REG - Brickability Group - Final results for the year ended 31 March 2023
17/07/2023 07:00
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RNS Number : 1433G Brickability Group PLC 17 July 2023
Brickability Group PLC
LEI: 213800SK28MWXB3K3P26
17 July 2023
Brickability Group PLC
("Brickability" or "the Group")
Final results for the year ended 31 March 2023
Good performance across all divisions
Brickability Group PLC (AIM: BRCK), the leading construction materials
distributor, is pleased to announce its audited final results for the
twelve-month period ended 31 March 2023.
Financial Highlights
• Revenue increased by 30.9% to £681.1m (2022: £520.2m)
• Group like-for-like((1)) revenue growth of 4.0% versus 2022 (15.4% excluding
timber) and 31.9% versus 2021
• Gross profit increased by 30.0% to £112.9m (2022: £86.8m)
• Gross profit margin of 16.6% (2022: 16.7%), with the slight reduction
anticipated due to the full-year inclusion of Taylor Maxwell
• Adjusted EBITDA((2)) increased by 30.4% to £51.5m (2022: £39.5m)
• Adjusted Profit before tax((3)) increased by 28.5% to £44.6m (2022: £34.7m)
• Statutory Profit before tax increased by 87.5% to £34.5m (2022: £18.4m)
• Statutory EPS increased by 110.5% to 9.26p (2022: 4.40p)
• Adjusted EPS increased by 18.6% to 11.93p (2022: 10.06p)
• Net debt as at 31 March £8.0m (2022: net cash £0.4m)
• Final dividend proposed of 2.15 pence per share giving a total dividend for
the year of 3.16p, an increase of 5.3% (2022: 3.00p)
2023 2022 % Change
£m £m
Revenue 681.1 520.2 30.9%
Gross profit 112.9 86.8 30.0%
Adjusted EBITDA ((1)) 51.5 39.5 30.4%
Adjusted profit before tax ((2)) 44.6 34.7 28.5%
Profit before tax 34.5 18.4 87.5%
Adjusted EPS ((3)) 11.93p 10.06p 18.6%
EPS 9.26p 4.40p 110.5%
Net (debt)/cash ((4)) (8.0) 0.4 -
Annual dividends paid and proposed per share 3.16p 3.00p 5.3%
Operational Summary
• Good performance reflecting the Group's strategic position within the
industry, despite a challenging sector environment.
• Acquisitions of Modular Clay Products in May 2022, E.T. Clay and Heritage Clay
Tile in September 2022, with all acquisitions integrated and contributing to
the Group's results.
• Further expansion of the Distribution division, with property purchased to
facilitate continued new branch openings within the U Plastics business and a
warehouse for HBS NE (trading as UPOWA).
Post Period and Outlook
• Acquisition of Precision Façade Systems Ltd ("FSL") in June 2023 for £0.6m.
• Ongoing review and progression of acquisition opportunities.
• Announcement of CEO succession with Frank Hanna, currently joint CEO of
Michelmersh Brick Holdings plc, to join the Group as CEO Designate. Alan
Simpson to remain with the business.
• As previously announced, and whilst remaining conscious of the challenges in
some of our segments in the short-term, the Group believes that the underlying
long-term demand for UK housing remains robust as does the demand for quality
materials for the construction sector generally. The Board remains confident
that the Group is well placed to continue delivering on its strategic
objectives and the underlying organic growth of the business and,
notwithstanding a number of industry participants publicly communicating their
own expectations of volume reductions in the near term, trading in the current
financial year to date has remained in line with Board expectations.
• Whilst mindful of the broader macroeconomic uncertainties the Board believes
that its diversified multi-business strategy places it in a good position to
meet stakeholder requirements moving forward for the long-term.
John Richards, Chairman of Brickability, said:
"It has been another strong twelve months for the Group. Our continued focus
on the strategic expansion and diversification of the business has seen the
Group achieve impressive growth in the year. Over the past year, the
housebuilding market has been faced with new challenges arising from the
macroeconomic and geopolitical environment. Considering the headwinds faced in
the wider market environment, the Board is very pleased with the Group's
performance. The results we achieved this year are thanks to the dedication
and determination of our people, who look to consistently deliver excellent
service while seizing opportunities as they arise."
((1) ) like-for-like revenue is a measure of growth in sales, adjusted for the impact
of acquisitions.
((2) ) Earnings before interest, tax, depreciation, amortisation and other
non-underlying items (See Financial Review and note 5).
((3) ) Statutory profit before tax excluding non-underlying items (see Financial
Review and note 5).
((4) ) Adjusted profit after tax (statutory profit after tax before non-underlying
items) divided by the weighted average number of shares in the year.
((5) ) Bank borrowings less cash (2022: Cash less bank borrowings).
Enquiries:
Brickability Group via Montfort Communications
PLC
John Richards, Chairman
Alan Simpson, Chief Executive
Officer
Mike Gant, Chief Financial Officer
Cenkos Securities plc (Nominated adviser and broker) +44 (0) 207 397 8900
Ben Jeynes, Max Gould (Corporate Finance)
Julian Morse, Alex Pollen (Sales)
Montfort Communications (Financial PR) +44 (0) 203 514 0897
brickability@montfort.london (mailto:brickability@montfort.london)
James Olley
Ella Henderson
This announcement contains inside information.
About Brickability
Brickability is a leading construction materials distributor, serving
customers across the UK and Europe for over 37 years through its national and
local networks. The Group supplies over 500m bricks annually and has over 70
locations across the country with over 700 employees.
Chairman's Statement
Overview
It has been another strong twelve months for the Group. Our continued focus on
the strategic expansion and diversification of the business has seen the Group
achieve impressive growth in the year. Across our four business divisions, the
Group has maintained strong momentum, delivering an excellent financial
performance for the year ended 31 March 2023 with revenue of £681.1 million,
up 30.9% from the previous year, and an adjusted EBITDA of £51.5 million, up
30.4%.
Over the past year, the housebuilding market has been faced with new
challenges arising from the macroeconomic and geopolitical environment.
Considering the headwinds faced in the wider market environment, the Board is
very pleased with the Group's performance. The results we achieved this year
are thanks to the dedication and determination of our people, who look to
consistently deliver excellent service while seizing opportunities as they
arise.
While major housebuilders reported some improvement in sales rates in the
first calendar quarter of 2023, the market has experienced a slowdown in
housebuilding, particularly in the first-time buyer sector. Despite these
challenges, the fundamentals of the housebuilding market remain strong. The
Board is confident in the Group's ability to continue delivering on its
strategy and deliver attractive returns, but we remain cautious about the
market outlook.
Acquisitions
This year, we continued to benefit from the strategic decision to diversify
and expand the Group's product portfolio and end-use markets. We announced
three acquisitions in the period, adding to the scale of our business and
increasing the Group's client base.
In May 2022, we completed the acquisition of Modular Clay Products Ltd. This
acquisition significantly increased the Group's presence in the specification
sector, which we previously addressed through our Taylor Maxwell and Bespoke
Brick Company businesses. It brought with it new access to a range of European
manufacturers, further boosting our strong import capabilities.
We were also pleased to complete the acquisition of E.T. Clay Products Limited
and Heritage Clay Tiles Limited in September 2022. These acquisitions
represented another important step in the growth of our importing division, by
expanding the supply base of the Group through new access to a range of
overseas manufacturers. Post period in June 2023, we completed the acquisition
of FSL for consideration of £0.6 million.
Environmental, Social and Governance
As the Group continues to grow, we remain committed to our responsibility as a
business to address ESG priorities. In March, we published our 'Together for
the Future' strategy - our roadmap to transition to a business that delivers
consistent financial returns to our shareholders and maximises long-term value
for our employees, suppliers and customers, while having a positive impact on
the environment, people and communities.
A central goal of our ESG strategy is to reach net zero in our own Scope 1 and
Scope 2 operations of our sales businesses by 2030. To minimise our
environmental impact and cut carbon emissions, this year we introduced a new
fleet of electric company cars and started the rollout of installing EV
chargers at our offices and warehouses.
We recognise that in order to achieve meaningful change, we need to work in
partnership with our employees, customers, partners, and suppliers. As noted
later in the Annual Report and Accounts, as part of our ESG strategy, we set a
goal to engage with the Supply Chain Sustainability School (SCSS) and obtain a
Gold-level membership. The SCSS is an award-winning and industry-wide
collaboration that encourages everyone in the supply chain to work together
for a sustainable future for the built environment. I am delighted to say that
we achieved our goal. Engaging with the SCSS has increased our team's
knowledge and confidence on issues surrounding sustainability, particularly
with our valued suppliers and customers.
Our charitable foundation goes from strength to strength in supporting causes
in the communities of our places of operation. Since its launch last year, the
Brickability Group Foundation Trust has not only supported incredible causes
but has also inspired many of our staff to take action personally to raise
money and volunteer in our local community. Under the Foundation's charter,
the Group donates 0.5% of its Adjusted EBITDA in each financial year to the
Foundation and matches funds raised through our employees' fundraising
efforts. This year the Group will be donating £257k (2022: £200k) to the
Foundation. The Foundation has donated £120k across various charities this
year (2022: £55k).
The Group is committed to creating an inclusive and diverse culture in which
everyone is supported to reach their full potential. This financial year we
completed an in-depth Diversity, Equity and Inclusion (DEI) and gender pay gap
analysis and began a review of all Group reward and recognition policies. In a
sector that has historically been very heavily male-dominated, we recognise
that there is still plenty of work to be done. Increasing female participation
and representation at the senior levels of our business is a Group-wide
priority.
Board and Governance
I would like to take a moment to recognise Giles Beale, who stepped down from
the Board in March. The Board has been very fortunate to have had Giles' wise
counsel, commitment and valuable contribution since the Group's IPO. On behalf
of the Brickability Directors, I would like to thank Giles for his service and
wish him all the best for the future.
This year we were delighted to welcome two new Independent Non-Executive
Directors to the Board - Susan McErlain and Sharon Collins. Susan has replaced
me on both the Audit & Risk and Remuneration committees and joined the
Nominations Committee, while Sharon has taken up the role of Chair of the
Remuneration Committee and has joined both the Nomination and Audit Committee
following Giles' leaving. I speak on behalf of the entire Board when I say
that we are very fortunate to have them on our team and we look forward to
continuing to work with them both.
Following year-end, we announced that 36 years after first starting work with
Brickability, Alan Simpson, Chief Executive Officer (CEO) and founder of many
of the Group's businesses, will be stepping down from the role of CEO and as a
Director of the Company. Alan has been instrumental in building Brickability
into the successful business it is today, overseeing the Group's IPO in 2019
and multiple transformative acquisitions since. Alan remains a major
shareholder of the Group and will continue to work with the Group in a
non-board role post his stepping down. On behalf of the Board, I thank Alan
for his invaluable years of service and congratulate him for his immense
achievements.
The Board is pleased that Alan will be succeeded as CEO by Frank Hanna. Frank
has more than 30 years' experience in the industry and I look forward to
welcoming Frank to the Brickability family in due course. I have every
confidence in his ability to lead the Group as it continues to grow.
People
To help people and communities thrive we prioritise health and safety. We
appointed a new Group Health and Safety Manager this year and conducted an
extensive audit around the business to ensure employee safety and wellbeing.
We have also taken on additional senior staff in Sales, Finance, IT and HR to
reflect our increased scale, both in terms of headcount and our portfolio
businesses.
Shareholder returns and dividends
The Group paid an interim dividend of 1.01 pence per share on 23 February
2023, which reflected the performance of the business and the Board's
confidence in the longer-term outlook.
The robust performance of the Group enables the Board to recommend the payment
of a final dividend for the year ended 31 March 2023 of 2.15 pence per share.
Subject to shareholder approval at the Annual General Meeting, the final
dividend will be paid on 21 September 2023, with a record date of 25 August
2023 and an ex-dividend date of 24 August 2023.
John Richards
Chairman
14 July 2023
Chief Executive's Review
I am very pleased to record another set of strong results. I believe this
success is down to a number of factors, namely the strategy of the Group as it
continues to diversify through acquisition, the strength of Brickability's
positioning in the market, and its ability to adapt and remain agile.
The results are especially pleasing considering the wider macroeconomic
challenges seen in the marketplace during the period. All our divisions have
once again performed well with both revenue and profit well ahead of the prior
financial year, and ahead of management's expectations going into the
financial year.
The Group continued to see strong demand for its goods and services across all
divisions, however, the demand for bricks fell during the second half of our
financial year as a result of the subdued housing market. Significant
year-on-year price inflation mitigated the financial impact of reduced
volumes.
The gross profit margin was 16.6% (2022: 16.7%), with this slight, and
expected reduction when compared to the prior year, driven by the first full
year trading contribution from the Taylor Maxwell Group (2022: 9 months),
which operates on lower margins than the Group prior to the acquisition, and
the fact that timber margins have fallen back from the exceptional highs of
the previous year. The impact of these factors were partly mitigated by the
acquisitions completed in this financial year, which operate on margins above
the average of the Group.
The continued expansion of the Group has been supported by investment in
recruitment at both Group and divisional levels of skilled and talented
individuals across functions such as Sales, Finance, IT and HR. In addition,
the Group has begun to optimise its systems through the rollout of
standardised IT systems platforms. The Group is also building skills for the
future through the launch of the Apprentice Scheme in the year, which this
year saw 10 apprentices join various businesses in the Group.
At the beginning of the current financial year, the Group took the decision to
re-align the reporting structure of some of our businesses and we have moved
from three divisions to four, in order to support the continued growth of the
Group and to further improve efficiencies. Detailed segmental analysis is per
note 3 of the preliminary final results. The Group's four distinct business
divisions are shown below:
Bricks and Building Materials - which incorporates the sale of superior
quality building materials to all sectors of the construction industry
including national house builders, developers, contractors, general builders
and retail to members of the public;
Importing - which is primarily responsible for importing building products,
the majority of which are on an exclusive basis to the UK market, to
complement traditional and contemporary architecture;
Distribution - which focuses on the sale and distribution of a wide range of
products, including windows, doors, radiators and associated parts and
accessories; and
Contracting - which provides flooring and roofing installation services,
primarily within the residential construction sector.
Full details of our divisions and each of our businesses can be found at
https://brickabilitygroupplc.com/ (https://brickabilitygroupplc.com/)
Bricks and Building Materials Division 73% (2022: 78%) of Group Revenue
Revenue of £498.6 million (including internal revenues of £8.1 million
(2022: £6.4 million)) for the year ended 31 March 2023 was up £94.0 million
on the prior year (2022: £404.6 million), with like-for-like revenue growth
of 1.4%. Excluding timber, like-for-like revenue growth was up 17.1%. Adjusted
EBITDA at £30.1 million for the year ended 31 March 2023 was up £5.8 million
on the prior year (2022: £24.3 million).
Throughout the year, the division managed the supply issues from both UK and
European manufacturers, and the softening in demand in the second half of the
year as a result of the uncertainty in the UK housing market. Like-for-like
revenue growth is driven by a combination of price increases and product mix.
In line with our expectations, timber volumes and pricing have fallen back
following the exceptional highs of the first half of the last financial year.
Taylor Maxwell & Co continued to perform strongly and has added new
national and regional house builders to its customer base. The opening of a
new showroom in the Grassmarket area of Edinburgh and the refurbishment of the
Manchester showroom in Albert Square further established the Group's presence
in the specification sector. Cladding, in particular, saw significant
year-on-year growth, most notably highlighted within SBS Cladding, underpinned
by large scale projects with further growth anticipated in the next financial
year. Vobster Cast Stone's (trading as Vobster Architectural) strong order
pipeline led to good revenue growth throughout the year.
The acquisition of a new yard in Glasgow in the previous financial year has
allowed for the expansion and growth of Bricklink though providing more
flexibility for the local area, enabling it to build a strong builder's
merchant customer base. The demand for social housing remains an important
factor in the Group, with LBT Bricks & Facades continuing to see good
growth in this area.
In June 2022, Architectural Facades entered a new, long-term strategic
partnership with Thyssenkrupp Materials UK to develop a new balcony system to
produce the next generation of balconies. This will improve lead times and
reduce time spent on-site, whilst providing exceptional curb appeal and
functionality. The patented design, which has passed the rigorous testing
stage that lasted several months, was launched in the second half of the year
and initial enquiries look very promising.
Importing Division 17% (2022: 14%) of Group Revenue
Revenue of £117.6 million (including internal revenues of £30.7 million
(2022: £21.7 million)) for the year ended 31 March 2023 was up £45.3 million
on the prior year (2022: £72.3 million), with like-for-like revenue growth of
12.1%. Adjusted EBITDA at £13.2 million for the year ended 31 March 2023 was
up £4.9 million on the prior year (2022: £8.3 million).
The division was further strengthened through the acquisition of Modular Clay
Products, which was acquired on 31 May 2022, and E.T. Clay and Heritage Clay
Tiles, which were acquired on 30 September 2022. These businesses brought new
customers to the Group, particularly in the merchant's channel, further
diversifying the Group's customer and revenue base.
The Bespoke Brick Co. had a strong year with price and volume growth although
some momentum to this growth slowed towards the end of the financial year. It
has invested in a Sustainability School and Showroom, based in Derbyshire. The
Showroom is due to open later in the year and will showcase all of the Group's
sustainability focussed products.
McCann Logistics has continued to grow in revenue, following the increase in
its trailer fleet and expansion of its operations to cover haulage from the
Netherlands, Germany, France, Spain, Belgium, and Portugal. Crest, Brick Slate
and Tile has continued to grow through its product mix of both brick and roof
tiles.
After the end of the financial year in May 2023, The Bespoke Brick Company's
'Brick Geek' programme received RIBA accreditation. This is available to
architects and specifiers and showcases the many benefits of using clay-facing
bricks in all sectors of construction.
Distribution Division 9% (2022: 9%) of Group Revenue
Revenue of £63.0 million (including internal revenues of £0.4 million (2022:
£0.2 million)) for the year ended 31 March 2023 was up £16.0 million on the
prior year (2022: £47.0 million) with like-for-like revenue growth of 25.5%.
Adjusted EBITDA at £8.9 million for the year ended 31 March 2023 was up £1.1
million on the prior year (2022: £7.8 million).
Revenue growth was seen across all of the businesses within the Distribution
division, led by the first full year of trading within the Group for HBS NE
Ltd (trading as UPOWA). UPOWA continues to win major national housebuilder
contracts and is expected to continue to grow as the market in renewable forms
of energy expands. The Group invested in a new warehouse for UPOWA, which was
fully operational in the year, to support its growth ambition.
Towelrads also saw strong growth through both the towel radiator sector and
through the new underfloor heating sector that was taken in-house during the
year. This sector is performing strongly and continuing to win contracts in
the market. Frazer Simpson more than doubled its revenue when compared to the
prior year, supported by strong contract wins and an expansion of its window
business.
The Group further invested in the U Plastics (trading as UP Building Products)
business, acquiring new branches in Sutton Coldfield and Bury St Edmunds. FSN
Doors has continued to grow in the mid-range bracket of the market, and Forum
Tiles continues to develop its product offering and grow its customer base.
Contracting Division 6% (2022: 5%) of Group Revenue
Revenue of £41.3 million (including internal revenues of £0.2 million (2022:
£0.3 million)) for the year ended 31 March 2023 was up £16.5 million on the
prior year (2022: £24.8 million) with like-for-like revenue growth of 12.5%.
Adjusted EBITDA at £5.6 million for the year ended 31 March 2023 was up £2.9
million on the prior year (2022: £2.7 million).
Beacon Roofing, which was acquired on 31 March 2022, has performed very well
throughout the year and has contributed to the reported revenue growth in the
year. Performance has been further supported by gaining new contracts
following a competitor going into administration. Crest Roofing and Excel
Roofing have continued to grow through the expansion of work with their
customer base. Leadcraft has performed well with its customer base growing in
the higher value large single-unit housing projects, and DSH Flooring
continues to grow year on year through long-term contracts with housebuilders.
Gross profit margins have started to improve, following the unprecedented
price increases in the cost of sales of roofing materials experienced last
year, through shorter fixed periods for contracts.
Continental Tile Joint Venture
In March 2022, the Group announced the formation of the Schermbecker Building
Products GmbH joint venture to manufacture clay tiles with a leading German
tile manufacturer and producer of roofing materials, operating from a factory
in Schermbeck, Germany. Initial manufacture and start-up production of clay
roof tiles by the joint venture was very good however due to the volatility of
energy prices in Germany, production was curtailed. With volatility in energy
prices having since reduced, the Group now expects to produce the clay roof
tiles for the UK market from the second quarter of the current financial year.
Outlook
The Group's results highlight the strategic strengths of Brickability,
especially when the backdrop of what has been a period of macroeconomic
uncertainty is considered. Its growing and diversified business divisions
continue to demonstrate their ability to deliver upon the Group's strategic
objectives and we remain committed to continuing to grow in a sustainable
manner. Recent uncertainty in the market has highlighted the strategic
importance of having long-standing relationships with customers and suppliers,
growing importing capabilities, and the ability to source and provide quality
products to clients. Brickability continues to be able to successfully meet
the demands and requirements of our customers.
Whilst the short-term outlook for the housing market sector remains uncertain,
and we remain cautious, our priority remains unchanged as we aim to secure
strong order intakes with clear and sustainable margins. The Board believes
that the Group's diversified multi-business strategy positions it well to
navigate what may be uncertain times ahead.
As previously announced, and whilst remaining conscious of the challenges in
some of our segments in the short-term, the Group believes that the underlying
long-term demand for UK housing remains robust as does the demand for quality
materials for the construction sector generally. The Board remains confident
that the Group is well placed to continue delivering on its strategic
objectives and the underlying organic growth of the business and,
notwithstanding a number of industry participants publicly communicating their
own expectations of volume reductions in the near term, trading in the current
financial year to date has remained in line with Board expectations.
Finally, as I prepare to hand over the role of CEO to Frank Hanna, I would
like to reflect on my 36 years with the Group to date. Leading the Group has
been and is a great honour, and I have enjoyed all the challenges and
rewarding experiences that I have shared with my colleagues. The business
continues to be well-placed in the current market, and I look forward to
continuing with the Group in a non-board role. Frank is an exceptional
operator, manager and leader and has excellent understanding and experience
within the industry. Once on board, I have no doubt he will continue to grow
the business in his capacity as Group CEO and I look forward to working with
him in future years.
Alan Simpson
Chief Executive Officer
14 July 2023
Financial Review
Once again, the financial results for the year reflect a combination of good
performance across the divisions, along with the contribution from
acquisitions made in the year and the annualisation of those acquisitions
completed in the prior year.
Revenue
Revenue totalled £681.1 million for the year ended 31 March 2023. This
represented an increase of 30.9% compared to the previous year (2022: £520.2
million). Group like-for-like revenue growth was 4.0% versus 2022.
Division 2023 2022 % Change % Change
£m £m LFL
Bricks and Building Materials 498.6 404.6 23% 1%
Importing 117.6 72.3 63% 12%
Distribution 63.0 47.0 34% 26%
Contracting 41.3 24.8 67% 12%
Group eliminations (39.4) (28.5) 38% -
Total 681.1 520.2 31% 4%
Gross Profit
Gross profit for the year increased to £112.9 million from £86.8 million.
Gross profit margin has decreased marginally by 0.1% to 16.6% driven by the
first full year trading contribution from the Taylor Maxwell Group (2022: 9
months), which operated on lower margins than the Group prior to the
acquisition. In addition, timber margins have fallen back from the exceptional
highs of the previous year and the impacts of these factors were partly
mitigated by the acquisitions completed in this financial year which operate
on gross profit margins above the average of the Group.
Statutory/Adjusted Profit and Adjusted EBITDA
Statutory profit before tax of £34.5 million (2022: £18.4 million) includes
other items of £10.1 million (2022: £16.3 million) which are not considered
to be part of the Group's underlying operations. These are analysed as
follows:
2023 2022
£'000 £'000
Statutory profit before tax 34,527 18,406
Acquisition costs 281 1,139
Re-financing costs - 97
Earn-out consideration classified as remuneration under IFRS 3 5,483 4,333
Share based payment expense 1,567 1,597
Amortisation of intangible assets 8,399 6,333
Impairment of goodwill - 16
Unwinding of discount on contingent consideration 2,891 938
Share of post-tax profit of equity accounted associates (123) (55)
Fair value (gains)/losses on contingent consideration (8,432) 1,916
Total other items before tax 10,066 16,314
Adjusted profit before tax 44,593 34,720
Share of post-tax losses of joint ventures* - 149
Depreciation and amortisation 4,715 3,342
Finance income (143) (54)
Finance expenses 2,365 1,311
Adjusted EBITDA 51,530 39,468
* The Group's share of losses in its joint venture is included within Adjusted
EBITDA in 2023 to reflect its increased contribution to the Group's results.
The joint venture was in its initial start-up phase in 2022 and thus not
included in order to present results of ongoing operations on a comparable
basis. Further details regarding the above other items are disclosed in note 5
to the preliminary final results.
Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation and other non-underlying items.
Adjusted EBITDA increased by 30.4% to £51.5 million (2022: £39.5 million)
for the year ended 31 March 2023. Detailed segmental analysis is per note 3 of
the preliminary final results. All our divisions saw like-for-like growth in
the year, however, demand for bricks fell during the second half of our
financial year as a result of the subdued housing market. Significant
year-on-year price inflation mitigated the financial impact of reduced
volumes. Earn-out consideration classified as remuneration relates to Modular
Clay Products and Taylor Maxwell (2022: Taylor Maxwell), with both tracking in
line with expectations. Fair value movements on contingent consideration
result in a gain of £8,423k (2022: loss of £1,916k). This predominately
relates to the movements in UPOWA where the combined impact of the application
of Part L and Part S renewable energy legislation taking longer than expected
by housebuilders, and the forecast slowdown in the housing market compared to
prior year forecasts, is expected to delay the period over which UPOWA will
benefit from the new legislation.
Taxation
The statutory charge for taxation was £6.8 million (2022: £6.1 million), an
effective rate of taxation (Tax expense divided by Profit Before Tax) of 19.8%
(2022: 33.2%). The effective rate for the year is marginally higher than the
statutory rate of corporation tax of 19% mainly due to the effect of
non-deductible expenses from a tax perspective. In 2022 the effective tax rate
was higher than the main rate of tax largely due to the impact on deferred tax
with the liability remeasured at 25% having originally being recognised at
19%.
Earnings Per Share
Basic EPS for the year was 9.26p (2022: 4.40p), an increase of 110.5%. The
Group also reports an adjusted underlying EPS which adjusts for the impact of
the other items analysed in the table above. Adjusted EPS for the year was
11.93p (2022: 10.06p) per share, an increase of 18.6%.
Dividends
As a result of the Group's trading performance and also in recognition of the
strength of the balance sheet at the year-end, the Board is recommending a
final dividend of 2.15 pence per share, bringing the full-year dividend to
3.16 pence per share.
Subject to approval by shareholders, the final dividend will be paid on 21
September 2023, with a record date of 25 August 2023 and an ex-dividend date
of 24 August 2023.
Balance sheet review
Inventories at £33.2 million (2022: £28.1 million) increased primarily due
to the impact of acquisitions, and the higher stock levels for UPOWA as it
continues to grow. The impact of significant price inflation experienced
during the year on the valuation of inventory was largely mitigated by the
managed reduction of inventory levels. The decrease in both trade and other
receivables and trade and other payables on the balance sheet were in line
with expectations having taken into account the impact of acquisitions, with
the net cashflow impact reflecting similar working capital movements to prior
year.
Cash Flow and Net Debt
Operating cash flows before movements in working capital increased to £46.2
million from £35.2 million in 2022. Cash generated from operations increased
to £44.9 million from £27.5 million.
At 31 March 2023, the Group had net debt (borrowings less cash) of £8.0
million which compares to net cash (cash less borrowings) of £0.4 million at
the prior year-end. The main components of the cash outflows are: additional
investment in property, plant and equipment of £7.2 million (2022: £6.3
million), tax paid of £11.1 million (2022: £7.3 million), net proceeds from
the issue of new shares £0.1 million (2022: £52.7million), the initial
payments for three new subsidiaries of £16.7 million (2022: £50.3 million),
net cash acquired with subsidiary undertaking £4.7 million (2022: £3.4
million), and the payment of deferred consideration, in relation to prior year
acquisitions, of £3.5 million (2022: £1.4 million). Dividends of £9.1
million (2022: £6.1 million) were also paid in the year. We continue to
expect that the Brickability Group will remain a business that is cash
generative.
Bank Facilities
The Group has revolving credit facilities with HSBC and Barclays of £60
million, which includes an ancillary facility carve out of a £5 million
overdraft. The facilities agreement also provides for an accordion facility to
increase the commitment under revolving facilities by up to a further £25
million. As at the year end, the Group had utilised £17.0 million of the
facilities.
Subsequent Events
On 2 June 2023, the Group completed the acquisition of the entire share
capital and 100% of the voting rights in FSL for consideration of £600,000.
On completion FSL had net assets of £21,000. On 8 June 2023, the Group
completed the sale of its shares in Lendwell Holdings Limited for
consideration of £188,000.
Going Concern
The Directors are confident, having made appropriate enquiries, that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
Mike Gant
Chief Financial Officer
14 July 2023
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 March 2023
2023 2022
Adjusted Other Total Adjusted Other Total
(note 5) (note 5)
Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue 681,087 - 681,087 520,169 - 520,169
Cost of sales (568,220) - (568,220) (433,366) - (433,366)
Gross profit 112,867 - 112,867 86,803 - 86,803
Other operating income 561 - 561 354 - 354
Administrative expenses (64,281) (15,730) (80,011) (50,581) (13,515) (64,096)
Comprising:
Depreciation and amortisation (4,715) (8,399) (13,114) (3,342) (6,349) (9,691)
Other administrative expenses (59,566) (7,331) (66,897) (47,239) (7,166) (54,405)
Impairment losses on financial assets (1,611) - (1,611) (450) - (450)
Finance income 143 - 143 54 - 54
Finance expense (2,365) (2,891) (5,256) (1,311) (938) (2,249)
Share of post-tax profit/(loss) of equity accounted associates - 123 123 - 55 55
Share of post-tax loss of equity accounted joint ventures (721) - (721) (149) - (149)
Fair value gains/(losses) - 8,432 8,432 - (1,916) (1,916)
Profit/(loss) before tax 44,593 (10,066) 34,527 34,720 (16,314) 18,406
Tax (expense)/credit (8,924) 2,094 (6,830) (6,494) 391 (6,103)
Profit/(loss) for the year 35,669 (7,972) 27,697 28,226 (15,923) 12,303
Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit pension schemes - 43 43 - (1,970) (1,970)
Deferred tax on remeasurement of defined benefit pension schemes - (11) (11) - 374 374
Fair value gain on investments in equity instruments designated as FVTOCI - 10 10 - 53 53
Other comprehensive income/ (loss) for the year - 42 42 - (1,543) (1,543)
Total comprehensive income/(loss) 35,669 (7,930) 27,739 28,226 (17,466) 10,760
Profit/(loss) for the year attributable to:
Equity holders of the parent 35,710 (7,972) 27,738 28,310 (15,923) 12,387
Non-controlling interests (41) - (41) (84) - (84)
35,669 (7,972) 27,697 28,226 (15,923) 12,303
Total comprehensive income/(loss) attributable to:
Equity holders of the parent 35,710 (7,930) 27,780 28,310 (17,466) 10,844
Non-controlling interests (41) - (41) (84) - (84)
35,669 (7,930) 27,739 28,226 (17,466) 10,760
Earnings per share
Basic earnings per share 7 9.26 4.40 p
Diluted earnings per share 7 9.10 4.32 p
Adjusted basic earnings per share 7 11.93 10.06 p
Adjusted diluted earnings per share 7 11.71 9.86 p
All results relate to continuing operations.
Consolidated Balance Sheet
As at 31 March 2023
2023 (Restated)*
2022
Note £'000 £'000
Non-current assets
Property, plant and equipment 24,783 19,057
Right of use assets 18,553 12,162
Intangible assets 152,424 150,951
Investments in equity accounted associates 324 261
Investments in equity accounted joint ventures - 279
Investments in financial assets 188 178
Trade and other receivables 3,611 1,023
Total non-current assets 199,883 183,911
Current assets
Inventories 33,159 28,120
Trade and other receivables 125,603 131,202
Employee benefit assets 646 781
Current income tax assets 1,677 101
Cash and cash equivalents 21,645 25,028
Total current assets 182,730 185,232
Total assets 382,613 369,143
Current liabilities
Trade and other payables (131,419) (140,046)
Loans and borrowings (12,624) -
Lease liabilities (3,225) (2,216)
Total current liabilities (147,268) (142,262)
Non-current liabilities
Trade and other payables (9,592) (17,910)
Loans and borrowings 9 (16,800) (24,240)
Lease liabilities (12,967) (10,417)
Provisions (2,364) (1,728)
Deferred tax liabilities (18,244) (18,102)
Total non-current liabilities (59,967) (72,397)
Total liabilities (207,235) (214,659)
Net assets 175,378 154,484
Equity
Called up share capital 3,003 2,985
Share premium account 102,847 102,146
Capital redemption reserve 2 2
Share-based payment reserve 3,509 1,930
Merger reserve 11,146 11,146
Retained earnings 55,002 36,365
Equity attributable to owners of the Company 175,509 154,574
Non-controlling interests (131) (90)
Total equity 175,378 154,484
*See note 8 for details of restatement.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
Share capital Share premium account Capital redemption Share-based payments Merger reserve Retained earnings Total attributable to equity holders of the parent Non-controlling interest Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2021 2,305 49,999 2 266 1,245 31,623 85,440 (6) 85,434
Profit or (loss) for the year - - - - - 12,387 12,387 (84) 12,303
Total comprehensive income for the year - - - - - 10,844 10,844 (84) 10,760
Dividends paid - - - - - (6,102) (6,102) - (6,102)
Issue of paid shares 578 54,422 - - - - 55,000 - 55,000
Issue of consideration shares 99 - - - 9,901 - 10,000 - 10,000
Issue of shares on exercise of share options 3 12 - - - - 15 - 15
Equity settled share based payments - - - 1,173 - - 1,173 - 1,173
Deferred tax on share based payment transactions - - - 491 - - 491 - 491
Share issue costs - (2,287) - - - - (2,287) - (2,287)
Total contributions by and distributions to owners 680 52,147 - 1,664 9,901 (6,102) 58,290 - 58,290
At 31 March 2022 2,985 102,146 2 1,930 11,146 36,365 154,574 (90) 154,484
Profit or (loss) for the year - - - - - 27,738 27,738 (41) 27,697
Other comprehensive income for the year - - - - - 42 42 - 42
Total comprehensive income for the year - - - - - 27,780 27,780 (41) 27,739
Dividends paid - - - - - (9,143) (9,143) - (9,143)
Issue of shares on exercise of share options 18 701 - - - - 719 - 719
Equity settled share based payments - - - 1,637 - - 1,637 - 1,637
Deferred tax on share based payment transactions - - - (197) - - (197) - (197)
Current tax on share based payment transactions - - - 139 - - 139 - 139
Total contributions by and distributions to owners 18 701 - 1,579 - (9,143) (6,845) - (6,845)
At 31 March 2023 3,003 102,847 2 3,509 11,146 55,002 175,509 (131) 175,378
Consolidated Statement of Cash Flows
For the year ended 31 March 2023
2023 2022
Note £'000 £'000
Operating activities
Profit for the year 27,697 12,303
Adjustments for:
Depreciation of property, plant and equipment 1,566 1,143
Depreciation of right of use assets 3,101 2,136
Amortisation of intangible assets 8,447 6,396
Gain on disposal of property, plant and equipment and right of use assets (314) (75)
Foreign exchange losses/(gains) 29 (27)
Share-based payment expense 1,567 1,597
Other operating income (365) (27)
Share of post-tax profit in equity accounted associates (123) (55)
Share of post-tax loss in joint ventures 721 149
Impairment of goodwill - 16
Fair value changes in contingent consideration (8,176) 1,916
Gain on acquisition (256) -
Movements in provisions (141) 12
Finance income (143) (54)
Finance expense 5,256 2,249
Acquisition costs 5 281 1,236
Income tax expense 6,830 6,103
Pension charge in excess of contributions paid 196 140
Operating cash flows before movements in working capital 46,173 35,158
Changes in working capital:
Increase in inventories (865) (6,700)
Decrease/(Increase) in trade and other receivables 19,331 (22,194)
(Decrease)/Increase in trade and other payables (19,765) 21,234
Cash generated from operations 44,874 27,498
Payment of acquisition expenses (281) (1,139)
Interest received 125 18
Income taxes paid (11,074) (7,256)
Net cash from operating activities 33,644 19,121
Investing activities
Purchase of property, plant and equipment (7,229) (6,317)
Proceeds from sale of property, plant and equipment 441 187
Purchase of right of use assets (2,525) -
Purchase of intangible assets (478) (488)
Acquisition of subsidiaries 8 (16,674) (50,292)
Net cash acquired with subsidiary undertakings 8 4,676 3,422
Acquisition of interests in joint ventures (442) (428)
Loan to joint venture (2,960) -
Proceeds from repayment of directors' loans - 978
Dividends received from associates 60 15
Net cash used in investing activities (25,131) (52,923)
Financing activities
Equity dividends paid 6 (9,143) (6,102)
Proceeds from issue of ordinary shares net of share issue costs 719 52,728
Payment of financing costs - (97)
Proceeds from bank borrowings 115,400 52,100
Repayment of bank borrowings (123,000) (43,400)
Payment of lease liabilities (2,791) (2,103)
Payment of deferred and contingent consideration (3,499) (1,358)
Interest paid (2,246) (1,139)
Payment of transaction costs relating to loans and borrowings - (375)
Net cash flows (used in)/from financing activities (24,560) 50,254
Net (decrease)/increase in cash and cash equivalents (16,047) 16,452
Cash and cash equivalents at beginning of year 25,028 8,592
Effect of changes in foreign exchange rates 40 (16)
Cash and cash equivalents at end of year 9,021 25,028
Notes to the Preliminary Results
Year ended 31 March 2023
1. General information
This announcement was approved by the Board of Directors on 14 July 2023.
Brickability Group PLC is a company incorporated in England and Wales
(registration number 11123804). The address of the registered office is South
Road, Bridgend Industrial Estate, Bridgend, United Kingdom CF31 3XG.
The financial information set out above does not constitute the Group's
statutory financial statements for the year ended 31 March 2023 or 2022 but is
derived from these financial statements. Statutory financial statements for
2022 have been delivered to the Registrar of Companies and those for 2023 will
be delivered by 30 September 2023. The auditor reported on these statutory
financial statements; their report was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement under Section
498(2) or (3) of the Companies Act 2006.
2. Basis of preparation
The financial information has been prepared in accordance with UK adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006.
The financial information is presented in pounds sterling, which is the
functional currency of the Company and Group. Amounts are rounded to the
nearest thousand, unless otherwise stated.
The financial information is prepared on the historical cost basis, with the
exception of certain financial assets and liabilities which are stated at fair
value.
Going Concern
The key uncertainly faced by the Group is the demand for its products and how
these are impacted by economic factors.
The expected budget forecast was reviewed with no concerns noted and
sufficient headroom in place. Budget scenarios have been prepared to compare a
number of outcomes where there is a significant and prolonged drop in demand
in the industry.
For each scenario, cash flow and covenant compliance forecasts have been
prepared. A significant drop in revenue of 50% with no adjustment to overheads
would lead to a breach. However, if overheads were cut by 17%, then a breach
could be avoided. The scenarios in which revenue could fall by this level so
rapidly are considered remote.
Having taken into account the scenarios modelled, the Directors are satisfied
that the Group has sufficient resources to continue to operate for a period of
not less than 12 months from the date of this report and until at least 30
September 2024. Accordingly, the consolidated financial information has been
prepared on a going concern basis.
New standards, interpretations and amendments not yet effective from 1 January
2022
The following standards and amendments became effective for the current
financial year:
• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
• Property, Plant and Equipment - Proceeds before Intended Use (Amendments to
IAS 16));
• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9,
IFRS 16 and IAS 41); and
• References to the Conceptual Framework (Amendments to IFRS 3).
The amendments above did not have any impact on the amounts recognised in
prior periods or the current year. They
are also not expected to significantly affect future periods.
New standards, interpretations and amendments not yet effective
Certain new standards and amendments have been issued by the IASB and will be
effective in future accounting periods.
The standards and amendments that are not yet effective, are likely to impact
the Group and have not been adopted
early by the Group include:
Amendments effective from 1 January 2023:
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2));
• Definition of Accounting Estimates (Amendments to IAS 8); and
• Deferred Tax Related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12).
Amendments effective from 1 January 2024:
• IFRS 16 Leases (Amendment - Liability in a sale and leaseback);
• IAS 1 Presentation of Financial Statements (Amendment - Classification of
liabilities as current or non-current);
• IAS 1 Presentation of Financial Statements (Amendment - Non-current
liabilities with covenants).
The amendments to IAS 12 will likely result in the Group recognising
additional deferred tax assets and liabilities in respect of right of use
assets accounted for under IFRS 16. The other amendments listed above are not
expected to have any impact on the amounts recognised in prior periods and are
not expected to significantly affect the current or future periods.
3. Segmental analysis
For management purposes, the Group is organised into segments based on its
products and services. During the year, the Group changed its reportable
segments due to increasing diversification following recent acquisitions. It
now has four reportable divisions as follows:
• Bricks and Building Materials, which incorporates the sale of superior quality
building materials to all sectors of the construction industry including
national house builders, developers, contractors, general builders and retail
to members of the public;
• Importing, which is primarily responsible for importing building products, the
majority of which are on an exclusive basis to the UK market, to complement
traditional and contemporary architecture;
• Distribution, which focuses on the sale and distribution of a wide range of
products, including windows, doors, radiators and associated parts and
accessories; and
• Contracting, which provides flooring and roofing installation services,
primarily within the residential construction sector.
This is the first time results have been presented in these segments within
the Group's Annual Report and Accounts and thus the results reported for the
prior year have also been re-presented for comparison purposes.
The Group's segments are strategic business units that offer different
products and services. Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating decision-maker
(CODM). The Group considers the CODM to be the senior management team,
including the Board of Directors, who are responsible for allocating resources
and assessing performance of the operating segments.
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Segment performance is evaluated based on adjusted
EBITDA, without allocation of depreciation and amortisation, finance expenses
and income, impairment losses, fair value movements or the share of results of
associates and joint ventures. This is the measure reported to the Board for
the purpose of resource allocation and assessment of segment performance.
The Group's revenue is primarily generated in the United Kingdom. Of the
revenue generated in Europe, £229,000 (2022:
£66,000) is included within revenue from the sale of goods. within the Bricks
and Building Materials segment and £111,000
(2022: £nil) is included within revenue from the sale of goods within the
Importing segment. The balance of £2,462,000 (2022:
£2,742,000) is included within revenue from the rendering of services within
the Importing segment. All of the revenue
generated in Other geographic locations is included within revenue from the
sale of goods within the Bricks and Building
Materials segment.
Revenue from the sale of goods and rendering of services is analysed by segment below. Revenue from the rendering of services within the Importing segment relates to the provision of transportation and distribution services. Revenue from the rendering of services within the Distribution segment relates to solar panel installation services.
No individual customer accounts for more than 10% of the Group's total revenue.
2023 2022
Bricks and Building Materials Importing Distribution Contracting Unallocated & Group Eliminations Consolidated Bricks and Building Materials Importing Distribution Contracting Unallocated & Group Eliminations Consolidated
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue from sale of goods 490,472 75,411 54,510 - - 620,393 398,198 40,451 44,020 - - 482,669
Revenue from Rendering of Services - 11,472 8,085 41,137 - 60,694 - 10,180 2,818 24,502 - 37,500
Total external revenue 490,472 86,883 62,595 41,137 - 681,087 398,198 50,631 46,838 24,502 - 520,169
Total internal revenue 8,122 30,700 394 201 (39,417) - 6,384 21,649 188 286 (28,507) -
Total revenue 498,594 117,583 62,989 41,338 (39,417) 681,087 404,582 72,280 47,026 24,788 (28,507) 520,169
Group adjusted EBITDA 30,141 13,188 8,893 5,620 (6,312) 51,530 24,317 8,273 7,849 2,680 (3,651) 39,468
Depreciation and amortisation (13,114) (13,114) (9,691) (9,691)
Acquisition and re-financing costs (281) (281) (1,236) (1,236)
Earn-out consideration classified as remuneration under IFRS 3 (5,483) (5,483) (4,333) (4,333)
Share based payment expense (1,567) (1,567) (1,597) (1,597)
Finance income 143 143 54 54
Finance expense (5,256) (5,256) (2,249) (2,249)
Share of results of associates 123 123 55 55
Share of results of joint ventures - - (149) (149)
Fair value gains and losses 8,432 8,432 (1,916) (1,916)
Group profit before tax 30,141 13,188 8,893 5,620 (23,315) 34,527 24,317 8,273 7,849 2,680 (24,713) 18,406
For the purposes of monitoring segment performance and allocating resources
between segments, the CODM monitors the
total non-current and current assets attributable to each segment. All assets
are allocated to reportable segments with the exception of those used
primarily for corporate purposes (central), investments in associates, joint
ventures and financial assets and deferred tax assets. Goodwill has been
allocated to reportable segments. No other assets are used jointly by
reportable segments. All liabilities are allocated to reportable segments with
the exception of those used primarily for corporate purposes (central), bank
borrowings and deferred tax liabilities.
Right of use assets, in respect of trailers, with a carrying value of
£2,706,000 (2022: £3,207,000), are either held in the United
Kingdom or Europe at the year-end, depending on the timing and location of
goods being transported. All other non-
current assets are solely held within the United Kingdom.
2023 2022
Bricks and Building Materials Importing Distribution Contracting Central & Group Eliminations Consolidated Bricks and Building Materials Importing Distribution Contracting Central & Group Eliminations Consolidated
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Non-current segment assets 79,152 33,147 49,880 29,520 7,672 199,371 82,280 16,123 52,901 31,358 531 183,193
Current segment assets 114,359 26,403 25,849 11,965 4,154 182,730 131,498 17,258 25,258 10,143 1,075 185,232
Total segment assets 193,511 59,550 75,729 41,485 11,826 382,101 213,778 33,381 78,159 41,501 1,606 368,425
Unallocated assets:
Investment in associates 324 261
Investment in joint ventures - 279
Investments in financial assets 188 178
Group assets 382,613 369,143
Total segment liabilities (96,394) (17,739) (18,601) (4,933) (34,524) (172,191) (99,360) (15,433) (4,357) (4,913) (48,254) (172,317)
Loans and borrowings (excluding leases and overdrafts) (16,800) (24,240)
Deferred tax liabilities (18,244) (18,102)
Group liabilities (207,235) (214,659)
Non-current asset additions
Property, plant and equipment 485 2,352 2,443 430 1,520 7,230 720 4,676 95 295 531 6,317
Right of use assets 1,803 1,521 2,939 78 2,618 8,959 438 2,768 126 - - 3,332
Intangible assets - - 478 - - 478 - - 488 - - 488
Total non-current asset additions 2,288 3,873 5,860 508 4,138 16,667 1,158 7,444 709 295 531 10,137
4. Profit before tax
Profit before tax is stated after charging/(crediting): 2023 2022
£'000 £'000
Amortisation of intangible assets 8,447 6,396
Impairment of goodwill - 16
Depreciation of property, plant and equipment 1,566 1,143
Depreciation of right of use assets 3,101 2,136
Gain on disposal of property, plant and equipment and right of use assets (314) (75)
Cost of inventories recognised as an expense 555,592 418,698
Customer rebates 7,987 6,153
Supplier rebates (8,799) (6,147)
Subcontractor costs 15,984 9,436
Impairment of trade receivables 1,611 450
Net foreign exchange gains 87 (32)
5. Other items
In order to assist with the understanding of the Group's performance, certain business combination related items that are significant in nature and items that management do not consider to be directly reflective of the Group's underlying performance in the period are presented separately, on the face of the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
This includes certain cash and non-cash items which tend to be charged or recognised throughout the year regardless of trading performance. For the purpose of assessing performance on a comparable basis year on year, management therefore considers both statutory and adjusted profit measures, with these adjusted measures presented separately in order to provide additional useful information about the Group's performance to users of the accounts.
Other items that are excluded from adjusted profit measures are as follows:
2023 2022
£'000 £'000
Amortisation of acquired intangible assets (8,399) (6,333)
Impairment of goodwill - (16)
Total depreciation and amortisation (8,399) (6,349)
Acquisition costs (281) (1,139)
Re-financing costs - (97)
Earn-out consideration classified as remuneration under IFRS 3 (5,483) (4,333)
Share-based payment expense (including employer NI) (1,567) (1,597)
Total other administrative expenses (7,331) (7,166)
Unwinding of discount on contingent consideration (2,891) (938)
Total finance expense (2,891) (938)
Share of post-tax profit of equity accounted associates 123 55
Gain/(loss) on re-measurement of contingent consideration 8,176 (1,916)
Gain on acquisition 256 -
Total fair value gains/(losses) 8,432 (1,916)
Total other items before tax (10,066) (18,230)
Tax on other items 2,094 391
Total other items after tax (7,972) (17,839)
Other comprehensive income/(loss)
Remeasurements of defined benefit pension schemes 43 (1,970)
Deferred tax on remeasurement of defined benefit pension schemes (11) 374
Fair value gain on investments in equity instruments designated as FVTOCI 10 53
Total other comprehensive income/(loss) 42 (1,543)
Total other items in total comprehensive income (7,930) (19,382)
Impact of business combinations
Following a business combination, intangible assets in respect of brands, customer relationships and supplier relationships are recognised as part of the fair value assessment of net assets acquired. Amortisation on these acquired intangibles is excluded from adjusted profit as the recognition of these intangibles is not comparable with the recognition of other internally generated assets. Its exclusion enables performance to be assessed on a like for like basis regardless of whether growth is organic or through acquisition and whether acquired intangibles have been fully amortised.
Acquisition costs associated with business combinations can fluctuate from year to year depending on the size and number of acquisitions. Legal and professional fees for acquisitions are also generally considered to be greater than those incurred during the course of regular trading. These are therefore excluded from adjusted results for improved comparability.
Any gains recognised on acquisition, subsequent changes in the fair value of contingent consideration and the related finance expense in connection with discounting deferred and contingent consideration can also make a comparison of trading performance on a like for like basis more difficult. These gains/losses and expenses are therefore also excluded from adjusted results, with the inclusion within other items consistent with the presentation of other acquisition related costs.
Fair value gains/(losses) include a gain of £8,176,000 (2022: loss of £1,916,000) in respect of changes in contingent consideration expected to be payable.
Acquisition costs comprise of transaction costs of £92,000 (2022: £383,000), in relation to stamp duty, plus a further £189,000 (2022: £756,000) in respect of legal and professional fees. £259,000 (2022: £1,060,000) was directly associated with the acquisitions in the year, £13,000 was in connection with a prior year acquisition and the remainder related to aborted acquisitions.
To facilitate the acquisition of Taylor Maxwell Group (2017) Limited in the prior year, the Group re-financed and agreed an increase in its available banking facilities, The re-financing costs directly associated with this are therefore considered to be connected with the acquisition and outside the normal course of business.
The agreements to purchase Taylor Maxwell Group (2017) Limited and Modular Clay Products Ltd include earn-out consideration, payable if certain performance-based targets are met over the following three-years. The share purchase agreements also include a 'bad leaver' clause, under which the earn-out consideration payment to such a leaver is forfeited. The clauses were included with the intention of protecting the value of the business over the first few years following acquisition. However, as a result of the earn-out consideration effectively being contingent on the continued employment or 'good leaver' status of the individual, the amount payable has been treated as remuneration in accordance with current IFRS interpretation guidance of IFRS 3. As such, the amount payable is considered significant in nature, business combination related and not reflective of a typical remuneration cost that would usually be incurred within the underlying trade of the Group.
Share-based payments
The share-based payment expense represents the share-based payment charge for the year, including associated accrued employer taxes. The majority of share options issued are subject to performance criteria, including both market and non-market conditions. Changes in market conditions after the grant date are not reflected in the share-based payment expense recognised. The accounting charge is therefore not considered to be directly linked to the Group's trading operations in the year and thus separate disclosure is deemed appropriate to assist with the understanding of the Group's performance in the year.
Equity accounted associates
The Group is not directly involved in the day-to-day operations of its associate and thus considers it appropriate to separate its share of this entity's results from the Group's adjusted results.
Tax
The tax credit arising on the other items is presented on the same basis as the cost to which it relates.
Other comprehensive income
Other comprehensive income relates to the remeasurement of the defined pension scheme, the associated deferred tax movement and the fair value gain on investments in equity instruments designated as fair value through other comprehensive income.
The defined benefit pension scheme was acquired as part of the net assets of Taylor Maxwell Group (2017) Limited in the prior year. Shortly afterwards, the Group entered into a buy-in insurance policy and is in the process of completing a buy-out, whereby the defined benefit pension liability will be transferred to an insurer. As such, the scheme related remeasurement and deferred tax movements are not considered to be part of the Group's underlying operations and have been reported separately from the Group's adjusted results.
The fair value change in investments in equity instruments designated as fair value through other comprehensive income is also not reflective of the Group's underlying trading performance and thus is not included in the Group's adjusted comprehensive income.
6. Dividends
2023 2022
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2022 of 2.0400p per share 6,111 3,236
(2022: for the year ended 31 March 2021 of 1.0850p per share)
Interim dividend for the year ended 31 March 2023 of 1.0100p per share 3,032 2,866
(2022: for the year ended 31 March 2022 of 0.9600p per share)
Total dividends paid in the year 9,143 6,102
The Directors recommend that a final dividend for 2023 of 2.15p (2022: 2.04p) per ordinary share be paid.
The final dividend will be paid, subject to shareholders' approval at the Annual General Meeting, to shareholders on the register at the close of business on 25 August 2023. This dividend has not been included as a liability in these financial statements.
7. Earnings per share
Earnings per share (EPS) is calculated by dividing the profit for the year, attributable to ordinary equity holders of the parent, by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the profit for the year, attributable to ordinary equity holders, by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
The calculation of basic and diluted earnings per share is based on the following data:
2023 2022
Earnings £'000 Weighted average number of shares Earnings per share (p) Earnings £'000 Weighted average number of shares Earnings per share (p)
Basic earnings per share 27,738 299,439,718 9.26 12,387 281,474,903 4.40
Effect of dilutive securities
Employee share options - 5,403,747 - - 5,512,650 -
Diluted earnings per share 27,738 304,843,465 9.10 12,387 231,088,804 4.18
Adjusted earnings per share and adjusted diluted earnings per share based on the adjusted profit attributable to the equity holders of the parent, as shown in the Adjusted column of the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Details of the Other items after tax, forming the difference between the statutory earnings above and adjusted earnings below, are outlined in note 5 of the preliminary final results.
2023 2022
Earnings £'000 Weighted average number of shares Earnings per share (p) Earnings £'000 Weighted average number of shares Earnings per share (p)
Adjusted basic earnings per share 35,710 299,439,718 11.93 28,310 281,474,903 10.06
Effect of dilutive securities
Employee share options - 5,403,747 - - 5,512,650 -
Adjusted diluted earnings per share 35,710 304,843,465 11.71 28,310 286,987,553 9.86
8. Business combinations
The Group acquired the entire share capital and 100% of the voting rights in the following companies during the year:
Company acquired Acquisition date
Modular Clay Products Ltd 31 May 2022
E. T. Clay Products Limited 30 September 2022
Heritage Clay Tiles Limited 30 September 2022
The fair value of the assets acquired and liabilities assumed on acquisition are as follows:
Modular Clay Products Ltd E. T. Clay Products Limited Heritage Clay Tiles Limited
£'000 £'000 £'000
Property, plant and equipment 16 157 29
Right of use assets 28 792 305
Identifiable intangible assets 3,810 3,083 309
Inventory 164 2,838 1,172
Trade and other receivables 2,888 8,651 1,732
Cash and cash equivalents 4,205 627 (156)
Trade and other payables (2,104) (5,604) (2,864)
Current income tax (514) (858) -
Lease liabilities (28) (792) (305)
Provisions - (27) (5)
Deferred tax (926) (792) (16)
Total identifiable net assets 7,539 8,075 201
Goodwill - 1,630 610
Gain on acquisition (256) - -
Total consideration 7,283 9,705 811
Satisfied by:
Cash paid 7,283 8,662 729
Contingent consideration - 1,043 82
Total consideration 7,283 9,705 811
Cash paid reflects an initial cash payment agreed in respect of the value attributed to the business, based on a multiple of Adjusted EBITDA, plus any further amounts paid in respect of excess working capital, including any surplus cash, based on agreed form completion accounts.
The Group acquired each of the above subsidiaries in order to expand its presence in the specification and further broaden the Group's access to overseas manufacturers, whilst enhancing the range of products that can be offered to its customers.
The fair value of identifiable intangible assets acquired through business combinations relate to brands and customer relationships.
The fair value of brands is based on a relief from royalty method, with a royalty rate of 0.75% to 1% applied based on comparable businesses in the market, reflecting the size of the entities acquired. The fair value of customer relationships is established using a multi-period excess earnings method, with discount rates of between 13% and 22% applied to the acquisitions in the year. Projected cashflows that underpin the valuations are based on management's best estimate of the expected levels of trade and profits following acquisition, taking into account actual results around the time of acquisition. Forecasts are prepared for a three-year period, with an inflationary 2% growth in revenue applied thereafter.
Any excess paid over the value of net assets acquired is included as goodwill. Goodwill principally comprises the value of expected synergies arising from the acquisitions and the value of the assembled workforce. None of the goodwill is expected to be deductible for tax purposes.
A gain has arisen on the acquisition of Modular Clay Products Ltd, which is recognised within the Fair Value Gains/(Losses) line in the Consolidated Statement of Profit or Loss and Other Comprehensive Income (note 13). The Group does not consider the acquisition to be a bargain purchase commercially. Further amounts are expected to be payable to the seller depending on future performance. However, these amounts are recognised as remuneration for post business combination services, as outlined in the following Contingent Consideration section. Due to this component of consideration being accounted for as remuneration, the fair value of identifiable net assets acquired exceeds the consideration under IFRS 3. The gain has therefore arisen as a result of accounting treatments, with IFRS 3 requiring the gain to be credited to profit or loss on acquisition.
Included within the fair value of trade and other receivables above are the following gross contractual amounts due and amounts not expected to be collected in respect of trade receivables:
Modular Clay Products Ltd E. T. Clay Products Limited Heritage Clay Tiles Limited
£'000 £'000 £'000
Gross contractual trade receivables 2,363 5,482 1,021
Amounts not expected to be collected (7) (5) -
Fair value of contractual receivables 2,356 5,477 1,021
Included in the consolidated financial statements are the following amounts of revenue and profit in respect of the subsidiaries acquired:
Modular Clay Products Ltd E. T. Clay Products Limited Heritage Clay Tiles Limited
£'000 £'000 £'000
Revenue 11,119 14,728 2,458
Net profit 1,637 618 122
Had the current year business combinations taken place at the beginning of the financial year, the Group's revenue for the year would have been £706,624,000 (2022: £617,122,000) and Group profit would have been £30,332,000 (2022: £15,507,000).
Acquisition related costs, included in administrative expenses, amounted to £259,000 in respect of the above acquisitions, as follows:
Modular Clay Products Ltd E. T. Clay Products Limited Heritage Clay Tiles Limited
£'000 £'000 £'000
Acquisition costs 100 133 26
Business combinations completed in prior periods
Whiffen Holdings Limited and Beacon Roofing Limited
The Group acquired 100% of the share capital and voting rights in Whiffen Holdings Limited and its subsidiary, Beacon Roofing Limited (together the 'Whiffen Holdings Group'), on 31 March 2022. As disclosed in the 2022 financial statements, due to the timing of the acquisition the value of the identifiable net assets was included on a provisional basis pending a detailed assessment of the fair value of the contingent consideration and all identifiable net assets.
Details of the revised fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
Book value originally reported Adjustment Restated fair value
£'000 £'000 £'000
Property plant and equipment 709 502 1,211
Identifiable intangible assets - 2,255 2,255
Inventory 45 - 45
Trade and other receivables 2,476 - 2,476
Cash and cash equivalents 741 - 741
Trade and other payables (1,206) - (1,206)
Current income tax liabilities (365) - (365)
Provisions (76) - (76)
Deferred tax (73) (675) (748)
Total identifiable net assets 2,251 2,082 4,333
Goodwill 5,968 (1,889) 4,079
Total consideration 8,219 193 8,412
Satisfied by:
Cash paid 5,371 - 5,371
Deferred cash consideration 1,676 - 1,676
Contingent consideration 1,172 193 1,365
Total consideration 8,219 193 8,412
Had the full fair value assessment been carried out prior to announcing the annual results to 31 March 2022, the financial statements would have differed as follows:
• The cost of property, plant and equipment would have been £502,000 higher, with a corresponding decrease in goodwill.
• Intangible assets of £2,255,000 and a related deferred tax liability of £675,000 would have also been recognised, with a corresponding net decrease in goodwill.
• The contingent consideration liability on acquisition would have been £193,000 higher, with a corresponding increase in goodwill.
• As the acquisition took place on the final day of the financial year, there is no impact on the profit or loss reported for the year ended 31 March 2022.
The March 2022 comparatives have been restated in these financial statements
to reflect the above changes.
Under paragraph 10(f) of IAS 1 Presentation of financial statements, a prior
period restatement would usually require the presentation of a third balance
sheet at 1 April 2021. However, as the restatement of the provisional fair
values would have no impact on the balance sheet at that date, it is not
considered that this would provide additional useful information. As such, a
third consolidated balance sheet has not been included within these financial
statements due to prior period business combinations.
Contingent consideration
The Group has entered into contingent consideration arrangements during the purchase of several subsidiaries. Final amounts payable under these agreements are all subject to future performance and the acquired business achieving pre-determined adjusted EBITDA targets, over the three years following acquisition, with the exception of HBS NE Limited which is over five years.
The fair value of all contingent consideration is based on a discounting cash flow model, applying a discount rate of between 1.7% and 23.6% to the expected future cash flows.
Summarised below are the fair values of the contingent consideration at both acquisition and reporting date, the potential undiscounted amount payable and the discount rates applied within the discounting cash flow models, for each acquisition where contingent consideration arrangements remain in place.
Company acquired Fair value at reporting date Fair value at reporting date
Fair value at acquisition 2023 2022
£'000 £'000 £'000 Undiscounted amount payable Undiscounted amount payable
2023 2022
Discount rate £'000 £'000
The Bespoke Brick Company Limited 4.9% - - 675 - 686
Brickmongers (Wessex) Ltd 4.8% 138 - 87 - 89
U Plastics Limited 3.5% 2,208 962 2,092 964 2,164
Bathroom Barn Limited 1.7% 231 108 166 110 170
McCann Logistics Ltd 1.7% 889 1,324 1,597 1,330 1,628
Taylor Maxwell Group (2017) Limited 4.1% - 390 422 406 435
SBS Cladding Limited 4.1% 1,845 1,464 1,804 1,500 1,900
Leadcraft Limited 10.4% 722 964 795 1,128 1,028
HBS NE Limited 16.1% - 10,069 3,901 10,770 6,998 22,188
23.6%
Beacon Roofing Limited* 13.0% 1,365* 2,355 1,365* 2,802 1,885*
E. T. Clay Products Limited 16.0% 1,043 2,433 - 3,210 -
Heritage Clay Tiles Limited 20.0% 82 193 - 270 -
*2022 and acquisition values restated following completion of fair value assessment of total consideration payable and net assets acquired as noted above.
The potential undiscounted amount payable in respect of E. T. Clay Products Limited and Heritage Clay Tiles Limited ranges from £nil to £3,480,000. In respect of prior period acquisitions, the undiscounted amount payable for U Plastics Limited ranges from £572,000 to £1,200,000 (2022: £246,000 to £2,400,000) and the amount payable for SBS Cladding Limited ranges from £500,000 to £2,000,000 (2022: £nil to £2,000,0000). It is not possible to determine a range of outcomes for other acquisitions as the arrangements do not contain a maximum payable.
Changes in the range of outcomes are due to amounts paid or payable being determined during the year as milestones within the performance period are met.
The acquisition of Taylor Maxwell Group (2017) Limited is also subject to further payments depending on future performance, ranging from £nil to £13,000,000, over the three years following acquisition. Based on current interpretation guidance concerning contingent payments to employees under IFRS 3, the earn-out amounts payable are recognised in profit or loss over the earn-out period as remuneration costs. This is due to the inclusion of a 'bad leaver' clause in the share purchase agreement, under which the earn-out consideration payment is forfeited. The earn-out consideration is therefore deemed to effectively be contingent on the continued employment of the seller and the seller not being considered a 'bad leaver'. The anticipated total amount payable, however, is not expected to change due to other clauses and payment terms within the share purchase agreement. A charge of £4,333,000 has been recognised in the year in respect of this earn-out consideration, presented within other items (note 5).
Similarly, the acquisition of Modular Clay Products Ltd is also subject to further amounts payable depending on future performance over the three years following acquisition, which are recognised as remuneration due to a 'good leaver' clause within the share purchase agreement. It is not possible to determine a range for these future payments as the agreement does not contain a maximum payable. A charge of £1,150,000 has been recognised in the year in respect of this earn-out consideration, presented within other items (note 5).
Changes in amounts recognised in respect of contingent consideration can be reconciled as follows:
Company acquired Finance expense
Additions £'000
through business combinations
£'000
Fair value at Fair value (gain)/loss Fair value at
31 March 2022 £'000 Settlement 31 March 2023
£'000 £'000 £'000
U Plastics Limited 2,092 - 47 (1,177) - 962
McCann Logistics Ltd 1,597 - 26 (124) (175) 1,324
SBS Cladding Limited 1,804 - 60 100 (500) 1,464
HBS NE Limited 10,770 - 2,352 (9,221) - 3,901
Beacon Roofing Limited 1,365 - 178 812 - 2,355
E. T. Clay Products Limited - 1,043 80 1,310 - 2,433
Other business combinations 2,146 82 111 124 (808) 1,655
During the year, a gain of £9,221,000 was recognised in respect of HBS NE Limited. Upon acquisition, significant growth was forecast with an anticipated increase in revenues and profits due to the introduction of Part L and Part S renewable energy legislation, which requires new homes within the UK to reduce their carbon footprint.
The application of this legislation by housebuilders has taken longer than initially anticipated. This, together with a forecast slow down of the housing market compared to prior years, is expected to delay the period over which HBS NE will benefit from the new legislation and achieve the forecast growth. As a result, an element of the projected future growth is now expected to fall outside of the performance period under which the contingent consideration payable is assessed.
In the case of U Plastics Limited, focus has continued to be on the acquisition and opening of additional branches. Profit levels achieved in the period immediately following acquisition have therefore not been as high as originally anticipated due to the timing of development and opening of these branches. As such, there has been a fair value gain of £1,177,000 recognised in the year.
Beacon Roofing Limited has performed well following acquisition, with results exceeding initial expectations. During the year, the company gained new business from a competitor that entered administration which has contributed to their strong performance. Consequently, the contingent consideration expected to be payable in relation to this acquisition is expected to increase, resulting in a fair value loss of £812,000.
The fair value loss for E. T. Clay Products Limited of £1,310,000 has arisen as a result of forecast results at the year end, from which the year-end expected contingent consideration payable has been derived, exceeding the initial expectations on acquisition. The company was acquired on 30 September 2022, when the economic environment was particularly volatile with high inflation and interest rates on the rise. In the second half of the financial year, whilst interest rates have continued to rise, inflation has started to fall and economic conditions stabilise, with the expectation that any recession or downturn in the UK would not be as severe as originally thought.
Other fair value gains and losses in the year also reflect changes in performance and/ or anticipated profits compared to those originally forecast at the end of the prior year or on acquisition.
9. Loans and borrowings
2023 2022
£'000 £'000
Current
Overdrafts 12,624 -
12,624 -
Non-current
Bank loans 16,800 24,240
16,800 24,240
Total loans and borrowings 29,424 24,240
The Directors consider that the carrying amount of loans and borrowings
approximates to their fair value. Non-current bank loans comprise a principal
loan value of £17,000,000 (2022: £24,600,000) less arrangement fees of
£200,000 (2022: £360,000), which are amortised over the term of the loan.
The Group has a revolving credit facility of £60,000,000, including an
ancillary carve out of a £5,000,000 overdraft,
which runs to December 2024. The revolving facility bears interest at a
variable rate based on the SONIA. At the reporting date, interest was charged
at a rate of 1.9% above the adjusted SONIA interest rate benchmark.
During the year, the Group entered into a notional pool agreement, whereby
certain cash balances within the Group are entitled to be offset, providing
the overall overdrawn balance does not exceed the £5,000,000 facility limit.
The Company's overdraft balance at the year-end is a result of the timing of
cash transfers within the Group and funds being transferred from the Group's
central facility.
The bank loans are secured by a fixed charge over the Group's properties and
floating charges over the remaining assets of the Group, including all
property, investments and assets of the Company's subsidiary undertakings. A
guarantee has also been provided by certain trading subsidiaries.
10. Pensions
Defined contribution plans
The total expense recognised in profit or loss in relation to contributions payable under defined contribution pension plans is £1,200,000 (2022: £1,024,000).
At the reporting date, contributions of £192,000 (2022: £104,000) due in respect of the reporting period had not yet been paid over to the pension provider.
Defined benefit plans
When the Group acquired Taylor Maxwell Group (2017) Limited on 30 June 2021, the net assets acquired included the Taylor Maxwell Group Limited Pension and Assurance Scheme, which is funded by the payment of contributions to a separately administered trust fund and provides both defined benefit and defined contribution pension benefits to members. The defined benefit pension scheme is closed to future accrual. Pension benefits are related to the members' final salary at retirement (or earlier date of leaving or death) and their length of service.
The scheme is a registered scheme under UK legislation and is subject to scheme funding requirements. It was established under trust and is governed by the scheme's Third Definitive Trust Deed and Rules, dated 20 September 2016. The trustees are responsible for the operation and governance of the scheme, including making decisions regarding the scheme's funding and investment strategy, in conjunction with the Group.
During the year, the Group made contributions of £nil (2022 - £nil) to the scheme. Contributions in the next year are also expected to be £nil. The most recent actuarial valuation was conducted as at 31 March 2018. On 7 July 2021, an insurance policy was purchased via the scheme assets with the intention of meeting future benefits payable and reducing the risk of additional funding from the Group.
A full buy-out process commenced in order to completely transfer the risk associated with the scheme to an insurer. This process was ongoing throughout the year and is substantially complete at the time of announcing these results. The process is expected to be finalised and the pension scheme wound up within the financial year ending 31 March 2024, at which point the scheme liabilities and associated assets will be derecognised and the residual surplus repaid net of any final expenses, with are expected to be immaterial.
A full actuarial valuation has been carried out at 31 March 2023, based on scheme membership data as at 1 October 2022, by a qualified independent actuary. Scheme invested assets are stated at their current bid price at 31 March 2023.
The principal assumptions used for the purposes of the actuarial valuations, on acquisition and at the reporting date, were as follows:
2023 2022
Discount rate 4.80% 2.60%
Inflation rate (CPI) 3.00% 3.60%
Pension increases (Post 1988 GMP) 2.60% 2.80%
Pension increases (Post 1997 pension) 3.00% 3.60%
Longevity at retirement age for current pensioners
Male 22.1 years 22.0 years
Female 24.4 years 24.3 years
Longevity at retirement age for future pensioners
Male 23.4 years 23.4 years
Female 25.8 years 25.8 years
Amounts recognised in profit or loss in respect of the defined benefit plan are as follows:
2023 2022
£'000 £'000
Service cost 196 140
Net interest expense (18) (36)
Included in profit or loss 178 104
The service cost has been included in profit or loss within administrative
expenses and the net interest expense within other interest receivable. The
remeasurement of the net defined benefit asset is included in other
comprehensive income.
Amounts recognised in other comprehensive income, in respect of the defined benefit plan, are as follows:
2023 2022
£'000 £'000
Re-measurement (gain)/loss arising from:
Financial assumptions (1,974) (637)
Experience assumptions 167 62
Return on assets, excluding interest income 1,764 2,545
Included in other comprehensive income/(loss) (43) 1,970
Reconciliation of defined benefit obligation and fair value of scheme assets
Defined benefit obligation Fair value of scheme assets Net defined scheme asset
£'000 £'000 £'000
At 1 April 2021 - - -
Acquired through business combinations (10,210) 13,065 2,855
Interest cost (127) 163 36
Net re-measurement gains - financial 637 - 637
Net re-measurement losses - experience (62) - (62)
Return on assets, excluding interest income - (2,545) (2,545)
Benefits paid 417 (417) -
Scheme administrative cost - (140) (140)
At 31 March 2022 (9,345) 10,126 781
Acquired through business combinations - - -
Interest cost (236) 254 18
Net re-measurement gains - financial 1,974 - 1,974
Net re-measurement losses - experience (167) - (167)
Return on assets, excluding interest income - (1,764) (1,764)
Benefits paid 522 (522) -
Scheme administrative cost - (196) (196)
At 31 March 2023 (7,752) 7,898 646
The weighted average duration of the scheme is 9.3 years (2022: 11.3 years).
Disaggregation of defined benefit scheme assets
The fair value of the scheme assets is analysed as follows:
2023 2022
£'000 £'000
Cash fund and net current assets 852 980
Insured annuities 7,046 9,146
Fair value of scheme assets 7,898 10,126
The scheme assets do not include any of the Group's own financial instruments
or any property occupied by the Group.
Risks
The scheme exposes the Group to actuarial risk, such as market (investment) risk, interest rate risk, inflation risk, currency risk and longevity risk.
The key risks are considered to be life expectancy and inflation risk. The scheme's obligation is to provide a pension for the life of the member, As the life expectancy increases, the value of the scheme's liabilities also increase. The benefit obligations are also linked to inflation. Higher inflation would therefore result in an increase in the scheme's liabilities.
However, following the purchase of a buy-in insurance policy, many of the risks associated with future pension obligations are transferred to the insurer under the policy. The scheme does not expose the Group to any unusual scheme specific or Group specific risks.
The value of the insured annuity policy is expected to equal the value of the liabilities, excluding any additional liability that may arise from amending benefits for the impact of the recent Lloyds Banking Group high court ruling on GMP equalisation. The insured annuity policy therefore provides a high level of protection against interest, inflation and mortality risks associated with the benefits. The cash holding is expected to be sufficient to meet any additional GMP equalisation liabilities and future expenses of running the scheme.
Sensitivity
A sensitivity analysis has been determined based on reasonably possible
changes the discount rate, rate of inflation (CPI) and life expectancy, with
all other variables held constant. Increases in pension payments are derived
from the assumed inflation rate.
If the discount rate were to decrease by 0.25%, the defined benefit scheme obligation would increase by £168,000 (2022: £266,000). If the rate of inflation (CPI) were to increase by 0.25%, the defined benefit scheme obligation would increase by £75,000 (2022: £111,000). If the life expectancy were to increase by 1 year, the defined benefit scheme obligation would increase by £281,000 (2022: £437,000) at the reporting date.
11. Post balance sheet events
On 2 June 2023, the Group completed the acquisition of the entire share capital and 100% of the voting rights in Precision Façade Systems Ltd.
The acquisition was made in order to supplement and expand the Group's existing product range in the cladding market.
The book value of the separable assets acquired and liabilities assumed on acquisition are estimated as follows:
£'000
Property plant and equipment 15
Inventory 5
Trade and other receivables 34
Cash and cash equivalents 7
Trade and other payables (40)
Total identifiable net assets 21
Due to the timing of the acquisition, a detailed assessment of the fair value of the identifiable net assets, and value of any uncollectible contractual cash flows, has not been completed at the date of approving these financial statements.
The total consideration expected to be payable is:
£'000
Cash 600
Total consideration 600
The above consideration is subject to post completion adjustments.
It is expected that goodwill will arise on the acquisition and this will primarily comprise the strategic value of the acquisition, including the potential for future growth within the framing market. This goodwill is not expected to be deductible for tax purposes.
Acquisition costs of £23,000, in relation to stamp duty and legal and professional fees, are estimated to be incurred in connection with this acquisition and will be recognised in profit or loss. Due to the timing of the acquisition, not all costs have been invoiced or finalised at the time of approving these financial statements.
On 8 June 2023, the Group completed the sale of its shares in Lendwell Holdings Limited for consideration of £188,000. There was a £nil gain or loss on the sale of this investment in equity instruments designated as FVTOCI.
12. Availability of annual report and accounts
The Annual Report and Accounts for the year ended 31 March 2023 will be posted to shareholders on or before 3 August 2023 and laid before the Group at the Annual General Meeting on 5 September 2023. Copies of the Annual Report and Accounts for the year ended 31 March 2022 will be available on request from the Company Secretary at Brickability Group PLC, South Road, Bridgend Industrial Estate, Bridgend CF31 3XG and from the Group's website
www.brickabilitygroupplc.com (http://www.brickabilitygroupplc.com)
.
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