TIDMALU
RNS Number : 3463L
Alumasc Group PLC
05 September 2023
IMMEDIATE RELEASE
Tuesday 5 September 2023
THE ALUMASC GROUP PLC
("ALUMASC")
FULL YEAR RESULTS ANNOUNCEMENT
RESILIENT PERFORMANCE; DELIVERY OF STRATEGIC PRIORITIES
Alumasc (ALU.L), the premium sustainable building products,
systems and solutions Group, announces results for the year ended
30 June 2023.
Commenting on the results reported today, Paul Hooper, Chief
Executive, said:
"We are delighted to report these full year results which
demonstrate the Group's resilience and benefits of our diversified
portfolio of innovative, sustainable building products, against a
challenging market backdrop and a comparative which included
significant overseas project sales.
"The management team has focused on execution of our growth
strategy. Strong organic growth was delivered in our Housebuilding
Products and Building Envelope divisions. Inorganic growth is also
being pursued with the proposed acquisition of ARP Group (subject
to CMA approval). ARP will complement Alumasc's business model,
broadening our product range in the Water Management division and
augmenting our routes to market. We are excited at the prospect of
this transaction bringing attractive scaling opportunities for both
businesses.
"As we enter FY24, we anticipate that short-term market
conditions will remain challenging, but are confident that we have
undertaken the right actions to manage these, while positioning the
Group well for when markets normalise."
Financial Highlights: Resilient performance against challenging
market backdrop
-- Group revenues from continuing operations maintained at
GBP89.1m (FY22: GBP89.4m)
-- Group underlying* profit before tax from continuing
operations GBP11.2m (FY22: GBP12.7m)
-- Delays in new Chek Lap Kok project impacted performance;
shipments commenced in July 2023
-- Strong cashflow performance; net debt reduced to GBP2.8m
(FY22: GBP4.7m)
-- Progressive dividend policy reflects Board's confidence in
outlook
-- Final dividend 6.9p (FY22: 6.65p) per share
-- Total dividend 10.3p (FY22: 10.0p) per share
Delivery of strategic priorities
-- Innovative, sustainable building products, with excellent
customer service and experienced teams
-- Continued focus on operational margin enhancements, with well
invested operations and significant capacity headroom, including
further investments in efficiency and capability
-- Increased sales presence across new geographies to accelerate
future export sales growth
-- Post year end acquisition of ARP Group ('ARP'), a
manufacturer of specialist metal rainwater and architectural
aluminium goods, for a maximum consideration of GBP10.0m on a cash
and debt free basis
-- Expected to be immediately accretive to underlying earnings
and will be funded from existing cash and debt facilities
-- Following completion, Alumasc's balance sheet will remain
strong, with June 2023 pro-forma net debt representing
approximately 0.75x EBITDA
-- Acquisition remains conditional upon clearance by the UK
Competition and Markets Authority, anticipated during the
Autumn
Divisional performance
-- Housebuilding Products
-- Outstanding performance with 19% increase in revenue to
GBP14.7m (FY22: GBP12.4m), 44% increase in underlying** operating
profit to GBP3.5m (FY22: GBP2.4m)
-- Continuation of market-leading customer service and new
product launches into adjacent channels
-- Water Management
-- Revenue GBP39.8m (FY22: GBP47.6m), underlying** operating
profit GBP5.8m (GBP8.8m); significant contribution from overseas
projects in comparative
-- New Chek Lap Kok airport project delayed into FY24,
deliveries commenced in July 2023
-- Building Envelope
-- Solid performance from continuing operations; 18% revenue
growth to GBP34.6m (FY22: GBP29.4m) and underlying** operating
profit of GBP4.1m (FY22: GBP3.6m)
-- Further market share gains assisted by new products and new
sales hires
Outlook
-- Healthy order book; year started in line with management's
expectations
-- Water Management expected to see positive impact from delayed
Chek Lap Kok contract and contribution from ARP acquisition
-- Diversified businesses, innovative products and demand for
sustainable building products provide resilience
-- The Board anticipate short-term market conditions will remain
challenging, but are confident the Group has taken the right
actions to manage these, while the Group remains well positioned to
benefit when markets normalise.
* a reconciliation of underlying to statutory profit before tax
is provided in note 5.
** see Divisional Review below for a reconciliation of
underlying to statutory operating profit.
Enquiries:
The Alumasc Group plc +44 (0)1536 383844
Paul Hooper (Chief Executive)
Simon Dray (Group Finance Director)
Peel Hunt (Broker) +44 (0)207 418 8831
Mike Bell
Ed Allsopp
finnCap (NOMAD) +44 (0)207 220 0561
Julian Blunt
Camarco (Financial PR) alumasc@camarco.co.uk
Ginny Pulbrook +44 (0)203 757 4992
Rosie Driscoll
Notes to Editors:
1 Alumasc is a UK-based supplier of premium sustainable building
products, systems and solutions. Almost 80% of Group sales are
driven by building regulations and specifications (architects and
structural engineers) because of the performance characteristics
offered.
2 The Group has three business segments with strong positions
and brands in their individual markets. The three segments are:
Water Management; Building Envelope; and Housebuilding
Products.
Strategic Report
Chair's Statement
I am pleased to report that Alumasc delivered a robust
performance despite challenges for building products from rising
interest rates, persistent inflation, labour shortages, political
upheaval and weaker market confidence.
Performance
The Group has once again shown its resilience and the benefits
of its diversified portfolio. Against a backdrop of challenging
market conditions, Group revenues from continuing operations were
maintained at around GBP89 million and underlying profit before tax
of GBP11.2 million delivered in accordance with market
expectations. There was some dilution to operating margins from
increased investment in capability as well as lower volumes in our
Water Management division, which should recover in 2024. Our
operating cash flow of GBP12.2 million (2022: GBP7.8 million)
enabled us to reduce our net bank debt by around GBP2 million
during the year, after payments for capex, dividends and the
Levolux business sold in the year.
Our Strategy of organic growth with synergistic M&A
We remain focused on accelerating growth and I am delighted that
our Building Envelope and House Building Products divisions grew
their revenues by 18% and 19% respectively. Our Water Management
division's revenues declined by 16%, reflecting significant export
orders in 2022 and the deferment of a new Chek Lap Kok airport
project into 2024. Deliveries under this project commenced in July
2023.
In line with our strategic objectives, we acquired post year end
(subject to regulatory clearance) ARP into our Water Management
division. We believe that the business will enable us to deliver
further growth and synergistic benefits, and it is expected to be
immediately accretive to underlying earnings.
ESG
Around 80% of our products deliver environmental benefits in the
built environment, especially through for example water and energy
management. As the move towards a greener economy accelerates, our
businesses are focused and well placed to support our customers to
deliver on their sustainability needs.
We are also focused on making a tangible difference to the
communities in which we operate and to our people, as well as
maintaining high standards of governance.
Pension scheme
As previously reported, our annual defined benefit pension
scheme contributions have been reduced to GBP1.2 million
(previously GBP2.3 million), reflecting an agreement with the
trustees until 2025. Along with many other schemes, Alumasc's
defined benefit pension scheme felt the effects of the financial
markets turmoil following the September 2022 mini-budget. The
pension scheme deficit was GBP4.3 million at 30 June 2023 (2022:
GBP2.1 million). The Company continues to work constructively with
the Trustees to enable the scheme to have a low dependency on the
Company in the medium term.
Dividends
The Company remains committed to its progressive dividend
policy. The interim dividend of 3.4p per share paid in April 2023
will be followed by a final dividend of 6.9p per share, if approved
by the shareholders, payable in November 2023. This will be a total
dividend per share of 10.3p per share (2022: 10.0p per share)
Outlook and Alumasc's People
While markets remain uncertain, Alumasc's strategy remains
focused on organic and inorganic growth in sustainable building
products. This places us well to capitalise on the many
opportunities in our industry from environmental change. We
continue to invest in people, product development and capacity to
encourage our divisions to grow market share and enter adjacent
product categories.
Our people, including colleagues joining us from ARP, whom we
are delighted to welcome, are critical to delivering our strategy.
They have once again shown admirable resilience and agility and, on
behalf of our other stakeholders, the Board and I thank them for
their ongoing hard work and commitment.
Vijay Thakrar
Chair
5 September 2023
Chief Executive's Review
Financial Highlights and Overview
2022/23 2021/22 % change
Group performance from continuing operations:
Revenue (GBPm) 89.1 89.4 -%
Underlying profit before tax (GBPm) * 11.2 12.7 -12%
Statutory profit before tax (GBPm) 10.5 12.0 -12%
Underlying earnings per share (pence) * 25.0 28.6 -13%
Basic earnings per share (pence) 23.3 26.8 -13%
6 6
Full year dividend per share (pence) 10.3 10.0 +3%
*A reconciliation of underlying to statutory profit before tax
is provided in note 5
Overview of performance
Group sales for the 12 months ending 30 June 2023 were GBP89.1
million, close to the prior year sales of GBP89.4 million. Group
sales in the UK were strong, increasing by GBP8.4 million (11%)
which was a reasonable achievement against a backdrop of a
declining market, particularly for the UK housebuilding sector,
which has seen the negative impact of inflation driving higher
interest rates and lower demand for mortgages.
As previously reported, against a comparative which included
significant sales to overseas projects, Gatic Covers experienced
delays in the launch of its new GBP7 million project to Chek Lap
Kok project in Hong Kong, which were scheduled for Q4. There was
also a slowdown in activity in the Middle East, believed to be as a
result of the focus on the FIFA World Cup. This led to a decline in
Water Management export sales. We are pleased to report that
shipments for the new Chek Lap Kok project have commenced in
quarter one of the new financial year.
Raw material prices were broadly stable over the year, but
general inflation remained high and further cost increases were
recovered through price rises.
Despite the above challenges and a general slowdown in
construction activity the Group achieved its profit forecast and
came in at the analysts' consensus for the year.
The divisional star performers of the year were Housebuilding
Products (sales +GBP2.3 million (+19%) and underlying operating
profit +GBP1.1 million (+44%)) and Building Envelope (sales +GBP5.2
million (+18%) and underlying operating profit +GBP0.5 million
(+14%)).
Divisional review
(a) Water Management
Revenue: GBP39.8 million (2021/22: GBP47.6 million)
Underlying operating profit*: GBP5.8 million (2021/22: GBP8.8
million)
Underlying operating margin*: 14.5% (2021/22: 18.4%)
Operating profit: GBP5.6 million (2021/22: GBP8.7 million)
* Prior to restructuring costs of GBP0.1 million (2021/22:
GBPnil) and brand amortisation charges of GBP0.1 million (2021/22:
GBP0.1 million)
Following two successive years of record performance, and a
doubling of its profit over three years, the Water Management
Division fell back due to the delays of several significant export
projects, including at Chek Lap Kok Airport in Hong Kong, which
delivered GBP6.6 million sales in the prior period. The delayed new
circa GBP7.0 million Chek Lap Kok project is now underway, with
shipments commencing in quarter one of our 2024 financial year.
UK sales remained strong and despite the challenging marketplace
managed to move slightly ahead of the prior year. Several large
projects for Gatic Slotdrain and Access Covers were delivered and
another good performance was achieved by the Architectural
Aluminium business, Skyline, which also benefitted from the
successful introduction of a number of new products. Of note was
also the second half year launch of the new patented Slotdrain E,
designed to require much less concrete during installation while
allowing faster installation. The first successful installation
took place at the historic and large business jet facility at
Farnborough Airport, and we anticipate strong demand for this new
product.
Rainclear, which has a certain reliance on self-build projects,
had a slower performance than the prior period due to pressure on
household income. However, it was successful in mitigating some of
this shortfall through work with regional housebuilders plus the
launches of its new canopy, veranda and skylight ranges, all which
are showing early promise.
The Water Management Division commences the new financial year
with an order book over twice the size of a year ago.
We should take the opportunity here to welcome, subject to The
Competition Markets Authority's approval, our new colleagues from
The ARP Group, a business with which we exchanged contracts on 24
July 2023.
(b) Building Envelope
Revenue: GBP34.6 million (2021/22: GBP29.4 million)
Underlying operating profit*: GBP4.1 million (2021/22: GBP3.6
million)
Underlying operating margin*: 11.8% (2021/22: 12.2%)
Operating Profit: GBP4.1 million (2021/22: GBP3.1 million)
1 * Prior to restructuring costs of GBPnil (2021/22: GBP0.5 million)
The Building Envelope Division had a strong revenue growth
(+18%) in the year under review driven by pro-active management
including the hiring of very experienced and effective sales
managers. It has increased market share also aided by new product
launches including a very successful flat to pitched roof system
along with the successful promotion of its CO(2) reducing product,
Olivine.
A good level of Academy work was won. Some reasonably
significant cost increases were passed on through sales prices. The
Roofing business continues to focus on high-end specification
offers supported by the highest standards, and a customer service
level which delivers low carbon systems combined with safety in
installation, all supported by long term warranties.
Long standing relationships with key clients, developers and
contractors, along with the increasing influence in large scale
projects (GBP1.0m+) is benefitting the Division. Work is ongoing to
broaden and to continually improve the environmental performance of
the product range.
(c) Housebuilding Products
Revenue: GBP14.7 million (2021/22: GBP12.4 million)
Underlying operating profit*: GBP3.5 million (2021/22: GBP2.4
million)
Underlying operating margin*: 23.9% (2021/22: 19.7%)
Operating profit: GBP3.3 million (2021/22: GBP2.4 million)
* Prior to restructuring costs of GBP0.2 million (2021/22:
GBPnil)
Timloc, our Housebuilding Products business, had an outstanding
year, growing its revenue 19% and its underlying operating profit
by 44%. This was achieved by the continuation of its
industry-leading next day delivery service and the continued growth
of its new products, which in 2022/23 accounted for approximately
25% of its revenue. This included the launch of the Inventive Tile
Vent range which has taken a significant market share during the
year. This highlights Timloc's ability to identify commercial
opportunities to launch innovative products and demonstrate its
position as an efficient manufacturer, supported by a brand,
endorsed by its reputation for outstanding service (100% OTIF in
the year). The Inventive Tile Vents have also taken Timloc into a
new distributor channel of specialist roofing merchants.
Despite the challenges of a weakening housing market and cost
increases, which were largely recovered, the Housebuilding Products
Division managed to deliver a strong operating margin of 24%.
Improved efficiencies, outstanding next day service and rigorous
cost controls contributed significantly, along with additional
manufacturing throughput and continued investment in
automation.
Timloc's continued focus on sustainability, including being the
first UK building products manufacturer to become carbon neutral,
leaves it well positioned to support the housebuilders' drive to
build carbon zero homes. During the year, Timloc was the first of
our businesses to fully comply with the Group's move to electric
vehicles.
Further investments are planned in operational capacity
(including automation), external sales representation and new
product development capabilities to support continued growth.
Strategic Overview
The Group continued to progress its long-term growth
strategy.
Accelerating sales growth by:
- Servicing markets with long term structural growth drivers .
Demand for our products is underpinned by building regulations and
legislation;
- Preserving and growing market share with market-leading
customer service and leveraging cross-selling opportunities across
our businesses;
- New product development to grow share and access adjacent markets; and
- Geographical sales expansion .
Driving margin improvement by:
- Maintaining agile and flexible production capacity ; and
- Simplifying and streamlining our businesses and reducing fixed overheads.
Championing sustainable business products:
- Creating durable, low maintenance products which reduce the
whole-life energy and financial cost of buildings.
- Addressing some of the environmental challenges facing the construction industry: building decarbonisation, water management and occupant wellbeing/urban biodiversity; and
- Embracing the circular economy by using recycled and recyclable materials.
Investing in value-enhancing opportunities , using our strong
balance sheet and operating cash generation:
- Organic growth through improving operational capability,
R&D/NPD, sales and marketing resource ; and
- Inorganic growth through bolt-on acquisitions in current or adjacent markets.
Alumasc is in a very strong position to benefit from the move
towards sustainable construction and green buildings, both in terms
of its portfolio of products and in its championing of the circular
economy. Many internal initiatives have also been taken to act in
an environmentally sustainable manner, including the sourcing of
electricity from renewable sources for 100% of the Group's supply.
The Group's Net Zero planning is underway, supported by a Group
policy to move to electric vehicles and make our operations as
carbon efficient as possible.
Outlook
Alumasc's cost savings programme, liquidity management, strong
balance sheet and improved commercial positioning underpin a
business that is well positioned to benefit from the long-term
growth drivers in its markets. Alumasc's primary aim is to manage
the long-term sustainability of the business and to focus on its
key strategic objectives, growing revenues faster than the UK
construction market and being a supplier of sustainable building
products.
Notwithstanding uncertainty over the short-term macro-economic
outlook, a robust platform is now in place which provides the Board
with confidence for another strong year, which has started in line
with management's expectations.
G Paul Hooper
Chief Executive
5 September 2023
Financial Review
Performance from continuing operations
GBPm 2022/23 2021/22
Continuing operations GBPm GBPm
------------------------------- -------- --------
Revenue 89.1 89.4
Gross profit 32.7 33.4
Gross margin 36.7% 37.3%
Underlying operating expenses (20.6) (20.1)
-------- --------
Underlying operating profit 12.1 13.3
Underlying operating margin 13.6% 14.9%
Net finance costs (0.9) (0.6)
-------- --------
Underlying profit before tax 11.2 12.7
Non-underlying items (0.7) (0.7)
-------- --------
Statutory profit before tax 10.5 12.0
-------- --------
The Group produced a resilient performance against a challenging
UK construction sector backdrop. Group revenue was GBP89.1 million
(2021/22: GBP89.4 million), broadly in line with a strong
comparative which included a GBP6.6 million contribution from
significant export contracts. Call-offs expected in the year for
the new circa GBP7 million Chek Lap Kok airport project were
delayed, but commenced in 2023/24.
Gross margin was 36.7% (2021/22: 37.3%). While raw material
prices stabilised over the year, general inflation remained high
and the Group continued to recover cost increases through selling
prices where they could not be mitigated or avoided.
Underlying operating expenses of GBP20.6 million (2021/22:
GBP20.1 million) reflect wage inflation and investments made in
sales and marketing capabilities, and are presented net of a GBP0.8
million (2021/22: GBPnil) research and development credit, against
qualifying expenditure of GBP4.1 million (2021/22: GBP3.9
million).
Underlying operating profit was GBP12.1 million (2021/22:
GBP13.3 million), representing a return on sales of 13.6% (2021/22:
14.9%).
Net finance costs were GBP0.9 million (2021/22: GBP0.6 million),
the increase driven by higher interest rates in the year.
Underlying profit before tax was GBP11.2 million (2021/22:
GBP12.7 million) and, after GBP0.7 million (2021/22: GBP0.7
million) of non-underlying charges, statutory profit before tax was
GBP10.5 million (2021/22: GBP12.0 million).
Non-underlying items
The Board uses underlying profit and earnings as an alternative
performance measure, to track and assess the Group's trading
performance. This measure excludes certain non-underlying items,
which include brand amortisation, pension scheme finance costs,
acquisition expenses, and other items which are significant and
one-off in nature. The non-underlying items in the current and
prior financial year were:
GBPm 2022/23 2021/22
Continuing operations GBPm GBPm
----------------------------------------- -------- --------
Brand amortisation 0.1 0.1
Restructuring and legal costs 0.3 0.5
Acquisition costs 0.2 -
-------- --------
Non-underlying operating expenses 0.6 0.6
IAS 19 net pension scheme finance costs 0.1 0.1
-------- --------
Non-underlying finance costs 0.1 0.1
Total non-underlying items 0.7 0.7
-------- --------
- Amortisation of acquired brands of GBP0.1 million (2021/22:
GBP0.1 million). This is a non-cash charge arising from the
application of accounting standards, to write off the estimated
value of brands associated with acquired businesses over their
anticipated useful life.
- Restructuring and legal costs of GBP0.3 million (2021/22:
GBP0.5 million), mainly representing one-off professional fees
incurred to resolve a commercial dispute and, in the prior year, in
exiting the Group's roofing installation business.
- Acquisition costs of GBP0.2 million (2021/22: GBPnil) which
are professional fees incurred in the Group's acquisition
activities, primarily in relation to the acquisition of ARP Group
announced on 25 July 2023.
- IAS 19 net pension scheme finance costs of GBP0.1 million
(2021/22: GBP0.1 million). These non-cash charges relate to the
Group's legacy defined benefit pension scheme, and are calculated
by actuaries to reflect the notional financing cost of the Group's
pension deficit.
Taxation
The Group's underlying effective tax rate on continuing
operations was 20.0% (2021/22: 19.4%), compared to the UK
corporation tax average rate for the year of 20.5% (2021/22:
19.0%). The tax rate varies in line with the UK rate and the
balance of available reliefs, non-taxable income and expenses. The
Group's underlying effective tax rate for 2023/24 is expected to be
around 25.5%.
The Group's effective tax rate on statutory profit from
continuing operations was 24.9% (2021/22: 20.6%). A reconciliation
of this rate to the average UK corporation tax rate is included in
note 8.
Earnings per share
Basic earnings per share from continuing operations was 23.3p
(2021/22: 26.8p), and underlying earnings per share from continuing
operations was 25.0p (2021/22: 28.6p).
Dividends
The Board have recommended to shareholders a final dividend of
6.9 pence per share (2021/22: 6.65 pence), which will absorb an
estimated GBP2.5m of shareholders' funds. This has not been accrued
in these accounts as it was proposed after the end of the financial
year. Subject to shareholder approval at the Annual General Meeting
on 26 October 2023, it will be paid on 3 November 2023 to members
on the share register on 29 September 2023.
Together with the interim dividend of 3.40 pence (2021/22: 3.35
pence) paid to shareholders on 6 April 2023, this will bring the
total distribution for the year to 10.3 pence per share (2021/22:
10.0 pence), which is covered 2.4 times (2021/22: 2.9 times) by
underlying earnings per share from continuing operations.
Discontinued Operations
The Group sold its Levolux business on 26 August 2022, and its
trading results up to the date of disposal have been reported
within discontinued operations in the current and prior year.
Proceeds from the sale were GBP1, and further contingent
consideration is unlikely to be paid. The prior year results
include a charge of GBP14.9 million to write down the carrying
value of Levolux's net held for sale assets to GBP1. A further
GBP1.7 million loss on disposal was recorded in the current year,
representing cash held by Levolux at the date of disposal, other
related write-downs and transaction costs.
Cash Flows and Net Debt
Underlying operating cash flow from continuing operations
GBPm 2022/23 2021/22
Continuing operations GBPm GBPm
------------------------------------------ -------- --------
Underlying operating profit 12.1 13.3
Depreciation and underlying amortisation 2.9 2.7
Share-based payments 0.2 0.1
Working capital movements (1.0) (4.9)
Underlying operating cash flow 14.2 11.2
-------- --------
Operating cash conversion 117% 84%
The Group's underlying operating cashflow from continuing
operations was GBP14.2 million (2021/22: GBP11.2 million),
representing 117% (2021/22: 84%) of underlying operating profit,
reflecting the partial unwind of investments in inventory made in
the prior year, to maintain customer service during a period of
supply chain disruption. Further reductions in working capital are
expected over 2023/24 as inventory holdings continue to reduce.
Average trade working capital as a percentage of revenue for the
year was 19.1% (2021/22: 18.1%).
Movement in net bank debt
GBPm 2022/23 2021/22
GBPm GBPm
--------------------------------------------------- -------- --------
Underlying operating cash flow from continuing
operations 14.2 11.2
Pension deficit funding (1.6) (2.6)
Non-underlying cash flows (0.4) (0.8)
-------- --------
Cash generated by continuing operating activities 12.2 7.8
Capital expenditure (2.7) (2.6)
Interest (0.8) (0.6)
Tax (0.5) (1.6)
Lease principal repaid (0.8) (0.7)
Purchase of own shares (0.1) (0.5)
Dividend payment (3.6) (3.4)
Other (0.1) 0.1
-------- --------
Net bank debt movement before discontinued
operations 3.6 (1.5)
Net bank debt movement - discontinued operations (1.7) (2.3)
-------- --------
Decrease/(increase) in net bank debt 1.9 (3.8)
-------- --------
Cash generated from continuing operating activities was GBP4.4
million higher than the prior year at GBP12.2 million, largely due
to the increase in underlying operating cash flows and the GBP1.0
million reduction in pension deficit funding, following the lower
schedule of contributions agreed with the trustees. Cash outflows
in respect of non-underlying items were GBP0.4 million (2021/22:
GBP0.8 million).
Capital expenditure was GBP2.7 million (2021/22: GBP2.6
million), representing 101% of depreciation (2021/22: 104%). The
main investments were capacity and efficiency investments at the
Housebuilding Products site in Howden, and in process automation in
the Water Management division. The Board see further opportunities
to invest in organic growth across the Group, and expect capital
expenditure to remain at or above the level of depreciation over
the medium term.
Interest payments were GBP0.8 million (2021/22: GBP0.6 million)
and tax payments GBP0.5 million (2021/22: GBP1.6 million).
After lease principal repayments of GBP0.8 million (2021/22:
GBP0.7 million), own share purchases to fulfil the vesting of
employee share options of GBP0.1 million (2021/22: GBP0.5 million),
and dividend payments of GBP3.6 million (2021/22: GBP3.4 million),
the reduction in net bank debt before discontinued operations was
GBP3.6 million (2021/22: GBP1.5 million increase in debt).
The cash outflow in respect of discontinued operations was
GBP1.7 million (2021/22: GBP2.3 million), leading to a reduction in
net bank debt for the year of GBP1.9 million (2021/22: GBP3.8
million increase).
Net Debt
GBPm 30 June 30 June
2023 2022
GBPm GBPm
-------------------------- -------- --------
Net bank debt 2.8 4.7
Lease liabilities 5.3 5.1
-------- --------
Total (IFRS 16) net debt 8.1 9.8
-------- --------
Net bank debt at June 2023, on which the Group's banking
covenants are based, was GBP2.8 million (June 2022: GBP4.7
million). Total net debt, including lease liabilities, was GBP8.1
million (2021/22: GBP9.8 million).
Financial Position
Group net assets at 30 June 2023 were GBP25.7 million (2021/22:
GBP25.7 million).
Pensions
The Group accounts for its defined benefit pension retirement
obligations in accordance with IAS 19 Employee Benefits, based on
the market value of scheme assets and a valuation of scheme
liabilities using a discount rate based on AA corporate bond yields
at year end. Mortality and inflation assumptions have been aligned
to updated actuarial information. The IAS 19 defined pension scheme
deficit at 30 June 2023, before deferred taxes, was GBP4.3 million
(June 2022: GBP2.1 million). Lower valuations led to scheme assets
decreasing in the year, by GBP15.8 million, to GBP71.5 million.
Scheme liabilities decreased by GBP13.6 million to GBP75.8 million,
due to an increase in the discount rate.
The contribution rate is agreed with the trustees based on
actuarial valuations rather than the IAS 19 deficit. Following the
triennial review in March 2022, the Group agreed to reduce annual
contributions from GBP2.3 million to GBP1.2 million from 1 October
2022. These payments are designed to enable the scheme to reach a
position of low dependency (where the scheme is expected to be able
to meet its future liabilities using prudent investment assumptions
and without further Group support) over a reasonable timescale.
Banking facilities and covenants
The Group maintains facilities with its banking partners to
ensure the availability of sufficient liquidity to meet the Group's
operational and strategic needs, at optimal cost. The Group
projects facility utilisation and compliance with the associated
covenants during its short-term forecasting, annual budgeting and
strategic planning exercises, to ensure adequate headroom is
maintained, taking into account the Group's expected performance
and investment plans.
At 30 June 2023, the Group's banking facilities comprised:
- An unsecured committed GBP25.0 million revolving credit
facility, which expires in August 2025 with two single year
extension options to August 2026 and 2027. In July 2023 the Group
exercised the first of these options, to extend the facility expiry
to August 2026;
- An uncommitted GBP20.0 million accordion facility, which would
allow the Group to increase its revolving credit facility to
GBP45.0 million if exercised and approved; and
- Overdraft facilities, repayable on demand, of GBP4.0 million.
The covenants associated with these facilities are set out
below, together with the reported figures at 30 June 2023 and
2022:
Covenant 30 June 2023 30 June 2022
Net debt: EBITDA <2.5 0.2 0.4
Interest cover >3.5 18.9 31.7
Return on investment
The Group defines its invested capital as shareholders' funds,
including historic goodwill but excluding net bank debt, pension
deficit (net of tax) and lease liabilities. The Group's post tax
return on invested capital (underlying operating profit from
continuing operations after tax, divided by invested capital) was
26.1% (2021/22: 29.8%); lower than the prior year due to the lower
operating profit and higher tax rate; but still substantially
higher than the Group's weighted average cost of capital, which the
Group estimates to be 11%.
Capital structure and capital allocation
The Group aims to deliver strong and sustainable financial
returns well in excess of its cost of capital. It achieves this by
investing the capital provided by its cash-generative operations
and its strong balance sheet in a disciplined manner consistent
with its long-term strategy, while maintaining debt at a prudent
level. The Board's allocation priorities are:
- Investment in organic growth, principally through capital
expenditure and investment in organisational capabilities,
particularly in research and development, manufacturing capacity
and efficiency, and sales and marketing resources.
- Providing regular returns to shareholders through a
progressive dividend policy, which aims to increase dividends
broadly in line with underlying earnings, while maintaining a
prudent level of cover.
- Investment in inorganic growth, identifying bolt-on
acquisition targets in current or adjacent markets which complement
the Group's existing business and deliver synergies.
The Group's solid financial platform has allowed it to continue
to invest in opportunities to build resilience and generate
sustainable growth. The acquisition of ARP Group, announced on 25
July 2023 and subject to CMA approval, is consistent with the
Group's inorganic growth strategy and disciplined approach to
capital allocation, and is expected to be immediately accretive to
underlying earnings while further enhancing the Group's prospects
over the medium term.
Going concern
As detailed in note 1, in assessing the Group's ability to
continue as a going concern, the Board has considered medium-term
forecasts based on the Group's approved budget and three-year plan
including stress test scenarios based on 10% and 20% reductions in
revenue.
Under the stress test scenarios, there remained adequate
headroom under the Group's banking facilities and no breach of
banking facilities over the period to September 2024. The Board
also took note of the Group's ability to reduce its cost base
and/or conserve cash facilities if necessary.
A reverse stress test scenario, that would lead to a breach of
the Group's banking covenants, was also modelled. The Board
consider the risk of such a scenario to be remote, and the Board
would take immediate mitigating actions were it to arise.
Having taken into account the scenario models above, and in
light of the remaining headroom against banking covenants and total
facilities under the various scenarios, the Board consider that the
Group has adequate resources to continue trading for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the financial statements.
Simon Dray
Group Finance Director
5 September 2023
PRINCIPAL RISKS AND UNCERTAINTIES
Risks and uncertainties Mitigating actions taken
Climate Change
* Improving partnerships and relationships in our
Risk/Impact Potential supply chain to combat disruption and potential price
to impact our supply chain increases.
and increase volatility
in the prices of raw materials,
and other supplies. Sudden * Greater resilience by using suppliers from different
climate changes events, geographical locations.
such as increased severe
weather conditions and
storms could impact our * Ensuring suppliers and logistics partners understand
supply chains and shipments. the risks of climate change.
Regulations increasing
costs could be imposed
on manufacturing, certain * Strategic buying of core products and careful
processes, fuels/goods stocking.
used, impacting prices
for products that customers
require. * Development of targets for our Scope 1, 2 and 3
emissions.
* Investment in new technology to manufacture new
products to address the needs of climate change, with
improved energy efficiency.
* Our strategy includes helping customers address
climate change, by selling and creating innovative
new products with sustainable qualities and
eco-friendly credentials.
* Providing environmental data for our customers,
employees, investors and stakeholders
--------------------------------------------------------------------
Geopolitical and macroeconomic
uncertainty * Strategic positioning in export markets/sectors
Risk/Impact anticipated to grow faster than the UK construction
market.
Macroeconomic uncertainty
on a
global basis post pandemic, * Revenues are derived from a variety of end-use
and construction markets - this provides resilience.
global geopolitical uncertainty.
Markets are not settled
post-Brexit and ongoing * Development of added value systems and solutions that
potential for delays due are required by legislation, building regulation
to strikes and disruption and/or specified by architects and engineers.
to other services.
Continuing inflationary * Continuous development and introduction of innovative
pressures green products, systems, solutions, and services that
on raw material, energy are market leading and differentiated against the
supplies competition.
and services, also impacting
pay
and other costs. * Increasing supply chain flexibility
* Limited exposure to currency risk, mainly the Euro
and US Dollar. These exposures are for the most part
hedged, with hedging percentages increased to manage
potential FX volatility
* Brexit developments being monitored closely, strong
relationships monitored and regular dialogue with key
European suppliers. Contingency planning is in place
for residual risk areas, including increased
inventory of materials/ products imported from the
UK.
* Robust management has ensured cost increases are
passed on to customers.
--------------------------------------------------------------------
Supply chain/Inflation
Risk/Impact * Annual strategic reviews, including supplier, quality,
International supply reliability, and sustainability.
chain risks
had increased following
the * Brand and product strength has allowed cost increases
pandemic and geopolitical to be largely recovered through higher prices
uncertainty. The residual
issue
is price inflation, skilled * Regular key supplier visits, good relationships
staff maintained including quality control reviews and
shortages, increased training.
tariffs/
duties, Brexit risks
in Europe * Supply chain flexibility to avoid strategic
and geopolitical uncertainty dependence on single sources of supply.
following the war in Ukraine.
* Supplier questionnaires and export checks are
completed to ensure compliance with Group policies
including anti-bribery and anti-modern slavery.
* Training provided on customs duties, particularly on
managing evolving arrangements post Brexit.
--------------------------------------------------------------------
Cyber security and Business
Interruption * IT disaster recovery plans are in place for all
Risk/Impact businesses and tested regularly - reviews are being
held with each business to ensure that the Recovery
Cyber security risks Time Objective (RTO) is adequate for the business.
and Business
Interruption risks are
increasing * Awareness training and management briefings held on
globally and have increased cyber security risks and actions taken as
during the Covid-19 pandemic preventative measures.
and following recent
geo-political
events globally. * New security protocols and software are installed and
continually updated to mitigate evolving cyber
The risk of a cyber threat threats.
from
increased failure/and/or
ICT cyber * Regular reviews of cyber security, including external
crime could cause interruption penetration testing and reviews with external IT
or professionals.
loss.
* Critical plant and equipment are identified, with
associated breakdown/recovery plans in place.
* Employee awareness of potential risk are mitigated
through cyber training.
* Further systems are being implemented to underpin the
business strategic growth plans and drive efficiency.
Implementation risks are mitigated via the use of
third-parties, qualified project managers, and
increased user-testing.
--------------------------------------------------------------------
Credit risk
* Most credit risks are insured, including all
Risk/Impact contracting credit risk.
The risk is that credit
is extended and customers * Large export contracts are backed by letters of
are unable to settle invoices. credit, performance bonds, guarantees or similar,
The Group manages credit where possible.
risks and the contribution
from the UK Government
Export Credit Scheme for * Due to Covid-19 and related uncertainties credit
overseas opportunities risks have increased, which has also been an area
has supported export opportunities. impacted by local lockdowns due to the pandemic.
* Any risks taken above insured limits are subject to
strict delegated authority limits.
* Credit checks when accepting new customers/new work.
* The Group employs experienced credit controllers and
aged debt reports are reviewed in monthly Board
meetings.
--------------------------------------------------------------------
Health & Safety Risks
* Health & safety and the wellbeing of staff is a core
Risk/Impact value of management and the first Board agenda item.
Health & safety incident/injury
could occur despite a * H&S commitment communicated to all levels of the
strong business
culture and previous
management
performance. Consequential * Risk assessments are carried out and safe systems of
reputational risk and work documented and communicated.
legal costs.
* All safety incidents and significant near misses are
reported at Board level monthly, with appropriate
remedial action taken.
* Group Health & Safety best practice days are held
twice year, chaired by the Chief Executive.
* Annual audits of health & safety are conducted in all
Group businesses by independent consultants and other
specialist advisers.
* Health & Safety training is provided, and
implementation is monitored, there has been a focus
on increasing the number of staff trained in H&S
across the business.
* Specific focus on improving safety of higher risk
operations, with external consultancy support as
needed.
* Serious near misses are reported to the Board.
--------------------------------------------------------------------
Staff recruitment and
retention risks * Remuneration packages are appropriate to the
position: staff are encouraged and supported to grow
Risk/Impact their careers through training and development.
Potential lack of skilled
employees being available * Board and Executive Committee focus on staff
for recruitment and risk retention and reward, supported by HR and external
of loss due to inflation advice.
in the jobs market. Risk
of not being able to take-
on/retain key skilled * Employee numbers and changes monitored in monthly
staff. subsidiary Board meetings.
* We offer competitive wages, training and development.
* Retention plans for key, high performing, and
high-potential employees.
* The Remuneration Committee considers retention and
motivation when considering the remuneration
framework.
* Succession planning.
* New training and development courses have been added
to the list of programmes available.
--------------------------------------------------------------------
Product/service differentiation
relative to competition * A devolved operating model with both Group and local
not developed or maintained management responsible for developing a deep
Risk/Impact Failure to knowledge of our specialist markets and identifying
innovate. New products opportunities and emerging market trends.
are required to grow and
maintain competitive advantage.
* Innovation best practice is planned at Group level
and carried out more regularly in each business. New
product ideas are discussed as part of the
businesses' strategy.
* Annual Group strategy meetings encourage innovation
and 'blue sky' thinking.
* New product introduction/development KPI used to
monitor progress.
* Monitoring the market for potentially new and/or
disruptive technologies.
* Customer feedback considered in the design and/or
supply of additional products and services.
* Devolved structure allows an agile approach to
business and an ability to meet increasing demand for
products.
* Employed new product managers to help identify gaps
in the market and to ensure we have a leading edge
portfolio of products and services.
--------------------------------------------------------------------
Loss of key customers * Cross selling of products encouraged to grow revenues,
and to introduce customers to all our product ranges.
Risk/Impact
The risk is the loss * Develop and maintain strong customer relationships
of markets or customers. through service excellence and dedicated account
Risk of loss of customers management.
to competitors.
* Product, system, and service differentiation and
reliability.
* Project tracking and enquiry/quote conversion rate
KPI.
* Increasing use of, and investment in, customer
relationship management (CRM) software.
* Organisational and business agility to understand and
adapt to changing and emerging customer needs.
* Developing new products for new customers/markets.
* Outstanding service and innovative products protect
and help to retain customers.
* The Group operates credit insurance to cover the
potential impact of loss of bad debts. Service and
client relationships also need to be maintained to
retain and grow the business.
--------------------------------------------------------------------
Legacy defined benefit
pension obligations * Continue to grow the business so that the relative
Risk/Impact affordability of pension deficit contributions is
improved over time. Active management of scheme
The long-term funding liabilities and assets to reduce deficit, with
of the pension scheme particular success during the year.
removes funds that need
to be re-invested into
new technology to grow * Continue to maintain constructive relationship with
the business. The pension Pension Trustees.
scheme's obligations need
to reduce by investments
and by the maturity of * Affordable pension funding commitments agreed and
the Scheme. met.
* Regular review at Group Board level.
* Use of specialist advisers.
* Investment performance and risk/return balance
overseen by an Investment Committee that receives
specialist investment advice.
* The Trustees are pursuing a lower risk investment
strategy to match liability risks and reduce future
volatility.
--------------------------------------------------------------------
Product warranty/ recall
risks * Robust internal quality systems, compliance with
Risk/Impact relevant legislation, building regulations and
industry standards (e.g., ISO, BBA etc.), and product
Risk is one of product testing, as appropriate.
recall with subsequent
cost and reputational
risks, however the Group * Group insurance programme to cover larger potential
does not have a history risks.
of significant warranty
claims or product recalls.
* Back-to-back warranties obtained from suppliers where
possible.
--------------------------------------------------------------------
consolidated STATEMENT of comprehensive income
For the year ended 30 June 2023
Year ended 30 June Year ended 30 June
2023 2022
Non-underlying Non-underlying
Underlying Total Underlying Total
Continuing operations: Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4 89,135 - 89,135 89,381 - 89,381
Cost of sales (56,406) - (56,406) (56,015) - (56,015)
---------- -------------- --------- ---------- -------------- --------
Gross profit 32,729 - 32,729 33,366 - 33,366
Net operating expenses
Net operating expenses
before non-underlying
items (20,620) - (20,620) (20,033) - (20,033)
Other non-underlying
items 5 - (585) (585) - (634) (634)
Net operating expenses (20,620) (585) (21,205) (20,033) (634) (20,667)
Operating profit 4, 5 12,109 (585) 11,524 13,333 (634) 12,699
Net finance costs (937) (48) (985) (608) (60) (668)
---------- -------------- --------- ---------- -------------- --------
Profit before taxation 5 11,172 (633) 10,539 12,725 (694) 12,031
Tax expense 8 (2,234) 48 (2,186) (2,469) 48 (2,421)
---------- -------------- --------- ---------- -------------- --------
Profit for the year
from continuing operations 8,938 (585) 8,353 10,256 (646) 9,610
Discontinued operations:
Loss after taxation
for the year from
discontinued operations 6 - (1,750) (1,750) (1,577) (15,080) (16,657)
Profit/(loss) for
the year 8,938 (2,335) 6,603 8,679 (15,726) (7,047)
========== ============== ========= ========== ============== ========
Other comprehensive
income:
Items that will not
be reclassified to
profit or loss:
Actuarial loss on
defined benefit pensions,
net of tax (2,796) (25)
--------- --------
Items that are or
may be reclassified
subsequently to profit
or loss:
Effective portion
of changes in fair
value of cash flow
hedges, net of tax (285) 480
Exchange differences
on retranslation of
foreign operations (18) 161
(303) 641
--------- --------
Other comprehensive
(loss)/profit for
the year, net of tax (3,099) 616
--------- --------
Total comprehensive
profit/(loss) for
the year, net of tax 3,504 (6,431)
========= ========
Earnings per share Pence Pence
Basic earnings per
share
- Continuing operations 23.3 26.8
- Discontinued operations (4.9) (46.5)
10 18.4 (19.7)
========= ========
Diluted earnings
per share
- Continuing operations 23.1 26.4
- Discontinued operations (4.9) (45.7)
10 18.2 (19.3)
========= ========
Reconciliations of underlying to statutory profit and earnings
per share are provided in notes 5 and 10 respectively.
consolidated statement of financial position
At 30 June 2023
Notes 2023 2023 2022 (restated)* 2022 (restated)*
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment
- owned assets 13,227 12,573
Property, plant and equipment
- right-of-use assets 5,007 4,926
Goodwill 7 8,526 8,526
Other intangible assets 2,073 2,126
Deferred tax assets 8 1,081 529
-------- ----------------
29,914 28,680
Current assets
Inventories 11,561 13,394
Trade and other receivables 20,748 18,786
Assets classified as held for
sale - 3,859
Derivative financial assets - 325
Cash at bank 5,995 8,284
-------- ----------------
38,304 44,648
3 4
Total assets 5 68,218 6 73,328
======== ================
Liabilities
Non-current liabilities
Interest bearing loans and borrowings (8,848) (13,000)
Lease liability (4,366) (4,251)
Employee benefits payable (4,323) (2,114)
Provisions (1,185) (1,061)
Deferred tax liabilities 8 (1,614) (1,730)
-------- ----------------
(20,336) (22,156)
Current liabilities
Trade and other payables (19,120) (19,031)
Lease liability (868) (881)
Provisions (612) (1,360)
Liabilities classified as held
for sale - (3,859)
Derivative financial liabilities (30) -
Corporation tax payable (1,505) (309)
-------- ----------------
(22,135) (25,440)
Total liabilities (42,471) (47,596)
======== ================
Net assets 7 25,747 8 25,732
======== ================
Equity
Share capital 4,517 4,517
Share premium 11 445 445
Capital reserve - own shares 11 (577) (601)
Hedging reserve 11 (22) 263
Foreign currency reserve 11 198 216
Profit and loss account reserve 21,186 20,892
-------- ----------------
Total equity 9 25,747 10 25,732
======== ================
*The financial position at 30 June 2022 has been restated to
separately present the gross held for sale assets and liabilities
of the Levolux business. See note 1.
The financial statements were approved by the Board of Directors
and authorised for issue on 5 September 2023
Paul Hooper Simon Dray
Director Director
5 September 2023 Company number 1767387
consolidated STATEMENT of cash flows
For the year ended 30 June 2023
Year ended Year ended
30 June 30 June
2023 2022
Notes GBP'000 GBP'000
Operating activities
Operating profit 11,524 12,699
Adjustments for:
Depreciation 2,681 2,459
Amortisation 247 257
Loss/(gain) on disposal of property, plant
and equipment 1 (18)
Decrease/(increase) in inventories 1,833 (2,573)
Decrease/(increase) in receivables 1,897 (2,536)
(Decrease)/increase in trade and other
payables (3,948) 279
Movement in provisions (624) (298)
Cash contributions to retirement benefit
schemes (1,567) (2,561)
Share based payments 182 118
----------- -----------
Cash generated by operating activities
of continuing operations 12,226 7,826
Operating loss from discontinued operations - (2,125)
Depreciation - 224
Movement in working capital from discontinued
operations - (438)
----------- -----------
Cash utilised by operating activities
of discontinued operations - (2,339)
Tax paid (530) (1,615)
Net cash inflow from operating activities 11,696 3,872
Investing activities
Purchase of property, plant and equipment (2,545) (2,449)
Payments to acquire intangible fixed assets (194) (123)
Proceeds from sales of property, plant
and equipment 24 22
Loss on disposal of subsidiary (1,750) -
Net cash outflow from investing activities (4,465) (2,550)
Financing activities
Bank interest paid (671) (356)
Equity dividends paid 9 (3,599) (3,434)
(Repayment)/draw down of amounts borrowed (4,000) 7,000
Principal paid on lease liabilities (765) (713)
Interest paid on lease liabilities (154) (169)
Purchase of own shares (51) (526)
Refinancing costs (262) -
Net cash (outflow)/inflow from financing
activities (9,502) 1,802
Net (decrease)/increase in cash at bank
and bank overdraft (2,271) 3,124
Net cash at bank and bank overdraft brought
forward 8,284 4,999
Net (decrease)/increase in cash at bank
and bank overdraft (2,271) 3,124
Effect of foreign exchange rate changes (18) 161
Net cash at bank and bank overdraft carried
forward 5,995 8,284
=========== ===========
consolidated STATEMENT of changes in equity
For the year ended 30 June 2023
Profit
Capital reserve Foreign and loss
Share - Hedging currency account Total equity
Notes Share capital premium own shares reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2021 4,517 445 (406) (217) 55 31,751 36,145
Loss for the year - - - - - (7,047) (7,047)
Exchange
differences on
retranslation
of foreign
operations - - - - 161 - 161
Net gain on cash
flow hedges - - - 593 - - 593
Tax on derivative
financial asset - - - (113) - - (113)
Actuarial loss on
defined benefit
pensions, net of
tax - - - - - (25) (25)
Tax on share
options - - - - - (140) (140)
Acquisition of own
shares - - (597) - - - (597)
Own shares used to
satisfy exercise
of share awards - - 402 - - - 402
Share based
payments - - - - - 118 118
Dividends 9 - - - - - (3,434) (3,434)
Exercise of share
based incentives - - - - - (331) (331)
At 1 July 2022 4,517 445 (601) 263 216 20,892 25,732
Profit for the year - - - - - 6,603 6,603
Exchange
differences on
retranslation
of foreign
operations - - - - (18) - (18)
Net loss on cash
flow hedges - - - (355) - - (355)
Tax on derivative
financial
liability - - - 70 - - 70
Actuarial loss on
defined benefit
pensions, net of
tax - - - - - (2,796) (2,796)
Tax on share
options - - - - - (21) (21)
Acquisition of own
shares - - (72) - - - (72)
Own shares used to
satisfy exercise
of share awards - - 96 - - - 96
Share based
payments - - - - - 182 182
Dividends 9 - - - - - (3,599) (3,599)
Exercise of share
based incentives - - - - - (75) (75)
At 30 June 2023 4,517 445 (577) (22) 198 21,186 25,747
------------- -------- --------------- --------- ---------- --------- --------------
1 basis of preparation
The Alumasc Group plc is incorporated and domiciled in England
and Wales. The Company's ordinary shares are traded on the
Alternative Investment Market ("AIM").
The Group's financial statements consolidate those of the parent
company and all of its subsidiaries as of 30 June 2023. All
subsidiaries have a reporting date of 30 June.
All transactions and balances between Group companies are
eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies. Amounts reported in the
financial statements of subsidiaries have been adjusted where
necessary to ensure consistency with the accounting policies
adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries
acquired or disposed of during the year are recognised from the
effective date of acquisition, or up to the effective date of
disposal, as applicable.
The Group's financial statements have been prepared in
accordance with UK adopted international accounting standards.
Going concern
At 30 June 2023 the Group had cash and cash equivalents of
GBP6.0 million and had utilised GBP8.9 million of the committed
GBP25.0 million revolving credit facility. This provided total
headroom of some GBP22.1 million against committed facilities and,
together with GBP4.0 million overdraft facilities, there is
headroom of some GBP26.1 million against total facilities at 30
June 2023. On 24 July 2023 the Group triggered the first of the two
single year extension periods, which extends the GBP25.0 million
committed revolving credit facility expiry date to August 2026. One
further single year extension period to August 2027 is still in
place.
In assessing going concern to take account of the continued
uncertainties caused by continued increasing inflation and interest
rates, the Group has modelled a Base Case (BC) trading scenario on
a "bottom up" basis. The Group has also modelled stress test
scenarios which assume a 10% reduction in revenue and a 20%
reduction in revenue, with no cost reduction or cash conservation
measures. Under the lowest point in these stress tested scenarios,
the Group retains adequate headroom against its total banking
facilities for the next 13 months to the end of September 2024,
with no breach of banking covenants across this period.
For the same period, the Group has modelled an additional
scenario (a reverse stress test) that would lead to a breach of its
banking covenants. It is considered that the risk of such a
scenario arising is remote. Management have also identified a
number of mitigating actions that the Group would take to stay
within its banking facilities and comply with the associated
covenants throughout the period.
Having taken into account all of the aforementioned comments,
actions and factors in relation to going concern, and in light of
the bank facility headroom under various scenarios, the Directors
consider that the Group has adequate resources to continue trading
for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
Prior year restatement
During 2023, the Financial Reporting Council (FRC) submitted a
request for further information on the Group's Annual Report and
Accounts for the year ended 30 June 2022. The FRC's review was
based solely on the Group's published Annual Report and Accounts
and does not provide assurance that the Annual Report and Accounts
are correct in all material respects; the FRC's role is not to
verify the information provided but to consider compliance with
reporting requirements.
As a result of this review, the Directors have agreed that the
gross assets and gross liabilities held for sale at 30 June 2022
relating to the Levolux business, which were originally presented
as a net receivable of GBP1, should have been separately presented
gross in the consolidated statement of financial position.
As a consequence, the comparative information for 30 June 2022
in the consolidated statement of financial position has been
restated to include GBP3,859,001 of assets and GBP3,859,000 of
liabilities classified as held for sale.
This restatement does not have an impact on the Group's profit,
earnings per share, net assets or cash flows reported in the 2022
Annual Report and Accounts.
2 judgments and estimates
The main sources of estimation uncertainty that could have a
significant risk of causing material adjustment to the carrying
amounts of assets and liabilities at 30 June 2023 within the next
financial year are the valuation of defined benefit pension
obligations and the valuation of the Group's acquired goodwill.
The assumptions applied in determining the defined benefit
pension obligation are particularly sensitive. Advice is taken from
a qualified actuary to determine appropriate assumptions at each
reporting date. The actuarial valuation involves making assumptions
about discount rate, mortality rates and future pension increases.
Due to the complexity of the valuation, the underlying assumptions
and the long term nature of these plans, such estimates are subject
to significant uncertainty.
Goodwill is tested at least annually for impairment, with
appropriate assumptions and estimates built into the value in use
calculations to determine if an impairment of the carrying value is
required.
3 Summary of significant accounting policies
The accounting policies adopted are consistent with those of the
previous financial year. The following new standards, amendments
and interpretations are effective for the period beginning on or
after 1 July 2022 and have been adopted for the Group financial
statements where appropriate with no material impact on the
disclosures and results made by the Group:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Business Combinations - Reference to the conceptual framework (IFRS 3);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); and
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9 and IAS 41).
4 segmental analysis
In accordance with IFRS 8 "Operating Segments", the segmental
analysis below follows the Group's internal management reporting
structure.
The Chief Executive reviews internal management reports on a
monthly basis, with performance being measured based on the
segmental operating result as disclosed below. Performance is
measured on this basis as management believe this information is
the most relevant when evaluating the impact of strategic decisions
because of similarities between the nature of products and
services, routes to market and supply chains in each segment.
Inter-segment transactions are entered into applying normal
commercial terms that would be available to third parties. Segment
results, assets and liabilities include those items directly
attributable to a segment. Unallocated assets comprise cash and
cash equivalents, deferred tax assets, income tax recoverable and
corporate assets that cannot be allocated on a reasonable basis to
a reportable segment. Unallocated liabilities comprise borrowings,
employee benefit obligations, deferred tax liabilities, income tax
payable and corporate liabilities that cannot be allocated on a
reasonable basis to a reportable segment.
2022/23 2021/22
------------------- -------------------
Segmental Segmental
operating operating
Revenue result Revenue result
GBP'000 GBP'000 GBP'000 GBP'000
Water Management 39,841 5,765 47,564 8,753
Building Envelope 34,559 4,084 29,389 3,580
Housebuilding Products 14,735 3,518 12,428 2,447
------- ---------- ------- ----------
Trading 89,135 13,367 89,381 14,780
Unallocated costs (1,258) (1,447)
Total from continuing operations 89,135 12,109 89,381 13,333
======= ========== ======= ==========
GBP'000 GBP'000
Segmental operating result 12,109 13,333
Brand amortisation (see note
5) (70) (70)
Restructuring & legal costs
(see note 5) (262) (564)
Acquisition costs (see note
5) (253) -
Total operating profit from
continuing operations 11,524 12,699
======= =======
Year to 30 June 2023 Capital expenditure
-------------------------
Property, Other
Segment Plant Intangible Deprecia-tion Amortisa-tion
Segment Liabilities & Assets
Assets Equipment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Water Management 31,118 (8,261) 1,774 70 1,285 200
Building Envelope 11,258 (8,958) 301 30 331 5
Housebuilding Products 16,489 (7,549) 1,381 94 1,025 42
Trading 58,865 (24,768) 3,456 194 2,641 247
Unallocated 9,353 (17,703) 8 - 40 -
Total 68,218 (42,471) 3,464 194 2,681 247
======= ============= =========== ============ =============== ===============
Year to 30 June 2022 Capital expenditure
-------------------------
Property, Other
Segment Plant Intangible Deprecia-tion Amortisa-tion
Segment Liabilities & Assets
Assets Equipment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Water Management 35,084 (11,236) 1,427 70 1,207 190
Building Envelope 13,849 (12,484) 141 12 360 187
Housebuilding Products 15,851 (7,346) 1,310 41 866 48
Trading 64,784 (31,066) 2,878 123 2,433 425
Unallocated 8,544 (16,530) 5 - 82 -
Total 73,328 (47,596) 2,883 123 2,515 425
======= ============= =========== ============ =============== ===============
Included in the Building Envelope analysis are Segment assets of
GBP3,859,001 and Segment liabilities of GBP3,859,000 in relation to
discontinued operations.
Sales to external customers by geographical segment
United North Middle Far Rest of
Kingdom Europe America East East World Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year to 30 June
2023 84,079 2,515 126 769 944 702 89,135
Year to 30 June
2022 75,714 2,983 21 2,006 8,071 586 89,381
Segment revenue by geographical segment represents revenue from
external customers based upon the geographical location of the
customer.
All non-current assets are held within the United Kingdom.
5 UNDERLYING to profit before tax reconciliation
2022/23 2021/22
------------------ -------------------
Operating Profit Operating Profit
profit before profit before
tax tax
GBP'000 GBP'000 GBP'000 GBP'000
Underlying operating profit & profit
before tax from continuing operations 12,109 11,172 13,333 12,725
Brand amortisation (70) (70) (70) (70)
IAS 19 net pension scheme finance
costs - (48) - (60)
Restructuring & legal costs (262) (262) (564) (564)
Acquisition costs (253) (253) - -
Profit before tax from continuing
operations 11,524 10,539 12,699 12,031
Underlying operating loss of Levolux (350) (350) (1,957) (1,957)
Brand amortisation Levolux - - (168) (168)
Write back/(down) of assets held
for sale 350 350 - (14,912)
Loss on disposal of Levolux - (1,750) - -
Operating profit & profit/(loss)
before tax 11,524 8,789 10,574 (5,006)
========= ======= ========= ========
In the presentation of underlying profits, management disclose
the amortisation of acquired brands and IAS 19 pension costs
consistently as non-underlying items because they are material
non-cash and non-trading items that would typically be excluded in
assessing the value of the business.
In addition, management has presented the following specific
items that arose in 2022/23 and 2021/22 financial years as
non-underlying as they are non-recurring items that are judged to
be significant enough to affect the understanding of the
year-on-year evolution of the underlying trading performance of the
business:
- One-off restructuring and legal costs incurred to resolve a
commercial dispute and, in the prior year, to exit the Blackdown
Roofing installation business; and
- Acquisition costs relating to professional fees incurred in
the Group's acquisition activities, primarily in connection with
the acquisition of ARP Group announced on 25 July 2023.
6 discontinued operations
Discontinued operations relate to the Levolux business which was
divested by the Group on 26 August 2022 and therefore disclosed as
held for sale at 30 June 2022. The liabilities held for resale at
30 June 2022 were GBP3,859,000, and the assets held for resale were
written down to GBP3,859,001 to reflect the sales proceeds of GBP1
received on 26 August 2022. In the year to 30 June 2023, a further
loss on disposal of GBP1,750,000 was recorded, representing cash
held by Levolux at the date of disposal, other related write downs
and transaction costs.
The results of Levolux included in the consolidated statement of
comprehensive income are as follows:
Year to 30 Year to 30
June 2023 June 2022
GBP'000 GBP'000
Revenue 436 7,820
---------- ----------
Underlying operating loss (350) (1,957)
Brand amortisation - (168)
Write down of goodwill - (10,179)
Write down of brand - (874)
Write back/(down) of Assets held for sale 350 (3,859)
Loss on disposal (1,750) -
Loss before taxation (1,750) (17,037)
Tax credit (see note 8) - 380
Loss after taxation (1,750) (16,657)
========== ==========
7 GOODWILL
2023 2022
GBP'000 GBP'000
Cost:
At 1 July 19,428 19,428
Disposals (10,179) -
-------- -------
At 30 June 9,249 19,428
======== =======
Impairment:
At 1 July 10,902 723
Disposals (10,179) -
Write down of Assets held for sale - 10,179
-------- ------
At 30 June 723 10,902
======== ======
Net book value at 30 June 8,526 8,526
======== ======
Goodwill acquired through acquisitions has been allocated to
cash generating units for impairment testing as set out below:
2023 2022
GBP'000 GBP'000
Alumasc Roofing (Building Envelope) 3,820 3,820
Timloc (Housebuilding Products) 2,264 2,264
Rainclear (Water Management) 225 225
Wade (Water Management) 2,217 2,217
------- -------
At 30 June 8,526 8,526
======= =======
Impairment testing of acquired goodwill
The Group considers each of the operating businesses that have
goodwill allocated to them, which are those units for which a
separate cashflow is computed, to be a cash generating unit (CGU).
Each CGU is reviewed annually for impairment. In assessing whether
an asset has been impaired, the carrying amount of the CGU is
compared to its recoverable amount. The recoverable amount is the
higher of its fair value less costs to sell and its value in use.
In the absence of any information about the fair value of a CGU,
the recoverable amount is deemed to be its value in use. Each of
the CGUs are either operating segments as shown in note 4, or
sub-sets of those operating segments.
For the purpose of impairment testing, the recoverable amount of
CGUs is based on value in use calculations. The value in use is
derived from discounted management cash flow forecasts for the
businesses, based on budgets and plans covering a five year period.
The growth rate used to extrapolate the cash flows beyond this
period was 1% (2022: 1%) for each CGU.
Key assumptions included in the recoverable amount calculation
are the discount rate applied and the cash flows generated by:
(i) Revenues
(ii) Gross margins
(iii) Overhead costs
Each assumption has been considered in conjunction with the
local management of the relevant operating businesses who have used
their past experience and expectations of future market and
business developments in arriving at the figures used.
The pre-tax rate used to discount the cash flows of these cash
generating units with on-balance sheet goodwill was 15% (2022:
12%). This rate was based on the Group's estimated weighted average
cost of capital (WACC) of 11% (2022: 7%), which was risk-adjusted
for each CGU taking into account both external and internal risks.
The Group's WACC in 2023 was higher than the rate used in 2022,
reflecting an increase in interest costs and the equity market risk
premium.
The surplus headroom above the carrying value of goodwill at 30
June 2023 was significant for all CGU's, with no impairment arising
from either a 2% increase in the discount rate; a growth rate of
-1% used to extrapolate the cash flows; or a reduction of 25% in
the cash flow generated in the terminal year.
The carrying value of goodwill at 30 June 2022 for Levolux was
written down to GBPnil to reflect the sale of the business on 26
August 2022.
8 tax expense
(a.) Tax on profit
Tax charged in the statement of comprehensive income
2022/23 2021/22
GBP'000 GBP'000
Current tax:
UK corporation tax - continuing operations 1,704 1,094
- discontinued operations - (380)
Overseas tax (6) 207
Amounts under/(over) provided in previous years 175 (16)
Total current tax 1,873 905
======= =======
Deferred tax:
Origination and reversal of temporary differences 404 833
Amounts (over)/under provided in previous years (206) 78
Rate change adjustment 115 225
------- -------
Total deferred tax 313 1,136
Total tax expense 2,186 2,041
======= =======
Tax charge on continuing operations 2,186 2,421
Tax credit on discontinued operations - (380)
Total tax expense 2,186 2,041
===== =====
Tax recognised in other comprehensive income
Deferred tax:
Actuarial losses on pension schemes (932) (9)
Cash flow hedge (70) 113
Tax charged to other comprehensive income (1,002) 104
======= =====
Total tax charge in the statement of comprehensive
income 1,184 2,145
======= =====
(b.) Reconciliation of the total tax charge
The total tax rate applicable to the tax expense shown in the
statement of total comprehensive income of 24.9% is higher than
(2021/22: 20.6% was higher than) the standard rate of corporation
tax in the UK of 20.5% (2021/22: 19.0%).
The differences are reconciled below:
2022/23 2021/22
GBP'000 GBP'000
Profit before tax from continuing operations 10,539 12,031
Loss before tax from discontinued operations (1,750) (2,125)
Accounting profit before tax 8,789 9,906
Current tax at the UK standard rate of 20.5% (2021/22:
19.0%) 1,802 1,882
Expenses not deductible for tax purposes 486 42
Income not taxable (186) (170)
Rate change adjustment 115 225
Tax under/(over) provided in previous years - current
tax 175 (16)
Tax (over)/under provided in previous years - deferred
tax (206) 78
2,186 2,041
======= =======
(c.) Unrecognised tax losses
The Group has tax capital losses in the UK amounting to GBP16.3
million (2022: GBP16.3 million) that relate to prior years. Under
current legislation these losses are available for offset against
future chargeable gains. The capital losses are able to be carried
forward indefinitely. Revaluation gains on land and buildings
amount to GBP1 million (2022: GBP1 million). These have been offset
in the prior year against the capital losses detailed above. A
deferred tax asset has not been recognised in respect of the net
capital losses carried forward of GBP15.3 million (2022: GBP15.3
million) as they do not meet the criteria for recognition.
(d.) Deferred tax
A reconciliation of the movement in deferred tax during the year
is as follows:
Pension
Accelerated Short term Total deferred
capital temporary Share deferred tax
allowances differences Brands Hedging options tax liability asset
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2021 904 (156) 589 (51) (320) 966 (1,145)
Charged/(credited)
to the statement
of comprehensive
income - current
year 463 22 (60) - 8 433 625
Charged/(credited)
to the statement
of comprehensive
income - prior year 79 (1) - - - 78 -
Charged/(credited)
to equity - - - 113 140 253 (9)
At 30 June 2022 1,446 (135) 529 62 (172) 1,730 (529)
============= ============= ======== ========= ========= =============== ==========
Charged/(credited)
to the statement
of comprehensive
income - current
year 216 (36) (18) - (23) 139 380
(Credited)/charged
to the statement
of comprehensive
income - prior year (14) 25 (217) - - (206) -
(Credited)/charged
to equity - - - (70) 21 (49) (932)
At 30 June 2023 1,648 (146) 294 (8) (174) 1,614 (1,081)
============= ============= ======== ========= ========= =============== ==========
Deferred tax assets and liabilities are presented as non-current
in the consolidated statement of financial position.
Deferred tax assets have been recognised where it is probable
that they will be recovered. Deferred tax assets of GBP3.8 million
(2022: GBP3.8 million) in respect of net capital losses of GBP15.3
million (2022: GBP15.3 million) have not been recognised.
(e.) Factors affecting the tax charge in future periods
In the Budget on 3 March 2021, the Government announced its
intention to increase the main rate of UK corporation tax from 19%
to 25% with effect from 1 April 2023. Since the 25% tax rate change
was enacted at the 30 June 2023 reporting date, deferred tax assets
and liabilities have been calculated to reflect the expected timing
of reversal of the related temporary difference.
2
9 dividends
2022/23 2021/22
GBP'000 GBP'000
Interim dividend for 2023 of 3.40p paid on 6
April 2023 1,217 -
Final dividend for 2022 of 6.65p paid on 4 November
2022 2,382 -
Interim dividend for 2022 of 3.35p paid on 6
April 2022 - 1,201
Final dividend for 2021 of 6.25p paid on 29
October 2021 - 2,233
3,599 3,434
======= =======
A final dividend of 6.90 pence per equity share, at a cash cost
of GBP2,471,000, has been proposed for the year ended 30 June 2023,
payable on 3 November 2023. This dividend has not been accrued in
these consolidated financial statements as it was proposed after
the year end.
10 earnings per share
Basic earnings per share is calculated by dividing the net
profit for the period attributable to ordinary equity shareholders
of the parent by the weighted average number of ordinary shares in
issue during the period. Diluted earnings per share is calculated
by dividing the net profit attributable to ordinary equity
shareholders of the parent by the weighted average number of
ordinary shares in issue during the period, after allowing for the
exercise of outstanding share options. The following sets out the
income and share data used in the basic and diluted earnings per
share calculations:
2022/23 2021/22
GBP'000 GBP'000
Net profit attributable to equity holders of
the parent - continuing operations 8,353 9,610
Net loss attributable to equity holders of the
parent - discontinued operations (1,750) (16,657)
6,603 (7,047)
======= ========
000s 000s
Weighted average number of shares 35,806 35,825
Dilutive potential ordinary shares - employee
share options 386 586
36,192 36,411
======= ========
2022/23 2021/22
Basic earnings per share: Pence Pence
Continuing operations 23.3 26.8
Discontinued operations (4.9) (46.5)
18.4 (19.7)
======= =======
Diluted earnings per share: 2022/23 2021/22
Pence Pence
Continuing operations 23.1 26.4
Discontinued operations (4.9) (45.7)
18.2 (19.3)
======= =======
Calculation of underlying earnings per share:
2022/23 2021/22
GBP'000 GBP'000
Reported profit before taxation from continuing
operations 10,539 12,031
Brand amortisation 70 70
IAS 19 net pension scheme finance costs 48 60
Restructuring & legal costs 262 564
Acquisition costs 253 -
Underlying profit before taxation from continuing
operations 11,172 12,725
Tax at underlying Group tax rate of 20.0% (2021/22:
19.4%) (2,234) (2,469)
------- -------
Underlying earnings from continuing operations 8,938 10,256
------- -------
Weighted average number of shares 35,806 35,825
Basic underlying earnings per share from continuing
operations 25.0p 28.6p
======= =======
Diluted underlying earnings per share from continuing
operations 24.7p 28.2p
======= =======
3
4
11 movements in equity
Share capital and share premium
The balances classified as share capital and share premium are
the proceeds of the nominal value and premium value respectively on
issue of the Company's equity share capital net of issue costs.
Capital reserve - own shares
The capital reserve - own shares relates to 322,418 (2022:
327,493) ordinary own shares held by the Company. The market value
of shares at 30 June 2023 was GBP475,567 (2022: GBP519,076). These
are held to help satisfy the exercise of awards under the Company's
Long Term Incentive Plans. During the year 52,630 (2022: 297,021)
shares with an original cost of GBP96,000 (2022: GBP402,000) were
used to satisfy the exercise of awards. A Trust holds the shares in
its name and shares are awarded to employees on request by the
Group. The Group bears the expenses of the Trust.
Hedging reserve
This reserve records the post-tax portion of the gain or loss on
a hedging instrument in a cash flow hedge that is determined to be
an effective hedge.
Foreign currency reserve
This foreign currency reserve is used to record exchange
differences arising from the translation of the financial
statements of foreign subsidiaries.
* Non-underlying items comprise brand amortisation and IAS19
pension costs in all years. Further details of the 2021/22 and
2022/23 non-underlying items can be found in note 5.
** Underlying operating profit after tax from continuing
operations, calculated using the underlying tax rate, as a
percentage of average capital invested from continuing
operations.
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END
FR LIMBTMTAMTRJ
(END) Dow Jones Newswires
September 05, 2023 02:00 ET (06:00 GMT)
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