Volvere plc

("Volvere" or the "Group")

Interim Results for the six months ended 30 June 2021

Volvere plc (AIM: VLE), the growth and turnaround investment company, announces its unaudited Interim Results for the six months ended 30 June 2021.

Highlights

·      Positive underlying performance from Shire Foods, the Group's frozen savoury products manufacturer in spite of margin pressure

·      Reduced losses at Indulgence Patisserie, the Group's frozen desserts manufacturer

·      Continuing strong financial position with high liquidity

Forward-looking statements:

This report may contain certain statements about the future outlook for Volvere plc.  Although the directors believe their expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").

Notes

1      Based on the net assets attributable to owners of the parent company and the respective period end shares in issue (excluding treasury shares), which were 2,571,922 at 30 June 2021, 1,834,182 at 30 June 2020, and 2,571,922 at 31 December 2020.

2      Profit before intra-group management and interest charges is considered to be a relevant and useful interpretation of the trading results of the business such that its performance can be understood on a basis which is independent of its ownership by the Group.  Further information is included in the Chief Executive's statement and Financial Review.

For further information:

Chairman's Statement

I am pleased to report on the results for the six months to 30 June 2021.  The Group again delivered a good performance, with both Shire Foods and Indulgence Patisserie showing continued progress.

Net assets per share have fallen slightly to £13.50 in the period due to the trading losses at Indulgence (30 June 2019: £13.29, 31 December 2020: £13.65).

The Group remains in a strong financial position with significant cash reserves and is poised to take advantage of any investment opportunities arising from reducing levels of UK government support schemes.

David Buchler

Chairman

17 September 2021

*Net assets attributable to owners of the parent company divided by total number of ordinary shares outstanding at the reporting date

(less those held in treasury) - see note 8.

Chief Executive's Statement

Shire Foods performed well, with an improved performance over the comparable 2020 period.  Indulgence Patisserie's losses are reducing and work is ongoing to drive further improvement.

As with most businesses in the UK, the COVID-19 pandemic has continued to affect the Group.  Our staff have had to adopt new working practices but nonetheless continued to work throughout most of the last 18 months.  We are enormously grateful to them for their efforts. We continue to put their health and wellbeing centre-stage in how we operate.

Investment opportunities in the first half of 2021 have been more limited than we expected when we raised capital in October 2020. As I have said before, we believe this is because of the availability of UK government support schemes. Those that have been considered did not meet the criteria we set for investment that has driven our returns to date.

In what is traditionally the weaker half of the year, overall Group revenue rose to £15.72 million for the period (30 June 2020: £12.95 million, 31 December 2020: £30.81 million).  The Group's loss before tax was £0.29 million, a reduction of £0.68 million compared to the comparable period in 2020 (30 June 2020: loss £0.97 million, year to 31 December 2020: loss £0.55 million).

The performance of each of the Group's segments is set out below and discussed further in the Financial Review.

Food manufacturing

This segment comprises Shire Foods, the Group's 80%-owned frozen pie and pasty manufacturing business which was acquired in 2011, and Indulgence Patisserie, a premium frozen desserts and cakes manufacturer, which was acquired in February 2020.

Revenues for the segment as a whole were £15.72 million (30 June 2020: £12.95 million, 31 December 2020: £30.81 million) and the profit before tax and intra-group management and interest charges was £0.24 million (30 June 2020: loss £0.25 million, 31 December 2020: profit £0.79 million).  The overall improvement reflects reduced losses at Indulgence, with an improved performance at Shire.

Detailed financial information relating to the two businesses is included in the Financial Review below.

Shire Foods

Revenue grew by 15.2% to reach £13.85 million (30 June 2020: £12.02 million).  Profit before tax and intra-Group management and interest charges** was £0.60 million, compared to £0.35 million for the six months to 30 June 2020 (31 December 2020: profit £1.81 million).

The performance of Shire Foods was pleasing given the circumstances arising from the COVID-19 pandemic.  With the reopening of schools, food service sales have once again increased. Our vegan brand, Naughty Vegan, continues to make progress whilst we seek further listings for our three savoury pastry ranges and two cheesecakes (made by Indulgence).  However, the increasing range of new products for vegans and vegetarians is making the battle for retail shelf space more challenging.

As noted in the Group's 2020 report, there is continuing pressure on raw material costs and we have seen sporadic logistics issues arising from driver shortages.  Labour costs also continue to rise but the greater challenge in more recent months has been attracting and retaining staff in sufficient numbers to allow us to maintain planned capacity, in spite of increasing rates of pay.  We do not see any short-term relief from these challenges whilst the country continues to weigh under the effects of the pandemic and Brexit. Some of these factors may have a modest impact in the second half but we remain positive that we will deliver year-on-year growth nonetheless.

Indulgence Patisserie

Following the acquisition of Indulgence in February 2020, we have been working to grow the company's revenue in both retail and foodservice channels.  The latter has been particularly difficult due to the COVID-19 pandemic but encouraging engagement is being achieved on a number of fronts now that restaurants are progressively reopening.

Revenue for the period was £1.87 million (30 June 2020: £0.92 million, 31 December 2020: £3.62 million) and the company made a loss before tax and intra-Group management and interest charges** of £0.36 million (30 June 2020: loss £0.60 million, 31 December 2020: loss £1.02 million).

Whilst we continue to focus on premium products, we are increasingly being asked to tender for "mid-tier" ranges. These afford a higher volume but are traditionally sold at lower margins and necessitate investment in equipment to increase efficiency.  To that end, we have recently commissioned an automatic cartoning machine to increase packing throughput and on-shelf box quality.  Further investments will be required as we extend our product range and depth, which are actively in development.

Local management is being supported by staff from across the Group to enable best practice and process improvements to be implemented in key areas. There remains work to be done to bring Indulgence up to the standard to which we aspire in a number of areas but we are actively strengthening our leadership where necessary to achieve that.

Investing and management services

This segment represents our central functions covering Group management, finance and IT services.  The loss before tax and intra-Group management and interest charges** for the period was £0.53 million (30 June 2020: loss £0.73 million, 31 December 2020: loss £1.34 million). The prior comparable period included an amount of £0.29 million for final bonuses paid in relation to a business sold in 2018.

Further segmental information is set out in the financial review below and in note 3.

Acquisitions and future strategy

The Coronavirus Job Retention Scheme ends this month and the ban on commercial evictions ends in March 2022.  Although there is a continuing backdrop of COVID-19 UK government support schemes, we believe that the debt burden and cashflow impact of a return to normality will prove too great for many businesses. This should increase investment opportunities - for which we have the resources ready to invest.  There are already early signs of an increase in the amount of opportunities and we expect that to continue.

Jonathan Lander

Chief Executive

17 September 2021

**Profit before intra-Group management and interest charges is considered to be a relevant and useful interpretation of the trading results of the business such that its performance can be understood on a basis which is independent of its ownership by the Group.

Financial Review

This financial review covers the Group's performance during the period ended 30 June 2021.  It should be read in conjunction with the Chairman's and Chief Executive's Statements.

Overview

Overall Group revenue for the period increased by £2.77 million to £15.72 million (30 June 2020: £12.95 million, 31 December 2020: £30.81 million). Of this increase, £1.83 million related to Shire Foods, with the balance of £0.94 million relating to Indulgence.

In comparison to the six-month period ended 30 June 2020, the Group's loss before tax reduced by £0.68 million to £0.29 million (30 June 2020: loss £0.97 million, year to 31 December 2020: loss £0.55 million). Of this reduction, £0.29 million relates to one-off incentive costs incurred in 2020 in respect of the sale of a former subsidiary.  The remainder of the reduction in losses is due principally to improved trading in Shire Foods and Indulgence.

Further comment on each segment is set out below and detailed information about the Group's segments is set out in note 3 to these interim results, which should be read in conjunction with this financial review.

Food manufacturing

The food manufacturing segment includes two businesses, Shire Foods and Indulgence Patisserie.  The results of both businesses are shown in the tables below.

Shire Foods

A summary of Shire's recent financial performance is set out in Table A below.

Although the underlying materials margin for the period increased by around 1.3% compared to the comparable period, it was 2.1% lower than the margin achieved for 2020 as a whole.  This reflects the inflationary external environment, which we are continuing to feel the effects of in 2021.  In addition, distribution and warehousing costs were approximately 24% (£0.17 million) above the comparable period, which is not explained simply by the growth in volumes.  Direct labour costs were £0.16 million higher this year compared to the period to 30 June 2020, an increase of approximately 8%.  We expect these cost pressures to continue for the foreseeable future and are endeavouring to reflect them in tender pricing whenever possible.

Continued investment in plant and machinery amounted to £0.18 million in Shire. Shire continues to be largely self-funding, utilising 3^rd party working capital and debt facilities where necessary, and there were no Group loans outstanding at 30 June 2021 (30 June 2020: nil, 31 December 2020: nil).

Shire's unaudited net assets at the period end amounted to £10.54 million (30 June 2020: £7.88 million; 31 December 2020: £10.11 million), of which 20% is attributable to non-controlling interests. Approximately £1.3 million of the increase over the prior comparable period is explained by the 2020 year end revaluation of Shire's land and buildings, with the balance due to trading profits arising.

Indulgence Patisserie

The acquisition of the business and assets of Indulgence Patisserie was effected through two wholly-owned subsidiaries, with the properties and certain plant assets held in a separate company from the trading operations.  The results below reflect the totality of the Indulgence operations as they are operated as one business.

A summary of Indulgence's recent financial performance is set out in Table B below.

The reduction in losses has been encouraging, reflecting the growth in retail volumes achieved, offset somewhat by continuing low volumes in the foodservice sector.  The latter is gradually increasing, but it is clear that the UK hospitality sector is in recovery mode, with recruiting new supply partners not a top priority at this time.

For one month during the period, a number of staff were placed on furlough. The business continued manufacturing, however, using a skeleton staff. Lower volumes have reduced the dependency on agency staff and this has allowed some proactive capacity planning in order to increase efficiency.  However, the availability of materials including packaging, as well as the reliability of transport partners due to driver shortages, has required a flexible approach to manufacturing planning.

Inventory build has continued throughout the period, with £0.80 million on hand at the period end (30 June 2020: £0.61 million, 31 December 2020: £0.74 million).  Credit from suppliers continues to be very low given the early stage of development of the company and the Group continues to provide loans to both finance losses and for working capital.

Group loans outstanding at the period end (including the original acquisition price and incidental costs) amounted to £4.71 million (30 June 2020: £2.84 million, 31 December 2020: £4.24 million).

Indulgence's combined unaudited net assets, excluding the Group loan noted above, amounted to £3.40 million at the period end (30 June 2020: £2.24 million, 31 December 2020: £3.25 million).

Finance income and expense

The Group's net finance expense was £0.06 million in the period, reflecting low interest rates on cash deposits offset by debt servicing costs (30 June 2020: net expense £nil, 31 December 2020: net expense £0.07 million).  In line with previous years, individual Group trading companies utilise leverage wherever appropriate and possible, and without recourse to the remainder of the Group. In the period in question, only Shire Foods borrowed externally, with Indulgence funded from Group resources.

Statement of financial position

Cash

Cash at the period end was £23.13 million (30 June 2020: £16.11 million, 31 December 2020: £23.71 million).  The increase in cash compared to June 2020 reflects the placing in October 2020, which raised £9.70 million net of expenses, offset by trading losses.

Full details of cash movements are shown in the consolidated statement of cash flows.  As is usual for the Group's food businesses, the movements in working capital reflect their lower sales volumes in the earlier part of the year, coupled with lower requirements for working capital loans.

Earnings per share and share capital

Total basic and diluted loss per ordinary share were (15.2) pence (30 June 2020: loss (56.1) pence; year ended 31 December 2020: loss (40.4) pence).

Purchase of own shares

The Company did not acquire any of its own ordinary shares during the period (30 June 2020: nil, 31 December 2020: 3,000 shares for £0.04 million).

Hedging

It is not the Group's policy to enter into derivative instruments to hedge interest rate or foreign exchange risk.

Key performance indicators (KPIs)

The Group uses key performance indicators suitable for the nature and size of the Group's businesses.  The key financial performance indicators are revenue and profit before tax.  The performance of the Group and the individual trading businesses against these KPIs is outlined above, in the Chief Executive's statement and disclosed in note 3.

Internally, management uses a variety of non-financial KPIs in respect of the food manufacturing segment, including order intake, manufacturing output and sales, all of which are monitored weekly and reported monthly.

Principal risk factors

The Company and Group face a number of specific business risks that could affect the Company's or Group's success.  The Company and Group invests in distressed businesses and securities, which by their nature often carry a higher degree of risk than those that are not distressed.  The Group's businesses are principally engaged in the provision of goods and services that are dependent on the continued employment of the Group's employees and availability of suitable, profitable workload.  In the food manufacturing segment, there is a dependency on a small number of customers and a reduction in the volume or range of products supplied to those customers or the loss of any one of them could impact the Group materially.  The current COVID-19 pandemic or a similar such event could impact on the Group's employees, customers, suppliers and financial position.

These risks are managed by the Board in conjunction with the management of the Group's businesses.

Nick Lander

Chief Financial & Operating Officer

17 September 2021

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of financial position

Consolidated statement of cash flows