian Leu

 

 

Strengthened by 10%

5

6

Weakened by 10%

(5)

(6)

Serbian Dinar

 

 

Strengthened by 10%

(6)

(13)

Weakened by 10%

6

13

Bulgarian Lev

 

 

Strengthened by 10%

157

117

Weakened by 10%

(157)

(117)

Macedonian Denar

 

 

Strengthened by 10%

1

(1)

Weakened by 10%

(1)

1

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash flow for operations. The Group manages its' risk to shortage of funds by monitoring forecast and actual cash flows.

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial investments and financial assets (e.g. accounts receivables, other financial assets) and projected cash flows from operations.

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, invoice discounting and long term loan finance.

 

 

Between

Between

 

 

Up to

1 and 2

2 and 5

Over

 

12 months

years

years

5 years

At 31 December 2019

£'000

£'000

£'000

£'000

Trade and other payables

56,270

-

-

-

Bank loans & invoice discounting

2,723

365

1,107

803

Lease liabilities

6,392

5,575

13,825

2,135

Deferred consideration

4,607

-

-

-

Total

69,992

5,940

14,932

2,938

 

 

 

 

 

 

 

Between

Between

 

 

Up to

1 and 2

2 and 5

Over

 

12 months

years

years

5 years

At 31 December 2018

£'000

£'000

£'000

£'000

Trade and other payables

53,850

-

-

-

Bank loans & invoice discounting

3,752

371

1,080

1,197

Deferred consideration

1,409

2,089

-

-

Total

59,011

2,460

1,080

1,197

22. CALLED UP SHARE CAPITAL

 

2019

2019

2018

2018

Ordinary Shares of £0.05 each

Number

£000s

Number

£000s

At the beginning of the year

133,713,604

6,686

117,431,144

5,872

Issued during the year

2,370,620

118

16,282,460

814

At the end of the year

136,084,224

6,804

133,713,604

6,686

50,000 deferred shares of £1.00 each

50,000

50

50,000

50

At the end of the year

136,134,224

6,854

133,763,604

6,736

Shares Issued

On 16 May 2019, the Company issued 1,655,876 shares to the former owners of Easy Managed Transport Limited ("EMT") as part of the payment of the deferred consideration relating to the acquisition of the entire equity of EMT in 2017. The total value of this transaction was £831,250 which was settled by the issuance of new shares.

In 22 May 2019 Alex Borrelli and Geoff Gillo exercised their share options. As a result of exercising these options, the Company issued shares of 416,667 to Alex Borrelli and shares of 208,333 to Geoff Gillo at an option price of 24 pence per share. The market value of the shares issued to Alex Borrelli when exercised was £210,000, resulting in a gain of £110,000. The market value of shares issued to Geoff Gillo when exercised was £105,000, resulting in a gain of £55,000.

On 5 December 2019, the Company issued 89,744 new ordinary shares of £0.05 each as part of the agreed deferred consideration for the acquisition of Regional Express Limited. The total value of this transaction was £35,000 which was settled by the issuance of the new shares.

On 8 June 2018, the Company issued 1,727,694 Ordinary Shares of £0.05 each in the Company as part of the agreed deferred consideration for the acquisition of EMT. The total value of this transaction was £1,074,625, which was settled by the issuance of the new shares.

On 11 July 2018, the Group raised a further £7,000,000 before expenses by issuing an additional 10,000,000 Ordinary Shares of £0.05 each in the Company. Costs of £424,000 have been taken to the share premium reserve. Following this fund raising, the Group acquired lmport Services Limited a contract logistics and warehousing business based in Southampton, UK. A further 3,740,648 (which equated to consideration of £3,000,000) Ordinary Shares of £0.05 each were issued as part of this transaction.

On 10 September 2018, 729,167 Ordinary Shares were issued to Dana Antohi as she exercised her options. The exercise price of this option was £0.05.

On 31 December 2018, the Company issued 84,951 Ordinary Shares of £0.05 each in the Company as part of the agreed deferred consideration for the acquisition of Regional Express Limited. The total value of this transaction was £35,000 which was settled by the issuance of the new shares.

23. RESERVE DESCRIPTION AND PURPOSE

Retained earnings: All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

Translation reserve: represents the difference arising on the translation of the net assets and results of subsidiaries into the presentation currency.

Merger Reserves: represents the difference between the nominal value of consideration paid for shares acquired in entities under common control and the nominal value of those shares. This arises as a result of the business combination falling outside the scope of IFRS 3 and merger accounting being applied in place of acquisition accounting. In addition, the premium on the fair value in excess of the nominal value of shares issued in consideration of business combinations is credited to the merger reserve.

Share premium is the amount subscribed for share capital in excess of nominal value.

Equity reserve represents the cost of the share options granted that have not yet been exercised.

24. SHARE-BASED PAYMENTS

The Company has granted Directors' and key management share option plans. These are unapproved schemes so they do not satisfy the requirements of schedule 4, ITEPA. A summary of the options plans is shown below. All options will vest between 1 to less than 4 years.

 

Share Option

Option Price

 

 

Name

No

£

Vesting Period

Expiry Date

SP Angel

55,250

0.24

July 2022

August 2022

Stephen Blyth - Tranche 1

214,286

0.70

November 2018

December 20211

Stephen Blyth - Tranche 2

214,286

0.70

May 2019

December 20212

Stephen Blyth - Tranche 3 - not earned

214,286

0.70

May 2020

December 20213

Stephen Blyth - Tranche 4

214,285

0.70

May 2021

December 20214

1         Tranche 1 - Options can be exercised from 27 November 2018

2          Tranche 2 - Options can be exercised immediately following the Company's AGM in 2019.

3          Tranche 3 - Options are no longer exercisable as the performance criteria were not met.

4          Tranche 4 - Options can be exercised immediately following the Company's AGM in 2021.

On 26 November 2018, the Company granted options over 857,143 Ordinary Shares (Stephen Blyth) and 642,857 Ordinary shares (Stuart Howard). These were split into four equal tranches. On 6 September 2019, Stuart Howard left the business, and as a result all unvested shares options were forfeited.

Tranche 1 (214,286 Ordinary Shares) are exercisable from November 2018 and have an expiry date of 31 December 2021. The options may only be exercised in whole and not part. There are no other vesting conditions.

Tranche 2 (214,286 Ordinary Shares) are exercisable from May 2019 and have an expiry date of 31 December 2021. The options may only be exercised in whole and not part. The Options are conditional on earnings per share of the Company increasing 10 per cent (or more) for the year ending 31 December 2018 compared with the prior year.

Tranche 3 (214,286 Ordinary Shares) are exercisable from May 2020 and have an expiry date of 31 December 2021. The options may only be exercised in whole and not part. The Options are conditional on earnings per share of the Company increasing 10 per cent (or more) for the year ending 31 December 2019 compared with the prior year. However, due to the performance of the business, tranche 3 (214,286) of Stephen Blyth's shares did not fulfil the criteria of earnings per share growth so can no longer be exercised.

Tranche 4 (214,285 Ordinary Shares) are exercisable from May 2021 and have an expiry date of 31 December 2021. The options may only be exercised in whole and not part. The Options are conditional on earnings per share of the Company increasing 10 per cent (or more) for the year ending 31 December 2020 compared with the prior year.

The exercise price of all the share options is £0.70.

On 10 September 2018 729,167 Ordinary Shares were issued to Dana Antohi as she exercised her options. The exercise price of this option was £0.05. The share price at the time of issue of these shares was £0.66.

On 11 August 2017, the Company has granted share options to the non-executive directors over 416,667 Ordinary Shares (Alex Borrelli) and 208,333 Ordinary Shares (Geoff Gillo). The options may only be exercised in whole and not part and exercise of the options are conditional on the earnings per share of the Company in each of the two years ending 31 December 2017 and 31 December 2018 increasing by 10 per cent. or more on the previous year. For Alex Borrelli, the options are also conditional on him being a director of the Company on the date that the consolidated audited accounts of the Company for the year ending 31 December 2018 are published and for Geoff Gillo, for being a non-executive director of the Company on such date. The exercise price of the options is the Placing Price. (£0.24). These were exercised on 22 May 2019.

The Company has also granted to SP Angel warrants to subscribe for 55,250 Ordinary Shares at the Placing Price, £0.24, exercisable at any time during the period of five years from Admission.

Options will normally lapse on cessation of employment. However, exercise is permitted for a limited period following cessation of employment for specified reasons, such as redundancy, retirement, ill-health, and, in other circumstances, at the discretion of the Remuneration Committee.

The movements in share options are as follows:

 

2019

2018

 

No

No

At 1 January

2,180,250

1,409,417

Share options granted during the year

-

1,500,000

Share options exercised during the year

(625,000)

(729,167)

Share options lapsed during the year

(857,143)

-

At 31 December

698,107

2,180,250

Weighted average share price of options

£0.66

£0.35

Weighted average grant fair value

£0.04

£0.04

Weighted average contractual life

4 Months

14 Months

Exercise price

£0.24 to

£0.24 to

 

£0.70

£0.70

The weighted average grant fair value during the year was 2019 £0.04 (2018 - £0.04) per option. The outstanding options have a weighted average contractual life of 4 months, and exercise price between £0.24 and £0.70.

Options were valued using the Black-Scholes option pricing model. No performance conditions were included in the fair value calculations. Expected dividends are not incorporated into the fair value calculations. The fair value per option granted and the assumptions used in the calculations are as follows;

 

2019

2018

Risk free investment

1.39%

1.55%

Expected life

24 Months

31 Months

Expected volatility

54.20%

50.72%

Weighted Average Share Price

For 2019 options granted, a volatility of 54.20% (2018 - 50.72%) has been used reflecting the historical volatility based on share transactions since listing. The maximum vesting period was used as a basis to determine the expected life of the option. The risk-free rate was based on the Government Gilts rates in effect at the time of the grant.

The Group recognised total expenses of £11,000 (2018 - £109,000) relating to equity-settled share-based payments.

25. LEASES

The Group adopted IFRS 16 with an initial application date of 1 January 2019. The Group applied the modified retrospective approach and comparative information has not been restated. Further information on the adoption of IFRS 16 can be found in note 2.1.

The Group as a lessee

The Group's leases consist primarily of property premises and equipment and is presented below:

Right-of-use assets

 

Property

 

 

 

Premises

Equipment

Total

 

£000s

£000s

£000s

Cost

 

 

 

Right-of-use assets recognised at 1 January 2019

30,205

719

30,924

Transfers from property, plant and equipment relating to finance leases (note 13)

-

100

100

At 1 January 2019

30,205

819

31,024

Additions during the year

1,938

378

2,316

At 31 December 2019

32,143

1,197

33,340

Depreciation

 

 

 

Charge for the year

(5,623)

(332)

(5,955)

At 31 December 2019

(5,623)

(332)

(5,955)

NET BOOK VALUE

 

 

 

At 31 December 2019

26,520

865

27,385

Lease liabilities included in the consolidated statement of financial position

 

2019

 

£000s

Current

6,392

Non-Current

21,535

Total

27,927

Amount recognised in the consolidated income statement

 

2019

 

£000s

Depreciation on right-of-use property premises

5,623

Depreciation charged on other right-of-use assets

332

Interest on lease liabilities

1,009

Total

6,964

The total cash outflow for leases during the current year was £6,546,000, including £591,000 of interest.

26. RELATED PARTY TRANSACTIONS

Delamode Holding BV, is indirectly owned by Shaun Godfrey, Sandu Grigore, and Cogels Investments Limited all of whom are shareholders of Xpediator Plc.

Delamode International Kft, Delamode Hungary, Kft and Delamode Consulting Srl are all subsidiaries of Delamode Holding BV.

Delamode Properitati Srl, a Company owned by Delamode Holding BV, is the landlord of one of the Group's leasehold properties in Romania. Rent payable under the current lease is at market rates. Shaun Godfrey, Sandu Grigore and Cogels Investment Limited are shareholders of Xpediator Plc.

During the year Group companies entered into the following transactions with related parties who are not members of the Group.

 

Sales

Purchases

Amounts owed by

Amounts owed to

 

2019

2018

2019

2018

2019

2018

2019

2018

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Related Party

 

 

 

 

 

 

 

 

Delamode Holding BV

-

-

-

-

117

55

-

446

Delamode Propretati, Srl

3

3

271

227

4

7

80

2

Delamode Hungary Kft

-

-

-

-

-

50

-

16

Companies in which directors or their immediate family have a significant controlling interest

Affinity Group Limited

-

-

-

-

-

45

4

-

COGELs Investment Ltd

-

-

-

-

-

237

-

-

Borrelli Capital Limited

-

-

2

13

-

-

 

-

Directors

 

 

 

 

 

 

 

 

Shaun Godfrey

-

-

-

-

-

1

-

-

Richard Myson

-

-

-

-

-

-

-

1

Stephen Blyth

-

13

-

-

-

-

-

-

The maximum amount owed to the Group by the directors at any time during the year was as follows:

 

2019

2018

 

£'000

£'000

Affinity Group Limited

4

45

COGELs Investment Ltd

237

237

Shaun Godfrey

-

14

Richard Myson

1

-

Stephen Blyth

-

13

Details of directors' remuneration and the remuneration of key management personnel are given in note 6.

At 31 December 2019, the bonuses payable to Stephen Blyth of £nil (2018 - £75,000) and Stuart Howard of £nil (2018 - £37,500) were accrued within these financial statements.

All related party transactions were made at an arm's length basis.

Delamode (SW) Limited

On the 1 June 2018, Delamode Holdings Limited entered into a franchise agreement with Delamode (SW) Limited ("DSW"), with Shaun Godfrey acting as a Director for both Companies. The Group provides certain administrative functions on behalf of DSW and charges a fee at an agreed rate and under the franchise agreement is entitled to a share of the profits. Included within the consolidated income statement is a management fee for the administrative functions and profit share of from DSW of £48,000 (2018 - £20,000).

At 31 December 2019, the amounts due from DSW was £9,000 (2018 - £89,000).

27. EXCEPTIONAL ITEMS

During the year, the Group incurred non-recurring costs totalling £856,000 (2018 - £318,000) comprising of £190,000 (2018 - £nil) relating to the aborted acquisition of Intereuropa DD, £451,000 (2018 - £nil) relating to additional contingent deferred consideration on Anglia Forwarding Group Limited and £215,000 (2018 - £nil)relating to additional contingent deferred consideration due on the Regional Express acquisition.

In the previous financial year, the Group incurred costs of £318,000 relating to the acquisitions of Anglia Group Forwarding Limited and Import Services Limited. These costs relate to external accountancy, legal support, professional fees and stamp duty payable to local tax authorities.

28. SUBSEQUENT EVENTS

Robert Ross was appointed as a director on 2 January 2020.

COVID-19

As the Company announced on 31 March 2020 relating to COVID-19, the wellbeing and safety of our people, customers and suppliers is Xpediator's first priority. Where possible individuals are working remotely from their homes and we are continuing to operate effectively whilst also taking the appropriate actions to limit the spread of this virus.

So far this year activity levels have remained broadly in line with management expectations, with high demand from some sectors and other areas slowing. In response we have sought to allocate resource to match demand across the business. While it is hard to make any predictions under these extraordinary circumstances, based on very recent trends, the Board believes that demand for our freight management and warehouse services, both in the UK and Europe will remain sufficiently robust overall but will be more volatile in any given month, and that we have the systems and protocols in place to meet this demand.

We are benefitting from our diverse operations across the UK and Europe which has already helped us offset challenges in some areas with higher activity in other markets. Pall-EX and European road freight forwarding have been areas of strength together with good levels of warehouse utilisation. That said, operating in this market environment is more complicated involving driver shortages in certain markets, some supply issues, more complex border checks and general cost inflation most of which can be passed to clients.

The Group also has the natural advantage of being an asset light business and does not own a large fleet of trucks, instead we have low fixed overheads and typically act as a broker to our clients sourcing capacity from the market as it is required. Despite being in a relatively good position, the Board has taken the prudent decision to introduce temporary pay reductions, reduce costs in areas of reduced activity and suspend certain. As a result, there are no subsequent events that have impacted these financial statements.

29. NATURE OF LEASES

The Group leases a number of properties in the jurisdictions from which it operates. In some jurisdictions it is customary for lease contracts to provide for payments to increase each year by inflation or and in others to be reset periodically to market rental rates. In some jurisdictions property leases the periodic rent is fixed over the lease term.

The Group also leases certain items of plant and equipment. In some contracts for services with distributors, those contracts contain a lease of vehicles. Leases of plant, equipment and vehicles comprise only fixed payments over the lease terms.

The percentages in the table below reflect the current proportions of lease payments that are either fixed or variable.

The sensitivity reflects the impact on the carrying amount of lease liabilities and right-of-use assets if there was an uplift of 5% on the balance sheet date to lease payments that are variable.

 

Lease

Fixed

Variable

 

 

Contract

Payments

Payments

Sensitivity

 

Number

%

%

£'000

Property leases with payments linked to inflation

3

-

3%

302

Property leases with fixed payments

26

26%

-

-

Leases of plant & equipment

34

35%

-

-

Vehicle leases

35

36%

-

-

Total

98

97%

3%

302

30. BUSINESS COMBINATIONS

Import Services Limited

On 13 July 2018, the Group acquired 100% of the issued share capital of Import Services Limited ("ISL") an international port-centric logistics Company. As ISL is based in Southampton, the Company is close to Britain's second largest deep-sea terminal and the first port of call for inbound container ships from the Far East and the USA into Northern Europe.

The principal reason for this acquisition was to enable the Group to enhance their warehousing and distribution services and to allow good cross-selling opportunities. The total consideration payable comprised cash on completion of £6,000,000, share based consideration of £3,000,000, Cash at completion equal to £5,773,000, a net working capital adjustment of £572,000 and two earn-out payments payable over two years. The deferred consideration is calculated as follows, both of which are subject to a maximum aggregate payment of £3,000,000:

·         An amount equal to the amount by which the aggregate value of the Xpediator Shares is less than £4,500,000 on 30th April 2020. The maximum Additional Consideration shall not be greater than £1,500,000.

·         If the Earnings Before Tax (EBT) is greater than the Target EBT (£1,462,500), £1,500,000 shall be payable. If EBT is less than the target EBT, the Earn Out payment shall be reduced by an amount by which EBT is less than the Target EBT multiplied by 3. If the aggregate value of the Xpediator Shares is equal or greater than £6,000,000 for a period of 90 consecutive days between the Completion Date and 30 April 2020, the additional Consideration and Earn Out Payment shall be deemed paid, and no payment will be made to the seller.

Fair Value assessment

As part of the fair value assessment of the Intangible assets of ISL, a Customer related and technology based intangible asset were identified. The fair value calculation of customer related intangible asset was determined by using the income approach based on the expected future cash flows. This was then discounted to determine the present value. The technology asset has been valued using the replacement cost approach. The valuation attempts to capture the effort required to develop similar technology at the valuation date. The weighted average cost of capital used in determining the present value, was 13.0%, which reflected the business and market risks factors. The outcome of the fair value calculation was to derive a customer related intangible asset with a value of £5,449,000 and a technology based asset of £510,000.

Economic useful life

When determining the economic useful life of the customer relationships the historical length of relationships with existing customers and those reported by listed companies in the sector was considered as well as an annual attrition rate of 7.0%. Based on these factors, it was concluded that the useful economic life for customer relationships in relation to ISL would be up to 12 years. For the technology based asset, a useful economic life of 5 years has been used, based on the pace of technological change in the sector.

Deferred tax

As a result of the creation of these intangible assets, there is a deferred tax liability, which was calculated as the sum of the fair values of the intangible assets multiplied by the tax rate. An average long-term tax rate of 17.0% was used as to determine this. This resulted in a deferred tax liability of £1,013,000.

Deferred Consideration

The deferred consideration consists of the

·         payment relating to the earn out period and;

·         amount by which the Completion Net Asset exceeds Target Net Assets and is dependent on the future share price of the Xpediator shares.

In determining the present value of the earn out payment, the first payment which is due in May 2020 was calculated using a cost of capital of 13.0%.

Using the forecasted results for the respective periods the present value of the deferred consideration relating to the earn out was calculated to be £2,573,000 (2018 - £1,583,000). The Directors have reviewed the fair value of the goodwill and deferred consideration relating to the acquisition of Import Services Limited in line with IFRS 3 Business Combinations, paragraph 45. Based on the interpretation of the standard, the Directors believe that there is new information available relating to the assumptions used to calculate the consideration payable. As a result of the new information, the Directors have increased the value of Goodwill and Consideration Payable to the vendors of Import Services Limited by £990,000.

Acquisition costs of £nil (2018 - £246,000) have been expensed to the income statement and are shown as part of the exceptional expenses.

Goodwill

When determining the revised goodwill arising on the acquisition the following calculations were used.

Purchase consideration

£'000

Initial consideration - cash paid

6,000

Initial consideration - shares

3,000

Initial consideration - cash in the business at acquisition

5,773

Net working capital adjustment

572

P.V. of deferred consideration

2,573

Total consideration for equity

17,918

Allocation of assets and liabilities acquired

 

Intangible assets

 

Customer-related intangible assets

5,449

Technology-related intangible assets

510

Other assets

 

Inventories

13

Trade receivables

2,584

Other receivables

7,619

Cash

1,605

Fixed assets

727

Liabilities

 

Trade payables

(1,874)

Other payables

(2,061)

Finance lease payables due within one year

(100)

Finance lease payables due more than one year

(41)

Provisions

(1,453)

Deferred tax liability for intangible assets

(1,013)

Goodwill

5,953

The goodwill recognised will not be deductible for tax purposes.

31. ANALYSIS OF CHANGES IN NET DEBT

 

 

 

 

 

 

Non-cash

 

 

 

 

 

 

 

 

interest

 

 

 

At 31

 

 

 

Right-of-

charge

Other

At 31

 

December

 

Foreign

IFRS 16

use asset

right-of-

non-cash

December

 

2018

Cashflow

exchange

adoption

additions

use assets

movements

2019

Group

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Cash at bank

8,449

2,882

(570)

-

-

-

-

10,761

Short term deposits

1,198

(8)

-

-

-

-

-

1,190

Total Cash

9,647

2,874

(570)

-

-

-

-

11,951

Finance lease balances

185

-

-

-

-

-

(185)

-

Confidential invoice discounting facility

3,024

(642)

-

-

-

-

-

2,382

Bank loans

3,191

(575)

-

-

-

-

-

2,616

Right-of-use-assets

-

(6,546)

-

31,109

2,316

1,009

39

27,927

Total debt

6,400

(7,763)

-

31,109

2,316

1,009

(146)

32,925

Net cash/(debt)

3,247

-

-

-

-

-

-

(20,974)

Net cash excluding right-of-use assets

3,247

-

-

-

-

-

-

6,953

 

 

 

 

 

At 31

 

 

Other

At 31

 

 

 

 

December

 

Foreign

non-cash

December

 

 

 

 

2017

Cashflow

exchange

movement

2018

Group

 

 

 

£'000

£'000

£'000

£'000

£'000

Cash at bank

 

 

 

5,900

2,359

190

-

8,449

Short term deposits

 

 

 

1,485

(287)

-

-

1,198

Bank overdrafts

 

 

 

(45)

45

-

-

-

Total Cash

 

 

 

7,340

2,117

190

-

9,647

Finance lease balances

 

 

 

131

(43)

-

97

185

Confidential invoice discounting facility

 

 

 

2,213

811

-

-

3,024

Bank loans

 

 

 

3,510

(319)

-

-

3,191

Total debt

 

 

 

5,854

449

-

97

6,400

Net cash

 

 

 

1,486

 

 

 

3,247

Reconciliation of net cash flow to movement in net debt

 

2019

2018

 

£'000

£'000

Net increase in cash and cash equivalents

2,874

2,117

Net (increase) in borrowings and right-of-use assets/lease finance

(26,525)

(546)

Foreign exchange movements

(570)

190

(Increase)/decrease in net debt

(24,221)

1,761

Opening net cash

3,247

1,486

Closing net (debt)/cash

(20,974)

3,247

 

 

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
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Price: 23.9

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