REG - Stelrad Group PLC - Interim results for six months ended 30 June 2022
12/08/2022 07:00
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RNS Number : 7669V Stelrad Group PLC 12 August 2022
Stelrad Group plc - interim results for the six months ended 30 June 2022
Continued progress across all territories.
Acquisition of DL Radiators in July 2022 strongly aligned with strategic
objectives.
Stelrad Group plc ("Stelrad" or "the Group" or "the Company", LSE: SRAD), a
leading specialist manufacturer and distributor of steel panel radiators in
the UK, Europe and Turkey, today announces its unaudited interim results for
the six months ended 30 June 2022.
Results summary*
Six months ended 30 June 2022 Six months ended 30 June 2021 Increase/ (decrease) %
Revenue, £m 150.1 127.9 17.4
Adjusted operating profit, £m ** 19.0 16.8 13.1
Adjusted operating profit margin, % ** 12.7 13.1 (0.4pp)
Adjusted profit after tax, £m ** 13.9 8.1 72.7
Adjusted Earnings per share, pence ** 10.95 6.34 72.7
Statutory operating profit, £m 11.9 17.9 (33.5)
Statutory profit after tax, £m 0.7 8.8 (92.5)
Statutory earnings per share, pence 0.52 6.94 (92.5)
Adjusted free cash flow, £m ** (2.5) 15.1 (116.6)
Net debt (excluding lease liabilities), £m 47.5 53.2 (10.7)
Dividend per share, pence 2.92 - n/a
*As a result of inflation in Turkey exceeding 100% over a three-year period,
the Group was required to adopt IAS 29 in respect of its Turkish subsidiary
for the first time in the financial statements for the six months ended 30
June 2022. The impact of the adoption of IAS 29 is a non-cash item but has a
£10.9m negative impact on statutory profit after tax. See note 15 for further
details.
**Adjusted figures are stated before exceptional items, foreign exchange
differences, the impact of IAS 29 and tax thereon where applicable. See note 9
for a reconciliation of adjusted profit after tax. See note 5 for a
reconciliation of adjusted operating profit. See the finance and business
review for a reconciliation of adjusted free cash flow.
Financial and operational highlights
· Continued progress across all territories during the first half
of 2022:
- UK & Ireland - 13.1% revenue growth, 19.4% growth in adjusted
operating profit.
- Europe - 17.7% revenue growth, 11.9% growth in adjusted operating
profit.
- Turkey & International - 42.9% revenue growth, 33.3% growth in
adjusted operating profit.
· Increased margin per radiator more than offset a 12.3%
year-on-year decline in volumes versus exceptionally strong first half
comparatives in 2021.
· Performance underpinned by pro-active margin management and an
improved mix of premium steel panel radiators.
· Completion of production line transfer from UK to lower cost
Turkish facility in the period.
· Net cash of £13.5 million (December 2021: £15.6 million) and
undrawn available facilities of £19.0 million (December 2021: £23.5 million)
provides the Group with significant financial flexibility.
· Acquisition of Italian manufacturer of heat emitters, DL
Radiators for €28.3 million in July 2022.
· Rising energy costs across Europe expected to drive increased,
long-term demand for more energy efficient heating solutions.
· Recommended interim dividend of 2.92 pence per share, to be paid
on 28 October 2022.
Commenting on the Group's performance, Trevor Harvey, Chief Executive Officer,
said:
"After entering 2022 with good momentum, we are pleased to have delivered
strong financial performance during the first half of the year, testament to
the underlying resilience of our business, with increased revenues and
improving margins per radiator more than offsetting previously flagged volume
reductions.
"Rising energy costs across Europe are sharpening consumers' focus on the need
for more energy efficient heating solutions and this, combined with the
ongoing decarbonisation agenda, is expected to drive increased, long-term
demand for our products.
"Whilst we continue to monitor the challenging economic conditions in our end
markets closely, we remain confident in the outcome for the full year and are
well-positioned to drive long-term shareholder value thanks to the resilience
of our business model, our market-leading positions and the strength of our
customer and supplier relationships."
Analyst Conference Call
Trevor Harvey (CEO) and George Letham (CFO) will host an analyst presentation
at 9:00am GMT today, Friday 12 August 2022, to talk through the Group's
operational and financial performance.
Please advise whether you and/ or a colleague would like to attend to
Powerscourt, either by phone on +44 (0) 20 7250 1446 or by email to
stelrad@powerscourt-group.com (mailto:stelrad@powerscourt-group.com) for dial
in details.
For further information:
Stelrad Group plc +44 (0)191 261 3301
Trevor Harvey, Chief Executive Officer
George Letham, Chief Financial Officer
Investec Bank plc (Sole Corporate Broker) +44 (0)20 7597 5970
Bruce Garrow
Ben Griffiths
Powerscourt (PR Advisor) stelrad@powerscourt-group.com (mailto:Stelrad@powerscourt-group.com)
James White +44 (0)7855 432 699
Genevieve Ryan
Notes to Editors
Stelrad Group plc is a leading specialist manufacturer and distributor of
steel panel radiators in the UK, Europe and Turkey, selling an extensive range
of standard and premium steel panel radiators, low surface temperature (LST)
radiators, towel warmers, decorative steel tubular radiators and other steel
"column" radiators to more than 500 customers annually. The Group has four
core brands: Stelrad, Henrad, Hudevad and Termo Teknik, which had
approximately 18.3 per cent. share by volume of total markets in the UK,
Europe, and Turkey in 2021, including 52.1 per cent. market share in the UK.
In 2021, the Group held top 3 share positions in 12 countries and was #1 in
the UK, Ireland, the Netherlands, Belgium and Denmark.
It is headquartered in Newcastle upon Tyne in the United Kingdom with
manufacturing and distribution facilities at Mexborough in the UK, Nuth in the
Netherlands and Çorlu in Turkey, employing 1,326 employees across the
business, during 2021.
The origins of the Group date back to the 1930s and, today, Stelrad enjoys
long established commercial relationships with many of its customers, having
served each of its top five customers for over twenty years.
In July 2022, the Group acquired DL Radiators, an Italian radiator
manufacturer located in Moimacco, near Udine, who employs approximately 350
people. Its product range includes steel panel, multicolumn steel, aluminium
and towel warmer radiators. DL Radiators generated €86.9 million revenue for
its financial year ended December 2021.
Further information can be found at: https://stelradplc.com/
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
Stelrad's results in the first half of 2022 continue to demonstrate the
resilience of our business model and the robustness of our strategy.
The Group delivered 17.4% organic revenue growth in the first half of 2022,
resulting in revenue up from £127.9 million in H1 2021 to £150.1 million
this year. Adjusted operating profit rose to £19.0 million, a 13.1%
increase from the £16.8 million reported in the first half of last year.
In line with our strategic objectives, Stelrad Group's recent acquisition of
Italy's DL Radiators offers considerable potential for the future, extending
the range of heat emitters for sale through our existing sales and
distribution networks and, through DL Radiators' highly regarded brands,
providing access to markets in countries and channels where the Group has
historically been underrepresented.
Results and performance for the period
In the first half of 2022, good progress has been made across all
territories. The UK & Ireland delivered revenue growth of 13.1%, whilst
adjusted operating profit rose by 19.4%. In Europe, revenue and adjusted
operating profit were up 17.7% and 11.9% respectively, whilst in our Turkey
& International markets, revenue grew by 42.9%, adjusted operating profit
by 33.3%.
Our growth in revenue has been driven primarily by timely and proactive margin
management, as steel, logistics and energy costs increased. Profitability
was enhanced by optimisation of our low-cost Turkish facility and an
improvement in the mix of premium steel panel radiators sold. This improvement
was achieved despite a 12.3% decrease in volume relative to the exceptionally
strong first half comparatives of 2021.
Strategic priorities
To fulfil our purpose of helping to heat homes sustainably, we continue to
pursue the commercial and operational strategies developed to achieve our four
key objectives: growing market share, improving product mix, optimising
routes to market and positioning effectively for decarbonisation.
DL Radiators acquisition
Stelrad Group completed the acquisition of leading Italian heat emitter
manufacturer DL Radiators for €28.3 million in July 2022. This acquisition
extends the range of radiators available to the Group's existing sales and
distribution network, expands our routes to market, increases manufacturing
capacity and gives the Group access to the well-established and complementary
DeLonghi brand.
From its Moimacco, Italy, facility DL Radiators generated €86.9 million
revenue and €5.0 million normalised EBITDA for its financial year ended
December 2021, with gross assets of €62.9 million.
Its product range includes steel panel, multicolumn steel, aluminium and towel
warmer radiators, providing customers with flexible heat emitter solutions in
both hydronic and electric technologies, suitable for a wide variety of
installations.
The acquisition is expected to be earnings enhancing in this financial year.
It is well aligned with Stelrad's stated strategic objectives and will allow
us to grow share both in steel panel and other heat emitter categories, to
drive product mix improvement and to position the Group more effectively for
decarbonisation whilst increasing our access to market through a combination
of retail and trade channels.
Sustainability
Stelrad Group is fully committed to high standards of corporate
responsibility, sustainability and employee engagement and aims to consider
fully the long-term impact of all our business operations.
At the end of 2021, we set up a task force to develop a comprehensive and
well-integrated ESG strategy, consistent with our purpose of helping to heat
homes sustainably. Understanding the needs of Stelrad Group's stakeholders
has been central to the development of our strategic framework "Fit for the
future".
During the second half of 2022, we plan to develop our sustainability targets,
including Key Performance Indicators for future publication.
Interim dividend
Based on the Group's financial results in the first half of 2022, the Board
recommends an interim dividend of 2.92 pence per share. The interim dividend
will be paid on 28 October 2022 to shareholders on the register on 7 October
2022.
Outlook
We continue to monitor the challenging economic conditions in our end markets
closely, and particularly consumer sentiment. While we are mindful of broader
macro-economic uncertainties and key leading indicators, we remain confident
in the outcome for the full year. This is testament to the resilience of our
business model, our market-leading positions which improved further in 2021
(Source: BRG Building Solutions), and the strength of customer and supplier
relationships.
Our acquisition of DL Radiators extends the range of radiators available to
our existing sales and distribution network, expands our routes to market,
provides well-established complementary brands and increases our manufacturing
capacity. Providing improved access to the European heat emitter market, the
acquisition is in line with our strategic objectives and our role as a natural
consolidator within the sector. Early integration of the business is
proceeding to plan and remains in line with expectations. We expect the
acquisition to be earnings enhancing in this financial year and to deliver
double digit earnings accretion in future years.
Longer term, the conflict in Ukraine has highlighted structural considerations
relating to European energy security and fossil fuel costs and, as a result,
we believe that there will be an inevitable focus on, and acceleration of,
renewable energy initiatives across Europe which in turn, will continue to
drive interest in and awareness of our products.
Trevor Harvey
Chief Executive Officer
12 August 2022
FINANCE AND BUSINESS REVIEW
Group overview
The following table summarises the Group's results from operations for the six
months ended 30 June 2022 and 30 June 2021.
Six months ended 30 June 2022 Six months ended 30 June 2021 Increase/ Increase/ (decrease)
(decrease)
£m £m £m %
Revenue 150.1 127.9 22.2 17.4
Adjusted operating profit 19.0 16.8 2.2 13.1
Exceptional items - (1.5) 1.5 100.0
Foreign exchange differences (3.0) 2.6 (5.6) (215.4)
Impact of IAS 29 (4.1) - (4.1) n/a
Operating profit 11.9 17.9 (6.0) (33.5)
Net finance costs (1.8) (5.5) 3.7 67.3
Monetary losses - net (IAS 29) (5.4) - (5.4) n/a
Profit before tax 4.7 12.4 (7.7) (62.1)
Income tax expense (4.0) (3.6) (0.4) (11.1)
Profit for the period 0.7 8.8 (8.1) (92.5)
Earnings per share (p) 0.52 6.94 (6.42) (92.5)
Adjusted profit for the period 13.9 8.1 5.8 71.6
Adjusted earnings per share (p)((1)) 10.95 6.34 4.61 72.7
Dividend per share (p) 2.92 - 2.92 n/a
( )
((1)) Adjusted earnings per share is calculated on adjusted profit after tax,
being earnings before exceptional items, IAS 29 adjustments and foreign
exchange differences and tax on these items.
Financial overview
Revenue for the six months ended 30 June 2022 was £150.1 million, an increase
of £22.2 million, or 17.4%, on the six months ended 30 June 2021 (2021:
£127.9 million). This was principally a result of the impact of selling price
increases implemented in the second half of 2021, partially offset by a
decrease in sales volumes. Steel price volatility continued in the first half
of 2022. Selling price increases were applied in the period to recover steel
and other inflationary cost increases.
Adjusted operating profit for the period was £19.0 million, an increase of
£2.2 million, or 13.1%, compared to the same period last year (2021: £16.8
million). This was principally as a result of the benefit of increased margins
per radiator, partially offset by a decrease in sales volumes of 12.3%.
Statutory operating profit for the period was £11.9 million (2021: £17.9
million), including the non-cash impact of IAS 29 of £4.1 million,
exceptional costs of £nil (2021: £1.5 million) and the impact of foreign
exchange losses of £3.0 million (2021: gains of £2.6 million).
Adjusted profit for the period increased by £5.8 million, or 71.6%, to £13.9
million. Statutory profit for the period, including the impact of IAS 29,
being £4.1 million within operating profit and £5.4 million of monetary
losses, decreased by £8.1 million, or 92.1%, to £0.7 million (2021: £8.8
million). Adjusted earnings per share was 10.95 pence (2021: 6.34 pence),
whilst the statutory earnings per share after the impact of IAS 29 was 0.52
pence (2021: 6.94 pence).
There was a further devaluation of the Turkish Lira against all hard
currencies during the first half of 2022. Historically devaluation of Turkish
Lira has led to foreign exchange gains (non-cash in nature) being recorded in
the income statement. The USD strengthened more significantly against Turkish
Lira than both GBP and Euro in the first half of 2022, resulting in non-cash
foreign exchange losses of £3.0 million (2021: gains of £2.6 million). These
currency differences arise from the retranslation of our hard currency assets
and liabilities in our Turkish subsidiary with the business maintaining a net
hard currency asset position consistent with the Group's historical approach.
Non-cash currency gains and losses have been excluded from adjusted operating
profit.
At 30 June 2022 the Group had cash of £13.5 million (December 2021: £15.6
million) and undrawn available facilities of £19.0 million (December 2021:
£23.5 million), with net debt excluding finance leases of £47.5 million
(December 2021: £40.9 million). During the six months ended 30 June 2022, the
Group's working capital increased due to an increase in inventories, with the
intention of improving customer service, and this has contributed to the
continued strength of our customer relationships. Working capital at 30 June,
reflects a seasonal high point with the lowest level of working capital
historically experienced in December each year. 2021 was exceptional in that
working capital did not follow the normal seasonal patterns due to the impact
of Covid-19. The Group expects a reduction in net debt by the end of the
financial year.
IAS 29
As a result of inflation in Turkey exceeding 100% over a three-year period,
the Group was required to adopt IAS 29 in respect of its Turkish subsidiary
for the first time in the financial statements for the six months ended 30
June 2022. The impact of the adoption of IAS 29 is explained in more detail in
note 15 of the consolidated interim financial statements, with the accounting
policy outlined in note 2.
The impact at 31 December 2021 is accounted for as a restatement to opening
reserves. A negative adjustment to operating profit in the period of £4.1
million has been removed in arriving at adjusted operating profit, as
management believe that the pre-IAS 29 results give a more meaningful
presentation of the Group's underlying performance due to more than 80% of
assets, liabilities, revenues and costs in the Turkish subsidiary being
denominated in hard currencies. Similarly, adjusted profit after tax is stated
before the full impact of IAS 29 loss for the period of £10.9 million.
The impact of IAS 29 on the results for the six months ended 30 June 2022 is
outlined below.
Statutory position IAS 29 Pre-IAS 29 position
£m £m
Revenue 150.1 2.3 147.8
Adjusted operating profit 19.0 - 19.0
Exceptional items - - -
Foreign exchange differences (3.0) (0.1) (2.9)
Impact of IAS 29 (4.1) (4.1) -
Operating profit / (loss) 11.9 (4.2) 16.1
Net finance costs (1.8) - (1.8)
Monetary losses - net (IAS 29) (5.4) (5.4) -
Profit / (loss) before tax 4.7 (9.6) 14.3
Income tax expense (4.0) (1.3) (2.7)
Profit / (loss) for the period 0.7 (10.9) 11.6
Revenue by geographical market
The table below sets out the Group's revenue by geographical market.
Revenue by geographical market Six months ended 30 June 2022 Six months ended 30 June 2021 Increase Increase
£m £m £m %
UK & Ireland 71.5 63.2 8.3 13.1
Europe 64.6 54.9 9.7 17.7
Turkey & International 14.0 9.8 4.2 42.9
Total 150.1 127.9 22.2 17.4
UK & Ireland
The Group's revenue in the UK & Ireland for the period was £71.5 million
(2021: £63.2 million), an increase of £8.3 million, or 13.1%. This was
principally a result of the impact of selling price increases implemented in
the second half of 2021 partially offset by a decrease in sales volumes.
Europe
The Group's revenue in Europe for the period was £64.6 million (2021: £54.9
million), an increase of £9.7 million, or 17.7%. This was principally a
result of the impact of selling price increases implemented in the second half
of 2021 partially offset by a decrease in sales volumes.
Turkey & International
The Group's revenue in Turkey & International for the period was £14.0
million (2021: £9.8 million), an increase of £4.2 million, or 42.9%. This
was principally a result of the impact of selling price increases implemented
in the second half of 2021.
Adjusted operating profit by geographical market
The table below sets out the Group's adjusted operating profit by geographical
market.
Adjusted operating profit by geographical market Six months ended 30 June 2022 Six months ended 30 June 2021 Increase/ (decrease) Increase/
(decrease)
£m £m £m %
UK & Ireland 12.3 10.3 2.0 19.4
Europe 7.5 6.7 0.8 11.9
Turkey & International 2.0 1.5 0.5 33.3
Central costs (2.8) (1.7) (1.1) (64.7)
Total 19.0 16.8 2.2 13.1
UK & Ireland
The Group's adjusted operating profit in the UK & Ireland for the period
was £12.3 million (2021: £10.3 million), an increase of £2.0 million, or
19.4%. This was principally as a result of the benefit of increased margins
per radiator, partially offset by lower sales volumes.
Europe
The Group's adjusted operating profit in Europe for the period was £7.5
million (2021: £6.7 million), an increase of £0.8 million, or 11.9%. This
was principally as a result of the benefit of increased margins per radiator,
partially offset by lower sales volumes.
Turkey & International
The Group's adjusted operating profit in Turkey & International for the
period was £2.0 million (2021: £1.5 million), an increase of £0.5 million,
or 33.3%. This was principally as a result of the benefit of increased margins
per radiator and higher sales volumes.
Central costs
Central costs for the period were £2.8 million (2021: £1.7 million), an
increase of £1.1 million, or 64.7%. Costs increased principally as a result
of additional expenditure arising due to the Group being listed, following the
completion of the IPO in November 2021.
Exceptional items
During the period exceptional costs of £nil were incurred (2021: £1.5
million). The exceptional costs incurred in 2021 related to the cost of
professional advisers employed to consider the potential recapitalisation of
the Group. These costs are one-off in nature and disclosing these costs as
exceptional allows the true underlying performance of the Group to be more
easily reviewed.
Finance costs
The Group's finance costs for the period were £1.8 million (2021: £5.5
million). The 67.3% decrease of £3.7 million is primarily due to the
repayment of the historic shareholder loans in November 2021, with these being
replaced by the Group's current debt structure which has lower interest rates.
Income tax expense
The Group's income tax expense for the period was £4.0 million (2021: £3.6
million), an increase of £0.4 million, or 11.1%. On an underlying, pre-IAS 29
basis, the Group's income tax expense was £2.7 million which is a reduction
of £0.9 million from 2021. The 2022 tax charge includes a £1.3 million
charge due to IAS 29, with a deferred liability recognised to reflect the
higher assets values arising under IAS 29. The reduction in the underlying tax
charge is due to a number of factors, including: a reduction in the Turkish
tax rate from 25% to 22%; a large part of the 2021 interest charge being
non-deductible for tax purposes; and a higher proportion of investment in
Turkey in 2022 qualifying for tax relief.
Earnings per share and adjusted earnings per share
Profit attributable to shareholders decreased by £8.1 million, or 92.5%, to
£0.7 million (2021: £8.8m) and earnings per share was 0.52 pence (2021: 6.94
pence). The weighted average number of shares was 127.4 million (2021: 127.4
million). Profit attributable to shareholders before exceptional items,
foreign exchange differences, the impact of IAS 29 and tax thereon increased
by £5.8 million, or 71.6%, to £13.9 million (2021: £8.1 million) and
consequently adjusted earnings per share was 10.95 pence (2021: 6.34 pence).
Dividends and reserves
The Group is committed to delivering returns for its shareholders. It has
adopted a progressive dividend policy targeting a pay-out of approximately 40%
of adjusted earnings, with capital allocation focused on reinvestment for
growth. The Group intends to split dividend payments approximately 33% and 67%
between the Group's interim and final dividend payments respectively, across
the fiscal year.
The Group paid its first dividend in May 2022 which, due to the timing of the
Group's admission, was the only dividend paid in respect of 2021. The 2021
dividend was determined on a pro rata basis for the period from admission to
31 December 2021.
The Group intends to pay an interim dividend of 2.92 pence per share on 28
October 2022.
The Company successfully submitted an application to the High Court of Justice
of England and Wales (the "Court") to reduce the value of each ordinary share
of the Company from £1.00 to £0.001; the reduction has been credited to the
retained earnings of the Company, resulting in an increase in distributable
reserves. Under the same application the Court approved the removal of the
share premium account of the Company in full, with the reduction credited to
the retained earnings of the Company. The Court approved the application on 25
January 2022. This created adequate distributable reserves in the Company to
enable both the 2021 final dividend and the 2022 interim dividend
distributions to be made.
Cash flows
The following table summarises the Group's cash flow for the six months ended
30 June 2022 and 30 June 2021.
Six months ended 30 June 2022 Six months ended 30 June 2021 Increase/
(decrease)
£m £m £m
Operating profit 11.9 17.9 (6.0)
Depreciation add back 4.2 3.8 0.4
Exceptional items add back - 1.5 (1.5)
Gain on disposal of property, plant and equipment (0.2) (0.2) -
Income statement adjustment - IAS 29 3.0 - 3.0
Share based payments 0.1 - 0.1
Working capital movements (15.1) (2.8) (12.3)
Net capital expenditure (4.3) (3.4) (0.9)
Adjusted cash flow from operations (0.4) 16.8 (17.2)
Income tax paid (2.2) (1.8) (0.4)
Interest received 0.1 0.1 -
Adjusted free cash flow (2.5) 15.1 (17.6)
Six months ended 30 June 2022 Six months ended 30 June 2021 Increase/
(decrease)
Adjusted cash flow from operations (£m) (0.4) 16.8 (17.2)
Adjusted operating profit (£m) 19.0 16.8 2.2
Adjusted cash flow from operations conversion (%) * (2.1) 100 (102.1)
*Adjusted cash flow from operations conversion is the ratio of adjusted cash
flow from operations to adjusted operating profit
The Group's adjusted free cash outflow for the period was £2.5 million (2021:
inflow £15.1 million), a decrease of £17.6 million. This reflects increased
working capital, with inventories higher due to a customer service led
recovery in finished goods stocks.
The Group's adjusted cash outflow from operations for the period was £0.4
million (2021: inflow £16.8 million), a decrease of £17.2 million. This was
principally as a result of an increase in working capital consistent with the
Group's historical seasonal pattern. 2021 was exceptional in that working
capital did not follow the normal seasonal patterns due to the impact of
Covid-19. Adjusted operating profit for the period was £19.0 million (2021:
£16.8 million), an increase of £2.2 million, following an increase in the
profitability of the Group. Adjusted cash flow from operations conversion for
the period was minus 2.1% (2021: plus 100.0%), a reduction of 102.1pp, mainly
due to the increase in working capital which is expected to reduce by December
2022.
Capital expenditures
The Group's capital expenditures mainly relate to investment in buildings and
operating plant and equipment. Key capital expenditure in the period ended 30
June 2022 related to investment in warehousing and an additional production
line at the Group's facilities in Turkey. Capital expenditure for the
remainder of 2022 will be in line with previous expectations, except for the
incremental spend of DL Radiators, who have committed to purchase a new steel
panel radiator production line at a cost of £3.6 million, to be incurred in
the next 12 months.
Net debt
At 30 June 2022, statutory net debt (including finance leases) of £56.5
million (2021: £50.2 million) comprises £61.0 million (2021: £56.5 million)
drawn down against the revolving credit facility and £9.0 million (2021:
£9.3 million) finance leases net of £13.5 million (2021: £15.6 million)
cash.
30 June 31 December 2021
2022
£m £m
Revolving credit facility 61.0 56.5
Cash (13.5) (15.6)
Net debt before finance leases 47.5 40.9
Finance leases 9.0 9.3
Net debt 56.5 50.2
Going concern
After reviewing the Group's current liquidity, net debt, financial forecasts
and stress testing of potential risks, the Board confirms there are no
material uncertainties which impact the Group's ability to continue as a going
concern for the period to 31 December 2023 and therefore these condensed
consolidated interim financial statements have therefore been prepared on a
going concern basis.
George Letham
Chief Financial Officer
12 August 2022
FORWARD-LOOKING STATEMENTS
This document may contain forward-looking statements which are made in good
faith and are based on current expectations or beliefs, as well as assumptions
about future events. You can sometimes, but not always, identify these
statements by the use of a date in the future or such words as "will",
"anticipate", "estimate", "expect", "project", "intend", "plan", "should",
"may", "assume" and other similar words. By their nature, forward-looking
statements are inherently predictive and speculative and involve risk and
uncertainty because they relate to events and depend on circumstances that
will occur in the future. You should not place undue reliance on these
forward-looking statements, which are not a guarantee of future performance
and are subject to factors that could cause our actual results to differ
materially from those expressed or implied by these statements. The Company
undertakes no obligation to update any forward-looking statements contained in
this document, whether as a result of new information, future events or
otherwise.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that these condensed consolidated interim financial
statements have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the interim management report includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
· material related party transactions in the first six months and
any material changes in the related party transactions described in the last
annual report.
The directors of Stelrad Group plc are listed in the Annual Report and
Accounts for the year ended 31 December 2021.
For and on behalf of the Board
Trevor Harvey
George
Letham
Chief Executive Officer Chief Financial
Officer
12 August
2022 12
August 2022
Stelrad Group plc. Registered number 13670010
Independent review report to Stelrad Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Stelrad Group plc's condensed consolidated interim financial
statements (the "interim financial statements") in the interim results of
Stelrad Group plc for the six month period ended 30 June 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the condensed consolidated interim balance sheet as at 30 June
2022;
· the condensed consolidated interim income statement and condensed
consolidated interim statement of comprehensive income for the period then
ended;
· the condensed consolidated interim statement of cash flows for
the period then ended;
· the condensed consolidated interim statement of changes in equity
for the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the interim financial results of
Stelrad Group plc have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the interim financial
statements and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim financial
statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the interim results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the interim results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Newcastle upon Tyne
12 August 2022
Condensed consolidated interim income statement
for the six months ended 30 June 2022
Six months ended 30 June 2022 Six months ended 30 June 2021 (not audited) Year ended 31 December 2021 (audited)
(not audited)
Notes £'000 £'000 £'000
Continuing operations
Revenue 5 150,110 127,925 272,285
Cost of sales (109,823) (88,717) (192,279)
Gross profit 40,287 39,208 80,006
Selling and distribution expenses (18,974) (17,276) (35,478)
Administrative expenses (excluding exceptional items) (6,685) (5,331) (11,584)
Exceptional items 5 - (1,446) (9,589)
Administrative expenses (6,685) (6,777) (21,173)
Other operating income 6 205 2,811 3,204
Other operating expenses 7 (2,988) (50) -
Operating profit 5 11,845 17,916 26,559
Finance income 31 103 141
Finance costs (1,761) (5,602) (10,379)
Monetary losses - net 15 (5,420) - -
Profit before tax 4,695 12,417 16,321
Income tax expense 8 (4,030) (3,575) (1,661)
Profit for the period 665 8,842 14,660
Notes
Earnings per share
Basic 9 0.52p 6.94p 11.51p
Diluted 9 0.52p 6.94p 11.51p
Adjusted earnings per share
Basic 9 10.95p 6.34p 16.92p
Diluted 9 10.93p 6.34p 16.92p
Condensed consolidated interim statement of comprehensive income
for the six months ended 30 June 2022
Six months ended 30 June 2022 Six months ended 30 June 2021 (not audited) Year ended
(not audited) 31 December 2021 (audited)
Notes £'000 £'000 £'000
Profit for the period 665 8,842 14,660
Other comprehensive income/(expense)
Other comprehensive income/(expense) that may be reclassified to profit or
loss in subsequent periods:
Net gain on monetary items forming part of net investment in foreign 1,362 645 5,192
operations and qualifying hedges of net investments in foreign operations
Income tax effect 8 (340) (137) (1,235)
Exchange differences on translation of foreign operations (4,575) (8,346) (26,072)
Net other comprehensive expense that may be reclassified to profit or loss in (3,553) (7,838) (22,115)
subsequent periods
Other comprehensive expense not to be reclassified to profit or loss in
subsequent periods:
Remeasurement losses on defined benefit plans (840) (100) (141)
Income tax effect 8 185 22 35
Net other comprehensive expense not to be reclassified to profit or loss in (655) (78) (106)
subsequent periods
Other comprehensive expense for the period, net of tax (4,208) (7,916) (22,221)
Total comprehensive income/(expense) for the period, net of tax attributable (3,543) 926 (7,561)
to owners of the parent
Condensed consolidated interim balance sheet
as at 30 June 2022
30 June 2022 30 June 2021 31 December 2021 (audited)
(not audited) (not audited)
Notes £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 69,139 56,861 53,694
Trade and other receivables 9 14 10
Deferred tax assets 2,399 3,487 6,284
71,547 60,362 59,988
Current assets
Inventories 65,452 41,039 56,781
Trade and other receivables 49,198 50,906 46,731
Income tax receivable 12 24 104
Other current financial assets - 140 -
Cash and cash equivalents 13,488 27,914 15,563
128,150 120,023 119,179
Total assets 199,697 180,385 179,167
Equity and liabilities
Equity
Share capital 127 65 127,353
Share premium - 198 13,391
Merger reserve (114,469) 940 (114,469)
Retained 222,667 52,024 57,814
earnings
Foreign currency reserve (60,730) (42,900) (57,177)
Total equity attributable to owners of the parent 47,595 10,327 26,912
Non-current liabilities
Interest-bearing loans and borrowings 11 67,109 87,473 62,865
Deferred tax liabilities 171 - 126
Provisions 262 225 158
Net employee defined benefit liabilities 13 2,520 2,326 1,728
70,062 90,024 64,877
Current liabilities
Trade and other payables 78,596 75,099 83,883
Interest-bearing loans and borrowings 11 1,921 3,205 1,794
Income tax payable 1,427 1,507 1,522
Provisions 96 223 179
82,040 80,034 87,378
Total liabilities 152,102 170,058 152,255
Total equity and liabilities 199,697 180,385 179,167
The financial statements on pages 15 to 31 were approved by the Board of
Directors on 12 August 2022 and signed on its behalf by:
George Letham
Chief Financial Officer
Condensed consolidated interim statement of changes in equity
for the six months ended 30 June 2022
Attributable to the owners of the parent
Issued share capital Share premium Merger reserve Retained earnings Foreign currency Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2020 (audited) 65 198 940 43,260 (35,062) 9,401
Profit for the year - - - 14,660 - 14,660
Other comprehensive expense for the year - - - (106) (22,115) (22,221)
Total comprehensive income/(expense) - - - 14,554 (22,115) (7,561)
Shares issued on incorporation 50 - - - - 50
"C" share redemption (13) - - - - (13)
Noosa share reorganization (50) 50 - - - -
Share for share exchange - old (2) (248) 250 - - -
Share for share exchange - new 115,659 - (115,659) - - -
Shares issued 11,644 13,391 - - - 25,035
At 31 December 2021 (audited) 127,353 13,391 (114,469) 57,814 (57,177) 26,912
IAS 29 Adjustment (note 15) - - - 8,327 - 8,327
At 31 December 2021 (restated) 127,353 13,391 (114,469) 66,141 (57,177) 35,239
Profit for the period - - - 665 - 665
Other comprehensive expense for the year - - - (655) (3,553) (4,208)
Total comprehensive income/(expense) - - - 10 (3,553) (3,543)
Capital reduction (127,226) (13,391) - 140,617 - -
IAS 29 Adjustment to retained earnings in the period (note 15) - - - 17,072 - 17,072
Share based payments charge - - - 50 - 50
Dividends paid (note 10) - - - (1,223) - (1,223)
At 30 June 2022 (not audited) 127 - (114,469) 222,667 (60,730) 47,595
Attributable to the owners of the parent
Issued share capital Share premium Merger reserve Retained earnings Foreign currency Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2020 (audited) 65 198 940 43,260 (35,062) 9,401
Profit for the period - - - 8,842 - 8,842
Other comprehensive expense for the year - - - (78) (7,838) (7,916)
Total comprehensive income/(expense) - - - 8,764 (7,838) 926
At 30 June 2021 (not audited) 65 198 940 52,024 (42,900) 10,327
Condensed consolidated interim statement of cash flows
for the six months ended 30 June 2022
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended 31 December 2021
(audited)
£'000 £'000 £'000
Operating activities
Profit before tax 4,695 12,417 16,321
Adjustments to reconcile profit before tax to net cash flows:
Depreciation of property, plant and equipment 4,236 3,784 7,409
Gain on disposal of property, plant and equipment (205) (182) (213)
Monetary loss IAS 29 5,420 - -
Monetary loss IAS 29 income statement element 3,029 - -
Share based payments 50 - -
Finance income (31) (103) (141)
Finance costs 1,761 5,602 10,379
Working capital adjustments:
Increase in trade and other receivables (3,972) (14,277) (17,380)
Increase in inventories (7,489) (12,083) (31,695)
(Decrease) / increase in trade and other payables (3,659) 23,631 40,291
Increase in provisions 57 121 158
Movement in other financial assets and liabilities - (151) -
Decrease in other pension provisions (12) (43) (59)
Difference between pension charge and cash contributions 17 (18) (22)
3,897 18,698 25,048
Income tax paid (2,203) (1,771) (3,734)
Interest received 31 103 141
Net cash flows from operating activities 1,725 17,030 21,455
Investing activities
Proceeds from sale of property, plant and equipment 209 400 487
Purchase of property, plant and equipment (3,597) (2,920) (8,646)
Net cash flows used in investing activities (3,388) (2,520) (8,159)
Financing activities
Transaction costs related to refinancing (111) - (1,171)
Proceeds from external borrowings 4,500 - 56,500
Repayment of external borrowings - (2,633) (11,001)
Repayment of shareholder loans - - (76,528)
Settlement of deferred consideration - - (202)
Payment of lease liabilities (899) (851) (1,666)
Share capital issued - - 25,085
Share capital repaid - "C" shares - - (13)
Interest paid (1,409) (323) (779)
Dividends paid (1,223) - -
Net cash flows generated from / (used in) financing activities 858 (3,807) (9,775)
Net (decrease) / increase in cash and cash equivalents (805) 10,703 3,521
Net foreign exchange difference (1,270) (2,872) (8,041)
Cash and cash equivalents at start of period 15,563 20,083 20,083
Cash and cash equivalents at end of period 13,488 27,914 15,563
Notes to the condensed consolidated interim financial statements
for the six months ended 30 June 2022
1 Corporate information
Stelrad Group plc is a public limited company that is incorporated, domiciled
and has its registered office in England and Wales.
2 Basis of preparation
The condensed consolidated interim financial statements for the half-year
reporting period ended 30 June 2022 have been prepared in accordance with the
UK-adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom' Financial Conduct Authority.
The interim financial statements do not include all of the notes of the type
normally included in annual financial statements. Accordingly, this report
is to be read in conjunction with the Annual Report and Accounts for the year
ended 31 December 2021, which has been prepared in accordance with UK-adopted
international accounting standards and with the requirements of the Companies
Act 2006, and any public announcements made by Stelrad Group plc during the
interim reporting period. The condensed consolidated interim financial
statements have been prepared using the same accounting policies and methods
of computation used to prepare the Group's 2021 Annual Report and Accounts as
described on pages 88 to 96 of that report, which can be found on the Group's
website at www.stelradplc.com (http://www.stelradplc.com) , and the adoption
of new standards and interpretations, noted below.
The condensed consolidated interim financial statements have been prepared
using the following two accounting policies for the first time in the six
months ended 30 June 2022:
Financial reporting in hyper-inflationary economies (IAS 29)
The financial statements of any subsidiary entity whose functional currency is
the currency of a hyperinflationary economy have been restated for changes in
the general purchasing power of that currency. The financial statements of
entities whose functional currency is the Turkish Lira have been restated from
1 January 2022 by applying a general price index. As a result the financial
statements are stated in terms of the measuring unit current at the balance
sheet date. In summary:
· Non-monetary assets and liabilities (other than those that are
carried at current amounts at the end of the reporting period, such as net
realisable value and fair value) have been restated for the change in
purchasing power caused by inflation from the date of initial recognition to
the balance sheet date.
· Monetary assets and liabilities have not been restated.
· All items in the statement of comprehensive income have been
expressed in terms of the measuring unit current at the end of the reporting
period and have therefore been restated for inflation from the dates when the
items of income and expenses were initially recorded in the financial
statements.
· A gain or loss on the net monetary position has been included in
profit or loss for the period from 1 January 2022 to the end of the reporting
period to reflect the impact of inflation on holding monetary assets and
liabilities in local currency.
The general price index used at the balance sheet date is the TUIK Index
provided by the Turkish Statistical Institute. The movement in the index
during the current reporting period was 42.35%.
One of the indicators of a hyperinflationary currency is cumulative inflation
over a three-year period in excess of 100 percent. This became the case for
the Turkish Lira at 31 March 2022, and as such the use of inflation accounting
is required in respect of Turkish Lira functional operations for periods
ending on or after 30 June 2022 using the published consumer price index.
In the process of applying the IAS 29, management does not consider that it
has made any judgements which would have a significant effect on the amounts
recognised in the consolidated financial statements.
The financial statements of a subsidiary entity that has the functional
currency of a hyper-inflationary economy are restated in accordance with IAS
29, as outlined above, before being included in the consolidated financial
statements. All amounts in the subsidiary's financial statements, including
all items in the statement of comprehensive income (which would usually be
translated at average exchange rate), have then been translated at the closing
exchange rate.
Comparative amounts presented previously in a stable currency have not been
restated.
The difference between the closing equity of the previous year and the opening
equity of the current year has been recognised as an IAS 29 adjustment in the
consolidated statement of changes in equity.
Further details on the application of IAS 29 are presented in note 15.
Share based payments (IFRS 2)
The fair value of equity settled share options granted is recognised as an
employee expense with a corresponding increase in equity. The fair value is
measured as at the date the options are granted and the charge is only amended
if vesting does not take place due to non-market conditions not being met.
Various option pricing models are used according to the terms of the option
scheme under which the options were granted. The fair value is spread over
the period during which the employees become unconditionally entitled to the
options. At the balance sheet date, if it is expected that non-market
conditions will not be satisfied, the cumulative expense recognised in
relation to the relevant options is reversed.
With respect to share based payments, a deferred tax asset is recognised on
the relevant tax base. The tax base is then compared to the cumulative share
based payment expense recognised in the income statement. Deferred tax
arising on the excess of the tax base over the cumulative share based payment
expense recognised in the income statement has been recognised directly in
equity outside the SOCI as share based payments are considered to be
transactions with shareholders.
The 2021 annual consolidated financial statements of the Group were prepared
in accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) no 1606/2002 as it applies in
the European Union.
The financial statements for the six months ended 30 June 2022 and the
comparative financial statements for the six months ended 30 June 2021 have
not been audited. However, the financial statements for the six months ended
30 June 2022 have been reviewed by the auditor, PricewaterhouseCoopers LLP.
The comparative financial statements for the year ended 31 December 2021 have
been extracted from the 2021 Annual Report and Accounts. The financial
statements contained in this interim report do not constitute statutory
accounts as defined in section 434 of the Companies Act 2006 and do not
reflect all of the information contained in the Group's 2021 Annual Report and
Accounts. The statutory accounts for the year ended 31 December 2021, which
were approved by the Board of Directors on 14 March 2022 and have been filed
with the Registrar of Companies, received an unqualified audit report which
did not draw attention to any matters by way of emphasis and did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
Significant changes
There have been two significant changes in the six months ended 30 June 2022
that affect the interim financial statements - the application of IAS 29
Financial reporting in hyperinflationary economies and the capital reduction.
The impact of IAS 29 on the interim financial statements is outlined in note
15. Details of the capital reduction can be found in the finance and
business review.
Going concern
In preparing these financial statements on the going concern basis, the
directors have considered the Group's current and future prospects and its
availability of cash resources and financing and the Group's financial
position.
The Group meets its day-to-day working capital requirements through a bank
loan facility which is in place up to November 2026. At the period-end date
the Group had drawn down £61.0 million of a £80 million revolving credit
facility. The remainder of the facility and significant cash balances of
£13.5 million were available to enable day-to-day working capital
requirements to be met.
As part of their period-end review, management has performed a detailed going
concern review, based on severe but plausible conditions, looking at the
group's liquidity and banking covenant compliance, examining expected future
performance. The Board have also reviewed the risks and uncertainties facing
the business. Based on the output of these going concern reviews, management
have concluded that the Group will be able to continue to operate within its
existing facilities and as such the financial statements have been prepared on
a going concern basis.
New standards and interpretations applied in the period
Several amendments and interpretations apply for the first time in 2022, but
do not have an impact on the consolidated financial statements of the Group.
These include:
· Reference to the Conceptual Framework - Amendments to IFRS 3
· Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16
· Onerous Contracts - Costs of Fulfilling a Contract - Amendments
to IAS 37
· IFRS 9 Financial Instruments - Fees in the "10%" Test for
Derecognition of Financial Liabilities
New standards and interpretations not applied
The International Accounting Standards Board has issued the following
standards and interpretations with an effective date after the date of these
financial statements:
International Accounting Standards (IAS/IFRSs) Effective date
(period beginning on or after)
IFRS 17 Insurance Contracts 1 January 2023
Classification of Liabilities as Current or Non-current - Amendments to IAS 1 1 January 2023
Definition of Accounting Estimates - Amendments to IAS 8 1 January 2023
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice 1 January 2023
Statement 2
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction - Amendment to IAS 12
It is anticipated that adoption of these standards and interpretations will
not have a material impact on the Group's financial statements.
The Group has not early adopted any standards, interpretations or amendments
that have been issued but are not yet effective.
3 Significant accounting judgements, estimates and assumptions
The preparation of the Group's condensed consolidated interim financial
statements requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the accompanying disclosures, and the disclosure of
contingent liabilities. Uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Group's accounting policies, management does
not consider that it has made any judgements which would have a significant
effect on the amounts recognised in the consolidated financial statements.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, which have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances
arising beyond the control of the Group. Such changes are reflected in the
assumptions when they occur.
Rebates
A proportion of rebates is paid to the end consumers of goods sold.
Uncertainties exist over provisions made as, until claims are made by end
consumers, the Group cannot be certain which consumers have purchased which
products. Due to this uncertainty it is therefore judgemental what contractual
rates, if any, will apply to goods sold.
Significant management judgement is required in order to assess the provision
required at the balance sheet date. Management is able to utilise market
information and historical/current data and trends in order to make an
appropriate provision.
A reasonably possible change in the estimates surrounding rebates would not
result in a material impact to the financial statements.
4 Principal risks
The Board has undertaken a review of the principal risks affecting the Group
for the six months ended 30 June 2022. The Board considers that the principal
risks, as discussed in the 'Risk management' section on pages 41 to 44 of the
Group Annual Report and Accounts for the year ended 31 December 2021
(available on the Group's website www.stelradplc.com), remain relevant.
5 Segmental information
IFRS 8 Operating Segments requires operating segments to be determined by the
Group's internal reporting to the Chief Operating Decision Maker ("CODM"). The
CODM has been determined to be the Chief Executive Officer and Chief Financial
Officer, who receive information on the Group's revenue channels in key
geographical regions based on the Group's management and internal reporting
structure. The CODM assesses the performance of geographical segments based on
a measure of revenue and adjusted operating profit.
Adjusted operating profit is earnings before interest, tax, amortisation,
exceptional items, foreign exchange differences and the impact of IAS 29.
IAS 29 was applied for the first time in the six months ended 30 June 2022.
The impact of IAS 29 has been removed in arriving at adjusted operating
profit, as management believe that the pre-IAS 29 results give a more
meaningful presentation of the Group's underlying performance.
Revenue by geographical market Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended 31 December 2021 (audited)
£'000 £'000 £'000
UK & Ireland 71,493 63,220 130,405
Europe 64,598 54,886 118,063
Turkey and International 14,019 9,819 23,817
Total revenue 150,110 127,925 272,285
Adjusted operating profit by geographical market Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended 31 December 2021
(audited)
£'000 £'000 £'000
UK & Ireland 12,311 10,252 21,589
Europe 7,486 6,737 12,929
Turkey and International 2,004 1,469 2,898
Central costs (2,848) (1,689) (4,247)
Adjusted operating profit 18,953 16,769 33,169
Exceptional items - (1,446) (9,589)
Foreign exchange differences (2,985) 2,593 2,979
Impact of IAS 29 (4,123) - -
Operating profit 11,845 17,916 26,559
Non-current operating assets Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended
31 December 2021
(audited)
£'000 £'000 £'000
UK 19,610 19,826 20,237
The Netherlands 22,939 24,684 23,606
Turkey 25,181 11,113 8,362
Other 1,409 1,238 1,489
Total 69,139 56,861 53,694
The exceptional items in the year ended 31 December 2021 are costs related to
professional advisers employed by the Group to explore the potential sale of
the Group and to subsequently execute the IPO. These costs were one-off in
nature and disclosing these costs as exceptional allows the true underlying
performance of the Group to be more easily reviewed.
The revenue information above is based on the locations of the customers. All
revenue arises from the sale of goods.
One customer has revenues in excess of 10% of revenue (six months ended 30
June 2021: one; year ended 31 December 2021: one).
6 Other operating income
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended
31 December 2021 (audited)
£'000 £'000 £'000
Net gain on disposal of property, plant and equipment 205 182 213
Foreign currency gains - 2,615 2,575
Net gains on forward derivative contracts - - 404
Sundry other income - 14 12
205 2,811 3,204
7 Other operating expenses
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended
31 December 2021 (audited)
£'000 £'000 £'000
Foreign currency losses 2,985 - -
Net losses on forward derivative contracts - 22 -
Sundry other expenses 3 28 -
2,988 50 -
8 Income tax expense
The major components of income tax expense are as follows:
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended 31 December 2021 (audited)
£'000 £'000 £'000
Consolidated income statement
Current income tax:
Current income tax charge 2,305 2,986 4,179
Adjustments in respect of current income tax charge of previous period (255) (79) (68)
Deferred tax:
Relating to origination and reversal of temporary differences 2,299 1,138 (2,095)
Relating to change in tax rates (319) (470) (355)
Income tax expense reported in the income statement 4,030 3,575 1,661
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended 31 December 2021 (audited)
£'000 £'000 £'000
Consolidated statement of comprehensive income
Tax related to items recognised in other comprehensive income/(expense) during
the period:
Deferred tax on actuarial loss (185) (22) (35)
Current tax on monetary items forming part of net investment and on hedges of 340 137 1,235
net investment
Income tax expensed to other comprehensive income/(expense) 155 115 1,200
The taxation charge has been calculated by applying the Directors' best
estimate of the annual effective tax rate to the profit for the period.
Changes in the corporate income tax rate
The UK Government has announced its intention to increase the UK corporation
tax rate to 25% by 1 April 2023. This rate change has now been substantively
enacted. When recognising deferred tax within the balance sheet, the Group has
used a blended rate which represents the rate at which deferred tax is
expected to unwind.
9 Earnings per share
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended 31 December 2021 (audited)
£'000 £'000 £'000
Net profit for the period attributable to owners of the parent 665 8,842 14,660
Exceptional items - 1,446 9,589
Foreign exchange differences 2,985 (2,593) (2,979)
Impact of IAS 29 9,610 - -
Tax on exceptional items, IAS 29 and foreign exchange differences 680 374 282
Adjusted net profit for the period attributable to owners of the parent 13,940 8,069 21,552
IAS 29 was applied for the first time in the six months ended 30 June 2022.
The impact of IAS 29 has been removed in arriving at adjusted net profit, as
management believe that the pre-IAS 29 results give a more meaningful
presentation of the Group's underlying performance.
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended
31 December 2021 (audited)
Basic weighted average number of shares in issue 127,352,555 127,352,555 127,352,555
Effect of dilutive potential ordinary shares 201,503 - -
Diluted weighted average number of shares in issue 127,554,058 127,352,555 127,352,555
Earnings per share
Basic earnings per share (pence per share) 0.52 6.94 11.51
Diluted earnings per share (pence per share) 0.52 6.94 11.51
Adjusted earnings per share
Basic earnings per share (pence per share) 10.95 6.34 16.92
Diluted earnings per share (pence per share) 10.93 6.34 16.92
10 Dividends paid and proposed
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended
31 December 2021
(audited)
£'000 £'000 £'000
Declared and paid during the period
Equity dividend on ordinary shares:
Final dividend for 2021: 0.96p per share (2020: nil) 1,223 - -
Interim dividend for 2021: nil - - -
1,223 - -
Six months ended 30 June 2022 (not audited) Six months ended 30 June 2021 (not audited) Year ended
31 December 2021
(audited)
£'000 £'000 £'000
Dividend proposed (not recognised as a liability)
Equity dividend on ordinary shares:
Final dividend for 2021: 0.96p per share (2020: nil) - - 1,223
Interim dividend for 2022: 2.92p per share (2021: nil) 3,719 - -
11 Financial liabilities
Financial liabilities - interest-bearing loans and borrowings
Effective interest rate Maturity 30 June 2022 (not audited) 31 December 2021 (audited)
% £'000 £'000
Current interest-bearing loans and borrowings
Lease liabilities 1,921 1,794
1,921 1,794
Non-current interest-bearing loans and borrowings
Lease liabilities 7,125 7,524
Revolving credit facility SONIA + 2.25% 9 Nov 2026 61,000 56,500
Unamortised loan costs (1,016) (1,159)
67,109 62,865
Total interest-bearing loans and borrowings 69,030 64,659
The £80 million revolving credit facility is jointly financed by National
Westminster Bank plc and Barclays PLC. It was first drawn on 10 November
2021, when the Group refinanced its external debt as part of the IPO, and is
secured on the assets of certain subsidiaries within the Group. The
revolving credit facility was increased in July 2022 - see note 16 for further
details.
12 Commitments and contingencies
Commitments
Amounts contracted for but not provided in the financial statements amounted
to £1,274,000 (31 December 2021: £1,389,000) for the Group. All amounts
relate to property, plant and equipment.
Contingent liabilities
Termo Teknik Ticaret ve Sanayi A.S. has issued letters of guarantee and
letters of credit to its steel suppliers amounting to $22,946,000 (31 December
2021: $30,089,000) and $27,626,000 (31 December 2021: $40,518,000)
respectively. Termo Teknik Ticaret ve Sanayi A.S. has also issued letters of
guarantee denominated in Turkish Lira totaling TL9,548,000 (31 December 2021:
TL9,497,000).
As part of the £80 million revolving credit facility, entered into in
November 2021, and continuing following the amendment to the facility
agreement outlined in note 16, the Group is party to a cross-collateral
agreement secured on specific assets of certain Group companies. No
liability is expected to arise from the agreement.
Under an unlimited multilateral guarantee, the Company, in common with certain
fellow subsidiary undertakings in the UK, has jointly and severally guaranteed
the obligations falling due under the Company's net overdraft facilities. No
liability is expected to arise from this arrangement.
13 Pensions and other post-employment plans
30 June 2022 (not audited) 31 December 2021
(audited)
£'000 £'000
Net employee defined benefit liability
Turkish scheme 2,458 1,655
Other retirement obligations - non-IAS 19 62 73
2,520 1,728
Turkish scheme
In Turkey there is an obligation to provide lump sum termination payments to
certain employees; this represents 30 days' pay (subject to a cap imposed by
the Turkish Government) for each year of service. The IAS 19 valuation gives
a liability of £2,458,000 (31 December 2021: £1,655,000). There are no
assets held in this plan (31 December 2021: nil). The expected contributions
to the plan for the next year to cover benefits paid are £196,000. The
service cost in the period was £81,000 (six months ended 30 June 2021:
£112,000).
UK scheme
The UK has one defined contribution pension scheme.
There were no outstanding contributions (31 December 2021: £nil) due to the
scheme at the balance sheet date.
Other overseas retirement obligations
The Group operates a number of defined contribution pension schemes in its
overseas entities and also has certain other retirement obligations. This
liability at the period end mainly relates to pre-pension payments that are
due to Belgian employees who have retired early of £20,000 (31 December 2021:
£39,000).
IAS 19 accounting - Turkish scheme only
Amounts recognised in the balance sheet
30 June 2022 (not audited) 31 December 2021 (audited)
£'000 £'000
Defined benefit obligation 2,458 1,655
Net pension liability 2,458 1,655
Principal actuarial assumptions
30 June 2022 (not audited) 31 December 2021 (audited)
Discount rate (per annum) 20.25% 19.00%
Future salary increases (per annum) 15.50% 14.25%
Quantitative sensitivity analysis
30 June 2022 (not audited) 30 June 2022 (not audited)
Discount rate Future salary increases
(per annum) (per annum)
+1% -1% +1% -1%
£'000 £'000 £'000 £'000
(Decrease)/increase in defined benefit obligation - Turkish scheme (170) 194 179 (159)
The sensitivity analysis above has been determined based on a method that
extrapolates the impact on the net defined benefit obligation as a result of
reasonable changes in key assumptions at the end of the reporting period.
14 Related party disclosures
There are no related party transactions or changes since the last year end
that could have a material effect on the Group's financial position or
performance for the period.
15 IAS 29 Financial reporting in hyperinflationary economies
The Turkish economy was designated as hyperinflationary from 1 April 2022. As
a result, application of IAS 29 'Financial Reporting in Hyperinflationary
Economies' has been applied to all Stelrad Group plc entities whose functional
currency is the Turkish Lira. IAS 29 requires that adjustments are applicable
from the start of the relevant entity's reporting period. For Stelrad Group
plc that is from 1 January 2022. The application of IAS 29 includes:
· Adjustment of historical cost non-monetary assets and liabilities
for the change in purchasing power caused by inflation from the date of
initial recognition to the balance sheet date;
· Adjustment of the income statement for inflation during the
reporting period;
· The income statement is translated at the period end foreign
exchange rate instead of an average rate; and
· Adjustment of the income statement to reflect the impact of
inflation and exchange rate movement on holding monetary assets and
liabilities in local currency.
Reconciliation of opening equity at 1 January 2022
The differences between the closing equity of the prior year at 31 December
2021 and the opening equity of the current year at 1 January 2022 have been
recognised as an IAS 29 adjustment in the consolidated statement of changes in
equity.
£'000
Retained earnings at 31 December 2021 57,814
IAS 29 adjustment 8,327
Retained earnings at 31 December 2021 (restated) 66,141
The IAS 29 adjustment at 1 January 2022 is made up as follows:
At 1 January 2022 (not audited)
£'000
Property, plant and equipment 9,395
Inventories 1,183
Prepayments 33
Deferred tax liability (2,284)
IAS 29 adjustment 8,327
Statement of changes in equity the six months ended 30 June 2022
The impact of the restatement of the opening reserves of entities whose
functional currency is the Turkish Lira was £17,072k, this is credited to the
statement of changes in equity in the period and subsequently reversed through
the "monetary losses - net" line in the income statement.
Six months ended 30 June 2022
(not audited)
£'000
Retained earnings credit 17,072
Monetary losses - net for the six months ended 30 June 2022
The monetary loss for the six months ended 30 June 2022 is made up as follows:
Six months ended 30 June 2022
(not audited)
£'000
Retained earnings (17,072)
Property, plant and equipment 7,982
Inventories 497
Prepayments 31
Income statement 3,142
Monetary losses - net (5,420)
16 Post balance sheet events
On 13 July 2022, Stelrad Radiator Holdings Limited, a wholly owned subsidiary
of the Group, acquired 100% of DL Radiators s.r.l., a radiator manufacturer
incorporated in Italy. The total consideration paid was €28,346,000.
Due to the acquisition date being so close to the date of signing of these
interim financial statements, it is impractical to provide any further
disclosure related to the acquisition at this stage.
The £80 million revolving credit facility jointly financed by National
Westminster Bank plc and Barclays PLC was increased by £20 million by means
of an accordion increase on 8 July 2022. The amended and restated facility
agreement is made up of a £76.027 million revolving credit facility and a
€28.346 million term loan facility.
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