Final Results

CEPS PLC

('CEPS' OR THE 'COMPANY' OR THE 'GROUP')

FINAL RESULTS

The Board of CEPS is pleased to announce its final results for the year ended 31 December 2024.

CHAIRMAN'S STATEMENT

I am delighted to present to shareholders the CEPS PLC final accounts for the year ended 31 December 2024.

Macro overview

Since the EU Referendum in 2016 and especially in the last few years, each of our financial years has been punctuated by extraordinary UK domestic events and seemingly 'cataclysmic' world events that have absorbed the mainstream media, filled newspaper column inches, occupied discussion programmes on television and, of course, the ever burgeoning, active and provocative social media.

The year we are reporting on has been no different. We have had the continuation of the war between Russia and Ukraine, which has now been ongoing for more than three years; discussions have recently commenced to try and draw an end to this bloody and destructive conflict. Whilst Russia might well end up retaining the territory it has taken, this relatively small increase in land mass comes at a great cost in terms of Russian and Ukrainian life and destruction of the Country's infrastructure. It is to be hoped that discussions between Ukraine and Russia develop positively and that the conflict comes to an end with a sustainable peace agreement.

The conflict between Israel and Hamas has led to increased political volatility in the Middle East and voter polarisation within certain constituencies in the recent UK General Election.

Over the course of 2024, we saw the expected further decline in inflation from 4% at the beginning of the year to a low of 1.7% in August; this was followed by an uptick to 3.5% by the end of April 2025. The April inflation figure contains a number of one-off policy driven changes, such as an increase in water bills, energy bills (driven by the base effect of a 12% fall in prices in April 2024) and air fares (reflecting the timing of Easter this year) as opposed to fundamental increases driven by the UK economy. The Bank of England is forecasting a rise to 3.7% by September this year followed by a decline thereafter to 2%. Whilst the Bank of England had started to reduce interest rates, having cut its base rate from 5.25% in four 0.25% reductions to 4.25%, the European Central Bank, over the same period, has reduced its rates from 4.5% to 2.25%. Domestic energy prices are projected to decline in July 2025, raising hopes that the Bank of England will implement one or two additional interest rate cuts over the remainder of the year, potentially bringing the base rate down to 4% or lower. It is to be hoped that the minority members of the Monetary Policy Committee who voted for a 0.5% reduction at the last rate setting will hold more sway going forward.

Further cuts are important to CEPS as elevated rates have an impact on consumer spending and the public's disposable income. With 'inflation busting' pay rises and the significant increase of 28.5% in the National Living Wage over the past three years, wages are now recovering some previous losses and, with inflation expected to trend down to 2%, positive real wage growth has re-emerged. Coupled with a gentle reduction in mortgage rates, the pressure on most household budgets should start to ease in conjunction with rate reductions.

The arrival of a new Labour Government on 5 July 2024 with a large majority was fully anticipated after 14 years of Conservative rule. It was expected, and hoped, that the new government would arrive in office with fully thought through plans to create the conditions for economic growth, which had been a major theme of the Labour manifesto. What has been disappointing to date has been the apparent lack of any clear plan coupled with the introduction of a series of measures which are unlikely to generate any growth or wealth, but which have absorbed the Government's capacity, time and maybe even its limited cash resources. The biggest direct impact for CEPS, in common with every business in the UK, has been the changes to the National Living Wage and National Insurance rates and thresholds, which the directors estimate will increase Group costs by approximately £385,000 on an annual basis. Since the Autumn Budget, most UK companies have developed plans to mitigate this cost by a combination of a reduction in employment, a moderated increase in wage rates for 2025 and further sales price increases.

The recent turmoil caused by the President of the United States through the introduction of specific tariffs across the world, followed by a 90-day pause with countries including China, has led to even further uncertainty. Given the CEPS companies sell nothing to the USA, it is difficult to see any direct negative consequences of these actions. In fact, it may be that the products sourced in China by Aford Awards become cheaper because China's major market has become more expensive to access, and manufacturers will seek new markets. In addition, as almost all overseas buying is priced in USD, the recent weakness in the USD against Sterling should also provide a positive tailwind. However, all this turmoil and uncertainty could well lead to a reduction in economic activity.

The latest GDP figures showing growth of 0.2% in March 2025 following an increase of 0.5% in February should be viewed with caution, as they were published before the full effects of the latest tariff farrago. The economy has been growing, albeit modestly, across most sectors since the latter part of 2023. From our experience of dealing largely with UK centric companies there is a mood, outside of the mainstream media, that the UK 'is getting on with getting on', and that companies are managing what is being presented to them, continuing to drive cost savings, and investing and innovating to produce productivity growth.

Records show that British households have had an elevated savings ratio since the first lockdown for Covid in 2020. Households have increased their savings, and these increases have coincided with cost-of-living pressures, weak consumer confidence and slower growth in household consumption. It is hoped that, as inflation falls and interest rates reduce, some of these funds will be released to provide a boost to the UK economy.

Financial review and performance of the CEPS Group

Despite all these issues at the macro level, total CEPS revenue increased by 6.4% from £29.7m in 2023 to £31.6m in 2024. Gross profits also increased by 6.4% from £12.5m to £13.3m over the same period. However, operating profits declined marginally from £2.6m to £2.4m, a reduction of 5.1%. This was largely due to an 8% increase in administration costs to support expansion at ICA and Aford Awards, coupled with a heightened level of inflation over this period. In addition, in 2023 there was an exceptional credit of £137,000 included in Group net costs which reduced this figure to £329,000. In 2024 Group net costs have returned to a more normal level of £455,000. Earnings per share increased by 4.2% from 2.65p to 2.76p

The background to this modest increase in earnings per share is set out below when we look at the financial performance of the underlying companies in more detail.

Aford Awards

The market in which Aford Awards operates has had a tough year. Wholesale distributors, a good barometer of market demand, have stated that the market may have declined by as much as 20%. Consequently, in our view, the performance by Aford Awards to produce a same again EBITDA for 2024 of £556,000 is a creditable performance.

The company has invested in new production equipment and processes and has expanded its product range; in so doing it is building a stronger, more diversified and better controlled business. We noted that this was planned in the last report, and are delighted to report that these new products are in the market and are taking Aford Awards into new areas of business. It is these developments that have helped bolster the year's financial performance.

A new warehouse has been secured locally to free up more space for the production unit at Maidstone and to improve the efficiency of stock flow. This extra space is essential to increase capacity and to improve efficiency given the increase in orders and the intention to acquire other businesses to relocate and absorb into the Maidstone facility.

A further small business, Millennium Awards trading as Online Trophies, was acquired towards the end of the year and sales are currently exceeding expectations. There are, as ever, further discussions ongoing with a few other potential opportunities in an industry which continues to consolidate.

Sales in 2024 were £3.7m as compared to £3.5m in 2023. The associated EBITDAs were £556,000 and £556,000 respectively.

Signature Fabrics, the holding company for Friedman's and Milano International

The two trading companies together had sales of £6.5m as compared to £6.8m in 2023. The associated EBITDAs were £567,000 and £1.1m. Sales were down by £200,000 in Friedman's and £100,000 in Milano.

Shareholders will be aware of some of the changes at Signature Fabrics during the period. In the early part of the year, David Kaitiff, the founder of Friedman's, informed CEPS of his wish to exit the business after 37 years. Aware that this was likely to happen at some time, we had been encouraging the strengthening and development of the management team. However, the impact of Covid on the trading performance of both companies, and the need to return the business back to its historic high level of profitability, was the primary goal.

We also became aware of operational issues at Milano and so, not only have we replaced David Kaitiff on a fulltime basis with an expanded team, but we have also taken the opportunity to change the senior personnel at Milano. David Kaitiff has been retained on a reduced remuneration basis to ensure that there is full transfer of his knowledge and experience to the new team. One of the principal issues has been that some of the traditional client base at Friedman's, which had been serviced very successfully for many years, appeared to collectively decide that the Covid experience was a step too far and gradually closed their businesses.

The operational efficiency at Friedman's remains intact and all efforts are being directed to expand the customer base and to return the gross margin to its previous levels. This year, the gross margin fell below the historic c.48% achieved in previous periods as a result of several one-off cost items, mainly associated with the sourcing of fabric during a period of shortages and elevated and fluctuating prices.

Milano has been significantly improved operationally since it was acquired at the end of 2019. However, it is still not 'firing' on all cylinders. Whilst it is early days, the new team has started well and we are optimistic that the business will continue to improve and grow.

The transaction to buy out David Kaitiff's shareholding was announced at the end of October 2024. A new company was established in the manner of the CEPS' usual approach. CEPS increased its shareholding from 55% in the old company to a directly held 67.5% of the new company. Helen Kaitiff with 22.5% directly held and a newly formed Signature Fabrics Employee Share Ownership Trust with 10% intended to be issued to key employees, make up the other shareholders. At 31 December 2024 the Trust had not yet granted beneficial ownership to employees and the Group had effective control of 75% of the company. In addition, CEPS received £2.1m of vendor loan stock.

ICA Group (formerly known as Hickton Group)

The newly named ICA Group has had another very strong year building on the consolidation achieved in 2022 and the subsequent growth in 2023. Sales were £21.4m in 2024 as compared to £19.4m in 2023. The associated EBITDAs were £2.65m and £2.07m respectively.

Shareholders will have seen the announcement on 1 April 2025 by ICA which covered several important matters. Firstly, it outlined an attractive 'bolt-on' acquisition of Align Building Control and Align Group (UK) ('Align'). Align fills a geographical gap in ICA's nationwide coverage and, whilst the brand name will be retained, its operations will be absorbed into the existing group. Align made a total of £356,000 unaudited profit before tax for the year ended 31 December 2024. The acquisition was funded by a new loan from ICA's existing banker, Santander.

At the same time, a modest share reconstruction was announced which essentially locks in an equity share valuation of £12m for existing holders and then, if and when ICA is sold in the future, the balance of the consideration above £12m will be participated in by the existing shares and by a new class of shares which will be held by the working directors and certain senior employees. Essentially, this structure is the equivalent of the introduction of a share option scheme. To summarise: up to a value for the equity of £12m CEPS will receive 55.6% of the consideration and for the portion above £12m CEPS will receive 50.7%.

Share capital

There was no share issuance in the current year and, therefore, the issued share capital remains at 21,000,000 shares as it has since September 2021. The balance sheet reconstruction was completed on 15 May 2024 as detailed in the Interim Report 2024.

As we also stated in the Interim Report 2024, we have put in place the necessary steps to introduce an Employee Share Ownership Trust which we expect to be operational by the fourth quarter of this year.

Debt structure

The debt in CEPS, the parent company, has been reduced by the repayment of the loan from David Horner, director of CEPS, of £192,000. The outstanding debt now totals £4.95m and is made up of a £2.0m loan from a third party (with a coupon of 9% and due to be repaid by 30 June 2026), and a loan from Chelverton Asset Management Limited of £2.95m with a coupon of 5% which is repayable with a notice period of 18 months.

Cash held by the Company at the financial year end was £212,000 (2023: £185,000) and Group cash was £677,000 (2023: £916,000). Cash in CEPS at the end of April 2025 was an elevated £793,000.

In CEPS we have external debt, as referred to above, of some £4.95m (2023: £5.14m) and loan notes and loans owed by the three subsidiaries of some £6.48m (2023: £4.49m).

Shareholder value creation

Continuing the approach from last year's Chairman's Statement, below is a summary of the profit/value creation events:

1. Expected increase in the profits of the three subsidiaries

Very strong growth in the profitability of the biggest subsidiary ICA.

A solid performance in Aford Awards with a more positive outlook for 2025.

A disappointing performance in Signature Fabrics made up of Friedman's and Milano. However, a change in the operational management team is expected to make an improvement in 2025.

2. Self-funded 'bolt-on deals' in each of the three subsidiaries in the manner that has occurred over the past five years

The acquisition made by Aford Awards of Millennium Awards trading as Online Trophies, which completed on 11 November 2024, has already started to contribute ahead of expectations.

The larger 'bolt-on' acquisition by ICA of Align Building Control and Align Group (UK) will contribute to ICA for nine months in 2025.

3. Repayment of loan stocks from the subsidiaries, absent any acquisitions, leading firstly to the repayment of the £2m third party loan in 2025 and then, finally, the Chelverton Asset Management loan of £2.95m

In the year, an outstanding loan from myself of £192,000 was repaid.

The outstanding loan stock owed to the original owners of Milano International of continued £100,000 was repaid.

4. Increase in CEPS' shareholdings in its subsidiary companies

The restructuring of the share capital of Signature Fabrics Holdings, the holding company of Friedman's and Milano International, meant that CEPS has increased its shareholding from 55% to a current 75% (which will reduce to 67.5% after the 10% held by the employee share ownership trust is allocated to key members of the Signature Fabrics Holdings management team) and received an additional £2.1m of loan stock.

The restructuring of the share capital of ICA means that if ICA were to be sold at equity values up to £12m CEPS will receive 55.6% as opposed to its previous 53.8%. To incentivise the working directors and senior management team, for an equity consideration above £12m CEPS' share of the consideration will reduce to 50.7%. The crossover valuation, for which CEPS' equity holding is equal to its previous 53.8%, is £19.9m.

5. Share buy backs and cancellation

In the future as the small shareholders may wish to sell their shares with CEPS acting as the buyer of last resort. This shrinking of the share capital will, at the right price, and over time, prove to be very accretive to earnings.

There were no share buy backs in the year. In the fourth quarter of 2025 we expect that an employee share ownership trust will be put in place to effect share purchases of small parcels of shares.

6. Offer to buy a subsidiary

As we grow the businesses, it is likely that we will be approached by larger corporates and private equity funds to buy one or more of the subsidiaries. This would likely be for a significant one-off gain.

Share price

In the Autumn budget the Chancellor, Rachel Reeves, changed the rates for Inheritance Tax Relief on AIM traded shares from 0% to 20%. Whilst CEPS, because of its small size, had not attracted the weight of money of some larger AIM traded shares, it is clearly not helpful as a means of attracting investors.

Outlook

Going forward in 2025 we are hopeful that the anticipated decline in inflation during Q4 will lead to a steady, but regular, reduction in interest rates. Historically, this type of environment has been very positive for small company trading performance, confidence and ultimately share prices.

As mentioned in the introduction, things remain very uncertain across the world; however, increasingly people are putting forward the view that the UK is more stable than many other parts of the world. The Government has another four years in power and enjoys a huge majority in Parliament. After an unsteady first six months, it looks like the market is limiting the Government's scope of action and, therefore, a period of stability and, hopefully, gentle improvement is to be expected.

With the management teams in the subsidiaries focused on creating sales at higher margins and driving further product development and efficient production, supplemented by further 'bolt-on' acquisitions, we expect our companies to outperform 2024. A long overdue period of stability will assist them in their endeavours.

David Horner

Chairman

The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

The directors of the Company accept responsibility for the content of this announcement.

Enquiries

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2024

All activity relates to continuing operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2024

The comprehensive income within the parent company financial statements for the year was a profit of £1,901,000 (2023: loss of £110,000).

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 DECEMBER 2024

Major non-cash movements. There were £293,000 of non-cash additions to right-of-use assets and lease liabilities in the year (2023: £733,000 of non-cash additions to right-of-use assets and lease liabilities). In connection with the restructuring of the Signature Fabrics group of companies £1,068,000 of loans were assumed by the minority shareholders (2023: none).

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2024

Share capital comprises the nominal value of shares subscribed for.

Share premium represents the amount above nominal value received for shares issued, less transaction costs.

Retained earnings comprise accumulated comprehensive income for the current year and prior periods attributable to the parent, less dividends paid.

Non-controlling interest represents the element of retained earnings which is not attributable to the owners of the parent.

Notes to the financial information

1. General information

CEPS plc (the 'Company') is a company incorporated and domiciled in England and Wales. The Company is a public company limited by shares, which is admitted to trading on the AIM market of the London Stock Exchange. The address of the registered office is 11 Laura Place, Bath BA2 4BL.

The principal activities of the Company are that of a holding company for service and manufacturing companies, acquiring stakes in stable and steadily growing entrepreneurial companies. Segmental analysis is given in note 4.

The financial statements are presented in British Pounds Sterling (£), the currency of the primary economic environment in which the Group's activities are operated and are reported in £'000. The financial statements are to the year ended 31 December 2024 (2023: year ended 31 December 2023).

The registered number of the Company is 00507461.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied throughout the year, unless otherwise stated.

2. Basis of preparation and going concern

This announcement is an extract from the consolidated financial statements of the Company for the year ended 31 December 2024 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issue on 28 May 2025. The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2023 or 2024 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2023 have been delivered to the Registrar of Companies and those for 2024 will be delivered following the Company's Annual General Meeting. The auditor's reports on the statutory accounts for the years ended 31 December 2023 and 31 December 2024 were unqualified and do not contain statements under s498(2) or (3) Companies Act 2006.

These financial statements have been prepared on a going concern basis under the historical cost convention in accordance with UK adopted International Financial Reporting Standards ('IFRS'), IFRIC interpretations and the Companies Act 2006 as applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention. The Group's business activities and financial position likely to affect its future development, performance and position are set out in the front end of the report.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

The Company has taken advantage of the exemption under the Companies Act 2006 not to present its own Statement of Comprehensive Income.

Going concern

The directors have considered the trading performance and financial position of the Company and of the Group together with detailed forecasts for the period to the end of 2026. The Aford Awards, Signature Fabrics and ICA Group sub-groups service their bank and shareholder held debt from cash generated in the trading subsidiaries which continue to trade profitably. The Group is generating cash from operations with significant headroom in the applicable banking covenants and mitigating actions could be taken to compensate for the current inflationary pressures and a degree of fluctuation in the economy. The Company had cash balances at 31 December 2024 and is receiving interest and fees from the trading subsidiary groups. In addition, the Company has agreed a 12 month extension with the third party provider of the £2.0m loan such that it is repayable on or before 30 June 2026. 

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to operate and to meet liabilities for the foreseeable future. Accordingly, the going concern basis of preparation continues to be adopted in the financial statements.

3. Critical accounting assumptions, judgements and estimates

The directors make estimates and assumptions concerning the future. They are also required to exercise judgement in the process of applying the Company's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances

The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are assessed below:

a) Impairment of intangible assets (including goodwill)

The Group tests annually whether intangible assets (including goodwill) have suffered any impairment, in accordance with the accounting policy. The recoverable amounts of the cash-generating units have been determined based on value-in-use calculations. The calculations require the use of estimates (note 10).

b) Impairment of investments (including loans)

The Company assesses the impairment of investments whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an impairment review include a significant underperformance of a trading subsidiary relative to historical or projected future operating results and significant negative industry or economic trends.

The assessment would include judgement over industry trends and forecasts using estimates.

c) Leases

The directors have reviewed the asset lives and associated residual values of all fixed asset classes and have concluded that Management utilise judgement in respect of any option clauses in leases and whether such an option to extend would be reasonably certain to be exercised. Management consider all facts and circumstances including past practice, costs of alternatives and future forecasts to determine the lease term. Management also apply judgement and estimation in assessing the discount rate, which is based on the incremental borrowing rate. These judgements impact on the lease term and associated lease liabilities.

d) Recognition of revenue in respect of services

Revenue is recognised in the period in which the services are provided in accordance with the stage of completion of the contract. This requires a degree of estimation in respect of the stage of completion and time required to complete the services, but is based on significant experience and data from completed services.

e) Acquisitions

Fair values have been applied on the acquisition of businesses which involve a degree of judgement and estimation, in particular in the identification and evaluation of intangible assets including customer relationships. The values recognised are derived from discounted cash flow forecasts and assumptions based on experience and estimated factors relevant to the nature of the business activity.

Where contingent consideration arises in respect of acquisitions, the best estimate of further payments to be made is accrued. The actual trading results may result in different amounts being payable and subsequent adjustments to the deferred consideration.

f) Provisions

Dilapidations provisions are by their nature specific to individual properties, can be open to interpretation of the lease terms and to a degree of estimation in respect of the potential reinstatement costs. As a result, the outcome of such claims can vary from the provisions made.

4. Segmental analysis

The Chief Operating Decision-Maker ('CODM') of the Group is its Board. Each operating segment regularly reports its performance to the Board which, based on those reports, allocates resources to and assesses the performance of those operating segments. 

The operating segments set out below are the only level for which discrete information is available or utilised by the CODM.

Operating segments and their principal activities are as follows:

Aford Awards, an engraving and colour print company specialising in sports and corporate awards;

Signature Fabrics, comprising Friedman's, a convertor and distributor of specialist lycra, and Milano International (trading as Milano Pro-Sport), a designer and manufacturer of leotards;

ICA Group, comprising Hickton Quality Control, Cook Brown, Morgan Lambert and Qualitas Compliance, providers of services to the construction industry.

Group costs, assets and liabilities incurred at Head Office level to support the activities of the Group.

The United Kingdom is the main country of operation from which the Group derives its revenue and operating profit and is the principal location of the assets and liabilities of the Group.

The Board assesses the performance of each operating segment by a measure of adjusted earnings before interest, tax, Group costs, depreciation and amortisation and, when applicable, exceptional costs (EBITDA). Other information provided to the Board is measured in a manner consistent with that in the financial statements.

i) Results by segment

ii) Assets and liabilities by segment as at 31 December

(iii) Revenue by geographical destination

(iv) Nature of revenue

5. Taxation

The tax assessed for the year is equal to (2023: higher than) the average standard rate of corporation tax in the UK of 25% (2023: 23.5%).

In May 2021 a change in rate to 25% from April 2023 was substantively enacted. The rate of 25% is accordingly applied to UK deferred taxation balances at 31 December 2024 (2023: 25%).

There are tax losses carried forward in the Company of approximately £1.7m (2023: £1.5m).

6. Earnings per share

Basic earnings per share is calculated on the profit for the year after taxation attributable to the owners of the parent of £580,000 (2023: £556,000) and on 21,000,000 (2023: 21,000,000) ordinary shares, being the weighted number in issue during the year.

There are no potentially dilutive shares in the Group.

7. Property, plant and equipment

8. Right-of-use assets

At the year end, assets held under hire purchase contracts and capitalised as plant and machinery right-of-use assets have a net book value of £330,000 (2023: £318,000).

The depreciation of £96,000 (2023: £60,000) in respect of these has been charged to cost of sales in the Consolidated Statement of Comprehensive Income.

9. Business combinations

Acquisition in 2024 of Millennium Awards Limited trading as Online Trophies

On 11 November 2024, a subsidiary, Aford Awards Limited, acquired the trade and customer lists of Millennium Awards Limited trading as Online Trophies. This supplies trophies, awards and medals.

This acquisition of a business has been accounted for using the acquisition method of accounting. Fair value adjustments were made in respect of customer relationships amounting to all of the consideration of £138,000, together with a related deferred tax liability of £34,000, resulting in goodwill of £34,000.

The following table shows the fair value of assets and liabilities included in the consolidated statements at the date of acquisition:

The cash outflow at the date of acquisition was £35,000 with forecast deferred contingent consideration payable of £103,000 contingent on sales over the five years following the acquisition. Deferred consideration is included in other payables.

The business contributed £11,000 of revenue for the two months in 2024 after the acquisition date. It is integrated into the overall Aford Awards business and generates similar margins. If it had been included from 1 January 2024, Group revenue would have been £130,000 higher and operating profit approximately £50,000 higher.

£137,000 of deferred consideration was also paid in 2024 (2023: £320,000) in respect of businesses acquired in earlier periods.

10. Intangible assets

Goodwill is not amortised under IFRS, but is subject to impairment testing. Any impairment charges are included in administration expenses and disclosed as an exceptional cost.

Customer relationship related assets and other intangibles in respect of computer software, website costs and licences are amortised over their estimated economic lives. The annual amortisation charge is expensed to cost of sales in the Consolidated Statement of Comprehensive Income.

Impairment tests for goodwill

The Group tests goodwill arising on the acquisition of a subsidiary annually for impairment or more frequently if there are indications that goodwill may be impaired.

For the purpose of impairment testing, goodwill is allocated to the Group's cash generating units (CGUs) on a business segment basis:

The recoverable amount of each CGU is based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond five years are assumed to increase only by a long-term growth rate of 1.5%. A discount rate of 13.7% (2023: 13.4%), representing the estimated pre-tax cost of capital, has been applied to these projections for all three CGUs.

Management has determined the budgeted revenue growth and gross margins based on past performance and their expectations of market developments in the future. Long-term growth rates are based on the lower of the UK long-term growth rate and management's general expectations for the relevant CGU.

In respect of all three CGUs, the value-in-use calculation gives rise to sufficient headroom such that reasonable changes in the key assumptions do not eliminate the headroom

11. Share capital and share premium

In March 2024, a special resolution was passed to reduce the nominal value of each share from 10 pence to 0.3 pence and to cancel the share premium resulting in a total nominal value of £63,000, no share premium and with an amount of £9,054,000 transferred to retained earnings.

12. Related Party Transactions

During the year the Company entered into the following transactions with its subsidiaries.

The Company is under the control of its shareholders and not any one individual party.

The restructuring of the Signature Fabrics group with a new intermediate holding company, Signature Fabrics Holdings Limited, used to acquire Signature Fabrics Limited, resulted in £2,132,500 of loan notes being issued to the Company, increasing the amounts receivable from this sub group. As part of the transaction D and H Kaitiff, directors of Signature Fabrics Limited, reduced their shareholdings from a combined 45% to 25% and received the new loan notes of £390,000 and £577,500 shown below. D Kaitiff also received £710,000 in cash for his shares and was owed a further £100,000, left as an interest-free short term loan at 31 December 2024. H Kaitiff continues to have director responsibilities, but D Kaitiff has none.

At the year end the parent company owed a loan of £2,950,000 (2023: £2,950,000) and accrued interest of £nil (2023: £nil) to an entity with common shareholders and interest of £148,000 (2023: £148,000) was charged on this loan during the year. The loan is guaranteed by D A Horner, Chairman.

At the year end the Company owed £2,000,000 to a third party (2023: £2,000,000). Interest of £140,000 (2023: £140,000) was charged on the third party loan during the year. The loan is guaranteed by D A Horner, Chairman.

At the year end the Company owed £nil (2023: £192,000) to a director, D A Horner, Chairman. The loan was unsecured, interest free and repaid in 2024.

At the year end amounts owed to directors of subsidiary companies and their close family members in respect of acquisition loan notes amounted to £2,386,000 (2023: £1,720,000). Interest payable on these loans in the year amounted to £144,000 (2023: £127,000).

At the year end amounts owed to directors of subsidiary companies in relation to loans amounted to £240,000 (2023: £140,000). Interest paid on these loans in the year amounted to £7,000 (2023: £7,000).

These amounts are analysed below:

13. Post balance sheet events

On 1 April 2025, the Company's subsidiary, ICA Group Limited, acquired Align Building Control Limited and Align Group (UK) Limited for a total consideration of £1.3m, of which £0.9m was paid at completion. The book net assets acquired were approximately £0.9m but the Group has not yet completed the acquisition accounting and identification of any intangible assets other than the goodwill. A new £2.5m bank loan was drawn down to assist in financing this acquisition, to fund £375,000 for a buy back being made of 3.1% of ICA Group Limited's share capital and to fund overall investment plans. The new bank loan is repayable quarterly over four years.

On 1 April 2025, ICA Group Limited also issued 25,900 B £0.01 ordinary shares at par to incentivise key employees. The B £0.01 shares only share in the capital value of ICA Group Limited to the extent it grows from the 1 April 2025 value.

On 9 May 2025 a 12 month extension was agreed with the third party provider of the £2.0m loan. The loan is repayable on or before 30 June 2026 and the interest rate has increased from 7% per annum to 9% per annum with effect from 15 May 2025. All other terms of the loan remain the same.

14. Distribution of the Annual Report and Notice of AGM

A copy of the 2024 Annual Report, together with a notice of the Company's Annual General Meeting ('AGM') to be held at 11:30am on Monday 23 June 2025 at 11 Laura Place, Bath BA2 4BL, will be sent to all shareholders on Friday 30 May 2025, Further copies will be available to the public from the Company Secretary at the Company's registered address at 11 Laura Place, Bath BA2 4BL and from the Group website, www.cepsplc.com.