REG - Alumasc Group Plc - Full Year Results
06/09/2022 07:17
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RNS Number : 3498Y Alumasc Group PLC 06 September 2022
IMMEDIATE RELEASE
Tuesday 6 September 2022
THE ALUMASC GROUP PLC
("ALUMASC")
FULL YEAR RESULTS ANNOUNCEMENT
STRONG PERFORMANCE ACROSS ALL DIVISIONS; DELIVERY OF STRATEGIC PRIORITIES
Alumasc (ALU.L), the premium sustainable building products, systems and
solutions Group, announces results for the year ended 30 June 2022.
Commenting on the results reported today, Paul Hooper, Chief Executive, said:
"These results mark a pivotal moment for Alumasc. I am delighted to report
this excellent set of results across our core businesses, with the strong
sustainability-linked and export sales demonstrating our growth potential.
With the disposal of Levolux on 26 August, we now have a simplified business
model and can focus our energies on growing our core businesses, with their
respected brands and significant market opportunities. Despite the current
macroeconomic uncertainty, FY23 trading to date has remained robust and order
books are strong, and we remain confident in the Group's future performance."
Financial Highlights: Strong performance from continuing operations:
· Revenues from continuing operations up 14.9% to £89.4m (2021:
£77.8m)
· Group underlying operating profit up 26.9% to £13.3m (2021:
£10.5m)
· Underlying operating margin increased by 140bps to 14.9% (2021:
13.5%)
· Underlying profit before tax up 27.0% to £12.7m (2021: £10.0m)
· Export sales of £13.7m (2021: £7.6m), representing 15% (2021:
10%) of total revenue
· Net bank debt of £4.7m (2021: £0.9m)
· Underlying EPS up 27.1% to 28.6p (2021: 22.5p)
· Basic EPS up 30.1% to 26.8p (2021: 20.6p)
· Final dividend up 6.4% to 6.65p (2021: 6.25p), with full year
dividend up 5.3% to 10.0p (2021: 9.5p)
Operational Highlights: Delivery of strategic priorities
· Disposal of Levolux post year end delivers a simplified business
model and a focus on core activities
· Benefits of cost efficient operating structure and volume growth
driving margin improvement
· Water Management Division delivered record revenues of £47.6m,
up 24% from 2021, and operating revenues of £8.8m
· Building Envelope Division's continuing activities delivered a 4%
increase in revenues to £29.4m and underlying operating profit sustained at
£3.6m
· Housebuilding Products grew its revenue by 12% to £12.4m and an
operating profit of £2.4m, with an operating margin of 19.7%
· Pension contributions reduced from £2.3m to £1.2m pa from
October 2022, following triennial review
· Growth investment opportunities continue to be appraised,
alongside a growing pipeline of potential acquisitions
· The Alumasc portfolio is strongly aligned to environmental growth
drivers, with c.80% of sales derived from environmental solution products,
underpinning the continued growth opportunity
Outlook:
· Alumasc is repositioned to focus on its strong brands, long-term
customer relationships across diverse markets and organic and inorganic growth
opportunities, supported by cost efficiencies
· Despite the current uncertain macroeconomic outlook, the Board
believes Alumasc's simplified business model, clear brands strategy and robust
start to FY23 provides confidence in the future.
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 present my first report as Chair, following the retirement of
John McCall on 31 December 2021. On behalf of Alumasc's stakeholders, I would
like to once again record my sincere thanks to John for his leadership,
contribution and unwavering support to Alumasc over many years.
In another year of unprecedented challenges, including continued Covid
disruption, the war in Ukraine, cost inflation not seen for a generation and
labour shortages, Alumasc's business has demonstrated strong momentum and
resilience, delivering underlying profits from continuing operations
substantially ahead of a successful prior year.
Performance
Revenues grew by 15% from £77.8 million to £89.4 million* and underlying
pre-tax profits from £10.0 million to £12.7 million*.
Alumasc's Net Debt increased to £4.7 million, compared to £0.9 million last
year. This reflects higher inventory levels to protect against material
shortages as well as Capex of £2.6 million, repaying pandemic related
government support of £0.7 million, dividend payments of £3.4 million and
pension contributions of £2.6 million. Our available bank credit facilities
have recently been increased to £29.0m, to allow Alumasc to invest both for
organic and inorganic growth.
*From continuing operations, see Note 5 for a reconciliation to statutory
profits.
Strategy - organic growth
Alumasc's divisions have been encouraged to reset their plans to deliver
faster and more ambitious growth. As a result, the divisions have invested in
additional high-quality people to accelerate product development and sales and
we expect to reap the benefits in the coming years. In addition, following the
successful cost reductions achieved from streamlining our operations in 2020,
Alumasc is examining the potential to drive further efficiencies across the
Group.
Strategy - corporate transactions
Following a strategic review, the Alumasc Board agreed that Levolux, with its
focus on installation, was non-core and it would be better positioned under
new ownership. Levolux was sold on 26 August 2022 to Talrus Limited, a company
associated with leading private investors, Rcapital. They are well placed to
support the Levolux business and management team, and we wish the Levolux team
and Talrus well.
Alumasc is also actively looking for synergistic acquisitions to supplement
its organic growth.
ESG
Our contribution to environmental sustainability through the energy and water
efficient products that we develop and sell was recognised by the London Stock
Exchange awarding Alumasc its Green Economy Mark in the year. This is awarded
to companies that derive the majority of their revenues from environmentally
friendly solutions and is appropriate recognition of the many Alumasc
colleagues who strive daily to produce solutions to combat climate change for
our customers and planet.
Pension scheme
The defined benefit pension scheme deficit has further reduced in the year
from £4.6 million to £2.1 million. I would like to thank both our Management
Team and the Pension Scheme Trustees for the collaborative approach they have
adopted to make further inroads to the deficit for the benefit of Scheme
Members, through a combination of Company pension contributions, sensible
asset investment decisions and the impact of gilt yields on liability
calculations. Agreement has also been reached with the Trustees to reduce the
Company's pension contributions to £1.2 million pa (previously £2.3 million)
until the next triennial valuation in 2025, in recognition of the reduced
scheme deficit.
Dividends
I am pleased to confirm that the Board continues to pursue a progressive
dividend policy. An interim dividend of 3.35p per share was paid in April 2022
and our proposed final dividend, if approved by shareholders, is 6.65p, making
a total distribution for the year of 10.0p per share (2020/21 9.5p per share).
Board
John McCall and Jon Pither, having given a combined nearly 70 years of loyal
service to Alumasc, retired during the year. On behalf of all our
stakeholders, I thank them for their immense contribution and wish them long
and happy retirements.
Stephen Beechey took on the role of Remuneration Committee Chair following
Jon's retirement. The Board was very pleased to welcome Karen McInerney to the
Board as a Non-executive Director and Chair of the Audit Committee in the
year. Karen brings a wealth of financial, treasury and risk management
experience from having worked in a small listed company which is now a FTSE
250 group and we are already benefitting from her insights.
Looking ahead and Alumasc's people
Whilst economic and geopolitical conditions continue to be unpredictable and
will doubtless lead to some volatility, Alumasc has a clear long-term strategy
of organic and inorganic growth focused on sustainable building products.
ur people have demonstrated remarkable resilience and adaptability in the past
two and a half years, and I am sure they will continue to do so in the times
ahead to deliver a strong performance for our various stakeholders. The Board
and I thank our staff colleagues for their continued hard work and commitment.
Vijay Thakrar
Chair
6 September 2022
Chief Executive's Review
Financial Highlights and Overview
2021/22 2020/21 % change
Group performance from continuing operations:
Revenue (£m) 89.4 77.8 +15%
Underlying profit before tax (£m) * 12.7 10.0 +27%
Statutory profit before tax (£m) 12.0 9.5 +27%
Underlying earnings per share (pence) * 28.6 22.5 +27%
Basic earnings per share (pence) 26.8 20.6 +30%
6
Dividends per share (pence) 10.0 9.5 +5%
*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. Our number one
priority is always the health, safety and wellbeing of our people and visitors
to sites. We have complied with, as a minimum, government regulations.
Unannounced HSE visits have confirmed this with very positive feedback being
received. 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 very proud of our incredible people and all that they have achieved.
Overview of performance
Despite the prior year delivering a record result assisted by circa £2.5
million of pent up revenue demand from the Covid affected lockdown year of
19/20, I am pleased to report a further record year driven by record revenue
(since the focus on only premium Building Products began in 2016) which
increased by 15% over the prior year.
The year was particularly affected by significant raw material and freight
cost increases, in many cases well ahead of inflation. These were successfully
recovered through sales price increases.
The star performer of the year was undoubtedly the Water Management Division.
Following its prior year record 27% profit growth to £6.1 million it grew a
further 43% to £8.8 million, increasing its operating margin to 18.4% from
15.9%. This was an outstanding performance and was driven by a 24% revenue
increase to £47.6 million.
The remaining two divisions had credible performances against a difficult
background of increasing global supply chain challenges, almost achieving the
same results as the previous financial year. Both the divisions grew their
sales albeit with margins down slightly against the prior year. New products
again played a major role, particularly at the Housebuilding Products Division
which in the past 18 months launched a record number of products. This was
again supported by its industry leading next day service, both of which have
significantly contributed to its performance.
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
UK revenue growth from continuing operations was 9% which we believe was at a
faster growth rate than the UK construction market. For instance, there is no
doubt that market share was taken both in the UK Roofing market and the UK
market in which Gatic Slotdrain operates.
2. Augment UK revenue growth through the development of selected
export markets
Compared to the prior year, in which export revenues were 10% of Group
revenues, this year export revenues from continuing operations reached 15% and
grew by just over £6.0 million (80%) assisted by Gatic Cover work on the Chek
Lap Kok Airport third runway in Hong Kong.
3. Grow profit at a faster rate than revenue by improving operating
margins
The Group's operating profit from continuing operations grew by £2.8 million
(27%) to £13.3 million.
Executing our priorities in FY21/22
Management accelerated the pace of strategic development during its 2022
financial year:
1. Levolux divestment
Following a strategic review it became clear that Levolux was no longer core
to the development of the Group. Its business model is different to the rest
of the Group's, with a focus on design and installation, despite management's
best efforts to be a supply only company which is not what the customers want.
Levolux was sold on 26 August 2022 to Talrus Limited who are well placed to
support the Levolux business and management team to return the business to
sustainable profit.
2. Implementation of a more cost-efficient operating structure
The Group's relentless focus on cost efficiency has supported the improvement
in underlying operating margin from continuing operations, from 8.4% in the
2018 financial year to 14.9% in 2022. Further efficiencies across the
facilities will continue to be sought.
3. Prioritising and focusing investment to drive profitable growth
Capital expenditure was £2.6 million, very slightly ahead of depreciation.
Once again investment has been focused on our businesses with the greatest
manufacturing activity: our Water Management business and our Housebuilding
Products business. We continue to invest 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 our Housebuilding
Products Division, including to support new product launches. The benefit of
the investments is evident in the relatively strong performances of these
businesses. There has also been a further reduction in our carbon emissions
brought about by the additional investment in more efficient machinery at
Timloc along with the Group's recent introduction of electric vehicles to the
company fleet.
4. Proactive management of our portfolio of businesses
The Group continues to seek to grow through bolt-on acquisitions. With the
Group's platform simplified and focused following the disposal of Levolux, we
are well placed to leverage our strong financial position and capitalise on
the opportunities presented by our growing pipeline of acquisition targets.
5. 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 who target
these criteria. An example of this is its 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 significantly
contributed to the energy conservation and air tightness within new build
housing with its ventilation products, cavity closers, cavity stop socks and
radiator seal. It is constantly innovating and launching new products that
meet or exceed the latest legislation including the latest uplift in Building
Regulations (Part F and Part L). A recent example of this is the new InVentive
Roof Tile Vent Range, a significant product launch for 2022/23 which opens a
new channel with Roofing Merchants.
The division is well placed to assist housebuilders with the introduction of
housing to the Future Homes Standard in 2025 and further changes in
legislation.
All divisions are totally committed to, and insist on, the use of recycled and
recyclable material where appropriate. Alumasc is very proud to be able to
state that 75% of the Group's products are made from readily recyclable
material and 26% of the Group's raw materials are sourced from recycled
material.
The Housebuilding Products Division is already operating at a carbon neutral
level and there are plans in place for the rest of the Group to follow suit
over time.
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.
Overview of performance
Continuing operations:
Revenue analysis
Revenue grew by £11.6 million (15%) compared to the prior year. This was the
resultant benefit of investing in high quality Roofing salespeople, launching
new products, winning market share, growing Gatic SlotDrain sales and winning
the Gatic Covers project at Chek Lap Kok Airport in Hong Kong.
Gross margin
Alumasc's Gross Margin fell by 0.5 percentage points, to 37.3%, following a
successful pass through of raw material price increases.
Net fixed and operating
expenses
Net fixed and operating expenses increased by £1.5 million during the year
mainly due to increased sales resource, marketing, product managers and
inflationary pay increases.
Underlying operating profit
Underlying operating profit was £13.3 million compared with £10.5 million in
the prior year.
Underlying profit before tax
Underlying profit before tax was £12.7 million (2020/21: £10.0 million).
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 £0.5 million net cost in the prior year. Further
details are given in the Financial Review.
Discontinued operations:
The Levolux trading loss, and the £14.9 million non-cash write down of the
associated assets held for sale, resulted in a loss after tax from
discontinued operations of £16.7 million (2020/21: £0.2 million profit).
Levolux - discontinued/divested/held for sale
Following its substantial turnaround in the prior year Levolux fell back with
a loss which was very disappointing. This was principally linked to the
reduction in commercial activity in the UK and USA, in some cases the result
of main contractors delaying the placing of orders to try to obtain lower
prices during the above mentioned period of significant cost increases. This
was all against a background in which Covid-19 affected activity and, in
particular, during further lockdowns in North America. A strategic review
determined that Levolux should be divested. Therefore, following a sales
process Levolux was sold on 26 August 2022 for a nominal initial consideration
of £1 together with £1 million of deferred consideration which is repayable
from proceeds in excess of £1 million arising from any subsequent disposal.
Profit after tax for the year
The Group's resulting overall statutory loss after tax for the year was £7.0
million (2020/21: £7.6 million profit).
Divisional review
(a) Water Management
Revenue: £47.6 million (2020/21: £38.4 million)
Underlying operating profit*: £8.8 million (2020/21: £6.1 million)
Underlying operating margin*: 18.4% (2020/21: 15.9%)
Operating profit: £8.7 million (2020/21: £6.0 million)
* Prior to brand amortisation charges of £0.1 million in both years
Water Management produced a record profit of £8.8 million which was £2.7
million (43%) higher than the previous year. This followed the prior year
record growth of £1.3 million (27%) versus the 19/20 year.
The drivers of the improvement were revenue related (which increased by £9.2
million (24%)) and product portfolio management, including new product
launches, general efficiency improvement and tight cost control. Significant
material cost increases were passed on in the year. The performance in this
division was assisted by the winning of the contract to supply the third
runway with Gatic Covers at Chek Lap Kok Airport in Hong Kong.
Water Management's operating profit return on sales increased to 18.4% from a
prior year of 15.9%. This was a very encouraging performance.
(b) Building Envelope
Revenue*: £29.4 million (2020/21: £28.4 million)
Underlying operating profit*: £3.6 million (2020/21: £3.8 million)
Underlying operating margin*: 12.2% (2020/21: 13.2%)
Operating profit*: £3.1 million (2020/21: £3.8 million
* From continuing operations. Underlying figures presented prior to
restructuring costs of £0.5 million in 2021/22
The Building Envelope Division sells principally into the high end UK
commercial and residential new build construction market.
Alumasc Roofing's performance was strong and in particular within the
Refurbishment sector. The five new salespeople recruited in the prior year
significantly strengthened some of the more weak areas of sales in the UK
whilst technical services staffing was increased across the country. It went
from strength to strength and increased its revenue stream whilst also
securing additional market share. This business now has a very strong and
capable sales force. Significant cost increases were passed on in the year.
(c) Housebuilding Products
Revenue: £12.4 million (2020/21: £11.1 million)
Underlying operating profit*: £2.4 million (2020/21: £2.6 million)
Underlying operating margin*: 19.7% (2020/21: 23.0%)
Operating profit: £2.4 million (2020/21: £2.5 million)
* Prior to restructuring costs of £0.1 million in 2020/21
Timloc, our Housebuilding Products Division, had another strong 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 saw continued growth of recently launched new products and
launched further new products including FrStop cavity stop socks,
Non-combustible products and a number of Roofline Products. A very exciting
full launch of its new Tile Vent Range will take place in Q1 of the new
financial year, with early indications of success encouraging.
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 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.
The Board believes that Alumasc's strong strategic and market positions
underpin its established track record over many years of outperforming the UK
construction market, together with:
• the outstanding Water Management Division's performance which is really
benefitting from both its UK and export re-focused strategy, as well as its
extensive online offering;
• the strong Roofing performance where it enters the new year with a very
healthy order book;
• the strong performance of the Housebuilding Products Division against a
structural market shortage of housing in the UK;
• focused investments in new products, manufacturing capability and
automation;
• investments in sales resources and product managers to grow the business
both in the UK and internationally;
• actions taken to deliver operational efficiencies across the Group; and
• close alignment to the sustainability agenda.
Demand remains strong entering the new financial year, which has started in
line with management's expectations.
Notwithstanding uncertainty over the current macroeconomic outlook, a strong
platform is now in place which provides the Board with confidence for another
strong year.
G Paul Hooper
Chief Executive
6 September 2022
Financial Review
Reconciliation of underlying to statutory profit before tax from continuing
operations
The underlying profit before tax from continuing operations for the 2021/22
financial year of £12.7 million reconciles to the statutory profit before tax
from continuing operations of £12.0 million as follows:
2021/22 2020/21
£m
£m
Underlying profit before tax 12.7 10.0
Brand amortisation (0.1) (0.1)
Net IAS 19 defined benefit pension scheme costs (0.1) (0.2)
Restructuring costs (0.5) (0.1)
IAS 19 past service cost in respect of GMP equalisation - (0.1)
Statutory profit before tax 12.0 9.5
The reconciling items were:
· Amortisation of acquired brands of £0.1 million (2020/21: £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.
· Net IAS 19 defined benefit pension scheme costs of £0.1 million
(2020/21: £0.2 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.
· One-off restructuring costs of £0.5 million (2020/21: £0.1
million), reflecting the cost of exiting the Group's remaining roofing
installation business and following changes in the estimated cost of several
reorganisation projects, which were announced during the 2019/20 financial
year.
· A one-off IAS 19 past service cost in the prior year of £0.1
million, representing an increase in the estimated cost of guaranteed minimum
pension equalisation between men and women, following a High Court ruling in
November 2020.
Taxation
The Group's underlying effective tax rate on continuing operations was 19.4%
(2020/21: 19.5%), slightly above the UK statutory corporation tax rate of 19%
due to certain costs that are disallowable for tax purposes. We expect the
Group's underlying tax rate to be approximately 21% in the 2022/23 financial
year, due to the planned increase in the main UK corporation tax rate from 19%
to 25% from 1 April 2023.
The Group's effective tax rate on statutory profit before tax was 20.6%
(2020/21: 22.6%). Reconciliations from the actual to statutory rates of tax
are provided in note 8. The reconciling items mainly relate to the tax
treatment of the one-off items in the Group's income statement and the
deferred tax impact of the planned increase in the corporation tax rate to 25%
from 1 April 2023.
Earnings per share
Underlying earnings per share from continuing operations for the year was 28.6
pence (2020/21: 22.5 pence). This increase is consistent with the increased
underlying profit before tax for the year.
Basic earnings per share from continuing operations of 26.8 pence (2020/21:
20.6 pence) reflected the increase in underlying profit before tax for the
year.
Dividends
The Board have recommended to shareholders a final dividend of 6.65 pence per
share (2020/21: 6.25 pence), which will absorb an estimated £2.4 million 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 4 November 2022 to members
on the share register on 30 September 2022.
Together with the interim dividend of 3.35p (2020/21: 3.25p) paid to
shareholders on 6 April 2022, this will bring the total distribution for the
year to 10.0 pence per share (2020/21: 9.5 pence), which is covered 2.9 times
(2020/21: 2.4 times) by underlying earnings per share from continuing
operations.
The Board continues to follow a progressive distribution policy, where
dividends rise broadly in line with earnings, while maintaining a prudent
level of cover.
Summarised Cash Flow Statement
2021/22 2020/21
£m
£m
Underlying operating profit from continuing operations 13.3 10.5
Underlying depreciation/amortisation 2.7 2.7
Underlying EBITDA 16.0 13.2
Change in working capital (4.0) 0.6
Deferred VAT repaid (0.7) (1.1)
Operating cash flow from continuing operations 11.3 12.7
Discontinued operation (2.3) (1.0)
Operating cash flow from continuing and discontinued operations
9.0 11.7
Capital expenditure (2.6) (2.0)
Interest (0.4) (0.2)
Tax (1.6) (0.2)
Pension deficit funding (2.6) (2.6)
Lease payments (0.9) (0.9)
Purchase of own shares (0.5) -
Dividend payments (3.4) (1.9)
Sub total (3.0) 3.9
Non-underlying payments (0.8) (0.5)
Movement in net bank debt (3.8) 3.4
Net bank debt at the year end 4.7 0.9
Cashflows and net debt
The Group's cash management activities during the year were focused on
repayment of the final tranches of Covid-related VAT and pension deferrals,
and the management of working capital during a period of strong demand coupled
with significant price inflation and continued supply chain disruption.
The Group's operating cashflow from continuing operations was £11.3 million
(2020/21: £12.7 million), after a cash outflow into working capital of £4.7
million, which includes payment of £0.7 million of VAT deferred from 2019/20
(2020/21: £0.5 million outflow, including £1.1 million of deferred VAT
payments). Operating cashflow from continuing operations as a percentage of
underlying operating profit was 85% (2020/21: 121%), reflecting selective
investment in inventory to maintain customer service and manage cost price
increases, coupled with the cost price inflation and strong revenue growth in
the period. As a consequence, average trade working capital as a percentage of
revenue was 18.1% over 2021/2022 (2020/21: 13.9%). After a £2.3 million cash
outflow from discontinuing operations (2020/21: £1.0 million outflow), the
total operating cash inflow from continuing and discontinued operations was
£9.0 million (2020/21: £11.7 million).
Capital expenditure was £2.6 million (2020/21: £2.0 million), representing
104% of depreciation (2020/21: 86%). The main investments were on capacity
and efficiency improvements at our Housebuilding Products facility in Howden,
East Yorkshire, and at Water Management. 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 £1.6 million were made in the year (2020/21: £0.2 million).
The prior year included a £0.4 million receipt of tax overpayments from
2018/19.
The Group recorded a net cash outflow for the year of £3.8 million (2020/21:
£3.4 million inflow), increasing net debt at 30 June 2022 to £4.7 million
(30 June 2021: £0.9 million).
Statement of financial position and return on investment
Group net assets decreased by £10.4 million in the year to £25.7 million at
30 June 2022, a consequence of the write down of assets held for sale in
relation to the Levolux business, partially offset by 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 from continuing operations divided by capital invested) was
25.8% (2020/21: 18.4%), reflecting the improved operating performance.
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. Mortality and inflation assumptions have
been aligned to updated actuarial information. The IAS 19 defined benefit
pension scheme deficit at 30 June 2022, before deferred taxes, was £2.1
million (30 June 2021: £4.6 million). Scheme assets decreased in the year by
£25.4 million to £87.2 million. Scheme liabilities decreased by £27.9
million to £89.3 million, due to an increase in the discount rate.
Payments into the scheme in the year were £2.6 million (2020/21 £2.6
million), including £0.2 million (2020/21 £0.4 million) of payments deferred
from 2019/20 under a COVID-19 cash conservation scheme agreed with the
trustees.
Future contributions are agreed with the scheme's trustees, based on actuarial
valuations rather than the IAS 19 deficit. Following the triennial review in
March 2022, the Group has agreed reduced annual payments of £1.2 million from
1 October 2022. These payments are designed to enable the scheme to reach a
fully funded position, using prudent assumptions about the future, 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.
During the year, the Group entered into a £25.0 million committed revolving
credit facility which expires in August 2025 and two further single year
extension periods to August 2026 and August 2027. A further £20 million is
available through an uncommitted accordion facility.
Alumasc's current banking facilities comprise:
· An unsecured committed three-year revolving credit facility of £25.0
million, with an expiry date of August 2025 and a further two one year
extension periods;
· 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 2022 and 2021:
Covenant 30 June 2022 30 June
2021
Net debt:
EBITDA
<2.5
0.4 0.1
Interest
cover
>3.5
31.7 42.1
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 including stress test scenarios modelled on both a resumption
of Government lockdowns and a 20% reduction in revenue.
Under the stress test scenarios, there remained adequate headroom in banking
facilities and no breach of banking covenants over the 13-month period to
September 2023. 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
6 September 2022
The contents of this announcement have been extracted from the annual report
and accounts for the year ended 30 June 2022 which will be dispatched to
shareholders on or around 22 September 2022 and will be available at
www.alumasc.co.uk (http://www.alumasc.co.uk) .
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.
· Strategy includes helping customers address climate change, by
selling and creating innovative new products with sustainable qualities and
eco-friendly credentials.
Geo-political uncertainty/Inflation
Risk/Impact · Strategic positioning in export markets/sectors anticipated to
grow faster than the UK construction market.
Macroeconomic uncertainty on a global basis due to the pandemic in countries following a zero covid policy in China and other countries, and following the Russian invasion of Ukraine and subsequent war in Ukraine. · Revenues are derived from a variety of end-use construction
Markets are not settled post Brexit and ongoing logistics delays continue. markets - this provides resilience.
Inflation and interest rates resulting in increased prices for raw material, energy supplies and services, also impacting pay and other costs.
· Development of added value systems and solutions that are
required by legislation, building regulation and/or specified by architects
and engineers.
· 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 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.
· 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 have increased through local lockdowns due to the Covid-19 pandemic, skilled staff shortages, increased tariffs/ duties, Brexit risks in Europe and together political/global volatility, and shortages of skilled logistics staff. · Regular key supplier visits, good relationships maintained
including quality control reviews and training.
· Logistics delays due to driver shortages have been managed and
delivery times agreed/managed with customers. Shortages of ships for cargo
transportation also impact delivery times. Delays in logistics are due to
shortage of transportation/staff and a steep rise in demand post Covid.
· Regular supplier quality, value for money and risk reviews.
· Avoidance of strategic dependence on single sources of supply.
· Contingency plans in place 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 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 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 Interruption risks are increasing globally · Business continuity plans are in place, or being evolved where we
and have increased during the Covid-19 pandemic and following the Russian are relocating operations, at each business.
invasion of Ukraine.
· Awareness training and management briefings held on cyber
security risks and actions taken as preventative measures.
· 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.
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.
Covid-19 pandemic
· The primary focus has been on the health and wellbeing of staff
and additional communication channels were established. In addition, a new
Risk/Impact wellbeing app has been made available to all staff to help to mitigate stress
at home and in the workplace.
The pandemic is still impacting our customers' and suppliers' businesses and the supply chain · Staff have moved to a hybrid working model where appropriate. All
Impact in countries overseas impacting customer and suppliers - with lockdowns. manufacturing sites have been operational with additional Covid-19 protocols
There is an established approach for our divisions and processes incorporated into business as usual. in place.
Adverse impact on the welfare of staff.
· Exports and internet sales have been buoyant and helped us to
connect with new customers/market share.
· Some business opportunities and mitigations used during the
pandemic (including use of video conferencing) continue to provide ways to
trade efficiently and improve margin/revenue due to cost
reduction/efficiencies. Best practices and new ways of working that proved to
be effective will be adopted going forward.
· With new ways of working the business is very agile and can
quickly implement any new 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 & safety risks
· Health & safety and the wellbeing of staff is the main
priority of management and the first Board agenda item.
Risk/Impact
· Risk assessments are carried out and safe systems of work
documented and communicated.
Health & safety incident could occur despite a strong culture and previous · All safety incidents and significant near misses are reported at
management performance. Board level monthly, with appropriate remedial action taken.
· Group health & safety best practice days are held twice a
year, chaired by the Chief Executive.
· Annual audits of health & safety are conducted in all Group
businesses by independent consultants and other specialist advisers.
· Health & Safety training is provided, and implementation is
monitored.
· Specific focus on improving safety of higher risk operations,
with external consultancy support as needed.
· Very 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.
· Retention plans for key, high performing, and high-potential
employees.
· The Remuneration Committee considers retention and motivation
when considering the remuneration framework.
· Succession planning.
Product/service differentiation relative to competition not developed or maintained legislative and media risks · 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 and have an agile and entrepreneurial but compliant business behaviour. Increasing regulation and media focus in products/service have impacted the risk profile. 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. The Group operates credit · Project tracking and enquiry/quote conversion rate KPI.
insurance (see credit risk) to cover the potential impact of loss of revenue.
Service and client relationship need to be maintained to retain and grow the · Increasing use of, and investment in, customer relationship
business. management (CRM) software.
· Organisational and business agility to understand and adapt to
changing and emerging customer needs.
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 to
prevent it holding back the business. · 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 2022
Year ended 30 June 2022 Year ended 30 June 2021 (restated)*
Underlying Non-underlying Underlying Non-underlying
Total Total
Continuing operations: Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 4 89,381 - 89,381 77,805 - 77,805
Cost of sales (56,015) - (56,015) (48,364) - (48,364)
Gross profit 33,366 - 33,366 29,441 - 29,441
Net operating expenses
Net operating expenses before non-underlying items
(20,033) - (20,033) (18,935) - (18,935)
IAS 19 past service pension cost 5 - - - - (150) (150)
Other non-underlying items 5 - (634) (634) - (128) (128)
Net operating expenses (20,033) (634) (20,667) (18,935) (278) (19,213)
Operating profit 4, 5 13,333 (634) 12,699 10,506 (278) 10,228
Net finance costs (608) (60) (668) (489) (268) (757)
Profit before taxation 12,725 (694) 12,031 10,017 (546) 9,471
Tax expense 8 (2,469) 48 (2,421) (1,953) (165) (2,118)
Profit for the year from continuing operations 10,256 (646) 9,610 8,064 (711) 7,353
Discontinued operations:
(Loss)/profit after taxation for the period from discontinued operations
6 (1,577) (15,080) (16,657) 401 (168) 233
Profit/(loss) for the year 8,679 (15,726) (7,047) 8,465 (879) 7,586
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit pensions, net of tax
(25)
10,393
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
480 (385)
Exchange differences on retranslation of foreign operations
161 (46)
641 (431)
Other comprehensive gain for the year, net of tax
616 9,962
Total comprehensive (loss)/profit for the year, net of tax (6,431) 17,548
Earnings per share Pence Pence
Basic earnings per share
- Continuing operations 26.8 20.6
- Discontinued operations (46.5) 0.6
10 (19.7) 21.2
Diluted earnings per share
- Continuing operations 26.4 20.2
- Discontinued operations (46.5) 0.6
10 (20.1) 20.8
*The results for the year to 30 June 2021 have been re-presented to show the
Levolux business as a discontinued operation. See note 6 for details
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 2022
Notes 2022 2022 2021 2021
£'000 £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment - owned assets 12,573 11,734
Property, plant and equipment - right-of-use assets 4,926 5,469
Goodwill 7 8,526 18,705
Other intangible assets 2,126 3,321
Deferred tax assets 8 529 1,145
28,680 40,374
Current assets
Inventories 13,394 10,871
Trade and other receivables 18,786 21,389
Derivative financial assets 325 -
Cash at bank 8,284 4,999
40,789 37,259
Total assets 69,469 77,633
Liabilities
Non-current liabilities
Interest bearing loans and borrowings (13,000) (5,936)
Lease liability (4,251) (4,811)
Employee benefits payable (2,114) (4,581)
Provisions (1,061) (1,267)
Deferred tax liabilities 8 (1,730) (966)
(22,156) (17,561)
Current liabilities
Trade and other payables (19,031) (21,011)
Lease liability (881) (795)
Provisions (1,360) (834)
Corporation tax payable (309) (1,019)
Derivative financial liabilities - (268)
(21,581) (23,927)
Total liabilities (43,737) (41,488)
Net assets 25,732 36,145
Equity
Share capital 4,517 4,517
Share premium 11 445 445
Capital reserve - own shares 11 (601) (406)
Hedging reserve 11 263 (217)
Foreign currency reserve 11 216 55
Profit and loss account reserve 20,892 31,751
Total equity 25,732 36,145
The financial statements were approved by the Board of Directors and
authorised for issue on 6 September 2022
Paul Hooper
Simon Dray
Director
Director
6 September 2022 Company number 1767387
consolidated STATEMENT of cash flows
For the year ended 30 June 2022
Year ended Year ended
30 June 30 June
2022 2021
Notes £'000 £'000
Operating activities
Operating profit from continuing operations 12,699 10,228
Adjustments for:
Depreciation 2,459 2,098
Amortisation 257 193
Gain on disposal of property, plant and equipment (18) (16)
IAS 19 past service pension cost 5 - 150
Increase in inventories (2,573) (2,546)
Increase in receivables (2,536) (4,570)
Increase in trade and other payables 279 6,557
Movement in provisions (298) (310)
Cash contributions to retirement benefit schemes (2,561) (2,614)
Share based payments 118 397
Cash generated by operating activities of continuing operations 7,826 9,567
Operating profit from discontinued operations (2,125) 330
Depreciation/amortisation 224 216
Movement in working capital from discontinued operations (438) (1,513)
Cash utilised by operating activities of discontinued operations (2,339) (967)
Tax paid (1,615) (161)
Net cash inflow from operating activities 3,872 8,439
Investing activities
Purchase of property, plant and equipment (2,449) (1,666)
Payments to acquire intangible fixed assets (123) (330)
Proceeds from sales of property, plant and equipment 22 46
Net cash outflow from investing activities (2,550) (1,950)
Financing activities
Bank interest paid (356) (207)
Equity dividends paid 9 (3,434) (1,878)
Draw down/(repayment) of amounts borrowed 7,000 (14,000)
Principal paid on lease liabilities (713) (692)
Interest paid on lease liabilities (169) (178)
Purchase of own shares (526) -
Refinancing costs - (65)
Net cash inflow/(outflow) from financing activities 1,802 (17,020)
Net increase/(decrease) in cash at bank and bank overdraft 3,124 (10,531)
Net cash at bank and bank overdraft brought forward 4,999 15,576
Net increase/(decrease) in cash at bank and bank overdraft 3,124 (10,531)
Effect of foreign exchange rate changes 161 (46)
Net cash at bank and bank overdraft carried forward 8,284 4,999
consolidated STATEMENT of changes in equity
For the year ended 30 June 2022
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 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 9 - - - - - (1,878) (1,878)
Exercise of share based incentives - - - - - (10) (10)
At 1 July 2021 4,517 445 (406) (217) 55 31,751 36,145
Loss for the period - - - - - (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 30 June 2022 4,517 445 (601) 263 216 20,892 25,732
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 have been prepared in accordance with UK
adopted international accounting standards.
Going concern
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 2022 the Group had cash and cash equivalents of £8.3 million and
had utilised £13.0 million of its committed £20.0 million revolving credit
facility. This provided total headroom of some £15.3 million against
committed facilities and, together with £4 million overdraft facilities,
there is headroom of some £19.3 million against total facilities at 30 June
2022. On 25 August 2022 the Group entered into a £25.0 million committed
revolving credit facility which expires in August 2025 with two further single
year extension periods to August 2026 and August 2027.
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 the end of September
2023, 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 2022 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 7 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 2021 and have been
adopted for the Group financial statements where appropriate with no material
impact on the disclosures made by the Group:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37);
· 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, IFRS 16 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 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
Year to 30 June 2022
Water Management 47,564 8,753
Building Envelope 29,389 3,580
Housebuilding Products 12,428 2,447
Trading 89,381 14,780
Unallocated costs (1,447)
Total from continuing operations 89,381 13,333
£'000
Segmental operating result 13,333
Brand amortisation (see note 5) (70)
Restructuring costs (see note 5) (564)
Total operating profit from continuing operations 12,699
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 9,990 (8,625) 141 12 360 187
Housebuilding Products 15,851 (7,346) 1,310 41 866 48
Trading 60,925 (27,207) 2,878 123 2,433 425
Unallocated 8,544 (16,530) 5 - 82 -
Total 69,469 (43,737) 2,883 123 2,515 425
Revenue Segmental operating
result
£'000 £'000
Year to 30 June 2021
Water Management 38,370 6,115
Building Envelope 28,362 3,757
Housebuilding Products 11,073 2,552
Trading 77,805 12,424
Unallocated costs (1,918)
Total from continuing operations 77,805 10,506
£'000
Segmental operating result 10,506
Brand amortisation (see note 5) (70)
Past service cost in respect of GMP equalisation (see note 5) (150)
Restructuring costs (see note 5) (58)
Total operating profit from continuing operations 10,228
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
Analysis by geographical segment 2021/22
United North Middle Far Rest of
Kingdom Europe America East East World Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales to external customers 75,714 2,983 21 2,006 8,071 586 89,381
Segment non-current assets 28,150 - - - 1 - 28,151
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 70,205 3,004 57 1,286 2,663 590 77,805
Segment non-current assets 39,225 - - - 4 - 39,229
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
2021/22 2020/21
Operating profit Profit before tax Operating profit Profit before tax
£'000 £'000 £'000 £'000
Underlying operating profit/profit before tax from continuing operations
13,333 12,725 10,506 10,017
Brand amortisation (70) (70) (70) (70)
IAS 19 net pension scheme finance costs - (60) - (268)
IAS 19 past service cost in respect of GMP equalisation - - (150) (150)
Restructuring & relocation costs (564) (564) (58) (58)
Profit before tax from continuing operations 12,699 12,031 10,228 9,471
Underlying operating (loss)/profit of Levolux (note 6) (1,957) (1,957) 498 498
Brand amortisation Levolux (note 6) (168) (168) (168) (168)
Write down of assets held for sale (note 6) - (14,912) - -
Statutory operating profit/(loss)/profit before tax 10,574 (5,006) 10,558 9,801
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 2021/22 and 2020/21 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 of separate businesses
within the Group in both 2021/22 and 2020/21;
- The one off IAS 19 past service pension cost relating to
Guaranteed Minimum Pension ("GMP") equalisation between men and women, in the
prior financial year; 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% in
the prior financial year.
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. At the year end the discontinued operation had liabilities of
£3,859,000. The assets held for resale were written down to a value
equivalent to the liabilities to reflect the sales proceeds of £1 received on
26 August 2022.
The results of Levolux included in the consolidated statement of comprehensive
income are as follows:
Year to 30 June 2022 Year to 30 June 2021
£'000 £'000
Revenue 7,820 12,660
Underlying operating (loss)/profit (1,957) 498
Brand amortisation (168) (168)
Write down of goodwill (10,179) -
Write down of brand (874) -
Write down of Assets held for sale (3,859) -
(Loss)/profit before taxation (17,037) 330
Tax credit/(charge) (see note 8) 380 (97)
(Loss)/profit after taxation (16,657) 233
7 GOODWILL
2022 2021
£'000 £'000
Cost:
At 1 July and 30 June 19,428 19,428
Impairment:
At 1 July 723 723
Write down of Assets held for sale 10,179 -
At 30 June 10,902 723
Net book value at 30 June 8,526 18,705
Goodwill acquired through acquisitions has been allocated to cash generating
units for impairment testing as set out below:
2022 2021
£'000 £'000
Alumasc Roofing 3,820 3,820
Timloc 2,264 2,264
Levolux - 10,179
Rainclear 225 225
Wade 2,217 2,217
At 30 June 8,526 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% (2021: 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 12% (2021: 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 2022 was similar to
the rate used in 2021.
The surplus headroom above the carrying value of goodwill at 30 June 2022 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 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 on ordinary activities
Tax charged in the statement of comprehensive income
2021/22 2020/21
£'000 £'000
Current tax:
UK corporation tax - continuing operations 1,094 1,346
- discontinued (380) 97
operations
Overseas tax 207 46
Amounts (over)/under provided in previous years (16) 23
Total current tax 905 1,512
Deferred tax:
Origination and reversal of temporary differences 833 405
Amounts under/(over) provided in previous years 78 (21)
Rate change adjustment 225 319
Total deferred tax 1,136 703
Total tax expense 2,041 2,215
Tax charge on continuing operations 2,421 2,118
Tax (credit)/charge on discontinued operations (380) 97
Total tax expense 2,041 2,215
Tax recognised in other comprehensive income
Deferred tax:
Actuarial (losses)/gains on pension schemes (9) 2,099
Cash flow hedge 113 (90)
Tax charged to other comprehensive income 104 2,009
2,145 4,224
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 20.6% is higher than (2020/21: 22.6% was higher
than) the standard rate of corporation tax in the UK of 19.0% (2020/21:
19.0%).
The differences are reconciled below:
2021/22 2020/21
£'000 £'000
Profit before tax from continuing operations 12,031 9,471
(Loss)/profit before tax from discontinued operations (2,125) 330
Accounting profit before tax 9,906 9,801
Current tax at the UK standard rate of 19.0% (2020/21: 19.0%) 1,882 1,862
Expenses not deductible for tax purposes 42 32
Income not taxable (170) -
Rate change adjustment 225 319
Tax (over)/under provided in previous years - current tax (16) 23
Tax under/(over) provided in previous years - deferred tax 78 (21)
2,041 2,215
(c.) Unrecognised tax losses
The Group has agreed tax capital losses in the UK amounting to £16.3 million
(2021: £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 (2021: £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 (2021: £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 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)
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)
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 (2021: £3.8 million) in
respect of net capital losses of £15.3 million (2021: £15.3 million) have
not been recognised, see note 8 (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 2022 balance
sheet date, deferred tax assets and liabilities have been calculated to
reflect the expected timing of reversal of the related temporary difference.
9 dividends
2021/22 2020/21
£'000 £'000
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 -
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
3,434 1,878
A final dividend of 6.65 pence per equity share, at a cash cost of
£2,381,000, has been proposed for the year ended 30 June 2022, payable on 4
November 2022. In accordance with IFRS accounting requirements this dividend
has not been accrued in these consolidated financial statements.
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:
2021/22 2020/21
£'000 £'000
Net profit attributable to equity holders of the parent - continuing 9,610 7,353
operations
Net profit attributable to equity holders of the parent - discontinued (16,657) 233
operations
(7,047) 7,586
000s 000s
Weighted average number of shares 35,825 35,766
Dilutive potential ordinary shares - employee share options 586 637
36,411 36,403
Basic earnings per share: Pence Pence
Continuing operations 26.8 20.6
Discontinued operations (46.5) 0.6
(19.7) 21.2
Diluted earnings per share: 2021/22 2020/21
Pence Pence
Continuing operations 26.4 20.2
Discontinued operations (46.5) 0.6
(20.1) 20.8
Calculation of underlying earnings per share:
2021/22 2020/21
£'000 £'000
Reported profit before taxation from continuing operations 12,031 9,471
Brand amortisation 70 70
IAS 19 net pension scheme finance costs 60 268
Pension GMP equalisation - 150
Restructuring & relocation costs 564 58
Underlying profit before taxation from continuing operations 12,725 10,017
Tax at underlying Group tax rate of 19.4% (2020/21: 19.5%) (2,469) (1,953)
Underlying earnings from continuing operations 10,256 8,064
Weighted average number of shares 35,825 35,766
Underlying earnings per share from continuing operations 28.6p 22.5p
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 327,493 (2021: 360,017) ordinary
own shares held by the Company. The market value of shares at 30 June 2022 was
£519,076 (2021: £954,045). These are held to help satisfy the exercise of
awards under the Company's Long Term Incentive Plans. During the year 297,021
(2021: 9,228) shares with an original cost of £402,000 (2021: £10,000) 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.
12 related party disclosure
The Group's principal actively trading subsidiaries at 30 June 2022 are listed
below:
Principal subsidiaries Principal activity Country of incorporation % of equity interest
and votes held
2022 2021
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 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income Statement Summary
Continuing operations:
Revenue 55,646 63,969 65,091 71,315 60,299 77,805 89,381
Gross profit 21,629 22,880 22,353 24,184 20,432 29,441 33,366
Gross margin 38.9% 35.8% 34.3% 33.9% 33.9% 37.8% 37.3%
Underlying operating profit 6,056 6,714 5,438 6,973 5,053 10,506 13,333
Underlying operating margin 10.9% 10.5% 8.4% 9.8% 8.4% 13.5% 14.9%
Net interest cost on borrowings (215) (132) (212) (281) (343) (311) (439)
Interest on lease liabilities - - - - (153) (178) (169)
Underlying profit before tax 5,841 6,582 5,226 6,692 4,557 10,017 12,725
Non-underlying items* (1,334) (720) (914) (4,431) (1,138) (546) (694)
Profit before taxation 4,507 5,862 4,312 2,261 3,419 9,471 12,031
Taxation (1,319) (1,492) (967) (256) (442) (2,118) (2,421)
Profit for the year from continuing operations 3,188 4,370 3,345 2,005 2,977 7,353 9,610
Discontinued operations - Profit/(loss) after tax 3,296 2,170 972 1,636 (721) 233 (16,657)
Profit/(loss) for the year 6,484 6,540 4,317 3,641 2,256 7,586 (7,047)
Underlying earnings per share from continuing operations (pence) 13.0 14.7 11.6 14.8 10.2 22.5 28.7
Basic earnings per share (pence) 18.2 18.3 12.0 10.1 6.3 21.2 (19.7)
Dividends per share (pence) 6.5 7.15 7.35 7.35 2.0 9.5 10.0
Balance Sheet Summary at 30 June
Shareholders' funds 16,580 20,437 24,421 25,445 19,841 36,145 25,732
Net debt/(cash) (8,632) (6,076) 4,812 5,095 4,333 937 4,716
Lease liabilities - - - - 5,924 5,606 5,132
Pension deficit (net of tax) 18,588 17,095 12,566 10,749 15,608 3,436 1,585
Discontinued operations (479) (334) (714) 359 - - -
Capital Invested - continuing operations 26,057 31,122 41,085 41,648 45,706 46,124 37,165
Underlying return on capital invested (post-tax)** 17.7% 18.6% 12.0% 13.4% 9.2% 18.4% 25.8%
Underlying tax rate 20.8% 20.6% 20.2% 20.4% 20.3% 19.5% 19.4%
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