REG - Alumasc Group Plc - Final Results
05/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230905:nRSE3463La&default-theme=true
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 £89.1m (FY22:
£89.4m)
§ Group underlying* profit before tax from continuing operations £11.2m
(FY22: £12.7m)
§ Delays in new Chek Lap Kok project impacted performance; shipments
commenced in July 2023
§ Strong cashflow performance; net debt reduced to £2.8m (FY22: £4.7m)
§ 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 £10.0m 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 £14.7m (FY22:
£12.4m), 44% increase in underlying** operating profit to £3.5m (FY22:
£2.4m)
§ Continuation of market-leading customer service and new product launches
into adjacent channels
§ Water Management
§ Revenue £39.8m (FY22: £47.6m), underlying** operating profit £5.8m
(£8.8m); 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
£34.6m (FY22: £29.4m) and underlying** operating profit of £4.1m (FY22:
£3.6m)
§ 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 £89
million and underlying profit before tax of £11.2 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 £12.2 million (2022: £7.8 million) enabled us to reduce our net
bank debt by around £2 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 £1.2 million (previously £2.3 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 £4.3 million at 30 June 2023 (2022: £2.1
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 (£m) 89.1 89.4 -%
Underlying profit before tax (£m) * 11.2 12.7 -12%
Statutory profit before tax (£m) 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 £89.1 million, close
to the prior year sales of £89.4 million. Group sales in the UK were
strong, increasing by £8.4 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
£7 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
+£2.3 million (+19%) and underlying operating profit +£1.1 million (+44%))
and Building Envelope (sales +£5.2 million (+18%) and underlying operating
profit +£0.5 million (+14%)).
Divisional review
(a) Water Management
Revenue: £39.8 million (2021/22: £47.6 million)
Underlying operating profit*: £5.8 million (2021/22: £8.8 million)
Underlying operating margin*: 14.5% (2021/22: 18.4%)
Operating profit: £5.6 million (2021/22: £8.7 million)
* Prior to restructuring costs of £0.1 million (2021/22: £nil) and brand
amortisation charges of £0.1 million (2021/22: £0.1 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 £6.6 million sales in the prior
period. The delayed new circa £7.0 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: £34.6 million (2021/22: £29.4 million)
Underlying operating profit*: £4.1 million (2021/22: £3.6 million)
Underlying operating margin*: 11.8% (2021/22: 12.2%)
Operating Profit: £4.1 million (2021/22: £3.1 million)
1 * Prior to restructuring costs of £nil (2021/22:
£0.5 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 (£1.0m+) is
benefitting the Division. Work is ongoing to broaden and to continually
improve the environmental performance of the product range.
(c) Housebuilding Products
Revenue: £14.7 million (2021/22: £12.4 million)
Underlying operating profit*: £3.5 million (2021/22: £2.4 million)
Underlying operating margin*: 23.9% (2021/22: 19.7%)
Operating profit: £3.3 million (2021/22: £2.4 million)
* Prior to restructuring costs of £0.2 million (2021/22: £nil)
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
£m 2022/23 2021/22
Continuing operations £m £m
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 £89.1 million (2021/22:
£89.4 million), broadly in line with a strong comparative which included a
£6.6 million contribution from significant export contracts. Call-offs
expected in the year for the new circa £7 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 £20.6 million (2021/22: £20.1 million)
reflect wage inflation and investments made in sales and marketing
capabilities, and are presented net of a £0.8 million (2021/22: £nil)
research and development credit, against qualifying expenditure of £4.1
million (2021/22: £3.9 million).
Underlying operating profit was £12.1 million (2021/22: £13.3 million),
representing a return on sales of 13.6% (2021/22: 14.9%).
Net finance costs were £0.9 million (2021/22: £0.6 million), the increase
driven by higher interest rates in the year.
Underlying profit before tax was £11.2 million (2021/22: £12.7 million) and,
after £0.7 million (2021/22: £0.7 million) of non-underlying charges,
statutory profit before tax was £10.5 million (2021/22: £12.0 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:
£m 2022/23 2021/22
Continuing operations £m £m
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 £0.1 million (2021/22: £0.1 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 £0.3 million (2021/22: £0.5 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 £0.2 million (2021/22: £nil) 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 £0.1 million (2021/22: £0.1 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 £2.5m 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 £1, and further
contingent consideration is unlikely to be paid. The prior year results
include a charge of £14.9 million to write down the carrying value of
Levolux's net held for sale assets to £1. A further £1.7 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
£m 2022/23 2021/22
Continuing operations £m £m
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
£14.2 million (2021/22: £11.2 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
£m 2022/23 2021/22
£m £m
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 £4.4 million higher
than the prior year at £12.2 million, largely due to the increase in
underlying operating cash flows and the £1.0 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 £0.4 million
(2021/22: £0.8 million).
Capital expenditure was £2.7 million (2021/22: £2.6 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 £0.8 million (2021/22: £0.6 million) and tax payments
£0.5 million (2021/22: £1.6 million).
After lease principal repayments of £0.8 million (2021/22: £0.7 million),
own share purchases to fulfil the vesting of employee share options of £0.1
million (2021/22: £0.5 million), and dividend payments of £3.6 million
(2021/22: £3.4 million), the reduction in net bank debt before discontinued
operations was £3.6 million (2021/22: £1.5 million increase in debt).
The cash outflow in respect of discontinued operations was £1.7 million
(2021/22: £2.3 million), leading to a reduction in net bank debt for the year
of £1.9 million (2021/22: £3.8 million increase).
Net Debt
£m 30 June 2023 30 June 2022
£m £m
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 £2.8 million (June 2022: £4.7 million). Total net debt, including lease
liabilities, was £8.1 million (2021/22: £9.8 million).
Financial Position
Group net assets at 30 June 2023 were £25.7 million (2021/22: £25.7
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 £4.3 million (June
2022: £2.1 million). Lower valuations led to scheme assets decreasing in the
year, by £15.8 million, to £71.5 million. Scheme liabilities decreased by
£13.6 million to £75.8 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 £2.3 million
to £1.2 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 £25.0 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
£20.0 million accordion facility, which would allow the Group to increase its
revolving credit facility to £45.0 million if exercised and approved; and
- Overdraft
facilities, repayable on demand, of £4.0 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 supply chain to
Risk/Impact combat disruption and potential price increases.
Potential to impact our supply chain and increase volatility in the prices of raw materials, and other supplies.
Sudden climate changes events, such as increased severe weather conditions and storms could impact our supply chains and shipments. · Greater resilience by using suppliers from different geographical
Regulations increasing costs could be imposed on manufacturing, certain processes, fuels/goods used, impacting prices for products that customers require. locations.
· Ensuring suppliers and logistics partners understand the risks of
climate change.
· Strategic buying of core products and careful stocking.
· 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
Risk/Impact · Strategic positioning in export markets/sectors anticipated to
grow faster than the UK construction market.
· Revenues are derived from a variety of end-use construction
Macroeconomic uncertainty on a markets - this provides resilience.
global basis post pandemic, and · Development of added value systems and solutions that are
required by legislation, building regulation and/or specified by architects
global geopolitical uncertainty. and engineers.
Markets are not settled post-Brexit and ongoing potential for delays due to · Continuous development and introduction of innovative green
strikes and disruption to other services. products, systems, solutions, and services that are market leading and
differentiated against the competition.
· Increasing supply chain flexibility
Continuing inflationary pressures
· Limited exposure to currency risk, mainly the Euro and US Dollar.
on raw material, energy supplies These exposures are for the most part hedged, with hedging percentages
increased to manage potential FX volatility
and services, also impacting pay
· Brexit developments being monitored closely, strong relationships
and other costs. 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,
reliability, and sustainability.
International supply chain risks
· Brand and product strength has allowed cost increases to be
had increased following the largely recovered through higher prices
pandemic and geopolitical · Regular key supplier visits, good relationships maintained
including quality control reviews and training.
uncertainty. The residual issue
· Supply chain flexibility to avoid strategic dependence on single
is price inflation, skilled staff sources of supply.
shortages, increased tariffs/ · Supplier questionnaires and export checks are completed to ensure
compliance with Group policies including anti-bribery and anti-modern slavery.
duties, Brexit risks in Europe
· Training provided on customs duties, particularly on managing
and geopolitical uncertainty evolving arrangements post Brexit.
following the war in Ukraine.
Cyber security and Business Interruption
Risk/Impact · IT disaster recovery plans are in place for all businesses and
tested regularly - reviews are being held with each business to ensure that
the Recovery Time Objective (RTO) is adequate for the business.
Cyber security risks and Business · Awareness training and management briefings held on cyber
security risks and actions taken as preventative measures.
Interruption risks are increasing
· New security protocols and software are installed and continually
globally and have increased updated to mitigate evolving cyber threats.
during the Covid-19 pandemic · Regular reviews of cyber security, including external penetration
testing and reviews with external IT professionals.
and following recent geo-political
· Critical plant and equipment are identified, with associated
events globally. breakdown/recovery plans in place.
· Employee awareness of potential risk are mitigated through cyber
training.
The risk of a cyber threat from
· Further systems are being implemented to underpin the business
increased failure/and/or ICT cyber strategic growth plans and drive efficiency. Implementation risks are
mitigated via the use of third-parties, qualified project managers, and
crime could cause interruption or increased user-testing.
loss.
Credit risk
· Most credit risks are insured, including all contracting credit
risk.
Risk/Impact
· Large export contracts are backed by letters of credit,
performance bonds, guarantees or similar, where possible.
The risk is that credit is extended and customers are unable to settle · Due to Covid-19 and related uncertainties credit risks have
invoices. The Group manages credit risks and the contribution from the UK increased, which has also been an area impacted by local lockdowns due to the
Government Export Credit Scheme for overseas opportunities has supported pandemic.
export opportunities.
· 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 value of
management and the first Board agenda item.
Risk/Impact
· H&S commitment communicated to all levels of the business
· Risk assessments are carried out and safe systems of work
Health & safety incident/injury documented and communicated.
could occur despite a strong · All safety incidents and significant near misses are reported at
Board level monthly, with appropriate remedial action taken.
culture and previous management
· Group Health & Safety best practice days are held twice year,
performance. Consequential chaired by the Chief Executive.
reputational risk and legal costs.
· 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 their careers through training and
Risk/Impact development.
· Board and Executive Committee focus on staff retention and
reward, supported by HR and external advice.
Potential lack of skilled employees being available for recruitment and risk
of loss due to inflation in the jobs market. Risk of not being able to take- · Employee numbers and changes monitored in monthly subsidiary
on/retain key skilled staff. 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 not developed or maintained · A devolved operating model with both Group and local management
Risk/Impact responsible for developing a deep knowledge of our specialist markets and
Failure to innovate. New products are required to grow and maintain competitive advantage. identifying opportunities and emerging market trends.
· 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.
· Develop and maintain strong customer relationships through
Risk/Impact service excellence and dedicated account management.
· Product, system, and service differentiation and reliability.
The risk is the loss of markets or customers. Risk of loss of customers to · Project tracking and enquiry/quote conversion rate KPI.
competitors.
· 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 affordability
Risk/Impact of pension deficit contributions is improved over time. Active management of
scheme liabilities and assets to reduce deficit, with particular success
during the year.
The long-term funding of the pension scheme removes funds that need to be · Continue to maintain constructive relationship with Pension
re-invested into new technology to grow the business. The pension scheme's Trustees.
obligations need to reduce by investments and by the maturity of the Scheme.
· Affordable pension funding commitments agreed and 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 relevant
legislation, building regulations and industry standards (e.g., ISO, BBA
Risk/Impact etc.), and product testing, as appropriate.
· Group insurance programme to cover larger potential risks.
Risk is one of product recall with subsequent cost and reputational risks, however the Group does not have a history 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 2023 Year ended 30 June 2022
Underlying Non-underlying Underlying Non-underlying
Total Total
Continuing operations: Notes £'000 £'000 £'000 £'000 £'000 £'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)*
£'000 £'000 £'000 £'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 £'000 £'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
Notes Share capital Share Capital reserve - Profit
premium own shares Foreign and loss account
Hedging currency reserve Total equity
reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'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 £6.0 million and
had utilised £8.9 million of the committed £25.0 million revolving credit
facility. This provided total headroom of some £22.1 million against
committed facilities and, together with £4.0 million overdraft facilities,
there is headroom of some £26.1 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 £25.0 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 £1, 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
£3,859,001 of assets and £3,859,000 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
Revenue Segmental operating Revenue Segmental operating
result result
£'000 £'000 £'000 £'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
£'000 £'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
Segment Assets
Property, Other
Segment Liabilities Plant & Intangible Deprecia-tion Amortisa-tion
Equipment Assets
£'000 £'000 £'000 £'000 £'000 £'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
Segment Assets
Property, Other
Segment Liabilities Plant & Intangible Deprecia-tion Amortisa-tion
Equipment Assets
£'000 £'000 £'000 £'000 £'000 £'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 £3,859,001
and Segment liabilities of £3,859,000 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
£'000 £'000 £'000 £'000 £'000 £'000 £'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 Profit before tax Operating profit Profit before tax
£'000 £'000 £'000 £'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 £3,859,000,
and the assets held for resale were written down to £3,859,001 to reflect the
sales proceeds of £1 received on 26 August 2022. In the year to 30 June 2023,
a further loss on disposal of £1,750,000 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 June 2023 Year to 30 June 2022
£'000 £'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
£'000 £'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
£'000 £'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
£nil 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
£'000 £'000
Current tax:
UK corporation tax - continuing operations 1,704 1,094
- discontinued - (380)
operations
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
1,184 2,145
Total tax charge in the statement of comprehensive income
(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
£'000 £'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 £16.3 million (2022:
£16.3 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 £1 million (2022: £1 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 £15.3 million (2022: £15.3 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:
Brands Hedging Share options Total Pension
Accelerated Short term deferred tax liability deferred tax
capital temporary asset
allowances differences
£'000 £'000 £'000 £'000 £'000 £'000 £'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 £3.8 million (2022: £3.8 million) in
respect of net capital losses of £15.3 million (2022: £15.3 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
£'000 £'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
£2,471,000, 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
£'000 £'000
Net profit attributable to equity holders of the parent - continuing 8,353 9,610
operations
Net loss attributable to equity holders of the parent - discontinued (1,750) (16,657)
operations
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
£'000 £'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
£475,567 (2022: £519,076). 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 £96,000 (2022: £402,000)
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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR LIMBTMTAMTRJRecent news on Alumasc
See all newsREG - Alumasc Group Plc - Holding(s) in Company
AnnouncementREG - Alumasc Group Plc - Director/PDMR Shareholding
AnnouncementREG - Alumasc Group Plc - Director/PDMR Shareholding
AnnouncementREG - Alumasc Group Plc - Interim results
AnnouncementREG - Alumasc Group Plc - Notice of Interim Results
Announcement