KITWAVE GROUP PLC

Earnings Release • Feb 27, 2024

National Storage Mechanism | Additional information RNS Number : 5239E Kitwave Group PLC 27 February 2024 27 February 2024 Kitwave Group plc ("Kitwave", the "Group" or the "Company") Final Results for the twelve months ended 31 October 2023 Kitwave Group plc (AIM: KITW), the delivered wholesale business, is pleased to announce its final results for the twelve months ended 31 October 2023. Financial summary �� Revenues increased by 20% to ��602.2 million���(FY22: ��503.1 million) �� Gross profit margin increased to 22% during the year���(FY22: 20%) �� Adjusted operating profit increased by 49% to ��32.0 million���(FY22: ��21.5 million) �� Profit before tax increased by 40% to ��24.9 million���(FY22: ��17.8 million) �� ��30.3 million net cash generated from operations���(FY22: ��26.5 million) �� Pre-tax operational cash conversion of 90%���(FY22: 105%) * For more information on alternative performance measures please see the glossary at the end of the announcement. The Board has declared that it is recommending a final dividend of 7.45 pence per ordinary share, subject to approval at the Annual General Meeting ("AGM") to be held on 22 March 2024, which will, if approved, result in a total dividend for the financial year ended 31 October 2023 of 11.20 pence per ordinary share. Operational highlights �� Acquisition of Westcountry Food Holdings Limited ("WestCountry"), a specialised fresh produce wholesaler in December 2022. WestCountry has been successfully integrated into the Foodservice division and has performed in line with expectations. �� Commenced construction of the new 80,000 sq. ft distribution centre to fully integrate the Group's South West operations, with completion scheduled for Autumn 2024. �� Expansion of the online trading platform across all divisions to improve existing customer relationships and enhance operational synergy within the Group. Post-period end �� Paul Young, Chief Executive Officer will be retiring and stepping down from the Board after the AGM on 22 March 2024 with Ben Maxted, the current Chief Operating Officer becoming the new Chief Executive Officer. �� Acquisition of WLG (Holdings) Limited which trades as Wilds of Oldham, a composite family-run drinks wholesaler, which was incorporated into the existing Foodservice on-trade business, HB Clark in November 2023. Paul Young, Chief Executive Officer of Kitwave, commented: "I am pleased to report on the Group's final results for the twelve months ending 31 October 2023. "As announced in the Group's trading update in November 2023, the strong performance continues to deliver growth with sustained momentum achieved throughout FY23. We are, therefore, able to report results in line with the significantly upgraded market expectations that were established after the Group's interim results, published in July 2023. "As can be seen from the results for this year, all our divisions have continued to grow while managing well the inflationary pressures in their cost base that existed throughout the year. "The successful integration of WestCountry into the Foodservice division demonstrates the value of our buy-and-build philosophy, with the Group continually assessing acquisition opportunities to combine with our initiatives to drive organic growth. "While we have now acquired and successfully integrated 13 businesses since 2011, the Board believes there remain a large number of opportunities available to us in what is a fragmented delivered wholesale market in the UK. "In addition to acquisitions we also seek operational improvement. The new distribution centre is an example as it will be key to increasing the efficiency and capacity of the Group's South West operations. "The launch of a web-based trading platform in February 2022 has brought immediate success, with electronic ordering becoming the predominant source of order capture for the Group at 47% of all orders in the quarter to October 2023. We recognise the importance of technology and will continue to invest to improve our operational capability. "The Group is strategically positioned to continue to deliver a high service offering within the UK wholesale market and we are confident of another positive trading period in 2024. "Finally, after over 35 years since Kitwave was founded and being a part of that process, I will be retiring after the AGM on 22 March 2024. It has been a pleasure to see the Group grow and with Ben Maxted taking over as the new Chief Executive Officer, I am confident that the Board and management have the expertise and experience to deliver Kitwave's growth strategy and generate further value for the Group and its shareholders. "I would like to take this opportunity to acknowledge and thank everyone within the Group. I am extremely grateful for my tenure as Chief Executive Officer and I wish Kitwave every success for the future." - Ends - For further information please contact: Kitwave Group plc Paul Young, Chief Executive Officer David Brind, Chief Financial Officer www.kitwave.co.uk Tel: +44 (0) 191 259 2277 Canaccord Genuity Limited (Nominated Adviser and Sole Broker) Bobbie Hilliam Alex Orr Tel: +44 (0) 20 7523 8150 Yellow Jersey PR (Financial media and PR) Sarah Hollins Shivantha Thambirajah Bessie Elliot Tel: +44 (0) 20 3004 9512 This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain. Company Overview Founded in 1987, following the acquisition of a single-site confectionery wholesale business based in North Shields, United Kingdom, Kitwave is a delivered wholesale business, specialising in selling and delivering impulse products, frozen, chilled and fresh foods, alcohol, groceries and tobacco to approximately 42,000, mainly independent, customers. With a network of 30 depots, Kitwave is able to support delivery throughout the UK to a diverse customer base, which includes independent convenience retailers, leisure outlets, vending machine operators, foodservice providers and other wholesalers, as well as leading national retailers. The Group's growth to date has been achieved both organically and through a strategy of acquiring smaller, predominantly family-owned, complementary businesses in the fragmented UK grocery and foodservice wholesale market. Kitwave Group plc (AIM: KITW) was admitted to trading on AIM of the London Stock Exchange on 24 May 2021. For further information, please visit: www.kitwave.co.uk. Chairman's Statement Overview We are pleased to report another year of excellent progress. In the prior year, the Group had capitalised on opportunities for growth as the challenges of the COVID-19 pandemic eased. As can be seen from the results for this year, all our divisions have continued to grow while managing well the inflationary pressures in their cost base that existed throughout the year. Results summary The Group has achieved significant growth in both revenue and adjusted operating profit during the year, with revenue increasing by 19.7% to ��602.2 million (FY22: ��503.1 million) and adjusted operating profit increasing by 48.8% to ��32.0 million (FY22: ��21.5 million). Included in the results for the year is an 11 month contribution from Westcountry Food Holdings Limited which is in line with our expectations at the time of the acquisition in December 2022. Existing operations ��m Acquisitions ��m FY23 ��m FY22 ��m Adjusted operating profit * 27.3 4.7 32.0 21.5 For more information on alternative performance measures please see the glossary at the end of the announcement. While increases in overhead costs such as labour, fuel and energy continue to be significant, management has again focussed on increasing gross margin in order to offset the adverse effects of inflationary increases in the Group's cost base. As a result, the ratio of distribution costs to revenue is only slightly ahead of the prior year and is in line with our expectations. Dividend The Board has a progressive dividend policy that has the intention to pay a total annual dividend of between 40% and 50% of profit after tax. In years where the Group incurs higher cash outflows through its investment activity in merger and acquisitions or infrastructure capital expenditure, the aggregate annual dividend is likely to be at the lower end of the range. For those years where there is no investment the annual dividend is likely to be at the higher end of the range. The Board is recommending a final dividend of 7.45 pence per ordinary share (FY22: 6.75 pence), subject to approval at the AGM, which, if approved, will result in an increase in the total dividend for the year of 21.1% to 11.20 pence per ordinary share (FY22: 9.25 pence). Environmental, Social and Governance (ESG) We remain of the belief that a long term sustainable business model is essential to the success of the Group and are committed to ensuring the highest standards of ESG practices across our business. The Group continues to develop its ESG framework and during the year, under the guidance of the ESG steering group, embedded its Corporate Social Responsibility Strategy within the overall Group Strategy. The Group is a significant user of energy to refrigerate and light its warehouse locations. During the financial year, we invested in the installation of solar panels at our Luton distribution centre. The Group now has solar power generation at seven of its larger sites producing 10.7% of the Group's annual energy requirements. Feasibility studies are being carried out on additional locations for further investment in 2024. Our colleagues are our most valuable asset and their welfare is a priority at Kitwave. We are pleased to be able to provide sustainable employment and to increase remuneration and benefits whenever possible across our workforce. The appointment of a Group Health and Safety Director in April 2022 has led to a number of changes including improved reporting and information flow, the standardisation of risk assessments and the roll out of defibrillators to all of our sites. The financial year also saw the implementation of the Kitwave One Employee Benefits portal, providing our colleagues with basic medical cover, death in service life cover as well as discounts on retail goods. The Enterprise Risk Management (ERM) framework, established in the prior year, was further developed and has been used as the tool for the Board to have regular engagement with appointed risk champions. Risks are scheduled into the Board agenda with the aim of having an in depth review of each of the strategic risks at least once in the year. Following the review of risks associated with cyber security, we have invested further in hardware, software and advisers to enhance our mitigation of this key risk. These additional investments have created a more secure environment facilitating the introduction of a cyber security insurance policy to provide further risk protection. Board On 1 February 2023, Teresa Octavio joined the Board as a Non-Executive Director. She has already made a valuable contribution and we look forward to her ongoing input to our discussions and decision making. On 6 November 2023, we announced that Paul Young, Chief Executive Officer, would be retiring and stepping down from the Board at the end of the Company's Annual General Meeting to be held in March 2024 and that Ben Maxted, the Group's Chief Operating Officer, would become Chief Executive Officer following Paul's retirement. Paul's retirement next year will mark the end of a remarkable career with Kitwave. Having founded the Company in 1987 as a single-site confectionery business Paul has been instrumental in its growth and development into the delivered wholesale business that it is today. On behalf of everyone at Kitwave, we thank Paul for his vision and enduring contribution to the Group and we wish him well in his retirement. We are delighted that the handover of responsibilities has gone well and that Ben will become Chief Executive Officer following the Company's Annual General Meeting. As Chief Operating Officer, Ben has demonstrated excellent commercial and operational expertise and these skills will continue to be invaluable in his new role and in delivering the next phase of our growth strategy. In line with our policy, a Board evaluation review was carried out during the year. As in the prior year this was led by me and took the form of a detailed questionnaire followed by an in depth discussion around those areas which scored least well. While in general the Board felt that it was functioning well a number of minor actions were agreed. One of these actions involved the commencement of a Board development exercise to assist in understanding different leadership styles, to increase self awareness and to identify opportunities for improved teamwork. With facilitation provided by a third party practitioner this exercise commenced in October 2023. Our people It is in large part due to the dedication of our colleagues that we continue to provide the high-quality service that our customers have come to expect. I would therefore like to take this opportunity to thank all of them for their continued exceptional commitment. Outlook While less than three years since Kitwave's IPO in May 2021, the Group has, in line with its strategy, grown significantly both organically and through the three acquisitions it has made since IPO. In addition it has adapted well to the different challenges of a pandemic and inflationary cost pressures to continually outperform market expectations. We continue to pursue our combined organic growth and acquisition-based strategy and believe there remain a large number of opportunities available to us in what is a fragmented delivered wholesale market in the UK. The success of our acquisitions to date has demonstrated the viability of this strategy, with the Group continuing to look to identify acquisition opportunities to combine with its initiatives to drive organic growth. Post-year end, we completed the acquisition of WLG (Holdings) Limited, which trades as Wilds of Oldham, a composite drinks wholesaler operating in the North West of England. The acquisition is in line with our criteria and has already been integrated into HB Clark our on-trade business. FY24 has started satisfactorily and, subject to successful management of the continued inflationary headwinds referred to above, we expect a positive outcome for the year and to continue to deliver value to our shareholders. Steve Smith Chairman 26 February 2024 Chief Executive Officer's statement Overview I am pleased to report the Company's final results for the 12 months ending 31 October 2023. This year, Kitwave has once again proven itself to be a resilient business despite wider macroeconomic pressures and inflationary challenges. The Group continued to perform well across all its divisions, Ambient, Frozen & Chilled and Foodservice, and we are pleased to report results in line with the significantly upgraded market expectations that were established after the Group's interim results, published in July 2023. The Group made strong progress as we delivered growth by making advancements, both operationally and commercially in the reporting period. As outlined in our trading update in November 2023, the integration of Westcountry Food Holdings ("WestCountry"), acquired in December 2022 has been successful. The Group's web-based trading platform has also delivered excellent results in terms of brand partner and customer engagement, resulting in electronic order capture standing at 47% for the quarter to October 2023. Divisional summary Set out below is the financial performance of the business by division for FY23: Ambient and Frozen & Chilled divisions The Group's Ambient and Frozen & Chilled divisions that service the Retail & Wholesale sectors of the grocery market saw combined revenues increase by ��44.7 million to ��423.6 million (FY22 ��378.9 million), a 12% increase from the year to October 2022. The gross margin in both divisions advanced by 1% at the same time as this revenue growth. Ambient ��000 FY23 FY22 Revenue 207,195 185,132 Gross profit 30,862 26,857 Gross margin % 15% 14% Frozen & Chilled ��000 FY23 FY22 Revenue 216,399 193,810 Gross profit 49,037 42,574 Gross margin % 23% 22% Foodservice division The Group's Foodservice division has also performed well during the period, resulting in an increase in revenues to ��178.6 million (FY22 ��124.1 million). The division's organic growth was 15%, with an increase in revenues of ��18.6 million. This year saw the acquisition of WestCountry and included in these numbers is ��35.9 million of acquired revenues. Foodservice ��000 FY23 FY22 Revenue 178,626 124,146 Gross profit 52,226 33,196 Gross margin % 29% 27% Facilities As part of Kitwave's 'buy-and-build' strategy, we were pleased to welcome WestCountry into the Group during the period. As a testament to the successful integration of WestCountry in June 2023, we commenced the construction of a new 80,000 sq. ft. distribution centre, due to be completed in Autumn 2024. The new distribution centre will be key to increasing the capacity of the Group's South West operations, and we look forward to updating the market on its progress in due course. Additionally, in line with our ESG commitments and to ensure our warehouse facilities are reducing their energy emissions, Kitwave continues to engage Businesswise Solutions as its energy management partner. The collaboration aims to mitigate Kitwave's carbon footprint by implementing energy-saving practices across its warehouses such as investing in solar generation. The Group now has solar PV capabilities at seven of its larger sites producing 513,000 kWh of energy in the year. Installed solar generation capacity is offering 10.7% self-sufficient energy generation. Strategy The Group remains committed to targeting expansion through strategic acquisitions. The Board recognises the significant opportunity within the fragmented UK wholesale market and it is focused on expanding the Group's market share from its existing position. The acquisition of WestCountry during the period enabled the Group to expand its offering to cover local, regional and imported fresh produce throughout the South West of England. This strategic investment complements existing businesses in the Foodservice division. In November 2023, which is post-period end, the Group acquired WLG (Holdings) Limited, a composite drinks wholesaler trading as Wilds of Oldham. The business has been established as a family-run drinks wholesaler for over 25 years, and it marks the 13th acquisition that the Group has made since 2011. Currently, Wilds of Oldham has 35 colleagues, 11 fleet vehicles, and annual revenue of ��10.2 million. Following the acquisition, the business will be incorporated into the Group's existing Foodservice on-trade business HB Clark. The Foodservice division continues to be a key driver for the Group and these acquisitions enable it to expand its presence in the market; providing a platform for further growth. The second fundamental element of the Group's strategy is the importance of organic growth and driving operational efficiency. The Group's investment in its infrastructure, systems, vehicles, and people has allowed it to continue to enhance its existing services and divisions providing an exceptionally high standard of service to customers. A notable investment by the Group is the focus on our people, with the implementation of the 'Kitwave One' programme. The initial roll-out of the programme, launched in October 2023, to over 600 colleagues within the Group, has provided a new online portal. This will improve engagement and provides external benefits to promote the wellbeing of our colleagues. We are confident that the Board and management team have the expertise and experience to deliver Kitwave's growth strategy, generating value for the Group and its shareholders. Colleagues In February 2023, we were delighted to welcome Teresa Octavio as a Non-Executive Director. Teresa has proven herself to be a key member of the Board, with her wealth of experience in global businesses such as Kantar Consulting, Diageo Plc and Procter & Gamble. The Group has also welcomed young adults on Universal Credit between the ages of 16-24 to work in our warehouses as part of the government-sponsored 'Kickstart' scheme. As a result, the Group has offered many apprenticeships to these individuals and the opportunity to start working in the form of longer-term employment. We are pleased to welcome them to the Kitwave community. As announced post-period end on 6 November 2023, I will be retiring at the Company's Annual General Meeting in March 2024. Having founded the Company in 1987, I could not be prouder of how far Kitwave has come as a business. I would also like to acknowledge that at Kitwave, our successes are inherently tied to the dedication of our team. I would like to express my gratitude to our colleagues across all areas of the Group for their unwavering commitment during this period. Ben Maxted, currently our Chief Operating Officer, will become the Chief Executive Officer following my retirement. Throughout his time at Kitwave, he has demonstrated strong operational and commercial expertise, and the Directors believe that the Group will be in very capable hands under his leadership. Summary and outlook Our FY23 results highlight yet another year of delivering growth for our business. We are proud of our high standard of service to our existing customers, as well as expanding our customer base and service offering through strategic acquisitions, both in the South West, and in the North West post-period end. The new distribution facility under construction in the South West region will open up new business opportunities, whilst improving both the ability to handle goods as well as the efficiency of the Group. The Group recognises the opportunities for the existing business model to continue to grow within the UK wholesale market yet understands that the business is evolving with technology. Our online order capturing has grown at a consistent rate since the launch in FY22 and expect greater utilisation by our customers in FY24 to become the preferred option. There remain many more acquisition opportunities in the UK's fragmented wholesale market, and Kitwave is well-positioned to capitalise on these opportunities and deliver further value to the Group and its shareholders. We would like to thank all our investors and stakeholders for their continued support throughout the period and look forward to updating the market with our progress in FY24. Paul Young Chief Executive Officer 26 February 2024 Chief Financial Officer's review Overview Group revenue increased to ��602.2 million, compared to ��503.1 million in the year to October 2022. This included ��35.9 million of acquired revenue and on a like-for-like basis a 13% increase in revenue. The Group's Ambient and Frozen & Chilled divisions that service the Retail & Wholesale sectors of the market saw revenues increase by ��44.7 million to ��423.6 million, a 12% increase in the year to October 2023. The Group's Foodservice division, saw revenues increase by ��54.5 million to ��178.6 million, an increase of 44% in the year to October 2023. This year saw the acquisition of Westcountry Food Holdings Limited in December 2022 and included in these numbers is ��35.9 million of acquired revenues. On a like-for-like basis, the division's organic growth was 15% with an increase in revenues of ��18.6 million. During the last 12 months, the grocery and foodservice market experienced more significant levels of price inflation and continued challenges with supply chain shortages. Despite these challenges, the Group continued to grow its overall unit sales as well as benefiting from the price rise inflation in the market. Gross profit margin has increased by 1.5% to 21.9% during the year. The increase is partly due to a mix change with the higher margin Foodservice division trading at increased revenue levels further helped by the acquired operations contributing a gross profit margin of 36.9%. Divisional margins are also ahead of the prior year. While inflationary pressure was seen in the cost base, overall distribution costs as a proportion of revenues only rose slightly. This includes the effect of the higher service levels in the acquired business that had a cost to serve of 15.4%. Overall distribution costs were 9.1% of Group revenue (FY22: 8.7%). The Group's adjusted operating profit of ��32.0 million (FY22: ��21.5 million) represents 5.3% (FY22: 4.3%) of Group revenue. All divisions generated an increase in adjusted operating profit margin compared with FY22. In the 12 months ended October 2023, Group profit before tax increased by ��7.0 million to ��24.9 million (FY22: ��17.9 million). This is a result of margin enhancing revenue growth in the business and the continued drive toward efficient delivery and cost control within the overhead base. Net finance costs of ��4.5 million (FY22: ��2.5 million) relate to the costs associated with the working capital facilities utilised by the Group of ��2.8 million (FY22: ��1.1 million) and interest relating to leased assets accounting of ��1.7 million (FY22: ��1.4 million). The statutory basic earnings per share for FY23 is 27.1 pence (FY22: 20.5 pence). The Board is recommending a final dividend of 7.45 pence per ordinary share (FY22: 6.75 pence), subject to approval at the AGM, which, if approved, will result in a total dividend for the year of 11.20 pence per ordinary share. This is a 21.1% rise in dividend per share compared to FY22. KPIs FY23 FY22 Financial profitability KPIs Gross margin % 21.9% 20.4% Adjusted operating profit * ��32.0m ��21.5m Adjusted operating margin * 5.3% 4.3% EPS (Basic) 27.1 pence 20.5 pence Financial structure KPIs Leverage (inc IFRS16 debt) * 1.4x 1.5x Leverage (exc IFRS16 debt) * 0.8x 0.6x Pre tax operational cash conversion * 90% 105% Return on Investment Capital * 19% 15% Return on Net assets * 30% 24% Non financial KPIs Service levels 98% 98% Service levels are assessed as the number of cases delivered right first time compared to the number of cases ordered during the financial year. For more information on alternative performance measures please see the glossary at the end of the announcement. Capital expenditure The Group has continued to invest in its operations over the financial year with ��3.8 million (FY22: ��2.0 million) invested in new assets and ��10.0 million (FY22: ��8.7 million) in right-of-use assets. Supply chain problems and long order times for new vehicles were seen right through the year. Despite these delays, investment in the vehicle fleet continued with ��1.5 million (FY22: ��0.6 million) of new vehicles acquired and ��7.7 million (FY22: ��3.1 million) invested through right-of-use vehicle replacement. Five of our leased premised were renewed resulting in an increase in right-of-use assets of ��1.9 million. Included within the plant and machinery increase was ��0.4 million due to the installation of solar panels at the Luton depot. Cashflow The net cash inflow from operating activities for the year was ��30.3 million (FY22: ��26.5 million) after net outflow from working capital of ��3.9 million (FY22: ��1.4 million inflow) and tax payments of ��6.1 million (FY22: ��4.0 million). This resulted in operating cash conversion of 75% (FY22: 91%) and pre-tax operational cash conversion of 90% (FY22: 105%). There was a cash outflow to the Group of ��19.6 million in relation to the acquisition of Westcountry Food Holdings Limited ("WestCountry"). This amount is the full consideration in relation to the transaction with no further payments due. During the period, WestCountry contributed a working capital outflow of ��0.8 million as a result of the part year of ownership. Excluding WestCountry the like for like pre-tax operational cash conversion would have been 91%. The Group paid a final dividend relating to FY22 in April 2023 of 6.75 pence per ordinary share and an interim dividend in respect of FY23 in August 2023 of 3.75 pence per ordinary share. The total cash outflow relating to dividend payments was ��7.4 million (FY22: ��4.9 million) during the year. The net cash decrease in the year was ��4.8 million. Financial position At 31 October 2023, cash and cash equivalents totalled ��0.7 million (FY22: ��5.5 million). The Group had a total of ��59.1 million (FY22: ��49.1 million) of interest-bearing debt facilities including ��26.2 million (FY22: ��25.9 million) of IFRS 16 lease liabilities. The Group's CID facility was drawn to a value of ��6.4 million (FY22: ��20.4 million) at year end. It has one covenant requiring net debt (including IFRS 16 lease liabilities) not to exceed three times the last twelve months' EBITDA which was satisfied as at 31 October 2023. In addition to the cash and cash equivalents, there were undrawn facilities available to the Group of ��39.6 million at the year end (FY22: ��25.6 million). During the period the Group extended the expiry on its CID facility by 18 months to December 2025. At the same time a new ��20.0 million revolving credit facility was put in place with expiry in December 2025. This revolving credit facility is available to be utilised for permitted acquisition opportunities undertaken by the Group and was fully drawn at 31 October 2023. This facility includes the same covenant as the CID facility plus an additional interest cover covenant set such that the last twelve month's EBITDA is required to cover the last twelve month's interest charge by at least four times. This covenant was comfortably satisfied at 31 October 2023. Taxation The tax charge for the year was ��5.9 million (FY22: ��3.5 million) at an effective rate of 24% (FY22: 20%). An increase in the UK corporation tax rate from 19% to 25% was enacted part way through the Group's financial year and as a result a pro-rated tax rate of 23% is applicable to earnings for the period ending 31 October 2023. The effective rate is higher than the pro-rated tax rate mainly due to the non-deductible element of acquisition costs and compensation for post combination services. A full reconciliation of the tax charge is shown in note 9 of the financial statements. Return on capital Utilising an effective tax rate of 23% (FY22: 18%) the adjusted profit after tax return on investment capital at 31 October 2023 was 19% (FY22: 15%). These returns exclude the charges relating to share-based payments. The Group drives its profitability through investment in operational infrastructure (property leases, IT & motor vehicles) and investment in working capital. The Board considers the returns on this investment in relation to capital allocation. A second returns measure is therefore included in this report again utilising an effective tax rate of 23% (FY22: 18%). The adjusted profit after tax return on net assets at 31 October 2023 was 30% (FY22: 24%). For more information on alternative performance measures including calculations on return on capital measures please see the glossary at the end of the announcement. Share based payments In the year there was an expense of ��1.0 million (FY22: ��0.9 million) for share-based payments comprising: �� ��0.9 million relating to shares under the Management Incentive Plan (MIP) that commenced in July 2021 post the completion of the IPO in May 2021. �� ��0.1 million relating to shares under the Long-Term incentive plan (LTIP) that were granted in March 2023. David Brind Chief Financial Officer 26 February 2024 Consolidated statement of profit and loss and other comprehensive income Note Year ended 31 October 2023 ��000 Year ended 31 October 2022 ��000 Revenue 3 602,220 503,088 Cost of sales (470,095) (400,460) Gross profit 132,125 102,628 Other operating income 4 183 374 Distribution expenses (54,570) (44,010) Administrative expenses (48,375) (38,617) Operating profit 29,363 20,375 Analysed as: Adjusted EBITDA 41,141 29,477 Amortisation of intangible assets 5, 11 (975) (99) Depreciation 5, 12,13 (8,992) (7,897) Acquisition expenses 5 (648) (148) Compensation for post combination services 5 (199) (95) Share based payment expense 5 (964) (863) Total operating profit 29,363 20,375 Finance expenses 8 (4,505) (2,534) Analysed as: Interest payable on bank loans and bank facilities 8 (2,842) (1,105) Finance charges on leases 8 (1,656) (1,427) Other interest 8 (7) (2) Financial expense (4,505) (2,534) Profit before tax 24,858 17,841 Tax on profit on ordinary activities 9 (5,902) (3,501) Profit for the financial year 18,956 14,340 Other comprehensive income - - Total comprehensive income for the year 18,956 14,340 Basic earnings per share (pence) 10 27.1 20.5 Diluted earnings per share (pence) 10 26.0 20.5 �� Consolidated balance sheet as at 31 October 2023 2022 Note ��000 ��000 Non-current assets Goodwill 11 58,680 44,342 Intangible assets 11 4,878 737 Tangible assets 12 16,614 13,037 Right-of-use assets 13 29,716 26,452 Investments 14 45 35 109,933 84,603 Current assets Inventories 15 35,410 31,846 Trade and other receivables 16 63,569 57,698 Cash and cash equivalents 17 673 5,511 99,652 95,055 Total assets 209,585 179,658 Current liabilities Other interest bearing loans and borrowings 19 (6,405) (20,354) Lease liabilities 19 (6,402) (5,509) Trade and other payables 18 (63,596) (57,891) Tax payable (594) (62) (76,997) (83,816) Non - current liabilities Other interest bearing loans and borrowings 19 (20,000) - Lease liabilities 19 (26,267) (23,240) Deferred tax liabilities 20 (1,876) (715) (48,143) (23,955) Total liabilities (125,140) (107,771) Net assets 84,445 71,887 Equity attributable to equity holders of the parent Company Called up share capital 23 700 700 Share premium account 23 64,183 64,183 Consolidation reserve 23 (33,098) (33,098) Share based payment reserve 22 2,042 1,090 Retained earnings 50,618 39,012 Equity 84,445 71,887 Company balance sheet as at 31 October 2023 2022 Note ��000 ��000 Non current assets Investments 14 12,993 12,993 Deferred tax assets 20 514 273 13,507 13,266 Current assets Trade and other receivables 16 60,033 61,535 Cash and cash equivalents 17 3 45 60,036 61,580 Total assets 73,543 74,846 Current liabilities Trade and other payables 18 (94) (61) Tax payable (45) - (139) (61) Total liabilities (139) (61) Net assets 73,404 74,785 Equity attributable to equity holders of the parent Company Called up share capital 23 700 700 Share premium account 23 64,183 64,183 Share based payment reserve 22 2,042 1,090 Retained earnings 6,479 8,812 Equity 73,404 74,785 * The Company's profit after tax for the year was ��5,017,000 (FY22: ��453,000 loss) Consolidated statement of changes in equity Called up share capital Share premium account Consolidation reserve Share based payment reserve Profit and loss account Total equity ��000 ��000 ��000 ��000 ��000 ��000 Balance at 1 November 2021 700 64,183 (33,098) 227 29,572 61,584 Total comprehensive income for the year Profit - - - - 14,340 14,340 Other comprehensive income - - - - - - Total comprehensive income for the year - - - - 14,340 14,340 Transactions with owners, recorded directly in equity Dividends - - - - (4,900) (4,900) Share based payment expense - - - 863 - 863 Total contribution by and transactions with owners - - - 863 (4,900) (4,037) Balance at 31 October 2022 700 64,183 (33,098) 1,090 39,012 71,887 Total comprehensive income for the year Profit - - - - 18,956 18,956 Other comprehensive income - - - - - - Total comprehensive income for the year - - - - 18,956 18,956 Transactions with owners, recorded directly in equity Dividends - - - - (7,350) (7,350) Share based payment expense - - - 952 - 952 Total contribution by and transactions with the owners - - - 952 (7,350) (6,398) Balance at 31 October 2023 700 64,183 (33,098) 2,042 50,618 84,445 Company statement of changes in equity Called up share capital Share premium account Share based payment reserve Profit and loss account Total equity ��000 ��000 ��000 ��000 ��000 Balance at 1 November 2021 700 64,183 227 14,165 79,275 Total comprehensive loss for the year Loss - - - (453) (453) Other comprehensive income - - - - - Total comprehensive loss for the year - - - (453) (453) Transactions with owners, recorded directly in equity Dividends - - - (4,900) (4,900) Share based payment expense - - 863 - 863 Total contribution by and distribution to owners - - 863 (4,900) (4,037) Balance at 31 October 2022 700 64,183 1,090 8,812 74,785 Total comprehensive income for the year Profit - - - 5,017 5,017 Other comprehensive income - - - - - Total comprehensive income for the year - - - 5,017 5,017 Transactions with owners, recorded directly in equity Dividends - - - (7,350) (7,350) Share based payment expense - - 952 - 952 Total contribution by and distributions with the owners - - 952 (7,350) (6,398) Balance at 31 October 2023 700 64,183 2,042 6,479 73,404 Consolidated cash flow statement Year ended 31 October 2023 Year ended 31 October 2022 Note ��000 ��000 Cash flow statement Cash flow from operating activities Profit for the year 18,956 14,340 Adjustments for: Depreciation and amortisation 11,12,13 9,967 7,996 Financial expense 8 4,505 2,534 Profit on sale of property, plant and equipment 4 (179) (164) Net gain on remeasurement of right-of-use assets and lease liabilities 4 (4) (8) Compensation for post combination services 5 199 95 Equity settled share based payment expense 5 964 863 Taxation 9 5,902 3,501 40,310 29,157 Increase in trade and other receivables (3,737) (2,909) Increase in inventories (2,553) (4,168) Increase in trade and other payables 2,353 8,450 36,373 30,530 Tax paid (6,075) (4,005) Net cash inflow from operating activities 30,298 26,525 Cash flows from investing activities Acquisition of property, plant and equipment (3,915) (2,608) Proceeds from sale of property, plant and equipment 473 308 Acquisition of subsidiary undertakings (net of overdrafts and cash acquired) 2 (19,593) (16,914) Net cash outflow from investing activities (23,035) (19,214) Cash flows from financing activities Proceeds from new loan 19 20,000 - Net movement in invoice discounting 19 (13,948) 5,734 Interest paid 8,19 (4,248) (2,534) Repayment of lease liabilities 19 (6,555) (5,068) Dividends paid (7,350) (4,900) Net cash outflow from financing activities (12,101) (6,768) Net (decrease)/increase in cash and cash equivalents (4,838) 543 Opening cash and cash equivalents 5,511 4,968 Cash and cash equivalents at year end 17 673 5,511 Notes 1 Accounting policies Kitwave Group plc (the "Company") is a public company limited by shares and incorporated, domiciled and registered in England in the UK. The registered number is 9892174 and the registered address is Unit S3, Narvik Way, Tyne Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The parent Company financial statements present information about the Company as a separate entity. The Group financial statements have been prepared and approved by the Directors in accordance with UK adopted international accounting standards. The Group and Company financial statements are presented in pounds sterling which is the functional currency of the Group. All values are rounded to the nearest thousand (��000), except when otherwise indicated. The financial information set out above does not constitute the Group or the Company's statutory accounts for the year ended 31 October 2023 or the financial year ended 31 October 2022. Statutory accounts for the year ended 31 October 2022 have been delivered to the registrar of companies, and those for the year ended 31 October 2023 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under s498 (2) or (3) of the Companies Act 2006. In publishing the Company financial statements together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual statement of profit and loss and related notes that form a part of these approved financial statements. The Company has applied the following exemptions in the preparation of its financial statements: �� A cash flow statement and related notes have not been presented; - �� Disclosures in respect of new standards and interpretations that have been issued but which are not yet effective have not been provided; �� Disclosures in respect of transactions with wholly-owned subsidiaries have not been made; and �� Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instruments have not been provided. �� Disclosures in respect of share based payments as required by IFRS 2 Share-based Payment have not been provided The accounting policies set out below have, unless otherwise stated, been applied consistently to both periods presented in these consolidated financial statements. The consolidated financial statements include the results of all subsidiaries owned by the Company per note 14. Certain of these subsidiaries have taken exemption from an audit for the year ended 31 October 2023 by virtue of s479A Companies Act 2006. To allow these subsidiaries to take the audit exemption, the Company has given a statutory guarantee of all the outstanding liabilities as at 31 October 2023. The subsidiaries which have taken this exemption from audit are: �� Alpine Fine Foods Limited; �� TG Foods Limited; �� Anderson (Wholesale) Limited; �� Angelbell Limited; �� Phoenix Fine Foods Limited; and �� Supplytech Limited 1.1 Critical accounting estimates and judgements The preparation of financial statements requires the Directors to make judgements, estimates and assumptions concerning the future performance and activities of the Group. Critical accounting estimates have been identified as follows: Impairment of goodwill In accordance with IAS 36 "Impairment of Assets", the Board identifies appropriate Cash-Generating Units ("CGUs") and the allocation of goodwill to these units. Where an indication of impairment is identified, assessment and estimation of the recoverable value of the cash generating units is required. This process involves estimation of the future cash flows from the CGUs and also the selection of appropriate discount rates in order to calculate the net present value of those cash flows. The discount rate is a key area of judgement and the forecast cash flow includes significant accounting estimates. Each of the CGUs has significant headroom under the annual impairment review and the Directors believe that no reasonable change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount. More information on the assumptions and sensitivities applied are set out in note 11 to these financial statements. Valuation of intangible assets arising on acquisition Under IFRS 3 Business Combinations, when an acquisition takes place the Group is required to assess whether there are any additional intangible assets arising separately from goodwill. This requires significant accounting estimates and judgements to be applied to the valuation of brands and customer relationships. In the year ended 31 October 2023, the Group acquired the entire share capital of Westcountry Food Holdings Limited. An independent valuation of the acquired intangible assets was performed by experts, requiring estimates of weighted average cost of capital, customer attrition and estimate future cash flows utilising the multi-period excess earnings methodology. The intangibles identified are set out in note 2 and the Directors have concluded that there is no significant risk of material adjustments to the fair value of assets acquired in the year. 1.2 Measurement convention The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: financial instruments classified at fair value through the statement of profit and loss, unlisted investments. 1.3 Going concern The Group has continued to deliver on its growth strategy, both operationally and financially, in the year ended 31 October 2023, with the recent acquisitions of M.J. Baker Foodservice Limited ("MJ Baker") and Westcountry Food Holdings Limited ("WestCountry") contributing to increased profitability and continued positive cash generation. MJ Baker and WestCountry have both delivered strong performances since their integration into the Group. The Directors are confident both entities will continue to go from strength to strength as they leverage from their complementary product ranges and customer lists. The year has seen a rising costs of living in the UK, as food prices, energy prices and interest rates have increased. In line with the Directors expectations, this has not impacted demand for the Group's products with case numbers up year on year. Impulse product in particular, fulfilled by the Ambient and Frozen & Chilled divisions, has remained resilient of the cost of living impact. Manufacturer led pricing increases have compensated for the inflationary increase in overheads seen within the Group with an overall improvement in operating profit year on year. The acquisition of WestCountry added ��35,887,000 of revenue and ��4,657,000 of operating profit, contributing to the improvement in cash flow from operations (before tax payments) from ��30,530,000 in FY22 to ��36,373,000 in FY23. The acquisition was funded via a new three-year revolving credit facility provided by the Group's existing lenders. This facility includes an option for the Group to extend it by a further two years. Post year end, H.B.Clark & Co. Successors Limited ("HB Clark") completed the acquisition of WLG (Holdings) Limited ("WLG") for ��2,700,000. The acquisition was funded from headroom in the Group's current banking facilities. WLG is an on-trade supplier based in the North West of England allowing the Group to expand is existing on-trade offering through HB Clark into this geography. WLG has annual turnover of approximately ��10,200,000 and will be immediately earnings and cash flow enhancing to the Group. The Group has prepared financial forecasts and projections for a 12 month period from the date of this report (the "going concern assessment period"), which take into account the acquired balance sheet and forecast trading of WLG. A 'severe but plausible' downside sensitivity has been prepared to support the Directors conclusion regarding going concern. In addition, a reverse stress test has been performed the results of which have not changed the conclusion around going concern. These sensitivities include a possible downside scenario to Group trading as a result of further inflationary pressure in 2024. The Group has significant headroom on banking facilities at the year end and throughout the forecast period. These facilities are committed beyond the forecast period under review. These forecasts show that the Group will have sufficient levels of financial resources available both to meet its liabilities as they fall due for that period and comply with remaining covenant requirements on its working capital facilities. Consequently, the Directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of this financial information and therefore have prepared the financial statements on a going concern basis. 1.4 Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 October 2023. A subsidiary undertaking is an entity that is controlled by the Company. The results of subsidiary undertakings are included in the consolidated statement of profit and loss account from the date that control commences until the date that control ceases. Control is established when the Company is exposed to, or has rights to, variable returns from its involvement with an entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. In respect of the legal acquisition of Kitwave One Limited by the Company in the year ended 30 April 2017, the principles of reverse acquisition have been applied under IFRS 3. The Company, via its 100% owned subsidiary Kitwave Investments Limited, is the legal acquirer of Kitwave One Limited but Kitwave One Limited was identified as the accounting acquirer of the Company. The assets and liabilities of the Company and the assets and liabilities of Kitwave One Limited continued to be measured at book value. By applying the principles of reverse acquisition accounting the Group is presented as if the Company has always owned Kitwave One Limited. The comparative consolidated reserves of the Group were adjusted to reflect the statutory share capital and share premium of the Company as if it had always existed, adjusted for movements in the underlying Kitwave One Limited's share capital and reserves until the date of the acquisition. A consolidation reserve was created which reflects the difference between the capital structure of the Company and Kitwave One Limited at the date of acquisition less any cash and deferred cash consideration for the transaction. 1.5 Foreign currency Transactions in foreign currencies are translated to the Group companies' functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognised in the statement of profit and loss. 1.6 Classification of financial instruments Financial assets Financial assets are classified at initial recognition, and subsequently measured at amortised cost, Fair Value through Other Comprehensive Income ("FVOCI") or Fair Value through the statement of Profit and Loss ("FVTPL"). The classification of financial assets under IFRS 9 is based on two criteria: �� the Group's business model for managing the assets; and �� whether the instruments' contractual cash flows represent 'Solely Payments of Principal and Interest on the principal amount outstanding (the "SPPI criterion"). A summary of the Group's financial assets is as follows: Trade and other receivables Amortised cost-hold to collect business model and SPPI met Cash and short-term deposits Amortised cost Financial liabilities Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions: (a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and (b) where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares. A summary of the Group's financial liabilities is as follows: Bank loans and overdrafts Amortised cost Trade and other payables Amortised cost Prepayments, other receivables, other taxation and social security payables and other payables do not meet the definition of financial instruments. Further information is included in note 25. 1.7 Non derivative financial instruments Trade and other receivables Trade and other receivables are recognised initially at transaction price. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any expected credit losses. Trade and other payables Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement. For payments received through electronic payment systems the Group recognises cash, and derecognises the relevant trade receivable, when the payment is completed, and the cash is received. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. Invoice discounting The Group is party to an invoice discounting arrangement which provides additional working capital up to the value of a set proportion of its trade receivables balances. The advances are secured against trade receivables (note 16) and are presented in trade and other payables (note 18). These are repayable within 90 days of the invoice and carry interest at a margin of 2.00%. This is a committed facility which expires in December 2025. The net movement of the balance is disclosed in the cash flow statement. Equity investments Equity investments are instruments that meet the definition of equity from the issuer's perspective: that is they do not contain an obligation to pay and provide a residual interest in the assets of the issuer. Equity investments are held at fair value through the statement of profit and loss. 1.8 Other financial instruments Derivative financial instruments Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the statement of profit and loss. No hedge accounting has been applied. 1.9 Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation is charged to the statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: �� Leasehold improvements 5-10% straight line or straight line over the term of the lease �� Freehold property 2% straight line �� Plant and machinery 10-20% reducing balance and straight line �� Fixtures and fittings 10-25% reducing balance and straight line �� Motor vehicles 15-25% reducing balance and straight line Depreciation methods, useful lives and residual values are reviewed at each balance sheet date. 1.10 Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. At the acquisition date, the Group measures goodwill at the acquisition date as: �� the fair value of the consideration (excluding contingent consideration) transferred; plus �� estimated amount of the contingent consideration (see below): plus �� the fair value of the existing equity interest in the acquiree; less �� the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities and contingent liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in the statement of profit and loss. Any contingent consideration payable is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in the statement of profit and loss. 1.11 Intangible assets and goodwill Goodwill Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units ("CGUs") and is not amortised but is tested annually for impairment. Intangible assets arising on acquisition and other intangible assets Intangibles assets arising on acquisition are capitalised at far value as determined at the date of acquisition and are stated at fair value less accumulated amortisation. Amortisation is charged to the statement of profit and loss on a straight line basis over the estimated useful lives of acquired intangible assets from the date they are acquired as follows: �� Customer relationships 6 years �� Brands 2 years Other intangible assets are stated at costs less accumulated amortisation. They relate to capitalised software and development costs and are being amortised on a straight line basis over 5-10 years. The cost of computer software purchased or developed in house which has the capacity to generate economic benefits for a period in excess of one year is capitalised as an intangible asset. 1.12 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle. The Group participates in rebate schemes with its suppliers. Rebates are principally earned from suppliers on purchase of inventory and are recognised at point of delivery to the Group. Where the rebate earned relates to inventories which are held by the Group at the period end, the rebates are deducted from the cost of those inventories. Any rebates based on a volume of purchases over a period are only recognised when the volume target has been achieved. 1.13 Impairment excluding inventories and deferred tax assets Non derivative financial assets - trade receivables The Group recognises loss allowance for Expected Credit Losses ("ECLs") on trade receivables measured at amortised cost. The Group measures loss allowances at an amount equal to lifetime ECLs as the term of the asset is considered short. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment including forward looking information. The Group utilises the practical expediency for short term receivables by adopting the simplified 'matrix' approach to calculate expected credit losses. The provision matrix is based on an entity's historical default rates over the expected life of the trade receivables as adjusted for forward looking estimates. The Group assumes that the credit risk on a financial asset has increased if it is aged more than 90 days since delivery. This is not relevant in all cases and management use its historical experience and knowledge of the customer base to assess whether this is an indicator of increased risk on a customer by customer basis. The Group considers the financial asset to be in default when the borrower is unlikely to pay its obligations or has entered a formal insolvency process or other financial reorganisation. Loss allowances for financial assets measured at amortised costs are deducted from the gross carrying amount of the assets. Non-financial assets The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "CGU"). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of profit and loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 1.14 Employee benefits Defined contribution plans and other long term employee benefits A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of profit and loss in the periods during which services are rendered by employees. Share-based payment transactions Share-based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Company. The Group operates a Management Incentive Plan ("MIP") for certain Directors and a Long Term Incentive Plan ("LTIP") for certain Directors and senior staff members, granting them equity settled share option rights to the Company's equity instruments. The fair value at the grant date of the options is recognised as an employee expense with a corresponding increase in equity, on a straight line basis over the vesting period. Under both the MIP and LTIP, the fair value of the awards granted is measured using an option valuation model, taking into account the terms and conditions upon which the awards were granted. The Monte Carlo option valuation model was adopted for both schemes and independent expert advice was sought for both schemes. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with market based conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. Further information is included in note 22. Under IFRS 3 the contingent payment which has been agreed for the remaining 5% of the share in Central Supplies (Brierley Hill) Ltd is classified as remuneration for post-combination services, as consideration for the shares is linked to an employment condition. The amount recognised in the statement of profit and loss and other comprehensive income was ��199,000 (FY22: ��95,000). 1.15 Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability. 1.16 Revenue IFRS 15 "revenue from contracts with customers" establishes a principles-based approach for revenue recognition and is based on the concept of recognising revenue for performance obligations only where they are satisfied, and the control of goods or service is transferred. In doing so, the standard applies a five-step approach to the timing of revenue recognition and applies to all contracts with customers, except those in the scope of other standards. The principal performance obligation of delivery and sale of goods is discharged on delivery/collection of the products by the customer at which point control of the goods has transferred. Customer discounts and rebates comprise variable consideration and are accounted for as a reduction in the transaction price, based on the most likely outcome basis. The most likely outcome model is used due to the simple nature of rebate agreements and the limited number of possible outcomes - principally whether or not the customer achieved the required level of purchases. 1.17 Financing income and expenses Financing expenses comprise interest payable, finance charges on put option liabilities and finance leases recognised in the statement of profit and loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the statement of profit and loss (see 1.5 foreign currency accounting policy). Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of the cost of that asset. Financing income comprise interest receivable on funds invested, finance income on the put option liability, and net foreign exchange gains. Interest income and interest payable is recognised in the statement of profit and loss as it accrues, using the effective interest method. Dividend income is recognised in the statement of profit and loss on the date the entity's right to receive payments is established. Foreign currency gains and losses are reported on a net basis. 1.18 Taxation Current tax Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the statement of profit and loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax is recognised on an undiscounted basis. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. 1.19 Leases The Group adopts the requirements of IFRS 16 as follows: The Group has lease arrangements in place for properties, vehicles, fork lift trucks and other equipment including plant and machinery. At the inception of the lease agreement, the Group assesses whether the contract conveys the right to control the use of an identified assets for a certain period of time and whether it obtains substantially all of the economic benefits from the use of that assets in exchange for consideration. The Group recognises a lease liability and a corresponding right-of- use asset with respect to all such lease arrangements. A right-of-use asset is capitalised on the balance sheet at cost, which comprises the present value of the future lease payments at inception of the lease. Right-of-use assets are depreciated using a straight line method over the shorter of the life of the asset or the lease term and are assessed in accordance with IAS 36 'Impairment of Assets' to determine whether the asset is impaired. The lease liability is initially measured at the present value of the lease payments as outlined above for the right-of-use asset and is increased by the interest cost on the lease liability, subsequently reduced by the lease payments made. Lease liabilities are classified between current and non-current on the balance sheet. An assessment of the discount rate used in the present value calculation for new lease additions is performed at inception of the lease to ensure it reflects the Group's incremental borrowing rate. The selected rate is supported by quotes from third parties for financing the asset and the Group's weighted average cost of capital. The Directors believe that no reasonable change in this accounting estimate would cause the carrying value of leases to be materially misstated. The Group has relied upon the exemption under IFRS 16 to exclude the impact of low-value leases and leases that are short- term in nature (defined as leases with a term of 12 months or less). Costs on these leases are recognised on a straight-line basis as an operating expense within the statement of profit and loss. All other leases are accounted for in accordance with this policy as determined by IFRS 16. 1.20 Government Grants The Group has elected to present grants related to income separately under the heading "Other income" within the statement of profit and loss. This income in the prior year represents the funding provided by the Government in relation to Additional Restrictions Grant and COVID-19 Additional Relief Fund Schemes. The Directors do not consider there to be a material risk that any funding received will be repayable. 1.21 Exceptional items Exceptional items are defined as income or expenses that arise from events or transactions that are clearly distinct from the recurring activities of the Group as a delivered wholesale business. Such items have been separately presented to enable a better understanding of the Group's operating performance. Details of exceptional expenses are presented in note 5. 1.22 Investments Investments in subsidiaries are carried at cost less impairment in the parent Company financial statements. 2. Acquisitions in the year Acquisitions in the year ended 31 October 2023 Westcountry Food Holdings Limited On 9 December 2022, the Group acquired the entire share capital of Westcountry Food Holdings Limited for a total consideration of ��28,485,811. After recognition of acquired intangible assets and associated deferred tax liabilities, the resulting goodwill of ��14,338,000 was capitalised and is subject to annual impairment testing under IAS 36. The acquisition had the following effect on the Group's assets and liabilities: Consolidated balance sheet as at 9 December 2022 Book value Fair value adjustments Fair value ��000 ��000 ��000 Non-current assets Tangible assets 2,146 - 2,146 Intangible assets - 4,992 4,992 Right-of-use assets 262 - 262 Investments 7 - 7 Current assets Inventories 1,011 - 1,011 Trade and other receivables 2,135 - 2,135 Cash and cash equivalents 8,893 - 8,893 Total assets 14,454 4,992 19,446 Current liabilities Lease liabilities (49) - (49) Trade and other payables (2,908) - (2,908) Corporation tax (453) - (453) Non-current liabilities Lease liabilities (499) - (499) Deferred tax (163) (1,226) (1,389) Total liabilities (4,072) (1,226) (5,298) Net identifiable assets and liabilities 10,382 3,766 14,148 Goodwill 14,338 Total net assets acquired 28,486 Initial purchase consideration paid 29,000 Net asset adjustment refunded (514) Purchase consideration and costs of acquisition paid in period 28,486 Cash acquired (8,893) Purchase consideration net of cash acquired 19,593 The business and its trading subsidiary, Westcountry Fruit Sales Limited, were acquired as part of the Group's growth strategy. Significant control was obtained through the acquisition of 100% of the share capital of Westcountry Food Holdings Limited. An independent valuation was performed to identify and intangible assets on acquisition per IFRS 3. As a result of this valuation, intangible assets in relation to brand and customer relationships were identified, and recognised, with attributable fair values of ��260,000 and ��4,732,000 respectively. The recognition of these intangible assets resulted in deferred tax liabilities of ��63,000 for the brand intangible and ��1,163,000 for the customer intangible also being recognised at acquisition. The acquired undertakings made a consolidated profit of ��3,479,000 from the beginning of its financial year on 2 January 2022 to the date of acquisition. In its previous financial year the profit after tax was ��3,112,000. Following acquisition, the business contributed revenue of ��35,887,000 and operating profit of ��4,657,000 to the Group for the year ended 31 October 2023. If the business had been acquired at the start of the Group's financial period, being 1 November 2022, it would have added ��37,861,000 to Group revenue and ��4,773,000 to Group operating profit for the year ended 31 October 2023 The initial consideration paid was ��29,000,000 from which an amount of ��514,189 was repaid by the vendor following submission of completion accounts which triggered a repayment to the Kitwave Group for the difference between the net asset target in the sales purchase agreement and the completion accounts net assets. This resulted in a net consideration paid in the period of ��28,485,811. Net of cash and cash equivalents of ��8,893,000 the net cash outflow from the Group as a result of the acquisition was ��19,592,811. On acquisition an assessment was made regarding the fair value of tangible assets which includes two freehold property. The result of an independent assessment was no change to the net book value held in Westcountry Food Holdings Limited accounts. 3. Segmental information The following analysis by segment is presented in accordance with IFRS 8 on the basis of those segments whose operating results are regularly reviewed by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to assess performance and make strategic decisions about allocation of resources The Group has the following operating segments defined by products and their associated margins: �� Ambient: Provides delivered wholesale of ambient food, drink and tobacco products; �� Frozen and chilled: Provides delivered wholesale of frozen and chilled food products; �� Foodservice: Provides delivered wholesale of alcohol, frozen, chilled and fresh food to trade customers. Corporate contains the central functions that are not devolved to the business units. These segments offer different products and services to different customer types, attracting different margins. They each have separate management teams. The segments share a commonality in service being delivered wholesale of food and drink products. The Group therefore benefits from a range of expertise, cross selling opportunities and operational synergies in order to run each segment as competitively as possible. The Group's forward look strategy is to provide an enhanced customer service by making available the wider Group product range to its existing customer base. As a result, the Board will be assessing the segments based on customer type going forward with the customers in the Ambient and Frozen & Chilled divisions operating in the retail and wholesale channel. The presentation convention adopted in these financial statements is to show the three operating segments as this is how the Board of Directors has assessed performance during the year. The following analysis shows how this development will be monitored in future periods whilst demonstrating the link to the existing segmental information Each segment is measured on its EBITDA, adjusted for acquisition costs and reconstruction costs, and internal management reports are reviewed monthly by the Board. This performance measure is deemed the most relevant by the Board to evaluate the results of the segments relative to entities operating in the same industry. FY23 Ambient ��000 Frozen & Chilled ��000 Total Retail and Wholesale ��000 Foodservice ��000 Corporate ��000 Total ��000 Revenue 207,195 216,399 423,594 178,626 - 602,220 Inter-segment revenue 15,561 3,392 18,953 625 - 19,578 Segment revenue 222,756 219,791 442,547 179,251 - 621,798 Adjusted EBITDA 12,291 14,115 26,406 20,030 (5,295) 41,141 Amortisation of intangibles - (80) (80) (6) (47) (133) Depreciation (1,773) (4,130) (5,903) (2,995) (94) (8,992) Adjusted operating profit 10,518 9,905 20,423 17,029 (5,436) 32,016 Group management charge (1,230) (840) (2,070) (1,750) 3,820 - Amortisation of intangible assets arising on acquisition - - - - (842) (842) Acquisition expense - - - - (648) (648) Compensation for post combination services - (199) (199) - - (199) Share based payment expense - - - - (964) (964) Interest expense (918) (1,344) (2,262) (689) (1,554) (4,505) Segment profit/(loss) before tax 8,370 7,522 15,892 14,590 (5,624) 24,858 Segment assets 43,697 56,373 100,070 44,586 64,929 209,585 Segment liabilities (28,380) (45,691) (74,071) (29,288) (21,781) (125,140) Segment net assets 15,317 10,682 25,999 15,298 43,148 84,445 Within Corporate segment assets is ��56,680,000 of goodwill on consolidation. This is allocated to the trading segments as follows (see note 11 for further information): Goodwill by segment 13,516 12,499 26,015 32,665 - 58,680 For more information on alternative performance measures please see the glossary on pages at the end of the announcement FY22 Ambient ��000 Frozen & Chilled ��000 Total Retail and Wholesale ��000 Foodservice ��000 Corporate ��000 Total ��000 Revenue 185,132 193,810 378,942 124,146 - 503,088 Inter-segment revenue 13,813 2,551 16,364 572 - 16,936 Segment revenue 198,945 196,361 395,306 124,718 - 520,024 Adjusted EBITDA 9,112 11,222 20,334 12,263 (3,120) 29,477 Amortisation of intangibles - (71) (71) (6) (22) (99) Depreciation (1,584) (3,911) (5,495) (2,345) (57) (7,897) Adjusted Operating Profit 7,528 7,240 14,768 9,912 (3,199) 21,481 Group management charge (730) (840) (1,570) (1,000) 2,570 - Acquisition expense - - - - (148) (148) Compensation for post combination services - (95) (95) - - (95) Share based payment expense - - - - (863) (863) Interest expense (736) (1,057) (1,793) (520) (221) (2,534) Segment profit before tax 6,062 5,248 11,310 8,392 (1,861) 17,841 Segment assets 43,029 52,441 95,470 39,106 45,082 179,658 Segment liabilities (33,501) (45,218) (78,719) (27,886) (1,166) (107,771) Segment net assets / (liabilities) 9,528 7,223 16,751 11,220 43,916 71,887 Within Corporate segment assets is ��44,342,000 of goodwill on consolidation. This is allocated to the trading segments as follows (see note 11 for further information) Goodwill by segment 13,516 12,499 26,015 18,327 - 44,342 For more information on alternative performance measures please see the glossary at the end of the announcement An analysis of revenue by destination is given below: Geographical information FY23 FY22 ��000 ��000 United Kingdom 597,292 497,842 Overseas 4,928 5,246 Group revenue 602,220 503,088 No one customer accounts for more than 9% (FY22: 9%) of Group revenue. 4. Other operating income FY23 FY22 ��000 ��000 Net gain on disposal of fixed assets 179 164 Net gain on foreign exchange - 33 Net gain on remeasurement of right-of-use assets and lease liabilities 4 8 Grant income - 169 183 374 Grant income in the year ended 31 October 2022 comprised of amounts received from the Government with respect to the Additional Restrictions Grant and COVID-19 Additional Relief Fund Schemes, which totalled ��169,000. 5. Expenses FY23 FY22 ��000 ��000 Included in profit/loss are the following: Depreciation of tangible assets Owned 2,253 1,946 Right-of-use assets 6,739 5,951 Amortisation of intangible assets 975 99 Expense relating to short term and low value assets 1,992 1,255 Impairment loss on trade receivables 675 871 The Group incurred a number of expenses not relating to the principal trading activities of the Group as follows: FY23 FY22 ��000 ��000 Exceptional expenses Acquisition expenses 648 148 Compensation for post combination services 199 95 Total exceptional expenses 847 243 Share based payment expense 964 863 Total exceptional expenses and share based payments 1,811 1,106 The Board consider the exceptional items to be non-recurring in nature. Both exceptional and share based payment expenses are adjusted for in the statement of profit and loss to arrive at the adjusted EBITDA. This measure provides the Board with a better understanding of the Group's operating performance. Acquisition expenses on both periods include the legal and professional fees connected to the acquisition of Westcountry Food Holdings Limited in the current year and M.J. Baker Foodservice Limited in the prior year. Compensation for post combination services relates to the value of a liability in connection the acquisition of the remaining share capital of Central Supplies (Brierley Hill) Ltd which is subject to an agreement to acquire it within two years of the acquisition. Share based payments relate to the MIP and LTIP and are non cash expenses. For further information see note 22. �� Auditor's remuneration: FY23 FY22 ��000 ��000 Audit of these financial statements 51 45 Amounts receivable by auditors and their associates in respect of: Audit of financial statements of subsidiaries of the Company 364 290 Other assurance services 5 5 In the current and prior year audit and non-audit fees were paid to Grant Thornton UK LLP. In addition to the fee disclosed above, direct disbursements were paid to Grant Thornton UK LLP of ��9,000 (FY22: ��11,000) 6. Staff numbers and costs The average number of persons employed by the Group (including Directors) during the year is analysed as follows: FY23 FY22 Management and administration 227 193 Sales 241 212 Warehouse 533 436 Distribution 508 395 Directors 3 3 1,512 1,239 The aggregate payroll costs of these persons were as follows; FY23 ��000 FY22 ��000 Wages and salaries 49,475 37,575 Social security costs 4,790 3,642 Other pension costs (note 21) 1,066 721 55,331 41,938 Staff costs accruing in the Company total ��964,000 (FY22: ��863,000) in relation to both the Management Incentive Plan and the Long term incentive plan (including employer NIC Costs), see note 22 for further details. 7. Directors' remuneration Included within staff costs (note 6) are the following amounts in respect of Directors' emoluments FY23 FY22 ��000 ��000 Directors' emoluments 1,164 922 Company contribution to personal pension scheme 15 20 1,179 942 Retirement benefits are accruing to three Directors under money purchase pension schemes (FY22: three) Amounts accrued under the MIP for two of the Directors was ��863,000 (FY22: ��863,000). Amount accrued under the LTIP for two of the Directors was ��40,000 (FY22: ��nil). FY23 FY22 ��000 ��000 Highest paid Director Directors' emoluments 389 357 Company contribution to personal pension scheme 8 8 397 365 8. Finance income and expense FY23 ��000 FY22 ��000 Interest payable and similar charges Interest payable on bank loans and invoice discount facilities 2,842 1,105 Finance charges payable in respect of leases 1,656 1,427 Other interest 7 2 4,505 2,534 Included in the above is ��257,000 of interest accrued not paid as at 31 October 2023 in relation to the Revolving Credit Facility (FY22: ��nil). 9. Taxation FY23 ��000 FY22 ��000 UK corporation tax Current tax charge on income for the year 6,193 3,559 Adjustment in respect of prior periods (39) (45) Total current tax 6,154 3,514 Deferred tax (see note 20) Reversal of timing differences (290) (109) Adjustment in respect of prior periods 38 96 Total deferred tax credit (252) (13) Tax charge on profit on ordinary activities 5,902 3,501 FY23 ��000 FY22 ��000 Current tax reconciliation Profit on ordinary activities after tax 18,956 14,340 Tax charge 5,902 3,501 Profit on ordinary activities before tax 24,858 17,841 Tax using the UK corporation tax of 23% (FY22: 19%) 5,631 3,390 Effect of: Expenses not deductible for tax purposes 455 250 Permanent fixed asset differences 46 - Income not taxable (27) (26) Adjustments in respect of prior periods (39) (45) Adjustment in respect of prior period - deferred tax 38 96 Share based payment (217) (164) Other tax adjustments 15 - Total current tax charge 5,902 3,501 An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. As the rate is effective part way through the Group's financial year, a pro-rated tax rate of 23% has been adopted in the above reconciliation in line with the relevant legislation. The deferred tax liability at 31 October 2023 has been calculated based on the 25% UK corporation tax rate, reflecting the expected timing of reversal of the related timing differences (FY22: 25%). 10. Earnings per share Basic earnings per share Basic earnings per share for the year ended 31 October 2023, and the previous year ended 31 October 2022 is calculated by dividing profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during each period as calculated below. Diluted earnings per share Diluted earnings per share for the year ended 31 October 2023, and previous year ended 31 October 2022 is calculated by dividing profit attributable to ordinary shareholders by the weighted average number of ordinary shares, adjusted for the effects of all dilutive potential ordinary shares, in this case issued equity warrants, outstanding during each period as calculated below. Profit attributable to ordinary shareholders FY23 ��000 FY22 ��000 Profit attributable to all shareholders 18,956 14,340 pence pence Basic earnings per ordinary share 27.1 20.5 Diluted earnings per ordinary shares 26.0 20.5 Weighted average number of ordinary shares FY23 FY22 Number Number Weighted average number of ordinary shares (basic) during the year 70,000,000 70,000,000 Weighted average number of ordinary shares (diluted) during the year 73,047,991 70,033,033 11. Intangible assets Group Intangible assets Goodwill Total ��000 ��000 ��000 Cost Balance at 1 November 2021 725 36,761 37,486 Additions 405 13,093 13,498 Balance at 31 October 2022 1,130 49,854 50,984 Amortisation Balance at 1 November 2021 294 5,512 5,806 Charge in year 99 - 99 Balance at 31 October 2022 393 5,512 5,905 Net book value At 31 October 2022 737 44,342 45,079 At 31 October 2021 431 31,249 31,680 Group Acquired intangibles Intangible assets Goodwill Total ��000 ��000 ��000 ��000 Cost Balance at 1 November 2022 - 1,130 49,854 50,984 Additions - 124 - 124 Recognised through business combinations 4,992 - 14,338 19,330 Balance at 31 October 2023 4,992 1,254 64,192 70,438 Amortisation Balance at 1 November 2022 - 393 5,512 5,905 Charge in year 842 133 - 975 Balance at 31 October 2023 842 526 5,512 6,880 Net book value At 31 October 2023 4,150 728 58,680 63,558 At 31 October 2022 - 737 44,342 45,079 Included in acquired intangibles are customer relationships with a net book value of ��4,009,000 and brands with a net book value of ��141,000. At the year ended 31 October 2023 both acquired intangibles relate to the acquisition of Westcountry Food Holdings Limited. No intangibles have been recognised on prior period acquisitions. The intangibles arise on consolidation only and are not recognised in the accounts of the trading entity. The customer relationships have an amortisation period of 5 years, and the brands have an amortisation period of 1 year remaining as at 31 October 2023. Impairment testing Goodwill arising on business combinations is assessed separately under IFRS 3 in the period of acquisition. Each acquisition provides the Group with an additional cash-generating unit ("CGU"). The Group allocates goodwill to groups of CGU's based on their operating segment as set out in note 3 as they leverage and share from each others operational infrastructure, centrally negotiate supplier terms and cross-sell products to the Group's wider customer base. The operating segments therefore represent the lowest level at which goodwill is monitored by the Board. Goodwill has been assessed as follows 2023 ��000 2022 ��000 Ambient 13,516 13,516 Frozen & Chilled 12,499 12,499 Foodservice 32,665 18,327 58,680 44,342 Under IAS 36 the Group is required to test goodwill for impairment at least annually or more frequently if indicators of impairment exist. The recoverable amount of a CGU has been calculated with reference to its value in use, using financial forecasts approved by the Board covering a 4 year period with the final period taken into perpetuity. The key assumptions of this calculation are shown below: 2023 2022 Period forecasts are based on: 4 years 4 years Growth rate applied: 2% 2% Pre-tax discount rate applied: 11.58% 10.59% Impairment testing at 31 October 2023 has considered a further impact of inflation and its potential impact on demand and overheads the CGU's. The Board expect product and overhead inflation to reduce from levels seen in the year ended 31 October 2023. Having operated through the trading restrictions of previous financial periods the Directors believe there is no reasonable prospective of a reduction in demand that would result in a material impairment. A 2% growth rate assumption has been made on the terminal value in the impairment calculation. The Group has demonstrated year on year growth outside of COVID-19 impacted financial periods and growth in consumer spending on food and drink was 2.5% in 2019, being the last period unaffected by COVID-19. There is a demonstrable link between consumer spending on food and drink and GDP trends. The discount rate is per the Group's current weighted average cost of capital adjusted to reflect the pre tax rate at 25% corporation tax and a risk premium from comparable listed entities to approximate a market based discount rate. A specific risk premium has not been applied to each CGU as they all operate in the wholesale of food and drinks and are therefore exposed to the same macroeconomic risks. This would be reassessed if the discount rate indicated potential impairment of any individual CGU. The increase in the discount rate follows the increase in risk free and market risk rate for UK equities which have increased in reaction to the wider economic issues, and also the increase in interest rates affecting the rate paid on debt instruments linked to base rate and SONIA. Other than changes to the discount or growth rate the key assumption in the forecast model is the gross margin generated by each CGU. The sensitivities vary by CGU but no reasonable sensitivity would result in impairment on any CGU Each of the CGUs has significant headroom under the annual impairment review. The Directors believe that no reasonable change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount. 12. Tangible assets Group Freehold property Leasehold improvements Fixtures and fittings Motor vehicles Plant & machinery Total ��000 ��000 ��000 ��000 ��000 ��000 Cost Balance at 1 November 2021 2,922 2,203 5,479 2,162 7,806 20,572 Additions 2 43 697 555 728 2,025 Disposals - - - (1,161) (12) (1,173) Transferred from right-of-use assets - - - 705 - 705 Acquired through business combinations 2,801 - 2 - 50 2,853 Balance at 31 October 2022 5,725 2,246 6,178 2,261 8,572 24,982 Depreciation Balance at 1 November 2021 93 858 4,078 1,108 4,331 10,468 Charge in year 119 156 466 505 700 1,946 Disposals - - - (1,029) (11) (1,040) Transferred from right-of-use assets - - - 571 - 571 Balance at 31 October 2022 212 1,014 4,544 1,155 5,020 11,945 Net book value At 31 October 2022 5,513 1,232 1,634 1,106 3,552 13,037 At 31 October 2021 2,829 1,345 1,401 1,054 3,475 10,104 Group Freehold property Leasehold improvements Fixtures and fittings Motor vehicles Plant & machinery Total ��000 ��000 ��000 ��000 ��000 ��000 Cost Balance at 1 November 2022 5,725 2,246 6,178 2,261 8,572 24,982 Additions 95 271 772 1,459 1,191 3,788 Disposals - (40) (113) (167) (49) (369) Transferred from right-of-use - 673 - 778 - 1,451 Acquired through business combinations 1,270 - 135 186 247 1,838 Balance at 31 October 2023 7,090 3,150 6,972 4,517 9,961 31,690 Depreciation Balance at 1 November 2022 212 1,014 4,544 1,155 5,020 11,945 Charge in year 171 171 558 624 729 2,253 Disposals - - (88) (59) (4) (151) Transferred from right-of-use - 359 - 670 - 1,029 Balance at 31 October 2023 383 1,544 5,014 2,390 5,745 15,076 Net book value At 31 October 2023 6,707 1,606 1,958 2,127 4,216 16,614 At 31 October 2022 5,513 1,232 1,634 1,106 3,552 13,037 13. Right-of-use assets Group Leasehold property Motor vehicles Plant & Machinery Total ��000 ��000 ��000 ��000 Cost Balance at 1 November 2021 19,914 13,444 1,618 34,976 Additions 4,670 3,105 950 8,725 Transferred to tangible assets - (705) - (705) Disposals (395) (301) (77) (773) Gain/(loss) on remeasurement 23 (352) (14) (343) Acquired through business combinations - 934 33 967 Balance at 31 October 2022 24,212 16,125 2,510 42,847 Depreciation Balance at 1 November 2021 3,956 6,989 843 11,788 Charge in year 2,111 3,450 390 5,951 Transferred to tangible assets - (571) - (571) Disposals (395) (301) (77) (773) At 31 October 2022 5,672 9,567 1,156 16,395 Net book value At 31 October 2022 18,540 6,558 1,354 26,452 At 31 October 2021 15,958 6,455 775 23,188 Group Leasehold property Motor vehicles Plant & Machinery Total ��000 ��000 ��000 ��000 Cost Balance at 1 November 2022 24,212 16,125 2,510 42,847 Additions 1,922 7,704 402 10,028 Transferred to tangible assets (673) (778) - (1,451) Disposals (683) (2,131) (692) (3,506) Loss on remeasurement (133) (167) (36) (336) Acquired through business combinations 242 307 20 569 Balance at 31 October 2023 24,887 21,060 2,204 48,151 Depreciation Balance at 1 November 2022 5,672 9,567 1,156 16,395 Charge in year 2,113 4,161 465 6,739 Transferred to tangible assets (359) (670) - (1,029) Disposals (683) (2,055) (692) (3,430) Loss on remeasurement (107) (111) (22) (240) Balance at 31 October 2023 6,636 10,892 907 18,435 Net book value At 31 October 2023 18,251 10,168 1,297 29,716 At 31 October 2022 18,540 6,558 1,354 26,452 14. Investments Unlisted investments 2023 2022 Group ��000 ��000 Cost and net book value At beginning of year 35 20 Additions 3 - Acquired on business combinations 7 25 Disposals - (10) At end of year 45 35 Shares in Group undertakings 2023 2022 Company ��000 ��000 Cost and net book value At beginning and end of year 12,993 12,993 The Company has the following investments in subsidiaries Subsidiary undertaking Country of incorporation Class of shares held Ownership 2023 Ownership 2022 Kitwave Investments Limited UK Ordinary 100% 100% Kitwave One Limited UK Ordinary 100% 100% Kitwave Limited UK Ordinary 100% 100% M&M Value Limited UK Ordinary 100% 100% Turner & Wrights Limited UK Ordinary 100% 100% FW Bishop & Son Limited UK Ordinary 100% 100% Westone Wholesale Limited UK Ordinary 100% 100% Automatic Retailing (Northern) Limited UK Ordinary 100% 100% Andersons (Wholesale) Limited UK Ordinary 100% 100% Teatime Tasties Limited UK Ordinary 100% 100% TG Foods Limited UK Ordinary 100% 100% Eden Farm Limited UK Ordinary 100% 100% Squirrels UK Limited UK Ordinary 100% 100% Thurston's Food's Limited UK Ordinary 100% 100% Angelbell Limited UK Ordinary 100% 100% David Miller Frozen Foods Limited UK Ordinary 100% 100% Phoenix Fine Foods Limited UK Ordinary 100% 100% MAS Frozen Foods Limited UK Ordinary 100% 100% Supplytech Limited UK Ordinary 100% 100% HB Clark Holdings Limited UK Ordinary 100% 100% HB Clark & Co (Successors) Limited UK Ordinary 100% 100% Churnet Valley Drinks Limited UK Ordinary 100% 100% Clarks Fine Wines Limited UK Ordinary 100% 100% FAM Soft Drinks Limited UK Ordinary 100% 100% Thorne Licence Wholesale Limited UK Ordinary 100% 100% Alpine Fine Foods Limited UK Ordinary 100% 100% Central Supplies (Brierley Hill) Ltd UK Ordinary 95% 95% M.J. Baker Foodservice Limited UK Ordinary 100% 100% Westcountry Food Holdings Limited UK Ordinary 100% 0% Westcountry Fruit Sales Limited UK Ordinary 100% 0% Veggies & More Limited * UK Ordinary 100% 0% Westcountry Fine Foods Limited UK Ordinary 100% 0% held indirectly thought Kitwave Investments Limited and its subsidiaries The registered office of all the above companies is: Unit S3 Narvik Way, Tyne Tunnel Trading Estate, North Shields, Tyne and Wear, NE29 7XJ 15. Inventories Group Company 2023 2022 2023 2022 ��000 ��000 ��000 ��000 Goods for resale 35,410 31,846 - - 35,410 31,846 - - Goods for resale recognised as cost of sales in the year amount to ��470,095,000 (FY22: ��400,460,000). 16. Trade and other receivables Group Company 2023 2022 2023 2022 ��000 ��000 ��000 ��000 Trade receivables 50,985 47,206 - - Amounts owed by Group undertakings - - 59,958 61,429 Other debtors 1,383 1,510 - - Prepayments and accrued income 11,201 8,982 75 106 63,569 57,698 60,033 61,535 Due within one year 62,692 56,926 60,033 61,535 Due after more than one year 877 772 - - 63,569 57,698 60,033 61,535 ��7,539,000 (FY22: ��23,946,000) of Group trade receivables are used as security against invoice discounting advances (note 19). 17. Cash and cash equivalents Group Company 2023 2022 2023 2022 ��000 ��000 ��000 ��000 Cash at bank and in hand 673 5,511 3 45 Cash and cash equivalents per cashflow statement 673 5,511 3 45 18. Trade and other payables: amounts falling due within one year Group Company 2023 2022 2023 2022 ��000 ��000 ��000 ��000 Trade payables 45,679 43,836 - - Other creditors 6,773 4,478 - - Accruals 11,144 9,577 57 39 Amounts owed to Group undertakings - - 37 22 63,596 57,891 94 61 19. Interest-bearing loans and borrowings This note provides information about the contractual terms of the Group's loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note 26. Group Company 2023 2022 2023 2022 Non current liabilities ��000 ��000 ��000 ��000 Lease liabilities 26,267 23,240 - - Revolving Credit Facility 20,000 - - - 46,267 23,240 - - Group Company 2023 2022 2023 2022 Current liabilities ��000 ��000 ��000 ��000 Lease liabilities 6,402 5,509 - - Invoice discounting advances 6,405 20,354 - - 12,807 25,863 - - The Group leases warehousing facilities, commercial vehicles and other logistics equipment for use in its operations. The Group made a commitment for a new lease relating to the distribution centre in the South West. This was not signed at the year end and will have a lease liability of ��5,853,000 on commencement of the lease, expected in the year ended 31 October 2024. Group Company 2023 2022 2023 2022 Lease liabilities ��000 ��000 ��000 ��000 Lease liabilities payable as follows: Within one year 6,402 5,509 - - In the second to fifth years 14,106 10,396 - - Over five years 12,161 12,844 - - 32,669 28,749 - - Terms and debt repayment schedule Currency Nominal interest rate Year of maturity 2023 Face value ��000 2023 Carrying value ��000 2022 Face value ��000 2022 Carrying value ��000 Lease liabilities Sterling 3.50% - 9.00% 2024-2041 41,333 32,669 37,686 28,749 Invoice discounting advances Sterling 2.00% + Base 2025 6,405 6,405 20,354 20,354 Revolving Credit Facility Sterling 2.05% + SONIA 2025 20,000 20,000 - - 67,738 59,074 58,040 49,103 Changes in liabilities from financing activities Loans and borrowings Lease liabilities Total ��000 ��000 ��000 Total debt at 31 October 2021 14,620 24,636 39,256 Changes from financing cash flows Payment of lease liabilities - (5,068) (5,068) Interest paid (1,105) (1,429) (2,534) Total changes from financing cash flows (1,105) (6,497) (7,602) Other changes New borrowing 5,734 8,548 14,282 Interest expense 1,105 1,429 2,534 Remeasurement of lease liabilities - (351) (351) Added through business combination - 984 984 Total other changes 6,839 10,610 17,449 Total debt at 31 October 2022 20,354 28,749 49,103 Changes from financing cash flows Repayment of borrowings (13,949) - (13,949) Payment of lease liabilities - (6,555) (6,555) Interest paid (2,585) (1,656) (4,241) Total changes from financing cash flows (16,534) (8,211) (24,745) Other changes New borrowing 20,000 10,025 30,025 Interest expense 2,585 1,656 4,241 Remeasurement of lease liability - (99) (99) Added through business combinations - 549 549 Total other changes 22,585 12,131 34,716 Total debt at 31 October 2023 26,405 32,669 59,074 All borrowings are denominated in Sterling. Bank trade loans are secured by means of debenture and cross guarantees over the assets of all Group undertakings. These are generally repayable within 35 days of drawdown and form an integral part of the Group's day to day short term cash management. Receipts and payments from trade loans are disclosed on a net basis in the cash flow statement under IAS 7 22(b) on the basis they are short maturity. The invoice discounting advances are secured against trade receivables (note 16). These are repayable within 90 days of the date of the invoice and carry interest at a margin of 2.00%. This is a committed facility due to expire December 2025. Under this arrangement trade customers remit cash directly to the Group companies and the Group companies use the trade receivables as security to draw down funds from finance providers. Cash receipts and cash payments with the finance provider are disclosed on a net basis in the cashflow statement as allowed under IAS 7 22(b) on the basis that they are short maturity. A ��20,000,000 Revolving Credit Facility ("RCF") was entered into in December 2022 as part of the funding for the Westcountry Food Holdings Limited acquisition. The permitted use of the RCF is to fund acquisitions and it is not part of the Group's working capital finance. The facility is in place until December 2025 and the Group has an option to extend this by two years to December 2027. The interest margin is based on leverage at the year ended was paid at c.2.25% over SONIA and has reduced post year end to 2.05% due to the reduction in the Group's leverage position. The Bank trade loans, invoice discounting and RCF advances rank pari passu and without preference between them in priority of payment. 20. Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Group Assets Liabilities 2023 2022 2023 2022 ��000 ��000 ��000 ��000 Property, plant and equipment 208 322 (2,701) (1,389) Share based payment expense 514 272 - - IFRS 16 timing differences 103 80 - - Tax assets / (liabilities) 825 674 (2,701) (1,389) Movement in deferred tax during the period: Group 31 October 2022 Amounts arising from business Recognised in income 31 October 2023 ��000 ��000 ��000 ��000 Property, plant and equipment (1,068) (1,389) (34) (2,491) Share based payment 273 - 241 514 IFRS 16 timing differences 80 - 21 101 Tax assets/ (liabilities) (715) (1,389) 228 (1,876) Company Assets Liabilities 2023 2022 2023 2022 ��000 ��000 ��000 ��000 Shared based payment expense 514 273 - - Tax assets 514 273 - - Company 31 October 2022 Amounts arising from business Recognised in income 31 October 2023 ��000 ��000 ��000 ��000 Share based payment 273 - 241 514 Tax assets 273 - 241 514 21. Employee benefits Defined contribution plans The Group operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the Group to the scheme and to other personal pensions schemes and amounted to ��1,066,000 (FY22: ��721,000) 22. Employee share schemes The Group has in place a MIP and an LTIP whereby the options are expected to be equity settled. The charge for the year in respect of the schemes, excluding NIC costs in relation to the LTIP, was as follows: 2023 2022 ��000 ��000 MIP 863 863 LTIP 89 - 952 863 The MIP is accounted for as a share-based payment under IFRS 2 and is expected to be settled by physical delivery of shares. Group and Company Date of grant Employees entitled Number of shares granted Principal vesting conditions Contractual life Management Incentive Plan July 2021 Selected senior employees Nil Service during vesting period EPS performance hurdle Market capitalisation hurdle 3 years, 6 months Long term Incentive Plan March 2023 Selected senior employees Nil Service during vesting period EPS performance hurdle Total Shareholder return hurdle 3 years, MIP 2022 Weighted average exercise price �� 2023 Weighted average exercise price �� 2023 Number of options 2022 Number of options Outstanding at the beginning of the year - 10,000 - 10,000 Granted during the year - - - - Outstanding at the end of the year - 10,000 - 10,000 Under the MIP, Growth shares were issued in Kitwave Limited with a subscription price of ��5.24 per option was paid on subscription. The 10,000 growth shares are exchangeable for shares in the Company up to a maximum of 4 per cent of the Company's issued ordinary shares subject to achieving the principal vesting conditions. LTIP 2022 Weighted average exercise price �� 2023 Weighted average exercise price �� 2023 Number of options 2022 Number of options Outstanding at the beginning of the year - - - - Granted during the year - 225,000 - - Outstanding at the end of the year - 225,000 - - Under the LTIP, the participants are offered the opportunity to acquire shares in Kitwave Group plc at nil cost subject to achieving the principal vesting conditions. The LTIP has incurred an expense under employee expenses of ��101,000 (FY22: ��nil). Of this expenditure, ��89,000 has been taken to the share based payment reserve, the other ��12,000 representing an accrual of employer NIC on the value of the options The share based payment reserve represents the accumulation of the cost of the MIP and LTIP in accordance with the treatment of equity settled share based payment expense under IFRS 2. As at 31 October 2023 the balance on this reserve is ��2,042,000 (FY22: ��1,090,000). The vesting period for the LTIP is 3 years. Executive Directors have a two year post vest holding period for awards under this scheme. 23. Called up share capital Group and Company 2023 2022 ��000 ��000 Authorised, called up and fully paid 70,000,000 ordinary shares of ��0.01 each 700 700 700 700 Share premium The share premium account increased for the premium paid on the new shares issued over their nominal value being ��63,300,000. Under IAS 32 the transaction costs associated with the issuance of new equity on IPO of the Company have been deducted from the share premium account, being a total of ��2,110,000. 24. Contingent liabilities Group bank borrowings (including invoice discounting advances) are subject to cross guarantee and debenture agreements over Group companies. The Company is party to a cross guarantee and debenture agreement to secure the ��6,405,000 (2022: ��20,354,000) bank borrowings of its subsidiary companies. 25. Financial instruments 25 (a) Fair values of financial instruments The carrying value of all financial assets and financial liabilities by class, are shown below. The carrying value approximates to each asset and liability's fair value: Group 2023 2022 ��000 ��000 Financial assets held at amortised cost Trade receivables 50,985 47,206 Cash and cash equivalents 673 5,511 51,658 52,717 Financial liabilities measured at amortised cost Trade payables 45,679 43,836 Accruals 11,144 9,577 Invoice discounting advances 6,405 20,354 Obligations under lease liabilities 32,669 28,749 Revolving Credit Facility 20,000 - 115,897 102,516 The Group holds a financial asset instrument, being trade receivables. The trade receivables are held at amortised cost. The objective of the business model for realising trade receivables is by collecting contractual cash flows for genuine debts. The considerations of Solely Principal Payments and Interest ("SPPI") have also been considered and the criteria met for holding at amortised cost as the trade receivables are for fixed payments due by fixed dates with no variable element of payment required. The standard requires impairment of trade receivables held at amortised cost is considered by reference to the expected credit loss method, discussed in the credit risk section of the financial information. Financial instruments measured at fair value through the statement of profit and loss IFRS 9 analyses financial instruments into a fair value hierarchy based on the valuation technique used to determine fair value. �� Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities �� Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) �� Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). All financial instruments for the year ended 31 October 2023 and 2022 were categorised as level 1. 25 (b) 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, and arises principally from the Group's receivables from customers. The Group has a well-established and diverse portfolio of customers including a large number of customers paying cash on delivery. Management do not believe there is a significant concentration risk as evidenced with no one customer accounting for more than 9% of Group revenue. All customers who wish to trade on credit terms are subject to credit verification procedures. The Group establishes an allowance for impairment that represents its estimate of incurred losses using a provision matrix which is based on historical levels of impairment and assessment of the quality of the receivable book to calculate a forward looking estimate. 2023 Gross ��000 Impairment ��000 Net ��000 Current 41,833 - 41,833 31-60 days from invoice 9,547 (395) 9,152 61-90 days from invoice 900 (900) - 90+ days 859 (859) - 53,139 (2,154) 50,985 The maximum Group exposure to credit risk in the period ended 31 October 2023 was ��50,985,000 (2022: ��47,206,000) being the total carrying amount of trade receivables and other receivables net of provision. The Directors assess the risk to trade receivables by reviewing the ageing of debt rather than by reference to the amount overdue. Many customers operate on terms requiring payment for the previous delivery on receipt of their next order, referred to as 'one over one'. As such a large population of debt would be classed as overdue due to the parameters of the Group's accounting software with debt operating under the agreement made with the customer. The expected credit loss on invoices less than 90 days old is immaterial. The bad debt expense for the year ended was 0.12% of Group revenue. The prior financial year annual debt expense was 0.16% of Group revenue. Applying the historic factor would result in a provision of c.��964,000 for the year ended 31 October 2023. The impairment charge on trade receivables in the 12 month period ended 31 October 2023 ��675,000 (note 5). Whilst the Directors are confident no single trade receivable will have a material impact on the Group's cash flow, they continue to take a prudent approach in relation to provisioning as the full impact of interest rate increases, consumer price inflation to date is expected to be seen in FY24. Debt is reviewed regularly by dedicated credit control teams within each division and information from credit rating agencies is often used to assess a customer's ability to meet its obligations. If there is significant doubt regarding a receivable a specific provision is created. In addition, a provision is created to account for the estimated losses that may be incurred in future periods. Management considers the level of provisioning to be materially correct based on these factors. Movement in expected credit loss 2023 2022 ��000 ��000 At beginning of the year 2,088 2,017 Provided during the year 675 871 Added on acquisition 107 19 Utilised during the year (716) (819) At the end of the year 2,154 2,088 25 (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages its liquidity risk by monitoring existing facilities and cash flows against forecast requirements based on a rolling cash forecast. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effect of netting agreements: 2023 Carrying amount Contractual cashflow 1 year or less 1-2 years 2-5 years More than 5 years ��000 ��000 ��000 ��000 ��000 ��000 Financial liabilities Trade payables 45,679 45,679 45,679 - - - Accruals 11,144 11,144 11,144 - - - Lease liabilities 32,669 41,333 7,775 6,140 11,548 15,870 Invoice discounting advances 6,405 6,405 6,405 - - - Revolving Credit Facility 20,000 20,000 - 20,000 115,897 124,561 71,003 26,140 11,548 15,870 2022 Carrying amount Contractual cashflow 1 year or less 1-2 years 2-5 years More than 5 years ��000 ��000 ��000 ��000 ��000 ��000 Financial liabilities Trade payables 43,836 43,836 43,836 - - - Accruals 9,577 9,577 9,577 - - - Lease liabilities 28,749 37,686 6,741 5,028 8,828 17,089 Invoice discounting advances 20,354 20,354 20,354 - - - 102,516 111,453 80,508 5,028 8,828 17,089 * The invoice discounting, Revolving Credit Facility (RCF) and bank trade loan are all revolving facilities. The invoice discounting facility is available up to ��38,000,000 of drawn down and is available until 2025. The trade loan facility is for ��8,000,000 and repayable within 35 days of draw down. Both the invoice discounting and trade loan facility form an integral part of the Group's day to day short term cash management. The RCF is available up to ��20,000,000 and is committed until 2025, with the Group's option to extend it for a further two years to 2027. The permitted use of the RCF is to fund acquisitions and it is presently fully drawn following the acquisition of Westcountry Food Holdings Limited in December 2022. 25 (d) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The Group has an immaterial exposure to currency risk on purchases denominated in a currency other than the functional currency of the Group since the balance owed to non UK business is immaterial at each period end. The Group is exposed to interest rate risk principally where its borrowings are at variable interest rates. At the balance sheet date the interest rate profile of the Group's interest-bearing financial instruments was. Group 2023 2022 Fixed rate instruments ��000 ��000 Financial liabilities (32,669) (28,749) (32,669) (28,749) 2023 2022 Variable rate instruments ��000 ��000 Financial liabilities (26,405) (20,354) (26,405) (20,354) Sensitivity analysis An increase of 25 basis points in interest rates throughout the period would have affected the statement of profit and loss by the amounts shown below. This calculation assumes that the charge occurred at all points in the period and had been applied to the average risk exposures throughout the period: 2023 2022 ��000 ��000 Profit or loss decreases 66 51 The above assumes the rate change is applicable on financial liabilities accruing interest on base rate and SONIA and affects them in the same way 25 (e) Capital management The primary objective of the Group is to manage its capital to ensure it is able to continue as a going concern, whilst maximising shareholder value. The capital structure of the Group consists of debt, which includes leasing related borrowings of ��32,669,000 (2022: ��28,749,000), cash and cash equivalents of ��673,000 (2022: ��5,511,000), an invoice discounting facility with a limit of ��38,000,000 drawn at ��6,405,000 (2022: ��20,354,000), a trade loan facility with a limit of ��8,000,000 draw at nil (2022: nil), a revolving credit facility drawn at ��20,000,000 (2022: ��nil) and equity attributable to the equity holders of the Group of ��84,445,000 (2022: ��71,887,000). The capital structure is reviewed regularly by the Directors. The Group's policy is to maintain gearing at levels appropriate to the business and its funders. The Directors take consideration of gearing by reference to the leverage calculating including IFRS 16 lease liability and without. The Group produces annual forecasts to enable the Board to assess the level of working capital needed in the business, taking careful account of working capital cycles, which are predictable, and the Board have significant experience of managing them. The Group has headroom on its working capital facilities, excluding cash, of ��39,600,000 at the year end (2022: ��25,600,000). 26. Related party transactions Kitwave One Limited, Kitwave Investments Limited, Kitwave Limited, Turner & Wrights Limited, FW Bishop & Son Limited, M & M Value Limited, Westone Wholesale Limited, Andersons (Wholesale) Limited, Teatime Tasties Limited, TG Foods Limited, Eden Farm Limited, Squirrels UK Limited, Thurston's Food's Limited, David Miller Frozen Foods Limited, Angelbell Limited, MAS Frozen Foods Limited, Supplytech Limited, Automatic Retailing (Northern) Limited, Phoenix Fine Foods Limited, H B Clark (Successors) Limited, H B Clark Holdings Limited, Churnet Valley Drinks Limited, Clarks Fine Foods Limited, F.A.M Soft Drinks Limited, M.J. Baker Foodservice Limited, Alpine Fine Foods Limited, Westcountry Food Holdings Limited, Westcountry Fruit Sales Limited, Veggies & More Limited and Westcountry Fine Foods Limited are all 100% owned subsidiaries of this Company. Central Supplies (Brierley Hill) Ltd is a 95% owned subsidiary of this Company. Key management personnel Total compensation of key management personnel in the period amounts to ��1,179,394 (FY22: ��942,439) in respect of short-term employment benefits, ��nil (FY22: ��nil) in respect of past-employment benefits and ��nil (FY22: nil) in respect of termination benefits. 27. Ultimate controlling party The Company is listed on the Alternative Investment Market of the London Stock Exchange. Material shareholders are detailed within the Directors' report. There is no ultimate controlling party of the Group. 28. Post balance sheet events Post year end the Group completed the acquisition of the entire ordinary share capital of WLG (Holdings) Limited for total consideration of ��2,700,000. The acquired balance sheet included cash and cash equivalents of ��192,000. The business will be incorporated into the existing Foodservice division. Significant control was obtained through the acquisition of 100% of the share capital. The fair values of the assets and liabilities acquired, intangible assets recognised and the associated goodwill arising from the acquisition are still under review at the point of signing these financial statements. The acquisition was funded through headroom on existing bank facilities. Alternative performance measure glossary This report provides Alternative Performance Measures ("APMs"), which are not defined or specified under the requirements of International Financial Reporting Standards. The Board believes that these APMs provide readers with important additional information on the Group. Alternative performance measure Definition and purpose Adjusted operating profit Represents the operating profit prior to exceptional (income) / expenses and share based payment expenses. This measure is consistent with how the Group measures performance and is reported to the Board. FY23 FY22 Note ��000 ��000 Total operating profit 29,363 20,375 Amortisation of intangible assets arising on acquisition 3 842 - Acquisition expenses 5 648 148 Compensation for post combination services 5 199 95 Share based payment expense 5 964 863 Adjusted operating profit 32,016 21,481 Adjusted EBITDA Represents the operating profit prior to exceptional (income) / expenses, share based payment expenses, fixed asset depreciation and intangible amortisation. This measure is consistent with how the Group measures trading and cash generative performance and is reported to the Board. FY23 FY22 Note ��000 ��000 Total operating profit 29,363 20,375 Amortisation of intangible assets 11 975 99 Depreciation 12,13 8,992 7,897 Acquisition expenses 5 648 148 Compensation for post combination services 5 199 95 Share based payment expense 5 964 863 Adjusted EBITDA 41,141 29,477 Pre tax operational cash conversion Represents the cash generated from operating activities pre tax as a proportion of cash flow from operating activities pre movements in working capital and tax. This measure informs the Board of the Group's cash conversion from operating activities, is used to monitor liquidity and is reported to the Board. FY23 FY22 ��000 ��000 Net cash inflow from operating activities 30,298 26,525 Tax paid 6,075 4,005 Cash flow from operating activities pre tax and compensation for post combination services (1) 36,373 30,530 Movement in working capital 3,937 (1,373) Cash flow from operating activities pre tax and compensation for post combination services and movement in working capital (2) 40,310 29,157 Pre tax operational cash conversion (1) divided by (2) 90% 105% Alternative performance measure Definition and purpose After tax return on invested capital Represents adjusted profit after tax as a proportion of invested capital. This measure informs the Board of how effective the Group is in generating returns from the capital invested. FY23 FY22 ��000 ��000 Adjusted operating profit 32,016 21,481 Operating lease interest (1,656) (1,427) 30,360 20,054 Tax charge at effective rate of tax of 23% (FY22:18%) (6,831) (3,690) Adjusted operating profit after tax (1) 23,529 16,364 Invested capital comprising: Invoice discounting advances 6,405 20,354 Lease liabilities 32,669 28,749 Revolving Credit Facility 20,000 - Share capital 700 700 Share premium 64,183 64,183 Less cash at bank and in hand (673) (5,511) Total invested capital (2) 123,284 108,475 After tax return on invested capital (1) divided by (2) 19% 15% Return on net assets Represents adjusted profit after tax as a proportion of the Group's investment in fixed assets and working capital. This measure informs the Board of how effective the Group is in generating returns from its fixed assets and net working capital. FY23 FY22 ��000 ��000 Adjusted operating profit 32,016 21,481 Tax charge at effective rate of tax of 23% (FY22:18%) (7,204) (3,953) Adjusted operating profit after tax (1) 24,812 17,528 Fixed assets and net working capital comprising: Intangible assets 728 737 Fixed assets 16,614 13,037 Right-of-use assets 29,716 26,452 Investments 45 35 Inventories 35,410 31,846 Trade and other receivables 63,569 57,698 Trade and other payables (63,596) (57,891) Liability for post combination services* 1,006 806 Total invested capital (2) 83,492 72,720 After tax return on invested capital (1) divided by (2) 30% 24% * excluding acquired intangibles arising on acquisition ** adjustment to exclude the liability for post combination services from trade and other payables Leverage Management assess leverage by reference to adjusted EBITDA against net debt including and excluding IFRS 16 lease liabilities and including the liability for post combination services held within other creditors. This indicates how much income is available to service debt before interest, tax, depreciation and amortisation. FY23 FY22 Note ��000 ��000 Adjusted EBITDA (1) 41,141 29,477 Invoice discounting advances 6,405 20,354 Lease liabilities 32,669 28,749 Revolving Credit Facility 20,000 0 Liability for post combination services 1,006 807 Cash at bank and in hand (673) (5,511) Net debt (2) 59,407 44,399 Leverage (including IFRS 16 debt) (2) divided by (1) 1.4 1.5 IFRS 16 lease liabilities 26,197 25,902 Net debt excluding IFRS 16 lease liabilities (3) 33,210 18,497 Leverage (excluding IFRS 16 lease debt) (3) dividend by (1) 0.8 0.6 Alternative performance measure Definition and purpose Reconciliation between existing and acquired operating profit for the year Note Existing operations 2023 ��000 Acquisitions 2023 ��000 Total year ended 31 October 2023 ��000 Year ended 31 October 2022 ��000 Revenue 3 566,333 35,887 602,220 503,088 Cost of sales (447,466) (22,629) (470,095) (400,460) Gross profit 118,867 13,258 132,125 102,628 Other operating income 4 201 (18) 183 374 Distribution expenses (49,026) (5,544) (54,570) (44,010) Administrative expenses (45,336) (3,039) (48,375) (38,617) Operating profit 24,706 4,657 29,363 20,375 Analysed as: Adjusted EBITDA 36,145 4,996 41,141 29,477 Amortisation of intangible assets 11 (975) - (975) (99) Depreciation 12,13 (8,653) (339) (8,992) (7,897) Acquisition expenses 5 (648) - (648) (148) Compensation for post combination services 5 (199) - (199) (95) Share based payment expense 5 (964) - (964) (863) Total operating profit 24,706 4,657 29,363 20,375 This information is provided by RNS, the news service of the London Stock Exchange. 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