9 April 2024
VENTURE LIFE GROUP PLC
("Venture Life", "VLG" or the "Group")
Final Results for year ended 31 December 2023
Venture Life (AIM: VLG), a leader in developing, manufacturing and commercialising products for the international self-care market, announces its audited results for the year ended 31 December 2023.
Strong growth driven by new products and wider distribution networks
· Group revenue increased 16.9% to £51.4m (2022: £44.0m), or +5.4% on a proforma1 basis Women's Health, Energy Management and Oncology (3 out of 6 key therapeutic areas) achieved double-digit sales growth
· 18 news SKUs (Stock-keeping units) contributed 6.1% to Group revenue, of which 9 SKUs for 3 VLG Brands2, and 9 new SKUs for Customers Brands3
· 28 new listings achieved across UK retail
· 9% YoY increase in UK distribution points (excluding Dentyl)
· Online revenue grew 40.7% to £4.3m (2022: £3.0m)
Enhanced operating profitability supported by improved operational leverage and revenue mix
· Adjusted EBITDA4 increased 28.9% to £11.6m (2022: £9.0m).
· Adjusted profit before tax5 increased to £7.3m (2022: £5.6m) and Profit before tax increased to £1.1m (2022: £0.7m)
· Adjusted EPS6 increased 28% to 5.21p (2022: 4.07p) and Basic EPS increased 78% to 0.73p (2022: 0.41p)
· VLG Brands accounted for 59.2% of overall Group revenue (2022: 51.8%), representing a YoY growth of 32.0%, or 9.3% on a proforma1 basis
· Pricing alignment across wholesalers achieved in Q4 2023 set to enhance margin in 2024
Further and quicker debt reduction facilitated by strong cash generation
· Cash generated from operations increased 59.0% to £9.8m (2022: £6.2m).
· Free cash flow increased 71% to £4.8m (2022: £2.8m)
· Group net leverage7 reduction to 1.30x (2022: 1.65x).
Post period end
· Earol achieved over 45% unit sales growth YTD, owing to Tesco and Amazon launch
· Average unit sales price across key VLG brands in UK retail increased by 9.4% YoY by end of March, 2024, reflecting higher selling prices from NPD (New product development) and stronger product positioning
· Further UK distribution gains secured with mainstream retailers for the women's health portfolio
· Distribution agreement extended with an existing EU partner broadening the supply of VLG products across the areas of women's health and footcare.
· 5+ new key VLG brand products in the pipeline, ready for launch across 2024
· Group net leverage7 reduced further to 1.15x at 31 March 2024
Revenue by stream for the 12 months ended 2023:
|
| Revenue (£m) |
| Revenue change (%) | ||
|
| 2023 | 2022 |
| Actual | Proforma1 |
| VLG brands | 30.5 | 23.1 | | 32.0% | 9.3% |
| Online8 | 4.3 | 3.0 | | 40.7% | 40.7% |
| Offline9 | 26.1 | 20.1 | | 30.0% | 6.5% |
| Customer brands | 20.9 | 20.8 | | 0.2% | 0.2% |
| Group revenue | 51.4 | 44.0 | | 16.9% | 5.4% |
Starting from 2024, a new revenue segment called Private label will be introduced to the Group, referring to products manufactured by VLG-owned factories, which develop formulations for retailers, who will sell these products through their own retail channels. This is aimed at providing a more comprehensive understanding of our business performance by segregating these revenues from the currently reported segments. As revenue from this segment grows, the Group will consider reporting and disclosing performance separately in future periods.
1 Proforma basis i.e. if the acquisitions had been in place for the whole of the prior year. This term is applied throughout the document.
2 VLG Brands refers to products manufactured, distributed, and marketed by VLG, which also owns the trademark and formulation of the products. This term is applied throughout the document.
3 Customer Brands refers to products manufactured by VLG-owned factories, which co-develop formulations with customers, who will distribute and market these products under their own brand names. This term is applied throughout the document.
4 Adjusted EBITDA is EBITDA before deduction of share based payments and exceptional items (i.e. M&A, restructure and integration costs - see note 3 for breakdown of exceptional items). This term is applied throughout the document (see note 11 for reconciliation of Adjusted EBITDA)
5 Adjusted profit before tax is profit before tax excluding amortisation and exceptional items (i.e. M&A, restructure and integration costs - see note 3 for breakdown of exceptional items)
6 Adjusted EPS (earnings per share) is profit after tax excluding amortisation, share-based payments and exceptional items (i.e. M&A, restructure and integration costs - see note 3 for breakdown of exceptional items)
7 Group net leverage calculated as net debt (excluding finance leases) and using proforma Adjusted EBITDA on a trailing 12-month basis (see note 11 for reconciliation)
8 Online refers to sales through Amazon & Lift website in the UK
9 Offline refers to sales into brick-and-mortar retailers in the UK
10 Net debt calculated as gross debt excl. finance leases less cash & cash equivalents (see note 11 for reconciliation)
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the company's obligations under Article 17 of MAR.
Jerry Randall, CEO of Venture Life commented: "I am delighted to announce another successful year for Venture Life Group, marked by significant commercial achievements and strengthened financial positions. Our strategic emphasis on organic growth and cash generation led to a faster reduction in net debt despite challenging market conditions. We have made notable inroads in new product development, resulting in increased revenue and showcasing our innovative in-house R&D capabilities. Furthermore, enhanced branding and marketing efforts have expanded the reach of our 9 key brands to a broader global audience, further propelling our growth trajectory. With a strong commitment to improving EBITDA margins, successful new product launches, and digital transformation initiatives, we are well-positioned for sustained success in 2024 and beyond."
For further information, please contact:
Venture Life Group PLC +44 (0) 1344 578004
Jerry Randall, Chief Executive Officer
Daniel Wells, Chief Financial Officer
Cavendish Capital Markets Limited (Nomad and Broker) +44 (0) 20 7720 0500
Stephen Keys/Camilla Hume (Corporate Finance)
Michael Johnson (Sales)
About Venture Life (www.venture-life.com)
Venture Life is an international consumer self-care company focused on developing, manufacturing and commercialising products for the global self-care market. With operations in the UK, Italy, and Sweden, the Group's product portfolio includes some key products such as the Balance Active range in the area of women's intimate healthcare, the Earol® product line in ENT care, the Lift and Glucogel product ranges for energy and glucose management and hypoglycaemia, the UltraDEX and Dentyl oral care product ranges, products for fungal infections and proctology, and dermo-cosmetics for addressing the signs of ageing. Its products are sold in over 90 countries worldwide.
The products, which are typically recommended by pharmacists or healthcare practitioners, are available primarily through pharmacies and grocery multiples. In the UK and The Netherlands these are supplied direct by the company to retailers, elsewhere they are supplied by the Group's international distribution partners.
Through its two Development & Manufacturing operations in Italy and Sweden, the Group also provides development and manufacturing services to companies in the medical devices and cosmetic sectors.
Chairman's Statement
In a year of significant macro-economic challenges, VLG Group's strategy, flexibility, investment in a positive culture and ESG has yielded significant growth of 17% in revenue, and 29% in Adjusted EBITDA4. With no acquisitions in 2023, this represented like- for- like organic revenue and Adjusted EBITDA4 growth of 5% and 8% respectively following the acquisition of HL Healthcare Ltd in December 2022, showcasing the strength and quality of our brands and focus on innovation for new product development. The positive impact of our merger and acquisition activities in recent years became evident in 2023. Notably, we achieved double-digit revenue CAGR for most of our acquired brands since 2020, thanks to investment in new product development, paving the way for further organic growth in the future. The impressive performance has enabled strong cash conversion, the planned quicker debt reduction from previous these acquisitions, strong cash conversion, and a robust financial position as we look forward.
Our dedication to ESG principles remains strong. Biokosmes, our development and manufacturing facility in Italy, is in the process of pursuing B Corp certification, building on its previous achievement of an EcoVadis silver medal. Recognizing the value of our human capital, we expanded our workforce from 153 to 165, aiming to foster an increasingly capable team.
The Board would like to express thanks to the whole VLG team for their ongoing enthusiasm, commitment, and professionalism, which is enabling the business to deliver such consistent results despite market dynamics.
The strength of the team, an integrated business model with internal R&D, best- in- class manufacturing, brand development, with a diversified sector portfolio showing strong resilience provides the Board with robust confidence in the Group's future success.
Paul McGreevy
Non-executive Chair
9 April 2024
Chief Executive Officer's Statement
The Group continued on its path of sustained consolidated growth in 2023, and for the first time since 2019 this was based solely on organic growth, without any M&A activity. A consistent theme in recent years has been that of global challenges and disruption, and 2023 was no different. However, our fantastic team, across all our locations continued to take this environment head on and delivered strong growth across the whole business. I am delighted to present these excellent results of our hard work in 2023 and give the credit to our wonderful team who worked tirelessly to achieve them, as we continue to work towards a more sustainable business for today and the future.
As was our plan, our focus for 2023 was organic growth, delivering strong cash generation which in turn drove de-levering of our business. 2023 saw sustained higher interest rates, and higher perceived risk of debt, so a key strategic focus for the Group in 2023 was to reduce our net debt. We have achieved that goal, with delivery of growth not only in our Venture Life Brands, but also over delivering on our targets set for Customer Brands. A significant milestone was reached in our distribution and digitisation efforts, with a noteworthy 40% YoY growth in online revenue. The addition of 28 new listings and a notable 9% YoY increase in UK distribution points (excluding Dentyl), showcased a much stronger omni-channel retail presence from last year, laying a solid foundation for our future results.
Our commitment to innovation was evident through the introduction of six new products from VLG brands, translating into nine SKUs across three brands. On top of that, we also brought nine new products to the market for our Customers thanks to Biokosmes and its full service CDMO (Contract Development and Manufacturing Operation) capability. The 18 new SKU's together contributed 6% to Group revenue. Building momentum on this strong foundation, we are already preparing a deep pipeline of new products in multiple therapy areas for market launch in 2024, which is set to propel our growth in 2024 as our total addressable market continues to expand thanks to our exciting new products.
We have also carved out a new revenue segment private label. Private label products, in contrast to our Customer Brands products, are developed, manufactured, and packaged specifically for retailers, who then distribute them through their own retail channels. Exploring private label opportunities allows us to successfully drive revenue and foster crucial relationships with retailers. We have a small number of products in the private label space already, with overall revenues from this area representing £2.4 million (2022: £1.9 million), included in our VLG Brands revenues. In 2023 we launched our first private label collaboration with Boots which yielded nearly £0.4 million in revenue during 2023, and we have more exciting collaborations in progress with this retailer and others, further enhancing our private label business opportunities. Moving forward we will be reporting this revenue stream separately from VLG Brands revenues.
Branding and marketing is key to organic growth, and has therefore been a focus area during 2023, having significantly bolstered our in house brand management team in late 2022. We are pleased to report that these initiatives have been strategic and impactful. Leveraging social media, digital marketing, and brick-and-mortar promotional activities, we have not only supported online and offline revenue growth but also strengthened our market presence. Let me move on to therapy area performance review to further explain how we hit our revenue targets through a successful execution of our marketing schemes.
VLG brands revenue by therapy for the 12 months ended 2023:
|
| Revenue (£m) |
| Revenue change (%) |
| |||
|
| 2023 | 2022 |
|
|
| ||
|
| Actual | Actual | Proforma1 |
| Actual | Proforma1 | |
| Women's Health | 6.5 | 5.9 | 5.9 | | 10.7% | 10.7% | |
| Energy Management | 7.3 | 6.3 | 6.3 | | 15.1% | 15.1% | |
| ENT | 5.3 | 0.2 | 5.0 | | 2,963.1% | 6.5% | |
| Oral Care | 4.7 | 4.6 | 4.6 | | 3.9% | 3.9% | |
| Oncology | 3.5 | 2.8 | 2.8 | | 25.4% | 25.4% | |
| Footcare | 2.0 | 1.9 | 1.9 | | 6.5% | 6.5% | |
| Dermatology & others | 1.0 | 1.3 | 1.3 | | (21.0%) | (21.0%) | |
| VLG brands revenue | 30.5 | 23.1 | 27.9 | | 32.0% | 9.3% | |
VLG Brands performance overview by therapeutical areas
1) Energy Management (Lift - Revenue £7.3m, +15.1% LFL)
Energy Management was the biggest contributor to Group growth in 2023, with Lift revenues seeing a notable increase of 15.1% YoY, including a substantial 52% online revenue growth. This growth can be attributed to effective pharmacy distribution and an active marketing campaign. The main contributors, Lift Fast Acting Glucose Shots and Chews experienced impressive growth rates of 100% and 21%, respectively, alongside prudent advertising investment and listing optimisation.
We have further established Lift in the sports energy market building on our dominance in the energy management space for diabetes, particularly addressing hypoglycemia. In 2023, we introduced Lift Activ Energy Boost, leveraging Lift's expertise in glucose energy management. This product aims to carve out a distinct consumer space within the casual sports and lifestyle energy sector.
We increased advertising spend which led to improved online sales. On Facebook and Instagram, Lift followers have grown by 359%, and the brand reached 2.6 million customers over the year through our PR activities. Noteworthy online and offline marketing campaigns with major retailers like Sainsbury's and Tesco gained traction, contributing to brand visibility. The launch of our own new Lift e-commerce website reflects our commitment to enhancing the digital customer experience and expanding our online presence, aligning with our vision for sustained growth in a digital marketplace.
2) Women's Health (Balance Activ - Revenue £6.5m, +10.7% LFL)
Balance Active witnessed over 10% revenue growth in the year, including a 17% YoY growth in online revenue. Despite this positive performance, there's still significant untapped potential, especially considering the introduction of new channels and products that took place in the latter half of the year.
Notably, our newly launched Thrush cream (registered medical device) exceeded expectations, prompting Superdrug to double the number of stores that distribute this product. This success highlights our keen ability to address consumer needs through innovative product development.
To further fortify our presence in women's health, we implemented a comprehensive marketing strategy. We completed a very significant piece of research during the year, the output of which we named the Big Vagina Report. This significant research project canvassed 5,000 women and is a testament to our commitment to health education and brand building. This insightful report adds value to our consumers and positions us as a reliable source of information in the field. Additionally, we organised expert webinars to provide a platform for in-depth discussions on female intimate care and engaging our audience. We also completed two specific campaigns to raise awareness about Bacterial Vaginosis (BV) and menopause, showcasing our commitment to a holistic approach in women's health.
Women's Intimate Health (WIH) is a £97 million market in the UK. Our objective is to emerge as the leading brand in this segment, transforming behaviours and extending care to women of all ages.
3) ENT (Earol, Earol Swim, Baby Earol, Sterinase - Revenue £5.3m, +6.5% LFL)
ENT is a relatively new therapy area in the VLG brands portfolio, however we have achieved much strategically with, Earol, a product for ear wax removal. We introduced a new product Baby Earol, targeting a completely different addressable market to attract new consumers and increase basket size of existing one. Online revenue for Earol was around £0.2 million, entirely incremental. HL Healthcare (which owns Earol, Earol Swim and Sterinase) was acquired at the end of 2022, at which time the products had limited UK and international distribution, and no direct distribution online. At the time of acquisition 95% of revenues were from the main Earol product, and were split approximately 50% into the UK and 50% into Scandinavia and some smaller EU countries. During 2023 we have expanded its presence into a number of UK retailers and launched the product through Amazon directly. Internationally we are looking to take the product into more of the EU territories.
To date the Earol product has been manufactured at an external CMO (Contract Manufacture Operation), but during 2024 we will transfer some of the manufacturing into our facility at Biokosmes, with a consequent reduction in cost of goods and working capital investment.
We have strong confidence in the quality of Earol products, especially since Earol Olive Spray won the Natural Healthcare category for 2023 MVP Awards. This accolade affirms its outstanding quality and contributes significantly to Earol's positioning in the market, reinforcing its reputation as a superior and valued product.
Earol has long been the No. 2 brand in the ENT market in the UK, gaining 1 percentage point of market share by volume to reach close to 14% throughout 2023. When looking at the top leader in the ear care segment, its product application, which is a traditional drop, differs from ours. It also has more SKUs than ours, hence our new products planned for 2024 are set to bring us closer to the market leader.
4) Oral Care (Dentyl, UltraDex - Revenue £4.7m, +3.9% LFL)
In the highly competitive Oral Care segment, we made a strategic decision to steer clear of head-to-head competition with the leading triopoly, which currently commands over 80% of the market share in the UK. Instead, our focus has been on adopting innovative approaches to thrive in this challenging landscape, and we are particularly pleased to see that in this environment our initiatives have still delivered growth.
Our UltraDEX online revenue witnessed an impressive growth of 52% YoY. Similarly, Dentyl experienced a significant online revenue increase of 42% YoY. These excellent performances can be attributed to a stronger advertising focus, higher average selling price, small strategic bulk buys and robust EPOS growth.
In this highly competitive space it is important to actively rotate Dentyl SKUs within retailers in order to retain listings and differentiate between retailers. Additionally, recognising the need to explore untapped markets and differentiate our approach in this competitive landscape, we are actively exploring discounter channels.
Dentyl has a host of exciting updates lined up for 2024, encompassing new packaging and ingredient modifications aimed at making the products both environmentally friendly and more profitable.
UltraDex maintained its No.1 position in the halitosis market in the UK, with close to 50% of market share. Our marketing strategy for this segment involves collaborating with influencers, notably Dr. Says, a celebrity dentist, to enhance brand visibility and resonate effectively with our target audience. These efforts manifested our commitment to not only navigate the challenges of a competitive market but also thrive through strategic innovation and market differentiation.
5) Oncology Support (Gelclair, Pomi-T, Xonrid - Revenue £3.5m, +25.4% LFL)
Oncology Support achieved notable growth, exceeding 25% over the past year, mainly due to Gelclair. Factors contributing to this success include a growth of approximately £0.4 million from a key customer returning to regular ordering after low volumes in the previous year. New distribution agreements in South America, aided by regulatory approval, resulted in first-time orders of about £0.2 million. Additionally, other business development initiatives contributed £0.1 million to the overall growth. However, regulatory delays in obtaining the CE mark led to excess safety stock. Consequently, we have doubled down efforts to expand into new markets, particularly the US and Latin America.
Xonrid's performance was largely driven by our Mexican partner and stock-building following regulatory constraints. Pomi-T's focus was on business development activities in new markets, and we expect to yield results in the upcoming year.
Customer Brands performance overview
Our Customer Brands segment consolidated the significant growth in 2022, contributing £21 million, or 40% to our Group revenue of the year. Revenues again came from a range of long standing as well as recent customers, and our active business development function continued to attract new development projects from new customers that will begin to deliver revenue in 2024.
Our Biokosmes team, in close collaboration with Customers, took the lead in innovating new products and launching multiple initiatives aimed at reducing waste and pollution from packaging. These efforts have garnered a 100% satisfaction rate from customers. The consistent excellence in innovation and execution helped Biokosmes consolidate long-term relationships with existing Customers, while also establishing an impressive track record to facilitate future business development.
Operational highlights
The prices of raw materials - crucial input costs for our operations - are becoming much more stable, bringing an end to the marked upward trend experienced in the past couple of years. It is important to note this is stabilisation from the high inflationary environment we have experienced recently, and we do not anticipate price reductions going forward, but rather a return to a more normal level of year-on-year price inflation. the Group continues to evaluate and enact initiatives for improving margin, which include customer price increases, alternative sourcing and renegotiation of existing supply arrangements. Coupled with increasing volumes and the benefits of operational leverage, these initiatives are expected to deliver gross and EBITDA margin increments in 2024 and beyond.
In 2023 we produced in total 28 million units of products, with a breakdown of seven million for VLG Brands and 21 million for Customer Brands. At Venture Life, we take pride in our in-house development and manufacturing capabilities and state-of-the-art facilities located in Lecco, Italy, and Gnesta, Sweden. That said, we still retain approximately 19% of product manufacturing through third-party arrangements in certain circumstances where: 1) acquired products' manufacturing has not yet been transferred in-house; 2) there is a cost benefit; or 3) the product is in a format that we cannot manufacture in our current facilities. For key products we also aim to have a second source of manufacturing in place as both a risk mitigation measure and where it can be beneficial in the reduction of our carbon footprint. Our aim is to transition more products to in-house production, achieving higher margins and improved operational leverage. This strategic shift is motivated by the pursuit of enhanced margins, working capital benefits, increased utilisation rates, and the efficient in-house production of specific products. We are still operating with additional free capacity at both sites, with utilisation rate of 48% and 19% for Italy and Sweden respectively, ensuring flexibility for future growth opportunities.
MDR compliance progress
We are making steady progress as planned in transitioning our 27 technical files from MDD to MDR compliance. The MDR approval was obtained for Gelclair during the year and a further nine technical files are due to be completed in 2024 following the investment made this year. To date, we have invested £1.5 million in this initiative, and expect to spend in the order of another £1.5 million over the next four years. During 2023 the Medical Device Regulator announced a change to the transitional rules meaning that the deadline for continuing to sell product under the existing MDD certification was extended to 2028, and we will take advantage of this to spread the remaining cost of MDR transition over the longer period to 2028.
2024 outlook
Going into 2024, we are committed to a trajectory of continuous improvement in both revenue and profitability. This includes contributions from higher prices that we have negotiated with customers during late 2023. Our New Product Development pipeline is geared towards a much more sizeable total addressable market, emphasising robust organic growth that aligns with evolving consumer needs and market trends.
We are also focused on expanding our channels, increasing online contributions, and consolidating relationships with key stakeholders such as grocers, pharmacies, and retailers. The exploration of private label opportunities will not only provide a new revenue stream but also serve as a gateway to entering new markets. Our key geographical focuses are the UK and EU, while actively looking for new partners in the APAC region.
Building on the success of our M&A track record, we remain open to inorganically expanding our brand portfolio with compelling opportunities focused on acquiring margin enhancing products and optimising our utilisation rate, utilising our free cash flow and RCF. Prioritising acquisitions that contribute to higher margins and operational efficiency positions us for sustained growth and increased competitiveness in the market, aligning with our overarching goal of creating long-term value for stakeholders.
Embracing a commitment to ESG principles, we are actively enhancing our initiatives to create a richer and more impactful set of ESG activities. This underscores our dedication to sustainability, social responsibility, and ethical governance practices.
As we navigate the complexities of the business landscape, we remain resolute in our pursuit of excellence and sustainable growth. These achievements underscore our resilience, adaptability, and commitment to delivering value to our stakeholders. I am confident that the strategic foundation we have laid will propel us to even greater heights. Thank you for your continued support as we forge ahead into a future full of promise and opportunity.
Jerry Randall
Chief Executive Officer
9 April 2024
Financial Review
Statement of Comprehensive Income
Results for the year
|
| 2023 | 2022 | Change |
|
| £'000 | £'000 | % |
| Revenue | 51,410 | 43,980 | 16.9% |
| Gross profit | 20,150 | 17,665 | 14.1% |
| Gross margin | 39.2% | 40.2% | (1.0)ppt |
| Administrative expenses | (8,960) | (8,926) | 0.4% |
| Depreciation | (2,128) | (1,821) | 16.9% |
| Amortisation | (4,516) | (3,564) | 26.7% |
| Impairment of intangibles | (760) | - | 100.0% |
| Exceptional costs | (639) | (1,278) | (50.0)% |
| Operating profit | 3,289 | 2,227 | 47.7% |
| Net finance expense | (2,166) | (1,521) | 42.4% |
| Profit before tax | 1,123 | 706 | 59.1% |
| Tax | (202) | (186) | 8.6% |
| Net income | 921 | 520 | 77.1% |
Group revenue
The Group reported 2023 revenues of £51.4 million, an increase of 16.9% over the £44.0 million reported in the previous period and benefited from the annualisation of HL Healthcare Ltd following its acquisition on 1 December 2022. On a proforma basis1 which treats new acquisitions as if they had been in place for the whole of the comparative period, overall Group revenue was 5.4% ahead of the prior year and comprised volume growth of 4.2% and price of 1.2%.
The Group comprises of two segments: Venture Life Brands and Customer Brands. The Venture Life Brands part of the business includes brands which are owned by Venture Life and this segment reported growth of 32.0% to £30.5 million (2022: £23.1 million) driven by the full-year impact of the HL Healthcare acquisition referred above. On a proforma basis1 the Venture Life Brands grew 9.3% owing to strong performance of core brands and significant gains made in bricks-and-mortar as well as online sales channels.
The Customer Brands business reported revenues of £20.9 million, an improvement of 0.2% versus 2022. As well as developing and manufacturing the majority of the Venture Life Brands, this part of the business is also focused on the development and manufacture of products on behalf of third parties, sold under their brands. Revenue from this segment over-delivered versus management's expectation for a second successive year as revenues from a key customer continued to perform strongly.
Gross profit
Gross profit for the year of £20.2 million increased 14.1% versus the previous year (2022: £17.7 million) with a slight decline in the gross margin percentage to 39.2% (2022: 40.2%). The absolute gross profit improvement was driven by higher revenues and delivered a material margin improvement of c.1.5% over the prior period. The material margin is the direct profit after costs of materials and packaging but before allocation of other direct and indirect costs such as production labour, transportation and facilities costs.
At a direct cost level, the online sales growth has an impact on the percentage gross margin of the Group since these sales generate a higher revenue per unit but incur additional variable costs in order to realise the revenue. Importantly these sales generate a similar level of cash profit as sales made through bricks & mortar channels however the percentage margin is diluted by these additional variable costs. During the year, the Group has reviewed the accounting treatment of these costs and reclassified commissions payable from net revenue to cost of sales, resulting in an uplift to both revenue and cost of sales by £0.5 million with nil impact on absolute profit and an adverse impact of 0.5ppts on the Group's gross margin percentage.
The key factors behind the gross margin performance are outlined below:
| Key Margin Factors | Impact description | % Impact | Segment |
| Online sales growth | The rapid growth of direct to consumer (D2C) sales has a dilutive effect on the Group's percentage gross margin due to additional variable costs incurred on each sale. | ↓ | VLG Brands |
| Input costs | Temporary lag effect from passing on additional raw material and packaging costs to customers after cost increases have been incurred - impact arises from inputs procured at a premium in the prior year (to secure supply) whereby costs unwound through the P&L in 2023 in advance of customer price increases becoming effective. | ↓ | Customer Brands |
| License fee income | Increased license fee income pertaining to regulatory obligations. | ↑ | Customer Brands |
| Sales mix | Temporary margin dilution due to adverse sales mix from high growth of lower margin brands. | ↓ | VLG Brands |
| Inventory management | Additional stock write off and destruction costs incurred relating to discontinued lines, including hand sanitiser gel and obsolete inventory for the China geography. | ↓ | VLG and Customer Brands |
| FX impact | The Euro strengthened against Sterling by 2.0% during 2023 (based on average FX rates), which had an overall positive impact on the reported revenue and operating profit of the Group as most of the Group's gross margins continue to be Euro denominated. | ↑ | VLG and Customer Brands |
| Other | Other factors include the unwind of fair value uplifts on inventory acquired as part of the HL Healthcare Ltd acquisition in the prior year. | ↓ | VLG Brands |
Administrative expenses
Administrative expenses before depreciation and amortisation were in line with the previous period at £8.9 million (2022: £8.9 million). This comprised cost increases from inflationary factors including an average 5% pay uplift across the Group's workforce, however this impact was largely mitigated by the rationalisation of the Executive Management team. Marketing expenditure was in line with the previous period owing to increased online advertisement which has driven growth through this this channel, this investment was offset by reduced spend on the oral care brands attributable to the decline of Dentyl sales in the UK following de-listings.
Gross R&D expenditure was up on the previous year due to investment in MDR and increased focus in new product innovation and development. Net R&D expenditure which resides within operating costs was down against the prior year as a higher proportion of these costs were capitalisable.
Adjusted EBITDA
Continued tight control of our cost base ensured that the additional gross margin over the prior year was passed through the P&L to deliver an Adjusted EBITDA4 of £11.6 million, an increase of 28.9% over the prior year (2022: £9.0 million) at a margin of 22.5% (2022: 20.4%).
Non-cash administrative expenses
Non-cash costs for amortisation and depreciation increased by £1.0 million and £0.3 million respectively, with the driver of the amortisation increase being the full year impact of amortisation from the acquisition of HL Healthcare Limited acquired on 1 December 2022. Depreciation charge increase reflects growth capex invested into Biokosmes over the last two years as the Group continues to seek opportunities to automate more of its activities and enable internalisation of production from third party manufacturers.
Impairment of intangibles
During the year the Dentyl and Pharmasource intangible assets were impaired by £0.8m collectively. Dentyl was impaired by £0.4m following non-materialisation of sales from the China geography which had been emphasised as a material uncertainty in the prior year accounts. Pharamsource was impaired by £0.4m resulting from margin erosion from a key customer in order to retain the business, coupled with expected business development opportunities not materialising until after the year end, notably if this new customer had been secured pre year end it would have avoided the need for an impairment to arise.
Exceptional costs
Exceptional costs of £0.6 million (2022: £1.3 million) reduced substantially during the period, with approximately half of the 2023 costs being related to further integration work from previous year acquisitions, including costs associated with evaluating an upgrade to the Group's ERP system and other IT integration. The balance of exceptional items related to restructuring costs incurred as part of a commercial team restructure.
Net finance expense
The Group is financed by a revolving credit facility established during 2021 in the committed sum of £30.0 million of which £16.5 million had been drawn at 31 December 2023. The revolving credit facility bears interest at a fixed rate of 2.5% plus SONIA on drawn funds as well as a commitment fee at the rate of 1.0% on the balance of undrawn funds up to the facility limit.
Finance costs increased by £0.7 million to £2.2 million (2022: £1.5 million), wholly owing to increased interest payable following additional drawdown from the facility at the end of the previous year to fund the acquisition of HL Healthcare Ltd. The total finance expense of £2.2 million includes significant non-cash elements amounting to £0.8 million related to amortisation of commitment fees and FX impact on conversion of EUR borrowings.
Operating profit, PBT and net income
Operating profit was £3.3 million (2022: £2.2 million) with the profit before tax for the Group of £1.1 million (2022: £0.7 million). The Group reported net income of £0.9 million (2022: £0.5 million) which translated into adjusted earnings per share6 of 5.21 pence (2022: 4.07 pence). Adjusted profit before tax5 which adds back exceptional items, amortisation and share based payments increased by 29.2% to £7.3 million (2022: £5.6 million).
Statement of Financial Position
|
| 2023 | 2022 |
|
| £'000 | £'000 |
| Intangible assets | 74,612 | 78,694 |
| Property, plant and equipment | 10,194 | 10,090 |
| Deferred Tax | 2,530 | 2,443 |
| Non-Current Assets | 87,336 | 91,227 |
| Inventories | 10,332 | 11,998 |
| Trade and other receivables | 16,205 | 16,433 |
| Cash and cash equivalents | 5,622 | 5,631 |
| Current Assets | 32,159 | 34,062 |
| Trade and other payables | 9,069 | 11,725 |
| Taxation | 269 | 891 |
| Interest-bearing borrowings | 20,342 | 3,867 |
| Current Liabilities | 29,677 | 16,483 |
| Interest-bearing borrowings | 4,050 | 22,979 |
| Statutory employment provision | 1,544 | 1,461 |
| Deferred tax liability | 7,970 | 8,707 |
| Non-Current Liabilities | 13,654 | 33,147 |
| Net Assets | 76,254 | 75,659 |
Non-current assets
Non-current assets including goodwill, reduced by £3.9 million during the year to £87.3 million (2022: £91.2 million) reflecting amortisation of intangible assets and the impairments charges recognised during the year on the Dentyl and Pharmasource CGU's.
Current assets
As anticipated, the value of inventory holding was reduced by 14.0% to £10.3 million versus 2022. Despite the revenue growth of the business, this scale of reduction was made possible by the easing supply chain situation which has enabled the Group to regain purchasing power and return to normalised levels. Trade and other receivables were broadly in line with the previous year at £16.2 million (2022: £16.4 million) and as seen historically the seasonality of revenue phasing was weighed towards the final quarter of the year.
Current liabilities
Trade and other payables reduced to £9.1 million (2022: £11.7 million) following a peak at the end of the prior year which reflected the inventory build at that time and payables related to professional fees and integration costs associated with the HL Healthcare Ltd acquisition completed on 1 December 2022. Taxation liabilities at 31 December 2023 reduced by £0.6m compared to the previous year and was attributable to prepaid taxes during 2023 in relation to estimated 2024 taxable profits for the Group's Italian subsidiary. Interest bearing borrowings due within one year include deferred consideration of £2.2m for the acquisition of HL Healthcare Ltd which becomes payable in November 2024. Interest bearing borrowings also include the full drawdown against the RCF which was due to expire in June 2024 and had not been renewed at the balance sheet date - this was subsequently renewed post period end (see note 31 of the financial statements).
Non-current liabilities
Interest bearing borrowings of £4.1 million (2022: £23.0 million) comprised finance leases due after more than one year. As described above, the previous year included deferred consideration and other interest bearing borrowings which are reported as part of current liabilities at the end of 2023. Statutory employment provisions, which relate solely to the Group's Italian subsidiary, increased by 6% over the prior year due to increased headcount.
Cash performance
|
| 2023 | 2022 | Change |
|
| £'000 | £'000 | % |
| Operating cash flow before movements in working capital | 10,840 | 7,544 | 43.7% |
| Change in working capital | (1,005) | (1,357) | - |
| Cash generated from operations | 9,835 | 6,187 | 59.0% |
| Income taxes paid | (1,615) | (621) | - |
| Net cash from operating activities | 8,220 | 5,566 | 47.7% |
| Cash outflow from investing activities - acquisitions | (2,933) | (9,860) | - |
| Cash outflow from investing activities - additions | (2,407) | (1,828) | - |
| Cash (outflow) / inflow from financing activities | (2,806) | 6,922 | - |
| Increase in cash and cash equivalents | 74 | 800 | - |
| Cash and cash equivalents at beginning of year | 5,631 | 5,235 | - |
| Effect of foreign exchange rates | (83) | (404) | - |
| Cash and cash equivalents at end of year | 5,622 | 5,631 | (0.1)% |
Cash generated from operations
Cash generated from operations increased 59.0% to £9.8 million (2022: £6.2 million) and is reported after an adverse working capital outflow of £1.0 million (2022: adverse £0.4 million) attributable to the normalisation of trade payables and inventories. Operating cash conversion, calculated as cash from operating activities as a proportion of Adjusted EBITDA4, increased to 85.1% (2022: 69.0%) as the Group benefited from the full year inclusion of the highly cash generative Earol brand.
Tax paid increased by £1.0 million to £1.6 million (2022: £0.6 million) arising from a significant increase in taxable profits within the Group's Italian subsidiary in 2022 and prepaid tax of £0.6 million based on estimated 2024 profits. Net cash from operating activities increased to £8.2 million (2022: £5.6 million).
Cashflows from investing activities
Cash used in investing activities reduced by 54% to £5.3 million (2022: £11.7 million) and comprised outflows of £3.0 million on deferred consideration for the acquisition of HL Healthcare Ltd, plus £0.8 million of capital investment into the manufacturing facilities in Italy and Sweden (2022: £0.9 million), plus £0.3 million of intangible assets arising from new product development (2022: £0.4 million), with the balance of £1.1 million put towards the Group's continued investment in upgrading its 27 medical devices to become MDR compliant ahead of the Medical Device Regulator's deadline in May 2028 (2022: £0.5 million).
Free cash flow
Notwithstanding the Group's significant investment to upgrade its medical devices, the free cash flow (FCF) generation of the Group has improved considerably for a second successive year, free cash flow available for debt service of £4.8 million was 71% up against the previous period (2022: £2.8 million) with a resulting Adjusted EBITDA4 to FCF conversion of 42% (2022: 32%).
| Free Cash Flow |
|
|
| Year-end Dec (£000) | 2023 | 2022 |
| Adjusted EBITDA4 | 11.6 | 9.0 |
| Operating cash generation | 9.8 | 6.2 |
| Cash conversion % | 85% | 69% |
| Net Operating cash flow | 8.2 | 5.6 |
| CAPEX, PPE | (0.8) | (0.9) |
| CAPEX, intangibles | (1.6) | (0.9) |
| Lease repayments | (1.0) | (0.9) |
| Free Cash Flow | 4.8 | 2.8 |
| FCF to Adjusted EBITDA % | 41.7% | 31.7% |
Cashflows from financing activities
Cash outflows from financing activities amounted to £2.8 million (2022: inflow £6.9 million) and comprised interest payments of £1.4 million (2022: £0.6 million) and lease payments of £1.0 million (2022: £0.9 million) with the balance of £0.4 million used to repay interest bearing borrowings (2022: net drawdown £8.2 million).
Net debt and leverage
Group net debt10 excluding finance lease obligations was £13.7 million (31 Dec 22: £16.6 million) and equated to net leverage7 of 1.30x at the period end (31 Dec 22: 1.65x). With an overall available RCF facility of £30 million (plus £20 million accordion), including an adjusted EBITDA4 to gross debt leverage limit of 2.5x, the Group retains access to meaningful funding.
Daniel Wells
Chief Financial Officer
9 April 2024
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Company number 05651130
| | | Year ended | Year ended |
| | | 31 December | 31 December |
| | | 2023 | 2022 |
| | Notes | £'000 | £'000 |
| | | | |
| Revenue | 5 | 51,410 | 43,980 |
| Cost of sales | | (31,260) | (26,315) |
| Gross profit | | 20,150 | 17,665 |
| Administrative expenses | | | |
| Operating expenses | | (11,189) | (10,927) |
| Impairment losses of financial assets | 16 | 101 | 180 |
| Amortisation and impairment of intangible assets | 13 | (5,276) | (3,564) |
| Total administrative expenses | | (16,364) | (14,311) |
| Other income | | 142 | 151 |
| Operating profit before exceptional items | | 3,928 | 3,505 |
| Exceptional costs | 6 | (639) | (1,278) |
| Operating profit | 7 | 3,289 | 2,227 |
| Finance income | | 15 | 1 |
| Finance costs | | (2,181) | (1,522) |
| Profit before tax | | 1,123 | 706 |
| Tax | 10 | (202) | (186) |
| Profit for the year | | 921 | 520 |
| Other comprehensive income: | | | |
| Items that will be reclassified subsequently to profit or loss | | | |
| Foreign exchange (loss) / gain / on translation of subsidiaries | | (551) | 1,679 |
| Total comprehensive profit for the year attributable to equity holders of the parent | | 370 | 2,199 |
All of the profit and the total comprehensive income for the year is attributable to equity holders of the parent.
| | | Year ended | Year ended |
| | | 31 December | 31 December |
| | | 2023 | 2022 |
| Earnings per share | | | |
| Basic earnings per share (pence) | 12 | 0.73 | 0.41 |
| Diluted earnings per share (pence) | 12 | 0.68 | 0.39 |
Consolidated Statement of Financial Position
at 31 December 2023
Company number 05651130
| | | At 31 December | At 31 December |
| | | 2023 | 2022 |
| | Notes | £'000 | £'000 |
| | | | |
| Assets | | | |
| Non-current assets | | | |
| Intangible assets | 13 | 74,612 | 78,694 |
| Property, plant and equipment | 14 | 10,194 | 10,090 |
| Deferred tax | | 2,530 | 2,443 |
| | | 87,336 | 91,227 |
| | | | |
| Current assets | | | |
| Inventories | 15 | 10,332 | 11,998 |
| Trade and other receivables | 16 | 16,205 | 16,433 |
| Cash and cash equivalents | 17 | 5,622 | 5,631 |
| | | 32,159 | 34,062 |
| Total assets | | 119,495 | 125,289 |
| | | | |
| Equity and liabilities | | | |
| Capital and reserves | | | |
| Share capital | 18 | 379 | 379 |
| Share premium account | 18 | 65,960 | 65,960 |
| Merger reserve | 19 | 7,656 | 7,656 |
| Foreign currency translation reserve | 20 | 1,014 | 1,565 |
| Share-based payments reserve | 21 | 1,034 | 812 |
| Retained earnings | 22 | 211 | (713) |
| Total equity attributable to equity holders of the parent | | 76,254 | 75,659 |
| | | | |
| Liabilities | | | |
| Current liabilities | | | |
| Trade and other payables | 23 | 9,066 | 11,725 |
| Taxation | | 269 | 891 |
| Interest-bearing borrowings | 24 | 20,342 | 3,867 |
| | | 29,677 | 16,483 |
| Non-current liabilities | | | |
| Interest-bearing borrowings | 24 | 4,050 | 22,979 |
| Statutory employment provision | 25 | 1,544 | 1,461 |
| Deferred tax liability | 11 | 7,970 | 8,707 |
| | | 13,564 | 33,147 |
| Total liabilities | | 43,241 | 49,630 |
| Total equity and liabilities | | 119,495 | 125,289 |
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Company number 05651130
| | | | | Foreign | | | |
| | | Share | | currency | Share-based | | |
| | Share | premium | Merger | translation | payments | Retained | Total |
| | capital | account | reserve | reserve | reserve | earnings | Equity |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | | | | |
| Balance at 1 January 2022 | 377 | 65,738 | 7,656 | (114) | 856 | (1,349) | 73,164 |
| Profit for the year | - | - | - | - | - | 520 | 520 |
| Foreign exchange | - | - | - | 1,679 | - | - | 1,679 |
| on translation | | | | | | | |
| Total comprehensive income | - | - | - | 1,679 | - | 520 | 2,199 |
| Share-based payments charge | - | - | - | - | 72 | - | 72 |
| Share-based payments charge recycling | - | - | - | - | (116) | 116 | - |
| Contributions of equity, net of transaction costs | 2 | 222 | - | - | - | - | 224 |
| Transactions with | 2 | 222 | - | - | - | - | 224 |
| Shareholders | | | | | | | |
| Balance at | | | | | | | |
| 1 January 2023 | 379 | 65,960 | 7,656 | 1,565 | 812 | (713) | 75,659 |
| Profit for the year | - | - | - | - | - | 921 | 921 |
| Foreign exchange | - | - | - | (551) | - | - | (551) |
| on translation | | | | | | | |
| Total comprehensive income | - | - | - | (551) | - | 921 | 370 |
| Share-based payments charge | - | - | - | - | 225 | - | 225 |
| Share-based payments charge recycling | - | - | - | - | (3) | 3 | - |
| Transactions with | - | - | - | - | 222 | 3 | 225 |
| Shareholders | | | | | | | |
| Balance at | | | | | | | |
| 31 December 2023 | 379 | 65,960 | 7,656 | 1,014 | 1,034 | 211 | 76,254 |
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
Company number 05651130
| | | Year ended | Year ended |
| | | 31 December | 31 December |
| | | 2023 | 2022 |
| | Notes | £'000 | £'000 |
| Cash flow from operating activities | | | |
| Profit before tax | | 1,123 | 706 |
| Finance expense | | 2,166 | 1,521 |
| Operating profit | | 3,289 | 2,227 |
| Adjustments for: | | | |
| - Depreciation of property, plant and equipment | 14 | 2,128 | 1,821 |
| - Impairment losses of financial assets | 16 | (101) | (180) |
| - Amortisation of intangible assets | 13 | 4,516 | 3,564 |
| - Impairment of intangible assets | 13 | 760 | - |
| - Loss on disposal of non-current assets | 13 | 23 | 40 |
| - Share-based payment expense | | 225 | 72 |
| Operating cash flow before movements in working capital | | 10,840 | 7,544 |
| Decrease / (increase) in inventories | | 1,481 | (2,329) |
| Decrease / (increase) in trade and other receivables | | 104 | (2,517) |
| (Decrease) / increase in trade and other payables | | (2,590) | 3,489 |
| Cash generated from operations | | 9,835 | 6,187 |
| - Tax paid | | (1,615) | (674) |
| - Tax receipt | | - | 53 |
| Net cash from operating activities | | 8,220 | 5,566 |
| Cash flow from investing activities: | | | |
| Acquisition of subsidiaries, net of cash acquired | | (2,933) | (7,482) |
| Purchases of property, plant and equipment | 14 | (820) | (860) |
| Expenditure in respect of intangible assets | 13 | (1,587) | (3,346) |
| Net cash used in investing activities | | (5,340) | (11,688) |
| Cash flow from financing activities: | | | |
| Proceeds from issuance of ordinary shares | 18 | - | 224 |
| Drawdown of interest-bearing borrowings | 24 | 3,165 | 14,985 |
| Repayment of interest-bearing borrowings | 24 | (3,581) | (6,728) |
| Leasing obligation repayments | 24 | (999) | (922) |
| Interest paid | | (1,391) | (637) |
| Net cash (used) / from financing activities | | (2,806) | 6,922 |
| Net increase in cash and cash equivalents | | 74 | 800 |
| Net foreign exchange difference | | (83) | (404) |
| Cash and cash equivalents at beginning of period | | 5,631 | 5,235 |
| Cash and cash equivalents at end of period | 17 | 5,622 | 5,631 |
Notes to the Consolidated Statements
for the year ended 31 December 2023
Company number 05651130
1. Basis of the announcement
The financial information of the Group set out above does not constitute statutory accounts for the purposes of Section 435 of the Companies Act 2006. The financial information for the year ended 31 December 2022 has been extracted from the Group's audited financial statements which were approved by the Board of directors on 4 April 2023 and delivered to the Registrar of Companies for England and Wales following the Company's 2023 Annual General Meeting.
The financial information for the year ended 31 December 2023 has been extracted from the Group's financial statements for that period. The report of the auditor on the 2023 financial statements was unmodified.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with UK adopted international accounting standards, in conformity with the requirements of the Companies Act 2006, that are relevant to companies that report under these standards, this announcement does not itself contain sufficient information to comply with those standards. This financial information has been prepared in accordance with the accounting policies set out in the 2023 Report and Accounts.
Items included in the financial information of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial information is presented in UK sterling (£), which is the Group's presentational currency.
The Company is a public limited company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange.
The principal activity of Venture Life Group plc and its subsidiaries is the development and commercialisation of healthcare products, including food supplements, medical devices and dermo-cosmetics for the ageing population, and the manufacture of a range of topical products for the healthcare and cosmetics.
2.1 Segment revenue and results
The following is an analysis of the Group's revenue and results by reportable segment:
| | Venture | | |
| | Life | Customer | Consolidated |
| | Brands | Brands | Group |
| | £'000 | £'000 | £'000 |
| Year ended 31 December 2023 | | | |
| Revenue | | | |
| Sale of goods | 32,629 | 27,331 | 59,960 |
| | | | |
| Intercompany sales elimination | (1,902) | (6,647) | (8,549) |
| Total external revenue | 30,728 | 20,683 | 51,411 |
| Results | | | |
| Operating profit before exceptional items, amortisation of acquired intangibles and excluding central administrative costs | 11,467 | 4,559 | 16,026 |
| Amortisation of acquired intangibles | (4,755) | (521) | (5,276) |
| Depreciation incurred by segment | (2,035) | (536) | (2,571) |
| Operating profit before exceptional items and excluding central administrative costs | 4,677 | 3,502 | 8,179 |
| | | | |
| Year ended 31 December 2022 | | | |
| Revenue | | | |
| Sale of goods | 24,579 | 25,621 | 50,200 |
| | | | |
| Intercompany sales elimination | (1,444) | (4,776) | (6,220) |
| Total external revenue | 23,135 | 20,845 | 43,980 |
| Results | | | |
| Operating profit before exceptional items, amortisation of acquired intangibles and excluding central administrative costs* | 8,637 | 4,606 | 13,243 |
| Amortisation of acquired intangibles | (3,043) | (442)
| (3,485) |
| Depreciation incurred by segment* | (1,795)
| (490)
| (2,285) |
| Operating profit before exceptional items and excluding central administrative costs | 3,799 | 3,674 | 7,473 |
* Prior year figures reanalysed to show segmental operating profit before amortisation of acquired intangible assets
The reconciliation of segmental operating profit to the Group's profit before tax is as follows:
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Operating profit before exceptional items and excluding central administrative costs | 8,179 | 7,473 |
| Exceptional items | (639) | (1,278) |
| Central administrative costs | (4,890) | (3,968) |
| Finance costs | (2,166) | (1,521) |
| Profit before tax | 1,123 | 706 |
One customer generated revenue of £8,346,036 which accounted for 10% or more of total revenue (2022: one customer generated revenue of £8,327,607 which accounted for 10% or more of total revenue).
2.2 Segmental assets and liabilities
| | At | At |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Assets | | |
| Venture Life Brands | 100,642 | 102,295 |
| Customer Brands | 17,682 | 22,149 |
| Central Group assets | - | 845 |
| Consolidated total assets | 118,324 | 125,289 |
| Liabilities | | |
| Venture Life Brands | 17,672 | 19,669 |
| Customer Brands | 7,757 | 10,839 |
| Central Group liabilities | 16,644 | 19,122 |
| Consolidated total liabilities | 42,073 | 49,630 |
2.3 Other segmental information
| | Depreciation | Addition to |
| | and | non-current |
| | Amortisation | Assets |
| | £'000 | £'000 |
| Year ended 31 December 2023 | | |
| Venture Life Brands | 6,790 | 2,077 |
| Customer Brands | 536 | 765 |
| Central administration | 78 | - |
| | 7,404 | 2,842 |
| Year ended 31 December 2022 | | |
| Venture Life Brands | 4,838 | 17,381 |
| Customer Brands | 490 | 811 |
| Central administration | 57 | - |
| | 5,385 | 18,192 |
2.4 Geographical information
The Group's revenue from external customers by geographical location of customer is detailed below:
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Revenue | | |
| UK | 19,041 | 15,033 |
| Italy | 11,413 | 12,870 |
| Switzerland | 1,662 | 1,829 |
| Germany | 606 | 393 |
| Netherlands | 938 | 1,612 |
| France | 602 | 252 |
| Rest of Europe | 9,447 | 8,015 |
| USA | 564 | 466 |
| Canada | 990 | 441 |
| Brazil | 860 | 518 |
| Ireland | 1,250 | 1,230 |
| Rest of the World | 4,038 | 1,320 |
| Total revenue * | 51,412 | 43,980 |
* Prior year figures reanalysed for correction and to expand geographical analysis
3. Exceptional items
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Costs incurred in the acquisition of HL Healthcare Ltd | - | 860 |
| Prospective M&A costs | 86 | - |
| Integration of acquisitions | 277 | 202 |
| Restructure | 276 | 216 |
| Total exceptional items | 639 | 1,278 |
During the period the Group incurred further integration costs in relation to previous year acquisitions plus new costs in relation to prospective M&A. Other exceptional items related to restructuring costs.
4. Income tax expense
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Current tax: | | |
| Current tax on profits for the year | 1,038 | 1,195 |
| Adjustments in respect of earlier years | (25) | 11 |
| Total current tax expense | 1,013 | 1,206 |
| Deferred tax: | | |
| Origination and reversal of temporary differences | (811) | (1,020) |
| Total deferred tax credit | (811) | (1,020) |
| Total income tax charge / (credit) | 202 | 186 |
Tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits and losses of the consolidated entities as follows:
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Profit before tax | 1,123 | 706 |
| Profit before taxation multiplied by the local tax rate of 23.52% (2022: 19%) | 264 | 134 |
| Net (tax allowances not recognised in financial statements) / expenses not deductible for tax purposes | (155) | 166 |
| Current year losses for which no deferred tax asset has been recognised | 31 | 117 |
| Utilised losses | - | (112) |
| Other adjustments | (70) | - |
| Re-measurement of deferred tax balances | (5) | (281) |
| Higher rate on foreign taxes | 162 | 151 |
| Adjustments for current tax of prior periods | (25) | 11 |
| Income tax charge | 202 | 186 |
With effect from 1 April 2023 the UK corporation tax rate rose from 19% to 25% on all profits in excess of £250,000. The standard corporation tax rate in Italy is 24% and there is in addition a regional production tax of 3.9%. Corporation tax rates in the Netherlands are 25.8% on profits in excess of €395,000 and 15% on profits below this threshold. Corporation tax rates in the Sweden are 20.6%. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.
As at the reporting date, the Group has unused tax losses of £9,469,282 (2022: £9,867,000) available for offset against future profits generated in the UK. A deferred tax asset has been recognised on the losses which the company considers will be utilised against future profits in the UK however, there remain further losses of £435,000 which a deferred tax asset has not be recognised on due to the uncertainty of their recoverability.
The tax charge of the Group is mainly driven by tax paid on the profits of Biokosmes S.r.l and PharmaSource B.V. as profits from the UK entities are Group relieved against current year and prior year losses within the UK Group. The group recognises a deferred tax asset in relation to losses carried forward in the UK entities as the performance of these entities is expected to become more profitable in future due to the introduction of new customers and products from recent acquisitions and business development activities, as well as cost rationalisation. The deferred tax liabilities generated on previous years acquisitions are released to the income statement over time.
5. Earnings per share
A reconciliation of the weighted average number of ordinary shares used in the measures is given below:
| | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | | |
| For basic EPS calculation | 126,498,197 | 126,257,101 |
| For diluted EPS calculation | 133,635,025 | 133,393,929 |
The dilution reflects the inclusion of the options and LTIPs that have been issued, amounting to 10,194,015 stock options and 554,115 LTIPs.
A reconciliation of the earnings used in the different measures is given below:
| | 2023 £'000 | 2022 £'000 |
| For basic and diluted EPS calculation | 921 | 520 |
| Add back: Amortisation | 5,276 | 3,564 |
| Add back: Exceptional costs | 639 | 1,278 |
| Add back: Share based Payments | 225 | 72 |
| For adjusted EPS calculation | 7,061 | 5,434 |
The resulting EPS measures are:
| | Pence | Pence |
| Basic EPS | 0.73 | 0.41 |
| Diluted EPS | 0.68 | 0.39 |
| Adjusted EPS | 5.58 | 4.30 |
| Adjusted diluted EPS | 5.21 | 4.07 |
6. Intangible assets
| | Development costs | Brands | Patents and trademarks | Goodwill | Other intangible assets | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Cost or valuation: | | | | | | |
| At 1 January 2022 | 4,049 | 20,093 | 979 | 35,483 | 10,727 | 71,331 |
| Acquired through business combinations | - | 9,282 | - | 3,407 | 2,628 | 15,317 |
| Additions | 923 | - | 45 | - | - | 968 |
| Disposals | (84) | - | - | - | - | (84) |
| Foreign exchange movements | 231 | - | 35 | 762 | 168 | 1,196 |
| At 31 December 2022 | 5,119 | 29,375 | 1,059 | 39,652 | 13,523 | 88,728 |
| Additions | 1,377 | - | 210 | - | - | 1,587 |
| Disposals | (22) | - | - | - | - | (22) |
| Foreign exchange movements | (84) | - | (15) | (305) | (68) | (472) |
| At 31 December 2023 | 6,390 | 29,375 | 1,254 | 39,347 | 13,455 | 89,821 |
| Amortisation: | | | | | | |
| At 1 January 2022 | 2,112 | 822 | 511 | - | 2,807 | 6,252 |
| Charge for the year | 585 | 1,522 | 164 | - | 1,293 | 3,564 |
| Disposals | (46) | - | - | - | - | (46) |
| Foreign exchange movements | 129 | - | 18 | - | 117 | 264 |
| At 31 December 2022 | 2,780 | 2,344 | 693 | - | 4,217 | 10,034 |
| Charge for the year | 869 | 1,917 | 144 | - | 1,586 | 4,516 |
| Impairment charge | - | - | - | 760 | - | 760 |
| Foreign exchange movements | (45) | - | (9) | 2 | (49) | (101) |
| At 31 December 2023 | 3,604 | 4,261 | 828 | 762 | 5,754 | 15,209 |
| Carrying amount: | | | | | | |
| At 31 December 2022 | 2,339 | 27,031 | 366 | 39,652 | 9,306 | 78,694 |
| At 31 December 2023 | 2,786 | 25,114 | 426 | 38,585 | 7,701 | 74,612 |
All Capitalised development costs are amortised over their estimated useful lives, which is five years. All amortisation has been charged to administrative expenses in the Statement of Comprehensive Income.
All trademark, licence and patent renewals are amortised over their estimated useful lives, which is between five and ten years. All amortisation has been charged to administrative expenses in the Statement of Comprehensive Income.
Other intangible assets currently comprise customer relationships and product formulations acquired through the acquisition of Biokosmes Srl. and customer relationships acquired through the acquisitions of Periproducts, the Dentyl brand, the Pharmasource group, BBI Healthcare Ltd, the Helsinn Brands and HL Healthcare Ltd. These assets were recognised at their fair value at the date of acquisition and were being amortised over a period of between five and ten years. The weighted average remaining amortisation period for other intangible assets is 5.4 years (2022: 5.9 years)
Assets with indefinite economic lives as well as associated assets with finite economic lives are tested for impairment at least annually or more frequently if there are indicators that amounts might be impaired. The impairment review involves determining the recoverable amount of the relevant cash-generating unit, which corresponds to the higher of the fair value less costs to sell or its value in use.
The key assumptions used in relation to the Biokosmes (Customer Brands comprising one CGU), Periproducts, the Dentyl brand, Pharmasource group, BBI Healthcare Ltd, the Helsinn brands and HL Healthcare Ltd (part of the Venture Life Brands comprising six CGU's) impairment review are outlined below:
Biokosmes SRL
· In 2023, Biokosmes SRL achieved revenue growth of 0.2% versus the previous year - being an above expectation result against the backdrop of exceptional revenue growth of 34.0% during 2022. Subsequent period expectations are for a marginal decline in this exceptional performance as revenues stabilise into 2025, followed by strong organic growth thereafter. Management have forecasted future revenue growths for the 5-year period ending 2028 of CAGR 4.1%.
· The group has valued Biokosmes SRL by discounting the associated future cash flows across a five year period, and with a terminal value to reflect future years. The discount rate is based upon the group pre-tax WACC of 14.3% and is adjusted for specific segment, country and currency risk plus local tax rates to derive a post-tax rate of 10.7%. These assumptions generate a headroom over the assets current carrying value equivalent to £14.4 million.
· An increase in the post-tax WACC rate by 6.7ppt would have resulted in no headroom over the assets of the business held at the balance sheet date.
· Sensitivity analysis has been performed on Biokosmes by restricting earnt margin on sales to 2023 levels, lowering it 0.7 ppts. Under this scenario, headroom remains at £13.0 million.
Periproducts Ltd
· In 2023, PeriProducts Ltd achieved revenue growth of 3.0% versus the previous year primarily owing to strong growth in the online sales of the Ultradex product line. Management have forecasted future revenue growths for the 5-year period ending 2028 of CAGR 4.3%.
· The group has valued PeriProducts Ltd by discounting the associated future cash flows across a five year period, and with a terminal value to reflect future years. The discount rate is based upon the group pre-tax WACC of 14.3% and is adjusted for specific segment, country and currency risk plus local tax rates to derive a post-tax rate of 10.7%. These assumptions generate a headroom over the assets current carrying value equivalent to £6.4m.An increase in the post-tax WACC rate by 10.6ppt would have resulted in no headroom over the assets of the business held at the balance sheet date.
· Sensitivity analysis has been performed to restrict growth in non-core brands to inflationary levels of 2% per annum. This is a considerably prudent scenario whereby Periproducts is engaging in significant marketing activities to promote its brands during the coming year, with anticipation of returns in 2025. Under this inflationary scenario future cashflows still generate a headroom of £6.0 million over the assets of the business held at the balance sheet date.
Dentyl Brand
· In 2023, revenues from the Dentyl Brand declined 8.8% versus the previous year following product delistings within the UK wholesaler channel. International revenues similarly underperformed particularly within the Chinese geography where existing distribution arrangements materialised below expectations. To appropriately reflect these adverse market conditions management has opted to impair the brand by £389,000 and has restricted it's forecasted 5-year revenue growth to a CAGR 1.7%. Primarily this restriction owes to the disregarding of International distribution revenues except where reasonably certain to materialise. The group remains committed to expanding Dentyl into the APAC region however and notes considerable upside opportunity with both existing and new partners.
· The group has valued the Dentyl Brand by discounting the associated future cash flows across a five year period, and with a terminal value to reflect future years. The discount rate is based upon the group pre-tax WACC of 14.3% and is adjusted for specific segment, country and currency risk plus local tax rates to derive a post-tax rate of 10.7%. Post-impairment the brand assets current carrying value is equivalent to its recoverable amount with no headroom.
· Sensitivity analysis has been performed on scenarios to completely restrict international revenues to nil, which would result in impairment of £0.4 million. Under this scenario, the Group would seek to mitigate this impact and the Directors are satisfied that the forecasts included in the original impairment assessment already apply a cautious approach.
Pharmasource BV
· In 2023, PharmaSource BV achieved revenue growth of 7.0% driven by strong performance in the international division. Outlook for 2024 and beyond includes the discontinuation of a significant customer contract, however minimum purchase obligations under post-year end secured business have more than mitigated this reduction. Benefits from this new contract are constrained by a negotiated price reduction with the groups largest footcare customer, however aggregate forecasted future revenue growths for the 5-year period ending 2028 retain a strong CAGR of 5.8%.
· The group has valued PharmaSource BV by discounting the associated future cash flows across a five year period, and with a terminal value to reflect future years. The discount rate is based upon the group pre-tax WACC of 14.3% and is adjusted for specific segment, country and currency risk plus local tax rates to derive a post-tax rate of 11.2%. Price inelasticity has contributed to margin erosion across the forecast period and an impairment has been recognised against the asset for £0.4m. The carrying value of the attributable intangible assets is now £5.0m at 31 December 2023, and the group is actively seeking new opportunities for the brand internationally.
· During February 2024 a new distribution contract was signed for footcare products with an existing customer with minimum purchase obligations of approximately £0.2 million per annum. No impairment would have been necessary had this contract been foreseeable at the point of valuation. This contract is expected to generate revenues across a five year period and minimum purchase obligations for the coming year have already been secured as orders, providing comfort against the need for future impairment.
BBI Healthcare Ltd
· In 2023, BBI Healthcare Ltd achieved revenue growth of 10.0% versus the previous year which is primarily driven by growth in the Lift brand across both Online and Pharmaceutical channels. Management have forecasted future revenue growths for the 5-year period ending 2028 of CAGR 9.7%, with the largest driver being 16.9% and 11.3% cumulative growth in UK/EU sales of Balance Activ and Lift brands respectively.
· The group has valued BBI Healthcare Ltd by discounting the associated future cash flows across a five year period, and with a terminal value to reflect future years. The discount rate is based upon the group pre-tax WACC of 14.3% and is adjusted for specific segment, country and currency risk plus local tax rates to derive a post-tax rate of 10.7%. These assumptions generate a headroom over the assets current carrying value equivalent to £27.8 million. An increase in the post-tax WACC rate by 6.5ppt would have resulted in no headroom over the assets of the business held at the balance sheet date.
· Sensitivity analysis has been performed to reduce anticipated revenue growths by 10% as a prudent scenario and shows that the future cashflows still generate a significant headroom of £27.1 million over the assets of the business held at the balance sheet date.
Helsinn Brands
· In 2023, Helsinn Brands achieved revenue growth of 25.9% versus the previous year primarily owing to exceptional 51.9% growth across international revenues of the Gelclair brand. Management have forecasted future revenue growths for the 5-year period ending 2028 of CAGR 10.0%.
· The group has valued Helsinn Brands by discounting the associated future cash flows across a five year period, and with a terminal value to reflect future years. The discount rate is based upon the group pre-tax WACC of 14.3% and is adjusted for specific segment, country and currency risk plus local tax rates to derive a post-tax rate of 10.5%. These assumptions generate a headroom over the assets current carrying value equivalent to £15.0 million.
· An increase in the post-tax WACC rate by 18.0ppt would have resulted in no headroom over the assets of the business held at the balance sheet date.
· Sensitivity analysis has been performed to restrict forecasted revenues to those from pre-existing customer relationships only as a prudent scenario and shows that the future cashflows still generate a significant headroom of £10.0 million over the assets of the business held at the balance sheet date.
HL Healthcare Ltd
· In 2023, HL Healthcare Ltd achieved revenue growth of 5.4% versus the previous year with core Earol brands growing 10.9%. Single year overall growth was restricted by the discontinuation of the low-margin Sterinase product line, with normalisation anticipated from 2024 onwards. Management have forecasted future revenue growth for the 5-year period ending 2028 of CAGR 10.1%.
· The group has valued HL Healthcare Ltd by discounting the associated future cash flows across a five year period, and with a terminal value to reflect future years. The discount rate is based upon the group pre-tax WACC of 14.3% and is adjusted for specific segment, country and currency risk plus local tax rates to derive a post-tax rate of 10.7%. These assumptions generate a headroom over the assets current carrying value equivalent to £7.2 million.
· An increase in the post-tax WACC rate by 3.7ppt would have resulted in no headroom over the assets of the business held at the balance sheet date.
· Forecasted revenues for HLH benefit from annualization following product launch of Earol Baby at the tail end of 2023. Sensitivity analysis has considered these new lines failing to generate any revenues versus the forecasted £0.3m per annum, which results in a total headroom of £6.0 million over the assets of the business held at the balance sheet date.
The above impairment assessments of Biokosmes SRL, Periproducts Ltd, the Dentyl brand, the Pharmasource group, BBI Healthcare Ltd, the Helsinn brands and HL Healthcare Ltd have included assessment of all elements of intangible value regardless of whether their economic lives are finite or indefinite, and include Customer Relationships, acquired formulations, acquired Trademarks and Goodwill.
Intangible assets with indefinite useful lives allocated to operating segments:
| | | | |
| | | | |
| | | Year ended 31 December 2023 | Year ended 31 December 2022 |
| | | £'000 | £'000 |
| Goodwill | PeriProducts Ltd | 3,337 | 3,337 |
| | Dentyl | 2,711 | 3,100 |
| | Pharmasource BV | 3,819 | 4,279 |
| | BBI Healthcare Ltd | 13,252 | 13,252 |
| | The Helsinn brands | 1,925 | 1,925 |
| | HL Healthcare Ltd | 3,406 | 3,406 |
| | Venture Life Brands Total | 28,450 | 29,299 |
| | | | |
| | Biokosmes SRL | 10,135 | 10,351 |
| | | | |
| | Customer Brands Total | 10,135 | 10,351 |
| | | | |
| | Total | 38,585 | 39,652 |
| | | | |
| Brands | | | |
| | The Helsinn brands | 2,010 | 2,010 |
| | |
|
|
| | Venture Life Brands Total | 2,010 | 2,010 |
| | | | |
| | | | |
| | Customer Brands Total | - | - |
| |
|
|
|
| | Total | 2,010 | 2,010 |
The recoverable amount of each segment was determined based on value-in-use calculations, covering a detailed five-year forecast and terminal value. The present value of the expected cash flows of each segment is determined by applying a suitable discount rate reflecting current market assessments of the time value of money and risks specific to the segment.
Recoverable amount of each operating segment:
| | | |
| | | |
| | Year ended 31 December 2023 | Year ended 31 December 2022 |
| | £'000 | £'000 |
| PeriProducts Ltd | 12,173 | 7,719 |
| Dentyl | 4,935 | 6,370 |
| Pharmasource BV | 4,980 | 9,509 |
| BBI Healthcare Ltd | 62,540 | 36,553 |
| The Helsinn brands | 21,485 | 12,749 |
| HL Healthcare Ltd | 21,961 | 20,735 |
| Venture Life Brands Total | 128,074 | 93,635 |
| | | |
| Biokosmes SRL | 34,556 | 28,501 |
| Customer Brands | 34,556 | 28,501 |
| | | |
These assumptions are subjective and provide key sources of estimation uncertainty, specifically in relation to growth assumptions, future cashflows and the determination of discount rates. The actual results may vary and accordingly may cause adjustments to the Group's valuation in future financial years.
Sensitivity analysis has been performed on the impairment review of all other operating segments and indicate sufficient headroom in the event of reasonably possible changes in key assumptions and these are unlikely to result in an impairment.
8. Cash and cash equivalents
| | At | At |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Available cash and cash equivalents | 5,622 | 5,631 |
The Group holds sterling, Chinese renminbi and euro denominated balances in the UK. The Group's subsidiaries hold US dollar, yen and euro accounts in Italy, euro accounts in the Netherlands, a Swiss franc account in Switzerland and Swedish Krona account in Sweden.
The Directors consider that the carrying value of cash and cash equivalents approximates their fair value.
9. Share capital and share premium
|
All shares are authorised, issued and fully paid. The Group has one class of ordinary shares which have full voting rights, no preferences and no restrictions attached.
| | | | |
| Ordinary shares of | Ordinary shares of | Share premium | Merger reserve | |
| 0.3p each | 0.3p each | | | |
| Number | £ | £'000 | £'000 | |
| At 31 December 2023 | 126,498,197 | 379,495 | 65,960 | 7,656 |
| At 31 December 2022 | 126,498,197 | 379,495 | 65,960 | 7,656 |
The Company issued no new shares during 2023. (666,667 new shares were issued during 2022 for total consideration of £224,667).
10. Interest-bearing borrowings
| | At | At |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Current | | |
| Invoice financing | 616 | - |
| Leasing obligations | 1,044 | 920 |
| Deferred contingent consideration | - | 2,947 |
| Secured bank loans due within one year | 16,467 | - |
| Subordinated loan note (Deferred consideration) | 2,215 | - |
| Total | 20,342 | 3,867 |
| Non-current | | |
| Leasing obligations | 4,050 | 3,651 |
| Secured bank loans due after one year | - | 17,314 |
| Subordinated loan note (Deferred consideration) | - | 2,014 |
| Total | 4,050 | 22,979 |
All bank loans are held jointly by Santander Bank and HSBC Innovation Bank and comprise the Group's revolving credit facility, secured against the assets and profits of most subsidiaries within the Group and with expiry in June 2024. This facility was established during 2021 in the committed sum of £30.0 million of which £16.5 million has been drawn at 31st December 2023 (31st December 2022: £17.3 million). Invoice financing includes the Italian RiBa (or "Ricevuta Bancaria") facility which is a short-term facility. The balance shown above of £0.6 million (2022: £nil) reflects the amount that had been settled in Biokosmes' account under RiBa and drawn against invoices in the UK as at the reporting date.
The revolving credit facility bears interest at a fixed rate of 2.5% plus SONIA on drawn funds as well as commitment interest at the rate of 1.0% on the balance of undrawn funds up to the facility limit. The RiBa invoice financing balance bears interest at variable rates.
A summary showing the utilisation of the revolving credit facility shown below:
| | 2023 GBP £'000 | 2023 EUR £'000 | 2023 All £'000 | 2022 GBP £'000 | 2022 EUR £'000 | 2022 All £'000 |
| Opening balance at 1 January | 11,900 | 5,757 | 17,657 | 4,000 | 5,039 | 9,039 |
| Drawdown | 2,250 | 303 | 2,553 | 10,400 | 4,585 | 14,985 |
| Repayments | (3,050) | (531) | (3,581) | (2,500) | (4,228) | (6,728) |
| Impact of foreign exchange | - | (108) | (108) | - | 361 | 361 |
| Closing balance at 31 December | 11,100 | 5,421 | 16,521 | 11,900 | 5,757 | 17,657 |
A summary showing the utilisation of the RIBa invoice financing is shown below:
| | 2023 £'000 | 2022 £'000 |
| Opening balance at 1 January | - | - |
| Drawdown | 612 | - |
| Impact of foreign exchange | 4 | - |
| Closing balance at 31 December | 616 | - |
A summary showing the contractual repayment of interest-bearing borrowings is shown below:
| |
At 31 December 2023
|
At 31 December 2022
| ||||
| | Leasing | | | Leasing | | |
| | obligations | Other | 2023 | obligations | Other | 2022 |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Amounts and timing of debt repayable: | | | | | | |
| Within 1 year | 1,187 | 20,181 | 21,368 | 985 | 5,250 | 6,235 |
| 1-2 years | 1,097 | - | 1,097 | 665 | 17,736 | 18,401 |
| 2-3 years | 979 | - | 979 | 613 | - | 613 |
| 3-4 years | 460 | - | 460 | 503 | - | 503 |
| 4-5 years | 435 | - | 435 | 432 | - | 432 |
| After more than 5 years | 1,271 | - | 1,271 | 1,595 | - | 1,595 |
| Total | 5,429 | 20,181 | 25,610 | 4,793 | 22,986 | 27,779 |
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date.
Net debt reconciliation:
| | Liabilities from Financing activities | Other assets | | ||
| | | | | | Net cash / |
| | Borrowings | Leases | Sub-total | Cash | (Net debt) |
| Net cash / (debt) at 1 January 2022 | 8,483 | 4,246 | 12,729 | 5,235 | (7,494) |
| Net cashflow | - | - | - | 800 | 800 |
| Finance lease repayments | - | (922) | (922) | - | 922 |
| Fees and Interest | 240 | - | 240 | - | (240) |
| Drawdown | 14,985 | 1,034 | 16,019 | - | (16,019) |
| (Repayments) | (6,728) | - | (6,728) | - | 6,728 |
| Deferred consideration arising on business combination | 4,933 | - | 4,933 | - | (4,933) |
| Foreign exchange movements | 362 | 213 | 575 | (404) | (979) |
| Net cash / (debt) at 31 December 2022 | 22,275 | 4,571 | 26,846 | 5,631 | (21,215) |
| Net cashflow | - | - | - | 74 | 74 |
| Finance lease repayments | - | (999) | (999) | - | 999 |
| Fees and interest | 478 | - | 478 | - | (478) |
| Drawdown | 3,165 | 1,602 | 4,767 | - | (4,767) |
| (Repayments) | (3,581) | - | (3,581) | - | 3,581 |
| Deferred consideration arising on business combination | (2,933) | - | (2,933) | - | 2,933 |
| Foreign exchange movements | (106) | (80) | (186) | (83) | 103 |
| Net cash / (debt) at 31 December 2023 | 19,298 | 5,094 | 24,392 | 5,622 | (18,770) |
Lease liability
In 2017 the Group adopted IFRS 16 which means that lease contracts that have previously been recognised as operating leases are now being recognised as finance leases. In the Statements of Financial Position additional lease liabilities at 31 December 2023 of £5,094,000 (2022: £4,571,000) and right-of-use assets of £5,007,000 (2022: £4,614,000) are recognised, giving a net liability position of £87,000 (2022: asset £43,000).
11. Alternative Performance Measures (APM's)
The Group uses certain financial measures that are not defined or recognised under IFRS. The Directors believe that these non-GAAP measures supplement GAAP measures to help in providing a further understanding of the results of the Group and are used as key performance indicators within the business to aid in evaluating its current business performance. The measures can also aid in comparability with other companies who use similar metrics. However as the measures are not defined by IFRS, other companies may calculate them differently or may use such measures for different purposes to the Group.
| EBITDA and Adjusted EBITDA | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Operating profit | 3,289 | 2,227 |
| Add back: | | |
| Depreciation | 2,128 | 1,821 |
| Amortisation | 4,516 | 3,564 |
| Impairment of Intangible assets | 760 | - |
| EBITDA | 10,693 | 7,612 |
| Add back: | | |
| Share-based payments charge | 225 | 72 |
| Exceptional costs | 639 | 1,278 |
| Adjusted EBITDA | 11,557 | 8,962 |
| Net debt / (cash) | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Cash and cash equivalents | (5,622) | (5,631) |
| Interest bearing borrowings - Deferred contingent consideration - current | - | 2,947 |
| Interest bearing borrowings - Bank Loans - current | 16,467 | - |
| Interest bearing borrowings - Bank Loans - non-current | - | 17,314 |
| Interest bearing borrowings - Subordinated Loan (deferred consideration) - current | 2,215 | - |
| Interest bearing borrowings - Subordinated Loan (deferred consideration) - non-current | - | 2,014 |
| Invoice financing | 616 | - |
| Net debt (excl finance leases) | 13,676 | 16,644 |
| Interest bearing borrowings - Leasing obligations - current | 1,044 | 920 |
| Interest bearing borrowings - Leasing obligations - noncurrent | 4,050 | 3,651 |
| Net debt (incl finance leases) | 18,770 | 21,215 |
| Net Leverage | Year ended | Year ended |
| | 31 December | 31 December |
| | 2023 | 2022 |
| | £'000 | £'000 |
| Net debt (excl finance leases) | 13,676 | 16,644 |
| | | |
| Adjusted EBITDA | 11,557 | 8,962 |
| Adjustment to include mid year acquisition on trailing 12 month basis | - | 2,110 |
| 12 month trailing adjusted EBITDA | 11,557 | 11,072 |
| deduct: | | |
| Lease payments for 12 month period | (999) | (992) |
| Adjusted EBITDA for net leverage | 10,558 | 10,080 |
| | | |
| Net leverage | 1.30x | 1.65x |
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