REG - Alumasc Group Plc - Annual Financial Report <Origin Href="QuoteRef">ALUG.L</Origin> - Part 2
03/09/2015 07:00
- Part 2: For the preceding part double click ID:nRSC9186Xa
Depreciation 1,157 1,175
Amortisation 332 381
Gain on disposal of property, plant and equipment (14) (3)
Increase in inventories (1,266) (344)
Decrease/(increase) in biological assets 96 (8)
(Increase)/decrease in receivables (1,924) 306
Increase/(decrease) in trade and other payables 2,435 (1,461)
Movement in provisions 358 168
Cash contributions to retirement benefit schemes (2,500) (1,992)
Share based payments 300 34
Cash generated from continuing operations 7,273 5,301
Loss before taxation from discontinued operations (1,604) (987)
Depreciation and amortisation 798 884
Movement in working capital from discontinued operations 612 (57)
Cash absorbed by discontinued operations (194) (160)
Tax paid (907) (1,114)
Net cash inflow from operating activities 6,172 4,027
Investing activities
Purchase of property, plant and equipment (1,114) (1,319)
Payments to acquire intangible fixed assets (322) (175)
Proceeds from sales of plant and equipment 60 10
Proceeds from sale of business activity 6,168 -
Acquisition of subsidiary, net of cash acquired - (320)
Interest received 5 10
Net cash inflow/(outflow) from investing activities 4,797 (1,794)
Financing activities
Interest paid (408) (465)
Equity dividends paid (1,889) (1,675)
Repayment of amounts borrowed (5,000) (7,000)
Net cash outflow from financing activities (7,297) (9,140)
Net increase/(decrease) in cash and cash equivalents 3,672 (6,907)
Net cash and cash equivalents brought forward 2,224 9,147
Effect of foreign exchange rate changes 18 (16)
Net cash and cash equivalents carried forward 5,914 2,224
Net cash and cash equivalents comprise:
Cash and cash equivalents 5,914 2,224
Net cash and cash equivalents comprise:
Cash and cash equivalents
5,914
2,224
consolidated STATEMENT of changes in equity
For the year ended 30 June 2015
Sharepremium Capital reserve -own shares Hedgingreserve Foreigncurrencyreserve Profitand loss accountreserve Total equity
Notes Share capital
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2013 4,517 445 (618) (12) 51 18,060 22,443
Profit for the period - - - - - 4,041 4,041
Exchange differences on retranslation of foreign operations - - - - (19) - (19)
Net loss on cash flow hedges - - - (70) - - (70)
Tax on derivative financial liability - - - 20 - -
20
Actuarial loss on defined benefit pensions, net of tax - - - - - (7,732)
(7,732)
Dividends 8 - - - - - (1,675) (1,675)
Share based payments - - - - - 34 34
At 1 July 2014 4,517 445 (618) (62) 32 12,728 17,042
Profit for the period - - - - - 4,376 4,376
Exchange differences on retranslation of foreign operations - - - - 17 - 17
Net loss on cash flow hedges - - - (179) - - (179)
Tax on derivative financial liability - - - 43 - -
43
Actuarial loss on defined benefit pensions, net of tax - - - - - (3,781)
(3,781)
Dividends 8 - - - - - (1,889) (1,889)
Share based payments - - - - - 300 300
At 30 June 2015 4,517 445 (618) (198) 49 11,734 15,929
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 London Stock Exchange.
The group's financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), as adopted by the European
Union as they apply to the financial statements of the group for the year
ended 30 June 2015, and the Companies Act 2006.
The financial information set out in this announcement does not constitute
statutory information as defined in section 434 of the Companies Act 2006.
The consolidated balance sheet at 30 June 2015 and the consolidated statement
of comprehensive income, consolidated cash flow statement, consolidated
statement of changes in equity and associated notes for the year
then ended have been extracted from the Group's 2015 statutory financial
statements upon which the auditor's
opinion is unmodified and does not include any statement under section 498 (2)
or (3) of the Companies Act 2006. Those financial statements have not yet been
delivered to the registrar of companies.
The consolidated financial statements consolidate those of the Company and its
subsidiaries (together referred to
as the 'Group').
The prior year cost of sales have been increased by £1,532,000, with gross
margins decreasing correspondingly, to reflect a re-classification of costs
relating to the management of construction contracts that were previously
disclosed within operating expenses. The re-classification has arisen due to
improved analysis and greater consistency of reporting across the group to
better reflect the nature of the underlying costs. Gross margin has decreased
by a further £1,016,000 due to the results of Alumasc Precision Components and
Pendock Profiles being restated as discontinued operations as a result of the
disposal of these businesses.
Going concern
The group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the Strategic
Report above. The financial position of the group, its cashflows and
liquidity position are set out in the above financial statements.
Following the year end the group signed a new five year £30 million revolving
credit banking facility consisting of a £12.5 million committed element and a
£17.5 million uncommitted accordion element. In addition, the group has
recently renewed overdraft facilities totalling £3 million for another year.
At 30 June 2015 the group's net cash was £0.9 million (2014: net debt £7.7
million).
On the basis of the group's financing facilities and current operating and
financial plans and sensitivity analyses, the Board is satisfied that the
group has adequate resources to continue in operational existence for the
foreseeable future and accordingly continues to adopt the going concern basis
in preparing the financial statements.
2. JUDGEMENTS AND ESTIMATES
The key sources of estimation uncertainty that have a significant risk of
causing material adjustment to the carrying amounts of assets and liabilities
within the next financial year are the measurement and valuation of goodwill
and brands, the measurement and valuation of defined benefit pension
obligations and the recognition of revenues and profit on construction
contracts.
The measurement of intangible assets other than goodwill on a business
combination involves estimation of future cash flows and the selection of a
suitable discount rate.
The group determines whether goodwill is impaired on an annual basis and this
requires an estimation of the value in use of the cash generating units to
which the intangible assets are allocated. This involves estimation of future
cash flows and choosing a suitable discount rate.
Measurement of defined benefit pension obligations requires estimation of
future changes in inflation, mortality rates and the selection of a suitable
discount rate.
Revenue recognised on construction contracts is determined by the assessment
of the stage of completion of each contract. The requirement for Directors'
judgement is limited in most cases due to the involvement of quantity
surveyors during the assessment process.
3. PRINCIPAL RISKS AND UNCERTAINTIES
Risks Mitigating actions taken
Loss of key employees Comment Generally, staff turnover is low. • Market competitive remuneration and incentive arrangements. • Changes in numbers of people employed monitored in monthly subsidiary board meetings, with staff turnover a KPI in most businesses. • Key and high potential employees identified and monitored
on a local and group basis. • Focused training and development programmes for key and high potential people. • Exit interviews held for senior people who leave the business, with learning points shared.
Product/service differentiation relative to competition not developed or maintained Comment Innovation and an entrepreneurial spirit is encouraged in all group companies. • Devolved operating model with local management responsible for identifying opportunities and emerging niche market trends.• Group-wide innovation best practice days are held annually.• Innovation and new product development workshops held regularly in
most group companies. • Annual group strategic planning meetings encourage innovation and "blue sky" thinking, with group resources allocated and prioritised as appropriate to support approved ideas.
Economic and market risks Comment Alumasc is a UK-based group of businesses with the majority of group sales made to the UK construction sector. • Develop and retain strong management teams (see above). • Ensure Alumasc products are market leading and differentiated against the competition to improve specification and to protect margin (see above). • Develop export sales (particularly in North
America, the Middle East and Far East). • Increasing sales to the more resilient building refurbishment (relative to new build) markets.• Increasing mix of UK sales towards the stronger London & South East regional markets.
Risk of loss of customers. CommentGenerally good track record of customer retention • Develop and maintain strong relationships through regular contact and seeking always to provide superior products, systems, solutions and service. • Good project tracking and enquiry/quote conversion rate tracking. • Increasing use of, and investment in,
customer relationship management (CRM) software.
International Business Development risk CommentInternational business development plans might take longer to succeed than initially anticipated or, in some instances, not succeed as intended. • Group board involvement in export development programme planning and monitoring.• Monthly agenda item (where relevant) in Operating Company board meetings.• Employ people with knowledge of both local markets and our products/systems.• Take appropriate UK
and local professional advice.• Regular monitoring/tracking of progress against plans and forecasts, adapting management action accordingly (for example recent widening of the product range in Gatic USA).
Pension obligations Comment Alumasc's pension obligations are material relative to its market capitalisation and net asset value. • Continue to grow the business so the relative affordability of pension contributions is improved over time. • Maintain a good, constructive and open relationship with Pension Trustees. • Meet agreed pension funding commitments. • Pension scheme
management is a regular group board agenda item. • Use of specialist advisors on both actuarial and investment matters. • Monitor and seek market opportunities to reduce gross pension liabilities.
Health and safety risks Comment The group has a strong overall track record of health & safety performance, with the number of lost time accidents significantly reduced over the last 10 years. • Health and safety is the number one priority of management and the first agenda item on all subsidiary and group board agendas. • Risk assessments are carried out and safe systems of work documented and communicated. • All safety incidents and
significant near misses reported to board level with appropriate remedial action taken. • Group health and safety best practice days are held twice a year, chaired by the Chief Executive. • Annual audit of health and safety in all group businesses by
independent consultants. • Specific focus on improving health and safety in higher risk operations. • All safety incidents and near misses reported monthly.
Product warranty/recall risks Comment The group has a good track record with regard to the management of these risks and does not have a history of significant claims. • Robust internal quality systems, compliance with relevant industry standards (eg ISO, BBA etc) and close co-operation with customers in their design and specification of the group's products.• Group insurance programme to cover larger potential risks and
exposures, where available.• Back to back warranties from suppliers, where appropriate.• Seek to manage contractual liabilities to ensure potential consequential losses are minimised and proportionate, and overall liabilities are capped, where possible.•
Specific local risk management procedures in group brands that install, assemble and supply building products (Levolux, Blackdown).
Reliance on key suppliers Comment Whilst the group does not have undue concentration on any single or small group of suppliers, certain Alumasc businesses do have key strategic suppliers, some of whom are located in the Far East. • Annual reviews of supplier concentration as part of strategic planning/formal business risk review process, with alternative suppliers sought and developed where practicable. • Regular visits to key suppliers, good relationships maintained and quality
control checks/training carried out. • Regular reviews as to whether work should be brought back to the UK (or elsewhere) as economic conditions evolve.
Loss of key production facilities/business continuity Comment The group has not experienced any significant loss of production facilities causing business continuity issues. Whilst the likelihood of a catastrophic loss is low, the impact if it were to happen could be high. • Business continuity plans prepared at subsidiary level, having regard to the specific risk factors. • Advice is being taken from insurers on continuous improvement of these plans. • IT disaster recovery plans are in place, with close to real time back up
arrangements using either off-site servers or cloud technology. • Critical plant and equipment is identified, with associated breakdown/recovery plans, including assessment of engineering spares held on site.
Strategic development and change projects Comment There are execution risks around a number of current strategic change projects, including the establishment of the AWMS brand, the relocation of AWMS and Timloc to the new properties in 2017 and various ERP systems implementations. • Key strategic change projects are governed by Steering Committees sponsored by the managing director of the business, with group executive director involvement, supported by independent specialist consultants where necessary particularly IT and property.
• Risk reviews conducted and updated regularly. • Project plans established and monitored monthly.• Project boards established. The project manager reports to the Steering Committee. • Use of proven, reliable software solutions and avoidance of bespoking
wherever possible.• Careful documentation and challenge of legacy business processes prior to implementation of new systems. • Pre-implementation testing, training and communication, with go-live delayed if implementation risk is judged to be too high.
Credit risk Comment The group has a generally good record in managing credit risks. Risks are higher amongst smaller building contractor customers, who are often installers of the group's products. • Most credit risks are insured. • Large export contracts are backed by letters of credit, performance bonds, guarantees or similar. • Any risks taken above insured limits in the Building Products division are subject to strict delegated authority limit
sign offs, including group executives' sign off for risks above £50k. • Credit checks when accepting new customers/prior to accepting new work. • The group employs experienced credit controllers, and aged debt reports are reviewed in monthly Board
meetings.
4. segmental analysis - continuing operations
In accordance with IFRS8 "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 segmental operating result as
disclosed below. Performance is measured on this basis as management believes
this information is the most relevant when evaluating the impact of strategic
decisions.
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.
Analysis by reportable segment 2014/15 Revenue
External Inter-segment Total Segmental OperatingResult
£'000 £'000 £'000 £'000
Solar Shading & Screening 16,007 - 16,007 929
Roofing & Walling 32,837 - 32,837 3,758
Energy Management 48,844 - 48,844 4,687
Construction Products 17,542 - 17,542 2,094
Rainwater, Drainage & House Building Products 23,909 33 23,942 3,018
Water Management & House Building Products 41,451 33 41,484 5,112
Building Products 90,295 33 90,328 9,799
Dyson Diecastings 7,787 272 8,059 708
Elimination / Unallocated costs - (305) (305) (1,485)
Total 98,082 - 98,082 9,022
£'000
Segmental operating result 9,022
Brand amortisation (268)
IAS19 pension scheme administration costs (455)
Total operating profit from continuing operations 8,299
Analysis by reportable segment 2014/15 Capital expenditure
Segment Assets Segment Liabilities Property,Plant &Equipment OtherIntangibleAssets Depreciation Amortisation
£'000 £'000 £'000 £'000 £'000 £'000
Solar Shading & Screening 18,171 (4,708) 127 267 46 168
Roofing & Walling 13,225 (7,876) 64 5 127 11
Energy Management 31,396 (12,584) 191 272 173 179
Construction Products 7,847 (3,366) 112 8 206 14
Rainwater, Drainage & House Building Products 12,706 (5,283) 586 137 435 118
Water Management & House Building Products 20,553 (8,649) 698 145 641 132
Building Products 51,949 (21,233) 889 417 814 311
Dyson Diecastings 4,475 (1,527) 135 5 245 7
Unallocated & Discontinued 11,470 (29,205) 140 - 889 21
Total 67,894 (51,965) 1,164 422 1,948 339
-
889
21
Total
67,894
(51,965)
1,164
422
1,948
339
Analysis by reportable segment 2013/14(re-stated) Revenue
External Inter-segment Total Segmental OperatingResult
£'000 £'000 £'000 £'000
Solar Shading & Screening 16,339 - 16,339 507
Roofing & Walling 26,927 - 26,927 2,929
Energy Management 43,266 - 43,266 3,436
Construction Products 15,534 - 15,534 1,676
Rainwater, Drainage & House Building Products 21,501 60 21,561 2,865
Water Management & House Building Products 37,035 60 37,095 4,541
Building Products 80,301 60 80,361 7,977
Dyson Diecastings 8,556 322 8,878 1,120
Elimination / Unallocated costs - (382) (382) (1,332)
Total 88,857 - 88,857 7,765
£'000
Segmental operating result 7,765
Brand amortisation (268)
IAS19 pension scheme administration costs (452)
Total operating profit from continuing operations 7,045
Total operating profit from continuing operations
7,045
Analysis by reportable segment 2013/14(re-stated) Capital expenditure
Segment Assets Segment Liabilities Property,Plant &Equipment OtherIntangibleAssets Depreciation Amortisation
£'000 £'000 £'000 £'000 £'000 £'000
Solar Shading & Screening 17,914 (4,818) 16 50 49 168
Roofing & Walling 12,387 (6,208) 203 12 132 10
Energy Management 30,301 (11,026) 219 62 181 178
Construction Products 7,291 (2,947) 211 97 176 38
Rainwater, Drainage & House Building Products 13,095 (5,319) 373 7 414 133
Water Management & House Building Products 20,386 (8,266) 584 104 590 171
Building Products 50,687 (19,292) 803 166 771 349
Dyson Diecastings 16,791 (6,643) 27 4 179 19
Unallocated & Discontinued 6,071 (30,572) 403 5 1,109 13
Total 73,549 (56,507) 1,233 175 2,059 381
381
Analysis by geographical segment 2014/15
United North Middle Far Rest of
Kingdom Europe America East East World Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 88,738 3,058 2,004 2,134 1,526 622 98,082
Segment non-current assets 26,808 - - - 1 - 26,809
Analysis by geographical segment 2013/14 (re-stated)
United North Middle Far Rest of
Kingdom Europe America East East World Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 77,008 3,362 4,524 1,795 1,155 1,013 88,857
Segment non-current assets 31,279 - - - 35 - 31,314
Segment revenue by geographical segment represents revenue from external
customers based upon the geographical location of the customer. The analyses
of segment non-current assets are based upon location of the assets.
5 NON-UNDERLYING ITEMS
2014/15 2013/14
£'000 £'000
Brand amortisation (268) (268)
IAS19 pension scheme administration costs (455) (452)
IAS19 net pension scheme finance costs (711) (448)
(1,434) (1,168)
(1,168)
6 DISCONTINUED OPERATIONS
Discontinued operations relate to the sale of the trade and assets of Pendock
Profiles in September 2014 and the sale of the trade and assets of Alumasc
Precision Components in June 2015. Further details are provided in the
Strategic Report above. The results of discontinued operations included in the
consolidated statement of comprehensive income are as follows:
Alumasc PrecisionComponents PendockProfiles
Period to 26 June 2015£'000 Period to 30 September 2014£'000 Total£'000
Year ended 30 June 2015
Revenue 16,672 785 17,457
Cost of sales (17,140) (530) (17,670)
Gross (loss)/ profit (468) 255 (213)
Net operating expenses (1,191) (200) (1,391)
Operating (loss)/profit (1,659) 55 (1,604)
Non-cash (loss)/gain on disposal of discontinued operations (300) 862 562
Costs of disposal of discontinued operations (1,040) (92) (1,132)
(Loss)/gain before taxation (2,999) 825 (2,174)
Tax credit/(charge) 1,205 (12) 1,193
(Loss)/profit after taxation (1,794) 813 (981)
(Loss)/profit after taxation
(1,794)
813
(981)
Alumasc PrecisionComponents PendockProfiles Total
£'000 £'000 £'000
Year ended 30 June 2014
Revenue 21,420 3,125 24,545
Cost of sales (21,385) (2,144) (23,529)
Gross profit 35 981 1,016
Net operating expenses (1,353) (650) (2,003)
Operating (loss)/profit (1,318) 331 (987)
Tax credit/(charge) 319 (80) 239
(Loss)/profit after taxation (999) 251 (748)
(999)
251
(748)
The net cash flows attributable to discontinued operations are as follows:
Alumasc PrecisionComponents PendockProfiles
Period to 26 June 2015£'000 Period to 30 September 2014£'000 Total £'000
Year ended 30 June 2015
Operating cash flows (134) (60) (194)
Investing cash flows 4,624 1,363 5,987
Net cash inflow 4,490 1,303 5,793
5,793
Alumasc PrecisionComponents PendockProfiles Total
£'000 £'000 £'000
Year ended 30 June 2014
Operating cash flows (497) 337 (160)
Investing cash flows (418) (5) (423)
Net cash (outflow)/inflow (915) 332 (583)
(583)
Details of the sale of the trade and assets of Alumasc Precision Components
and Pendock Profiles are as follows:
Alumasc PrecisionComponents Pendock Profiles Total
£'000 £'000 £'000
Sales proceeds 5,800 1,500 7,300
Assets disposed of:
Land and buildings 1,043 - 1,043
Plant and equipment 2,631 78 2,709
Working capital 2,426 560 2,986
(Loss)/gain on disposal (300) 862 562
Costs of disposal (1,040) (92) (1,132)
Net (loss)/gain on disposal (1,340) 770 (570)
Included within the Alumasc Precision Components costs of disposal of
£1,040,000 are consequential intra-group restructuring costs of £171,000 and
insurance run-off premium costs of £270,000.
7 TAX EXPENSE
(a.) Tax on profit on ordinary activities
Tax charged in the statement of comprehensive income
2014/15 2013/14(re-stated)
£'000 £'000
Current tax:
UK corporation tax - continuing operations 1,138 1,168
- discontinued operations (297) (197)
Overseas tax 11 30
Amounts under/(over) provided in previous years 39 (26)
Total current tax 891 975
Deferred tax:
Origination and reversal of temporary differences:
- continuing operations 483 291
- discontinued operations (896) (42)
Amounts over provided in previous years (56) -
Rate change adjustment 24 (176)
Total deferred tax (445) 73
Total tax expense 446 1,048
446
1,048
Tax charge on continuing operations 1,639 1,287
Tax credit on discontinued operations (1,193) (239)
Total tax expense 446 1,048
1,048
Tax recognised in other comprehensive income
Deferred tax:
Actuarial losses on pension schemes (945) (1,618)
Cash flow hedge (43) (20)
Tax credited to other comprehensive income (988) (1,638)
Total tax credit in the statement of
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