REG - Genuit Group PLC - Final Results
12/03/2024 07:15
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RNS Number : 4260G Genuit Group PLC 12 March 2024
Genuit Group plc
Audited results for the year ended 31 December 2023
Strong strategic progress despite a challenging market backdrop
Genuit Group plc ("Genuit", the "Company" or the "Group"), the UK's largest
provider of sustainable water, climate and ventilation solutions for the built
environment, today announces its audited results for the year ended 31
December 2023.
Financial Results
Statutory Measures 2023 2022 Change %
Revenue (£m) 586.5 622.2 (5.7)
Operating profit (£m) 62.0 53.4 16.1
Profit before tax (£m) 48.4 45.4 6.6
Earnings per share (basic - pence) 15.5 14.7 5.4
Cash generated from operations (£m) 109.7 93.9 16.8
Dividend per share (pence) 12.4 12.3 0.8
Alternative Performance Measures(1) 2023 2022 Change %
Underlying operating profit (£m) 94.1 98.2 (4.2)
Underlying operations cash conversion (%) 87.7 57.4 3030 bps
Underlying operating margin (%) 16.0 15.8 20 bps
Underlying profit before tax (£m) 80.5 90.6 (11.1)
Underlying earnings per share (basic - pence) 25.2 30.8 (18.2)
Leverage (times pro-forma EBITDA) (2) 1.1 1.2 -
(1) (Alternative performance measures (APMs) are used by the Group to assess
the underlying performance of the business. A definition of all the APMs is
set out in note 1 on page 23.)
(2.Pro-forma EBITDA is reconciled in note 13 on page 35.)
( )
Joe Vorih, Chief Executive Officer, said:
"2023 was a year of significant strategic progress for the Genuit Group in the
context of a challenging market backdrop. The actions we have taken to
simplify the business and deploy the Genuit Business System have enabled us to
deliver an improved profit margin and strong cash conversion, despite the
headwinds. Based on our strengthened balance sheet and confidence in our
medium-term strategy, we are pleased to be increasing our full year dividend.
These results are a credit to the whole Genuit team, and I'd like to thank all
my colleagues for their contribution.
We have started 2024 in line with our expectations, in the context of
continuing market headwinds. Our ongoing operational and commercial progress
put us in a strong position to benefit from eventual market normalisation and,
looking further ahead, we remain confident in our ability to capitalise on the
structural, sustainability-linked growth drivers of our markets."
Financial Highlights
· Underlying operating margin up 20 basis points to 16.0%, despite
a full year market-driven revenue reduction of 5.7%, demonstrating continued
progress towards the Group's medium-term operating margin target of >20%.
· A full year volume reduction of 12.4% was partially offset by new
product launches, balanced price and cost management and business
simplification projects, resulting in a 4.2% year-on-year reduction in
underlying operating profit.
· £15m of annualised cost savings underpinned across 2022 and
2023, partially offsetting inflationary headwinds and market-driven volume
softness.
· Reported operating profit of £62.0m (2022: £53.4m) increased
16.1% year-on-year. On an underlying basis, operating profit was £94.1m
(2022: £98.2m).
· Strong underlying operating cash generation of £82.5m (87.7%
cash conversion), with net debt reduced from 1.2 times to 1.1 times underlying
pro-forma EBITDA, in line with expectations.
· Underlying EPS decreased to 25.2p, predominantly as a result of
increased tax and interest costs.
· New progressive dividend policy: total dividend per share for the
year of 12.4p (2022: 12.3p), reflecting strength of the balance sheet and
confidence in execution of strategy.
Strategic and operational highlights:
Growth - Focusing on higher- growth, sustainability-driven markets, via
organic growth and disciplined M&A opportunities.
o Sustainable Building Solutions (SBS) revenue declined by 14.1%, while
underlying operating profit margin improved, driven by business simplification
projects.
§ Launched PolyPlumb Enhanced plastic plumbing range following multi
million-pound investment programme. This is a key part of growing our market
share in the RMI segment and features patented installation benefits.
o Water Management Solutions (WMS) revenue declined 1.2%, but with a
stronger second half performance and business simplification projects driving
an improvement in operating profit margin.
§ Launched SubTerra CT driving growth in fibre network rollout.
§ Continued growth in Permavoid, with UK showing significant uptake in green
urbanisation solutions, addressing the twin issues of stormwater water
attenuation and providing better urban spaces.
o Climate Management Solutions (CMS) revenue grew 4.6% with strong
residential ventilation growth offsetting continued weakness in the boiler
market. Underlying operating margin was lower on a full year basis but has
improved in H2 versus H1.
§ Launched Nu-Deck underfloor heating range targeting the RMI segment to
promote UFH and heat pump adoption outside of new build.
§ Drove further growth and specifications for MVHR with integral cooling
module, addressing the need for combining low carbon heating and cooling,
along with providing fresh healthy air.
o Across the Group international revenue increased by 9.8%, representing
11.5% of revenue in the year (2022: 9.9%).
Sustainability - Continually improving the sustainability of our operation to
be the lowest-carbon choice for our customers.
· Progress on SBT's and Pathway to Net-Zero by 2050. Absolute
carbon reduced by 33% vs prior year.
· Scopes 1 & 2 Carbon intensity remained consistent despite
challenge of lower volumes.
· Recyclate use c. 50% with projects to further increase in 2024.
· Retained The 5% Club silver status with pathway to gold.
Genuit Business System - Creating value through lean transformation and
operational excellence.
· Undertook 'lean lighthouse' projects across Adey and Polypipe
Building Products and commenced a further project in Horncastle in 2024 to
drive efficiencies.
· Lean tools and Kaizen methodologies being deployed on a
multi-year basis across the Group to drive continuous improvement.
· Over 10% of Genuit employees have participated in lean Kaizen
events or training so far, empowering and inspiring our workforce as we
progress on our lean journey.
People and Culture - Creating value and enabling growth through the
capability, expertise and development of our employees.
· Established the Genuit Leadership Team (top c.70) with
increasingly cross-functional working practices and launched the Genuit
Leadership programme.
· DE&I training rolled out for all Leaders and diversity of
leadership team improving, with female representation now at 29%.
· Genuit Group became a strategic partner of Construction Industry
Coalition.
Outlook
· Trading for 2024 has started in line with our expectations,
despite continued market uncertainty.
· Current softness in UK construction expected to continue but will
vary by end market.
o New housebuilding volumes continue to be challenging.
o Uncertainty in RMI and commercial sectors remains.
o Pent-up demand for boiler replacements continues to grow.
o Penetration of ventilation and stormwater attenuation continues to
increase.
· Given the strategic and operational progress made in 2023, the
Group is in a strong position to navigate the near-term market headwinds and
benefit from eventual market normalisation.
· The Group remains confident in the medium-term growth drivers
including demand generated by addressing the structural UK housing shortage,
as well as regulatory changes and increasing customer demand for
sustainability-linked solutions in both water and climate management.
Enquiries:
Joe Vorih, Chief Executive Officer
Tim Pullen, Chief Financial Officer
+44 (0) 1138 315315
Headland Consultancy:
Andy Rivett-Carnac Telephone: 020 3805 4822
(https://www.google.com/search?q=headland+consultancy&rlz=1C1GCEA_enGB1082GB1082&oq=headland+consultancy+&gs_lcrp=EgZjaHJvbWUyBggAEEUYOTIHCAEQABiABDIHCAIQABiABDIHCAMQABiABDIHCAQQABiABDIHCAUQABiABDIHCAYQABiABDIGCAcQRRg80gEIMzc4MmowajSoAgCwAgA&sourceid=chrome&ie=UTF-8)
Email: genuit@headlandconsultancy.com
Matt Denham
Chloe Francklin
A copy of this report will be available on our website www.genuitgroup.com
(http://www.Genuitgroup.com) today from 0700hrs (BST).
A live webcast of the Final Results presentation, hosted by Joe Vorih, Chief
Executive Officer, and Tim Pullen, Chief Financial Officer, will be broadcast
at 0830 on Tuesday 12 March 2024. To access the live presentation on that
date, participants will be required to register in advance using the following
webcast link:
https://www.investis-live.com/genuit-group/65cde81a6195a5120007ae1a/hser
(https://protect-eu.mimecast.com/s/JmAZCVAvLtPENMZtGfrTF?domain=investis-live.com)
We recommend you register by 0815hrs (GMT). The webcast will be recorded, and
a replay will be available shortly after the webcast ends via the same link
above. A recording of the presentation and a copy of the slides will be
available following the event on the Company's website at Results, Reports
& Presentations - Genuit Group plc
(https://protect-eu.mimecast.com/s/FREECWLPMuyQR04ixpCR7?domain=genuitgroup.com)
Notes to Editors:
About Genuit Group plc
Genuit Group plc is the UK's largest provider of sustainable water, climate
and ventilation products for the built environment. Genuit's solutions allow
customers to mitigate and adapt to the effects of climate change and meet
evolving sustainability regulations and targets.
The Group is divided into three Business Units, each of which addresses
specific challenges in the built environment:
· Sustainable Building Solutions - Providing a range of
construction solutions to reduce the carbon content of the built environment.
· Water Management Solutions - Driving climate adaptation and
resilience through integrated surface and drainage solutions.
· Climate Management Solutions - Addressing the drivers for low
carbon heating and cooling, and clean and healthy air ventilation.
Across these divisions, Genuit's brands are some of the most well-established
and innovative in the industry, including Polypipe, Nuaire and Adey.
The Group primarily serves the UK and European building and construction
markets with a presence in Italy and the Netherlands and sells to specific
niches in the rest of the world.
Group Results
Group revenue for the year ended 31 December 2023 was £586.5m (2022:
£622.2m), declining 5.7% despite an overall volume reduction of 12.4%
year-on-year, in the context of market headwinds. UK revenue declined 7.4% but
international revenue increased by 9.8%, representing 11.5% of revenue in the
year (2022: 9.9%).
Underlying operating profit was £94.1m (2022: £98.2m), a decrease of 4.2%
with a volume reduction offset by new product launches, balanced price and
cost management and business simplification projects. As a result, the Group
underlying operating margin increased by 20 basis points to 16.0% (2022:
15.8%), demonstrating progress towards medium-term margin targets despite the
prevailing market softness.
The Group successfully completed several business simplification projects in
2022 and 2023, including a number of site closures and a centralised approach
to procurement. The Group also started the multi-year deployment of the Genuit
Business System (GBS) which focuses on continuous improvement. These
activities have successfully underpinned £15m of annualised cost savings
without any reduction in capacity to ensure strong operating gearing as
volumes normalise.
Profit before tax was £48.4m (2022: £45.4m), an increase of 6.6%. The Group
continued to invest in product development and innovation throughout the year.
In 2023, operating profit benefitted from £1.5m of HMRC approved Research and
Development expenditure credit, relating to the year ended 31 December 2023.
Non-underlying items decreased to £32.1m (2022: £45.2m) before tax. These
were driven by non-cash amortisation of £14.8m (2022: £15.2m) and total
impairment charges of £2.5m (2022: £14.8m) respectively. The Group incurred
one off costs of restructuring of £15.3m (2022: £9.3m) related to the
business simplification projects that have underpinned the £15m of annualised
savings.
Underlying finance costs increased to £13.6m (2022: £7.6m) due to
significantly higher Standard Overnight Index Average (SONIA) interest rates
partially offset by lower level of RCF borrowings. Interest cover was 8.2x for
the year (2022: 16.0x).
Interest was payable on the RCF at SONIA (2022: SONIA) plus an interest rate
margin ranging from 0.90% to 2.75%. The interest rate margin at 31 December
2023 was 1.65% (2022: 1.60%). The Group has commenced an interest rate hedging
strategy in 2024 to provide increased certainty and manage interest rate risk.
The underlying tax charge in 2023 was £17.9m (2022: £14.1m) representing an
effective tax rate of 22.2% (2022: 15.6%). This was below the composite UK
standard tax rate of 23.5% (2022: 19.0%).
Underlying profit after tax was lower than the prior year at £62.6m (2022:
£76.5m) due to the increase in finance costs and higher tax rate. Underlying
basic earnings per share was 25.2 pence (2022: 30.8 pence).
Including non-underlying items, profit after tax was £38.5m (2022: £36.5m),
and basic earnings per share was 15.5 pence (2022: 14.7 pence).
The final dividend of 8.3 pence (2022: 8.2 pence) per share is being
recommended for payment on 5 June 2024 to shareholders on the register at the
close of business on 3 May 2024. The ex-dividend date will be 2 May 2024. The
Group is announcing a progressive dividend policy and an increase in the
full-year dividend of 12.4p per share, despite challenging near-term trading
conditions and changes to interest and tax costs. This reflects the Group's
strong balance sheet and confidence in its medium-term strategy.
Revenue and operating profit and margin 2023 2022 Change
£m £m %
Revenue 586.5 622.2 (5.7)
Underlying operating profit 94.1 98.2 (4.2)
Underlying operating margin 16.0% 15.8% 20 bps
Revenue by geographic destination 2023 2022 Change
£m £m %
UK 519.1 560.8 (7.4)
Europe 33.4 32.4 3.1
Rest of World 34.0 29.0 17.2
Group 586.5 622.2 (5.7)
Chief Executive Officer Review
Our Results: Progress toward our mid-term targets
My second year as CEO of Genuit has been one of significant strategic progress
for the Group, despite a backdrop of continued external challenges. Our
performance was resilient in the face of ongoing softness in the UK
construction market, with successful product launches, balanced price and cost
management, ongoing business simplification and growth in our international
revenues helping to offset this volume decline.
Importantly, our leadership team has remained fully focused on executing our
Sustainable Solutions for Growth strategy, the benefits of which are already
flowing through. All this has only been possible thanks to the great work of
our incredible team across the entire Genuit Group.
Our business simplification programme over 2022 and 2023 has been highly
successful, and we have announced £15m of annualised savings from a range of
self-help measures that leave the Group more streamlined, efficient and better
placed for profitable growth. This has included the site consolidation
programme across six sites that we are in the final phases of completing, with
no reduction to our productive capacity. The deployment of the Genuit Business
System on a multi-year basis has also begun to bear fruit as we begin to
implement lean processes throughout the Group in order to drive a culture of
continuous improvement.
These strategic decisions have served to improve our annual underlying profit
margin from 15.8% to 16.0% despite the market-driven decline in revenues of
5.7%. Underlying operating cash conversion has also been strong at 87.7%,
approaching our 90% mid term target, strengthening our financial position and
allowing us to de-leverage the balance sheet while continuing to invest in
growth.
With the Group on a firm financial footing and with high confidence in our
strategic direction, we are pleased to be able to propose an increase in our
full-year dividend to 12.4p and formally introduce a progressive dividend
policy.
Our Customers: Challenging market conditions remain
Genuit today is focused on sustainability-driven growth, helping our customers
respond to climate adaptation and mitigation challenges. We continue to focus
on segments that benefit from mid-term regulation and a customer-driven need
for climate solutions - the electrification of our houses and workplaces to
reduce carbon, better cooling and ventilation as the climate warms, more
effective rainwater collection and reuse, and attenuation of flooding and
storm runoff now more prevalent than ever. We provide these solutions into a
range of end markets - new house building and RMI, commercial and multi-story
residential construction, infrastructure including storm water management
projects within road and rail - and we are growing in many of these sectors
internationally.
The structural UK housing shortage continues and must be addressed, so that
despite the recent weakness, mid-term growth in this sector should be robust
as the UK seeks to build the houses needed. 2023 saw a decline in site
openings and starts, with higher interest rates affecting mortgages, cost of
living concerns continuing and planning constraints still affecting
housebuilders. We are expecting these low levels to continue into 2024 but
expect pent-up demand to drive stronger growth in time.
There were some important segmental trends in residential construction.
Notably, our Nuaire ventilation business saw organic growth in 2023 driven by
increased penetration of new ventilation solutions - most notably to control
damp and mould in social housing. Our Nu-Heat business saw a decline in
renewable energy conversion projects as affordability was a concern for
consumers, though project interest has increased since the government
announced the increase of the Boiler Upgrade Scheme from £5,000 to £7,500 -
certainly a positive development. On the other hand, the gas boiler market
remained below normal levels, as the supply chain constraints of 2022 were
replaced with decreased demand as consumers put off boiler replacements,
keeping existing systems running. Historically, this has created pent-up
demand for replacement of boilers as they age, demand that may return quickly
when confidence returns.
While the UK still represents nearly 90% of Group sales, our geographic
expansion activity continues as the demand for water management and building
drainage solutions in the Middle East continues to develop, and we introduced
new network infrastructure products - including for the North American market.
Despite the short-term headwinds that continue in 2024, we do see positive
developments. The Future Homes Standard is expected to drive a significantly
increased uptake of air-sourced heat pumps (ASHP's) and underfloor heating,
more heat recovery in ventilation, and a continued focus on energy efficiency
and lower carbon products. Again, last year, we saw hotter summers and more
pronounced storms and flooding - challenging construction in the short term
but reaffirming confidence in the need for our water management and green
urbanisation solutions. In addition, lower carbon content (such as with the
higher recycled-content plastic products we provide) is quickly moving up the
agenda for our customers, in line with their own carbon commitments or driven
by local initiatives such as the London Plan. On balance, while the short-term
outlook is unsettled, there has never been a better time to be focused on
creating sustainable living.
Our Strategy: Sustainable Solutions for Growth
Our Sustainable Solutions for Growth strategy is built around four key pillars:
· Growth - Focus on higher-growth, sustainability-driven markets,
via organic growth and disciplined M&A opportunities
· Sustainability - Continually improve the sustainability of our
operations to be the lowest-carbon choice for our customers
· Genuit Business System - Create value through lean transformation
and operational excellence
· People and Culture - Create value and enable growth through the
capability, expertise and development of our employees
I am pleased with the progress that we have made against each of these
commitments in 2023, which has seen us drive improvements throughout the
business and strengthen our position going into 2024.
Growth
By focusing on sustainability-driven markets in the built environment, we see
significant opportunities to outperform the broader construction market. The
necessity of adapting to climate change, regulatory changes and shifting
customer preferences create a series of structural tailwinds that will enable
us to achieve organic growth and open the possibility for disciplined M&A
opportunities.
Despite the softness in the UK construction sector in 2023 and the overall
decline in volumes, I'm pleased to say that this approach helped to secure
revenue opportunities across all three of our divisions. Sustainability-driven
structural growth drivers including the need for greater ventilation in social
housing and stormwater attenuation have served to drive demand for our
solutions.
The launch of exciting new product lines, including PolyPlumb Enhanced in
Sustainable Building Solutions (SBS), Nu-Deck and MVHR with cooling in Climate
Management Solutions (CMS) and SubTerra CT in Water Management Solutions
(WMS), demonstrates our commitment to innovating within our product ranges and
providing customers with innovative and highly relevant solutions. All these
products tie into the need to address climate adaptation challenges and
improve the resilience of the built environment.
Solution selling, including expanding the Nu-heat direct-to-contractor or
homeowner offering, and working with national and regional homebuilders to
install early ASHP and underfloor heating solutions - ahead of the Future
Homes Standard - were effective. Our commercial offering has expanded with
Polypipe Advantage pre-fabricated solutions growing, enhanced with a new Stax
line of pre-configured solutions. We merged our Keytec and Alderburgh
installation businesses to create a class leading water management solution
partner with national reach.
The launch of these products, solutions and services, with a continued
pipeline of development, means that despite some variation as products mature,
we remain on track to maintain our target of 25% of all sales coming from
products developed in the last five years. Furthermore, our success in
integrating past acquisitions successfully, stronger leadership capability,
and decreased leverage, all position the Group well to continue to develop and
pursue strategic acquisitions that will add to our organic growth potential
and enhance shareholder returns in the future.
Sustainability
Our growth strategy is inextricably linked to sustainability, as the key
driver of our markets and the core of our product suites. It is therefore
imperative that we are continually pursuing a programme of improvement in
regard to our own sustainability metrics, ensuring that we are the
lowest-carbon supplier of choice to our customers.
We are on a trajectory to become net-zero by 2050, and our sustainability
plans have progressed well in the year. Most notably, in 2023 we became the
first amongst our UK peers to have verified SBTi approval for our near-term
carbon reduction targets, which amongst other commitments will see us reduce
our scopes 1 & 2 GHG emissions by 30% by 2027 compared to 2021.
We are also the largest user of recycled polymers across our European peer
group, making up almost half our total tonnage, and we have held the Green
Mark since 2019 with over 70% green revenues.
We said that we would leverage sustainability leadership for growth, remain
the champion of the most sustainable building solutions and extend our plastic
recycling usage. As these sustainability targets are a key component of our
strategy, they form an integral part of Executive and senior management
remuneration to ensure reward is fully aligned with our strategic priorities.
In 2023, we added the annual measure of carbon reduction into the annual
bonus arrangements for a wider cohort of our managers.
Genuit Business System
Embedding the lean transformation of the business and creating a culture of
continuous operational improvement and excellence is at the heart of our value
creation strategy. The Genuit Business System (GBS) will enable the Group to
standardise processes, share best practices and achieve benefits of scale, and
will be at the core of our journey to achieving our medium-term >20%
operating margin target.
In 2022, we started our journey to implement these principles as we began to
deploy the GBS at Adey as our first Lean Lighthouse. We have seen significant
productivity improvements, financial savings and space savings from this first
lean site transformation.
In 2023, we extended that Lean Lighthouse deployment across Polypipe Building
Products, and we also commenced a further project in Horncastle that will
accelerate in 2024.
The success of our Lean Lighthouse projects has energised our people and
allowed us to continue the multi-year deployment of the Genuit Business System
on a wider scale across the Group. In the first full year, over 10% of Genuit
employees have now participated in lean Kaizen events or training - showing
both the pace of deployment across the group and how much more progress and
benefit there is to realise. We are very pleased with the results of this so
far and believe that it will help to empower and inspire our people. Enabling
our people to unlock the full potential of our business is at the heart of
what we are building.
People and Culture
Our people are the heart of our business and the key driver of our success,
and as such our growth strategy is highly focused on making sure that they are
empowered to drive progress. Accordingly, we have continued to invest in
talent, engagement and culture throughout 2023.
Core to the creation of a positive culture has been the creation of our Genuit
Leadership Team (GLT) in 2022, consisting of c.70 of the top leaders across
the Group. This group was instrumental in defining our new purpose (Together,
we create sustainable living) and forming our trademark behaviours that will
underpin our culture - We work together, We take ownership and We find a
better way. Since this team will be instrumental in modelling and
strengthening our culture and executing our strategy, we have focused our
diversity and leadership development efforts with them first. We are proud
that GLT membership now consists of 29% female leaders, and all of them will
participate in a new Genuit Leadership Programme over the coming year.
We have also worked to strengthen the Group-wide talent pipeline in 2023 and
are committed to providing accredited learning programmes through our graduate
schemes and apprenticeships. Further, we have been able to develop an
accredited programme to help our current workforce be better prepared for the
future, learning basic manufacturing and lean tools. All these efforts have
helped us increase the percentage of our workforce in such programmes to 8% -
a significant improvement and a sign of the importance we place on career
development. The year also saw us launch Workday - our new self-serve HR
platform to make people management and development more effective, and in
early 2024 we plan to undertake our first employee engagement survey.
Additionally, our use of the Workplace platform has resulted in stronger
cross-Group communication with all our colleagues.
Lastly, Genuit Group became a strategic partner of Construction Inclusion
Coalition in 2023, extending our commitment to inclusion in this all-important
industry.
Summary: We are well-placed for 2024 and beyond
Overall, this has been a year of significant strategic progress towards our
medium-term targets. We have successfully created a more streamlined and
effective business, leading to improved margins and a strong financial
position that has given us the confidence to implement a progressive dividend
policy. Across our strategic pillars we have made good progress, and the work
that has been done to create a Group that can achieve growth and efficiencies,
underpinned by sustainability and a strong culture, is evident.
The macro economic uncertainty that impacted the construction sector in 2023
is likely to continue into 2024, and the softness in volumes is therefore
expected to continue across several markets. The strategic successes that we
have achieved in 2023, however, mean that Genuit is in an excellent position
to navigate the near-term market headwinds, and will be well-placed to benefit
when the market normalises. I remain highly confident that we are moving in
the right direction, and sustainability-driven tailwinds such as the need for
increasing energy efficiency in heating and ventilation, stormwater solutions
to address significant rainfall events and the need for lower carbon building
materials will significantly benefit our businesses over the medium-term.
I would like to close by thanking all my colleagues at Genuit for their
efforts in the year. Ever since I joined as CEO, I have been constantly
impressed by their dedication, imagination, and hard work, and I look forward
to continuing to work with them all to create sustainable living together.
Business Unit Review
Revenue 2023 2022 Change LFL Change
£m £m % %
Sustainable Building Solutions 242.8 282.5 (14.1) (14.1)
Water Management Solutions 170.4 172.4 (1.2) (1.8)
Climate Management Solutions 165.9 158.6 4.6 4.6
579.1 613.5 (5.6) (5.8)
Other* 7.4 8.7 (14.9) (14.9)
Total Group 586.5 622.2 (5.7) (6.0)
* Relates to assets held for sale which are not reported as part of the
Group's Strategic Business Units.
Underlying operating profit 2023 ROS 2022 ROS Change
£m %* £m %* Bps
Sustainable Building Solutions 53.1 21.9 59.3 21.0 90
Water Management Solutions 17.7 10.4 14.1 8.2 220
Climate Management Solutions 22.7 13.7 25.2 15.9 (220)
93.5 16.1 98.6 16.1 -
Other** 0.6 8.1 (0.4) (4.6) 1270
Total Group 94.1 16.0 98.2 15.8 20
* Return on sales (ROS) is equivalent to underlying operating margin
(underlying operating profit/ revenue)
** Relates to assets held for sale which are not reported as part of the
Group's Strategic Business Units.
Revenue, in the Strategic Business Units, for year ended 31 December 2023 was
5.6% lower than the prior year at £579.1m (2022: £613.5m). On a
like-for-like basis, excluding the impact of acquisitions, revenue was 5.8%
lower than prior year.
Ongoing self-help measures, deployment of the Genuit Business System and
continued business simplification have strengthened our financial performance
to offset continued levels of high inflation in materials, energy and labour
costs. The team have worked hard on continuing to improve efficiencies,
creating value and positioning us for growth.
We have built on the momentum from prior year in driving commercial excellence
which has enabled us to successfully launch new products whilst balancing
price and cost management. We have strived to improve our portfolio profit mix
by taking ongoing actions on lower margin business. Against a backdrop
of more challenging conditions, notably in the residential new build and RMI
markets, we have continued optimising the cost base whilst maintaining
capacity, investing in new equipment and boosting operational efficiency to
ensure we are well positioned for improved market conditions.
Sustainable Building Solutions
Sustainable Business Solutions (SBS) provides a range of construction
solutions to reduce the carbon content of the built environment.
The strength and resilience of the SBS Business Unit was evident in a
challenging market environment in 2023. Trading in SBS was resilient with
revenue of £242.8m (2022: £282.5m), 14.1% lower than prior year. The volume
decline was in-line with the UK residential new build and RMI sectors.
Despite volume challenges, underlying operating profit margin improved by 90
basis points, driven primarily by effective cost management through several
improvement projects. As part of the wider Group business simplification
plans, SBS executed an operating footprint consolidation with the completion
on the sale of the Glasgow distribution centre and exiting of the Kirk
Sandall site, both of which were integrated into the larger and strategic
Doncaster facilities. The improvement projects were designed to simplify and
improve the cost base without impacting service or reducing capacity.
The deployment of a lean transformation started with the continual, multi-year
implementation of GBS at Polypipe Building Products (Doncaster) leading to
improved customer service levels and providing a foundation for continuous
business improvement. Management successfully completed a significant
equipment refresh programme, which enabled a substantial reduction in past due
orders, yielding both efficiency and inventory benefits. The Business Unit
remains poised to take advantage of the eventual recovery in construction
markets and in the meantime is focused on generating organic growth through
significant product developments, including the PolyPlumb Enhanced range and
value-add sustainability focused solutions such as Polypipe Advantage and
Stax.
Water Management Solutions
Water Management Solutions (WMS) is focused on driving climate adaptation and
resilience through integrated surface and drainage solutions.
WMS revenue of £170.4m (2022: £172.4m) declined by 1.2% versus 2022 (1.8% on
a like-for-like basis). The Business Unit performed well with revenue
generated from new products and geographical expansion. In the second half of
2023, WMS revenue grew by 2.1% driven by structural climate change relating to
growth drivers, namely the increased frequency and severity of flood events
resulting in a greater number of projects requiring stormwater attenuation
solutions.
The Business Unit reported an underlying operating margin of 10.4% during the
period, representing a 220-basis points improvement versus prior year. This
improvement was driven by a combination of business and brand
rationalisations, cost controls and focused investment in our people,
processes and manufacturing capabilities.
The WMS medium term growth strategy is underpinned by focused commercial
activity, leveraging the increased levels of product development in 2023 and
the business unt expects to benefit from changes in water management and
biodiversity legislation.
Climate Management Solutions
Climate Management Solutions (CMS) addresses the drivers for low carbon
heating and cooling, and clean and healthy air ventilation.
Revenue of £165.9m (2022: £158.6m) in Climate Management Solutions (CMS)
increased by 4.6% versus 2022. This increase was driven by strength in the
residential ventilation market, with structural drivers associated with
ventilating to reduce mould and damp problems, particularly in the social
housing sector. This growth was partially offset by reduced demand for new
boiler and heating system installations which has adversely affected the Adey
business. The Adey business remains well positioned to benefit from the
eventual recovery in the boiler market.
The CMS Business Unit reported an underlying operating margin of 13.7% in
2023, 220 basis points lower than 2022. This resulted predominantly from lower
volumes at Adey and one-off IT security investment to achieve Group standard.
The continual, multi-year implementation of GBS has begun in the Business Unit
and business simplification projects including the consolidation of the
Surestop business into Adey were completed in the year.
The Business Unit now has a solid foundation for profitable growth and is
well-positioned to benefit from legislative and environmental tailwinds to
deliver growth into the future.
Financial Review
Non-underlying items
Non-underlying items before tax decreased to £32.1m (2022: £45.2m). These
were driven by non-cash amortisation of £14.8m (2022: £15.2m) and total
impairment charges of £2.5m (2022: £14.8m) respectively. The Group incurred
one off costs of restructuring of £15.3m (2022: £9.3m) related to the
business simplification projects that have underpinned the £15m of annualised
savings.
Non underlying items comprised:
2023 2022
£m £m
Amortisation of intangible assets 14.8 15.2
Impairment of goodwill - 12.0
Impairment of intangible assets 2.5 2.8
Restructuring costs 15.3 9.3
Employment matters 2.0 -
Contingent consideration on acquisitions 1.8 3.1
Workday configuration (SaaS) 1.2 -
Acquisition costs 0.4 0.2
Profit on disposal of property, plant and equipment (4.7) -
Product liability claim (1.2) 1.0
Isolated cyber incident - 1.2
Unamortised deal costs - 0.4
Non-underlying items before taxation 32.1 45.2
Tax effect on non-underlying items (8.0) (5.2)
Non-underlying items after taxation 24.1 40.0
Exchange rates
The Group trades predominantly in Sterling but has some revenue and costs in
other currencies, mainly the US Dollar and the Euro, and takes appropriate
forward cover on these cash flows using forward currency derivative contracts
in accordance with its hedging policy.
Finance Costs
Underlying finance costs increased to £13.6m (2022: £7.6m) due to
significantly higher Standard Overnight Index Average (SONIA) interest rates
partially offset by lower level of RCF borrowings. Interest cover was 8.2x for
the year (2022: 16.0x).
Interest was payable on the RCF at SONIA (2022: SONIA) plus an interest rate
margin ranging from 0.90% to 2.75%. The interest rate margin at 31 December
2023 was 1.65% (2022: 1.60%). The Group has commenced an interest rate hedging
strategy in 2024 to provide increased certainty and manage interest rate risk.
Pensions
The Group does not have any defined benefit pension schemes and only has
defined contribution pension arrangements in place. Pension costs for the year
amounted to £5.4m (2022: £6.5m) reflecting the reduction in headcount in the
Group across the year.
Taxation
Underlying taxation
The underlying tax charge in 2023 was £17.9m, (2022: £14.1m) representing an
effective tax rate of 22.2% (2022: 15.6%). This was below the composite UK
standard tax rate of 23.5% (2022: 19.0%).
Taxation on non-underlying items
The non-underlying taxation credit of £8.0m (2022: £5.2m) represents an
effective rate of 24.8% (2022: 11.5%).
Earnings per share
2023 2022
£m £m
Pence per share:
Basic 15.5 14.7
Underlying basic 25.2 30.8
Diluted 15.4 14.6
Underlying diluted 25.1 30.5
The Directors consider that the underlying basic earnings per share (EPS)
measure provides a better and more consistent indication of the Group's
underlying financial performance and more meaningful comparison with prior and
future periods to assess trends in our financial performance.
Underlying basic EPS decreased by 18.2% in 2023 predominantly the result of
increased interest and tax costs, driven by external factors.
Dividend
The final dividend of 8.3 pence (2022: 8.2 pence) per share is being
recommended for payment on 5 June 2024 to shareholders on the register at the
close of business on 3 May 2024. The ex-dividend date will be 2 May 2024. The
proposed increase in the full-year dividend reflects the Group's strong
balance sheet and confidence in its medium-term strategy.
The Group aims to pay a progressive dividend, based on dividend cover of 2.0x
or greater over the business cycle. The Directors intend that the Group will
pay the total annual dividend in two tranches, an interim dividend and a final
dividend, announced at the time of publication of the interim and preliminary
results.
Balance Sheet
The Group's balance sheet is summarised below:
2023 2022
£m £m
Property, plant and equipment 176.4 169.9
Right-of-use assets 22.9 22.3
Goodwill 454.1 455.4
Other intangible assets 142.7 159.7
Net working capital 28.3 33.8
Taxation (44.7) (47.9)
Other current and non-current assets and liabilities 6.2 0.1
Net debt (loans and borrowings, and lease liabilities, net of cash and cash (149.3) (166.2)
equivalents)
Net assets 636.6 627.1
The net value of property, plant and equipment has increased by £6.5m
following the continued focus on investing in targeted capital expenditure
offset by the sale of two additional sites.
Cash flow and net debt
The Group's cash flow statement is summarised below:
2023 2022
£m £m
Operating cash flows before movement in net working capital 105.6 113.6
Add back non-underlying cash items 14.2 9.6
Underlying operating cash flows before movement in net working capital 119.8 123.2
Movement in net working capital 4.1 (19.7)
Net Capital expenditure excluding non-underlying proceeds of sale (33.8) (40.9)
Settlement of lease liabilities (7.6) (6.2)
Underlying cash generated from operations after net capital expenditure 82.5 56.4
excluding non-underlying proceeds of sale
Income tax paid (12.1) (7.0)
Interest paid (13.4) (3.7)
Non-underlying proceeds of sale 6.9 -
Other non-underlying cash items (14.2) (9.6)
Settlement of deferred and contingent consideration (1.6) (0.5)
Acquisition of businesses - (2.6)
Debt issue costs - (3.1)
Dividends paid (30.5) (30.5)
Proceeds from exercise of share options net of purchase of own share 0.3 0.4
Other (0.7) 2.2
Movement in net debt - excluding IFRS 16 17.2 2.0
Movement in IFRS 16 (0.3) (2.5)
Movement in net debt - including IFRS 16 16.9 (0.5)
Delivery of strong cash generation remains core to the Group's strategy.
Underlying operating cash conversion of 87.7% (2022: 57.4%) calculated as
underlying operating cashflow (after payments for capital expenditure
excluding non-underlying proceeds of sale and lease liabilities) divided by
underlying operating profit. The Group remains committed to achieving a
conversion rate of 90.0% over the medium term.
A positive working capital movement in the year was achieved through lower
levels of inventory following increases in prior periods to improve customer
service performance following the recovery in demand and supply chain
disruption that followed the pandemic.
Net capital expenditure investment (excluding non-underlying proceeds from
sale) decreased to £33.8m (2022: £40.9m) as the Group continued to focus on
investing in targeted manufacturing facility development, capacity and key,
strategic and innovative projects.
Net debt of £149.3m comprised:
2023 2022
£m £m
Bank loans (145.0) (195.9)
Cash and cash equivalents 17.0 50.0
Net debt (excluding unamortised debt issue costs) (128.0) (145.9)
Unamortised debt issue costs 2.1 2.8
IFRS 16 (23.4) (23.1)
Net debt (149.3) (166.2)
Net debt (excluding unamortised deal issue costs): pro-forma EBITDA 1.1 1.2
Financing
The Group has a Sustainability-Linked Loan (SLL) committed through to August
2027 with two further uncommitted annual renewals through to August 2029
following a refinancing with the existing bank syndicate in 2022. The
facility limit is £350.0m with an additional uncommitted 'accordion' facility
of up to £50.0m. At 31 December 2023, £120.0m of the RCF was drawn down.
Additionally, in 2022 the Group entered a fixed rate £25.0m seven-year
private placement loan note until August 2029 with an uncommitted shelf
facility of an additional £125.0m.
The Group is subject to two financial covenants. At 31 December 2023, there
was significant headroom and facility interest cover and net debt to EBITDA
covenants were comfortably achieved:
Covenant
Covenant requirement Position at
31 December 2023
Interest cover >4.0:1 8.2:1
Leverage <3.0:1 1.1:1
Going Concern
The Group continues to meet its day-to-day working capital and other funding
requirements through a combination of long-term funding and cash deposits. The
Group's bank financing facilities consist of a £350.0m Sustainability-Linked
Loan with an uncommitted 'accordion' facility of £50.0m and a seven-year
private placement loan note of £25.0m with an uncommitted £125.0m shelf
facility. At 31 December 2023, liquidity headroom (cash and undrawn committed
banking facilities) was £247.0m (2022: £229.1m). The Group's focus will
continue to be on deleveraging, and its net debt to EBITDA ratio stood at 1.1x
pro-forma EBITDA at 31 December 2023 (2022: 1.2x). This headroom means the
Group is well-positioned with a strong balance sheet.
As a result, the Directors have satisfied themselves that the Group has
adequate financial resources to continue in operational existence for a period
of at least the next 21 months to 31 December 2025. Accordingly, they continue
to adopt the going concern basis in preparing the consolidated financial
statements.
Principal Risks and Uncertainties
The Board continually assesses and monitors the key risks of the Business, and
the Group has developed a risk management framework to identify, report, and
manage its principal risks and uncertainties. The principal risks and
uncertainties that could have a material impact on the Group's performance and
prospects, and the mitigating activities which are aimed at reducing the
impact or likelihood of a major risk materialising are those detailed in the
Group's Annual Report and Accounts. They have not changed significantly during
the year.
Forward-Looking Statements
This report contains various forward-looking statements that reflect
management's current views with respect to future events and financial and
operational performance. These forward-looking statements involve known and
unknown risks, uncertainties, assumptions, estimates and other factors, which
may be beyond the Group's control, and which may cause actual results or
performance to differ materially from those expressed or implied from such
forward-looking statements. All statements (including forward-looking
statements) contained herein are made and reflect knowledge and information
available as of the date of preparation of this report and the Group disclaims
any obligation to update any forward-looking statements, whether as a result
of new information, future events or results or otherwise. There can be no
assurance that forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue reliance on
forward-looking statements due to the inherent uncertainty therein. Nothing in
this report should be construed as a profit forecast.
Directors' Responsibilities
Each of the Directors confirms that, to the best of their knowledge, the
consolidated financial statements, prepared in accordance UK-Adopted
International Accounting Standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group and
undertakings included in the consolidation taken as a whole; and the Group
Results, Chief Executive Officer Review and Financial Review includes a fair
review of the development and performance of the business and the position of
the Group and undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they
face.
Annual General Meeting
The Annual General Meeting is scheduled to be held on 28 May 2024.
By order of the Board:
Joe Vorih Tim Pullen
Chief Executive Officer Chief Financial Officer
Group Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
Notes Underlying Non-underlying Total Underlying Non-underlying Total
£m £m £m £m £m £m
Revenue 2 586.5 - 586.5 622.2 - 622.2
Cost of sales (338.7) (2.0) (340.7) (372.1) (2.5) (374.6)
Gross profit 247.8 (2.0) 245.8 250.1 (2.5) 247.6
Selling and distribution costs (81.5) - (81.5)
(73.5) (1.0) (74.5)
Administration expenses (79.4) (11.8) (91.2) (70.2) (12.3) (82.5)
Amortisation of intangible assets (0.2) (15.2) (15.4)
(0.8) (14.8) (15.6)
Impairment of intangible assets - (2.5) (2.5) - (2.8) (2.8)
Impairment of goodwill - - - - (12.0) (12.0)
Operating profit 2 94.1 (32.1) 62.0 98.2 (44.8) 53.4
Finance costs 5 (13.6) - (13.6) (7.6) (0.4) (8.0)
Profit before tax 80.5 (32.1) 48.4 90.6 (45.2) 45.4
Income tax 6 (17.9) 8.0 (9.9) (14.1) 5.2 (8.9)
Profit for the period attributable to the owners of the parent company 76.5 (40.0) 36.5
62.6 (24.1) 38.5
Basic earnings per share (pence) 7 15.5 14.7
Diluted earnings per share (pence) 7 15.4 14.6
Dividend per share (pence) - interim 8 4.1 4.1
Dividend per share (pence) - final
8.3 8.2
12.4 12.3
Non-underlying items are presented separately and are detailed in note 4.
Group Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
£m £m
Profit for the period attributable to the owners of the parent company 38.5 36.5
Other comprehensive income:
Items which may be reclassified subsequently to the income statement:
Effective portion of changes in fair value of forward foreign currency 0.1 0.1
derivatives
Exchange differences on translation of foreign operations (0.1) -
Other comprehensive income for the period net of tax - 0.1
Total comprehensive income for the period attributable to the owners of the 38.5 36.6
parent company
Group Balance Sheet
At 31 December 2023
31 December 31 December
Notes 2023 2022
£m £m
Non-current assets
Property, plant and equipment 9 176.4 169.9
Right-of-use assets 10 22.9 22.3
Intangible assets 11 596.8 615.1
Total non-current assets 796.1 807.3
Current assets
Inventories 69.2 89.9
Trade and other receivables 73.9 68.1
Income tax receivable 5.4 2.2
Cash and cash equivalents 13 17.0 50.0
Derivative financial instruments 13 0.1 -
Assets held-for-sale 17.1 10.7
Total current assets 182.7 220.9
Total assets 978.8 1,028.2
Current liabilities
Trade and other payables (114.8) (124.2)
Lease liabilities 10, 13 (5.0) (5.8)
Liabilities held-for-sale (2.8) (2.6)
Deferred and contingent consideration 12 (8.2) -
Total current liabilities (130.8) (132.6)
Non-current liabilities
Loans and borrowings 13 (142.9) (193.1)
Lease liabilities 10, 13 (18.4) (17.3)
Deferred and contingent consideration 12 - (8.0)
Deferred income tax liabilities (50.1) (50.1)
Total non-current liabilities (211.4) (268.5)
Total liabilities (342.2) (401.1)
Net assets 636.6 627.1
Capital and reserves
Equity share capital 0.2 0.2
Share premium 93.6 93.6
Capital redemption reserve 1.1 1.1
Hedging reserve 0.1 -
Foreign currency retranslation reserve (0.1) -
Other reserves 116.5 116.5
Retained earnings 425.2 415.7
Total equity 636.6 627.1
Group Statement of Changes in Equity
For the year ended 31 December 2023
Equity share capital Capital redemption reserve Foreign currency retranslation reserve
£m Share premium £m Hedging reserve £m Other reserves Retained earnings Total equity
£m £m £m £m £m
At 31 December 2023
Opening balance 0.2 93.6 1.1 - - 116.5 415.7 627.1
Profit for the period - - - - - - 38.5 38.5
Other comprehensive income - - - 0.1 (0.1) - - -
Total comprehensive income for the period - - - 0.1 (0.1) - 38.5 38.5
Dividends paid - - - - - - (30.5) (30.5)
Share-based payments charge - - - - - - 2.1 2.1
Share-based payments settled - - - - - - 0.3 0.3
Share-based payments excess tax benefit - - - - - - (0.9) (0.9)
Closing balance 0.2 93.6 1.1 0.1 (0.1) 116.5 425.2 636.6
At 31 December 2022
Opening balance 0.2 93.6 1.1 (0.1) - 116.5 406.4 617.7
Profit for the period - - - - - - 36.5 36.5
Other comprehensive income - - - 0.1 - - - 0.1
Total comprehensive income for the period - - - 0.1 - - 36.5 36.6
Dividends paid - - - - - - (30.5) (30.5)
Share-based payments charge - - - - - - 2.9 2.9
Share-based payments settled - - - - - - 0.4 0.4
Share-based payments excess tax benefit - - - - - - - -
Closing balance 0.2 93.6 1.1 - - 116.5 415.7 627.1
Group Cashflow Statement
For the year ended 31 December 2023
Notes 2023 2022
£m £m
Operating activities
Cash generated from operations 14 109.7 93.9
Income tax paid (12.1) (7.0)
Net cash flows from operating activities 97.6 86.9
Investing activities
Settlement of deferred and contingent consideration 12 (1.6) (0.5)
Acquisition of businesses net of cash at acquisition 12 - (2.6)
Proceeds from disposal of property, plant and equipment 7.6 2.9
Purchase of property, plant and equipment (32.8) (41.1)
Patent and development costs expenditure (1.7) (2.7)
Net cash flows from investing activities (28.5) (44.0)
Financing activities
Debt issue costs - (3.1)
Drawdown of bank loan 50.0 266.2
Repayment of bank loan (100.9) (268.3)
Interest paid (13.4) (3.7)
Dividends paid (30.5) (30.5)
Proceeds from exercise of share options 0.3 0.4
Settlement of lease liabilities (7.6) (6.2)
Net cash flows from financing activities (102.1) (45.2)
Net change in cash and cash equivalents (33.0) (2.3)
Cash and cash equivalents - opening balance 50.0 52.3
Cash and cash equivalents - closing balance 17.0 50.0
1. Basis of preparation
The preliminary results for the year ended 31 December 2023 have been prepared
in accordance with UK-Adopted International Accounting Standards (UK-Adopted
IAS). Whilst the financial information included in this preliminary
announcement has been computed in accordance with the recognition and
measurement requirements of IFRS, this announcement does not itself contain
sufficient information to comply with IFRS. The accounting policies adopted
have been consistently applied in all material aspects to all the periods
presented.
The financial information set out in this announcement does not constitute the
statutory accounts for the Group within the meaning of Section 435 of the
Companies Act 2006. The statutory accounts for the year ended 31 December 2022
have been filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2023 will be filed in due course. The auditor's
report on these accounts was not qualified or modified and did not contain any
statement under Sections 498(2) or (3) of the Companies Act 2006 or any
preceding legislation.
There were no accounting standards or interpretations that have become
effective in the current reporting period which had an impact on disclosures,
financial position, or performance.
The Directors have made enquiries into the adequacy of the Group's financial
resources, through a review of the Group's budget and medium-term financial
plan, including cash flow forecasts. The Group has modelled a range of
scenarios with the base forecast being one in which, over the 24 months ending
31 December 2025, sales volumes grow in line with external construction
industry forecasts. In addition, the Directors have considered several
downside scenarios, including adjustments to the base forecast, a period of
significantly lower like-for-like sales, profitability, and cash flows. The
Directors have considered the impact of climate-related matters on the going
concern assessment and it is not expected to have a significant impact on the
Group's going concern.
At 31 December 2023, the Group had available £230.0m of undrawn committed
borrowing facilities in respect of which all conditions precedent had been
met. The Group's borrowing facilities were renewed on 10 August 2022 and
included an increase in the RCF facility to £350.0m available until at least
August 2027, subject to covenant headroom, and a seven-year private placement
loan note of £25.0m repayable August 2029. The Directors are satisfied that
the Group has sufficient liquidity and covenant headroom to withstand
reasonable variances to the base forecast, as well as the downside scenarios.
In addition, the Directors have noted the range of possible additional
liquidity options available to the Group, should they be required.
As a result, the Directors have satisfied themselves that the Group has
adequate financial resources to continue in operational existence for a period
of at least the next 21 months. Accordingly, they continue to adopt the going
concern basis in preparing the consolidated financial statements.
Four non-statutory measures have been used in preparing the consolidated
financial statements:
· Underlying profit and earnings measures exclude certain
non-underlying items (which are detailed in note 4) and, where relevant, the
tax effect of these items. The Directors consider that these measures provide
a better and more consistent indication of the Group's underlying financial
performance and more meaningful comparison with prior and future periods to
assess trends in the Group's financial performance.
· Underlying operating cash conversion is defined as cash generated
from operations, adjusted for non-underlying cash items, after movement in net
working capital and capital expenditure net of underlying proceeds from
disposals of property, plant and equipment divided by underlying operating
profit.
· Leverage is defined as net debt divided by pro-forma EBITDA (both
are reconciled in note 13). Net debt within the leverage calculation is
defined as loans and borrowings net of unamortised issue costs less cash and
cash equivalents, excluding the effects of IFRS 16.
· Pro-forma EBITDA is defined as pre-IFRS 16 underlying operating
profit before depreciation, amortisation and share-based payment charges, for
the 12 months preceding the balance sheet date, adjusted where relevant, to
include a full year of EBITDA from acquisitions made during those 12 months.
2. Segment information
From 1 January 2023, reporting segments have been aligned with the Group's
Sustainable Solutions for Growth strategy and reorganised into three segments
- Sustainable Building Solutions (SBS), Water Management Solutions (WMS) and
Climate Management Solutions (CMS). Adey, Nuaire, Domus, Nu-Heat and Surestop
have been reallocated from the Residential Systems segment into CMS, with the
remainder of Residential Systems moving into SBS. The Commercial and
Infrastructure segment is now reported as WMS without the commercial element
of Nuaire which is now reported in CMS. The reporting segments are organised
based on the nature of the end markets served. Inter-segment sales are on an
arm's length basis in a manner similar to transactions with third parties. The
prior year comparatives have been restated to the three divisions.
Sustainable Water Climate Total
Building Management Management Other
Solutions Solutions Solutions
Year ended 31 December 2023 £m £m £m £m £m
Segmental revenue 268.0 193.9 169.2 8.4 639.5
Inter segment revenue (25.2) (23.5) (3.3) (1.0) (53.0)
Revenue 242.8 170.4 165.9 7.4 586.5
Underlying operating profit** 53.1 17.7 22.7 0.6 94.1
Non-underlying items - segmental (1.4) (11.3) (15.0) (0.3) (28.0)
Non-underlying items - Group (4.1)
Segmental operating profit / (loss) 51.7 6.4 7.7 0.3 62.0
Finance costs (13.6)
Profit before tax 48.4
* The other revenue of £7.4m (2022: £8.8m) relates to assets held for sale
which do not form part of the Group's reporting segments.
** Underlying operating profit is stated before non-underlying items as
defined in the Group Accounting Policies in the Annual Report and Accounts and
is the measure of segmental profit used by the Group's CODM. Details of the
non-underlying items of £32.1m (2022: £45.2m) are detailed in note 4.
Sustainable Water Climate Total
Building Management Management Other
Solutions Solutions Solutions
Year ended 31 December 2022 £m £m £m £m £m
Segmental revenue 311.5 189.2 162.4 9.7 672.8
Inter segment revenue (29.0) (16.8) (3.8) (1.0) (50.6)
Revenue 282.5 172.4 158.6 8.7 622.2
Underlying operating profit / (loss)** 59.3 14.1 25.2 (0.4) 98.2
Non-underlying items - segmental (4.4) (6.1) (28.8) (1.2) (40.5)
Non-underlying items - Group (4.3)
Segmental operating profit / (loss) 54.9 8.0 (3.6) (1.6) 53.4
Finance costs (7.6)
Non-underlying items - finance costs (0.4)
Profit before tax 45.4
Geographical analysis
Revenue by destination 2023 2022
£m £m
UK 519.1 560.8
Rest of Europe 33.4 32.4
Rest of World 34.0 29.0
Total - Group 586.5 622.2
3. Operating Profit
2023 2022
£m £m
Income statement charges
Depreciation of property, plant and equipment (owned) 20.3 19.4
Depreciation of right-of-use assets 5.6 5.4
Cost of inventories recognised as an expense 287.9 318.3
Research and development costs expensed 9.0 8.8
Income statement credits
Research and development expenditure credit 1.5 1.2
Profit on disposal of property, plant and equipment 0.4 0.7
4. Non-underlying items
Non-underlying items comprised:
2023 2022
Gross Tax Net Gross Tax Net
£m £m £m £m £m £m
Cost of sales: 1.5 (0.3) 1.2 1.5 (0.3) 1.2
Inventory write down
Restructuring costs 0.4 (0.1) 0.3 - - -
Employment matters 1.3 (0.2) 1.1 - - -
Product liability claim (1.2) (0.1) (1.3) 1.0 - 1.0
Selling and distribution costs :
Restructuring costs 1.0 (0.2) 0.8 - - -
Administration expenses
Restructuring costs 12.4 (2.3) 10.1 7.8 (1.5) 6.3
Acquisition costs - acquisition and other M&A activity 2.2 (0.1) 2.1 3.3 - 3.3
Workday configuration (SaaS) 1.2 (0.3) 0.9 - - -
Employment matters 0.7 (0.1) 0.6 - - -
Isolated cyber incident costs - - - 1.2 (0.2) 1.0
Profit on disposal of property plant and equipment (4.7) - (4.7) - - -
Amortisation of intangible assets 14.8 (3.7) 11.1 15.2 (2.6) 12.6
Impairment of intangible assets 2.5 (0.6) 1.9 2.8 (0.5) 2.3
Impairment of Goodwill - - - 12.0 - 12.0
Finance costs: - - - 0.4 (0.1) 0.3
Unamortised deal fees
Total non-underlying items 32.1 (8.0) 24.1 45.2 (5.2) 40.0
Restructuring costs incurred in both periods are in relation to the
reorganisation of the Group, which concluded during 2023, with a cumulative
cost over the two-year period of £24.6m. The Group reviewed its operating
footprint which resulted in the closure of six sites, this included the sale
of two properties which accounts for the profit on disposal, reorganisation
costs in relation to the new operating structure of the segmental units (see
note 2) and costs incurred for consultancy fees for advisory support as part
of the initial deployment and design of the Genuit Business system. SaaS costs
related to the design and configuration of Workday software that is a
significant project to support the Group's medium-term strategy.
The product liability claim is associated with a historic acquisition and
comprised of an increase in the provision for remediation works which have
been ongoing in 2023, the total amount recognised as a liability on the
balance sheet for the remaining works at 31 December 2023 is £1.3m (2022:
£3.3m). This is offset by a settlement being received, net of legal costs
incurred, associated with the acquisition.
Acquisition costs in both years relate predominantly to a £1.8m (2022:
£3.1m) charge arising in connection with contingent consideration treated as
remuneration in respect of the acquisition of Plura.
Costs associated with Employment matters are in relation to one off regulatory
claims.
During 2022, there was an isolated cyber incident at one of the Group's
businesses, which resulted in temporary disruption to manufacturing and
consequently sales in April and May 2022.
Impairment of intangible assets of £2.5m (2022: £2.8m) related to assets
associated with the closure of a site within the year and in 2022 is in
respect of a customer relationship agreement ending early and impairment of
goodwill relates to a 2021 acquisition. Amortisation charged relates to
intangible assets arising on business combinations.
5. Finance costs
2023 2022
£m £m
Interest on bank loan 11.6 6.2
Debt issue cost amortisation 0.8 0.5
Unwind of discount on lease liabilities 1.2 0.8
Other finance costs - 0.1
13.6 7.6
6. Income tax
(a) Tax expense reported in the income statement
2023 2022
£m £m
Current income tax:
UK income tax 11.0 7.7
Overseas income tax 0.2 0.1
Current income tax 11.2 7.8
Adjustment in respect of prior years (0.4) (0.5)
Total current income tax 10.8 7.3
Deferred income tax:
Origination and reversal of timing differences (1.9) 0.4
Effects of changes in income tax rates 0.1 1.3
Deferred income tax (1.8) 1.7
Adjustment in respect of prior years 0.9 (0.1)
Total deferred income tax (0.9) 1.6
Total tax expense reported in the income statement 9.9 8.9
Details of the non-underlying tax credit of £8.0m (2022: £5.2m) are set out
in Note 4.
(b) Reconciliation of the total tax expense
A reconciliation between the tax expense and the product of accounting profit
multiplied by the UK standard rate of income tax for the years ended 31
December 2023 and 2022 is as follows:
2023 2022
£m £m
Accounting profit before tax 48.4 45.4
Accounting profit multiplied by the UK standard rate of income tax of 23.52% 8.6
(2022: 19.0%)
11.4
Expenses not deductible for income tax 1.6 3.4
Non-taxable income (2.2) (0.4)
Adjustment in respect of prior years 0.5 (0.6)
Effects of patent box (1.1) (1.6)
Effects of changes in income tax rates 0.1 1.3
Effects of super deduction (0.1) (1.8)
Effects of other tax rates/credits (0.3) -
Total tax expense reported in the income statement 9.9 8.9
The effective rate for the full year was 20.5% (2022: 19.6%). If the impact of
non-underlying items is excluded, the underlying income tax rate would be
22.2% (2022: 15.6%).
Deferred income tax
The deferred income tax included in the Group balance sheet is as follows:
31 December 2023 31 December 2022
£m £m
Deferred income tax liabilities/(assets)
Short-term timing differences 31.4 37.8
Capital allowances in excess of depreciation 23.0 16.9
Share-based payments (1.3) (2.1)
Tax losses (3.0) (2.5)
50.1 50.1
The Group offsets tax assets and liabilities if, and only if, it has a legally
enforceable right to offset current income tax assets and current income tax
liabilities and the deferred income tax assets and deferred income tax
liabilities relate to income taxes levied by the same tax authority.
(c) Change in corporation tax rate
On 24 May 2021, legislation was passed which substantively enacted an increase
in UK corporation tax rate from 19% to 25% from April 2023. Deferred tax on
the balance sheet at 31 December 2023 was therefore measured at 25%.
(e) Unrecognised tax losses
No deferred income tax has been recognised on non-trading losses and other
timing differences of £3.4m (2022: £1.3m) as the Directors do not consider
that they will be utilised in the foreseeable future.
7. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the
period attributable to the owners of the parent company by the weighted
average number of ordinary shares outstanding during the period. The diluted
earnings per share amounts are calculated by dividing profit for the period
attributable to the owners of the parent company by the weighted average
number of ordinary shares outstanding during the period plus the weighted
average number of potential ordinary shares that would be issued on the
conversion of all the dilutive share options into ordinary shares.
The calculation of basic and diluted earnings per share is based on the
following:
2023 2022
Weighted average number of ordinary shares for the purpose of basic earnings 248,182,934 248,001,063
per share
Effect of dilutive potential ordinary shares 1,024,432 2,414,364
Weighted average number of ordinary shares for the purpose of diluted earnings 249,207,366 250,415,426
per share
Underlying earnings per share is based on the result for the period after tax
excluding the impact of non-underlying items of £24.1m (2022: £40.0m). The
Directors consider that this measure provides a better and more consistent
indication of the Group's underlying financial performance and more meaningful
comparison with prior and future periods to assess trends in the Group's
financial performance. The underlying earnings per share is calculated as
follows:
2023 2022
Underlying profit for the period attributable to the owners of the parent 62.6 76.5
company (£m)
Underlying basic earnings per share (pence) 25.2 30.8
Underlying diluted earnings per share (pence) 25.1 30.5
8. Dividends per share
2023 2022
£m £m
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2022 of 8.2p per share (2021: 20.3 20.3
8.2p)
Interim dividend for the year ended 31 December 2023 of 4.1p per share (2022: 10.2 10.2
4.1p)
30.5 30.5
Proposed final dividend for the year ended 31 December 2023 of 8.3p per share 20.6 20.3
(2022: 8.2p)
The proposed final dividend is subject to approval by shareholders at the
Annual General Meeting and has not been included as a liability in these
consolidated financial statements.
9. Property, plant and equipment
Freehold Plant Total
land and and other £m
buildings equipment
£m £m
Cost
At 1 January 2022 58.4 183.5 241.9
Additions 4.9 36.1 41.0
Disposals (0.1) (10.6) (10.7)
Transfer to assets held for sale - (6.4) (6.4)
Acquisition of businesses - 0.4 0.4
Exchange adjustment - 0.4 0.4
At 31 December 2022 63.2 203.4 266.6
Additions 6.2 26.6 32.8
Disposals (4.6) (10.6) (15.2)
Transfer to assets held for sale (3.6) (0.3) (3.9)
Exchange adjustment - (0.1) (0.1)
At 31 December 2023 61.2 219.0 280.2
Depreciation
At 1 January 2022 9.1 81.1 90.2
Provided during the year 1.7 17.7 19.4
Disposals - (8.7) (8.7)
Transfer to assets held for sale - (4.0) (4.0)
Exchange adjustment - (0.2) (0.2)
At 31 December 2022 10.8 85.9 96.7
Provided during the year 2.0 18.3 20.3
Disposals (2.6) (10.1) (12.7)
Transfer to assets held for sale (0.3) (0.4) (0.7)
Exchange adjustment - 0.2 0.2
At 31 December 2023 9.9 93.9 103.8
Net book value
At 31 December 2023 51.3 125.1 176.4
At 31 December 2022 52.4 117.5 169.9
In 2023 as part of the Group simplification to reduce its operational
footprint it undertook the following actions:
- Sold the land and buildings of one of its operating warehouses, the
net gain on disposal has been recognised in non-underlying items see (note 4).
- Exited two freehold land and buildings during the year which have
been reclassified to assets held for sale at net book value, which is lower
than fair value less cost to sell. The properties are marketed as for sale and
completion is expected within 12 months of the reporting date.
During the year the Group revised its depreciation policy for Plant and other
equipment. This reduced the depreciation charge by £0.6m.
Included in freehold land and buildings is non-depreciable land of £17.9m
(2022: £18.2m).
Capital commitments
At 31 December 2023, the Group had commitments of £7.1m (2022: £2.8m)
relating to plant and equipment purchases.
10. Right-of-use assets and lease liabilities
Freehold land and buildings Plant and other equipment Motor vehicles Total Lease liabilities
£m £m £m £m £m
At 1 January 2022 12.7 7.8 0.1 20.6 (20.6)
Additions 3.2 3.8 1.1 8.1 (8.2)
Disposals (0.5) (0.6) - (1.1) -
Depreciation of right-of-use asset (2.2) (2.7) (0.5) (5.4) -
Depreciation on disposal of right-of-use asset 0.1 0.4 - 0.5 -
Transfer to assets held for sale (0.4) - - (0.4) 0.3
Unwind of discount - - - - (0.8)
Settlements - - - - 6.2
At 31 December 2022 12.9 8.7 0.7 22.3 (23.1)
Additions 1.8 2.2 3.9 7.9 (7.9)
Disposals (1.2) (1.5) (0.6) (3.3) 1.2
Depreciation of right-of-use assets (1.9) (2.5) (1.2) (5.6) -
Depreciation on disposal of right - of - use asset - 1.2 0.4 1.6 -
Unwind of discount on lease liabilities - - - - (1.2)
Settlement of lease liabilities - - - - 7.6
At 31 December 2023 11.6 8.1 3.2 22.9 (23.4)
11. Intangible Assets
Goodwill Patents Brand Customer Licences Customer Development Total
£m £m names relationships £m order book costs £m
£m £m £m £m
Cost
At 1 January 2021 467.7 39.5 66.5 114.3 0.8 0.9 2.0 691.7
Additions - 0.5 - - - - 2.3 2.8
Acquisition of businesses
2.9 - - - - - - 2.9
Transfer to Assets held for sale
(3.2) - - - - - - (3.2)
At 31 December 2022 467.4 40.0 66.5 114.3 0.8 0.9 4.3 694.2
Additions - 0.4 - - - - 1.3 1.7
Disposals - - - - - - (0.6) (0.6)
Transfer to Assets held for sale (1.3)
- - - - - - (1.3)
At 31 December 2023 466.1 40.4 66.5 114.3 0.8 0.9 5.0 694.0
Amortisation and impairment losses
At 1 January 2022 - 15.4 19.2 13.4 0.3 0.4 0.2 48.9
Charge for the year - 3.4 5.1 6.1 0.1 0.5 0.2 15.4
Impairment losses 12.0 - - 2.8 - - - 14.8
At 31 December 2022 12.0 18.8 24.3 22.3 0.4 0.9 0.4 79.1
Charge for the year - 3.3 5.1 6.4 0.1 - 0.7 15.6
Impairment losses - 1.0 0.9 0.6 - - - 2.5
At 31 December 2023 12.0 23.1 30.3 29.3 0.5 0.9 1.1 97.2
Net book value
At 31 December 2023 454.1 17.3 36.2 85.0 0.3 - 3.9 596.8
At 31 December 2022 455.4 21.2 42.2 92.0 0.4 - 3.9 615.1
Brand names and customer relationships which arise from business combinations
are amortised over their estimated useful lives of five to twenty years. There
are two existing brands that have a significant carrying value: Nuaire
(£4.0m) and Adey (£23.2m) with an estimated useful life of five and eighteen
years respectively. Customer relationships that have a significant carrying
value are Adey's relationships with key customers (£73.5m) with an estimated
useful life of between nine and 18 years and Manthorpe's (£5.9m) with an
estimated useful life of ten years.
Impairment testing of goodwill
Goodwill is not amortised but is subject to annual impairment testing.
Goodwill has been allocated for impairment testing purposes to a number of
cash-generating units (CGUs) which represent the lowest level in the Group at
which goodwill is monitored for internal management purposes. The carrying
amount of goodwill allocated to each of the CGUs is as follows:
CGU 31 December 2023 31 December 2022
£m £m
Building Services & International 29.1 30.4
Infrastructure & Landscape 43.6 43.6
Residential Systems 169.6 169.6
Climate & Ventilation 93.7 93.7
Nu-Heat 17.3 17.3
Adey 95.5 92.8
Others 5.3 8.0
454.1 455.4
At 31 December 2023, £4.5m (2022: £3.2m) of goodwill has been allocated to
assets held-for-sale from the Building Services & International CGU, in
relation to Polypipe Italia SRL. During the year Surestop was hived up into
Adey Innovation and as such the goodwill arising on the acquisition of
Surestop was subsequently transferred to the Adey CGU.
From 1 January 2023, reporting segments have been aligned with the Group's
Sustainable Solutions for Growth strategy and reorganised into three segments
- Sustainable Building Solutions (SBS), Water Management Solutions (WMS) and
Climate Management Solutions (CMS). Adey, Nu-Heat and Climate &
Ventilation CGUs have been allocated into CMS, Residential Systems and
Building Services & International CGUs are allocated into SBS and
Infrastructure & Landscape and Ulster CGUs are now reported as WMS.
Key assumptions used for value-in-use calculations:
The recoverable amount of all CGUs are determined from value -in-use
calculations, being the net present value of future pre-tax cash flows,
discounted at a mid-year position, covering a 5-year period. These pre-tax
cash flows are based on budgeted cash flows information for a period of one
year, construction industry forecasts of growth for the following year and
management's forecast of growth between 1.6% to 7.3% for years 3 to 5 (2022:
2.0% to 5.0%). Terminal growth rates between 2.0% to 2.4% (2022: 2.0% to 2.4%)
have been applied beyond this, based on historical macroeconomic performance
and projections of the sector served by the CGUs.
A pre-tax discount rate of 13.9% (2022: 12.9%) has been applied in determining
the recoverable amounts of CGUs. The pre-tax discount rate is estimated based
on the Group's risk adjusted cost of capital. When assessing for impairment of
goodwill, management have considered the impact of climate change and have not
identified any material short-term impacts from climate change that would
impact the carrying value of goodwill. Over the longer term, the risks and
opportunities are more uncertain, and management will continue to assess the
quantitative impact of risks at each balance sheet date.
Recoverable amounts and sensitivities:
The Group has applied sensitivities to assess whether any reasonably possible
changes in assumptions could cause an impairment that would be material to
these consolidated financial statements. The application of these
sensitivities did not cause an impairment of goodwill.
At 31 December 2022 the Group recognised a £12.0m impairment charge in the
Adey CGU, leaving the recoverable amount equal to that of the carrying value.
The headroom resulting from the value-in-use calculations at 31 December 2023
indicates that the Adey CGU is sensitive to changes in the key assumptions and
management considers that a reasonably possible change in any single
assumption could give rise to an impairment of the corresponding carrying
amount of goodwill. The detailed sensitivity analysis indicates that the
following changes in each of these key assumptions would result in an
impairment charge being recognised:
• The pre-tax discount rate increasing to 14.2% from that used in the
value-in-use calculations of 13.9%. would give rise to an impairment charge of
£4.2m.
• A reduction in the long-term growth rate to 2.0% from that used in the
value-in-use calculations of 2.4% would give rise to an impairment charge of
£3.8m.
• Average revenue growth rates declining by 0.5% points from used in the
value-in-use calculations would give rise to an impairment charge of £7.5m.
• Gross margin efficiencies are not achieved by 2028 and margin declines by
3% points from used in the value-in-use calculations would give rise to an
impairment charge of £16.1m.
Management has reviewed the forecasts associated with the CGU noting the
assumptions used, the sensitivity analysis performed and the ability of the
business to adapt to challenging economic environments in which they operate,
and is satisfied that no further impairments are necessary at 31 December
2023.
12. Acquisitions
Keytec
On 31 March 2022, the Group acquired 100% of the voting rights and shares of
Keytec Geomembranes Holding Company Limited (Keytec), for an initial cash
consideration of £2.5m on a cash-free and debt-free basis plus a deferred
consideration of £0.6m, which was paid in early 2023. The total cash
consideration of £2.9m included a payment for net cash and working capital
commitments on completion of £0.4m. Keytec is a supplier and installer of
stormwater attenuation products, geomembranes and gas protection products.
No material intangible assets were identified. The goodwill arising on the
acquisition primarily represented the technical expertise of the Keytec staff,
synergies of companies offering both supply and install services and market
share. The goodwill was initially allocated entirely to the Commercial and
Infrastructure Systems, which is now the Water Management Solutions segment.
Acquisition-related deferred and contingent consideration comprised:
Year ended 31 December 2023 Year ended 31 December 2022
£m £m
Deferred and contingent consideration on Keytec acquisition - 0.6
Deferred consideration on Plura acquisition 8.2 7.4
8.2 8.0
An amount of 1.8m has been recognised as a non-underlying expense in the
Group Income Statement in the year ended 31 December 2023 in respect of the
Plura contingent consideration arrangement. This takes the total amount
recognised as a liability on the Group Balance Sheet at 31 December 2023 to
8.2m. A payment of 1.0m was made in relation to this arrangement in
December 2023. Accordingly, the aggregate final total amount payable under the
contingent consideration is expected to be approximately 9.2m. Contingent
consideration was determined based upon the agreed purchase price of the
remaining 49% of shares on 8 December 2023. There is no material difference
between the cash consideration and the fair value and the final payment was
subsequently paid in February 2024.
Acquisition-related cash flows comprised:
Year ended 31 December 2023 Year ended 31 December 2022
£m £m
Operating cash flows - settlement of acquisition costs
Keytec - 0.1
Other - 0.1
- 0.2
Year ended 31 December 2023 Year ended 31 December 2022
£m £m
Investing cash flows - Settlement of deferred and contingent consideration
Keytec 0.6 -
Plura 1.0 -
Permavoid - 0.5
1.6 0.5
Year ended 31 December 2023 Year ended 31 December 2022
£m £m
Investing cash flows - acquisition of businesses net of cash at acquisition
Keytec - 2.6
- 2.6
13. Financial Liabilities
31 December 31 December
2023 2022
£m £m
Non-current loans and borrowings:
Bank loan - principal 120.0 170.9
- unamortised debt issue costs (2.1) (2.8)
Loan notes 25.0 25.0
Total non-current loans and borrowings 142.9 193.1
Cash at bank and in hand (17.0) (50.0)
Net debt (excluding lease liabilities) 125.9 143.1
31 December 2023 31 December 2022
£m £m
Other financial liabilities:
Trade and other payables 114.7 124.2
Lease liabilities 23.4 23.1
Deferred and contingent consideration 8.2 8.0
146.3 155.3
On 10 August 2022, the Group renewed its banking facilities and entered a
Sustainability-Linked Loan revolving credit facility agreement for £350.0m
with a £50.0m uncommitted accordion facility expiring in August 2027 and a
separate agreement for private placement loan notes of £25.0m with an
uncommitted £125.0m shelf facility repayable in August 2029.
Interest is payable on the bank loan at SONIA plus an interest margin ranging
from 0.90% to 2.75% which is dependent on the Group's ESG targets and the
Group's leverage (net debt excluding lease liabilities as a multiple of
pro-forma EBITDA) and reduces as the Group's leverage reduces. The interest
margin at 31 December 2023 was 1.65% (2022: 1.46%). Pro-forma EBITDA for the
year was £114.9m (2022: £120.3m) and is defined as pre-IFRS 16 underlying
operating profit before depreciation, amortisation and share-based payment
charges, for the 12 months preceding the Balance Sheet date adjusted where
relevant to include a full year of EBITDA from acquisitions made during those
12 months.
31 December 2023 31 December 2022
£m £m
Pro-forma EBITDA (12 months preceding the balance sheet)
Underlying operating profit 94.1 98.2
Depreciation of property, plant and equipment 19.1 19.4
Amortisation of internally generated intangible assets 0.8 0.2
Unwind of discount on lease liabilities (1.2) (0.8)
Share-based payments charge 2.1 3.1
114.9 120.1
EBITDA from acquisitions - 0.2
114.9 120.3
At 31 December 2023, the Group had available, subject to covenant headroom,
£230.0m (2022: £179.1m) of undrawn committed borrowing facilities in respect
of which all conditions precedent had been met.
The Group is subject to a number of covenants in relation to its bank loan
which, if breached, would result in the bank loan becoming immediately
repayable. These covenants specify certain maximum limits in terms of net
debt, excluding lease liabilities, as a multiple of pro-forma EBITDA and
interest cover. At 31 December 2023, the Group was not in breach of any bank
covenants. The covenant position was as follows:
Covenant Covenant Position at
requirement 31 December
2023
Interest cover (Underlying operating profit: Finance costs excluding debt >4.0:1 8.2:1
issue cost amortisation)
Leverage (Net debt excluding lease liabilities: pro-forma EBITDA) <3.0:1 1.1:1
14. Reconciliation of profit before tax to cash generated from operations
Operating activities
Profit before tax 48.4 45.4
Finance costs 5 13.6 8.0
Operating profit 62.0 53.4
Non-cash items:
Profit on disposal of property, plant and equipment (underlying) (0.4)
(0.7)
Research and development expenditure credit (1.5) (1.2)
Warranty provision release - (1.0)
Non-underlying items:
- amortisation of intangible assets arising on business combinations 4 14.8 15.2
- impairment of intangible assets arising on business combinations 4 2.5 2.8
- impairment of goodwill arising on business combinations 4 - 12.0
- provision for acquisition costs 4 2.2 3.3
- provision for restructuring costs 4 14.1 9.3
- provision for restructuring costs - accelerated depreciation of property, 4 1.2 -
plant and equipment (non-underlying)
- Workday configuration (SaaS) 4 1.2 -
- provision for product liability claim 4 (1.2) 1.0
- Employment matter 4 2.0 -
- Isolated cyber incident 4 - 1.2
- Gain on sale of property 4 (4.7) 1.2
Depreciation of property, plant and equipment (underlying) 9 19.1 19.4
Depreciation of right-of-use assets 10 5.6 5.4
Amortisation of internally generated intangible assets 0.8 0.2
Share-based payments 2.1 2.9
Cash items:
- settlement of acquisition costs (0.4) (0.2)
- settlement of net product liability claim costs (1.7) -
- settlement of restructuring costs (12.1) (8.2)
- settlement of isolated cyber incident - (1.2)
Operating cash flows before movement in working capital 105.6 113.6
Receivables (6.9) 7.8
Payables (9.9) (10.4)
Inventories 20.9 (17.1)
Cash generated from operations 109.7 93.9
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