Strategic Report Financial Review continued
Exceptional administrative expenses Exceptional costs of £1.0m were incurred in 2022 in relation to the relocation of our Marlow Head Office into a smaller building following the changes to working patterns that have resulted from the Covid pandemic as well as aborted M&A advisory costs. Exceptional costs of £4.0m were incurred in 2021 in relation to start up losses at our new Lutterworth and Northampton Fulfilment sites as well as depot restructuring costs and aborted M&A costs. Taxation The effective rate of corporation tax was 3.3% (2021: 30.3%) which was lower than the standard UK corporation tax rate of 19.0% (2021: 19.0%). This reflects the impact of long- term capital investment programmes and timing differences, such as capital allowances and taxable losses. We generate revenue, profit, and employment, all of which deliver substantial tax revenues for the UK government in the form of VAT, Corporation Tax, and Income Tax. Our tax policy, which has been approved by the Board aligns with this strategy and ensures that we fulfil our obligations as a responsible UK taxpayer. The E-commerce Marketing division, expanded its gross profit due to the full-year impact of the acquisition of Relish Agency.
Dividend In the year the Board declared and paid priority dividends totaling £0.75m (2021: £1.5m) to holders of “A” ordinary shares. No other dividends were declared or paid in 2022 or 2021. Priority dividends are treated as a compound instrument in the financial statements with a liability recognised on the balance sheet and interest charged through the profit and loss account. Investment 2022 was a year of consolidation after the large investments made in 2021 which included the new Lutterworth and Northampton warehouses. The Fulfilment division focused on the onboarding of new customers to bring capacity added in 2021 on stream, together with managing our significant existing customer base. Maintenance capex across the group of £2.6m (2021: £2.3m) remained steady and reflects our policy to retain a well invested operational network and to drive efficiency. We implemented a new Transport Management System whose impact has immediately reduced the total distance driven, minimising transport costs. No new acquisitions were made in 2022 and all deferred consideration in relation to historic acquisitions have been settled. All investments have been funded by cash flows from ongoing operating activities and without recourse to our substantial unutilised lines of funding.
We have been able to offer integrated warehouse fulfilment and parcel solutions to e-commerce customers, leveraging Whistl’s expertise in these areas. The underlying EBITDA 1 of £7.2m was down on the record result achieved in 2021 but remains robust and has allowed us to maintain deep liquidity and balance sheet strength, providing a strong foundation for future growth and investment in new opportunities. Gross profit of £43.9m in 2022 was 11.3% lower than in 2021, but 15.9% higher than in 2019, the last full year before the Covid pandemic. In the first half of the year, the Fulfilment division faced adjustments in the labour market, with inflationary pressure on wages and staff availability intersecting with changes in customer demand patterns and supply chain issues which impacted the import of products into the UK. These factors together with the lack of predictability of demand and the ensuing operational inefficiency, partly contributed to the overall reduction in Group profitability in 2022. Within the Parcels, International, and Mail network, gross profit margins remained robust, and there was no repeat of the 2021 economy wide HGV driver shortage. We implemented measures to keep costs under control, despite record fuel and energy price increases caused by the war in Ukraine. The E-commerce Marketing division, expanded its gross profit due to the full-year impact of the acquisition of Relish Agency. However, the division experienced headwinds in the second half of the year, as worries of a recession in the economy reduced customer marketing budgets. Administration expenses excluding exceptional costs increased by £3.9m to £51.6m in 2022 (2021: £47.7m). After adjusting for the full year impact of acquisitions the increase was £2.8m (6%) and was driven by increased investment in IT systems and growth in staff costs as well as inflationary pressure on insurance premiums and other administrative costs. We will continue to exercise tough control on costs and investigate opportunities for efficiency and value.
2022 £m
2021 £m
Change £m
Financial Position
69.9 23.2
Goodwill
80.5 (10.6) 24.0 (0.8)
Fixed assets
0.5
Stocks
0.5
-
94.9 32.5
Debtors
85.0 40.8
9.9
Cash at bank and in hand
(8.3)
(165.6)
Creditors: amounts falling due within one year Creditors: amounts falling due after one year
(169.2)
3.6
(8.9) (1.3)
(5.1)
(3.8) (0.1)
Provisions for liabilities
(1.2)
Net assets
45.2
55.3 (10.1)
1 Underlying EBITDA represents operating profit before interest, tax and exceptional items adjusted for the depreciation and amortisation charge for the year.
12
Whistl Annual Report 2022
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