Full Year Results for Year Ended 31 December 2023

Huddled Group PLC

13 May 2024

 

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13 May 2024

Huddled Group plc

("Huddled", the "Company" or the "Group")

Full Year Results for the Year Ended 31 December 2023

Huddled Group plc (AIM:HUD), the group focused on building a portfolio of e-commerce brands, is pleased to announce its audited full year results for the year to 31 December 2023, in which the group delivered a profit after tax from total operations of £13.0m.  

Background

During the year, the Group revised its strategy for growth following the sale of its Immotion and Uvisan businesses, the return of £12.7m to shareholders via a share buyback programme, and the acquisition of Discount Dragon, underpinning the Company's new strategy to build a portfolio of high-growth e-commerce brands. Such events limit the relevance of financial comparisons to the prior period.

Discount Dragon, the Group's main e-commerce brand is a direct-to-consumer e-commerce business, which predominantly sells surplus FMCG goods at a significant discount. As well as offering customers a cheaper alternative for branded goods, Discount Dragon's range includes short-dated and surplus products which helps prevent waste in the food supply chain.

Discount Dragon FY2023 highlights:    

Following its acquisition in October 2023, Discount Dragon has continued its growth trajectory:

·      Post-acquisition revenue of £1.6m (17 October - 31 December 2023) 

·      Q4 2023 revenue increased by 37.3% to £1.8m versus £1.3m in Q3 2023.

·      Q4 2023 orders placed increased by 18.3% to 48.5k versus 41.0k in Q3 2023. 

·      Q4 2023 average order value ("AOV") increased by 15.9% to £35.96 versus £31.03 in Q3 2023. 

Discount Dragon post period highlights:

·      Q1 2024 unaudited revenue increased by 21.3% to £2.1m versus £1.8m in Q4 2023.

·      Q1 2024 orders placed increased by 31.4% to 63.8k versus 48.5k in Q4 2023.

·      Q1 2024 unaudited AOV decreased 8.8% to £32.80 versus £35.96 in Q4 2023 following the introduction of more generous incentives for new customers placing an order in the period (AOV in April 2024 recovered, exceeding £36.00 following the refinement of these incentives and the increase in the minimum order value to £30 inclusive of VAT)

·      Q1 2024 new customers placing an order for the first time increased by 74.4% to 20.6k versus 11.8k in Q4 2023.

FY 2023 Group financial highlights:

·      Profit after tax from total operations for the period of £13.0m (2022: £0.7m loss)

·      Cash proceeds of £20.4m from the sale of the Immotion and Uvisan businesses, (inclusive of the $1.25m loan note repaid February 2024 and net of expenses)

·      Share buyback programme returned £12.7m to shareholders in the period

·      Completion of Discount Dragon acquisition in October 2023 

·      Revenue from continuing operations (constituting Discount Dragon and Let's Explore) of £2.4m, with the vast majority falling in the last quarter of the year

FY 2023 Group post period highlights:

·      Completion of Food Circle Supermarket acquisition

·      Let's Explore partnership with Wicked Vision Limited

Martin Higginson, Chief Executive Officer of Huddled Group PLC, commented:

"Generating a profit of £13.0m in 2023 allowed us to return significant funds to shareholders as well as enabling us to transition into a group focused on developing high growth e-commerce brands, which is a market in which we see great potential.

"Discount Dragon has continued to deliver solid growth both in terms of revenue and customer numbers since we acquired the business. At a challenging time for consumers, the offering is extremely relevant, and we feel that being able to offer great products, including many of the biggest brands at significantly discounted prices, delivered to the customer's door, will have wide appeal. Alongside this, we are playing our part in reducing food waste by offering short-dated, mispackaged or other surplus stock as part of our core range. 

"Delivering on our strategy of building a Group of high growth e-commerce businesses, the acquisition of Food Circle Supermarket bolsters our position in the online surplus food sector and introduces a broader range of customers to the Group, with a specific focus on health and nutrition, which is a fast-growing space in the sector. 

"Supported by a strong balance sheet, the next 12 months will be a year of cash investment in the key areas of marketing, stock and fulfilment. We are confident this investment will continue to stimulate growth and deliver long term shareholder value."

Enquiries:

For further information please visit www.huddled.com/investors, or contact:

Huddled Group plc Martin Higginson David Marks Daniel Wortley	[e-mail]
Zeus (Nominated Adviser and Sole Broker) Nick Cowles, James Hornigold, Alex Campbell-Harris Dominic King	Tel + 44 (0) 203 829 5000 (Investment Banking) (Corporate Broking)
Alma Strategic Communications (Financial PR) Rebecca Sanders-Hewett Sam Modlin Kieran Breheny	[e-mail]

 

Chairman's Statement

The year of 2023 was a year of significant change for the Group. The sale of the Immotion and Uvisan divisions for £20.4m[1] allowed us to not only deliver a significant return of capital to shareholders, it also gave us the opportunity to pivot the business into a fully-fledged e-commerce group.

Building a group of high growth e-commerce businesses

The acquisition of Discount Dragon in October 2023 was a pivotal milestone for the Company. Discount Dragon is a direct-to-consumer e-commerce business, which focuses on the sale of branded FMCG, predominantly dry and tinned groceries and beverages.  Its core focus is selling surplus, end of line, mispackaged, and short-dated items at significant discounts to full retail prices. By procuring and reselling surplus goods, Discount Dragon not only offers customers a cheaper alternative, it helps to tackle the issue of waste in the food supply chain.

The market for discounters has, over the last few years, been expanding significantly. According to the Nationwide Spending Report, UK customers spent 41% more with discount retailers in January 2024 compared to the previous year. Additionally, according to Mintel's UK Food and Non-Food Discounters report 2023, 90% of UK consumers now shop with food discount retailers. While much of this market share growth has been achieved through the rapid roll-out of high street stores by major retailers, according to IBISWorld the online grocery market, whilst still fragmented, has continued to grow at 12% per annum from 2018, reaching annual revenues of £20.6bn in 2023. Furthermore, in the twelve-week period to 14 April 2024 Ocado was named as the fastest growing supermarket in the UK which, in our opinion, signals that the demand for home delivered groceries is on the increase.

The rapid growth in both revenue and customer numbers since the acquisition of Discount Dragon gave us the confidence to acquire Food Circle Supermarket in April 2024, a business with significant growth potential in a niche sector and further strengthening our position in the online surplus food space. In the coming weeks we will rebrand this business 'Nutricircle' as we hone its focus further into the nutritional eating market.

As for our Let's Explore business, we are pleased to have agreed a partnership with Wicked Vision Limited ("Wicked Vision"), the key wholesale distributor of our Vodiac products since 2022.  The agreement will see a jointly owned business which benefits from the end-to-end revenue and margin from the sales of both Vodiac and Let's Explore products. The partnership will also involve Wicked Vision's team taking operational control on a day-to-day basis, allowing us to focus more of our time on building the Discount Dragon and Nutricircle brands, as well as looking for additional strategic acquisitions.

The dedication of our teams across the Group during the year cannot be overstated, and my thanks go to the wider team for all of their efforts, as we enter the next, exciting phase of our journey.

Looking ahead with confidence

Looking to the year ahead, we are excited to continue to build on the progress made in 2023. FY24 is set to be a year of continued investment in the three pillars the executive team outlined some months ago: the product range, marketing and fulfilment. In the short to medium term this investment will result in losses for the business, but we are confident this investment will drive growth and ultimately deliver a sizeable profitable business in an exciting sector.

We will be looking to improve our stock range both in terms of depth and breadth, giving customers more choice and opportunities to purchase.

On the marketing side we have scaled our marketing effort through our data-driven growth strategy and seen the number of new purchasing customers increase by some 74% against Q4 2023, underpinning our focus on growth and investment in this area.

We have now located a potential new warehouse and we are working to move our operations there as soon as possible. This will allow us to scale our business further and to operate more efficiently. 

In addition, we are investing in the further development of our website to ensure it offers both a first-class experience for customers, as well as giving us flexibility in running promotions and enhancing customer spend, thus improving lifetime values.

We have fast growing businesses in a growth sector, and cash on the balance sheet. As such I believe the Group is in a good position to deliver against our plans and drive shareholder value.

Chief Executive's Review

This was a transformational period, in which we pivoted the Group towards growing our presence in the e-commerce market, whilst returning substantial value to shareholders.

A transaction that delivered significant returns to shareholders

Our decision to sell the Immotion business brought in over £20m, creating a substantial profit, and delivering a significant return of £12.7m to shareholders. Following the return of cash to shareholders, we retained sufficient cash to develop the Group into a business that we believe can drive significant further value for shareholders.

Our transition to high growth

Having looked at several potential businesses, we entered into a due diligence process on Discount Dragon and completed the acquisition of the business in October 2023. Since acquisition, we have overseen the rapid growth of revenue and customers numbers, underpinning our decision to focus our efforts on building out a portfolio of e-commerce businesses. The focus during 2024 will be scaling the Discount Dragon business further and driving it towards profitability.

We believe Discount Dragon is well positioned to benefit from three key market trends: the growth in popularity of discount retailers, the desire for home delivered goods, and consumers becoming increasingly conscious of the environmental impact of food waste.

In Q4 2023 Discount Dragon's revenue increased sharply by 37.3% to £1.8m. This growth continued into 2024 with Q1 2024 unaudited revenues being 21.3% up on Q4 2023 at £2.1m. Average order value in Q1 2024 reduced slightly to circa £32.80, as a result of testing introductory discounts for new customers. These incentives have since been amended and the minimum order value on the website has been increased to £30 (inclusive of VAT) and as a result we have seen unaudited AOV rebound to more than £36 in April 2024.

Driving growth for the long term

As outlined when we acquired the business there are three interdependent foundation stones on which we need to build: customer acquisition and retention, breadth and depth of stock, and fulfilment.

Customer acquisition and retention

We have invested heavily in both the team and technology to help us drive this area. Our business intelligence platform delivers real time data thus allowing us to hone our customer communication strategy with a view to improving both retention and the lifetime value of our customers.  

We are encouraged by the performance of our acquisition marketing, adding some 20.6k new customers in Q1 2024. This has given us the confidence to test other acquisition channels such as teleshopping and print advertising.

We are pleased to have come to an agreement with ShopOnTV, a late-night teleshopping show on ITV1. Following successful airings in April 2024, it has been agreed that Discount Dragon will now become a regular weekly feature on the show.

In the initial trial, viewers were educated about the offers available along with the Group's core values around surplus stock and waste. Viewers of the ITV1 channel will now be able to tune in weekly to see a selection of special offers, alongside product displays and features of the current stock range. We will continue to strive for excellence in this area as we use data and insights to repeatedly drive people to our site.

Stock

With the benefit of the Group balance sheet, our stock buying has improved considerably over the last six months and we have developed a number of important new supplier relationships.  We have a considerably greater range now being offered to customers and will seek to grow this further and maintain consistency across key categories. Growth in sales has allowed us to buy deeper which in turn can help us improve margins. We believe a wider range and greater depth of stock will have a positive impact on both AOV and the frequency at which our customers return.

Warehouse capacity

With a rapidly growing customer base comes fulfilment challenges, but our team has risen to these challenges. With our current growth trajectory we are cognisant of the need for a move to a new warehouse facility and to this end we have identified a potential option which we hope to relocate to as soon as possible. We are being assisted by a specialist consultancy who are helping us in design and internal logistics to ensure a smooth transition as well as optimising the new setup.

Broadening our group of e-commerce brands

The acquisition of Food Circle Supermarket Limited ("Food Circle"), post-period end, was a further step in building a portfolio of e-commerce brands and further underpins our focus on the online surplus food market. Food Circle is an online, direct-to-consumer retailer specialising in discounted goods for the health and nutrition market, such as high-protein bars, whey powders, and other energy products. Food Circle serves customers across the UK and stocks well-known brands within this market, including Huel, Nakd, Grenade and Optimum Nutrition, amongst others. A rebranding of the business to 'Nutricircle' is underway, which we feel better reflects its offering.

Founded in 2018 by Paul Simpson and James Barthorpe, who remain in their roles with the business, Food Circle has seen strong growth since inception and delivered £1.4m of revenue and a small net loss for the year ended 31 December 2023 (unaudited). Food Circle's trading to date is underpinned by strong market drivers in health foods, the demand for direct delivery, and a group of highly loyal customers.

Additional capital will be provided to further develop the business, and potential warehousing and marketing synergies make this a perfect fit for the Group. Early signs are very encouraging with sales showing a notable increase since acquisition. We are confident this will be highly accretive, and that the team running it will be a great addition to our organisation.

Driving growth in Let's Explore

Let's Explore delivered revenues of £0.8m for FY23 (FY22: £0.8m). This was generated from two primary sources, firstly a wholesale agreement on Vodiac with Wicked Vision, and secondly a direct-to-consumer sales strategy on the Let's Explore range, predominantly through Amazon. 

As referenced in our trading update in January 2024, sales of our Vodiac product have been encouraging with circa 30,000 headsets sold in 2023 via our wholesale partner, Wicked Vision. Sales have been generated mainly via TV shopping channels, including QVC in both the UK and USA, TSC in Canada and TVSN in Australia.

The new Let's Explore range launched in Q4 2023 and has proven very popular with consumers achieving an 'Excellent' rating on TrustPilot.  Sales of over 8,000 units were achieved in Q4 2023 across the UK and USA, predominantly through Amazon in the weeks running up to Christmas.

As we focus more of our time and effort on the growing online surplus FMCG sector, and having built a suite of products customers clearly love, we wanted to explore how we could scale the Let's Explore business more quickly and efficiently.

Following discussions with Wicked Vision, we have agreed to issue them equity in the Let's Explore business.  As noted above, all revenue and contribution from the sale of Vodiac and Let's Explore products will accrue to the jointly-owned entity.  Wicked Vision's team will manage the business and will also turn their attention to promoting the Let's Explore range of products whilst continuing to sell Vodiac.

In return for their wholesale margin being transferred and taking on day-to-day management of the business, Wicked Vision will be issued an initial 25% equity interest in Let's Explore Limited, a subsidiary of Huddled, and will see their shareholding increase to 50% once Huddled has recouped circa £400,000, being the value of the working capital in the business at the time the deal was completed.

Delivering on the sizeable opportunity

The opportunities within the surplus FMCG market, the continued search for value among consumers, and the demand for e-commerce and direct delivery services, provide both Discount Dragon and Food Circle with a significant opportunity to drive growth and take market share.

As we move into 2024, we can see the levers that need to be pulled to capitalise on the opportunities available to us. Through our strong balance sheet, this year will be one of investment in our three foundation stones as we take the brands to more customers across the UK and scale our businesses towards profitability.

Financial review

The split between continuing and discontinued operations in the period is summarised below.  The results of Immotion and Uvisan are included within discontinued operations in the period, as they were in the published 2022 results.

	Discount Dragon £'000	Let's Explore £'000	Head Office £'000	Continuing Operations £'000	Discontinued Operations £'000	Total Operations £'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
Adjusted EBITDA[2]	(130)	(337)	(866)	(1,333)	312	(1,021)
Profit/(loss) after tax	(210)	(521)	(1,556)	(2,287)	15,268	12,981

Revenue from continuing operations increased to £2,423,000 from £796,000 in 2022.  The increase in revenue was driven by Discount Dragon, which generated revenue of £1,631,000 subsequent to its acquisition in October 2023, with Let's Explore's revenue being flat year-on-year (£792,000 in 2023 vs £796,000 in 2022).

Discount Dragon made a small gross profit of £90,000 in the period.  Cost of sales of £1,541,000 included cost of goods sold, fulfilment costs including warehouse payroll costs, and marketing costs.  As the business scales we would expect to see these costs, excluding marketing costs, fall as a percentage of revenue.

Let's Explore produced a gross loss of £135,000 (2022: £69,000 loss).  The division suffered from the increased cost of social media marketing felt across the industry in Q4 2023, which impacted direct-to-consumer margins and units sold, leaving us with inventory of circa 14,000 Let's Explore packs at the period end. Sales via business-to-business channels produced a positive contribution to divisional overheads.

Head office costs were mitigated in the period through income of £244,000 received for the provision of transitional finance and other services to the disposed Immotion and Uvisan subsidiaries.

Also included within the head office segment was £337,000 finance income received on its cash deposits and the accrued loan note interest payable by the buyer of the Immotion business.

One-off costs in the period of £675,000 reflected the range of corporate transactions which took place in the year: the disposal of Immotion, the acquisition of Discount Dragon, capital reduction and share buybacks and other restructuring costs.

Included within discontinued operations is a £15,206,000 profit on the disposal of the Immotion and Uvisan businesses.

Balance sheet

Net assets increased to £10,302,000 at the period end (2022: £5,321,000).

Intangible assets increased to £3,935,000 (2022: £214,000) as a result of the Discount Dragon acquisition (the carrying value of the Immotion and Uvisan businesses were included in assets held for sale in the prior period).

Inventories increased to £724,000 (2022: £67,000), mainly driven by Discount Dragon's presence on the balance sheet at the end of the period though Let's Explore stock on hand also increased.

Included within receivables was the £1,030,000 loan note due from the buyer of the Immotion business (repayment of which was received by the Company in February 2024).

Cash increased to £4,268,000 (2022: £51,000) following the sale of the Immotion business and subsequent return of capital to shareholders.

There were also notable changes to the capital and reserves of the Company in the year.  A capital reduction was required to facilitate the share buyback programme and resulted in £20,572,000 being transferred from share premium to retained earnings. A capital redemption reserve was created in the period, being the nominal value of shares cancelled following the buybacks. The acquisition of Discount Dragon also resulted in the creation of two new reserves: a merger reserve and an equity reserve. The former being the premium above the nominal value of the shares issued for the initial consideration; the latter being a provision for the deferred equity consideration yet to be issued.

Cash flow

Net cash increased £3,939,000 in the period to £4,268,000.  Operating cash outflows before and after changes in working capital were £2,454,000 and £3,201,000 respectively. Other major movements were the £19,818,000 cash inflow from the disposal of subsidiaries and the £12,680,000 returned to shareholders through the share buyback programme.

HUDDLED GROUP PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
		Year Ended 31 December 2023	Year Ended 31 December 2022
		£'000	£'000
Continuing operations	Note
Revenue		2,423	796
Cost of sales		(2,468)	(865)
		---------------	---------------
Gross loss		(45)	(69)
Administrative expenses		(2,813)		(1,848)
Other operating income		244	-
		---------------	---------------
Loss from operations		(2,614)	(1,917)
Memorandum:
Adjusted EBITDA		(1,333)	(1,582)
Depreciation	9	(28)	(1)
Amortisation	10	(241)	(168)
Share based payments		(337)		(133)
One-off costs	5	(675)		(33)
		---------------	---------------
Loss from operations		(2,614)	(1,917)
Finance costs		(2)	(11)
Finance income		337	-
		_______	_______
Loss before taxation and attributable to equity holders of the parent		(2,279)		(1,928)
Taxation		(8) _______	- _______
Loss after taxation from continuing operations		(2,287)		(1,928)
Profit after tax from discontinued operations	6	15,268		1,267
		______		______
Profit/(Loss) after taxation from all operations		12,981		(661)
Other comprehensive expense
Profit/(loss) on translation of subsidiary		(282)		129
Cumulative translation differences transferred to the income statement on disposal of subsidiaries		155		-
		______		______
Loss after taxation and attributable to equity holders of the parent and total comprehensive income for the period		12,854		(532)
		========		========

HUDDLED GROUP PLC   CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
		Year ended 31 December 2023	Year ended 31 December 2022
		£0.01	£0.01
Earnings/(loss) per share
Continuing operations
Basic	7	(0.71)	(0.46)
Diluted	7	(0.71)	(0.46)
		------------	------------
Discontinued operations
Basic	7	4.75	0.30
Diluted	7	4.75	0.30
		------------	------------
Continuing and discontinued operations
Basic	7	4.04	(0.16)
Diluted	7	4.04	(0.16)
		------------	------------

HUDDLED GROUP PLC  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023
	Share capital	Share premium	Foreign exchange reserve	Merger reserve	Capital redemption reserve		Equity reserve	Retained earnings/ (deficit)	Total equity
	£'000	£'000	£'000	£'000	£'000		£'000	£'000	£'000
Balance at 1 January 2022	166	20,556	(36)	-	-		-	(14,966)	5,720
Loss after tax	-	-	-	-	-		-	(661)	(661)
Equity settled share-based payments	-	-	-	-	-		-	133	133
Currency translation of overseas subsidiary	-	-	129	-	-		-	-	129
	------------	--------------	------------	------------	------------		------------	----------------	------------
Balance at 31 December 2022	166	20,556	93	-	-		-	(15,494)	5,321
	------------	--------------	------------	------------	------------		------------	----------------	------------
Profit after tax	-	-	-	-	-		-	12,981	12,981
Equity settled share-based payments	-	-	-	-	-		-	337	337
Currency translation differences transferred to income statement on disposal of subsidiaries	-	-	155	-	-		-	-	155
Currency translation of overseas subsidiary	-	-	(282)	-	-	-		-		(282)
Exercise of share options	19	1,159	-	-	-	-		-		1,178
Acquisition of subsidiaries	52	-	-	2,823	-	417		-		3,292
Reduction in share premium	-	(20,572)	-	-	-	-		20,572		-
Buyback and cancellation of shares	(110)	-	-	-	110	-		(12,680)		(12,680)
	------------	--------------	------------	------------	------------	------------		----------------		------------
Balance at 31 December 2023	127	1,143	(34)	2,823	110	417		5,716		10,302
	------------	--------------	------------	------------	------------	------------		----------------		------------

HUDDLED GROUP PLC  CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
		31 December 2023		31 December 2022
ASSETS	Note	£'000		£'000
Non-current assets
Property, plant and equipment	9	209		3
Intangible fixed assets	10	3,935		214
		------------		------------
Total non-current assets		4,144		217
Current assets
Inventories		724		67
Trade and other receivables		1,819		786
Contract assets		95		2
Cash and cash equivalents		4,268		51
		------------		------------
Total current assets		6,906		906
		------------		------------
Assets held for sale	6	-		6,362
		------------		------------
Total assets		11,050		7,485
		======		======
LIABILITIES
Current liabilities
Trade and other payables		(580)		(786)
Provisions		(53)		(7)
Loans and borrowings		(10)		(45)
		------------		--------------
Total current liabilities		(643)		(838)
		------------		--------------
Non-current liabilities
Loans and borrowings		(18)		(28)
Deferred tax		(87)		-
		------------		------------
Total non-current liabilities		(105)   ------------		(28) ------------
Liabilities associated with assets held for sale	6	-		(1,298)
		------------		------------
Total liabilities		(748)		(2,164)
		------------		------------
Total net assets		10,302		5,321
		======		======
Capital and reserves attributable to owners
of the parent
Share capital	11	127		166
Share premium	12	1,143		20,556
Foreign exchange reserve	12	(34)		93
Merger reserve	12	2,823		-
Capital redemption reserve	12	110		-
Equity reserve	12	417		-
Retained earnings/(deficit)	12	5,716		(15,494)
		---------------		------------
Total equity		10,302		5,321
		=======		======

The financial statements were approved by the Board and authorised for issue on 10 May 2024

Martin Higginson                                                                   Daniel Wortley

Chief Executive Officer                                                         Finance Director

HUDDLED GROUP PLC CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023
	Year ended 31 December 2023	Year ended 31 December 2022
	£'000	£'000
Cash flows from operating activities
Loss before tax from continuing operations	(2,279)	(1,928)
Profit before tax from discontinued operations	15,276	1,297
Adjustments for:
Share based payments	337	133
Depreciation of property plant and equipment	201	1,036
Loss/(gain) on disposal of fixed assets	3	(19)
Amortisation of intangible assets	280	601
Gain on disposal of subsidiary undertakings	(15,206)	-
Costs relating to the disposal of subsidiaries	(437)
Impairment of tangible and intangible assets	-	176
Finance costs	6	37
Finance income	(337)	(1)
Foreign exchange profit/(loss)	(282)	37
Foreign corporate tax payment	(16)	(4)
Corporation tax repayment received	-	18
	_____	_____
Cash inflows/(outflows) from operating activities before changes in working capital	(2,454)	1,383
Increase in inventories	(41)	(11)
Decrease/(increase) in trade and other receivables	195	(46)
Decrease/increase in trade & other payables	(901)	278
	_____	_____
Cash from/(used in) operations	(3,201)	1,604
Investing activities
Purchase of intangible assets	(157)	(510)
Purchase of property, plant and equipment	(278)	(1,797)
Proceeds from disposals of property, plant and equipment	-	24
Proceeds from the sale of subsidiary undertakings	19,818	-
Cash disposed on disposal of subsidiaries	(354)	-
Cash acquired with subsidiaries	45	-
	_____	_____
Net cash from/(used in) investing activities	19,074	(2,283)
Financing activities
Finance costs	(6)	(37)
Finance income	337	1
New loans and finance leases	-	328
Loan and finance lease repayments	(763)	(422)
Foreign exchange on retranslation of financing	-	39
Issue of new share capital	1,178	-
Share buybacks	(12,680)	-
	_____	_____
Net cash used in financing activities	(11,934)	(91)
	Year ended 31 December 2023	Year ended 31 December 2022
	£'000	£'000
Net (decrease)/increase in cash and cash equivalents	3,939	(770)
Cash and cash equivalents at beginning of the period	329	1,099
	_____	_____
Cash and cash equivalents at end of the period	4,268 ======	329 ======
	Year ended 31 December 2023	Year ended 31 December 2022
	£'000	£'000
Reconciliation of net cashflow to movement in net debt
Net (decrease)/increase in cash and cash equivalents	3,939	(770)
New loans and finance leases	-	(328)
Loans acquired with subsidiaries	(695)	-
Repayment of loans and finance leases	763	422
Foreign exchange on retranslation of financing	-	(39)
Loans and finance leases disposed on sale of subsidiaries	309	-
	_____	_____
Movement in net funds in the year	4,316	(715)
Net funds/(debt) at beginning of year	(76)	639
	_____	_____
Net funds at end of year	4,240 ======	(76) ======
Breakdown of net funds/(debts)
Cash and cash equivalents	4,268		51
Cash and cash equivalents attributable to disposal groups	-		278
	_____		_____
	4,268		329
Loans and borrowings	(28)		(73)
Loans and borrowings attributable to disposal groups	-		(136)
Lease liabilities attributable to disposal groups	- _____		(196) _____
Net funds at end of year	4,240 ======		(76) ======

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.

---

[1] Inclusive of the $1.25m loan note repaid February 2024 and net of transaction costs.

[2] Adjusted EBITDA is stated before finance income and costs, taxation, depreciation, amortisation, share based payments, profit on asset disposals and one-off costs. Adjusted EBITDA a non-GAAP metric.

 

END