REG - Alumasc Group Plc - FULL YEAR RESULTS ANNOUNCEMENT
07/09/2021 07:00
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RNS Number : 9086K Alumasc Group PLC 07 September 2021
7 September 2021
IMMEDIATE RELEASE
THE ALUMASC GROUP PLC
("ALUMASC")
FULL YEAR RESULTS ANNOUNCEMENT
STRONG PERFORMANCE ACROSS ALL DIVISIONS; WELL-POSITIONED TO BENEFIT FROM
LONG-TERM GROWTH DRIVERS
Alumasc (ALU.L), the premium sustainable building products, systems and
solutions Group, announces results for the year ended 30 June 2021.
Commenting on the results reported today, Paul Hooper, Chief Executive, said:
"After a record first half performance, in which volume growth was
supplemented by around £2.5m of sales delayed from 2020 by the initial
Covid-19 lockdown, the numbers today reflect the determined efforts by Alumasc
employees across the Group to ensure the underlying momentum was maintained
throughout the second half.
I am delighted to report this excellent set of results to our shareholders and
believe Alumasc is well-positioned to benefit from the long-term growth
drivers in our market."
Financial Highlights:
· Double-digit growth in revenues from continuing operations:
£90.5m (2019/20: £76.0m): +19.0%
· Group underlying operating profit £11.0m (2019/20: £4.2m):
+162% reflecting both strong growth and the benefit of structural cost and
efficiency gains
· Underlying operating margin: 12.2% (2019/20: 5.5%)
· Reported PBT £9.8 million (2019/20: £2.7 million)
· Robust balance sheet with net bank debt of £0.9m (2020:
£4.3m). Headroom c.£23m
· Underlying EPS: 23.7p (2019/20: 8.2p): +189%
· Basic EPS: 21.2p (2019/20: 6.3p)
· Final dividend: 6.25p (2019/20: nil)
o Full year dividend 9.5p (2019/20: 2.0p)
Operational Highlights: Strong performance in all divisions
· Water Management Division delivered an excellent performance with
operating profit of £6.1m (2019/20: £4.8m), indicative of the potential for
the business as market conditions normalise
· Building Envelope Division saw a significant revenue increase of
£7.8m (+24%) and a £5.2m operating profit improvement, including a £1.4m
turnaround at Levolux, resulting in the division achieving a double-digit
underlying margin of 10.4%
· Housebuilding Products (Timloc) had an outstanding year growing
its revenue by 22% and operating profit by 105% versus a Covid affected prior
year
o Operating margin 23% (2019/20: 13.7%)
o Long-term growth drivers remain strong
· The Alumasc portfolio is aligned to environmental growth drivers,
with c.80% of sales derived from environmental solution products
Outlook:
· Alumasc remains well-positioned to deliver sustainable growth,
underpinned by a clear strategy and strong market positions:
o Water Management is benefitting from both its UK and export-focussed
strategy
o Building Envelope entered the new year with a strong order book, supported
by the benefits of the recent restructuring
o Housebuilding Products (Timloc) continues to innovate and develop new
products, against a favourable UK housebuilding backdrop
· The Group's cost savings programme, liquidity management, strong
balance sheet and improved commercial positioning underpin a robust platform
that positions Alumasc to benefit from the long-term growth drivers in our
markets
· The Board is cognisant of the potential for short-term disruption
to our customers' operations from shortages of building materials, labour and
road haulage, and delays in the global container shipping industry
· Notwithstanding these risks, the Board believes Alumasc's strong
platform provides confidence for another year of progress
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
Daniel Sherwen +44 (0)203 781 9241
LEI: 2138002MV11VKZFJ4359
Notes to Editors:
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.
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
Chairman's Statement
This has been an extremely successful year for Alumasc.
There have been several reasons for this:
· Our industry -principally UK construction - was fortunate to be
able, indeed encouraged, to continue operating, despite the presence of the
Covid pandemic throughout the year. We pursued this opportunity
enthusiastically while abiding by, and in many cases exceeding, the stringent
rules introduced to manage the attendant risks.
· Following the temporary closures that did occur, both of our own
operations and of those of our customers, during the latter part of the prior
financial year, a number of projects resumed during the year under review,
creating demand arguably above the underlying level. This demand was not easy
to accommodate, particularly within the Covid rulebook and with Brexit
looming. However, the combination of prudent stock building and magnificent
co-operation from our workforce enabled us to sustain a high level of service
in response. We believe that gains in market share were won as a result.
· During the year prior to that under review, Alumasc had
significantly streamlined its business, reducing the number of
operating/manufacturing sites from ten to six and taking costs out of the
business amounting to some £2.4 million per annum in the process. As a
result, a higher proportion of the margins earned on healthy sales was
converted to profit and profit margins rose as a result.
· Finally, and perhaps most significantly, our management teams and
their colleagues throughout the company responded with calmness and
determination to the very uncertain conditions brought about by the pandemic
and made this outcome possible. I thank them all on behalf of fellow
Shareholders and Directors.
Performance
Revenues of £90.5 million were £14.5 million (19.0%) ahead of the prior
year, which was badly affected by Covid. They were very slightly ahead of the
previous "pre-pandemic" year. Roofing Products grew by a remarkable 62% year
on year and Housebuilding Products by 22%, both arguably benefitting from the
demand that was building during the interruptions suffered in the prior year.
Levolux was the only business that saw a reduction in sales, reflecting both
the weakness in commercial activity in the period and the intentional focusing
of that business to a narrower, more selective market.
Profit, however, was well ahead, not just of the depressed prior year but also
of the earlier year, not so affected. Trading Profit of £12.9 million, hence
trading margins, were double that of the earlier year, reflecting the
reduction in costs referred to above and further efficiencies achieved during
the intervening period. See note 4.
Similar improvements in the group's profit have benefitted cash and more than
recovered the group's capacity to pay dividends.
Alumasc's focus on the prudent management of cash has reduced net bank debt
from £5.1 million two years ago to £4.3 million one year ago at the height
of the Pandemic's impact, and further to £0.9 million at 30 June 2021. With
debt facilities in excess of £20 million, this places the group in a strong
position for further development.
Dividend
The unpredictable consequences of Covid led your Board to suspend dividend
payments in the conservation of cash during the first half of last year; and
payments were only resumed, albeit at a low level by historical standards, as
the year progressed. It is enormously gratifying to be able to recover this
year's dividend payment above pre-pandemic levels and your Board is
recommending an increase in the final dividend to 6.25p per share (2020: 2p
per share), making a total for the year of 9.5p. This compares with a total of
2p in 2019/20, and 7.35p in the earlier "pre-pandemic" year.
Strategy and Corporate Activity
The principal focus has been operational during the year, always within the
strategic framework set out in this and previous reports. Hence, it has been a
quiet year in the corporate sphere. There has, however, been progress on the
twin fronts of outperforming our sector and evolving our sustainable
credentials, illustrated by the ESG Statement in the full Annual report and
accounts.
Pensions
There has been significant progress also in reducing the pensions legacy,
partly due to the impact of rising gilt yields on our liabilities, and partly
to an excellent investment performance.
The Boardroom
Following six years in the post, David Armfield resigned his non-executive
directorship during the year in order to concentrate on his other activities.
I am grateful to David for his wise support during his time with Alumasc and
wish him every success.
In March this year, Simon Dray was appointed to the vacant position of Group
Finance Director and is a welcome addition to our team. His broad experience
is well matched to our strategic targets and public company responsibilities.
Prospects
It is never easy to follow such success, particularly when an element of that
success was due to an abnormal carry over of demand from the prior year.
However, demand from our markets remains buoyant, including an anticipated
partial recovery from the much depressed commercial sector, which
unsurprisingly was most affected by the events of the past year and a half.
The principal area of concern, therefore, relates to the availability of
materials and human resources to meet this demand and the cost implications of
shortages, which may dampen demand in certain areas, possibly permanently
delaying some projects already in the pipeline. At present, the industry
understands and is absorbing these rising costs and additional capacity has a
way of soon following on the heels of unsatisfied demand.
It is therefore reasonable to anticipate another strong performance from
Alumasc in the coming year, as the UK economy recovers from its recent
misfortunes.
John McCall
Chairman
Chief Executive's Review
Financial Highlights and Overview
2020/21 2019/20 % change
Group performance:
Revenue (£m) * 90.5 76.0 +19%
Underlying profit before tax (£m) * 10.5 3.7 +187%
Statutory profit before tax (£m) 9.8 2.7 +263%
Underlying earnings per share (pence) * 23.7 8.2 +189%
Basic earnings per share (pence) 21.2 6.3 +237%
Dividends per share (pence) 9.5 2.0 +375%
* A reconciliation of underlying to statutory profit before tax is provided in
note 5
Covid-19
The response of our employees to the challenges faced this year has been
exceptional. Covid-19 has brought many difficult challenges but our number
one priority is always the health, safety and wellbeing of our people and
visitors to sites. The actions taken to comply, as a minimum, with
government advice has resulted in several unannounced HSE visits that have
confirmed the actions taken with very positive feedback being received.
During the year we had one small Covid-19 outbreak involving less than 20
people. Swift management action contained this with a full return to work
within 10 days. Our new norm allowed us to adapt our working practices to
have more people working from home while maintaining a good premium customer
service. I am immensely proud of our incredible people and all that they
have achieved.
Overview of performance
Following an outstanding and record performance in H1, which included around
£2.5 million of pent-up demand revenue carried forward from the prior year
Covid affected lockdown, Alumasc's underlying momentum was maintained
throughout H2, despite the effects of Brexit. Growth was achieved in all
three divisions against a backdrop of resilient building and construction
activity along with market share gains. In addition, raw material and
shipping cost increases to date have been successfully recovered through sales
price increases.
Close control of costs and the benefit of the restructuring implemented in FY
2020 have also contributed to the improved profitability. Levolux delivered
a substantially improved performance during the financial year, returning to
consistent profitability on improved tendering and contract management
disciplines and a streamlined cost base.
The star performer of the year was undoubtedly the Building Envelope Division
which turned a prior year loss of £0.9 million into a £4.3 million profit.
This was a testament to several factors, but both parts of this division,
Roofing and Levolux, contributed significantly. As you will see in the
section on this division it was really a volume/market share increase that
improved Roofing's performance while Levolux had a significant turnaround into
profit from a prior year loss assisted by significant cost reductions and
efficiency improvements.
The remaining two divisions had record performances, both driven by
volume/market share gains and operational efficiencies. New products were
also important and, in particular, for the Housebuilding Products Division
which launched a record number, supported by its industry leading service,
with some considerable success.
Strategy and performance against strategic objectives
Alumasc's strategy is to:
1. Build leading positions in specialist markets to grow revenues faster
than the UK construction market
Although the impact of Covid-19 makes any analysis of the most recent year
difficult when compared with the consistent outperformance of the previous
years we have however gained market share and grown the business.
2. Augment UK revenue growth through the development of selected
export markets
Compared to the prior year in which export revenues were 15% of Group
revenues, during the year under review export revenues were 14% of Group
revenue. However, actual export sales grew by £1.1 million (10%). Export
sales at AWMS (Gatic and Wade) were marginally behind the prior year, due to a
large one-off European order in 2019/20. However sales to the Far East grew
strongly, supported by investment in both sales and marketing. The year end
export order book for AWMS stood at £1.7 million, versus £1.2 million at the
prior year end.
Meanwhile, Levolux accelerated its export revenue by a strong 32%. At the
start of the new financial year a second experienced US Senior VP of sales has
been appointed in the USA. We anticipate good further growth in the USA from
this development.
3. Grow profit at a faster rate than revenue by improving operating
margins
The Group's underlying operating margins grew from a Covid affected prior year
5.5% to 12.2% (and also improved on underlying operating margins in 2019 of
6.5%) representing a pleasing result. This movement into a 'double-digit
percentage' return has been achieved earlier than expected. The prior year's
structural £2.4 million cost savings have been a significant contribution
along with increased sales.
Executing our priorities in FY20/21
Management accelerated the pace of strategic development during its 2021
financial year:
1. Levolux business improvement plan
The objective of this plan was to return Levolux to sustainable profit. At
the start of the year the Board announced a refocus of the business to those
areas where it could clearly differentiate and add most value to customers and
therefore shareholders. This included concentration on developing the more
profitable areas of the business, simplifying operational delivery and
reducing risk. The key elements have been:
• Integrated sales approach. Incorporate Levolux solar shading, screening
and balconies as major constituents in a new "Alumasc Building Envelope"
Division, providing integrated solutions for developers and specifiers seeking
high quality roofing and walling systems. A new, collaborative divisional
sales approach has increased Levolux's existing market reach and leverages
existing strong customer relationships. This is the second year of this new
division's formation.
This objective is being achieved and examples where the 'cross-sell' and
single expert service has been welcomed by specifiers and clients are
growing. There are several examples of this including the new DWP Welsh
Valleys offices.
• Leverage core strengths. Focus on design and supply activities as we do
in the rest of the Alumasc Group. In-house installation will only be offered
where this service is particularly valuable to customers and Levolux. Over
time this will improve margin mix and enhance profit margins.
This objective is being achieved with the order book strengthening for supply
only projects.
• Export opportunities. Invest in local technical sales resources to
accelerate growth in the profitable Levolux business in North America. Current
revenues in this market are circa £4.7 million (+32% v PY). This objective
was achieved with a US-based Senior VP appointed.
• Reduce overhead. We announced a significant restructuring of the
existing Levolux operational and overhead cost base, including a relocation of
sites, with fixed cost savings achieved of £1.8 million in the Group's
2019/20 financial year versus a target £1.0 million, and further significant
annualised savings of £0.7 million. These benefits have assisted the 2020/21
financial year.
Alumasc continues to believe that Levolux, as part of the Building Envelope
Division, has a great future potential and continues to be one of the Group's
strongest brands.
2. Develop further opportunities for specification cross selling
There remains a significant future opportunity for the Group from offering an
integrated "Building Envelope" of exterior building products facilitating the
integration of walling, roofing, balconies, solar shading and integrated
aluminium detailing. This not only provides a full external envelope solution
but also mitigates both client's and contractor's risks by ensuring that the
horizontal and vertical planes are detailed to remove tolerance and
interfacing detail issues. Closer working between divisions has led to
cross-selling opportunities. This will continue to be a focus going forward.
3. Implementation of a more cost-efficient operating structure
Following the move in the prior year of the AWMS Gatic Slotdrain manufacturing
from a leased facility in Dover to the freehold AWMS's Wade facility and the
restructuring of Levolux described above, some £0.6 million per annum has
been saved in leased property costs. The objective to move to six facilities
from ten has also been achieved.
Total annualised cost savings of £2.4 million were achieved in the prior year
versus a target of £2.0 million and these structural cost savings have
assisted the current year.
4. Prioritising and focusing investment to drive profitable growth
Capital expenditure was £2.0 million, slightly below depreciation which was
£2.3 million.
Once again investment has been focused on our businesses with the greatest
manufacturing activity: our Water Management business and Timloc. Within
this was a continued investment in tooling at strategic suppliers for the
Water Management business which has improved manufacturing efficiencies and
significantly lowered the carbon footprint of our suppliers along with
ensuring continuity of supply. Investment continued at Timloc, including
to support new product launches. The benefit of the investments is evident
in the relatively strong performances of these businesses.
Investment in new people was directed into expanding the sales reach, notably
in the Building Envelope Division where previously weaker areas of the UK now
have a stronger senior sales representation. Growing Levolux and Water
Management divisional export sales have also been a focus.
5. Proactive management of our portfolio of businesses
The Group continues to seek to grow through bolt-on acquisitions and there are
no plans to make divestments.
6. Remaining closely aligned with the sustainability agenda
With the ever-increasing low carbon and sustainable agenda Alumasc is in a
perfect position to increase supply solutions to its customers that target
these criteria. Not only does it have strong positions in energy management
through its presence in solar shading, which can reduce the energy consumption
required to cool a building, but it also has innovative Roofing solutions,
such as Olivine, which can actually reduce CO(²) in the environment. Within
the Water Management Division, the increasing scarcity of water can be managed
very successfully. There are examples where both divisions combine to
provide a 'Blue Roof'. This, in effect, produces an equivalent to an
attenuation tank on a flat roof allowing the controlled egress into the water
effluent systems while saving clients the significant alternative cost of an
attenuation tank installation. Our Housebuilding Products Division has also
significantly contributed to the energy management within housing with its
sealed ventilation systems, cavity closer and radiator seals. It is constantly
innovating and launching new products that deliver sustainable solutions for
our clients.
All divisions are totally committed to, and insist on, the use of recycled
material where appropriate. Alumasc is very proud to be able to state that
75% of the Group's products are sourced from recyclable material.
The relentless pursuit of both innovative energy and water management
solutions combined with the increasing use of recycled material will
continue. Alumasc is already well placed in this regard. Our bespoke
approach to product and specification means customers will be able to meet
more stringent environmental criteria in the years ahead.
All divisions have plans in place to work towards the Net Zero government led
construction targets by 2050.
Overview of performance
Revenue analysis
Revenue grew by £14.5 million (19%) compared to a prior year Covid affected
performance. This included some carry over of pent-up demand from the
Covid-disrupted prior year but also, significantly, benefitted from investing
in high quality Roofing salesmen, launching new products and winning market
share.
Gross margin
Alumasc's Gross Margin grew by 6.2 percentage points, to 35.9%, a very strong
performance and a great testament to the management actions taken in saving
costs, increasing efficiencies and growing margins.
Net fixed and operating
expenses
Net fixed and operating expenses increased by £1.9 million (excluding any
furlough benefit in FY20) during the year mainly due to increased sales
resource and variable remuneration.
Underlying operating profit
Underlying operating profit was £11.0 million compared with £4.2 million in
the prior year. This was a very strong performance with all 3 divisions
performing significantly better than the prior year.
Bank interest
Bank interest of £0.3 million was similar to the prior year.
Underlying profit before tax
Underlying profit before tax was £10.5 million (2019/20: £3.7 million -
Covid affected).
Non-underlying, non-recurring items
Non-underlying and non-recurring items amounted to a £0.7 million net cost in
the period compared with a £1.3 million net cost in the prior year. Further
details are given in the Financial Review.
Coronavirus Job Retention Scheme
Government grant income of £0.1 million was repaid during the period in
relation to Coronavirus Job Retention Scheme income that had been claimed in
the previous financial period for employees that have, unfortunately,
subsequently been made redundant.
Profit after tax for the year
The Group's resulting overall statutory profit after tax for the year was
£7.6 million (2019/20: £2.3 million).
Divisional review
(a) Water Management
Revenue: £38.4 million (2019/20: £33.7 million)
Underlying operating profit*: £6.1 million (2019/20: £4.8 million)
Underlying operating margin*: 15.9% (2019/20: 14.3%)
Operating profit: £6.0 million (2019/20: £4.6 million)
* Prior to restructuring costs of £0.1 million in 2019/20 and brand
amortisation charges of £0.1 million in both years
Water Management produced a record profit of £6.1 million which was £1.3
million (27%) higher than the previous year.
The drivers of the improvement were revenue related (which increased by £4.7
million (14%)) and by selective price increases, product portfolio management,
cost reductions (partly brought about by the move of Gatic Slotdrain
manufacturing from Dover to Wade's freehold facility), and general efficiency
improvement and tight cost control.
Water Management's operating profit return on sales increased to 15.9% from a
prior year of 14.3%. This was a very encouraging performance and is
indicative of improved margins.
(b) Building Envelope
Revenue: £41.0 million (2019/20: £33.2 million)
Underlying operating profit / (loss)*: £4.3 million (2019/20: £(0.9)
million)
Underlying operating margin*: 10.4% (2019/20: (2.8)%)
Operating profit / (loss): £4.1 million (2019/20: £(1.4) million)
* Prior to restructuring costs of £0.3 million in 2019/20 and brand
amortisation charges of £0.2 million in both years
The Building Envelope division sells principally into the high end UK
commercial and residential new build construction market.
Levolux's restructuring has taken significant cost out of the business and
when combined with a more selective strategy for work that it will target with
a focus on supply only, along with a stronger push into export markets, the
benefits showed in the year with an outstanding £1.4 million turnaround from
a £0.9 million loss to an encouraging £0.5 million profit. This was the
result of following the very effective turnaround plan.
Alumasc Roofing's performance was outstanding and driven strongly within the
Refurbishment sector. Five new salespeople were recruited and significantly
strengthened some of our historically under-represented markets in the UK
whilst technical services staffing was increased across the country. It went
from strength to strength and with the pressure of Covid-19 encouraging more
external work, particularly for schools and health boards, Roofing benefited
and increased its revenue stream whilst also securing additional market share.
(c) Housebuilding Products
Revenue: £11.1 million (2019/20: £9.1 million)
Underlying operating profit*: £2.6 million (2019/20: £1.2 million)
Underlying operating margin*: 23.0% (2019/20: 13.7%)
Operating profit: £2.5 million (2019/20: £1.2 million)
* Prior to restructuring costs of £0.1 million in 2020/21
Timloc, our Housebuilding Products Division, had an outstanding year growing
its revenue by 22% and PBIT by 105% (versus a Covid affected prior year). In
addition, during a challenging year, Timloc continued to launch new products,
improve efficiencies and maintain 100% OTIF to customers. Timloc continues
to receive very positive feedback from its customers on its excellent service
and promotes this through its '#TrustTimloc to deliver' strapline.
New product development is an important factor in Timloc's success and during
the year it successfully launched a number of new products including Rad-Seal
face-fix, FR60 fire rated cavity closer and FRSTOP cavity stop socks.
With its constant focus on improving efficiencies, new product development and
customer service Timloc is well positioned to maximise opportunities presented
by the housebuilding sector.
Outlook
Alumasc's cost savings programme, liquidity management, strong balance sheet
and improved commercial positioning underpin a robust platform that positions
Alumasc to benefit from the long-term growth drivers in our 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.
The Board believes Alumasc remains well positioned to deliver sustainable
earnings progression, underpinned by a clear strategy and strong market
positions, together with:
• Water Management benefiting from both its UK and export-focussed strategy,
and a growing online offering;
• Building Envelope entered the new year with a strong order book, supported
by specification cross-selling and restructuring benefits;
• Housebuilding Products continues to innovate and develop new products,
against a favourable backdrop of structural UK housing shortage; and
• the major restructuring of the Levolux business within the Building
Envelope Division.
Further investment opportunities exist in:
• sales resource and manufacturing capacity
• bolt-on M&A to expand capabilities, product range and routes to
market.
Demand remains strong entering the new financial year, which has started in
line with management's expectations. The Board is however cognisant of the
potential for short-term disruption to our customers' operations from
shortages of building materials, labour and road haulage, and delays in the
global container shipping industry.
Notwithstanding these risks, a strong platform is now in place which should
provide the Board with confidence for another strong year.
Paul Hooper
Chief Executive
7 September 2021
Financial Review
Reconciliation of underlying to statutory profit before tax
The underlying profit before tax for the 2020/21 financial year of £10.5
million reconciles to the statutory profit before tax of £9.8 million as
follows:
2020/21 2019/20
£m
£m
Underlying profit before tax 10.5 3.7
Brand amortisation (0.2) (0.2)
Net IAS 19 defined benefit pension scheme costs (0.3) (0.3)
IAS 19 past service cost in respect of GMP equalisation (0.1) -
Restructuring & relocation costs (0.1) (0.8)
Net gain from business disposals - 0.3
Statutory profit before tax 9.8 2.7
The reconciling items were:
· Amortisation of acquired brands of £0.2 million (2019/20: £0.2
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.
· Net IAS 19 defined benefit pension scheme costs of £0.3 million
(2019/20: £0.3 million) are also non-cash charges. These relate to the
Group's legacy defined benefit pension scheme, which was closed to future
accrual in 2009. The value of the charge is determined by actuarial assessment
and represents the notional financing cost of the Group's pension deficit.
· A one-off IAS 19 past service cost of £0.1 million (2019/20:
£nil), representing an increase in the estimated cost of guaranteed minimum
pension equalisation between men and women, following a High Court ruling in
November 2020.
· One-off restructuring and relocation costs of £0.1 million
(2019/20: £0.8 million) following changes in the estimated cost of several
material reorganisation projects, which were announced during the 2019/20
financial year.
· The net gain from business disposals was recognised in the prior
year following the receipt of £0.3 million of deferred consideration relating
to the divestment of the Alumasc Facades business.
Taxation
The Group's underlying effective tax rate was 19.5% (2019/20: 20.3%), slightly
above the UK statutory rate of tax of 19% applicable to the Group's financial
year due to certain costs that are disallowable for tax purposes. We expect
the Group's underlying tax rate to be circa 20% in the 2021/22 financial year.
The Group's effective tax rate on statutory profit before tax was 22.6%
(2019/20: 16.4%). Reconciliations from the actual to statutory rates of tax
are provided in note 7. The reconciling items chiefly relate to the tax
treatment of the one-off items in the Group's income statement and the
deferred tax impact of the increase in future tax rate from 19% to 25% from 1
April 2023.
Earnings per share
Underlying earnings per share for the year was 23.7 pence (2019/20: 8.2
pence). This increase is consistent with the increased underlying profit
before tax for the year.
Basic earnings per share of 21.2 pence (2019/20: 6.3 pence) reflected both the
increase in underlying profit before tax for the year and the lower level of
non-underlying costs in 2020/21 relative to 2019/20.
Dividends
The Board have recommended to shareholders a final dividend of 6.25 pence per
share (2019/20: 2.0 pence), which will absorb an estimated £2.2m 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, it will be paid on 29 October 2021 to members
on the share register on 24 September 2021.
Together with the interim dividend of 3.25p (2019/20: nil) paid to
shareholders on 6 April 2021, this will bring the total distribution for the
year to 9.5 pence per share (2019/20: 2.0 pence), which is covered 2.5 times
(2019/20: 4.1 times) by underlying earnings per share.
The Board continues to follow a progressive distribution policy, where
dividends rise broadly in line with earnings, while maintaining sensible
cover.
Summarised Cash Flow Statement
2020/21 2019/20
£m
£m
EBITDA * 13.8 6.2
Change in working capital (0.7) 0.7
VAT (paid)/deferred (1.1) 1.8
Operating cash flow 12.0 8.7
Capital expenditure (2.0) (1.7)
Interest (0.2) (0.3)
Tax (0.2) (0.1)
Pension deficit funding (2.6) (2.3)
Finance lease payments (0.9) (0.5)
Dividend payments (1.9) (1.6)
Sub total 4.2 2.2
Non-underlying payments (0.8) (1.4)
Net cash flow 3.4 0.8
Net bank debt at the year end 0.9 4.3
* EBITDA: Underlying operating profit from continuing operations before
interest, tax, depreciation and amortisation
Cashflows and net debt
At the onset of the Covid-19 pandemic in the UK, in the second half of
financial year 2019/20, the Group undertook a series of measures to conserve
cash, including agreements to defer £1.8 million of VAT and £0.6 million of
pension payments. The Group's cash management activities in financial year
2020/21 have been focused on repaying these deferred amounts as they fall due,
along with managing the working capital demands of a period of strong growth.
The Group's operating cashflow was £12.0 million (2019/20: £8.7 million),
after a cash outflow into working capital of £1.8 million, which includes
payment of £1.1 million of VAT deferred from 2019/20 (2019/20: £2.5 million
inflow, with £1.8 million of VAT payment deferral). The remaining £0.7
million VAT deferral will be repaid in the first half of 2021/22. Trade
working capital as a percentage of revenue was 13.9% at 30 June 2021 (30 June
2020: 17.7%).
Capital expenditure was £2.0 million (2019/20: £1.7 million), representing
86% of depreciation (2019/20: 87%). The main investments were on upgrading
equipment at our Housebuilding Products facility in Howden, East Yorkshire,
and tooling at our Water Management division. The Board see further
opportunities for targeted investments to deliver organic growth, and expect
capital expenditure to remain above depreciation for the medium term.
Tax payments of £0.2 million were made in the year (2019/20: £0.1
million). The current year payment is stated net of a £0.4 million
(2019/20: £nil) tax refund relating to financial year 2018/19.
The Group recorded a net cash inflow for the year of £3.4 million (2019/20:
£0.8m), reducing net debt at 30 June 2021 to £0.9 million (30 June 2020:
£4.3 million).
Statement of financial position and return on investment
Group net assets increased by £16.3 million in the year to £36.1 million at
30 June 2021, a consequence of the profit retained for the year and a
reduction in the pension deficit.
The Group defines its capital invested as the sum of shareholders' funds,
including historic goodwill but excluding net bank debt, pension deficit (net
of tax) and lease liabilities. Post tax return on investment (underlying
operating profit divided by capital invested) was 19.8% (2019/20: 7.2%),
reflecting the improved operating performance and close management of capital
employed during the year.
Pensions
The Group accounts for its defined benefit 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. The IAS 19 defined benefit pension scheme
deficit at 30 June 2021 was £4.6 million (30 June 2020: £19.3 million).
Scheme assets increased by £9.2 million, on a strong investment performance
and £2.6 million of deficit reduction payments made by the Group in the
period. Scheme liabilities decreased by £5.5 million, with an increase in
the discount rate offsetting an increase in inflation. As funding levels
rise, the scheme is adopting a lower risk investment strategy, in which
interest rate and inflation risks are more closely hedged, which should reduce
volatility in the deficit valuation going forward.
The deficit reduction payments are agreed between the Group and the scheme's
trustees, based on triennial actuarial valuations. At the last review on 31
March 2019, Alumasc agreed to pay £2.3m annually under a seven year recovery
plan. As part of its Covid-19 cash conservation measures, the Group agreed
with the trustees to defer £0.6 million of deficit reduction payments due in
financial year 2019/20. £0.4 million of this was repaid over financial year
2020/21, and the remaining £0.2 million will be repaid in the first half of
financial year 2021/22.
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.
During the year, the expiry date of the Group's revolving credit facility was
extended by one year. Alumasc's current banking facilities comprise:
· An unsecured committed three-year revolving credit facility of £20.0
million, with a revised expiry date of April 2023 and a further one year
extension period;
· 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 2021 and 2020:
Covenant 30 June 2021 30 June
2020
Net debt:
EBITDA
<3.5*
0.1 0.8
Interest
cover
>2.5*
42.1 17.3
* changes to <2.5 and >4 from 31 December 2021.
Going Concern
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. The Board has also considered stress test scenarios modelled
on both a resumption of Government lockdowns and a 20% reduction in revenue
for the period to September 2022.
Under the stress test scenarios, there remained adequate headroom in banking
facilities and no breach of banking covenants over the period covered by the
models. The Board also took note of the Group's further ability to reduce its
cost base and/or conserve cash resources at short notice if necessary.
A reverse stress test scenario, that would lead to a breach of the Group's
banking covenants, was also modelled. The Board considered the risk of such a
scenario arising to be remote.
Having taken into account the scenario models above, 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. See note 1 for the full Going Concern assessment.
Simon Dray
Group Finance Director
7 September 2021
The contents of this announcement have been extracted from the annual report
and accounts for the year ended 30 June 2021 which will be dispatched to
shareholders on or around 23 September 2021 and will be available at
www.alumasc.co.uk.
PRINCIPAL RISKS AND UNCERTAINTIES
Risks and uncertainties Mitigating actions taken
COVID-19 · The company took swift action in 2020 and managed costs and cash
flow intensively. Capital expenditure and non-essential new hires were
delayed.
Comment · The primary focus was on the health and wellbeing of staff and
additional communication channels were established. In addition, a new
wellbeing app has been made available to all staff to help to mitigate stress
at home and in the workplace.
The Coronavirus pandemic is still impacting our customers' businesses and the
way we work. As the duration of the pandemic is uncertain, concerns remain · Staff, where possible, switched to working from home without
over the potential risk of future lockdowns and restrictions returning disruption.
together with possibly new variants of Covid-19.
All manufacturing sites have been operational with additional Covid-19
protocols this financial year.
· Supply chain remained resilient.
· Exports and internet sales have been expanding and helped to gain
new customers/market share.
· Some business opportunities and mitigations used during the
pandemic (including use of TEAMS) continue to provide ways to trade
efficiently and improve margin/revenue. Best practices and new ways of
working, that proved to be effective, will be adopted going forward.
· All Government guidelines on Health & Safety, including
social distancing were implemented and continue to be followed on all sites.
· With new ways of working the business is very agile and can
quickly implement Government guidelines to protect employees and customers
from Covid-19. There is now greater use of IT and other flexible ways of
working have been adopted.
Health and safety risks · 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
Comment documented and communicated.
· All safety incidents and significant near misses are reported at
Board level monthly, with appropriate remedial action taken.
The Group has a strong overall track record of health and safety management
performance, with the number of lost time accidents significantly reduced. · Group health and safety best practice days are held twice a year,
chaired by the Chief Executive.
· Annual audits of health and safety are conducted in all Group
businesses by independent consultants and other specialist advisers.
· Specific focus on improving safety of higher risk operations,
with external consultancy support as needed.
Staff recruitment and retention risks · Increasing focus of Board and Executive Committee on staff
retention and reward, supported by HR and external advice.
· Competitive remuneration/incentive rates paid to attract and
Comment retain talented employees.
· Employee numbers and changes monitored in monthly subsidiary
Board meetings.
Including recruitment, retention, succession, people development. Risk of loss
of skills, ability to innovate and improve. · Retention plans for key, high performing, and high-potential
employees.
· Training and development programmes.
· The Remuneration Committee considers retention and motivation
when considering the Remuneration framework.
· Succession planning.
Product/service differentiation relative to competition not developed · A devolved operating model with both group and local management
or maintained responsible for developing a deep knowledge of our specialist markets and
identifying opportunities and emerging market trends.
· Innovation best practice planned at Group level and more
Comment regularly in each business. New product ideas are discussed as part of the
businesses' strategy.
· Annual Group strategy meetings encourage innovation and "blue
Innovation, an agile and entrepreneurial spirit is encouraged in all Group sky" thinking.
companies. Constantly looking for innovation for new products, particularly
those that contribute to sustainability within the built environment. · 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.
· Agile approach to business and an ability to meet increasing
demand for products.
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
Comment service excellence and dedicated account management.
· Product, system and service differentiation and reliability.
Generally, the Group has a good track record of customer retention and has a · Project tracking and enquiry/quote conversion rate KPI.
diversified customer base.
· Increasing use of, and investment in, customer relationship
management (CRM) software.
· Organisational and business agility to adapt to changing and
emerging customer needs.
Legacy defined benefit pension obligations · Continue to grow the business so the relative affordability of
pension deficit contributions is improved over time. Active management of
scheme liabilities and assets to reduce deficit, with particular success
during the year.
Comment
· Continue to maintain constructive relationship with Pension
Trustees.
Alumasc's pension obligations are material relative to its market · Affordable pension funding commitments agreed and met.
capitalisation and shareholders' funds.
· Regular review at Group Board level.
· Use of specialist advisors.
· Investment performance and risk/return balance overseen by an
Investment Committee.
· The Trustees are pursuing a lower risk investment strategy to
match liability risks and reduce future volatility.
Supply chain risks · Annual strategic reviews, including supplier, quality,
reliability and sustainability.
· Regular key supplier visits, good relationships maintained
Comment including quality control reviews and training.
· Logistics delays due to post Brexit driver shortages have been
managed and delivery times agreed/managed with customers.
International supply chain
risks could increase through local lockdowns due to the · Regular supplier quality, value for money and risk reviews.
Covid-19 pandemic, increased tariffs/duties, Brexit risks in Europe and
political/global volatility. · Avoidance of strategic dependence on single sources of supply.
· Contingency plans to manage Brexit and Asian sourcing risks.
· Supplier questionnaires and export checks are completed to ensure
compliance with Group policies including anti-bribery and anti-modern slavery.
· Training has been provided on customs duties, particularly on
managing new arrangements post Brexit.
· Brand and product strength generally enable increases in raw
material prices to be passed on through selling prices.
Cyber security · IT disaster recovery plans are in place for all businesses and
and Business Interruption tested regularly.
Comment · Business continuity plans are in place, or being evolved where we
are relocating operations, at each business.
· Awareness training and management briefings held on cyber
Cyber security risks and Business Interruption risks are increasing globally security risks and actions taken as preventative measures.
and have increased during the Covid-19 pandemic.
· New security protocols and software are installed and continually
reviewed to help mitigate Cyber threats.
· Regular reviews of cyber security, including external penetration
testing and reviews with external IT professionals.
· Critical plant and equipment are identified, with associated
breakdown/recovery plans in place.
· Business interruption insurance to cover residual risks.
· Further systems are being implemented to underpin the business
strategic growth plans and drive efficiency. Implementation risks are
mitigated via the use of third-parties, qualified project managers and
increased user-testing.
Economic uncertainty · Strategic positioning in markets/sectors anticipated to grow
and Brexit risks faster than the UK construction market.
· Development of export sales opportunities, especially for Levolux
(particularly in North America) and Alumasc Water Management (in Asia and the
Comment Middle East).
· Revenues are derived from a variety of end-use construction
markets.
Due to the ongoing pandemic, there is still macroeconomic uncertainty on a
global basis. Markets are also not completely settled post Brexit, and this · Development of added value systems and solutions that are either
has had an impact on logistics, raw material prices and supplies. This is required by legislation, building regulation and/or specified by architects
challenging the housebuilding and engineers.
/house-sales/construction industry. Government spending on infrastructure
projects needs to be maintained. · Continuous development and introduction of innovative green
products, systems, solutions, and services that are market leading and
differentiated against the competition.
· The Group has limited exposure to currency risk, mainly the Euro
and US Dollar. These exposures are for the most part hedged, with hedging
percentages increased in 2019 to manage potential FX volatility associated
with Brexit.
· Brexit developments being monitored closely, strong relationships
monitored and regular dialogue with key European suppliers. Contingency
planning is in place for key residual risk areas, including increased
inventory of materials/products imported from the EU.
Product warranty · Robust internal quality systems, compliance with relevant
/recall risks legislation, building regulations and industry standards (e.g. ISO, BBA etc),
and product testing, as appropriate.
· Group insurance programme to cover larger potential risks.
Comment
· Back-to-back warranties obtained from suppliers where possible.
· Specific local risk management procedures in Group brands that
The Group does not have a history of significant warranty claims or product also install (and supply) building products (i.e. Levolux and Blackdown).
recall.
Credit risk · Most credit risks are insured, including all contracting credit
risk.
· Large export contracts are backed by letters of credit,
Comment performance bonds, guarantees or similar.
· Due to Covid-19 and related uncertainties credit risks have
increased.
The Group has good recent record in managing credit risks and the contribution
from the UK Government Export Credit Scheme for overseas opportunities has · Any risks taken above insured limits are subject to strict
supported export opportunities. 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.
consolidated STATEMENT of comprehensive income
For the year ended 30 June 2021
Year ended 30 June 2021 Year ended 30 June 2020
Underlying Non-underlying Underlying Non-underlying
Total Total
Continuing operations: Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 4 90,465 - 90,465 75,992 - 75,992
Cost of sales (57,950) - (57,950) (53,413) - (53,413)
Gross profit 32,515 - 32,515 22,579 - 22,579
Net operating expenses
Net operating expenses before non-underlying items (21,511) - (21,511) (19,386) - (19,386)
Other operating income 5 - - - 968 - 968
IAS 19 past service pension cost 5 - (150) (150) - - -
Other non-underlying items 5 - (296) (296) - (1,045) (1,045)
Net operating expenses (21,511) (446) (21,957) (18,418) (1,045) (19,463)
Operating profit 4, 5 11,004 (446) 10,558 4,161 (1,045) 3,116
Net finance costs (489) (268) (757) (496) (261) (757)
Profit before taxation 10,515 (714) 9,801 3,665 (1,306) 2,359
Tax expense 7 (2,050) (165) (2,215) (744) 302 (442)
Profit for the year from continuing operations 8,465 (879) 7,586 2,921 (1,004) 1,917
Discontinued operations:
Profit after taxation for the period from discontinued operations - - - - 339 339
Profit for the year 8,465 (879) 7,586 2,921 (665) 2,256
Other comprehensive income:
Items that will not be recycled to profit or loss:
Actuarial gain/(loss) on defined benefit pensions, net of tax
10,393
(6,473)
Items that are or may be recycled subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges, net of tax
(385) 176
Exchange differences on retranslation of foreign operations
(46) 11
(431) 187
Other comprehensive gain/(loss) for the year, net of tax 9,962 (6,286)
Total comprehensive profit/(loss) for the year, net of tax 17,548 (4,030)
Earnings per share Pence Pence
Basic earnings per share
- Continuing operations 21.2 5.4
- Discontinued operations - 0.9
9 21.2 6.3
Diluted earnings per share
- Continuing operations 20.8 5.4
- Discontinued operations - 0.9
9 20.8 6.3
Alternative Performance Measures:
Underlying earnings per share (pence) 23.7 8.2
Reconciliations of underlying to statutory profit and earnings per share are
provided in notes 5 and 9 respectively.
consolidated statement of financial position
At 30 June 2021
Notes 2021 2021 2020 2020
£'000 £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment - owned assets 11,734 11,089
Property, plant and equipment - right-of-use assets 5,469 5,856
Goodwill 6 18,705 18,705
Other intangible assets 3,321 3,352
Deferred tax assets 7 1,145 3,661
40,374 42,663
Current assets
Inventories 10,871 8,596
Trade and other receivables 21,389 16,270
Corporation tax receivable - 325
Derivative financial assets - 207
Cash at bank 4,999 16,143
37,259 41,541
Total assets 77,633 84,204
Liabilities
Non-current liabilities
Interest bearing loans and borrowings (5,936) (19,909)
Lease liability (4,811) (5,244)
Employee benefits payable (4,581) (19,269)
Provisions (1,267) (1,182)
Deferred tax liabilities 7 (966) (1,007)
(17,561) (46,611)
Current liabilities
Trade and other payables (21,011) (15,311)
Lease liability (795) (680)
Provisions (834) (1,194)
Corporation tax payable (1,019) -
Derivative financial liabilities (268) -
Bank overdraft - (567)
(23,927) (17,752)
Total liabilities (41,488) (64,363)
Net assets 36,145 19,841
Equity
Share capital 4,517 4,517
Share premium 10 445 445
Capital reserve - own shares 10 (406) (416)
Hedging reserve 10 (217) 168
Foreign currency reserve 10 55 101
Profit and loss account reserve 31,751 15,026
Total equity 36,145 19,841
The financial statements were approved by the Board of Directors and
authorised for issue on 7 September 2021
Paul Hooper Simon Dray
Director
Director
7 September 2021
Company number 1767387
consolidated STATEMENT of cash flows
For the year ended 30 June 2021
Year ended Year ended
30 June 30 June
2021 2020
Notes £'000 £'000
Operating activities
Operating profit 10,558 3,116
Adjustments for:
Depreciation 2,146 1,851
Amortisation 361 313
Impairment of assets - 300
(Gain)/loss on disposal of property, plant and equipment (16) 4
IAS 19 past service pension cost 5 150 -
(Increase)/decrease in inventories (2,275) 1,892
(Increase)/decrease in receivables (5,119) 5,114
Increase/(decrease) in trade and other payables 5,287 (4,564)
Movement in provisions (275) (1,229)
Cash contributions to retirement benefit schemes (2,614) (2,254)
Share based payments 397 -
Cash generated by operating activities 8,600 4,543
Tax paid (161) (93)
Net cash inflow from operating activities 8,439 4,450
Investing activities
Purchase of property, plant and equipment (1,666) (1,342)
Payments to acquire intangible fixed assets (330) (417)
Proceeds from sales of property, plant and equipment 46 143
Net proceeds from sale of business activity - 339
Net cash outflow from investing activities (1,950) (1,277)
Financing activities
Bank interest paid (207) (297)
Equity dividends paid (1,878) (1,574)
(Repayment)/draw down of amounts borrowed (14,000) 12,000
Principal paid on lease liabilities (692) (346)
Interest paid on lease liabilities (178) (153)
Refinancing costs (65) -
Net cash (outflow)/inflow from financing activities (17,020) 9,630
Net (decrease)/increase in cash at bank and bank overdraft (10,531) 12,803
Net cash at bank and bank overdraft brought forward 15,576 2,762
Net (decrease)/increase in cash at bank and bank overdraft (10,531) 12,803
Effect of foreign exchange rate changes (46) 11
Net cash at bank and bank overdraft carried forward 4,999 15,576
consolidated STATEMENT of changes in equity
For the year ended 30 June 2021
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 2019 4,517 445 (416) (8) 90 20,817 25,445
Profit for the period - - - - - 2,256 2,256
Exchange differences on retranslation of foreign operations - - - - 11 - 11
Net gain on cash flow hedges - - - 217 - - 217
Tax on derivative financial asset - - - (41) - - (41)
Actuarial loss on defined benefit pensions, net of tax - - - - - (6,473) (6,473)
Dividends 8 - - - - - (1,574) (1,574)
At 1 July 2020 4,517 445 (416) 168 101 15,026 19,841
Profit for the period - - - - - 7,586 7,586
Exchange differences on retranslation of foreign operations - - - - (46) - (46)
Net loss on cash flow hedges - - - (475) - - (475)
Tax on derivative financial liability - - - 90 - - 90
Actuarial gain on defined benefit pensions, net of tax - - - - - 10,393 10,393
Tax on share options - - - - - 237 237
Own shares used to satisfy exercise of share awards - - 10 - - - 10
Share based payments - - - - - 397 397
Dividends 8 - - - - - (1,878) (1,878)
Exercise of share based incentives - - - - - (10) (10)
At 30 June 2021 4,517 445 (406) (217) 55 31,751 36,145
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 financial information included within this announcement does not
constitute statutory accounts within the meaning of section 435 of the
Companies Act 2006 (the "Act"). The financial information for the year ended
30 June 2021 has been extracted from the statutory accounts on which an
unqualified audit opinion has been issued.
The statutory accounts for the year ended 30 June 2021 will be delivered to
the Registrar of Companies following the Company's Annual General Meeting.
The Group financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), International Financial
Reporting Standards Interpretations Committee ("IFRS IC") interpretations and
those provisions of the Companies Act 2006 applicable to companies reporting
under IFRS. The Group financial statements have been prepared on the going
concern basis and adopting the historical cost convention. The Group's
accounting policies remain consistent with the previous financial year.
Going concern and COVID-19
Management continued to take actions to allow the business to trade
effectively and manage the risks associated with the Covid-19 pandemic.
At 30 June 2021 the Group had cash and cash equivalents of £5.0 million and
had utilised £5.9 million of the committed £20m revolving credit facility.
This provided total headroom of some £19.1m against committed facilities and,
together with £4m overdraft facilities, there is headroom of some £23.1m
against total facilities at 30 June 2021. Management extended the expiry date
of the committed £20 million revolving credit facility during the year to
April 2023, and retain the option to extend it by a further year.
In assessing going concern to take account of the continued uncertainties
caused by Covid-19, the Group has modelled a Base Case (BC) trading scenario
on a "bottom up" basis. Given the continuing uncertainty regarding the impact
of Covid-19 (including potential further waves of the pandemic) on the
economy, customer behaviour and ultimately on the Group's performance, the
Group has also modelled a stress test scenario which assumes a 20% reduction
in revenue, with no cost reduction or cash conservation measures, and a
Covid-19 model, which assumes a five month disruption of trade consistent with
that experienced during the first wave of the pandemic. 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 September 2022, with no
breach of banking covenants across this 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 the potential impact of Covid-19, 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.
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 2021 within the next financial year are the valuation
of defined benefit pension obligations, the valuation of the Group's acquired
goodwill, the recognition of revenues and profit on contracts with customers
where revenue is recognised over time.
Valuation of defined benefit pension obligations requires estimation of future
changes in inflation, mortality rates and the selection of a suitable discount
rate.
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. See note 6 for
further disclosure of the assumptions and estimates applied.
Revenue and associated margin recognised over time on contracts with customers
is recognised using the input method under IFRS15 and therefore progressively
as costs are incurred, having regard to latest estimates of cost to complete
and expected project margins. Contract revenue includes an assessment of
contract variations when their recovery is considered highly probable.
Judgment is therefore required in the application of the Group's policy
regarding revenue and profit recognition relating to estimates of costs to
complete contracts, the final profit margin on those contracts and the
inclusion of potential contract variations prior to these being fully agreed.
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 2020 and have been
adopted for the Group financial statements where appropriate with no material
impact on the disclosures made by the Group:
• Definition of a Business (Amendments to IFRS 3);
• Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS 9,
IAS 39 and IFRS 7); and
• Covid-19-Related Rent Concessions (Amendments to IFRS 16).
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 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.
Revenue Segmental operating
result
£'000 £'000
Full Year to 30 June 2021
Water Management 38,370 6,115
Building Envelope 41,022 4,255
Housebuilding Products 11,073 2,552
Trading 90,465 12,922
Unallocated costs (1,918)
Total from continuing operations 90,465 11,004
£'000
Segmental operating result 11,004
Brand amortisation (238)
Past service cost in respect of GMP equalisation (see note 5) (150)
Restructuring & relocation costs (see note 5) (58)
Total operating profit from continuing operations 10,558
Capital expenditure
Segment Assets
Property, Other
Segment Liabilities Plant & Intangible Deprecia-tion Amortisa-tion
Equipment Assets
£'000 £'000 £'000 £'000 £'000 £'000
Water Management 29,866 (9,635) 1,455 271 1,081 137
Building Envelope 25,500 (10,208) 215 36 175 180
Housebuilding Products 14,747 (7,114) 769 23 798 44
Trading 70,113 (26,957) 2,439 330 2,054 361
Unallocated 7,520 (14,531) - - 92 -
Total 77,633 (41,488) 2,439 330 2,146 361
Revenue Segmental operating
result
£'000 £'000
Full Year to 30 June 2020
Water Management 33,715 4,824
Building Envelope 33,209 (939)
Housebuilding Products 9,068 1,243
Trading 75,992 5,128
Unallocated costs (967)
Total from continuing operations 75,992 4,161
£'000
Segmental operating result
Brand amortisation 4,161
Restructuring & relocation costs (see note 5) (238)
(807)
Total operating profit from continuing operations 3,116
Capital expenditure
Segment Assets
Property, Other
Segment Liabilities Plant & Intangible Deprecia-tion Amortisa-tion
Equipment Assets
£'000 £'000 £'000 £'000 £'000 £'000
Water Management 26,645 (7,244) 1,813 264 785 100
Building Envelope 22,267 (8,346) 162 17 175 173
Housebuilding Products 13,051 (5,687) 361 29 798 39
Trading 61,963 (21,277) 2,336 310 1,758 312
Unallocated/discontinued 22,241 (43,086) 19 131 93 1
Total 84,204 (64,363) 2,355 441 1,851 313
Analysis by geographical segment 2020/21
United North Middle Far Rest of
Kingdom Europe America East East World Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 78,194 4,133 3,599 1,286 2,663 590 90,465
Segment non-current assets 39,225 - - - 4 - 39,229
Analysis by geographical segment 2019/20
United North Middle Far Rest of
Kingdom Europe America East East World Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 64,816 4,147 3,184 1,485 1,587 773 75,992
Segment non-current assets 38,996 - - - - - 39,002
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 and
exclude discontinued operations.
5 UNDERLYING to Statutory profit before tax
reconciliation
2020/21 2019/20
Operating profit Profit before tax Operating profit Profit before tax
£'000 £'000 £'000 £'000
Underlying operating profit/profit before tax 11,004 10,515 4,161 3,665
Brand amortisation (238) (238) (238) (238)
IAS 19 net pension scheme finance costs - (268) - (261)
IAS 19 past service cost in respect of GMP equalisation (150) (150) - -
Restructuring & relocation costs (58) (58) (807) (807)
Profit/profit before tax from continuing operations 10,558 9,801 3,116 2,359
Profits/gains relating to discontinued operations - - - 339
Statutory operating profit/profit before tax 10,558 9,801 3,116 2,698
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 2020/21 and 2019/20 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 costs of material restructuring and relocation of
separate businesses within the Group in both 2020/21 and 2019/20, including
costs associated with the departure and recruitment of a Group Finance
Director during the prior financial year;
- The one off IAS 19 past service pension cost relating to
Guaranteed Minimum Pension ("GMP") equalisation between men and women,
following a High Court decision on 20 November 2020; and
- The one-off deferred tax rate change adjustment charge of £319k
relating to the increase in main rate of UK corporation tax from 19% to 25%.
6 GOODWILL
2021 2020
£'000 £'000
Cost:
At 1 July and 30 June 19,428 19,428
Impairment:
At 1 July and 30 June 723 723
Net book value at 30 June 18,705 18,705
Goodwill acquired through acquisitions has been allocated to cash generating
units for impairment testing as set out below:
2021 2020
£'000 £'000
Alumasc Roofing 3,820 3,820
Timloc 2,264 2,264
Levolux 10,179 10,179
Rainclear 225 225
Wade 2,217 2,217
At 30 June 18,705 18,705
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 indicators of 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% (2020: 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, including Covid-19,
in arriving at the figures used.
The range of pre-tax rates used to discount the cash flows of these cash
generating units with on-balance sheet goodwill was between 11% and 12% (2020:
between 11% and 12%). These rates were based on the Group's estimated weighted
average cost of capital (W.A.C.C.), which was risk-adjusted for each CGU
taking into account both external and internal risks. The Group's W.A.C.C. in
2021 was similar to the rate used in 2020.
The surplus headroom above the carrying value of goodwill at 30 June 2021 was
significant in the case of Timloc, Rainclear, Wade and Alumasc Roofing, 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 surplus headroom above the carrying value of goodwill at 30 June 2021 for
Levolux was more sensitive and the following change to each of the key
assumptions would lead to an impairment:
- a 3% increase in the discount rate;
- a growth rate of -1% used to extrapolate the cash flows;
- a 35% reduction in the cash flow generated in the terminal year.
7 tax expense
(a.) Tax on profit on ordinary activities
Tax charged in the statement of comprehensive income
2020/21 2019/20
£'000 £'000
Current tax:
UK corporation tax 1,443 22
Overseas tax 46 48
Amounts under/(over) provided in previous years 23 (19)
Total current tax 1,512 51
Deferred tax:
Origination and reversal of temporary differences 405 450
Amounts over provided in previous years (21) (157)
Rate change adjustment 319 98
Total deferred tax 703 391
Total tax expense 2,215 442
Tax recognised in other comprehensive income
Deferred tax:
Actuarial gains/(losses) on pension schemes 2,099 (1,838)
Cash flow hedge (90) 41
Tax charged/(credited) to other comprehensive income 2,009 (1,797)
4,224 (1,355)
Total tax charge/(credit) 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 22.6% is higher than (2019/20: 16.4% was lower
than) the standard rate of corporation tax in the UK of 19% (2019/20: 19.0%).
The differences are reconciled below:
2020/21 2019/20
£'000 £'000
Profit before tax from continuing operations 9,801 2,359
Profit before tax from discontinued operations - 339
Accounting profit before tax 9,801 2,698
Current tax at the UK standard rate of 19.0% (2019/20: 19.0%) 1,862 513
Expenses not deductible for tax purposes 32 71
Use of capital losses - (64)
Rate change adjustment 319 98
Tax under/(over) provided in previous years - current tax 23 (19)
Tax over provided in previous years - deferred tax (21) (157)
2,215 442
(c.) Unrecognised tax losses
The Group has agreed tax capital losses in the UK amounting to £16.3 million
(2020: £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 (2020: £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 (2020: £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 2019 540 (66) 482 (2) - 954 (2,202)
Charged/(credited) to the statement of comprehensive income - current year
170 (12) 11 - - 169 379
Credited to the statement of comprehensive income - prior year
(160) 3 - - - (157) -
Charged/(credited) to equity - - - 41 - 41 (1,838)
At 30 June 2020 550 (75) 493 39 - 1,007 (3,661)
Charged/(credited) to the statement of comprehensive income - current year
359 (65) 96 - (83) 307 417
Credited to the statement of comprehensive income - prior year
(5) (16) - - - (21) -
Charged/(credited) to equity - - - (90) (237) (327) 2,099
At 30 June 2021 904 (156) 589 (51) (320) 966 (1,145)
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 £3.7 million (2020: £2.9 million) in
respect of net capital losses of £15.3 million (2020: £15.3 million) have
not been recognised, see note 10 (c).
(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. Existing temporary differences on which deferred tax has been
provided may therefore unwind in future periods at this increased rate. Since
the 25% tax rate change was substantively enacted at the 30 June 2021 balance
sheet date, deferred tax assets and liabilities have been calculated to
reflect the expected timing of reversal of the related temporary difference
with an impact of £319k on the 2020/21 tax charge.
8 dividends
2020/21 2019/20
£'000 £'000
Interim dividend for 2021 of 3.25p paid on 6 April 2021 1,163 -
Final dividend for 2020 of 2.0p paid on 30 October 2020 715 -
Final dividend for 2019 of 4.4p paid on 31 October 2019 - 1,574
1,878 1,574
A final dividend of 6.25 pence per equity share, at a cash cost of
£2,236,000, has been proposed for the year ended 30 June 2021, payable on 29
October 2021. In accordance with IFRS accounting requirements this dividend
has not been accrued in these consolidated financial statements. The 2020
interim dividend, which was due to be paid on 7 April 2020 at a cash cost of
£1,055,000, was cancelled as part of the Group's Covid-19 cash conservation
programme.
9 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:
2020/21 2019/20
£'000 £'000
Net profit attributable to equity holders of the parent - continuing 7,586 1,917
operations
Net profit attributable to equity holders of the parent - discontinued - 339
operations
7,586 2,256
000s 000s
Weighted average number of shares 35,766 35,764
Dilutive potential ordinary shares - employee share options 637 55
36,403 35,819
Basic earnings per share: Pence Pence
Continuing operations 21.2 5.4
Discontinued operations - 0.9
21.2 6.3
Diluted earnings per share: 2020/21 2019/20
Pence Pence
Continuing operations 20.8 5.4
Discontinued operations - 0.9
20.8 6.3
Calculation of underlying earnings per share:
2020/21 2019/20
£'000 £'000
Reported profit before taxation from continuing operations 9,801 2,359
Brand amortisation 238 238
IAS 19 net pension scheme finance costs 268 261
Pension GMP equalisation 150 -
Restructuring & relocation costs 58 807
Underlying profit before taxation from continuing operations 10,515 3,665
Tax at underlying Group tax rate of 19.5% (2019/20: 20.3%) (2,050) (744)
Underlying earnings from continuing operations 8,465 2,921
Weighted average number of shares 35,766 35,764
Underlying earnings per share from continuing operations 23.7p 8.2p
10 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 360,017 (2020: 369,245) ordinary
own shares held by the Company. The market value of shares at 30 June 2021 was
£954,045 (2020: £265,856). These are held to help satisfy the exercise of
awards under the Company's Long Term Incentive Plans. During the year 9,228
shares with an original cost of £10,000 were used to satisfy the exercise of
awards. No shares were exercised in the prior financial period. 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.
11 related party disclosure
The Group's principal actively trading subsidiaries at 30 June 2021 are listed
below:
Principal subsidiaries Principal activity Country of incorporation % of equity interest
and votes held
2020 2019
Alumasc Building Products 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.
Financial Summary 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income Statement Summary
Continuing operations:
Revenue 69,950 73,005 88,368 87,048 90,104 75,992 90,465
Underlying operating profit 6,341 7,010 8,703 6,224 5,865 4,161 11,004
Underlying operating margin 9.1% 9.6% 9.8% 7.2% 6.5% 5.5% 12.2%
Net interest cost on borrowings (592) (215) (132) (212) (281) (343) (311)
Interest on lease liabilities - - - - - (153) (178)
Underlying profit before tax 5,749 6,795 8,571 6,012 5,584 3,665 10,515
Non-underlying items* (1,434) (1,502) (888) (1,082) (4,599) (1,306) (714)
Profit before taxation 4,315 5,293 7,683 4,930 985 2,359 9,801
Taxation (1,120) (1,319) (1,492) (967) (256) (442) (2,215)
Profit for the year from continuing operations 3,195 3,974 6,191 3,963 729 1,917 7,586
Discontinued operations - (Loss)/profit after tax 1,181 2,510 349 354 2,912 339 -
Profit for the year 4,376 6,484 6,540 4,317 3,641 2,256 7,586
Underlying earnings per share from continuing operations (pence) 12.6 15.1 19.1 13.4 12.4 8.2 23.7
Basic earnings per share (pence) 12.3 18.2 18.3 12.0 10.1 6.3 21.2
Dividends per share (pence) 6.0 6.5 7.15 7.35 7.35 2.0 9.5
Balance Sheet Summary at 30 June
Shareholders' funds 15,929 16,580 20,437 24,421 25,445 19,841 36,145
Net debt/(cash) (914) (8,632) (6,076) 4,812 5,095 4,333 937
Lease liabilities - - - - - 5,924 5,606
Pension deficit (net of tax) 16,748 18,588 17,095 12,566 10,749 15,608 3,436
Discontinued operations (3,708) (479) (334) (714) 359 - -
Capital Invested - continuing operations 28,055 26,057 31,122 41,085 41,648 45,706 46,124
Underlying return on capital invested (post-tax)** 17.9% 20.5% 24.2% 13.8% 10.2% 7.2% 19.8%
Underlying tax rate 22.0% 20.8% 20.6% 20.2% 20.4% 20.3% 19.5%
Notes
* Non-underlying items comprise brand amortisation and IAS 19 pension costs
in all years. Further details of the 2019/20 and 2020/21 non underlying items
can be found in note 5 of the Report and Accounts 2021.
** Underlying operating profit after tax from continuing operations calculated
using the underlying tax rate, as a percentage of average capital invested
from continuing operations.
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