REG - Stelrad Group PLC - Interim results for six months ended 30 June 2023
14/08/2023 07:00
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RNS Number : 1336J Stelrad Group PLC 14 August 2023
Stelrad Group plc - interim results for the six months ended 30 June 2023
Strategy continuing to deliver with outlook for the full year unchanged
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 2023.
Results summary*
Six months ended 30 June 2023 Six months ended 30 June 2022 Increase/ (decrease) %
Adjusted results
Revenue (pre-IAS 29), £m ** 157.0 147.8 6.2
Adjusted operating profit, £m ** 14.0 19.0 (26.3)
Adjusted operating profit margin, % ** 8.9 12.9 (31.0)
Adjusted profit after tax, £m ** 8.1 13.9 (41.9)
Adjusted earnings per share, pence ** 6.36 10.95 (41.9)
Statutory results
Statutory revenue, £m 157.0 150.1 4.6
Statutory operating profit, £m 13.8 11.9 16.0
Statutory profit after tax, £m 8.0 0.7 1,105.8
Statutory earnings per share, pence 6.27 0.52 1,105.8
Free cash flow, £m 3.4 (3.6) 194.4
Net debt (excluding lease liabilities), £m 70.4 47.5 48.2
Dividend per share, pence 2.92 2.92 -
*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 in
the financial statements for the six months ended 30 June 2022. On 1 January
2023, the functional currency of the Turkish business was changed from Turkish
Lira to Euros and, as a result, IAS 29 is no longer being applied after this
date.
**Adjusted figures are stated before exceptional items, the impact of IAS 29
(until 31 December 2022), amortisation of customer relationships, foreign
exchange differences (until 31 December 2022) 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 free cash flow.
Financial and operational highlights
· Record first half revenue of £157.0 million. The integration of DL
Radiators' activities enabled the Group to deliver 6.2% revenue growth,
although like-for-like revenues were 12.7% lower than prior year, against very
strong first half comparatives in 2022, combined with the impact of high
inflation and rising interest rates, supressing both new construction and
renovation activities:
- UK & Ireland: revenue (pre-IAS 29) -0.7% (-1.0% organic),
adjusted operating profit -6.5%.
- Europe: revenue (pre-IAS 29) +20.3% (-22.1% organic), adjusted
operating profit -34.7%.
- Turkey & International: revenue (pre-IAS 29) -23.5% (-29.8%
organic), adjusted operating profit -65.0%.
· Group contribution per radiator (pre-IAS 29) increased by 10.0%,
driven by dynamic pricing and cost management.
· Volume mix of higher margin, premium steel panel radiators up
slightly during the period.
· Adjusted operating profit performance adversely impacted by the
anticipated volume decline versus strong H1 22 comparative and increased
depreciation charges, partially offset by pro-active margin management and
cost reduction initiatives.
· Strong cash flow performance driven by proactive working capital
management, despite seasonal high point.
· Leverage at 30 June 2023 was 1.76x (December 2022: 1.62x), based on
net debt before lease liabilities. Cash balances of £20.6 million (December
2022: £22.6 million) and undrawn available facilities of £9.3 million
(December 2022: £10.1 million) provides the Group with financial flexibility.
· Longer-term tailwinds of decarbonised, energy efficient heating
systems continue to underpin Stelrad's confidence in the future. Launch of new
electric range in the UK in second half 2023.
· Recommended interim dividend of 2.92 pence per share (2022 interim
dividend: 2.92p), to be paid on 27 October 2023, reflecting the Board's
confidence in the Group's prospects and balance sheet.
· Outlook for FY23 adjusted operating profit unchanged. 1
Commenting on the Group's performance, Trevor Harvey, Chief Executive Officer,
said:
"Despite challenging macroeconomic conditions across a number of countries,
Stelrad's leading positions mean that the Group remains well placed to
outperform the market and deliver on its full year expectations.
"Our focus remains on our key objectives of growing market share, improving
product mix, optimising routes to market and positioning effectively for
decarbonisation. Following a pivotal first year as a PLC in 2022, I am
pleased that, despite the notable headwinds facing the wider industry, we have
been able to deliver on our plans for the first half of 2023 and remain on
course to achieve our expectations for the full year.
"The resilience of our business model, alongside our experience of navigating
previous market downturns, means that the Group is well positioned to
capitalise once markets improve. Regardless of the near term headwinds
facing the wider sector, the increasing need for decarbonised, energy
efficient heating systems remains unchanged and underpins our confidence in
our ability to drive long-term shareholder value."
Analyst Conference Call
Trevor Harvey (CEO) and George Letham (CFO) will host an analyst presentation
at 9am GMT today, 14 August 2023, 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 radiator manufacturer, selling an
extensive range of hydronic, hybrid, dual fuel and electrical heat emitters to
more than 500 customers in over 40 countries. These include standard, premium
and low surface temperature (LST) steel panel radiators, towel warmers,
decorative steel tubular, steel multicolumn and aluminium radiators.
Following the acquisition of DL Radiators in July 2022, the Group has five
core brands: Stelrad, Henrad, Termo Teknik, DL Radiators and Hudevad. In the
countries reported by BRG Building Solutions in 2023 to date, Stelrad moved
into a market leadership position, with 18.5% share by volume of the combined
UK, European and Turkish steel panel radiator market. The Group is now
market leader in six countries - the UK, Ireland, France, the Netherlands,
Belgium and Denmark, with a top 3 position in a further five territories.
Stelrad is headquartered in Newcastle upon Tyne in the UK and in 2022 employed
1,500+ people, with manufacturing and distribution facilities in Çorlu
(Turkey), Mexborough (UK), Moimacco (Italy) and Nuth (Netherlands), with
further commercial and distribution operations in Kolding (Denmark) and Krakow
(Poland).
The Group's origins date back to the 1930s and Stelrad enjoys long established
commercial relationships with many of its customers, having served each of its
top five current customers for over twenty years.
Further information can be found at: https://stelradplc.com/.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
Despite challenging macroeconomic conditions across a number of markets,
Stelrad remains well-positioned to deliver on expectations for the full year.
The integration of DL Radiators' activities enabled the Group to deliver 6.2%
revenue growth in the first half of the year, rising from £147.8 million in
2022 to £157.0 million in 2023.
Like-for-like revenues were 12.7% lower than prior year, against strong first
half comparatives in 2022 combined with the impact of high inflation and
rising interest rates, supressing both new construction and renovation
activities.
Group contribution per radiator, a key performance indicator for the business,
increased by 10.0%, offsetting a 3.2% year-on-year sales volume decline (15.7%
like-for-like decline) versus very strong first half comparatives in 2022.
Overall, volumes have declined in all territories, resulting in a 2023 first
half adjusted operating profit of £14.0 million, a £5.0 million reduction
relative to the same period in 2022.
Nevertheless, Stelrad's market positioning, focused strategy and management
experience mean that the Group remains confident in its ability to take
further market share in the near term, despite market headwinds, while the
integration of DL Radiators remains on track. Stelrad is now European market
leader in steel panel radiators, with number one positions in six markets.
The Group remains confident that it is well positioned to capitalise once
markets improve while, longer term, the increasing need for decarbonised,
energy efficient heating systems remains a key driver in Stelrad's long-term
growth plans.
Results and performance for the period
In the first half of 2023, relative to its competitors, Stelrad's strong UK
share position has been advantageous, with volume, revenue and adjusted
operating profit impacted less in this territory than in mainland European and
other international markets.
Revenue in the UK & Ireland decreased by 0.7% to £70.1 million, whilst
adjusted operating profit reduced by 6.5% to £11.5 million. In Europe,
revenue increased by 20.3% to £76.5 million, benefitting from the acquisition
of DL Radiators. Adjusted operating profit decreased by 34.7% to £4.9
million, driven by a reduction in like-for-like sales volumes across Stelrad's
principal European markets. In Stelrad's Turkey & International markets,
revenue reduced by 23.5% to £10.4 million, mainly due to significantly lower
sales volumes to China, also resulting in a 65.0% fall in adjusted operating
profit, to £0.7 million.
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 strategic objectives: growing market share, improving product mix,
optimising routes to market and positioning effectively for decarbonisation.
The acquisition and integration of DL Radiators is well aligned with all four
of these objectives, in particular extending our electric technologies.
Following the acquisition, Stelrad has moved into the number three position
in the German steel panel radiator market and has increased share in higher
added-value multicolumn steel, aluminium and towel warmer radiator markets,
driving product mix improvement.
With access to the well-established and complementary De'Longhi brand, a wider
range of both retail and trade channels to market are now available to
Stelrad. Through providing our customers with a wider range of heat emitter
solutions in both hydronic and electric technologies, the acquisition has also
positioned the Group more effectively for decarbonisation, with the launch of
a range of electric products into the UK market anticipated during the second
half of 2023.
Sustainability
Stelrad Group remains fully committed to high standards of corporate
responsibility, sustainability and employee engagement. We believe that our
long-term success depends on proactively addressing the sustainability
challenges that we face. In 2022, we developed our Fit for the Future
sustainability framework, focused on the material issues for Stelrad Group
and its stakeholders.
Centred around our core purpose, helping to heat homes sustainably, it
reflects the significant role we can play in the transition to a zero carbon
heating industry, through driving better environmental performance, enabling
our exceptional workforce and by conducting business responsibly, underpinned
by strong governance, exceptional safety standards and effective oversight of
supply chain management.
Interim dividend
Based on the Group's financial results in the first half of 2023, the Board
recommends an interim dividend of 2.92 pence per share. The interim dividend
will be paid on 27 October 2023 to shareholders on the register on 13 October
2023.
Outlook
The Group's outlook for the full year remains unchanged with the Group
remaining confident in its long-term growth plans.
For the second year in succession, economic conditions in our end markets
remain extremely challenging, with the combined impact of high levels of
inflation and rising interest rates constraining consumer confidence and
disposable income.
However, Stelrad's strong, long-lasting customer relationships, combined with
the Group's flexible, low-cost manufacturing capabilities, market-leading
product availability and customer service, mean that the Group is better
placed than its competitors to trade through periods of wider market
uncertainty.
The Group has also adapted effectively to the current financial climate
through proactive margin management and cost reduction activities, and has
also benefitted from a favourable geographic mix, with a particularly strong
UK position. Encouragingly, volume mix of premium steel panel radiators, a
Group key performance indicator, has shown growth in the first half of 2023.
Integration of DL Radiators is proceeding to plan and is fully aligned with
our key strategic objectives, with the introduction of Stelrad's first UK
range of electrical heat emitters later in the year.
The continued resilience of our business model, alongside our experience of
navigating previous market downturns, means that the Group will be well
positioned to capitalise once markets improve. Regardless of the near term
headwinds facing the wider sector, the increasing need for decarbonised,
energy efficient heating systems remains unchanged and underpins our
confidence in our ability to drive long-term shareholder value.
Trevor Harvey
Chief Executive Officer
14 August 2023
FINANCE AND BUSINESS REVIEW
Group overview
The following table summarises the Group's results from operations for the six
months ended 30 June 2023 and 30 June 2022.
Six months ended 30 June 2023 Six months ended 30 June 2022 Increase/ Increase/ (decrease)
(decrease)
£m £m £m %
Revenue 157.0 150.1 6.9 4.6
Revenue (pre-IAS 29) 157.0 147.8 9.2 6.2
Adjusted operating profit((1)) 14.0 19.0 (5.0) (26.3)
Exceptional items (0.1) - (0.1) n/a
Amortisation of customer relationships (0.1) - (0.1) n/a
Foreign exchange differences - (3.0) 3.0 n/a
Impact of IAS 29 - (4.1) 4.1 n/a
Operating profit 13.8 11.9 1.9 16.0
Net finance costs (3.5) (1.8) (1.7) (94.4)
Monetary losses - net (IAS 29) - (5.4) 5.4 n/a
Profit before tax 10.3 4.7 5.6 119.1
Income tax expense (2.3) (4.0) 1.7 42.5
Profit for the period 8.0 0.7 7.3 1,105.8
Earnings per share (p) 6.27 0.52 5.75 1,105.8
Adjusted profit for the period((1)) 8.1 13.9 (5.8) (41.9)
Adjusted earnings per share (p)((1)) 6.36 10.95 (4.59) (41.9)
Dividend per share (p) 2.92 2.92
( )
((1)) Adjusted figures are stated before exceptional items, the impact of IAS
29 (until 31 December 2022), amortisation of customer relationships, foreign
exchange differences (until 31 December 2022) and tax thereon where
applicable.
Financial overview
Business performance was negatively impacted by a reduction in demand during
the first half of 2023 compared to the same period in 2022. Renovation
activity across the majority of European countries remained weak throughout
the period, driven by a challenging macroeconomic environment related to high
inflation and interest rates. The impact of volume decline varied by operating
segment with the UK & Ireland being more robust than Europe and Turkey
& International. Steel and energy costs remain high relative to historical
benchmarks but have been decreasing in recent months.
Revenue for the six months ended 30 June 2023 was £157.0 million, an increase
of £9.2 million, or 6.2%, on the six months ended 30 June 2022 (2022: £147.8
million (pre-IAS29)), with the inclusion of DL Radiators since August 2022.
Higher selling prices partially offset a decline in like-for-like sales
volumes. Higher selling prices primarily represent the full year impact of
2022 price increases which were applied to recover steel and other
inflationary cost increases. Revenue (pre-IAS 29) fell by 12.7% on a
like-for-like basis.
Adjusted operating profit for the period was £14.0 million, a decrease of
£5.0 million, or 26.3%, compared to the same period last year (2022: £19.0
million). The reduction in operating profit was mainly the result of a
reduction in sales volumes year on year leading to a reduction in EBITDA of
£2.8 million. Additionally, depreciation increased by £2.2 million in the
period - mainly a legacy of the IAS 29 revaluation of Turkish fixed assets
which crystalised in the opening balance sheet and a depreciation charge for
DL Radiators (2022: £nil). The impact of lower volumes has been partially
offset by operational improvements mainly relating to increased efficiencies
at plants, fully utilising the flexibility of our manufacturing footprint.
Statutory operating profit for the period was £13.8 million (2022: £11.9
million), after deducting exceptional items of £0.1m (2022: £nil) and the
amortisation of customer relationships £0.1m (2022: £nil). Statutory
operating profit in the first half of 2022 also included the non-cash impact
of IAS 29 of £4.1 million and the impact of foreign exchange losses of £3.0
million.
Adjusted profit after tax for the period decreased by £5.8 million to £8.1
million (2022: £13.9 million). Statutory profit for the period increased by
£7.3 million to £8.0 million (2022: £0.7 million) due to the impact of IAS
29 in the prior year. Adjusted earnings per share was 6.36 pence (2022:
10.95 pence). The statutory earnings per share was 6.27 pence (2022: 0.52
pence), with the 2022 statutory earnings per share being impacted by IAS 29.
At 30 June 2023 the Group had cash of £20.6 million (December 2022: £22.6
million) and undrawn available facilities of £9.3 million (December 2022:
£10.1 million), with net debt before lease liabilities of £70.4 million
(December 2022: £68.4 million). Working capital at 30 June reflects a
seasonal high point prior to the heating season with the lowest level of
working capital historically experienced in December. The Group therefore
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 in the six months ended 30
June 2022 is explained in more detail in note 16 of the consolidated interim
financial statements.
On 1 January 2023, the functional currency of the Turkish business was changed
from Turkish Lira to Euros and, as a result, IAS 29 is no longer being applied
after this date.
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 2023 Six months ended 30 June 2022 Increase / (decrease) Increase / (decrease)
£m £m £m %
UK & Ireland 70.1 70.6 (0.5) (0.7)
Europe 76.5 63.6 12.9 20.3
Turkey & International 10.4 13.6 (3.2) (23.5)
Total 157.0 147.8 9.2 6.2
* 2022 figures are stated pre-IAS 29
UK & Ireland
The Group's revenue in the UK & Ireland for the period was £70.1 million
(2022: £70.6 million (pre-IAS 29)), a decrease of £0.5 million, or 0.7%.
This was principally a result of a decrease in sales volumes partially offset
by the impact of selling price increases implemented to mitigate the impact of
inflationary costs.
Europe
The Group's revenue in Europe for the period was £76.5 million (2022: £63.6
million (pre-IAS 29)), an increase of £12.9 million, or 20.3%, supported by
the acquisition of DL Radiators and the impact of selling price increases
implemented to mitigate the impact of inflationary costs, offset by a decrease
in like-for-like sales volumes. Excluding the acquisition of DL Radiators, the
Group's revenue in Europe for the period was £49.6 million. Our European
markets have been most affected by the weak demand experienced in the period,
giving rise to a significant reduction in link-for-like sales.
Turkey & International
The Group's revenue in Turkey & International for the period was £10.4
million (2022: £13.6 million (pre-IAS 29)), a decrease of £3.2 million, or
23.5%. This was principally a result of significantly lower sales volumes to
China.
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 2023 Six months ended 30 June 2022 Increase/ (decrease) Increase/
(decrease)
£m £m £m %
UK & Ireland 11.5 12.3 (0.8) (6.5)
Europe 4.9 7.5 (2.6) (34.7)
Turkey & International 0.7 2.0 (1.3) (65.0)
Central costs (3.1) (2.8) (0.3) (10.7)
Total 14.0 19.0 (5.0) (26.3)
UK & Ireland
The Group's adjusted operating profit in the UK & Ireland for the period
was £11.5 million (2022: £12.3 million), a decrease of £0.8 million, or
6.5%. This was principally as a result of lower sales volumes, partially
offset by proactive margin management leading to increased contribution per
radiator.
Europe
The Group's adjusted operating profit in Europe for the period was £4.9
million (2022: £7.5 million), a decrease of £2.6 million, or 34.7%. Sales
volumes have increased in Europe due to the acquisition of DL Radiators,
though the incremental volumes are at lower margin. Like-for-like sales
volumes have fallen significantly due to a weak macroeconomic environment
which has reduced operating profit, partially compensated for by proactive
margin management leading to increased like-for-like contribution per
radiator.
Turkey & International
The Group's adjusted operating profit in Turkey & International for the
period was £0.7 million (2022: £2.0 million), a decrease of £1.3 million,
or 65.0%. This was principally as a result of lower sales volumes and higher
post-IAS 29 depreciation.
Central costs
Central costs for the period were £3.1 million (2022: £2.8 million), an
increase of £0.3 million, or 10.7% partially as a result of inflationary
pressures.
Exceptional items
During the period exceptional costs of £0.1 million were incurred (2022:
£nil). The exceptional items in the six months ended 30 June 2023 are the
final costs associated with the 2022 acquisition of DL Radiators.
Finance costs
The Group's finance costs for the period were £3.5 million (2022: £1.8
million). The increase of £1.7 million is due to an increase in interest
rates (blended 6%) during the first half of 2023 in addition to a higher
quantum of debt drawn following the acquisition of DL Radiators.
Income tax expense
The Group's income tax expense for the period was £2.3 million (2022: £4.0
million), a decrease of £1.7 million. The 2022 charge was increased by £1.3m
due to the impact of IAS 29. The 2023 tax charge has benefitted from a
deferred tax credit associated with higher tax asset values allowed by the
Turkish government due to hyperinflation, partially offset by withholding tax
charges associated with the repatriation of cash from Turkey.
Earnings per share and adjusted earnings per share
Profit attributable to shareholders increased by £7.3 million to £8.0
million (2022: £0.7m) and earnings per share was 6.27 pence (2022: 0.52
pence). The weighted average number of shares was 127.4 million (2022: 127.4
million). Profit attributable to shareholders before exceptional items,
amortisation of customer relationships, foreign exchange differences (until 31
December 2022), the impact of IAS 29 (until 31 December 2022) and tax thereon
decreased by £5.8 million to £8.1 million (2022: £13.9 million) and
consequently adjusted earnings per share was 6.36 pence (2022: 10.95 pence).
Dividends
The Group is committed to delivering returns for its shareholders. It adopted
a progressive dividend policy at IPO targeting an initial 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 final dividend of 4.72 pence per share in May 2023,
resulting in a total dividend for 2022 of 7.64 pence per share.
The Group intends to pay an interim dividend of 2.92 pence per share on 27
October 2023, maintaining the 2022 dividend payment despite lower earnings due
to short term trading headwinds. This reflects the board's prudent view on the
current commercial and strategic position of the business, confidence in the
Group's financial position and cash generation, and the intention to support
shareholder returns through the cycle.
Cash flows
The following table summarises the Group's cash flow for the six months ended
30 June 2023 and 30 June 2022.
Six months ended 30 June 2023 Six months ended 30 June 2022 Increase/
(decrease)
£m £m £m
EBITDA((1)) 19.7 22.5 (2.8)
Exceptional items (0.1) - (0.1)
Gain on disposal of property, plant and equipment - (0.2) 0.2
Share-based payment charge 0.3 0.1 0.2
Working capital (adjusted for foreign exchange 2022) (4.9) (18.1) 13.2
Net capital expenditure (4.5) (4.3) (0.2)
Cash flow from operations 10.5 - 10.5
Income tax paid (4.1) (2.2) (1.9)
Net interest paid (3.0) (1.4) (1.6)
Free cash flow 3.4 (3.6) 7.0
((1)) EBITDA is profit before interest, taxation, depreciation, amortisation
and exceptional items. In 2022, EBITDA was also stated before foreign exchange
differences and the impact of IAS 29.
Six months ended 30 June 2023 Six months ended 30 June 2022 Increase/
(decrease)
Cash flow from operations (£m) 10.5 - 10.5
Adjusted operating profit (£m) 14.0 19.0 (5.0)
Cash flow from operations conversion (%) * 75.2 (0.1)
*Cash flow from operations conversion is the ratio of cash flow from
operations to adjusted operating profit
The Group's free cash inflow for the period was £3.4 million (2022: outflow
£3.6 million), an increase of £7.0 million. This reflects an improvement in
cash flow from operations offset by higher income tax and interest payments.
The Group's cash inflow from operations for the period was £10.5 million
(2022: £nil), an increase of £10.5 million. This was principally as a result
of working capital management to mitigate the historical seasonal pattern.
Adjusted operating profit for the period was £14.0 million (2022: £19.0
million), a decrease of £5.0 million. Cash flow from operations conversion
for the period was 75.2% (2022: -0.1%), mainly due to the proactive working
capital management in the period.
Capital expenditures
The Group's capital expenditures mainly relate to investment in operating
plant and equipment. Key capital expenditure in the period ended 30 June 2023
related to the final installation of a new steel panel radiator line at the
Group's facilities in Italy. Capital expenditure for the remainder of 2023
will be in line with expectations.
Net debt
At 30 June 2023, statutory net debt (including lease liabilities) of £80.9
million (December 2022: £78.4 million) comprises £91.0 million (December
2022: £91.0 million) drawn down against the multicurrency facility and £10.5
million (December 2022: £10.0 million) lease liabilities net of £20.6
million (December 2022: £22.6 million) cash.
30 June 2023 31 December 2022
£m £m
Revolving credit facility - GBP 56.4 55.3
Revolving credit facility - EUR 10.3 10.6
Term loan 24.3 25.1
Cash (20.6) (22.6)
Net debt before lease liabilities 70.4 68.4
Lease liabilities 10.5 10.0
Net debt 80.9 78.4
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 2024 and therefore these condensed
consolidated interim financial statements have been prepared on a going
concern basis.
George Letham
Chief Financial Officer
14 August 2023
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 2022.
For and on behalf of the Board
Trevor Harvey George Letham
Chief Executive Officer Chief Financial
Officer
14 August 2023 14 August 2023
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 6 month period ended 30 June 2023 (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 2023;
· 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 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 ("ISRE (UK) 2410"). 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 results 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 ISRE (UK) 2410. 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
14 August 2023
Stelrad Group plc
Condensed consolidated interim income statement
for the six months ended 30 June 2023
Six months ended 30 June 2023 Six months ended 30 June 2022 (not audited) Year ended 31 December 2022 (audited)
(not audited)
Notes £'000 £'000 £'000
Continuing operations
Revenue 5 157,043 150,110 316,315
Cost of sales (excluding exceptional items) (113,711) (109,823) (235,194)
Exceptional items 5 - - (1,054)
Cost of sales (113,711) (109,823) (236,248)
Gross profit 43,332 40,287 80,067
Selling and distribution expenses (21,301) (18,974) (40,800)
Administrative expenses (excluding exceptional items) (8,463) (6,685) (12,811)
Exceptional items 5 (81) - (755)
Administrative expenses (8,544) (6,685) (13,566)
Other operating income 6 1,231 205 373
Other operating expenses 7 (919) (2,988) (3,446)
Operating profit 5 13,799 11,845 22,628
Finance income 41 31 50
Finance costs (3,579) (1,761) (4,573)
Monetary losses - net 16 - (5,420) (7,860)
Profit before tax 10,261 4,695 10,245
Income tax expense 8 (2,273) (4,030) (5,936)
Profit for the period 7,988 665 4,309
Notes
Earnings per share
Basic 9 6.27p 0.52p 3.38p
Diluted 9 6.27p 0.52p 3.38p
Adjusted earnings per share
Basic 9 6.36p 10.95p 19.11p
Diluted 9 6.36p 10.93p 19.11p
Stelrad Group plc
Condensed consolidated interim statement of comprehensive income for the six
months ended 30 June 2023
Six months ended 30 June 2023 Six months ended 30 June 2022 (not audited) Year ended
(not audited) 31 December 2022 (audited)
Notes £'000 £'000 £'000
Profit for the period 7,988 665 4,309
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 873 1,362 1,691
operations and qualifying hedges of net investments in foreign operations
Income tax effect 8 (205) (340) (631)
Exchange differences on translation of foreign operations (3,351) (4,575) (5,941)
Net other comprehensive expense that may be reclassified to profit or loss in (2,683) (3,553) (4,881)
subsequent periods
Other comprehensive expense not to be reclassified to profit or loss in
subsequent periods:
Remeasurement losses on defined benefit plans (716) (840) (1,932)
Income tax effect 8 143 185 423
Net other comprehensive expense not to be reclassified to profit or loss in (573) (655) (1,509)
subsequent periods
Other comprehensive expense for the period, net of tax (3,256) (4,208) (6,390)
Total comprehensive income/(expense) for the period, net of tax attributable 4,732 (3,543) (2,081)
to owners of the parent
Stelrad Group plc (Registered Number 13670010)
Condensed consolidated interim balance sheet
as at 30 June 2023
30 June 2023 30 June 2022 31 December 2022 (audited)
(not audited) (not audited)
Notes £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 88,682 69,139 91,604
Intangible assets 5,157 - 3,855
Trade and other receivables 306 9 317
Deferred tax assets 4,945 2,399 5,397
99,090 71,547 101,173
Current assets
Inventories 68,895 65,452 77,851
Trade and other receivables 59,352 49,198 60,497
Income tax receivable 518 12 235
Cash and cash equivalents 20,563 13,488 22,641
149,328 128,150 161,224
Total assets 248,418 199,697 262,397
Equity and liabilities
Equity
Share capital 127 127 127
Share premium - - -
Merger reserve (114,469) (114,469) (114,469)
Retained 229,553 222,667 227,849
earnings
Foreign currency reserve (64,741) (60,730) (62,058)
Total equity 50,470 47,595 51,449
Non-current liabilities
Interest-bearing loans and borrowings 12 99,242 67,109 98,513
Deferred tax liabilities 214 171 2,611
Provisions 1,877 262 1,799
Net employee defined benefit liabilities 14 4,034 2,520 4,542
105,367 70,062 107,465
Current liabilities
Trade and other payables 88,013 78,596 99,214
Interest-bearing loans and borrowings 12 1,458 1,921 1,520
Financial liability 12 419 - -
Income tax payable 2,287 1,427 1,829
Provisions 404 96 920
92,581 82,040 103,483
Total liabilities 197,948 152,102 210,948
Total equity and liabilities 248,418 199,697 262,397
The financial statements on pages 16 to 34 were approved by the Board of
Directors on 14 August 2023 and signed on its behalf by:
George Letham
Chief Financial Officer
Stelrad Group plc
Condensed consolidated interim statement of changes in equity
for the six months ended 30 June 2023
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 2021 (audited) 127,353 13,391 (114,469) 57,814 (57,177) 26,912
IAS 29 adjustment (note 16) - - - 8,327 - 8,327
At 31 December 2021 (restated) 127,353 13,391 (114,469) 66,141 (57,177) 35,239
Profit for the year - - - 4,309 - 4,309
Other comprehensive expense for the year - - - (1,509) (4,881) (6,390)
Total comprehensive income/(expense) - - - 2,800 (4,881) (2,081)
Capital reduction (127,226) (13,391) - 140,617 - -
IAS 29 adjustment to retained earnings in the year - - - 22,982 - 22,982
Share-based payment charge - - - 250 - 250
Dividends paid (note 10) - - - (4,941) - (4,941)
At 31 December 2022 (audited) 127 - (114,469) 227,849 (62,058) 51,449
Profit for the period - - - 7,988 - 7,988
Other comprehensive expense for the period - - - (573) (2,683) (3,256)
Total comprehensive income/(expense) - - - 7,415 (2,683) 4,732
Share-based payment charge - - - 300 - 300
Dividends paid (note 10) - - - (6,011) - (6,011)
At 30 June 2023 (not audited) 127 - (114,469) 229,553 (64,741) 50,470
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 2021 (audited) 127,353 13,391 (114,469) 57,814 (57,177) 26,912
IAS 29 Adjustment (note 16) - - - 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 period - - - (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 16) - - - 17,072 - 17,072
Share-based payment 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
Stelrad Group plc
Condensed consolidated interim statement of cash flows
for the six months ended 30 June 2023
Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended 31 December 2022
(audited)
£'000 £'000 £'000
Operating activities
Profit before tax 10,261 4,695 10,245
Adjustments to reconcile profit before tax to net cash flows:
Depreciation of property, plant and equipment 5,785 4,236 9,700
Amortisation of intangible assets 71 - 163
Gain on disposal of property, plant and equipment (11) (205) (220)
Monetary loss IAS 29 - 5,420 7,860
Monetary loss IAS 29 income statement element - 3,029 3,530
Share-based payment charge 300 50 250
Finance income (41) (31) (50)
Finance costs 3,579 1,761 4,573
Working capital adjustments:
(Increase) / decrease in trade and other receivables (821) (3,972) 1,632
Decrease / (increase) in inventories 6,877 (7,489) 5,831
Decrease in trade and other payables (9,687) (3,659) (11,528)
(Decrease) / increase in provisions (427) 57 (1,297)
Decrease in other pension provisions (5) (12) (23)
Difference between pension charge and cash contributions (1,263) 17 (319)
Financial derivatives 427 - -
15,045 3,897 30,347
Income tax paid (4,083) (2,203) (3,801)
Interest received 41 31 50
Net cash flows from operating activities 11,003 1,725 26,596
Investing activities
Proceeds from sale of property, plant, equipment and intangible assets 72 209 316
Purchase of property, plant and equipment (3,329) (3,597) (9,671)
Purchase of intangible assets - - (164)
Business combination of subsidiaries, net of cash acquired - - (20,484)
Net cash flows used in investing activities (3,257) (3,388) (30,003)
Financing activities
Transaction costs related to refinancing - (111) (429)
Proceeds from external borrowings 1,100 4,500 34,122
Repayment of external borrowings - - (1,250)
Repayment of borrowings acquired with subsidiary - - (10,746)
Principal elements of lease payments (1,236) (899) (2,049)
Interest paid (3,058) (1,409) (3,269)
Dividends paid (6,011) (1,223) (4,941)
Net cash flows (used in) / generated from financing activities (9,205) 858 11,438
Net (decrease) / increase in cash and cash equivalents (1,459) (805) 8,031
Net foreign exchange difference (619) (1,270) (953)
Cash and cash equivalents at start of period 22,641 15,563 15,563
Cash and cash equivalents at end of period 20,563 13,488 22,641
Stelrad Group plc
Notes to the condensed consolidated interim financial statements
for the six months ended 30 June 2023
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 2023 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's 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 2022, which has been prepared in accordance with UK adopted
international accounting standards in conformity 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 2022 Annual Report and
Accounts as described on pages 98 to 108 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 not been prepared
using any new accounting policies in the six months ended 30 June 2023.
The 2022 annual consolidated financial statements of the Group were prepared
in accordance with UK adopted international accounting standards in conformity
with the requirements of the Companies Act 2006 and the disclosure guidance
and transparency rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The financial statements for the six months ended 30 June 2023 and the
comparative financial statements for the six months ended 30 June 2022 have
not been audited. However, the financial statements for the six months ended
30 June 2023 and 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 2022 have been extracted from the 2022 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 2022 Annual Report and Accounts. The statutory accounts for the year
ended 31 December 2022, which were approved by the Board of Directors on 13
March 2023 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.
Functional currency
There has been one significant change in the six months ended 30 June 2023
that affects the interim financial statements: On 1 January 2023, the
functional currency of the Turkish business was changed from Turkish Lira to
Euros and, as a result, IAS 29 is no longer being applied after this date.
The Group determined that the functional currency of its Turkish business has
changed following the increased production capabilities at the Turkish factory
arising from the installation of two new manufacturing lines in the second
half of 2022. The new lines are intended to predominantly serve the European
and UK export markets which has given rise to a change in the currency profile
and therefore functional currency of the business. The Turkish business
predominantly holds excess cash balances in Euros.
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 2024. At the period-end date
the Group had drawn down £91.0 million of a £100 million revolving credit
facility. The remainder of the facility and significant cash balances of
£20.6 million are 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 2023, but
do not have a material impact on the consolidated financial statements of the
Group. These include:
· IFRS 17 Insurance Contracts
· Definition of Accounting Estimates - Amendments to IAS 8
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendment to IAS 12
· International Tax Reform - Pillar Two Model Rules - Amendment to
IAS 12
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)
Classification of Liabilities as Current or Non-current - Amendments to IAS 1 1 January 2024
Lease liability in a Sale and Leaseback - Amendments to IFRS 16 1 January 2024
Non-current liabilities with Covenants - Amendments to IAS 1 1 January 2024
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7 1 January 2024
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 consolidated 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 has
made judgements which would have a significant effect on the amounts
recognised in the consolidated financial statements.
Business combinations
In July 2022, the Group acquired DL Radiators SpA, an Italian manufacturer of
heat emitters, for €28.3m.
As a result, an exercise was undertaken to measure the fair value of assets
and liabilities acquired as part of the business combination. This included
ascertaining a fair value for all inventory acquired as part of the business
combination. Management exercised judgement in determining whether any
additional intangible assets, such as customer relationships, should be
identified and the valuation assigned to these. Management engaged with
experts in order to assist with the valuation of certain tangible and
intangible assets, including customer relationships. The opening acquisition
balance sheet was finalised in the period with the changes from the initial
assessment outlined in note 11.
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 2023. The Board considers that the principal
risks, as discussed in the 'Risk management' section on pages 49 to 54 of the
Group Annual Report and Accounts for the year ended 31 December 2022
(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 of
customer relationships, exceptional items, the impact of IAS 29 (until 31
December 2022) and foreign exchange differences (until 31 December 2022).
IAS 29 was applied in the six months ended 30 June 2022 and the year ended 31
December 2022. The impact of IAS 29 has been removed in arriving at revenue
(pre-IAS 29) and adjusted operating profit, as management believe that the
pre-IAS 29 results give a more meaningful presentation of the Group's
underlying performance.
On 1 January 2023, the functional currency of the Turkish business was changed
from Turkish Lira to Euros and, as a result, IAS 29 is no longer being applied
after this date. Also, after this date, the impact of foreign exchange
differences is no longer adjusted for in arriving at adjusted operating
profit.
Revenue by geographical market Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended 31 December 2022 (audited)
£'000 £'000 £'000
UK & Ireland 70,106 70,588 138,874
Europe 76,494 63,652 147,909
Turkey & International 10,443 13,576 25,335
Revenue (pre-IAS 29) 157,043 147,816 312,118
Impact of IAS 29 - 2,294 4,197
Total revenue 157,043 150,110 316,315
Adjusted operating profit by geographical market Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended 31 December 2022
(audited)
£'000 £'000 £'000
UK & Ireland 11,470 12,311 22,716
Europe 4,926 7,486 13,877
Turkey & International 666 2,004 2,055
Central costs (3,111) (2,848) (4,668)
Adjusted operating profit 13,951 18,953 33,980
Exceptional items (81) - (1,809)
Amortisation of customer relationships (71) - (57)
Foreign exchange differences (until 31 December 2022) - (2,985) (3,446)
Impact of IAS 29 - (4,123) (6,040)
Operating profit 13,799 11,845 22,628
Non-current operating assets Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended
31 December 2022
(audited)
£'000 £'000 £'000
UK 18,618 19,610 18,823
The Netherlands 21,452 22,939 22,757
Turkey 25,961 25,181 26,854
Italy 22,293 - 22,686
Other 1,133 1,409 1,239
Total 89,457 69,139 92,359
The exceptional items in the period ended 30 June 2023 are the final costs
associated with the 2022 acquisition. In the year ended 31 December 2022 the
exceptional items within administrative expenses relate to redundancy costs
and acquisition costs and the exceptional item within cost of sales relates to
the reversal of the IFRS 3 fair value uplift on finished goods and work in
progress.
The revenue information above is based on the locations of the customers. All
revenue arises from the sale of goods.
No customers have revenues in excess of 10% of revenue (six months ended 30
June 2022: one; year ended 31 December 2022: none).
6 Other operating income
Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended
31 December 2022 (audited)
£'000 £'000 £'000
Net gain on disposal of property, plant and equipment 11 205 220
Foreign currency gains 1,060 - -
Sundry other income 160 - 153
1,231 205 373
7 Other operating expenses
Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended
31 December 2022 (audited)
£'000 £'000 £'000
Foreign currency losses - 2,985 3,446
Net losses on forward derivative contracts 919 - -
Sundry other expenses - 3 -
919 2,988 3,446
8 Income tax expense
The major components of income tax expense are as follows:
Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended 31 December 2022 (audited)
£'000 £'000 £'000
Consolidated income statement
Current income tax:
Current income tax charge 3,932 2,305 4,090
Adjustments in respect of current income tax charge of previous period 177 (255) (290)
Deferred tax:
Relating to origination and reversal of temporary differences (1,664) 2,299 2,802
Relating to change in tax rates (172) (319) (666)
Income tax expense reported in the income statement 2,273 4,030 5,936
Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended 31 December 2022 (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 (143) (185) (423)
Current tax on monetary items forming part of net investment and on hedges of 205 340 631
net investment
Income tax expensed to other comprehensive income/(expense) 62 155 208
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 corporation tax rate rose to 25% from 1 April 2023.
9 Earnings per share
Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended 31 December 2022 (audited)
£'000 £'000 £'000
Net profit for the period attributable to owners of the parent 7,988 665 4,309
Exceptional 81 - 1,809
items
Amortisation of customer relationships 71 - 57
Foreign exchange differences - 2,985 3,446
Impact of IAS 29 - 9,610 13,906
Tax on exceptional items, IAS 29, amortisation and foreign exchange (39) 680 806
differences
Adjusted net profit for the period attributable to owners of the parent 8,101 13,940 24,333
IAS 29 was applied in the six months ended 30 June 2022 and the year ended 31
December 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 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended
31 December 2022 (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 127,352,555 127,554,058 127,352,555
Earnings per share
Basic earnings per share (pence per share) 6.27 0.52 3.38
Diluted earnings per share (pence per share) 6.27 0.52 3.38
Adjusted earnings per share
Basic earnings per share (pence per share) 6.36 10.95 19.11
Diluted earnings per share (pence per share) 6.36 10.93 19.11
10 Dividends paid and proposed
Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended
31 December 2022
(audited)
£'000 £'000 £'000
Declared and paid during the period
Equity dividend on ordinary shares:
Final dividend for 2022: 4.72p per share (2021: 0.96p per share) 6,011 1,223 1,223
Interim dividend for 2022: 2.92p per share (2021: nil) - - 3,718
6,011 1,223 4,941
Six months ended 30 June 2023 (not audited) Six months ended 30 June 2022 (not audited) Year ended
31 December 2022
(audited)
£'000 £'000 £'000
Dividend proposed (not recognised as a liability)
Equity dividend on ordinary shares:
Final dividend for 2022: 4.72p per share (2021: 0.96p per share) - - 6,011
Interim dividend for 2023: 2.92p per share (2022: 2.92p per share) 3,719 3,719 -
11 Business combinations
On 13 July 2022, Stelrad Radiator Holdings Limited, a wholly owned subsidiary
of the Group, acquired 100% of DL Radiators SpA, a radiator manufacturer
incorporated in Italy. The total consideration paid was €28,346,000.
The fair value of the net assets acquired were as follows:
Book value Provisional fair value adjustment Fair value at 31 December 2022 Final fair value adjustment Fair value at 30 June 2023
£'000 £'000 £'000 £'000 £'000
Intangible assets 713 1,761 2,474 - 2,474
Property, plant & equipment 11,054 6,474 17,528 - 17,528
Inventory 24,499 1,034 25,533 (398) 25,135
Trade & other receivables 17,837 - 17,837 (952) 16,885
Trade & other payables (28,403) - (28,403) - (28,403)
Deferred taxation 1,853 (1,538) 315 - 315
Current taxation (49) - (49) - (49)
Cash & cash equivalents 3,490 - 3,490 - 3,490
Provisions (3,580) - (3,580) (131) (3,711)
Pension liabilities (1,033) - (1,033) - (1,033)
Loans & other borrowings (11,360) - (11,360) - (11,360)
Total identifiable net assets 15,021 7,731 22,752 (1,481) 21,271
Goodwill on the business combination
1,222 2,703
Discharged by:
Cash consideration 23,974 23,974
During the period ending 30 June 2023, the provisional fair values of the
identifiable net assets were revisited with the fair value reduced by
£1,481,000 which increased the goodwill value to £2,703,000. Goodwill of
£2,703,000 reflects certain intangibles that cannot be individually separated
and reliably measured due to their nature. These items include the value of
expected synergies arising from the business combination and the experience
and skill of the acquired workforce. The fair value of the customer
relationships was identified and included in intangible assets.
The gross amount of trade and other receivables is £18,681,000 in both the
provisional and final fair values. All of the trade and other receivables are
expected to be collected in full, other than those that have been provided
for.
Transaction costs relating to professional fees associated with the business
combination in the six months ended 30 June 2023 were £81,000 (31 December
2022: £251,000) and have been expensed.
DL Radiators generated revenue of £31,541,000 and a loss for the year of
£405,000 (adjusted profit for the year of £485,000) in the period from
acquisition to 31 December 2022 which are included in the consolidated
statement of comprehensive income for this reporting period. If the
combination had taken place at 1 January 2022, the Group's revenue would have
been £40,588,000 higher and the profit for the year from continuing
operations would have been £1,296,000 lower than reported.
12 Financial liabilities
a) Financial liabilities - other - not interest bearing
30 June 2023 (unaudited) 31 December 2022 (audited)
£'000 £'000
Liabilities
Financial instruments at fair value through profit or loss
Derivatives not designated as hedges - foreign exchange forward contracts 419 -
Total instruments at fair value through profit or loss 419 -
Current 419 -
Non-current - -
Financial instruments through profit or loss reflect the positive change in
fair value of those foreign exchange forward contracts that are not designated
in hedge relationships, but are, nevertheless, intended to reduce the level of
foreign currency risk for expected sales and purchases.
b) Financial liabilities - interest-bearing loans and borrowings
Effective interest rate Maturity 30 June 2023 (not audited) 31 December 2022 (audited)
% £'000 £'000
Current interest-bearing loans and borrowings
Lease liabilities 1,458 1,520
1,458 1,520
Non-current interest-bearing loans and borrowings
Lease liabilities 9,037 8,516
Revolving credit facility - GBP SONIA + 2.25% 9 Nov 2024 56,350 55,250
Revolving credit facility - Euro Euribor + 2.25% 9 Nov 2024 10,298 10,647
Term loan Euribor + 2.25% 9 Nov 2024 24,325 25,150
Unamortised loan costs (768) (1,050)
99,242 98,513
Total interest-bearing loans and borrowings 100,700 100,033
On 10 November 2021, the Group refinanced its external debt as part of the IPO
and entered into an £80 million revolving credit facility ("RCF") jointly
financed by National Westminster Bank plc and Barclays PLC, which was first
drawn on 10 November 2021.
On 8 July 2022, the £80 million revolving credit facility was increased by
£20 million by means of an accordion option. The facility consists of a
£76.027 million revolving credit facility and a €28.346 million term loan
facility.
The RCF and term loan facilities are secured on the assets of certain
subsidiaries within the Group.
13 Contingent liabilities
Termo Teknik Ticaret ve Sanayi A.S. has issued letters of guarantee and
letters of credit to its steel suppliers amounting to $21,669,000 (31 December
2022: $22,685,000) and $9,791,000 (31 December 2022: $11,175,000)
respectively. Termo Teknik Ticaret ve Sanayi A.S. has also issued letters of
guarantee denominated in Turkish Lira totalling TL14,970,000 (31 December
2022: TL13,220,000).
As part of the £100 million revolving credit facility, entered into in
November 2021, and continuing following the amendment to the facility
agreement outlined in note 12, 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.
14 Pensions and other post-employment plans
30 June 2023 (not audited) 31 December 2022
(audited)
£'000 £'000
Net employee defined benefit liability
Turkish scheme 3,101 3,546
Italian scheme 886 944
Other retirement obligations - non-IAS 19 47 52
4,034 4,542
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 £3,101,000 (31 December 2022: £3,546,000). There are no
assets held in this plan (31 December 2022: nil).
Italian scheme
The Italian pension scheme, the Trattamento di Fine Rapporto, is a deferred
compensation scheme established by Italian law. Employers are required to
provide a benefit to employees when, for any reason, their employment is
terminated. The IAS 19 valuation gives a net liability of £886,000 (31
December 2022: £944,000).
UK scheme
The UK has one defined contribution pension scheme.
There were no outstanding contributions (31 December 2022: £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.
IAS 19 accounting - Turkish and Italian schemes
Amounts recognised in the balance sheet
Italian scheme Turkish scheme Italian scheme Turkish scheme
30 June 2023 (not audited) 30 June 2023 (not audited) 31 December 2022 (audited) 31 December 2022 (audited)
£'000 £'000 £'000 £'000
Defined benefit obligation 886 3,101 944 3,546
Net pension liability 886 3,101 944 3,546
Principal actuarial assumptions
Italian scheme Turkish scheme Italian scheme Turkish scheme
30 June 2023 (not audited) 30 June 2023 (not audited) 31 December 2022 (audited) 31 December 2022 (audited)
Discount rate (per annum) 3.70% 10.60% 3.70% 10.60%
Future salary increases (per annum) n/a 10.10% n/a 10.10%
Quantitative sensitivity analysis
30 June 2023 (not audited) 30 June 2023 (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 (203) 239 238 (205)
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.
15 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.
16 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.
IAS 29 was applied to the results of the Group's Turkish subsidiary in the six
months ended 30 June 2022 and the year ended 31 December 2022. On 1 January
2023, the functional currency of the Turkish business was changed from Turkish
Lira to Euros and, as a result, IAS 29 is no longer being applied after this
date.
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
£'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)
1 Average analyst adjusted operating profit consensus is currently £28.5
million.
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