HUDDLED GROUP PLC

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE YEAR ENDED 31 DECEMBER 2023

1   GENERAL INFORMATION

 

Huddled Group plc is a public limited company incorporated and domiciled in the United Kingdom. The address of the registered office is Cumberland Court, 80 Mount Street, Nottingham, England, NG1 6HH. The Group is listed on AIM.

 

During the year, the principal activities of the Group were: (i) the sale of the Group's Let's Explore and Vodiac consumer products; and (ii) the sale of FMCG via the Group's Discount Dragon website.

 

These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 2.

 

2   ACCOUNTING POLICIES

 

Principal accounting policies

The Company is a public company incorporated and domiciled in the United Kingdom. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

 

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the United Kingdom ("adopted IFRSs") and those parts of the Companies Act 2006 which apply to companies preparing their financial statements under IFRSs. The financial statements are presented to the nearest round thousand (£'000) except when otherwise indicated.

Basis of Consolidation

The Group comprises a holding company and a number of subsidiaries all of which have been included in the consolidated financial statements in accordance with the principles of acquisition accounting as laid out by IFRS 3 Business Combinations.

 

Going concern

At the time of approving the financial statements, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  The going concern basis of accounting has therefore been adopted in preparing the financial statements. 

In reaching this conclusion, the Directors have considered the financial position of the Group, together with its forecasts and projections for the next 12 months, taking into account reasonably possible changes in trading performance and capital expenditure requirements.

 

The financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

 

Business combinations and goodwill

Acquisitions of subsidiaries are accounted for using the acquisition method. The assets and liabilities and contingent liabilities of the subsidiaries are measured at their fair value at the date of acquisition. Any excess of acquisition over fair values of the identifiable net assets acquired is recognised as goodwill. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment twice-annually. Any impairment is recognised immediately in profit or loss accounts and is not subsequently reversed. Acquisition related costs are recognised in the income statement as incurred.

 

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:

 

Discount Dragon

For sales to consumers via Discount Dragon's website, revenue is recognised on sales in the period in which the corresponding order is placed, at which point products purchased are allocated to that customer. There is typically no more than one week between the point when an order is placed and when the goods are received by the customer.

 

For wholesale sales, revenue is recognised in the period in which delivery to the wholesaler takes place.

 

Let's Explore

For sales to consumers, revenue is recognised on sales of the Let's Explore and Vodiac products in the period in which the corresponding order is placed, at which point products purchased are allocated to that customer. There is typically no more than one week between the point when an order is placed and when the goods are received by the customer.

 

For sales to resellers, revenue is recognised in the period in which delivery to the reseller takes place.

 

Foreign currency

The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pound sterling, which is the functional currency of the Group, and the presentational currency for the consolidated financial statements.

 

In preparing the financial statements of the individual companies, transactions in currencies other than the Group functional currency (foreign currencies) are recorded at rates of exchange prevailing on the dates of the transactions. At the reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of the gain or loss is also recognised directly in equity.

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's foreign exchange reserve. Such translation differences are recognised as other comprehensive income and expense in the period of the disposal of the operation. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rates.

 

Property, plant and equipment

Property, plant and equipment are stated at cost net of accumulated depreciation and provision for impairment. Depreciation is provided on all property plant and equipment, at rates calculated to write off the cost less estimated residual value, of each asset on a straight-line basis over its expected useful life.

 

The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful economic life.

 

The method of depreciation for each class of depreciable asset is:

 

Leasehold property                                      - Over term of lease on a straight-line basis

Fixtures, fittings and equipment                  - 3 years on a straight-line basis

Motor vehicles                                             - Between 3 and 7 years on a straight-line basis

IFRS 16 right of use assets                         - Over term of lease on a straight-line basis

 

Intangible assets

Intangible assets include goodwill arising on the acquisition of subsidiaries and represents the difference between the fair value of the consideration payable and the fair value of the net assets that have been acquired. The residual element of goodwill is not being amortised but is subject to twice-annual impairment review. The expected useable lives of the classes of intangible assets held by the Group are shown in note 10. 

 

Internally-generated intangible assets

An internally-generated intangible asset arising from the Group's development activities is capitalised and held as an intangible asset in the statement of financial position when the costs relate to a clearly defined project; the costs are separately identifiable; the outcome of such a project has been assessed with reasonable certainty as to its technical feasibility and its ultimate commercial viability; the aggregate of the defined costs plus all future expected costs in bringing the product to market is exceeded by the future expected sales revenue; and adequate resources are expected to exist to enable the project to be completed. Internally generated intangible assets are amortised over their estimated useful lives, being 3 years from completion of development. Other development expenditure is recognised as an expense in the income statement in the period in which it is incurred.

 

Impairment of assets

Impairment tests on goodwill are undertaken twice-annually. The recoverable value of goodwill is estimated on the basis of value in use, defined as the present value of the cash generating units with which the goodwill is associated. When value in use is less than the book value, an impairment is recorded and is irreversible.

 

Other non-financial assets are subject to impairment tests whenever circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its estimated recoverable value (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly. Where it is not possible to estimate the recoverable value of an individual asset, the impairment test is carried out on the asset's cash-generating unit. The carrying value of property, plant and equipment is assessed in order to determine if there is an indication of impairment. Any impairment is charged to the statement of comprehensive income. Impairment charges are included under administrative expenses within the consolidated statement of comprehensive income. 

 

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where applicable, direct labour costs and overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

 

Financial instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument.

 

The Group recognises lifetime expected credit losses for trade receivables and amounts due on contracts with customers when appropriate. The expected credit losses on these financial assets are estimated based on the Group's historical credit loss experience, adjusted for facts that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecasted conditions at the reporting date, including time value of money where appropriate. Lifetime expected credit losses are losses which will result from all possible default events over the expected life of a financial instrument.

 

Contract assets

Contract assets are recognised when the Group has satisfied a performance obligation but cannot recognise a receivable.

 

Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value, and subsequently measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of any provision is recognised in profit or loss.

 

Cash and cash equivalents

Cash and cash equivalents are recognised as financial assets. They comprise cash held by the Group and short-term bank deposits with an original maturity date of three months or less.

 

Trade payables

Trade payables are initially recognised as financial liabilities measured at fair value, and subsequent to initial recognition are measured at amortised cost.

 

 

Bank borrowings

Interest bearing bank loans, overdrafts and other loans are recognised as financial liabilities and recorded at fair value, net of direct issue costs. Finance costs are accounted for on an amortised cost basis in the income statement using the effective interest rate.

Provisions

Provisions are recognised where it is probable that an outflow of resources will be required to settle a liability of an uncertain amount or timing but where a reliable estimate can be made of the amount of the liability.  Provisions are expensed to the income statement and included within liabilities on the statement of financial position.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deduction of all its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income on a straight-line basis over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of options expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

 

Where share options are cancelled due to employees leaving the Group's employment before they have vested, cumulative share based payment expenses recognised in respect of those employees are reversed through the statement of comprehensive income.

 

Where share options are replaced the fair value of the replaced options at the date of grant continues to be recognised through the statement of comprehensive income in addition to a charge equating to the incremental value of the new options granted.

Pensions

The pension schemes operated by the Group are defined contribution schemes. The pension cost charge represents the contributions payable by the Group.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the executive directors, who are responsible for allocating resources and assessing performance of the operating segments.

 

A business segment is a group of assets and operations, engaged in providing products or services that are subject to risks and returns that are different from those of other operating segments.

 

A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. The executive directors assess the performance of the operating segments based on the measures of revenue, adjusted EBITDA, profit before taxation and profit after taxation. Central overheads are not allocated to business segments.

Non-current assets held for sale and discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.

 

The criteria for held for sale classification is regarded as met only when the sale is highly probable, the asset or disposal group is available for immediate sale in its present condition and the sale is expected to complete within one year from the date of the classification.

 

Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.

 

The Immotion and Uvisan divisions have been classified as discontinued operations in the consolidated statement of comprehensive income.

 

Administrative expenses which the Group will continue to incur following the sale of the disposal groups are included within continuing operations and costs which will cease on disposal are included in discontinued operations.

 

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement.

 

Details of discontinued operations are shown in note 6.  All other notes to the financial statements include amounts for continuing operations only, unless otherwise stated.

 

3   CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

 

In the application of the Group's accounting policies, which are described in note 2, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on experience and other factors considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

The following are the critical judgments and estimations that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

 

Critical accounting judgments

Discontinued operations

The sale of the Immotion and Uvisan businesses took place in the period.  Management were required to exercise judgment both in respect of allocation of the consideration and presentation of the results in discontinued operations in accordance with IFRS 5.

 

Valuation of intangible assets arising on acquisition at fair value

Separately identifiable intangible assets arising on acquisition have been recognised at fair value as assessed at the acquisition date. This identification and recognition of these intangibles requires the application of judgement and is subject to significant estimation uncertainty given assumptions made about future performance of these identified assets. Details of the separately identifiable intangible assets recognised on acquisition can be found in note 8.

Revenue recognition

For sales to consumers, revenue from the sale of Let's Explore and Vodiac products is recognised on receipt of payment, which is a condition for an order to be accepted. The price paid by the consumer excluding sales taxes is recognised as revenue.  At each accounting date provision is made for refunds to be made for orders received and paid for, prior to the accounting date. This provision is based on past experience of the level of refund applications received.

Recoverability criteria for capitalisation of development expenditure

The Group recognises costs incurred on development projects as an intangible asset which satisfies the requirements of IAS 38. The calculation of the costs incurred includes the percentage of time spent by certain employees on development projects. The decision whether to capitalise and how to determine the period of economic benefit of a development project requires an assessment of the commercial viability of the project and the prospect of selling the project to new or existing customers. An assessment is made as to the future economic benefits of the project and whether an impairment is needed.

Impairment of goodwill

Impairment of the valuation of the goodwill relating to the acquisition of subsidiaries is considered twice-annually for indicators of impairment to ensure that the asset is not overstated within the financial statements. The twice-annual impairment assessment in respect of goodwill requires estimates of the value in use (or fair value less costs to sell) of subsidiaries to which goodwill has been allocated. As a result, estimates of future cash flows are required, together with an appropriate discount factor for the purpose of determining the present value of those cash flows. Further details of the considerations made when conducting the impairment review can be found in note 10.

Valuation of inventories

The carrying value of inventories of finished products held by the Group are assessed for impairment at the end of each period.  Judgment is required to assess whether the net realisable value (NRV) of inventories held is less than carrying value with reference to the expected price the inventory is likely to achieve if sold.  Where items of inventory are identified as having a NRV of less than their carrying value, a provision for impairment is recognised.

 

 

Critical accounting estimates

Amortisation of intangible assets

The periods of amortisation adopted to write down capitalised intangible assets and capitalised staff costs requires judgments to be made in respect of estimating the useful lives of the intangible assets to determine an appropriate amortisation rate. Variances between actual and estimated useful economic lives could impact on the operating results both positively and negatively.

Depreciation

The useful economic lives of tangible fixed assets are based on management's judgment and experience. When management identifies that actual useful economic lives differ materially from the estimates used to calculate deprecation, that charge is added retrospectively. Variances between actual and estimated useful economic lives could impact on the operating results both positively and negatively.

Share based payments expense

Non-market performance and service conditions are included in the assumptions about the number of options that are expected to vest. At the end of each reporting period the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to the original estimates, if any, in the consolidated statement of comprehensive income, with a corresponding adjustment to equity. This requires a judgment as to how many options will meet the future vesting criteria as well as the judgments required in estimating the fair value of the options. Where options are cancelled followed by the grant of new options at or close to the time of the cancellations, judgment is required as to the extent to which the new options granted are modifications of, or replacements for, the cancelled options, or new options. Modifications to share options give rise to a charge to the income statement equating to the difference between the estimated fair value of the share options immediately prior to and immediately after the modification takes place. Judgment is required to calculate the fair values of options at these points in time.

 

 

 

4     SEGMENTAL INFORMATION

 

A segmental analysis of revenue and expenditure for the year ended 31 December 2023 is below. 

 

	DiscountDragon	Let's Explore	Head Office	Total Continuing Operations	Dis-continued Operations	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	1,631	792	-	2,423	1,626	4,049
Cost of sales	(1,541)	(927)	-	(2,468)	(924)	(3,392)
Gross profit/(loss)	90	(135)	-	(45)	702	657
Administrative expenses*	(220)	(202)	(1,110)	(1,532)	(390)	(1,922)
Other operating income	-	-	244	244	-	244
Adjusted EBITDA**	(130)	(337)	(866) (866)	(1,333)        ()	312	(1,021)
Depreciation	(6)	(1)	(21)	(28)	(173)	(201)
Amortisation	(61)	(175)	(5)	(241)	(39)	(280)
Loss on disposal of assets	-	-	-	-	(3)	(3)
Profit on disposal of subsidiaries	-	-	-	-	15,206	15,206
One-off costs	(13)	-	(662)	(675)	(23)	(698)
Share based payments	-	-	(337)	(337)	-	(337)
Finance costs	-	-	(2)	(2)	(4)	(6)
Finance income	-	-	337	337	-	337
Taxation	-	(8)	-	(8)	(8)	(16)
	-----------	-----------	-------------	----------	------------	------------
(Loss) / profit for the year	(210)	(521)	(1,556)	(2,287)	15,268	12,981
	======	======	======	======	======	======

 

 

*Administrative expenses exclude depreciation, amortisation, profit on disposals, one-off costs and share based payments.

 

**Adjusted EBITDA is a non-GAAP metric.

 

 

 

A segmental analysis of revenue and expenditure for the year ended 31 December 2022 is below:

 

	Let's Explore	Head Office	Total Continuing Operations	Discontinued Operations	Total
	£'000	£'000	£'000	£'000	£'000
Revenue	796	-	796	10,781	11,577
Cost of sales	(865)	-	(865)	(5,696)	(6,561)
Gross profit/(loss)	(69)	-	(69)	5,085	5,016
Administrative expenses*	(143)	(1,370)	(1,513)	(2,167)	(3,680)
Other operating income	-	-	-	39	39
Adjusted EBITDA**	(212)	(1,370)	(1,582)	2,957	1,375
Depreciation	-	(1)	(1)	(1,035)	(1,036)
Amortisation	(158)	(10)	(168)	(433)	(601)
Impairment: intangible assets	-	-	-	(78)	(78)
Impairment: assets held for sale	-	-	-	(97)	(97)
Profit on disposal	-	-	-	19	19
One-off costs	-	(33)	(33)	(12)	(45)
Share based payments	-	(133)	(133)	-	(133)
Finance costs	-	(11)	(11)	(25)	(36)
Finance income	-	-	-	1	1
Taxation	-	-	-	(30)	(30)
	----------	------------	--------------	---------------	----------
Loss for the year	(370)	(1,558)	(1,928)	1,267	(661)
	=======	=======	=======	=======	======

 

*Administrative expenses exclude depreciation, amortisation, impairment, loss on disposal, restructuring costs and share based payments

 

**Adjusted EBITDA is a non-GAAP metric.

 

 

The table below splits revenue, assets and capital expenditure by location:

 

			Revenue
			2023 £'000	2022 £'000
Continuing operations
United Kingdom			1,934	396
USA & Canada			489	400
			----------	------------
			2,423	796
			=====	======
	Total assets		Net tangible capital expenditure
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
United Kingdom	11,301	1,062	173	3
USA & Canada	320	61	-	-
Assets held for sale	-	6,362	-	1,794
	------------	------------	-------------	------------
	11,621	7,485	173	1,797
	======	======	======	======

5    ONE-OFF COSTS

	2023	2022
	£'000	£'000
One-off costs (non-GAAP measure)*
Costs relating to the acquisition of Huddled Holdings Limited	244	-
Costs related to the capital reduction and share buybacks	225	-
Bonuses awarded in relation to the LBE business sale	181	-
Business restructuring	25 ------------- 675 ======	33 ------------ 33 ======
*One-off costs are included within administrative expenses but have been added back for the purposes of calculating adjusted EBITDA which is a non-GAAP alternative performance measure.

 

 

6    DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

 

The Immotion and Uvisan businesses were sold on 28 February 2023 and 1 February 2023 respectively. The results for these businesses have been excluded from the continuing results of the Group for the periods ended 31 December 2023 and 31 December 2022.

 

Summary income statement

 

The results for Immotion and Uvisan included in the income statement as discontinued operations are as follows:

	Immotion	Uvisan	Total 2023	Total 2022
Discontinued operations	£'000	£'000	£'000	£'000
Revenue	1,532	94	1,626	10,781
Cost of sales	(886)	(38)	(924)	(5,697)
Other operating income	-	-	-	39
Administrative expenses	(579)	(49)	(628)	(3,802)
	----------------	----------------	---------------	---------------
Operating profit	67	7	74	1,321
Finance costs	(4)	-	(4)	(25)
Finance income	-	-	-	1
	----------------	----------------	-------------	-------------
Profit before taxation	63	7	70	1,297
Taxation	(8)	-	(8)	(30)
	----------------	----------------	-------------	-------------
Profit from discontinued operations before gain on disposal of subsidiaries	55	7	62	1,267
	----------------	----------------	-------------	-------------
Gain on disposal of subsidiaries	15,164	42	15,206	-
	----------------	----------------	-------------	-------------
Profit from discontinued operations	15,219	49	15,268	1,267
	----------------	----------------	-------------	-------------
Adjusted EBITDA	279	33	312	2,957
Depreciation	(172)	(1)	(173)	(1,035)
Amortisation	(37)	(2)	(39)	(433)
Impairment of intangible assets	-	-	-	(78)
Impairment of assets held for sale	-	-	-	(97)
Profit/(loss) on disposal of fixed assets	(3)	-	(3)	19
One-off costs	-	(23)	(23)	(12)
	----------------	----------------	-------------	-------------
Operating profit	67	7	74	1,321
	----------------	----------------	-------------	-------------

 

Immotion - Location-based entertainment

Uvisan - Sale of UV-C disinfection cabinets

 

The figures included in discontinued operations do not include any allocation of head office costs, details of which can be found in note 4.

 

 

Summary cash flow statement

 

The net cash flows for Immotion and Uvisan included in the cash flow statement are as follows:

 

	Immotion	Uvisan	Total 2023	Total 2022
Discontinued operations	£'000	£'000	£'000	£'000
Cash generated from/(used in) operating activities	416	72	488	3,216
Cash generated from/(used in) investing activities	19,335	(43)	19,292	(2,070)
Cash used in financing activities	(27)	-	(27)	(105)
	----------------	----------------	-------------	-------------
Net cash flows generated/(used in) discontinued operations	19,724	29	19,753	1,041
	----------------	----------------	-------------	----------------

 

 

Net assets held for sale

 

The major classes of assets and liabilities classified as held for sale as at 31 December 2022 were as follows:

 

	Immotion	Uvisan	Total
Discontinued operations	£'000	£'000	£'000
Assets
Property, plant and equipment	1,996	23	2,019
Goodwill on consolidation	2,438	-	2,438
Other intangible assets	466	32	498
Cash and cash equivalents	187	91	278
Other assets	1,013	213	1,226
Impairment of assets held for sale	-	(97)	(97)
	------------	------------	------------
Assets held for sale	6,100	262	6,362
	------------	------------	------------
Liabilities
Liabilities directly associated with assets held for sale	(1,136)	(162)	(1,298)
	------------	------------	-----------
Net assets held for sale	4,964	100	5,064
	------------	------------	-----------

 

Other assets comprise inventories, receivables, prepayments and accrued income. Liabilities comprise payables, accruals, deferred income and tax liabilities.

 

 

7	EARNINGS PER SHARE
		2023	2022
		£'000	£'000
	Profit/(loss) after taxation
	Continuing operations	(2,287)	(1,928)
	Discontinued operations	15,268	1,267
		--------------	-------------
	Profit/(loss) after taxation from all operations	12,981	(661)
	Basic weighted average number of shares	321,686,426	415,538,083
	Diluted weighted average number of shares	355,153,905	473,775,097
		============	============
	Continuing and discontinued operations	£0.01	£0.01
	Basic earnings/(loss) per share	4.04	(0.16)
	Diluted earnings/(loss) per share	4.04	(0.16)
		========	========
	Continuing operations	£0.01	£0.01
	Basic loss per share	(0.71)	(0.46)
	Diluted loss per share	(0.71)	(0.46)
		========	========
	Discontinued operations	£0.01	£0.01
	Basic earnings per share	4.75	0.30
	Diluted earnings per share	4.75	0.30
		========	========

 

Earnings/(loss) per ordinary share has been calculated using the weighted average number of shares outstanding during the relevant financial periods. In accordance with IAS 33, diluted EPS must be presented when a company could be required to issue shares that would decrease earnings per share or increase the loss per share. However, IAS 33 stipulates that diluted EPS cannot show an improvement compared to basic EPS. In this case, as the inclusion of potential ordinary shares would result in an improvement, they have been disregarded in the calculation of diluted EPS. Diluted EPS is calculated based on continuing operations. Although the discontinued operations generated positive earnings per share, the loss per share from continuing operations means that the dilutive effect of the potential ordinary shares is ignored.

 

8    BUSINESS COMBINATIONS

 

      On 17 October 2023, the Company announced that it had acquired 100% of the ordinary shares in Huddled Holdings Limited (formerly Huddled Group Limited) for equity consideration of up to £3,950,000, the shares having been priced at 2.64p under the terms of the share purchase agreement.  In accordance with IFRS 3, the consideration has been priced at 2.2p per share which was the price of the Company's shares when the acquisition completed.  This investment is also included in the Parent Company's statement of financial position at the fair value of the equity consideration at the date of acquisition.

 

      The assets and liabilities of the acquired company were as follows:

 

	Book Value	Fair Value Adjustment	Fair Value to Group
	£'000	£'000	£'000
Property, plant and equipment	62	-	62
Intangible assets: Discount Dragon brand	-	2,097	2,097
Intangible assets: customer database	-	86	86
Intangible assets: other	55	-	55
Cash and cash equivalents	45	-	45
Inventories	340	260	600
Trade and other receivables	140	-	140
Trade and other payables	(497)	(149)	(646)
Loans	(695)	-	(695)
Deferred tax	-	(87)	(87)
	-------------	-------------	-------------
Net assets on acquisition	(550)	2,207	1,657
Goodwill on acquisition			1,635
			-------------
Total consideration			3,292
			======
Consideration discharged by:
Shares in the Company issued in the year			2,875
Shares in the Company yet to be issued			417
			-------------
			3,292
			======

 

On 17 October 2023, the Company issued 130,681,818 new ordinary shares at a fair value of 2.2p each in satisfaction of the £2,875,000 initial consideration.  Subject to any adjustments to the purchase price in the event of warranty claims against the vendors, the Company will issue a further 18,939,394 new ordinary shares in satisfaction of the deferred consideration within 5 business days of the date of filing of the consolidated financial statements of the Group for the financial year ending on 31 December 2024. The deferred consideration shares have been valued at completion date fair value of 2.2p each.

 

A net deferred tax liability of £87,000 has been recognised in relation to fair value adjustments arising on the business combination.  The net liability is comprised of a £573,000 deferred tax liability arising on the fair value adjustment which has been partially offset by a deferred tax asset of £486,000 arising on accumulated losses in the acquired group.

 

The goodwill on consolidation of £1,635,000 includes assets acquired which did not meet the criteria for separate recognition such as supplier relationships and employees' 'know-how'.

 

Costs of £225,000 relating to the acquisition are included within administrative expenses in the year.

 

The revenue and loss after tax recorded by Huddled Holdings Limited and its subsidiaries in the period were £1,631,000 and £216,000 respectively.  Had the acquisition of Huddled Holdings Limited completed on 1 January 2023, the combined revenue and loss before tax for the Group would have been £6,030,000 and £3,890,000 respectively.

 

9	PROPERTY, PLANT AND EQUIPMENT
		Leasehold Property	Fixtures, Fittings & Equipment	Motor Vehicles	Right-of-Use Asset	Total
	Cost	£'000	£'000	£'000	£'000	£'000
	At 1 January 2022	379	2,699	-	642	3,720
	Additions	71	1,498	-	228	1,797
	Disposals	(154)	(86)	-	(659)	(899)
	Foreign exchange	-	230	-	42	272
	Redesignated as held for sale	(296)	(4,338)	-	(253)	(4,887)
		-----------	------------	------------	--------------	------------
	At 31 December 2022	-	3	-	-	3
		-----------	------------	------------	--------------	------------
	At 1 January 2023	-	3	-	-	3
	Acquired with subsidiary	-	74	6	-	80
	Additions	-	17	156	-	173
		-----------	--------------	--------------	--------------	------------
	At 31 December 2023	-	94	162	-	256
		------------	---------------	--------------	--------------	------------
	Accumulated depreciation
	At 1 January 2022	315	1,701	-	516	2,532
	Depreciation of owned assets	64	816	-	-	880
	Depreciation of financed assets	-	-	-	156	156
	Disposals	(153)	(84)	-	(659)	(896)
	Foreign exchange	-	149	-	47	196
	Redesignated as held for sale	(226)	(2,582)	-	(60)	(2,868)
		-----------	---------------	---------------	--------------	------------
	At 31 December 2022	-	-	-	-	-
		-----------	---------------	---------------	---------------	------------
	At 1 January 2023	-	-	-	-	-
	Acquired with subsidiary		18	1	-	19
	Depreciation of owned assets	-	7	21	-	28
		-------------	--------------	--------------	--------------	------------
	At 31 December 2023	-	25	22	-	47
		-------------	--------------	--------------	--------------	------------
	Net Book Value
	At 31 December 2023	-	69	140	-	209
		=======	=======	=======	=======	========
	At 31 December 2022	-	3	-	-	3
		=======	=======	=======	=======	========
	At 31 December 2021	64	998	-	126	1,188
		=======	=======	=======	=======	======

 

The net book value of assets held under finance leases or hire purchase contracts, included above, is £Nil (2022: £Nil).

 

 

 

10	INTANGIBLE ASSETS
			Development Costs	Goodwill on Consolidation	Other Intangible Assets	Total
			£'000	£'000	£'000	£'000
	Cost
	At 1 January 2022		2,467	2,438	568	5,473
	Additions		493	-	17	510
	Disposals		-	-	(66)	(66)
	Foreign exchange		57	-	-	57
	Redesignated as held for resale		(2,563)	(2,438)	(490)	(5,491)
			-------------	-------------	------------	---------------
	At 31 December 2022		454	-	29	483
			-------------	-------------	------------	---------------
	At 1 January 2023		454	-	29	483
	Acquired with subsidiary		30	1,635	2,226	3,891
	Additions		86	-	9	95
	Transfers		-	-	7	7
	Disposals		-	-	(20)	(20)
			-------------	-------------	------------	---------------
	At 31 December 2023		570	1,635	2,251	4,456
			-------------	-------------	------------	---------------
	Accumulated amortisation
	At 1 January 2022		1,623	-	545	2,168
	Amortisation		582	-	19	601
	Disposals		-	-	(66)	(66)
	Impairment		78	-	-	78
	Foreign exchange		42	-	-	42
	Redesignated as held for resale		(2,070)	-	(484)	(2,554)
			-------------	-------------	-------------	---------------
	At 31 December 2022		255	-	14	269
			-------------	-------------	-------------	---------------
	At 1 January 2023		255	-	14	269
	Acquired with subsidiary		5	-	13	18
	Amortisation		166	-	75	241
	Transfers		-	-	5	5
	Disposals		-	-	(12)	(12)
			-------------	-------------	-------------	---------------
	At 31 December 2023		426	-	95	521
			-------------	-------------	-------------	---------------
	Net Book Value
	At 31 December 2023		144	1,635	2,156	3,935
			======	=======	======	=======
	At 31 December 2022		199	-	15	214
			======	=======	======	=======
	At 31 December 2021		844	2,438	23	3,305
			======	=======	======	=======

Other intangible assets comprise the Discount Dragon brand, customer databases, trademarks and other intellectual property.

 

Amortisation is charged on the Discount Dragon brand at 10% on a straight-line basis.  The Discount Dragon brand has an estimated useful life of over ten years.

 

Amortisation is charged on all other intangible assets over periods ranging between two and three years on a straight-line basis. All other intangible assets have between one and three years' remaining average useful lives.

 

Goodwill and impairment

 

The Group is obliged to test goodwill annually for impairment, or more frequently if there are indications that goodwill and indefinite life intangibles might be impaired, due to the goodwill deemed to have an indefinite useful life. In order to perform this test, management is required to compare the carrying value of the relevant cash generating unit ("CGU") including the goodwill with its recoverable amount. The recoverable amount of the CGU is determined from a value in use calculation. It is considered that any reasonably possible changes in the key assumptions would not result in an impairment of the present carrying value of the goodwill. The goodwill on consolidation relates to the Discount Dragon CGU in its entirety.

 

Discount Dragon

The recoverable amount of the Discount Dragon segment has been assessed from a review of its current and anticipated performance. In preparing these projections, an asset-specific discount rate of 19.71% has been applied to forecast earnings for 2024 to 2026 followed by a terminal value calculation based on 5% annual growth and subjected to sensitivity analysis. Reducing forecasted revenue by 25% throughout the forecast period produced discounted cash flows which were still sufficient to support the carrying value of the CGU's intangible assets.  The asset-specific discount rate is based on the Company's estimated weighted average cost of capital plus 3%.

 

 

11	SHARE CAPITAL
		2023	2023	2022	2022
	Called up share capital Allotted, called up and fully paid	Shares of 0.040108663 pence each	£'000	Shares of 0.040108663 pence each	£'000
	At beginning of period	415,538,083	166	415,538,083	166
	Share options exercised	47,125,978	19	-	-
	Share buybacks and cancellations	(275,040,736)	(110)	-	-
	Acquisition of Huddled Holdings Limited	130,681,818	52	-	-
	At end of period	318,305,143	127	415,538,083	166

 

 

12

RESERVES

 

Full details of movements in reserves are set out in the consolidated statement of changes in equity. The following describes the nature and purpose of each reserve within owners' equity:

 

Share premium: Amount subscribed for share capital in excess of nominal value.

 

Merger reserve: Premium above the nominal value of shares issued for equity consideration.

 

Capital redemption reserve: Nominal value of the Company's own shares purchased and cancelled.

 

Retained deficit: Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.

 

Foreign exchange reserve: Reserve arising on translation of the Group's overseas subsidiaries.

 

Equity reserve: Deferred equity consideration in relation to the Huddled Holdings Limited (formerly Huddled Group Limited) acquisition.

 

 

13	POST BALANCE SHEET EVENTS

 

On 29 February 2024, the Company received $1,325,000 from the buyer of the Immotion location based entertainment business in settlement of the loan note which formed part of the consideration from the sale of that business.

 

On 12 April 2024, the Company announced that it had acquired the entirety of Food Circle Supermarket Limited for consideration of up to £300,000.  The consideration is comprised of an initial payment of £100,000 in cash and £50,000 in shares.  A further £50,000 in shares will be payable on the first anniversary of the acquisition, subject to any adjustments in the event of any warranty claims against the sellers.  An additional £100,000 in cash will be payable if the business meets certain targets during its first 12 months post-acquisition.  The business combination accounting in respect of this acquisition has not yet been completed.

 

On 10 May 2024, the Company announced that it had entered into an agreement with Wicked Vision Limited to manage the Group's Let's Explore division in exchange for a 25% share in Let's Explore Limited, increasing to 50% subject to the Company being repaid an amount equating to the working capital in the business, being circa £400,000.  Wicked Vision are the current distributor of the Group's Vodiac product and as part of the deal the jointly-owned Let's Explore Limited will benefit from the distribution margin which previously accrued to Wicked Vision.