REG - Brickability Group - Interim results for six months ended 30 Sept 2023
28/11/2023 07:00
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RNS Number : 8307U Brickability Group PLC 28 November 2023
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO. 596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
28 November 2023
Brickability Group PLC
("Brickability" or "the Group")
Interim Results for the six months ended 30 September 2023
Brickability Group PLC (AIM: BRCK), the leading construction materials
distributor, today announces its unaudited interim results for the six months
ended 30 September 2023 ("H1 FY24").
H1 FY24 Financial Highlights
· Revenue of £324.8m, a decrease of 7.9% compared to H1 FY23 (H1 FY23:
£352.7m) and a 14.4% reduction on a like-for-like((1)) basis
· Gross profit of £55.0m (H1 FY23: £54.9m)
· Increased gross profit margin of 16.9% (H1 FY23: 15.6%)
· Adjusted EBITDA((2)) increased slightly to £25.6m (H1 FY23: £25.5m((3)))
· Adjusted Profit before tax((4)) decreased by 2.7% to £21.8m (H1 FY23:
£22.4m((3)))
· Statutory Profit before tax increased by 8.8% to £16.0m (H1 FY23:
£14.7m((3)))
· Statutory EPS increased by 1.1% to 3.78p (H1 FY23: 3.74p)
· Adjusted EPS((5)) decreased by 11.7% to 5.30p (H1 FY23: 6.00p)
· Net debt((6)) as at 30 September 2023 of £30.9m (H1 FY23: £27.4m)
· Increased Interim dividend of 1.07 pence per share (H1 FY23: 1.01 pence)
Operational Highlights
· Resilient performance across the Group in the first half of FY23, despite
macroeconomic and geopolitical backdrop.
· Particularly strong performance in the Contracting and Distribution divisions,
highlighting the benefit of the Group's diversification strategy.
Post Period and Outlook
· Strategic acquisition announced in October of Group Topek Holdings Limited
("Topek") which means the Group now has a full range of cladding capabilities,
as well as significantly increasing the Group's presence in the cladding
remediation market.
· Borrowing facility increased to an initial £100m, from £60m, providing the
Group with additional liquidity headroom to fund the Group's working capital
requirements and potential further acquisitions.
· Proportion of brick revenues now reduced to c.50% of Group revenues as the
Company's strategic focus on diversification continues to yield substantial
benefits.
· As previously announced by the Company on 11 October 2023, the Board expects
that forecast reductions in newbuild volumes will have a corresponding impact
upon the performance of the Group's existing businesses throughout the second
half of the current financial year.
· The acquisition pipeline continues to be exciting, and targeted growth against
our robust acquisition criteria will continue.
· The Board remains confident in the Group's ability to continue to deliver on
its strategic objectives.
· Increased interim dividend reflects the performance of the business in the
half year and the Board's confidence in the longer-term outlook for the Group.
((1) ) like-for-like ("LFL") revenue is a measure of performance, 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) ) Re-stated (see note 8 in the interim statement)
((4) ) Statutory profit before tax excluding non-underlying items (see note 5).
((5) ) Adjusted profit after tax (statutory profit after tax before non-underlying
items) divided by the weighted average number of shares in the year.
((6) ) Bank borrowings less cash.
( )
John Richards, Chairman, commented:
"It is pleasing to report H1 FY24 performance, and maintained profitability,
in line with Board expectations despite challenging trading conditions. Whilst
we have previously communicated that the second half of the year is
anticipated to see industry wide volume reductions, which the Group is not
immune, the Board continues to believe that Brickability's diversified,
multi-business, approach positions the Group to continue to perform well in
the current market backdrop and in the future.
"The acquisition of Topek is the Group's second largest((7)) to date and, with
the acquisition of Taylor Maxwell having delivered a significant increase in
exposure for the Group to public and commercial end markets, the addition of
Topek further increases our presence in these markets.
"Market conditions will continue to be uncertain in the near term but, having
built a robust and increasingly diverse business and with a disciplined
approach to costs, we remain confident in the Group's ability to continue to
deliver on its strategy. The Board is pleased to recommend an interim dividend
of 1.07p per share, reflecting the performance of the business in the half
year and the Board's confidence in the longer-term outlook for the Group."
(7) Based on transaction value
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 / George Lawson (Corporate Finance)
Julian Morse / Michael Johnson (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 operates from more than 70 locations across the
country with over 700 employees.
Brickability Group PLC
Interim Report for the six months ended 30 September 2023
Chairman's Statement
Overview
I am pleased to report a resilient set of results for the six months to 30
September 2023 with the Group delivering a good financial performance trading
in line with expectations, achieving an adjusted EBITDA of £25.6 million (H1
FY23: £25.5 million).
As has been well documented, the private housebuilding sector has encountered
a number of headwinds. Against this macro backdrop, it is pleasing to see the
Group's strategic focus on diversification yielding substantial benefits, with
public housebuilding and contracting proving to be robust in comparison. Our
Taylor Maxwell bricks and cladding businesses, which form integral parts of
the Group's diversified portfolio, have demonstrated resilience and are
notably less exposed to private housebuilding. Our Distribution and
Contracting businesses have also performed well.
Despite the short-term headwinds, the mid- to long-term fundamentals of the
private housebuilding sector are robust. Population growth provides a solid
foundation for sustained demand, while changing demographics and societal
trends continue to drive an increase in household formation. The historical
and persistent gap between demand and supply in the housing market indicates
significant potential for growth and expansion. We also continue to operate
within a supportive political environment. Finally, the strength and financial
stability of major housebuilders provide confidence in the sector's ability to
weather short-term challenges and capitalise on long-term opportunities.
A pivotal aspect of our strategy is robust cost control, including in relation
to recruitment, aligning our workforce with the evolving market conditions. We
are also steadfast in our commitment to developing and nurturing talent within
the organisation. Despite cost control measures, we are pressing forward with
our management development programmes and business apprenticeship scheme.
These initiatives empower us to cultivate a robust management talent pool,
ensuring our ability to thrive in the future.
Against the current macro backdrop, Brickability's diversified, multi-business
approach and long-term mindset continues to enable the Group to perform well
and position the Group in good stead for the future.
Acquisitions
We continue to look for opportunities to grow the business organically and to
capitalise on the synergies created within the Group. The acquisition pipeline
continues to be exciting, and targeted growth against our robust acquisition
criteria will continue.
In June 2023, we completed the acquisition of Precision Facades Systems
Limited for an initial consideration of £0.6 million with its patented
framing system for cladding. Post period, we announced the strategic
acquisition of Topek in October 2023. Topek offers a range of services which
will complement the Group's existing cladding portfolio, including Taylor
Maxwell Cladding, SBS Cladding and Architectural Facades, meaning that the
Group now has a full range of cladding capabilities including design,
fabrication, supply and installation. The acquisition of Topek will also
significantly increase the Group's presence in the cladding remediation market
and further enhances our diversification.
Board and Environmental, Social and Governance
As the Group continues to expand in scale and customer base, we are acutely
aware of the role and responsibility we have in tackling environmental, social
and governance priorities. We remain committed to developing our ESG strategy
and ensuring continued progress is made in that regard.
In May 2023 we announced that 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 the Brickability Group 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, who
will take up the role in April 2024. Frank is a prominent figure in the UK
brick industry and, with the wealth of experience he brings, will help lead
the Group through its next stages of growth.
Interim Dividend
The Board is pleased to recommend an interim dividend of 1.07p per share (H1
FY23: 1.01p), payable on 22 February 2024, reflecting the performance of the
business in the half year and the Board's confidence in the longer-term
outlook for the Group. The ex-dividend date is 25 January 2024 with an
associated record date of 26 January 2024.
John Richards
Chairman
28 November 2023
Chief Executive's Review
The Group has performed in line with the board's expectations during the first
half of the year, against an uncertain economic environment. Whilst revenue
fell compared to last year, gross profit remained comparable with the prior
period reflecting improved margins across all the divisions.
Group adjusted EBITDA margin has grown by 0.7% compared to the prior period,
driven by price inflation and business mix.
We continue to develop our IT systems to enhance the quality and pace of our
management information, along with making progress in upgrading our corporate
website.
Bricks and Building Materials Division
The Group's largest division, representing c70% of total sales, saw revenues
fall 15.2%, 15.2% on a LFL basis, during the period. Following a period of
significant growth in the division, the fall is a reflection of the weaker
economic conditions affecting the housing market, especially the newbuild
sector. Adjusted EBITDA margins however have been maintained, supported by
price increases as well as reflecting the mix of the companies in the
division.
Brick volumes have declined in line with the market movement for UK despatches
whilst manufacturer price increases flowing from H2 FY23 have helped to soften
the impact on revenue. Whilst Timber volumes are substantially flat over the
period, market pricing has been in decline following the significant increases
experienced recent years. The performance in our public and commercial sectors
together with the growth of our higher-margin cladding supply businesses has
been strong and has helped to mitigate some of the impact of the headwinds in
the private housing sector.
Importing Division
The Importing Division's revenue decreased by 1.6% in the first half of the
year. Adjusting for the impact of the acquisitions of Modular Clay Products,
which was acquired on 31 May 2022, along with E.T. Clay and Heritage Clay
Tiles, which were acquired on 30 September 2022, revenue fell 34.1%, on a LFL
basis. The fall in revenue reflects the weaker economic environment with lower
demand for bricks in the UK market and an increased availability of domestic
bricks.
During the period of high market demand last year, our flexible supply chain
meant we were able to source bricks for our customers when the domestic market
experienced shortages. The current financial year sees a reduction in this
activity as the availability of bricks manufactured in the UK has improved,
however, there still remains a demand for imported brick types not available
from UK sources. It is our expectation that when market conditions and brick
demand normalise, the demand for imported bricks will increase again due to
the capacity constraints of domestic manufacture.
Distribution Division
Revenue in the first half grew by 7.0% in the Distribution Division, 7.0% on a
LFL basis, with growth in all businesses in the division. Towelrads continues
to grow, driven by customer and product diversification. FSN Doors and Forum
Tiles saw strong revenue growth as a result of some recent high-value orders.
HBS NE Ltd (Upowa) continues to grow, and we expect the growth rate to
accelerate throughout the second half of the year, despite the headwinds in
the private housing sector, following the introduction of Part L legislation.
Contracting Division
Revenue in the first half grew by 17.8%, 17.8% on a LFL basis, driven by the
continued recovery of material price inflation and the resilience of
housebuilding in the mid to higher end of the market in the Sout East. The
recovery of the significant material price increases experienced in FY23 has
also seen margins improve during the period.
Continental Tile Joint Venture
Production trials for new clay tiles from our joint venture in Germany have
progressed to an advanced stage in the period, with an expected launch in Q1
FY25. Whilst market demand remains suppressed, we have invested in new sales
infrastructure in the UK to maximise the success of this opportunity.
Summary
In a challenging market, Brickability has demonstrated its resilience and its
ability to deliver upon its strategic objectives and remains committed to
growing the business in a sustainable manner.
We continue to prepare for Frank Hanna's arrival, and I look forward to
handing over the CEO role to Frank and working with him, in a non-board role,
to further grow and develop the Group.
Alan J Simpson
Chief Executive
28 November 2023
Financial Review
Revenue and Gross Profit
The Group delivered revenue of £324.8 million in the first six months of H1
FY24 (H1 FY23: £352.7 million), a decrease of 7.9% (£27.9 million) compared
to the prior period. When the impact of acquisitions is adjusted, like for
like revenue decreased by 14.4% when compared to H1 FY23.
The decrease in LFL revenue largely reflects the general challenges being
faced in the construction industry, with the weaker economic environment
affecting product demand in the housebuilding sector. The Distribution
division is also continuing to grow through the diversification of customers
and products. The Contracting division has seen an increase in revenue
compared to H1 FY23, with growth primarily from major housebuilders and
developers operating in the mid to higher end of the market.
Revenue by division was:
H1 FY24 H1 FY23 % Change
£'000 £'000 LFL % Change
Bricks and Building Materials 229,167 270,101 (15.2) (15.2)
Importing 53,247 54,125 (1.6) (34.1)
Distribution 33,227 31,041 7.0 7.0
Contracting 23,421 19,880 17.8 17.8
Group eliminations (14,222) (22,478) (36.7) -
Total 324,840 352,669 (7.9) (14.4)
Gross profit for the 6 months increased by 0.2% to £55.0 million (H1 FY23: £54.9 million) whilst the Group's gross margin percentage increased to 16.9% (H1 FY23: 15.6%), reflecting the change in product mix across the group.
Adjusted Profit and Adjusted EBITDA
Statutory profit before tax of £16.0 million (H1 FY23: £14.7 million((3))) includes a net charge of £5.8 million (H1 FY23: £7.6 million), in respect of 'other items' which are largely acquisition related and not considered reflective of the Group's underlying trading operations. These are analysed below the Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income.
The Group's Adjusted EBITDA at £25.6 million for the first six months of FY24 was comparable with the same period last year. Adjusted EBITDA as a percentage of revenue has increased to 7.9% (H1 FY23: 7.2%, FY 2023: 7.6%) due mainly to the change in sales mix across the group as noted above.
Adjusted EBITDA by division was:
H1 FY24 H1 FY24 H1 FY23 H1 FY23
£'000 EBITDA as % Revenue £'000 EBITDA as % Revenue
Bricks and Building Materials 13,585 5.9% 15,704 5.8%
Importing 4,924 9.2% 5,424 10.0%
Distribution 5,229 15.7% 4,953 16.0%
Contracting 3,690 15.8% 2,565 12.9%
Central (1,861) - (3,112) -
Total 25,567 7.9% 25,534 7.2%
Statutory Profit before tax
Statutory Profit before tax for the period was £16.0 million (H1 FY23: £14.7
million). Comparative results to 30 September 2022 have been restated,
following the completion of the fair value assessment relating to acquisitions
acquired shortly before the prior year interim financial statements were
published. The restatement relates to the consideration and net assets
acquired.
The decrease of £0.6 million in the H1 FY23 statutory profit before tax,
compared to the £15.3 million originally reported, primarily relates to a
charge of £0.5 million in connection with earn-out consideration payable for
the acquisition of Modular Clay Products. Contingent consideration of £2.4
million was initially recognised within goodwill and deferred consideration
payable. However, after review and based on interpretation guidance under IFRS
3, the earn-out consideration payable treatment has been amended and is now
recognised as remuneration costs as an expense in profit or loss over the
earn-out performance period.
Further details of the prior period restatement are included in note 8 to the
interim financial statements.
Earnings per share
Basic EPS was 3.78 pence per share (H1 FY23: 3.74 pence restated), while
adjusted basic EPS was 5.30 pence per share (H1 FY23: 6.00 pence restated).
Adjusted EPS is an underlying EPS, based on the adjusted profit as noted
above.
Dividend
The Board is recommending an interim dividend of 1.07p per share (H1 FY23:
1.01p) to shareholders on the register at 26 January 2024. The ex-dividend
date and payment date for the dividend will be 25 January 2024 and 22 February
2024 respectively.
Cash flow and net debt
The Group generated operating cash flows before movements in working capital
of £22.6 million in the first six months of the year compared to £23.2
million in the same period in FY23. Cash generated from operations was £3.4
million (H1 FY23: £6.3 million).
The net working capital outflow of £19.3 million is comprised of a £3.5
million outflow in respect of inventories, trade receivables and trade
payables and £15.8 million of accrual movements and payments, primarily in
respect of supplier rebates, employee bonuses and contingent earn-outs, which
are timing related and mostly expected to unwind by the financial year end.
The net debt position (cash less bank borrowings) at 30 September 2023 was
£30.9 million compared to £27.4 million at 30 September 2022, and is an
increase of £22.9 million since the net debt position at 31 March 2023.
The increase in net debt during the period includes an outflow of working
capital requirements of £19.3 million (H1 FY23: £16.9 million) in line with
the expected working capital cycle of the Group. Much of this is expected to
unwind during the second half of the year. Other notable cash outflows were;
the further investment in property plant and equipment and intangible assets
of £4.5 million (H1 FY23: £5.8 million), tax paid of £5.0 million (H1 FY23:
£5.0 million), dividends paid of £6.5 million (H1 FY23: £6.1 million), the
initial payment for the acquisition of Precision Facades Systems of £0.6
million (H1 FY23: £15.4 million) and payment of deferred consideration, in
relation to previous acquisitions, of £4.7 million (H1 FY23: £2.0 million).
Bank facilities
At the reporting date, the group had a total bank debt of £30.9 million, with
a further £29.1 million of undrawn committed facilities available. In October
2023 and following the acquisition of Topek, the Group entered into a new
revolving credit facility with an initial limit of £100 million, on a club
basis with HSBC and Barclays. The £100m limit reduces to £80m over the term
of the loan which is 3 years (with the option of two one-year extensions).
Defined benefit pension scheme
In June 2021, the Group acquired a defined benefit pension scheme as part of
the net assets of Taylor Maxwell (2017) Limited. Shortly afterwards, it
entered into a buy-out process to transfer the risk associated with the scheme
to an insurer. This process was completed during the period and the pension
scheme is expected to be wound up by the end of the financial year.
Subsequent events
In October 2023, the Group acquired the entire share capital and 100% of the
voting rights in Group Topek Holdings Limited for consideration initially
expected to be up to £52.8 million, with up to £17.7 million of this payable
over the three years following acquisition depending on performance. The
£52.8 million is higher than the £45 million disclosed in the RNS as it
includes working capital adjustments to acquire the business on a cash-free,
debt-free basis. Further details are outlined in note 13. At the same time,
the Group refinanced its banking facilities as noted above.
There are no other material post-balance sheet events.
Mike Gant
Chief Financial Officer
28 November 2023
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive
Income
For the six months ended 30 September 2023 (unaudited)
6 months ended Year ended
6 months ended 30 Sept 2022 31 March 2023
30 Sept 2023 (Restated) (Audited)
£'000 £'000 £'000
Notes
Revenue 324,840 352,669 681,087
Cost of sales (269,861) (297,720) (568,220)
Gross profit 54,979 54,949 112,867
Other operating income 720 - 561
Administrative expenses 5 (40,187) (38,360) (80,011)
Comprising:
Depreciation and amortisation (6,921) (6,368) (13,114)
Other administrative expenses (33,266) (31,992) (66,897)
Impairment losses on financial assets (414) (408) (1,611)
Finance income 208 52 143
Finance expense (2,248) (2,342) (5,256)
Share of post-tax profit of equity accounted associates 97 91 123
Share of post-tax loss of equity accounted joint ventures - (384) (721)
Fair value gains 2,815 1,142 8,432
Profit before tax 15,970 14,740 34,527
Tax expense (4,631) (3,593) (6,830)
Profit for the period 11,339 11,147 27,697
Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit pension schemes (17) 26 43
Deferred tax on remeasurement of defined benefit pension schemes 6 (5) (11)
Fair value gain on investments in equity instruments designated as FVTOCI - - 10
Other comprehensive income for the period (11) 21 42
Total comprehensive income 11,328 11,168 27,739
Profit/(loss) for the year attributable to:
Equity holders of the parent 11,336 11,169 27,738
Non-controlling interests 3 (22) (41)
11,339 11,147 27,697
Total comprehensive income/(loss) attributable to:
Equity holders of the parent 11,325 11,190 27,780
Non-controlling interests 3 (22) (41)
11,328 11,168 27,739
Earnings per share
Basic earnings per share 7 (#_bookmark67) 3.78 p 3.74 p 9.26 p
Diluted earnings per share 7 (#_bookmark67) 3.70 p 3.67 p 9.10 p
Adjusted basic earnings per share 7 (#_bookmark67) 5.30 p 6.00 p 11.93 p
Adjusted diluted earnings per share 7 (#_bookmark67) 5.20 p 5.89 p 11.71 p
Adjusted
profit
Adjusted profit excludes those items that are not considered to be directly attributable to the Group's underlying trading operations or for which separate disclosure would assist in understanding the Group's performance in the period. It can be reconciled to statutory profit after tax as follows:
6 months ended Year ended
6 months ended 30 Sept 2022 31 March 2023
30 Sept 2023 (Restated) (Audited)
£'000 £'000 £'000
Profit for the period 11,339 11,147 27,697
Acquisition costs 23 171 281
Earn-out consideration classified as remuneration under IFRS 3 2,695 2,627 5,483
Share-based payment expense (including employer NI) 830 571 1,567
Amortisation and impairment of intangible assets 4,315 4,084 8,399
Unwinding of discount on contingent consideration 832 1,421 2,891
Share of post-tax profit of equity accounted associates (97) (91) (123)
Fair value gains on contingent consideration (2,815) (886) (8,176)
Gain on acquisition - (256) (256)
Tax on adjusting items (1,196) (890) (2,094)
Adjusted profit for the period 15,926 17,898 35,669
Depreciation and amortisation 2,606 2,284 4,715
Finance income (208) (52) (143)
Finance expense 1,416 921 2,365
Tax expense 5,827 4,483 8,924
Adjusted EBITDA 25,567 25,534 51,530
Adjusted EBITDA reflects earnings before interest, tax, depreciation, amortisation and other non-underlying items. A reconciliation between adjusted EBITDA and statutory profit before tax is included in note 5.
Condensed Consolidated Balance Sheet
Six months ended 30 September 2023 (unaudited) 6 months ended Year ended
30 Sept 2022 31 March 2023
6 months ended (Restated) (Audited)
30 Sept 2023 £'000 £'000
£'000
Notes
Non-current assets
Property, plant and 28,457 23,859 24,783
equipment
Right of use 17,240 13,586 18,553
assets
Intangible 148,769 156,573 152,424
assets
Investments in equity accounted 391 321 324
associates
Investments in financial assets - 178 188
Trade and other 6,456 3,944 3,611
receivables
Total non-current assets 201,313 198,461 199,883
Current assets
Inventories 34,347 36,579 33,159
Trade and other receivables 116,357 132,948 125,603
Employee benefits 523 660 646
Current income tax assets 953 - 1,677
Cash and cash 22,920 6,651 21,645
equivalents
Total current assets 175,100 176,838 182,730
Total 376,413 375,299 382,613
assets
Current liabilities
Trade and other payables (101,487) (128,194) (131,419)
Current income tax liabilities - (699) -
Loans and borrowings 10 (15,836) - (12,624)
Lease liabilities (3,234) (3,386) (3,225)
Total current liabilities (120,557) (132,279) (147,268)
Non-current liabilities
Trade and other payables (6,188) (17,273) (9,592)
Loans and borrowings 10 (37,880) (33,820) (16,800)
Lease liabilities (11,685) (10,813) (12,967)
Provisions (1,967) (1,445) (2,364)
Deferred tax liabilities (17,222) (19,122) (18,244)
Total non-current liabilities (74,942) (82,473) (59,967)
Total liabilities (195,499) (214,752) (207,235)
Net assets 180,914 160,547 175,378
Equity
Called up share capital 3,003 2,997 3,003
Share premium account 102,851 102,633 102,847
Capital redemption reserve 2 2 2
Share-based payment reserve 4,169 2,438 3,509
Merger reserve 11,146 11,146 11,146
Retained earnings 59,871 41,443 55,002
Equity attributable to equity holders of the parent 181,042 160,659 175,509
Non-controlling interests (128) (112) (131)
Total equity 180,914 160,547 175,378
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 September 2023 (unaudited)
Share capital Share premium account Retained Total attributable to equity holders of the parent Non-controlling interest Total
Capital redemption Share-based payments Merger reserve Earnings
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2022 2,985 102,146 2 1,930 11,146 36,365 154,574 (90) 154,484
Profit for the six months to 30 September 2022 (as restated) - - - - - 11,169 11,169 (22) 11,147
Other comprehensive income for the six months to 30 September 2022 (as - - - - - 21 21 - 21
restated)
Total comprehensive income for the period - - - - - 11,190 11,190 (22) 11,168
Dividends paid - - - - - (6,111) (6,111) - (6,111)
Issue of shares on exercise of share options 12 487 - - - - 499 - 499
Equity settled share-based payments - - - 670 - - 670 - 670
Deferred tax on share-based payment transactions - - - (162) - - (162) - (162)
Total contributions by and distributions to owners 12 487 - 508 - (6,111) (5,104) - (5,104)
At 30 September 2022 2,997 102,633 2 2,438 11,146 41,444 160,660 (112) 160,548
Profit for the six months to 31 March 2023 - - - - - 16,569 16,569 (19) 16,550
Other comprehensive income for the six months to 31 March 2023 - - - - - 21 21 - 21
Total comprehensive income for the six months to 31 March 2023 - - - - - 16,590 16,590 (19) 16,571
Dividends paid - - - - - (3,032) (3,032) - (3,032)
Issue of shares on exercise of share options 6 214 - - - - 220 - 220
Equity settled share-based payments - - - 967 - - 967 - 967
Deferred tax on share-based payment transactions - - - (35) - - (35) - (35)
Current tax on share-based payment transactions - - - 139 - - 139 - 139
Total contributions by and distributions to owners 6 214 - 1,071 - (3,032) (1,741) - (1,741)
At 31 March 2023 3,003 102,847 2 3,509 11,146 55,002 175,509 (131) 175,378
At 1 April 2023 3,003 102,847 2 3,509 11,146 55,002 175,509 (131) 175,378
Profit for the six months to 30 September 2023 - - - - - 11,336 11,336 3 11,339
Other comprehensive income for the six months to 30 September 2023 - - - - - (11) (11) - (11)
Total comprehensive income for the period - - - - - 11,325 11,325 3 11,328
Dividends paid - - - - - (6,456) (6,456) - (6,456)
Issue of shares on exercise of share options - 4 - - - - 4 - 4
Equity settled share-based payments - - - 839 - - 839 - 839
Deferred tax on share-based payment transactions - - - (179) - - (179) - (179)
Total contributions by and distributions to owners - 4 - 660 - (6,456) (5,792) - (5,792)
At 30 September 2023 3,003 102,851 2 4,169 11,146 59,871 181,042 (128) 180,914
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 September 2023 (unaudited)
6 months ended Year ended
30 Sept 2022 31 March 2023
6 months ended (Restated) (Audited)
30 Sept 2023 £'000 £'000
£'000
Operating activities
Profit for the period 11,339 11,147 27,697
Adjustments for:
Depreciation of property, plant and equipment 715 946 1,566
Depreciation of right of use assets 1,847 1,338 3,101
Amortisation of intangible assets 4,359 4,084 8,447
Gain on disposal of property, plant & equipment (41) (31) (314)
and right of use assets
Foreign exchange losses 147 138 29
Share-based payments expense 830 571 1,567
Other operating income (60) - (365)
Share of post-tax profit in equity accounted associates (97) (91) (123)
Share of post-tax loss in equity accounted joint ventures - 384 721
Fair value changes in contingent consideration (2,815) (886) (8,176)
Gain on acquisition - (256) (256)
Movements in provisions (397) (315) (141)
Finance income (208) (52) (143)
Finance expense 2,248 2,342 5,256
Acquisition costs 23 171 281
Income tax expense 4,631 3,593 6,830
Pension charge in excess of contributions paid 121 155 196
Operating cash flows before movements in working capital 22,642 23,238 46,173
Changes in working capital:
Increase in inventories (1,183) (4,284) (865)
Decrease in trade and other receivables 8,263 8,949 19,331
Decrease in trade and other payables (26,338) (21,611) (19,765)
Cash generated from operations 3,384 6,292 44,874
Payment of acquisition expenses (23) (171) (281)
Interest received 41 8 125
Income taxes paid (5,042) (5,047) (11,074)
Net cash (used in)/generated from operating activities (1,640) 1,082 33,644
Investing activities
Purchase of property, plant and equipment (4,402) (5,582) (7,229)
Proceeds from sale of property, plant and equipment 47 86 441
Purchase of right of use assets (16) - (2,525)
Purchase of intangible assets (124) (264) (478)
Acquisition of subsidiaries (550) (15,403) (16,674)
Net cash acquired with subsidiary undertakings - 4,675 4,676
Acquisition of interests in joint ventures - - (442)
Loan to joint venture (1,719) (2,608) (2,960)
Proceeds from sale of other investments 188 - -
Dividends received from associates 30 30 60
Net cash used in investing activities (6,546) (19,066) (25,131)
Financing activities
Equity dividends paid (6,456) (6,111) (9,143)
Proceeds from issue of ordinary shares net of share issue costs 4 499 719
Proceeds from bank borrowings 60,000 53,000 115,400
Repayment of bank borrowings (39,000) (43,500) (123,000)
Payment of lease liabilities (1,737) (1,357) (2,791)
Payment of deferred and contingent consideration (4,744) (2,038) (3,499)
Interest paid (1,754) (882) (2,246)
Net cash generated from/(used in) financing activities 6,313 (389) (24,560)
Net decrease in cash and cash equivalents (1,873) (18,373) (16,047)
Cash and cash equivalents at beginning of period 9,021 25,028 25,028
Effect of changes in foreign exchange rates (64) (4) 40
Cash and cash equivalents at end of period 7,084 6,651 9,021
Notes to the Condensed Consolidated Interim Financial Statements
For the six months ended 30 September 2023 (unaudited)
1. General Information
Brickability Group PLC (the 'Company' or the 'Group') is a public company limited by shares, incorporated in the United Kingdom under the Companies Act 2006 (registration number 11123804) and registered in England and Wales. The registered office address is c/o Brickability Limited, South Road, Bridgend Industrial Estate, Bridgend, United Kingdom, CF31 3XG.
Copies of the Interim Report may be obtained from the registered address or from the Investors section of the Company's website at
www.brickabilitygroupplc.com (http://www.brickabilitygroupplc.com)
.
2. Basis of Preparation
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 March 2023. They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to understanding changes in the Group's financial position and performance since the last annual financial statements.
The Annual Report and Accounts for the year ended 31 March 2023 was audited and has been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Accounts for the year ended 31 March 2023 was not qualified and did not contain statements under s498(2) or (3) of the Companies Act 2006.
The financial information for the six months ended 30 September 2023 and 30 September 2022 is unaudited and has not been reviewed by the Company's auditors.
The interim financial statements are presented in pounds sterling, which is the functional currency of the Group. Amounts are rounded to the nearest thousand, unless otherwise stated.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and thus continue to adopt the going concern basis in preparing these interim financial statements.
3. Significant Accounting Policies
The Group has applied the same accounting policies in these interim financial statements as in its 2023 annual financial statements. New standards effective from 1 January 2023 are outlined in the 2023 annual financial statements. The application of these standards has not had a material impact on the amounts reported in either the current or prior reporting periods.
There have been no other significant amendments or new standards introduced during the period that would have a material impact on the amounts reported.
4. Use of judgements and estimates
The significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty for the interim financial statements are the same as those described in the 2023 annual financial statements.
5. Segmental analysis
The Group 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, not otherwise available in the UK, 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 construction
services, primarily within the residential construction sector.
Revenues and profits are reported in the same manner as that reported internally to the Board, as the Group's Chief Operating Decision-Maker (CODM).
6 months ended 30 September 2023
Consolidated
Bricks and Building Materials Importing Distribution Unallocated and group eliminations £'000
£'000 £'000 £'000 £'000
Contracting
£'000
Revenue from sale of goods 226,171 38,085 28,866 - - 293,122
Revenue from rendering of services - 4,363 3,934 23,421 - 31,718
Total external revenue 226,171 42,448 32,800 23,421 - 324,840
Total internal revenue 2,996 10,799 427 - (14,222) -
Total revenue 229,167 53,247 33,227 23,421 (14,222) 324,840
Adjusted EBITDA 13,585 4,924 5,229 3,690 (1,861) 25,567
Depreciation and amortisation (6,921) (6,921)
Acquisition and re-financing costs (23) (23)
Earn out consideration classified as remuneration under IFRS 3 (2,695) (2,695)
Share-based payment expense (830) (830)
Finance income 208 208
Finance expense (2,248) (2,248)
Share of results of associates 97 97
Fair value gains and losses 2,815 2,815
Group profit before tax 13,585 4,924 5,229 3,690 (11,458) 15,970
6 months ended 30 September 2022
Consolidated
Bricks and Building Materials Importing Distribution Unallocated and group eliminations £'000
£'000 £'000 £'000 £'000
Contracting
£'000
Revenue from sale of goods 264,899 30,728 27,133 - - 322,760
Revenue from rendering of services - 6,278 3,776 19,855 - 29,909
Total external revenue 264,899 37,006 30,909 19,855 - 352,669
Total internal revenue 5,202 17,119 132 25 (22,478) -
Total revenue 270,101 54,125 31,041 19,880 (22,478) 352,669
Adjusted EBITDA 15,704 5,424 4,953 2,565 (3,112) 25,534
Depreciation and amortisation (6,368) (6,368)
Acquisition and re-financing costs (171) (171)
Earn out consideration classified as remuneration under IFRS 3 (2,627) (2,627)
Share-based payment expense (571) (571)
Finance income 52 52
Finance expense (2,342) (2,342)
Share of results of associates 91 91
Fair value gains and losses 1,142 1,142
Group profit before tax 15,704 5,424 4,953 2,565 (13,906) 14,740
Year ended 31 March 2023
Consolidated
Bricks and Building Materials Importing Distribution Unallocated and group eliminations £'000
£'000 £'000 £'000 £'000
Contracting
£'000
Revenue from sale of goods 490,472 75,411 54,510 - - 620,393
Revenue from rendering of services - 11,472 8,085 41,137 - 60,694
Total external revenue 490,472 86,883 62,595 41,137 - 681,087
Total internal revenue 8,122 30,700 394 201 (39,417) -
Total revenue 498,594 117,583 62,989 41,338 (39,417) 681,087
Adjusted EBITDA 30,141 13,188 8,893 5,620 (6,312) 51,530
Depreciation and amortisation (13,114) (13,114)
Acquisition and re-financing costs (281) (281)
Earn out consideration classified as remuneration under IFRS 3 (5,483) (5,483)
Share-based payment expense (1,567) (1,567)
Finance income 143 143
Finance expense (5,256) (5,256)
Share of results of associates 123 123
Fair value gains and losses 8,432 8,432
Group profit before tax 30,141 13,188 8,893 5,620 (23,315) 34,527
6 months ended 30 September 2023
Consolidated
Bricks and Building Materials Importing Distribution £'000
£'000 £'000 £'000
Contracting Central
£'000 £'000
Non-current segment assets 77,469 24,725 55,823 29,230 13,675 200,922
Current segment assets 102,616 25,887 28,903 13,503 4,191 175,100
Total segment assets 180,085 50,612 84,726 42,733 17,866 376,022
Unallocated assets:
Investment in associates 391
Investment in joint ventures -
Investment in financial assets -
Group assets 376,413
Total segment liabilities (78,446) (12,664) (17,868) (4,960) (26,459) (140,397)
Loans and borrowings (37,880)
(excluding leases and overdrafts)
Deferred tax liabilities (17,222)
Group liabilities (195,499)
6 months ended 30 September 2022
Consolidated
Bricks and Building Materials Importing Distribution £'000
£'000 £'000 £'000
Contracting Central
£'000 £'000
Non-current segment assets 80,812 26,784 52,809 31,014 6,543 197,962
Current segment assets 111,735 31,779 23,043 10,281 - 176,838
Total segment assets 192,547 58,563 75,852 41,295 6,543 374,800
Unallocated assets:
Investment in associates 321
Investment in joint ventures -
Investment in financial assets 178
Group assets 375,299
Total segment liabilities (99,418) (24,209) (10,994) (5,589) (21,600) (161,810)
Loans and borrowings (33,820)
(excluding leases and overdrafts)
Deferred tax liabilities (19,122)
Group liabilities (214,752)
Year ended 31 March 2023
Consolidated
Bricks and Building Materials Importing Distribution £'000
£'000 £'000 £'000
Contracting Central
£'000 £'000
Non-current segment assets 79,152 33,147 49,880 29,520 7,672 199,371
Current segment assets 114,359 26,403 25,849 11,965 4,154 182,730
Total segment assets 193,511 59,550 75,729 41,485 11,826 382,101
Unallocated assets:
Investment in associates 324
Investment in joint ventures -
Investment in financial assets 188
Group assets 382,613
Total segment liabilities (96,394) (17,739) (18,601) (4,933) (34,524) (172,191)
Loans and borrowings (16,800)
(excluding leases and overdrafts)
Deferred tax liabilities (18,244)
Group liabilities (207,235)
6. Dividends
6 months ended 6 months ended Year ended
30 Sept 2023 30 Sept 2022 31 March 2023
£'000 £'000 (Audited)
£'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 March 2023 of 2.15p per share 6,456 6,111 6,111
(30 Sept 2022: for the year ended 31 March 2022 of 1.0850p per share)
(31 March 2023: for the year ended 31 March 2022 of 2.04p per share)
Interim dividend for the year ended 31 March 2024 - - 3,032
(31 March 2023: for the year ended 31 March 2023 of 1.01p per share)
Total dividends paid during the period 6,456 6,111 9,143
The Directors recommend that an interim dividend of 1.07p per ordinary share be paid for the year ended 31 March 2024. This dividend has not been included as a liability in these interim 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:
6 months ended 30 September 2023 6 months ended 30 September 2022
(Restated)
Earnings Weighted Earnings Earnings Weighted Earnings
£'000 average per share £'000 average per share
number of (p) number of (p)
shares shares
Basic earnings per share 11,336 300,289,736 3.78 11,169 298,826,434 3.74
Effect of dilutive securities
Employee share options - 5,971,423 - - 5,411,479 -
Diluted earnings per share 11,336 306,261,159 3.70 11,169 304,237,913 3.67
Year ended 31 March 2023 (Audited)
Earnings Weighted Earnings
£'000 average per share
number of (p)
shares
Basic earnings per share 27,738 299,439,718 9.26
Effect of dilutive securities
Employee share options - 5,403,747 -
Diluted earnings per share 27,738 304,843,465 9.10
Adjusted earnings per share and adjusted diluted earnings per share, based on
the adjusted profit attributable to the equity holders of the parent (adjusted
profit for the period add non-controlling interest share of loss), is based on
the following data:
6 months ended 30 September 2023 6 months ended 30 September 2022
(Restated)
Earnings Weighted Earnings Earnings Weighted Earnings
£'000 average per share £'000 average per share
number of (p) number of (p)
shares shares
Adjusted basic earnings per share 15,923 300,289,736 5.30 17,920 298,826,434 6.00
Effect of dilutive securities
Employee share options - 5,971,423 - - 5,411,479 -
Adjusted diluted earnings per share 15,923 306,261,159 5.20 17,920 304,237,913 5.89
Year ended 31 March 2023 (Audited)
Earnings Weighted Earnings
£'000 average per share
number of (p)
shares
Adjusted basic earnings per share 35,710 299,439,718 11.93
Effect of dilutive securities
Employee share options - 5,403,747 -
Adjusted diluted earnings per share 35,710 304,843,465 11.71
8. Business combinations
The Group acquired the entire share capital and 100% of the voting rights in the following company during the period:
Company acquired Acquisition date
Precision Façade Systems Ltd 2 June 2023
The book value of the assets acquired and liabilities assumed on acquisition were as follows:
Precision Façade Systems Ltd
£'000
Property plant and equipment 15
Right of use assets -
Inventory 5
Trade and other receivables 15
Cash and cash equivalents -
Trade and other payables (14)
Current income tax liabilities -
Lease liabilities -
Deferred tax -
Total identifiable net assets 21
Goodwill 579
Total consideration 600
Satisfied by:
Cash paid 550
Deferred cash consideration 50
Contingent consideration -
Total consideration 600
Due to the timing of the acquisition, a detailed assessment of the fair value of all identifiable net assets, and the value of any uncollectable contractual cash flows, has not yet been completed at the date of these interim financial statements.
The goodwill figure is therefore subject to change and the above consideration is subject to post completion adjustments. Residual goodwill will primarily comprise the strategic value of the acquisition, including the potential for future growth within the framing market. None of the goodwill is expected to be deductible for tax purposes.
The acquisition was carried out in order to supplement and expand the Group's existing product range in the cladding market. Upon acquisition the assets and liabilities were hived into the acquiring group company and the entity ceased trading. As such, the Group's revenue and net profit would not be impacted had the business combination taken place at the beginning of the financial period.
Acquisition costs of £23,000 were recognised in profit or loss in respect of stamp duty and legal and professional fees associated with this acquisition.
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 Annual Report and Accounts, 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. This assessment was still ongoing at the time of publishing the 2022 interim financial statements.
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 interim results to 30 September 2022, the interim financial statements would have differed as follows:
· The cost of property, plant and equipment would have been £502,000 higher on acquisition, with a corresponding decrease in goodwill. A depreciation charge of £6,000 would have also been subsequently recorded, with a corresponding reduction in the property, plant and equipment balance at 30 September 2022.
· 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. An amortisation charge of £113,000 and a deferred tax credit of £23,000 would have been recorded in profit or loss.
· The contingent consideration liability on acquisition would have been £193,000 higher, with a corresponding increase in goodwill. An interest charge of £89,000 would have been recognised in respect of unwinding the discount applied to the contingent consideration.
Modular Clay Products Ltd
The Group acquired 100% of the share capital and voting rights in Modular Clay Products Ltd on 31 May 2022. As disclosed in the 2022 interim financial statements, the value of the identifiable net assets had been included at 30 September 2022 on a provisional basis as an independent valuation of the fair value of was ongoing at the time of preparing the interim financial statements. The values were, however, finalised before reporting the Group's annual results to 31 March 2023.
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 16 - 16
Right of use assets 28 - 28
Identifiable intangible assets - 3,810 3,810
Inventory 164 - 164
Trade and other receivables 2,569 319 2,888
Cash and cash equivalents 4,205 - 4,205
Trade and other payables (1,785) (319) (2,104)
Current income tax liabilities (514) - (514)
Lease liabilities (28) - (28)
Deferred tax 8 (934) (926)
Total identifiable net assets 4,663 2,876 7,539
Goodwill 5,010 (5,010) -
Gain on acquisition - (256) (256)
Total consideration 9,673 (2,390) 7,283
Satisfied by:
Cash paid 7,283 - 7,283
Contingent consideration 2,390 (2,390) -
Total consideration 9,673 (2,390) 7,283
Had the full fair value assessment been carried out prior to announcing the interim results to September 2022, these interim financial statements would have differed as follows:
· £460,000 would have been recognised in administrative expenses in respect of earn-out consideration payable to the sellers of Modular Clay Products. Earn-out consideration is payable depending on the future performance of the business. Due to a clause in the contract, this earn-out consideration is deemed to be treated as remuneration under IFRS 3, with the cost being accrued in the profit and loss over the earn-out period. This would have also led to a reduction in goodwill and contingent
consideration.
· Amortisation amounting to £127,000 would have been charged on the intangible assets recognised. A deferred tax credit of £24,000 would have also been recognised on the release of the associated deferred tax liability over the intangible assets' useful life.
· A gain of £256,000 would have been recognised in profit or loss on the acquisition. The Group does not consider the acquisition to be a bargain purchase commercially. However, as noted above, further amounts payable to the seller, dependent on future performance, are deemed to be treated as remuneration as a result of a 'good leaver' clause being included within the contract. 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.
E. T. Clay Products Limited
The Group acquired 100% of the share capital and voting rights in E. T. Clay Products Limited on 30 September 2022. As disclosed in the 2022 interim 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 157 - 157
Right of use assets - 792 792
Identifiable intangible assets - 3,083 3,083
Inventory 2,838 - 2,838
Trade and other receivables 8,651 - 8,651
Cash and cash equivalents 627 - 627
Trade and other payables (5,524) (80) (5,604)
Current income tax liabilities (878) 20 (858)
Lease liabilities - (792) (792)
Provisions - (27) (27)
Deferred tax (31) (761) (792)
Total identifiable net assets 5,840 2,235 8,075
Goodwill 5,868 (4,238) 1,630
Total consideration 11,708 (2,003) 9,705
Satisfied by:
Cash paid 7,490 1,172 8,662
Deferred cash consideration 1,008 (1,008) -
Contingent consideration 3,210 (2,167) 1,043
Total consideration 11,708 (2,003) 9,705
Had the full fair value assessment been carried out prior to announcing the interim results to 30 September 2022, the interim financial statements would have differed as follows:
· Right of use assets of £792,000 would have been recognised, with a corresponding lease liability.
· Intangible assets of £3,083,000 and a related deferred tax liability of £761,000 would have been recognised, with a corresponding net decrease in goodwill.
Heritage Clay Tiles Limited
The Group acquired 100% of the share capital and voting rights in Heritage Clay Tiles Limited on 30 September 2022. As disclosed in the 2022 interim 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 29 - 29
Right of use assets - 305 305
Identifiable intangible assets - 309 309
Inventory 1,172 - 1,172
Trade and other receivables 1,072 660 1,732
Cash and cash equivalents (109) (47) (156)
Trade and other payables (2,214) (650) (2,864)
Current income tax liabilities (37) 37 -
Lease liabilities - (305) (305)
Provisions - (5) (5)
Deferred tax 60 (76) (16)
Total identifiable net assets (27) 228 201
Goodwill 1,012 (402) 610
Total consideration 985 (174) 811
Satisfied by:
Cash paid 630 99 729
Deferred cash consideration 85 (85) -
Contingent consideration 270 (188) 82
Total consideration 985 (174) 811
Had the full fair value assessment been carried out prior to announcing the interim results to 30 September 2022, the interim financial statements would have differed as follows:
· Right of use assets of £305,000 would have been recognised, with a corresponding lease liability.
· Intangible assets of £309,000 and a related deferred tax liability of £76,000 would have been recognised, with a corresponding net decrease in goodwill.
As the acquisitions of E. T. Clay Products Limited and Heritage Clay Tiles
Limited took place on the final day of the reporting period, there is no
impact on the profit or loss reported for the six months ended 30 September
2022.
For both acquisitions, the change from deferred cash consideration to
additional cash paid was due to the timing of the final completion payments
being made, based on final agreed form completion accounts, compared to the
interim financial statements being published.
The contingent consideration liability would have been discounted to fair
value, with a corresponding reduction in goodwill. Following a further review
of forecast results on acquisition, and the expected changes in market and
economic conditions, the contingent consideration payable was also initially
anticipated to be lower than that upon which the undiscounted contingent
consideration reported in the 2022 interim financial statements was originally
based.
The September 2022 comparatives have been restated in these interim financial
statements to reflect the changes for all of the above acquisitions.
A prior period restatement would usually require the presentation of a third
balance sheet at 1 April 2022. 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 interim
financial statements.
Contingent consideration
The Group has entered into contingent consideration arrangements in purchasing several subsidiaries. Final amounts payable under these agreements are all subject to future performance and the acquired business achieving pre-determined 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 30 September Fair value at 30 September
Fair value at acquisition 2023 2022
£'000 £'000 £'000 Undiscounted amount payable 30 September Undiscounted amount payable 30 September
2023 2022
Discount rate £'000 £'000
U Plastics Limited 3.5% 2,208 - 1,100 - 1,116
Bathroom Barn Limited 1.7% 231 73 98 74 100
McCann Logistics Ltd 1.7% 889 - 1,584 - 1,604
Taylor Maxwell Group (2017) Limited 4.1% - 333 431 340 435
SBS Cladding Limited 4.1% 1,845 782 1,434 800 1,500
Leadcraft Limited 10.4% 722 957 700 1,066 861
HBS NE Limited 16.1% - 10,069 4,285 11,287 6,998 21,513
23.6%
Beacon Roofing Limited 13.0% 1,365* 1,643 1,452* 1,962 1,885*
E. T. Clay Products Limited 16.0% 1,043* - 1,043* - 1,420*
Heritage Clay Tiles Limited 20.0% 82* - 82* - 119*
*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 and the amount payable for SBS Cladding Limited ranges from £1,200,000 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 £2,167,000 has been recognised in the period ended 30 September 2023 in respect of this earn-out consideration, presented within other administrative expenses.
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 £528,000 has been recognised in the period in respect of this earn-out consideration, presented within other administrative expenses.
Company acquired Finance
Additions expense
through business combinations £'000 Fair value at
Fair value at £'000 Fair value 30 September 2023
31 March 2023 (gain)/loss Settlement £'000
£'000 £'000 £'000
U Plastics Limited 962 - 2 - (964) -
McCann Logistics Ltd 1,324 - 6 7 (1,337) -
SBS Cladding Limited 1,464 - 18 - (700) 782
HBS NE Limited 3,901 - 384 - - 4,285
Beacon Roofing Limited 2,355 - 148 167 (1,027) 1,643
E. T. Clay Products Limited 2,433 - 187 (2,620) - -
Other business combinations 1,655 - 77 (369) - 1,363
Beacon Roofing Limited has continued to perform well following acquisition, gaining new business from a competitor that entered administration during the year ended 31 March 2023. This has resulted in the fair value loss as the amount expected to be paid in relation to contingent consideration is now higher.
A fair value gain has been recognised for E. T. Clay Products Limited and Heritage Clay Tiles (within 'Other Business Combination' line) as trading has been more challenging than previously expected. Given the ongoing uncertainty in the market, and the anticipated timescales for the industry to return to former levels of demand, further payment in the earn-out period is not currently expected.
A sensitivity in respect of the inputs into the discounted cash flow model, determining the contingent consideration, is outlined in note 9.
9. Financial instruments
Fair values
The significant unobservable inputs used in the fair value measurements categorised within level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis at 30 September and 31 March are shown below:
Financial instrument Valuation technique Significant Range/ Sensitivity of the
Unobservable estimate input to fair value
inputs
Contingent Present value of future cash flows Assumed probability-adjusted EBITDA of acquired entities. Sept 2023: The higher the adjusted EBITDA, the higher the
Consideration in a business combination (note 8) £362,000 - fair value. If forecast
£17,702,000 EBITDA was 10% higher, while all other variables
remained constant, the
Sept 2022: fair value of the overall contingent consideration liability would increase by
£830,000 (2022: £2,465,000). A 10% decrease in EBITDA would result in a
£435,000 - decrease in the liability of £762,000 (2022: £3,241,000).
£53,781,000 (March 2023: increase and decrease of £706,000)
March 2023: The higher the discount
£406,000 - rate, the lower the fair value. If the discount rate applied was 2% higher,
while all other variables remained constant, the fair value of the overall
£17,702,000 contingent consideration liability would decrease by £232,000 (2022:
£719,000). A 2% decrease in the rate would result in an increase in the
liability of £245,000 (2022: £657,000).
(March 2023: decrease of £372,000 and increase of £393,000)
Discount rate
Sept 2023:
1.7% - 23.6%
Sept 2022:
1.7% - 23.6%
March 2023:
1.7% - 23.6%
Reconciliation of level 3 fair value measurements of financial instruments
6 months ended 6 months ended Year ended
30 Sept 2023 30 Sept 2022 31 March 2023
£'000 (Restated) (Audited)
Contingent consideration liability £'000 £'000
At 1 April 14,093 19,774 19,774
Additions through business combinations - 1,125 1,125
Finance expense charged to profit or loss 822 1,398 2,853
Settlement (4,027) (1,435) (1,483)
Fair value gains recognised in profit or loss (2,815) (886) (8,176)
At 30 September/ 31 March 8,073 19,976 14,093
10. Loans and borrowings
6 months ended 6 months ended Year ended
30 Sept 2023 30 Sept 2022 31 March 2023
£'000 £'000 (Audited)
£'000
Current loans and borrowings at 1 April 12,624 - -
Non-current loans and borrowings at 1 April 16,800 24,240 24,240
Total loans and borrowings at 1 April 29,424 24,240 24,240
Issue of bank loans 60,000 53,000 115,400
Repayment of bank loans (39,000) (43,500) (123,000)
Movement in overdraft facility 3,212 - 12,624
Other movements* 80 80 160
Loans and borrowings at 30 September/ 31 March 53,716 33,820 29,424
Analysed as:
Current loans and borrowings 15,836 - 12,624
Non-current loans and borrowings 37,880 33,820 16,800
Loans and borrowings at 30 September/ 31 March 53,716 33,820 29,424
*Other movements relate to interest accrued, arrangement fees incurred and the amortisation of those fees.
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 £38,000,000 (2022: £34,100,000, March 2023:
£17,000,000) less arrangement fees of £120,000 (2022: £280,000, March 2023:
£200,000), which are amortised over the term of the loan.
During the period, the Group had a revolving credit facility of
£60,000,000, including an ancillary carve out of a £5,000,000 overdraft,
which run 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.
The Group also has 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 reporting date is a result of the timing of
cash transfers within the Group and funds being transferred from the Group's
central facility.
Since the reporting date, the Group re-financed its banking
facilities and now has a revolving credit facility for an initial
£100,000,000, which will run for three years with two extension options of
one year.
11. Pensions
Defined benefit pension plans
On 30 June 2021, the Group acquired Taylor Maxwell Group (2017) Limited, which operated a defined benefit pension scheme.
The Group commenced a buy-out process to transfer the risk associated with the scheme to an insurer. As part of this process, a buy-in contract was incepted on 7 July 2021 to meet the future benefits payable and reduce the risk of additional funding being required from the Group. On 1 August 2023, the scheme's liabilities relating to the policy were fully transferred to the insurance company, when the policy was converted into individual policies in the members' names.
Scheme assets relate to cash funds net of residual liabilities relating to top-up benefit payments, which are due to past members of the scheme following a High Court ruling on the Lloyds Banking Group pensions court case. Scheme invested assets are stated at their current bid price at 30 September 2023. The defined benefit scheme is expected to completely wound up by 31 March 2024.
The valuations for September 2023 and September 2022 have been prepared using the same methodology as that included in the Annual Report and Accounts for the year ended 31 March 2023. Other principal assumptions, in respect of mortality rates, are consistent with those set out in that Annual Report and Accounts for all periods.
12. Related party transactions
Transactions and balances between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Key management personnel
Year ended
31 March 2023
6 months 6 months ended (Audited)
ended 30 Sept 2022 £'000
30 Sept 2023 £'000
£'000
Key management personnel compensation
Short-term employee benefits 1,766 1,808 6,031
Post-employment benefits 54 40 80
Share-based payment expense 350 200 538
2,170 2,048 6,649
During the interim period, the Group made sales amounting to £nil (2022: £21,000 and year to 31 March 2023: £31,000) to members of key management. A £nil balance was included within trade receivables at each the reporting date, in respect of these sales.
Other related parties
Included within trade and other receivables/payables are the following amounts due from/to other related parties, at the reporting date:
Amounts owed by related parties Amounts owed to related parties
Year Year ended
ended 31 March 2023
6 months ended 6 months ended 31 March 2023 6 months ended 6 months ended (Audited)
30 Sept 2023 30 Sept 2022 (Audited) 30 Sept 2023 30 Sept 2022 £'000
£'000 £'000 £'000 £'000 £'000
Associates - - 6 124 92 184
Joint ventures 4,881 2,668 3,033 - - 88
Other related parties 42 - 200 8 - 27
4,923 2,668 3,239 132 92 299
During the period, the Group made a loan of €2,000,000 (2022: €3,050,000 and year to 31 March 2023: €3,450,000) to its joint venture, equating to £1,736,000 (2022: £2,668,000 and year to 31 March 2023: £3,033,000) outstanding at the reporting date. The loan is repayable by 30 June 2025 and carries interest, payable monthly, at a rate of 3% above the Bank of England base rate. Interest of £152,000 (2022: £36,000 and year to 31 March 2023: £127,000) was charged in the period.
Transactions undertaken between the Group and its related parties during the year were as follows:
Sales to related parties Purchases from related parties
Year Year ended
ended 31 March 2023
6 months ended 6 months ended 31 March 2023 6 months ended 6 months ended (Audited)
30 Sept 2023 30 Sept 2022 (Audited) 30 Sept 2023 30 Sept 2022 £'000
£'000 £'000 £'000 £'000 £'000
Associates - - 5 92 239 537
Joint ventures - - - - - 431
Other related parties 249 - 202 - 106 218
249 - 207 92 345 1,186
Other related parties comprise of entities owned by directors and key management. Sales relate to building materials. Purchases relate to rent and administrative expenses payable.
Right of use assets in respect of properties leased from other related parties had a carrying value of £2,365,000 (2022: £407,000 and 31 March 2023: £2,377,000), while associated lease liabilities of £2,214,000 (2022: £434,000 and 31 March 2023: £2,209,000) are included at the period end.
13. Post balance sheet events
On 10 October 2023, the Group completed the acquisition of the entire share capital and 100% of the voting rights in Group Topek Holdings Limited, a specialist cladding installation and remediation contractor.
The acquisition was made in order to expand the Group's cladding portfolio, to establish a full range of cladding capabilities including design, fabrication, supply and installation.
The provisional book values of the separable assets acquired and liabilities assumed on acquisition are estimated as follows:
£'000
Property plant and equipment 58
Right of use assets 136
Trade and other receivables 5,050
Cash and cash equivalents 7,915
Trade and other payables (1,676)
Loans and borrowings (351)
Current income tax liabilities (404)
Lease liabilities (136)
Deferred tax (16)
Total identifiable net assets 10,576
Satisfied by:
Cash paid 35,140
Contingent consideration 17,700
Total consideration 52,840
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 draft agreed form completion accounts.
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 above consideration is undiscounted and subject to post completion adjustments.
It is expected that goodwill will arise on the acquisition which will primarily comprise the value of expected synergies arising from the acquisition and the value of the assembled workforce. The goodwill is not expected to be deductible for tax purposes.
The contingent consideration subject to future performance, with the amount payable dependent on the acquired business achieving pre-determined EBITDA targets over the three years following acquisition. The potential contingent consideration payable ranges from £nil to £17,700,000.
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 10 October 2023, the Group also re-financed its existing banking facilities, as outlined in note 10.
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