Volvere plc

 

("Volvere" or the "Group")

 

Interim Results for the six months ended 30 June 2022

 

Volvere plc (AIM: VLE), the growth and turnaround investment company, announces its unaudited Interim Results for the six months ended 30 June 2022.

 

Highlights

 

£ million except where stated	Six months ended		Year ended
	30 June 2022	30 June 2021	31 December 2021
Group revenue	17.87	15.72	35.58
Group (loss)/profit before tax	(1.12)	(0.29)	0.07
	As at 30 June 2022	As at 30 June 2021	As at 31 December 2021
Consolidated net assets per share (excluding non-controlling interests)(1)	£13.33	£13.50	£13.49
Group net assets	36.05	36.89	37.05
Cash and available-for-sale investments	20.39	23.13	21.87

 

·      Acceptable result from Shire Foods, the Group's savoury products manufacturer

·      Poor performance from Indulgence Patisserie, the Group's frozen desserts manufacturer

·      Liquidity and financial position remain strong

 

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").

 

Note

 

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 2,516,422 at 30 June 2022, 2,571,922 at 30 June 2021, and 2,568,422 at 31 December 2021.

 

For further information:

Volvere plc
Jonathan Lander, CEO	Tel: +44 (0) 20 7634 9707
	www.volvere.co.uk
Cairn Financial Advisers LLP (Nominated Adviser) Sandy Jamieson/James Lewis	Tel: + 44 (0) 20 7213 0880
Canaccord Genuity Limited (Joint Broker) Bobbie Hilliam   Hobart Capital Markets LLP (Joint Broker) Lee Richardson	Tel: + 44 (0) 207 523 8000         Tel: +44 (0) 20 7070 5691

 

Chairman's Statement

 

I set out below the results for the six months to 30 June 2022. 

 

The Group's performance in the period was below our expectations. Whilst Shire Foods performed well in the circumstances, Indulgence Patisserie's performance was worse than we had hoped for due to the impact of increased raw material prices.  The effect on net assets per share has, however, been substantially mitigated by a £1.1 million increase in the value of the Indulgence properties and modest gains on our treasury investments.  The Group has taken steps to curtail the losses in Indulgence through refocused and reduced activities.

 

Net assets per share⁽¹⁾ fell slightly to £13.33 in the period (30 June 2021: £13.50, 31 December 2021: £13.49).

 

The Group's financial position remains strong, with significant cash reserves.

 

David Buchler

Chairman

 

29 September 2022

 

Note 1: 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

 

The first half trading performance of 2022 was disappointing.  The tragic war in Ukraine and the related rise and volatility in raw material, energy, and labour costs has made it very difficult to price products for customers with reasonable certainty of acceptable profit. 

 

Shire Foods and Indulgence Patisserie have both been affected by cost inflation, but Shire entered the period from a much stronger position, with its energy costs fixed for the longer term, and as an established market player.  Indulgence on the other hand faced the same environment without energy price certainty and with the added challenges of a turnaround.

 

Indulgence's losses have been partly offset by the more than doubling in the value of its properties. We also enjoyed some gains on a more actively managed treasury portfolio in H1 2022. Following some share repurchases in the period, the fall in net assets per share was contained to less than 2%.

 

Overall Group revenue rose to £17.87 million for the period (30 June 2021: £15.72 million, 31 December 2021: £35.58 million).  The Group's loss before tax was £1.12 million (30 June 2021: loss £0.29 million, year to 31 December 2021:  profit £0.07 million).

 

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

 

Shire Foods

 

Revenues increased year-on-year by 13.9%, to reach £15.78 million (30 June 2021: £13.85 million, 31 December 2021: £30.61 million).  Although revenues grew, profit before tax and intra-Group management and interest charges⁽²⁾ remained largely static at £0.58 million (30 June 2021: £0.60 million, 31 December 2021: profit £2.14 million).

 

Whilst it is positive that we have been able to operate profitably in the period, the benefit of revenue growth has been eroded by the increasing cost of materials, labour and other overheads.  Actions to pass on cost increases to customers have, however, intensified through 2022 and we are seeing a greater acceptance of periodic price rises with our customers.  This is expected to stabilise or increase margins in the second half, which is also typically our stronger sales period.

 

Indulgence Patisserie

 

Revenues increased to £2.09 million from £1.87 million in the comparable period (31 December 2021: £4.97 million).  The loss before tax and intra-Group management and interest charges⁽²⁾ was a disappointing £1.51 million (30 June 2020: loss £0.36 million, 31 December 2020: loss £1.01 million).

 

Significant raw material price increases took effect in the period and we were unable to mitigate the effects of these fully by increasing selling prices. We also decided to exit entirely the manufacturing of retail products. Retail manufacture was part of our original turnaround strategy but that strategy is not viable with the current volatility in prices.  This has led to one-off costs of approximately £0.28 million associated with the write down of raw materials used solely for retail customers and which is included in the loss before tax for the period. 

 

Following the period end, headcount has been reduced and, in order to generate cash, manufacturing has been suspended indefinitely as finished stock levels of £0.60 million are sufficient to satisfy foodservice and existing retail customers for several months.  We continue to assess the ongoing viability of the Indulgence business in the light of the future sales opportunities, product margins and overhead costs associated with it.

 

On a more positive note, the company's properties (which are freehold) were independently valued during the period at £2.03 million, an increase of £1.11 million compared to the carrying value of £0.92 million.

 

Further information relating to Shire and Indulgence is set out in the financial review below and in note 3.

 

Acquisitions and future strategy

 

There is a significant degree of instability across the UK economy and consequently we are seeing an increase in potential investment opportunities.  Not surprisingly we have reviewed a number of businesses where the continuing uncertainty in relation to energy costs is a particular challenge.  Our preference is for investments in companies where we can make a substantive change to effect a turnaround, but high energy costs are not something we can influence.  We believe some good opportunities will emerge, but timing is critical and the current macroeconomic and geopolitical situation make that issue very challenging.  

 

 

 

Jonathan Lander

Chief Executive

 

29 September 2022

 

Note 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.

 

 

Financial Review

 

This financial review covers the Group's performance during the period ended 30 June 2022.  It should be read in conjunction with the Chairman's and Chief Executive's Statements.

 

Overview

 

Group revenues for the period reached £17.87 million, an increase of £2.15 million compared to the prior comparable period (30 June 2021: £15.72 million, 31 December 2021: £35.58 million).  The increase was principally in Shire Foods (£1.93 million), with the balance in Indulgence Patisserie (£0.22 million).

 

The Group's loss before tax for the period was £1.12 million, an increase of £0.83 million compared to the prior comparable period.  This reflects increased losses in Indulgence, partially offset by gains arising from treasury management activities. Group net assets fell to £36.05 million from £37.05 million at 31 December 2021 (30 June 2021: £36.89 million).

 

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

 

Food manufacturing

 

The results of Shire Foods and Indulgence Patisserie, which represent the food manufacturing segment, are shown in the tables below.

 

Shire Foods

 

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

 

Table A	6 months to 30 June 2022 £'000	6 months to 30 June 2021 £'000	Year ended 31 December 2021 £'000	Year ended 31 December 2020 £'000	Year ended 31 December 2019 £'000
Revenue	15,776	13,850	30,605	27,189	23,036
Underlying profit before tax, intra-group management and interest charges	580	599	2,139	1,813	1,384
Intra-group management and interest charges	(98)	(75)	(252)	(200)	(200)
Profit before tax	482	524	1,887	1,613	1,184

 

The additional contribution from the growth in revenues was eroded by a fall in the materials margin, which reduced by approximately 4.2% compared to the first half of 2021 and by 4.7% compared to the whole of 2021.  This was due to the rapid increase in raw materials' costs which were not, in the timescales available, able to be passed on to customers.  Following the period end a number of selling prices have been reset with customers and it is hoped that this will ensure a recovery in margins over time.  It is, however, difficult to predict given the continuing inflationary pressures across the economy as a whole.

 

The margin percentage reduction, along with broadly higher costs for labour and overheads, meant the profit before tax was similar to the previous period, in spite of the increased revenues.

 

Investment increased in new plant and equipment, with additions in the period of £0.39 million (30 June 2021: £0.18 million, 31 December 2021: £0.27 million).  All of these were funded from the Company's own resources and there were no Group loans outstanding at 30 June 2022 (30 June 2021: nil, 31 December 2021: nil).

 

 

Indulgence Patisserie

 

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

 

Table B	6 months to 30 June 2022 £'000	6 months to 30 June 2021 £'000	Year ended 31 December 2021 £'000
Revenue	2,091	1,867	4,973
Underlying loss before tax, intra-group management and interest charges	(1,506)	(360)	(1,007)
Intra-group management and interest charges	-	-	(92)
Loss before tax	(1,506)	(360)	(1,099)

 

The increased losses at Indulgence have been driven to a large extent by continuing raw material price increases - particularly in dairy costs - since the start of 2022.  The nature of Indulgence's products (many having a large dairy element) is such that the effect on margins has been significant.  Whilst we were able to increase prices with some retail customers, we had to terminate supply with others in view of the mounting costs of ingredients.  The risk of continuing to supply product would have been too great in the current inflationary environment.  Foodservice margins started to show improvement as price rises took effect later in the period.

 

As noted in the Chief Executive's Statement, the decision has been taken to cease manufacturing for retail customers, resulting in approximately £0.28 million of one-off costs being recognised in the period.  Indulgence has suspended manufacturing altogether since early August and reduced its headcount, as finished goods inventory levels for the foodservice sector had been bolstered in preparation for retail Christmas period launches but, with that retail capacity no longer needed, a period of de-stocking of finished goods is now underway.

 

The Group continued to make loans during the period in view of the losses.  The loans outstanding at the period end (including the original acquisition price and incidental costs of £1.31 million) amounted to £6.83 million (30 June 2021: £4.71 million, 31 December 2021: £5.56 million).

 

The three wholly-owned properties occupied by the business (of which two are physically linked) were independently valued in July 2022, resulting in an upwards revaluation of £1.11 million (before a deferred tax liability of £0.28 million).  This has been credited to reserves.  The properties are owned by an entity separate from the trading entity (and their cost is included in the acquisition price of £1.31m), although they are presented as one business above.

 

Investing and management services

 

This segment represents our central functions covering Group management, treasury, finance and IT services.  The loss before tax and intra-Group management and interest charges⁽²⁾ for the period was £0.19 million (30 June 2021: loss £0.53 million, 31 December 2021: loss £1.07 million).  This is stated after investment income and realised gains from disposal of available-for-sale investments totalling £0.40 million (30 June 2021 and 31 December 2021: nil).

 

Investment revenues and other gains and losses

 

During the period the Group invested £4.55 million in available-for-sale investments, the income from which amounted to £86,000.  Some of these investments were subsequently sold in the period, realising gains on disposal of £310,000.  There was no comparable income or gains in prior periods.  The remaining available-for-sale investments are explained further below.

 

Finance income and expense

 

The Group's net finance expense was £0.07 million in the period, reflecting low interest rates on cash deposits offset by debt servicing costs (30 June 2021: £0.06 million, 31 December 2021: £0.14 million).  In line with previous years, individual Group trading companies utilised 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 and available-for-sale investments

 

Cash at the period end was £18.80 million (30 June 2021: £23.13 million, 31 December 2021: £21.87 million).  In overview, cash outflows reflect the trading losses, repayment of debt and share buy-backs and the purchase of fixed assets and available-for-sale investments.  Full details of cash movements are shown in the consolidated statement of cash flows.

 

At the end of the period there was an investment in available-for-sale investments with a period end value of £1.59 million.  The carrying value of this is below the original cost and the unrealised loss of £0.09 million has been debited to reserves.

 

Earnings per share and share capital

 

Total basic and diluted loss per ordinary share were (47.9) pence (30 June 2021: loss (15.2) pence; year ended 31 December 2021: loss (11.6) pence).

 

Purchase of own shares

 

The Company acquired 52,000 ordinary shares for a total consideration including costs of £622,000 during the period (30 June 2021: nil, 31 December 2021: 3,500 shares for £44,000).

 

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.  Rising inflation, including increases in raw materials and overhead costs, may not be able to be passed on to customers through increased prices and this could result in reduced profitability.  Any pandemic or other such similar event which could affect the consumers, suppliers, customers or staff may limit or inhibit the Group's operations.

 

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

 

 

 

Nick Lander

Chief Financial & Operating Officer

 

29 September 2022

 

Consolidated income statement

 

	Note	6 months to 30 June 2022	6 months to 30 June 2021	Year ended 31 December 2021
		£'000	£'000	£'000
Continuing operations
Revenue	3	17,867	15,718	35,578
Cost of sales		(16,466)	(13,359)	(29,682)
Gross profit		1,401	2,359	5,896
Distribution costs		(1,090)	(991)	(2,223)
Administrative expenses		(1,757)	(1,591)	(3,470)
Operating (loss)/profit		(1,446)	(223)	203
Investment revenues	4	86	-	-
Other gains and losses	4	310	-	-
Finance expense	5	(69)	(63)	(137)
Finance income	5	-	-	-
(Loss)/profit before tax		(1,119)	(286)	66
Income tax expense		-	-	(11)
(Loss)/profit for the period		(1,119)	(286)	55
Attributable to:
- Equity holders of the parent		(1,215)	(390)	(299)
- Non-controlling interests	7	96	104	354
		(1,119)	(286)	55
Earnings per share	6
Basic and Diluted - loss from continuing operations		(47.9)p	(15.2)p	(11.6)p
- earnings from discontinued operations		-	-	-
Total		(47.9)p	(15.2)p	(11.6)p

 

 

Consolidated statement of comprehensive income

 

		6 months to 30 June 2022	6 months to 30 June 2021	Year ended 31 December 2021
		£'000	£'000	£'000
(Loss)/profit for the period		(1,119)	(286)	55
Other comprehensive income Deferred tax recognised directly in equity Revaluation of property net of deferred tax Revaluation of available-for-sale investments		- 836 (92)	- - -	(140) - -
Total comprehensive income for the period		(375)	(286)	(85)
Attributable to:
Equity holders of the parent		(471)	(390)	(411)
Non-controlling interests		96	104	326
		(375)	(286)	(85)

 

 

Consolidated statement of changes in equity

Six months to 30 June 2022	Share capital £'000	Share premium £'000	Revaluation reserve £'000	Retained earnings £'000	Total £'000	Non-controlling interests £'000	Total £'000
Loss for the period	-	-	-	(1,215)	(1,215)	96	(1,119)
Revaluation of available-for-sale investments	-	-	(92)	-	(92)	-	(92)
Revaluation of property	-	-	1,114	-	1,114	-	1,114
Deferred tax recognised directly in equity	-	-	(278)	-	(278)	-	(278)
Total comprehensive income for the period	-	-	744	(1,215)	(471)	96	(375)
Balance at 1 January	50	7,885	827	25,886	34,648	2,402	37,050
Transactions with owners:
Purchase of own treasury shares	-	-	-	(622)	(622)	-	(622)
Total transactions with owners	-	-	-	(622)	(622)	-	(622)
Balance at 30 June	50	7,885	1,571	24,049	33,555	2,498	36,053
Six months to 30 June 2021	Share capital £'000	Share premium £'000	Revaluation reserve £'000	Retained earnings £'000	Total £'000	Non-controlling interests £'000	Total £'000
Loss for the period	-	-	-	(390)	(390)	104	(286)
Total comprehensive income for the period	-	-	-	(390)	(390)	104	(286)
Balance at 1 January	50	7,885	939	26,229	35,103	2,076	37,179
Transactions with owners:
Purchase of own treasury shares	-	-	-	-	-	-	-
Total transactions with owners	-	-	-	-	-	-	-
Balance at 30 June	50	7,885	939	25,839	34,713	2,180	36,893
Year ended 31 December 2021	Share capital £'000	Share premium £'000	Revaluation reserve £'000	Retained earnings £'000	Total £'000	Non-controlling interests £'000	Total £'000
Loss for the year	-	-	-	(299)	(299)	354	55
Deferred tax recognised directly in equity	-	-	(112)	-	(112)	(28)	(140)
Total comprehensive income for the year	-	-	(112)	(299)	(411)	326	(85)
Balance at 1 January	50	7,885	939	26,229	35,103	2,076	37,179
Transactions with owners:
Purchase of own treasury shares	-	-	-	(44)	(44)	-	(44)
Total transactions with owners	-	-	-	(44)	(44)	-	(44)
Balance at 31 December	50	7,885	827	25,886	34,648	2,402	37,050

 

 

Consolidated statement of financial position

 

 

		30 June 2022	30 June 2021	31 December 2021
	Note	£'000	£'000	£'000
Assets
Non-current assets
Property, plant & equipment		10,311	9,670	9,306
Total non-current assets		10,311	9,670	9,306
Current assets
Inventories		5,899	5,830	4,384
Trade and other receivables		6,663	5,453	8,874
Available-for-sale investments		1,592	-	-
Cash and cash equivalents		18,802	23,130	21,871
Total current assets		32,956	34,413	35,129
Total assets		43,267	44,083	44,435
Liabilities
Current liabilities
Loans and other borrowings		(111)	(483)	(1,452)
Finance leases		(359)	(377)	(392)
Trade and other payables		(4,457)	(4,065)	(3,379)
Total current liabilities		(4,927)	(4,925)	(5,223)
Non-current liabilities
Loans and other borrowings		(878)	(988)	(933)
Finance leases		(590)	(888)	(691)
Total non-current liabilities		(1,468)	(1,876)	(1,624)
Total liabilities		(6,395)	(6,801)	(6,847)
Provisions - deferred tax		(819)	(389)	(538)
NET ASSETS		36,053	36,893	37,050
Equity
Share capital		50	50	50
Share premium account		7,885	7,885	7,885
Revaluation reserves		1,571	939	827
Retained earnings		24,049	25,839	25,886
Capital and reserves attributable to equity holders of the Company		33,555	34,713	34,648
Non-controlling interests	7	2,498	2,180	2,402
TOTAL EQUITY		36,053	36,893	37,050

 

Consolidated statement of cash flows

		6 months to 30 June 2022	6 months to 30 June 2022	6 months to 30 June 2021	6 months to 30 June 2021	Year ended 31 December 2021	Year ended 31 December 2021
	Note	£'000	£'000	£'000	£'000	£'000	£'000
(Loss)/profit for the period			(1,119)		(286)		55
Adjustments for:
Investment revenues		(86)		-		-
Other gains and losses		(310)
Finance expense	5	69		63		137
Finance income	5	-		-		-
Depreciation		572		559		1,131
Operating lease rentals		(38)		(50)		(68)
Income tax expense		-		-		11
			207		572		1,211
Operating cash flows before movements in working capital			(912)		286		1,266
Decrease/(increase) in trade and other receivables			2,113		1,732		(1,688)
Increase in trade and other payables			1,139		719		42
Increase in inventories			(1,506)		(1,939)		(379)
Tax paid			-		-		-
Net cash generated from/(used by) operating activities			834		798		(759)
Investing activities
Purchase of property, plant and equipment		(456)		(273)		(467)
Purchase of available-for-sale investments		(4,548)		-		-
Proceeds from disposal of available-for-sale investments		3,174		-		-
Income from investments		86		-		-
Interest received		-		-		-
Net cash used by investing activities			(1,744)		(273)		(467)
Financing activities
Interest paid		(67)		(59)		(130)
Purchase of own shares (treasury shares)	8	(622)		-		(44)
Sale of own shares (treasury shares)		-		-		-
Net repayment of borrowings		(1,470)		(1,047)		(440)
Net cash used by financing activities			(2,159)		(1,106)		(614)
Net (decrease)/ increase in cash			(3,069)		(581)		(1,840)
Cash at beginning of period			21,871		23,711		23,711
Cash at end of period			18,802		23,130		21,871