REG - Alumasc Group Plc - Final Results <Origin Href="QuoteRef">ALUG.L</Origin> - Part 2
05/09/2017 07:05
- Part 2: For the preceding part double click ID:nRSE7807Pa
- - (3,172)
(3,172)
Dividends 7 - - - - - (2,208) (2,208)
Share based payments - - - - - 181 181
Acquisition of own shares (net) - - (313) - - - (313)
Exercise of share based incentives - - - - - (299) (299)
At 1 July 2016 4,517 445 (931) (221) 50 12,720 16,580
Profit for the period - - - - - 6,540 6,540
Exchange differences on retranslation of foreign operations - - - - 34 - 34
Net gain on cash flow hedges - - - 207 - - 207
Tax on derivative financial liability - - - (37) - - (37)
Actuarial loss on defined benefit pensions, net of tax - - - - - (792)
(792)
Dividends 7 - - - - - (2,368) (2,368)
Share based payments - - - - - 157 157
Own shares used to satisfy exercise of share awards - - 390 - - - 390
Exercise of share based incentives - - - - - (274) (274)
At 30 June 2017 4,517 445 (541) (51) 84 15,983 20,437
(541)
(51)
84
15,983
20,437
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 2017, and the Companies Act 2006.
The financial information set out in this announcement does not constitute the
group's statutory information for the years ended 30 June 2017 or 2016, but is
derived from the group's 2017 statutory financial statements. The group's
consolidated financial information has been prepared in accordance with
accounting policies consistent with those adopted for the year ended 30 June
2017. Statutory accounts for 2016 have been delivered to the registrar of
companies and those for 2017 will be delivered following the group's Annual
General Meeting. The auditor has reported on these accounts, their reports
were unqualified and did not contain statements under the Companies Act 2006,
s498(2) or (3).
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 cash flows and
liquidity position are set out in the above financial statements.
The group has committed borrowing facilities of £12.5 million which expire in
August 2020. In addition, the group has recently renewed overdraft facilities
totalling £2 million for another year. At 30 June 2017 the group's net cash
resources were £6.1 million (2016: £8.6 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 main source of estimation uncertainty that could have a significant risk
of causing material adjustment to the carrying amounts of assets and
liabilities at 30 June 2017 within the next financial year are the valuation
of defined benefit pension obligations and the recognition of revenues and
profit on construction contracts.
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. Judgment is required in making
forecasts of contract outcomes and on revenue and profit recognition relating
to:
(i) potential contract variations prior to these being fully
agreed; and/or
(ii) if there are differences, timing or otherwise, between the
assessment of internal quantity surveyors and those of our customers as to the
level of work performed.
3 Principal risks and uncertainties
Risks and uncertainties Mitigating actions taken
Economic, construction market and foreign exchange risks Comment • Strategic positioning in markets/sectors anticipated to grow faster than the UK construction market.• Selected development of export sales opportunities, especially for Levolux and Gatic (particularly in North America, Europe, the Middle East and Far
Alumasc is a UK-based group of businesses. The majority of group sales made to the construction sector in the UK. This market can be cyclical in nature.The depreciation of Sterling during the year impacted material costs.There is relatively high economic and political uncertainty at the current time. East).• Revenues are derived from a variety of end use construction markets.• Development of added value systems and solutions that are either required by legislation, building regulation and/or specified by architects and engineers.• Continuous
development and introduction of innovative products, systems, solutions and services that are market leading and differentiated against the competition.• The group has exposure to currency risk, particularly the Euro and US Dollar. Sterling has depreciated
against these currencies since June 2016. The impact is being mitigated by selling price increases, purchasing savings, operational efficiencies and forward currency hedging.
Loss of key employees Comment • Market competitive remuneration/incentive arrangements.• Employee numbers and changes monitored in monthly subsidiary board meetings.• Key, high performing and high potential employees identified and monitored.• Training and development programmes.• Exit
Generally, staff turnover is low. interviews held with learning points shared.
Product/service differentiation relative to competition not developed or maintained Comment • A devolved operating model with both group and local management responsible for developing a deep knowledge of our specialist markets and identifying opportunities and emerging market trends.• Innovation best practice days held annually at group level
Innovation and an entrepreneurial spirit is encouraged in all group companies. Over 10% of group sales relate to products launched in the last three years. and more regularly in each business.• Annual group strategic planning meetings encourage innovation and "blue sky" thinking.• New product introduction/development KPIs used to monitor progress.• Monitor the market for potentially new and/or disruptive
technologies.
Loss of key customers. Comment • Develop and maintain strong customer relationships.• Product, system and service differentiation.• Good project tracking and enquiry/quote conversion rate tracking.• Increasing use of, and investment in, customer relationship management (CRM) software.•
Generally the group has a good track record of customer retention. The group has a diversified customer base with the largest customer representing only circa 3% of group revenues. Organisational and cultural flexibility to adapt to changing and emerging customer needs.
Funding legacy pension obligations Comment • Continue to grow the business so the relative affordability of pension contributions is improved over time.• Maintain constructive relationship with Pension Trustees.• Meet agreed pension funding commitments.• Regular review at group board level.• Use of
Alumasc's pension obligations are material relative to its market capitalisation and net asset value. specialist advisors.• Investment performance and risk/return balance overseen by an Investment Committee.• Monitor and seek opportunities to reduce gross pension liabilities.• Use of derivatives to partly hedge inflation and interest rate risk.
Product warranty/recall risks Comment • Robust internal quality systems; compliance with relevant legislation, building regulations and industry standards (eg ISO, BBA etc) and product testing, as appropriate.• Group insurance programme to cover larger potential risks.• Back to back warranties
The group has a good track record with regard to the management of these risks and does not have a history of significant claims. obtained from suppliers where appropriate.• Specific local risk management procedures in group brands that also install (as well as supply) building products (i.e. Levolux and Blackdown).• Internal reviews of quality and supply chain and design procedures
targeted at higher risk areas, particularly Solar Shading and Architectural Screening, Roofing and Walling.
Supply chain risks • Annual strategic reviews, including supplier concentration, quality, reliability and sustainability.• Regular key supplier visits, good relationships maintained including quality control reviews and training.• Regular reviews as to whether work should be
Comment brought back to the UK (or elsewhere) as economic conditions evolve, including the impact of foreign exchange rate movements.• Alumasc will seek to recover increased EU customers duties through selling price increases and internal efficiencies.
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. In August 2017 the EU imposed a 33% customs duty on certain iron castings imported from China.
Business continuity risks • Business continuity plans prepared at each business.• IT disaster recovery plans are in place, with close to real time back up arrangements.• Awareness training and management briefings held on cyber security risks and actions taken on preventative
Comment measures.• Regular reviews of cyber security, including external penetration testing.• Energy supply and contingency arrangements reviewed periodically, with back up supplies in place as needed.• Critical plant and equipment is identified, with associated
The group has not previously experienced any significant loss of operational capability causing business continuity issues. Cyber security risks are increasing globally. breakdown/recovery plans, including assessment of engineering spares held on site.
Strategic development risks and change projects Comment • Key strategic change projects are governed by Steering Committees sponsored by independent specialist consultants where necessary, for example IT and property.• Project risk reviews conducted and updated regularly.• Project plans established and
There are execution risks around a number of current strategic change projects, including new product launches, the relocation of Timloc to a new factory in 2018 and various ERP and CRM system implementations. monitored monthly.• 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.
Health and safety risks Comment • Health and safety is the number one priority of management and the first board agenda item.• Risk assessments are carried out and safe systems of work documented and communicated.• All safety incidents and significant near misses reported to board level
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. monthly. 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 of higher risk operations.
Credit risk Comment • 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 are subject to strict delegated authority limit sign offs.• Credit checks when
The group has a generally good record in managing credit risks. Risks can be higher amongst smaller building contractor customers, who are often installers of the group's products. accepting new customers/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 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 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 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.
Analysis by reportable segment 2016/17 Revenue
External Inter-segment Total Segmental OperatingResult
£'000 £'000 £'000 £'000
Solar shading & architectural screening 24,399 - 24,399 1,989
Roofing & walling 41,472 17 41,489 3,259
Water management 29,332 1,204 30,536 3,628
Housebuilding & ancillary products 9,558 4 9,562 1,573
Sub-total 104,761 1,225 105,986 10,449
Inter-segment elimination / unallocated costs - (1,225) (1,225) (1,306)
Total 104,761 - 104,761 9,143
£'000
Segmental operating result 9,143
Brand amortisation (268)
Total operating profit from continuing operations 8,875
Capital expenditure
Segment Assets Segment Liabilities Property,Plant &Equipment OtherIntangibleAssets Deprecia-tion Amortisa-tion
£'000 £'000 £'000 £'000 £'000 £'000
Solar shading & architectural screening 19,839 (5,261) 18 46 73 251
Roofing & walling 17,212 (10,505) 306 6 155 102
Water management 12,342 (5,550) 241 76 414 25
Housebuilding & ancillary products 7,315 (2,409) 447 17 283 47
Sub-total 56,708 (23,725) 1,012 145 925 425
Unallocated 12,958 (25,504) 13 2 33 -
Total 69,666 (49,229) 1,025 147 958 425
Analysis by reportable segment 2015/16 Revenue
External Inter-segment Total Segmental OperatingResult
£'000 £'000 £'000 £'000
Solar shading & architectural screening 17,359 - 17,359 954
Roofing & walling 40,045 6 40,051 3,959
Water management 26,269 1,299 27,568 3,489
Housebuilding & ancillary products 8,560 10 8,570 1,420
Sub-total 92,233 1,315 93,548 9,822
Inter-segment elimination / unallocated costs - (1,315) (1,315) (1,346)
Total 92,233 - 92,233 8,476
£'000
Segmental operating result 8,476
Brand amortisation (268)
IAS 19 pension scheme administration costs (510)
Total operating profit from continuing operations 7,698
Capital expenditure
Segment Assets Segment Liabilities Property,Plant &Equipment OtherIntangibleAssets Deprecia-tion Amortisa-tion
£'000 £'000 £'000 £'000 £'000 £'000
Solar shading & architectural screening 19,266 (7,178) 80 57 70 214
Roofing & walling 16,281 (10,185) 71 - 146 104
Water management 11,439 (5,256) 212 34 422 17
Housebuilding & ancillary products 6,350 (2,390) 488 91 213 27
Sub-total 53,336 (25,009) 851 182 851 362
Unallocated & discontinued 15,678 (27,425) 88 - 219 4
Total 69,014 (52,434) 939 182 1,070 366
Analysis by geographical segment 2016/17
United North Middle Far Rest of
Kingdom Europe America East East World Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 87,396 3,905 8,009 630 2,359 2,462 104,761
Segment non-current assets 24,184 - - - - - 24,184
Analysis by geographical segment 2015/16
United North Middle Far Rest of
Kingdom Europe America East East World Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 84,217 3,262 1,860 337 1,593 964 92,233
Segment non-current assets 24,397 - - - - - 24,397
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 UNDERLYING to Statutory profit reconciliation
2016/17 2015/16
Operating profit Profit before tax Operating profit Profit before tax
£'000 £'000 £'000 £'000
Underlying profit 9,143 9,011 8,476 8,261
Less: Brand amortisation (268) (268) (268) (268)
Less: IAS 19 pension scheme administration costs - - (510) (510)
Less: IAS 19 net pension scheme finance costs - (620) - (724)
Statutory profit from continuing operations 8,875 8,123 7,698 6,759
Discontinued operations - - 27 928
Total statutory profit 8,875 8,123 7,725 7,687
8,875
8,123
7,725
7,687
In the presentation of underlying profits, management treats the amortisation
of acquired brands and IAS 19 pension costs as non-underlying items because
they are material non-cash and non-trading items that typically would be
excluded in assessing the value of the business. Following the 2016 triennial
review and agreement of the revised deficit recovery plan, pension scheme
administration costs are now paid directly by the pension schemes rather than
being reimbursed by the company.
6 TAX EXPENSE
(a.) Tax on profit on ordinary activities
Tax charged in the statement of comprehensive income
2016/17 2015/16
£'000 £'000
Current tax:
UK corporation tax - continuing operations 1,117 1,433
- discontinued operations - (697)
Overseas tax 11 5
Amounts over provided in previous years (22) (2)
Total current tax 1,106 739
Deferred tax:
Origination and reversal of temporary differences:
- continuing operations 478 247
- discontinued operations - 319
Amounts under/(over) provided in previous years 78 (48)
Rate change adjustment (79) (54)
Total deferred tax 477 464
Total tax expense 1,583 1,203
1,583
1,203
Tax charge on continuing operations 1,583 1,581
Tax credit on discontinued operations - (378)
Total tax expense 1,583 1,203
1,203
Tax recognised in other comprehensive income
Deferred tax:
Actuarial losses on pension schemes 152 (240)
Cash flow hedge 37 1
Tax charged/(credited) to other comprehensive income 189 (239)
Total tax charge in the statement of comprehensive income 1,772 964
1,772
964
(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 19.5% is lower than (2015/16: 15.6% was lower
than) the standard rate of corporation tax in the UK of 19.75% (2015/16: 20%).
The differences are reconciled below:
2016/17 2015/16
£'000 £'000
Profit before tax from continuing operations 8,123 6,759
Profit before tax from discontinued operations - 928
Accounting profit before tax 8,123 7,687
Current tax at the UK standard rate of 19.75% (2015/16: 20.00%) 1,604 1,537
Expenses not deductible for tax purposes 2 139
Chargeable gains/use of capital losses - (369)
Rate change adjustment (79) (54)
Tax over provided in previous years - current tax (22) (2)
Tax under/(over) provided in previous years - deferred tax 78 (48)
1,583 1,203
1,583
1,203
The group's total tax charge in 2015/16 of £1,203,000 benefited from the
impact of business disposals where capital gains on sale of assets were
shielded by indexation allowances and capital losses brought forward.
(c.) Unrecognised tax losses
The group has agreed tax capital losses in the UK amounting to £20 million
(2016: £20 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 £1 million (2016: £1 million). These have been
offset against the capital losses detailed above. A deferred tax asset has not
been recognised in respect of the net capital losses carried forward of £19
million (2016: £19 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:
Acceleratedcapitalallowances Short termtemporarydifferences Brands Hedging TotalDeferred tax liability PensionDeferred taxasset
£'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2015 19 (38) 458 (49) 390 (4,187)
Charged/(credited) to the statement of comprehensive income - current year 267 (8) (94) - 165 347
(Credited)/charged to the statement of comprehensive income - prior year (53) 5 - - (48) -
Charged/(credited) to equity - - - 1 1 (240)
At 30 June 2016 233 (41) 364 (48) 508 (4,080)
Charged/(credited) to the statement of comprehensive income - current year 33 4 (65) - (28) 427
Charged to the statement of comprehensive income - prior year 73 5 - - 78 -
Charged to equity - - - 37 37 152
At 30 June 2017 339 (32) 299 (11) 595 (3,501)
299
(11)
595
(3,501)
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 £3.2 million (2016: £3.4 million) have
not been recognised in respect of net capital losses of £19 million (2016: £19
million), see note 6 (c).
(e.) Factors affecting the tax charge in future periods
In the Budget on 16 March 2016, the UK Government announced its intention to
further reduce the main rate of UK corporation tax to 17% with effect from 1
April 2020. Existing temporary differences on which deferred tax has been
provided may therefore unwind in future periods at this reduced rate. This
rate change was substantively enacted at the balance sheet date. Deferred tax
assets and liabilities have been calculated based on the rate of 17%
substantively enacted at the balance sheet date.
7 dividends
2016/17 2015/16
£'000 £'000
Interim dividend for 2017 of 2.85p paid on 7 April 2017 1,018 -
Final dividend for 2016 of 3.8p paid on 1 November 2016 1,350 -
Interim dividend for 2016 of 2.7p paid on 7 April 2016 - 960
Final dividend for 2015 of 3.5p paid on 28 October 2015 - 1,248
2,368 2,208
2,208
A final dividend of 4.3 pence per equity share, at a cash cost of £1,538,000,
has been proposed for the year ended 30 June 2017, payable on 31 October 2017.
In accordance with IFRS accounting requirements this dividend has not been
accrued in these consolidated financial statements.
8 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:
2016/17 2015/16
£'000 £'000
Profit attributable to equity holders of the parent - continuing operations 6,540 5,178
Profit attributable to equity holders of the parent - discontinued operations - 1,306
Net profit attributable to equity holders of the parent 6,540 6,484
000s 000s
Weighted average number of shares 35,663 35,618
Dilutive potential ordinary shares - employee share options 556 520
36,219 36,138
36,219
36,138
Calculation of underlying earnings per share from continuing operations:
2016/17 2015/16
£'000 £'000
Reported profit before taxation from continuing operations 8,123 6,759
Add: brand amortisation 268 268
Add: IAS 19 pension scheme administration costs - 510
Add: IAS 19 net pension scheme finance costs 620 724
Underlying profit before taxation from continuing operations 9,011 8,261
Tax at underlying group tax rate of 20.6% (2015/16: 20.8%) (1,856) (1,718)
Underlying earnings from continuing operations 7,155 6,543
Weighted average number of shares 35,663 35,618
Underlying earnings per share from continuing operations 20.1p 18.4p
Underlying earnings per share from continuing operations
20.1p
18.4p
9 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 361,789 (2016: 622,528) ordinary
own shares held by the company. The market value of shares at 30 June 2017 was
£672,928 (2016: £756,372). These are held to help satisfy the exercise of
awards under the company's Long Term Incentive Plans. During the year 260,739
shares at a cost of £390,000 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 company. The company 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
10 Related party disclosure
The group's principal subsidiaries are listed below:
Principal subsidiaries Principal activity Country of incorporation % of equity interest and votes held
2017 2016
Alumasc Exterior Building Products Limited Building products England 100 100
Alumasc Limited Building products England 100 100
Levolux Limited Building products England 100 100
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made at arms-length market
prices. Outstanding balances at the year end are unsecured and settlement
occurs in cash. There have been no guarantees provided or received for any
related party receivables.
Transactions with other related parties
Key management personnel are determined as the Directors of The Alumasc Group
plc.
11 post balance sheet events
As described in the Strategic Report above, the group sold Scaffold and
Construction Products on 31 July 2017. Disposal proceeds were £1,000,000. The
business generated revenues of £4,200,000 in the year to 30 June 2017 and
recorded a break-even result at operating profit level.
In late August 2017 the EU announced it was imposing a 33% duty on certain
iron castings imported from China. This will impact Gatic's UK access covers
business. The additional cost will be recovered through selling price
increases and internal efficiencies, where possible.
Five Year Summary 2012/13 2013/14 2014/15 2015/16 2016/17
£'000 £'000 £'000 £'000 £'000
Income Statement Summary
Revenue 85,291 80,301 90,295 92,233 104,761
Underlying operating profit 7,133 6,645 8,314 8,476 9,143
Underlying operating margin 8.4% 8.3% 9.2% 9.2% 8.7%
Net interest cost on borrowings (767) (521) (592) (215) (132)
Underlying profit before tax
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