REG - Stelrad Group PLC - Interim Results
12/08/2024 07:00
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RNS Number : 9847Z Stelrad Group PLC 12 August 2024
Stelrad Group plc - interim results for the six months ended 30 June 2024
Strong performance; on target for full year outlook
Stelrad Group plc ("Stelrad" or "the Group" or "the Company", LSE: SRAD), a
leading specialist manufacturer and distributor of radiators in the UK, Europe
and Turkey, today announces its unaudited interim results for the six months
ended 30 June 2024.
Results summary
Six months ended 30 June 2024 Six months ended 30 June 2023 Movement
%
Revenue, £m 143.1 157.0 (8.9)
Operating profit, £m 15.6 13.8 13.5
Operating profit margin, % 10.9 8.8 2.1 ppts
Profit for the period, £m 8.0 8.0 0.5
Earnings per share, pence 6.30 6.27 0.5
Adjusted operating profit, £m ((1)) 15.7 14.0 12.8
Adjusted operating profit margin, % ((1)) 11.0 8.9 2.1 ppts
Adjusted profit for the period, £m ((1)) 8.1 8.1 (0.3)
Adjusted earnings per share, pence ((1)) 6.34 6.36 (0.3)
Free cash flow, £m ((1)) 1.3 3.4 (58.8)
Return on capital employed, % 26.4 23.9 2.5 ppts
Net debt before lease liabilities, £m 64.6 70.4 (8.2)
Dividend per share, pence 2.98 2.92 2.0
(1) The Group uses some alternative performance measures to track and
assess the underlying performance of the business. Alternative performance
measures are defined in the glossary of terms and reconciled to the
appropriate financial statements line item at the end of this announcement.
Financial and operational highlights
· Revenue was down 8.9%, as anticipated, to £143.1 million due to
the continuation of a challenging macroeconomic environment.
o UK & Ireland: revenue was only down 1.5% supported by strong product mix
despite reduced volume.
o Europe: revenue was down 12.6% primarily due to depressed levels of repair,
maintenance and improvement ("RMI") activity.
o Turkey & International: revenue was down 30.6%, to £7.2 million, due to
low economic activity in Turkey.
· Market share increased by 1.6% to 20.8% 1 .
· On Time In Full (OTIF) delivery of 98% in the UK & Ireland
building trust in our supply chain to customers.
· 16% rise in contribution per radiator to over £20, driven by
operational flexibility, new designs and cost management.
· Operating profit rose to £15.6 million, an increase of £1.8
million (13.5%), benefitting from ongoing operational discipline and margin
management. Adjusted operating profit rose to £15.7 million with an adjusted
operating profit margin of 11.0%, up from 8.9% in 2023.
· Positive free cash flow, despite seasonal high point and
selective investments in working capital in advance of an expected market
recovery.
· Return on capital employed increased by 2.5 ppts to 26.4% due to
improved operating performance and lower Euro asset values.
· Leverage at 30 June 2024 was 1.49x (December 2023: 1.47x), based
on net debt before lease liabilities.
· Interim dividend of 2.98p pence per share (2023 interim dividend:
2.92p), to be paid on 25 October 2024, an increase of 2%, reflecting the
strength of the Group's balance sheet and the Board's confidence in the
Group's future growth prospects and increasing cash generation.
· Outlook for FY24 unchanged.
Commenting on the Group's performance, Trevor Harvey, Chief Executive Officer,
said:
"Despite continued macroeconomic challenges across Stelrad's geographies, the
Group has delivered a strong performance in a volume environment that remains
subdued, with inflation and high interest rates continuing to suppress both
RMI and new build markets.
"Stelrad's performance during the period, particularly in terms of market
share growth and growth in contribution per radiator, combined with cost base
reduction and ongoing margin optimisation actions, demonstrates the strength
of our business model, and further underpins the Board's confidence in the
outlook for the full year.
"Stelrad remains well positioned for a sustained period of profitable growth
as markets recover across our core geographies, with the Group well placed to
benefit from strong underlying replacement demand across Europe and the
long-term regulatory tailwinds for decarbonised, energy-efficient heating
systems."
Analyst Conference Call
Trevor Harvey (CEO) and Leigh Wilcox (Interim CFO) will host an analyst
presentation at 9am today, 12 August 2024, to talk through the Group's
operational and financial performance.
The presentation will be broadcast live at https://brrmedia.news/SRAD_HY24
(https://url.uk.m.mimecastprotect.com/s/4eYcCgpXySAxG32tNfYu4_E3b?domain=brrmedia.news)
To dial in via a phone line, please use the below dial in details.
Dial in number: +44 (0) 33 0551 0200
Password: Stelrad
For further information:
Stelrad Group plc +44 (0) 191 261 3301
Trevor Harvey, Chief Executive Officer
Leigh Wilcox, Interim Chief Financial Officer
Davy (Joint Corporate Broker) (mailto:stelrad@powerscourt-group.com) +44 (0) 20 7448 8871
Graham Hertrich / Will Smith / Sara Hale
Investec (Joint Corporate Broker) +44 (0) 207 597 4000
Ben Griffiths / David Anderson / Tom Brookhouse
Sodali & Co stelrad@sodali.com (mailto:stelrad@sodali.com)
James White / Pete Lambie +44 (0)79 3535 1934
Notes to Editors
Stelrad Group plc is Europe's 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.
The Group has five core brands: Stelrad, Henrad, Termo Teknik, DL Radiators
and Hudevad. In the data reported by BRG Building Solutions for 2022,
Stelrad moved into a market leadership position, with 18.8% share by volume of
the combined UK, European and Turkish steel panel radiator market. The Group
was market leader in seven countries - the UK, Ireland, France, the
Netherlands, Belgium, Denmark and Greece - with a top 3 position in a further
nine territories. In the 20 countries for which 2023 steel panel radiator
share data is now available (which represented 95% of the European market in
2022), Stelrad's market share has increased by 1.6 percentage points to 20.8%.
Stelrad is headquartered in Newcastle upon Tyne in the UK and in 2023 employed
1,400+ 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/
(https://stelradplc.com/) .
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
Despite continued macroeconomic challenges across our geographies, the Group
has delivered a strong performance in a volume environment that remains
subdued, with inflation and high interest rates continuing to suppress both
RMI and new build markets.
As anticipated, revenues declined 8.9% to £143.1 million (2023: £157.0
million) against volume declines of 8% which by geographical segment were
split: UK & Ireland (7.2% decline), Europe (5.1% decline) and Turkey &
International (26.3% decline).
The Group's cost reduction initiatives, combined with favourable product mix
and steel pricing in the UK, drove a significant increase in contribution per
radiator, which increased by 16.0% in the period to over £20 for the first
time, building on six consecutive year on year increases. As a result of these
factors, operating profit increased to £15.6 million during the period, a
13.5% increase relative to 2023. Adjusted operating profit increased to £15.7
million during the period, a 12.8% increase relative to 2023.
Stelrad's performance during the period, particularly in terms of market share
growth and growth in contribution per radiator, combined with cost base
reduction and ongoing margin optimisation actions, further underpin the
Board's confidence in the outlook for the full year and beyond.
Strong operating performance driven by share gains and geographic
diversification
In the first six months of 2024, despite a volume environment that remains
subdued, the Group's geographic diversification remained a key driver, with
product mix benefits in the UK & Ireland helping to more than offset
challenging trading environments in Europe and Turkey. Crucially, the Group's
financial performance at the EBITDA and adjusted operating profit level
remained strong, particularly in the UK & Ireland, driven by the cost
reduction activities initiated in the second half of 2023 alongside ongoing
margin management activity, including the transfer of further manufacturing
volume to Turkey.
Relative to its competitors, Stelrad's strong UK share position has been
advantageous, with UK & Ireland revenue only declining marginally and
adjusted operating profit improving.
Revenue in the UK & Ireland decreased by 1.5% to £69.1 million, while
adjusted operating profit increased significantly by 31.5% to £15.1 million,
driven by the Group's margin management initiatives alongside a more
favourable product mix as a result of Part L regulatory changes and management
actions to drive adoption.
In Europe, revenue decreased by 12.6% to £66.8 million, with adjusted
operating profit declining 23.5% to £3.7 million, primarily due to the
decreased sales volumes in addition to adverse country and customer mix in our
principal European markets. Radiators SpA operates predominantly within the
European segment with a strong presence in the German and French markets,
which have both experienced significant volume declines since mid-2022. While
the continuation of challenging market conditions has meant that the financial
performance of Radiators SpA has remained below expectations, at the point of
acquisition, the strategic value of Radiators SpA within the Group is
compelling and profitability is expected to improve with recovery in its key
end markets, enhanced product mix and margin management.
In Stelrad's Turkey & International markets, while revenue reduced by
30.6% to £7.2 million, adjusted operating profit increased 35.0% to £0.9
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 Group's strong positioning across the UK and Europe has contributed to a
significant increase in our market share across key territories. In the 20
European countries for which 2023 steel panel radiator share data is
available, Stelrad's market share increased by 1.6% to 20.8%.
Mainly due to the UK's stronger performance relative to Europe, the Group's
product mix of higher added-value premium steel panel and other designer
radiators fell marginally to 13.2% (2023: 14.3%). However, Stelrad remains
well positioned to benefit from expected long-term growth in these products
and has delivered progress in the UK & Ireland, the Group's largest
segment.
The Group's expanded product portfolio, including electrical, K3, vertical and
900mm high radiators, which are all aligned with decarbonisation priorities,
contributed to the strong performance in the UK, with a 7% increase in the
average radiator size in this region driven by the implementation of revised
Part L building regulations.
Environmental, social and governance ("ESG") objectives
Sustainability is central to our core purpose, and significant progress in
this area has been made since we developed our Fit for the Future
sustainability framework. This framework 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.
In 2024, our focus has been on further developing our metrics and targets,
building on the sustainability targets first published in 2023, and on
addressing our most material sustainability areas, including health and
safety, packaging and developing products suitable for all customers as we
transition to a lower carbon heating industry. This includes the successful
launch of a low-carbon range of radiators.
Interim dividend
The Board has declared an interim dividend of 2.98 pence per share, an
increase of 2%. The interim dividend will be paid on 25 October 2024 to
shareholders on the register on 11 October 2024. This increase reflects the
strength of the Group's balance sheet and the Board's confidence in the
Group's future growth prospects and increasing cash generation.
Outlook
The Group's outlook for the full year remains unchanged with the Board
remaining confident in its long-term growth plans.
While challenging economic conditions across the Group's key territories have
begun to show indicators of easing, interest rates remain elevated, which
continues to subdue both RMI and new build markets for now.
There have been some early indicators of a recovery in the volumes in some of
the Group's European territories, with recent volume increases in Belgium, the
Netherlands, Poland and Sweden.
As evidenced by the Group's performance, particularly in the contribution per
radiator, Stelrad's proactive margin management and cost reduction activities
have positioned the Group well to continue to deliver in a persistently
challenging market. Given the early economic and trading indicators of a
potential recovery in volumes, the Group has made some selective investments
in working capital in advance of an expected market recovery to ensure
continuation of our high standards of customer service.
The flexibility and resilience of Stelrad's business model, along with
experience of navigating prior market downturns, continue to underpin
confidence in the Group's ability to capitalise on a market recovery. This
confidence has been further reinforced by the Group's market share growth and
increase in contribution per radiator during the period.
These factors, combined with the improvements made in the Group's cost base
and margin management, position Stelrad well to benefit from strong underlying
replacement demand across Europe and regulatory tailwinds for decarbonised,
energy-efficient heating systems, underpinning our confidence in driving
continued long term shareholder value.
Trevor Harvey
Chief Executive Officer
12 August 2024
FINANCE AND BUSINESS REVIEW
Group overview
The following table summarises the Group's results from operations for the six
months ended 30 June 2024 and 30 June 2023.
Six months ended 30 June 2024 Six months ended 30 June 2023 Movement Movement
£m £m £m %
Revenue 143.1 157.0 (13.9) (8.9)
EBITDA((1)) 21.7 19.7 2.0 9.9
Adjusted operating profit((1)) 15.7 14.0 1.7 12.8
Exceptional items - (0.1) 0.1 100.0
Amortisation of customer relationships (0.1) (0.1) - 2.8
Operating profit 15.6 13.8 1.8 13.5
Net finance costs (3.9) (3.5) (0.4) (11.5)
Profit before tax 11.7 10.3 1.4 14.2
Income tax expense (3.7) (2.3) (1.4) (62.7)
Profit for the period 8.0 8.0 - 0.5
Earnings per share (p) 6.30 6.27 0.03 0.5
Adjusted profit for the period((1)) 8.1 8.1 - (0.3)
Adjusted earnings per share (p)((1)) 6.34 6.36 (0.02) (0.3)
Dividend per share (p) 2.98 2.92 0.06 2.0
( )
(1) The Group uses some alternative performance measures to track and
assess the underlying performance of the business. Alternative performance
measures are defined in the glossary of terms and reconciled to the
appropriate financial statements line item at the end of this announcement.
Financial overview
A strong operating performance driven by ongoing operational control and
margin management allowed the Group to more than offset the impact of a
continued reduction in demand during the first half of 2024. In a trend
consistent with 2023, 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.
Revenue for the six months ended 30 June 2024 was £143.1 million, a decrease
of £13.9 million, or 8.9%, on the six months ended 30 June 2023 (2023:
£157.0 million). The decline in revenue was mainly due to a 8.0% decline in
sales volumes during the period.
Operating profit for the period was £15.6 million, an increase of £1.8
million, or 13.5%, compared to the prior year (2023: £13.8 million). The
increase in operating profit arose despite the 8.0% decrease in sales volumes.
Operating profit grew due to the benefits of cost base management initiatives,
favourable material price and strong product mix in UK & Ireland,
partially offset by lower sales volumes, continued wage inflation and
increased depreciation. Cost management initiatives include the transfer of
further volume to Turkey and the optimisation of our facilities in the UK and
the Netherlands.
Adjusted operating profit for the period was £15.7 million, an increase of
£1.7 million, or 12.8%, compared to the same period last year (2023: £14.0
million). Adjusted operating profit is stated before the deduction of
exceptional items of £nil (2023: £0.1 million) and the amortisation of
customer relationships of £0.1 million (2023: £0.1 million).
Supported by ongoing operational control and margin management, the
contribution per radiator has increased by 16.0% in the period to over £20
for the first time. The strong contribution per radiator positions the Group
well for future growth in market demand. The Group continues to push the sale
of premium products throughout its markets, recognising the additional margin
that these products generate. Year on year the proportion of premium panel
sales to total volumes fell by 0.1ppts to 5.7%, mainly due to a large decline
in sales to Germany where the penetration of these products is high.
Positively, the penetration of premium panel products into the UK &
Ireland increased in the period from 2.8% to 3.1% as a result of targeted
management action in the Group's largest segment, with additional work being
undertaken to drive this growth further.
Profit for the period remained at £8.0 million (2023: £8.0 million).
Adjusted profit for the period remained at £8.1 million (2023: £8.1
million). For both profit after tax measures, the increase in operating profit
was offset by increased interest charges and a return to a more normal
effective tax rate after a one off credit in 2023, as previously disclosed at
the full year 2023 results. Earnings per share was 6.30 pence (2023: 6.27
pence). Adjusted earnings per share was 6.34 pence (2023: 6.36 pence).
At 30 June 2024 the Group had cash of £19.4 million (December 2023: £21.4
million) and undrawn available facilities of £16.0 million (December 2023:
£18.7 million), with net debt before lease liabilities of £64.6 million
(December 2023: £60.4 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.
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 2024 Six months ended 30 June 2023 Movement Movement
£m £m £m %
UK & Ireland 69.1 70.1 (1.0) (1.5)
Europe 66.8 76.5 (9.7) (12.6)
Turkey & International 7.2 10.4 (3.2) (30.6)
Total 143.1 157.0 (13.9) (8.9)
UK & Ireland
The Group's revenue in the UK & Ireland for the period was £69.1 million
(2023: £70.1 million), a decrease of £1.0 million, or 1.5%. This was
principally a result of a decrease in sales volumes of 7.2%, partially offset
by a continued increase in the average size of radiators sold, with a 7% year
on year higher output, and an increase in the penetration of premium panel
products both of which improve the average selling price per unit.
Europe
The Group's revenue in Europe for the period was £66.8 million (2023: £76.5
million), a decrease of £9.7 million, or 12.6%, a result of a 5.1% decrease
in sales volumes, in addition to adverse country and customer mix and the
impact of modest price concessions. European revenue has also been negatively
impacted on consolidation by the GBP strengthening against the Euro.
Encouragingly, we note certain key geographies in Europe have shown a year on
year increase in volumes, including Belgium, the Netherlands, Poland and
Sweden.
Turkey & International
The Group's revenue in Turkey & International for the period was £7.2
million (2023: £10.4 million), a decrease of £3.2 million, or 30.6%. This
was principally a result of lower volumes to Turkey due to the economic
slowdown and also lower sales 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 2024 Six months ended 30 June 2023 Movement Movement
£m £m £m %
UK & Ireland 15.1 11.5 3.6 31.5
Europe 3.7 4.9 (1.2) (23.5)
Turkey & International 0.9 0.7 0.2 35.0
Central costs (4.0) (3.1) (0.9) (29.0)
Total 15.7 14.0 1.7 12.8
UK & Ireland
The Group's adjusted operating profit in the UK & Ireland for the period
was £15.1 million (2023: £11.5 million), an increase of £3.6 million, or
31.5%. The result includes the benefit of the 2023 restructure, favourable
material prices, the increase in the average size of radiators and stronger
premium panel penetration. These factors have combined to more than offset the
lower sales volumes and the impact of ongoing inflation.
Europe
The Group's adjusted operating profit in Europe for the period was £3.7
million (2023: £4.9 million), a decrease of £1.2 million, or 23.5%. Sales
volumes have continued to fall due to a weak macroeconomic environment.
Additionally, adverse country and customer mix has led to a reduction in the
average contribution per radiator. A high fixed cost base in Europe, combined
with the sales volume decrease, has led to a reduction in operating margin
percentage. The Group continues to focus on improving the margins of Radiators
SpA's sales, and whilst initiatives to drive efficiencies have to date been
offset by lower volumes, we expect margins for Radiators SpA, and the wider
Europe segment, to recover in line with market recovery.
Turkey & International
The Group's adjusted operating profit in Turkey & International for the
period was £0.9 million (2023: £0.7 million), an increase of £0.2 million,
or 35.0%. The increase is due to favourable material prices, which were
partially offset by a decline in sales volumes.
Central costs
Central costs for the period were £4.0 million (2023: £3.1 million), an
increase of £0.9 million, or 29.0%. The rise is due to additional LTIP
charges following further awards being made in the year, an increase in the
accrued charge for management bonuses and consultancy costs related to the
appraisal of premium panel penetration strategies.
Exceptional items
During the period no exceptional costs were incurred (2023: £0.1 million).
Finance costs
The Group's finance costs for the period were £3.9 million (2023: £3.5
million). The increase of £0.4 million is due to comparatively higher
interest rates (blended 6.8%) in the first half of 2024 with no increase in
rates expected in the balance of 2024.
Income tax expense
The Group's income tax expense for the period was £3.7 million (2023: £2.3
million), an increase of £1.4 million. The 2023 tax charge benefitted from a
deferred tax credit associated with higher tax asset values allowed by the
Turkish government due to hyperinflation as previously disclosed at the full
year 2023 results.
Earnings per share and adjusted earnings per share
Profit for the period remained at £8.0 million (2023: £8.0m) and basic
earnings per share was 6.30 pence (2023: 6.27 pence). The weighted average
number of shares was 127.4 million (2023: 127.4 million). Adjusted profit for
the period remained at £8.1 million (2023: £8.1 million) and consequently
basic adjusted earnings per share was 6.34 pence (2023: 6.36 pence).
Dividends
The Group is committed to delivering returns for its shareholders. The Board
has confidence in the Group's financial position and believes that its leading
market positions, regulatory tailwinds and favourable contribution per
radiator will lead to strong future financial performance. On this basis,
despite lower earnings due to short term trading headwinds, the Group intends
to pay an interim dividend of 2.98 pence per share on 25 October 2024 to
shareholders on the register on 11 October 2024, an increase of 2% on the 2023
interim dividend.
The Group paid its final dividend for 2023 of 4.72 pence per share in May
2024, resulting in a total dividend for 2023 of 7.64 pence per share.
Cash flows
The following table summarises the Group's cash flow for the six months ended
30 June 2024 and 30 June 2023.
Six months ended 30 June 2024 Six months ended 30 June 2023 Movement
£m £m £m
EBITDA 21.7 19.7 2.0
Exceptional items - (0.1) 0.1
Gain on disposal of property, plant and equipment (0.1) - (0.1)
Share-based payment charge 0.3 0.3 -
Working capital (9.8) (4.9) (4.9)
Net capital expenditure (3.1) (4.5) 1.4
Cash flow from operations 9.0 10.5 (1.5)
Income tax paid (4.0) (4.1) 0.1
Net interest paid (3.7) (3.0) (0.7)
Free cash flow 1.3 3.4 (2.1)
Six months ended 30 June 2024 Six months ended 30 June 2023 Movement
Cash flow from operations (£m) 9.0 10.5 (1.5)
Adjusted operating profit (£m) 15.7 14.0 1.7
Cash flow from operations conversion (%) 57.7 75.6
The Group's free cash inflow for the period was £1.3 million (2023: £3.4
million), a decrease of £2.1 million. This reflects a higher than prior year
seasonal increase in working capital and higher interest paid, partially
offset by an increase in EBITDA and reduced capital expenditure as the Group
now returns to a lower level of spend. The Group continues to invest in
working capital to ensure that it is well placed to respond to market demand.
The Group's cash inflow from operations for the period was £9.0 million
(2023: £10.5 million), a decrease of £1.5 million. Adjusted operating profit
for the period was £15.7 million (2023: £14.0 million), an increase of £1.7
million. Cash flow from operations conversion for the period was 57.7% (2023:
75.6%).
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 2024
related to various maintenance and upgrade projects. Capital expenditure for
the remainder of 2024 will be in line with expectations.
Net debt and leverage
At 30 June 2024, net debt (including lease liabilities) of £73.4 million
(December 2023: £70.3 million) comprises £84.0 million (December 2023:
£81.8 million) drawn down against the multicurrency facility and £8.8
million (December 2023: £9.9 million) lease liabilities net of £19.4 million
(December 2023: £21.4 million) cash.
30 June 2024 31 December 2023
£m £m
Revolving credit facility - GBP 44.7 46.9
Revolving credit facility - EUR 15.3 10.4
Term loan 24.0 24.5
Cash (19.4) (21.4)
Net debt before lease liabilities 64.6 60.4
Lease liabilities 8.8 9.9
Net debt 73.4 70.3
Leverage at 30 June 2024 was 1.49x (31 December 2023: 1.47x; 30 June 2023:
1.76x), based on net debt before lease liabilities.
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 2025 and therefore these condensed
consolidated interim financial statements have been prepared on a going
concern basis.
Leigh Wilcox
Interim Chief Financial Officer
12 August 2024
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 2023.
For and on behalf of the Board
Trevor Harvey
Chief Executive Officer
12 August
2024
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 2024 of
Stelrad Group Plc for the 6 month period ended 30 June 2024 (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 2024;
· 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 2024 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 2024 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 2024, 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 2024 in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the interim results 2024, 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 2024 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 2024
Stelrad Group plc
Condensed consolidated interim income statement
for the six months ended 30 June 2024
Six months ended 30 June 2024 Six months ended 30 June 2023 (not audited) Year ended 31 December 2023 (audited)
(not audited)
Notes £'000 £'000 £'000
Continuing operations
Revenue 5 143,116 157,043 308,193
Cost of sales (98,987) (113,711) (221,343)
Gross profit 44,129 43,332 86,850
Selling and distribution expenses (19,922) (21,301) (42,278)
Administrative expenses (excluding exceptional items) (9,164) (8,463) (16,624)
Exceptional items 5 - (81) (2,466)
Administrative expenses (9,164) (8,544) (19,090)
Other operating income/(expenses) 6 624 312 1,199
Operating profit 5 15,667 13,799 26,681
Finance income 113 41 182
Finance costs (4,057) (3,579) (7,681)
Profit before tax 11,723 10,261 19,182
Income tax expense 7 (3,699) (2,273) (3,758)
Profit for the period 8,024 7,988 15,424
Notes
Earnings per share
Basic 8 6.30p 6.27p 12.11p
Diluted 8 6.26p 6.27p 12.11p
Adjusted earnings per share
Basic 8 6.34p 6.36p 13.62p
Diluted 8 6.30p 6.36p 13.62p
Stelrad Group plc
Condensed consolidated interim statement of comprehensive income
for the six months ended 30 June 2024
Six months ended 30 June 2024 Six months ended 30 June 2023 (not audited) Year ended
(not audited) 31 December 2023 (audited)
Notes £'000 £'000 £'000
Profit for the period 8,024 7,988 15,424
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 421 873 674
operations and qualifying hedges of net investments in foreign operations
Income tax effect 7 (105) (205) (158)
Exchange differences on translation of foreign operations (2,226) (3,351) (2,250)
Net other comprehensive expense that may be reclassified to profit or loss in (1,910) (2,683) (1,734)
subsequent periods
Other comprehensive expense not to be reclassified to profit or loss in
subsequent periods:
Remeasurement losses on defined benefit plans (907) (716) (936)
Income tax effect 7 200 143 206
Net other comprehensive expense not to be reclassified to profit or loss in (707) (573) (730)
subsequent periods
Other comprehensive expense for the period, net of tax (2,617) (3,256) (2,464)
Total comprehensive income/(expense) for the period, net of tax attributable 5,407 4,732 12,960
to owners of the parent
Stelrad Group plc (Registered Number 13670010)
Condensed consolidated interim balance sheet
as at 30 June 2024
30 June 2024 30 June 2023 31 December 2023 (audited)
(not audited) (not audited)
Notes £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 82,111 88,682 87,247
Intangible assets 14 4,990 5,157 5,251
Trade and other receivables 298 306 301
Deferred tax assets 6,640 4,945 6,685
94,039 99,090 99,484
Current assets
Inventories 70,512 68,895 63,376
Trade and other receivables 57,690 59,352 50,674
Income tax receivable 230 518 243
Financial assets 10 83 - -
Cash and cash equivalents 19,359 20,563 21,442
147,874 149,328 135,735
Total assets 241,913 248,418 235,219
Equity and liabilities
Equity
Share capital 127 127 127
Merger reserve (114,469) (114,469) (114,469)
Retained 234,971 229,553 233,329
earnings
Foreign currency reserve (65,702) (64,741) (63,792)
Total equity 54,927 50,470 55,195
Non-current liabilities
Interest-bearing loans and borrowings 10 89,610 99,242 88,227
Deferred tax liabilities 214 214 218
Provisions 1,925 1,877 1,980
Net employee defined benefit liabilities 12 4,865 4,034 4,053
96,614 105,367 94,478
Current liabilities
Trade and other payables 85,963 88,013 78,056
Financial liabilities 10 - 419 318
Interest-bearing loans and borrowings 10 2,295 1,458 2,469
Income tax payable 1,317 2,287 1,686
Provisions 797 404 3,017
90,372 92,581 85,546
Total liabilities 186,986 197,948 180,024
Total equity and liabilities 241,913 248,418 235,219
The financial statements on pages 16 to 32 were approved by the Board of
Directors on 12 August 2024 and signed on its behalf by:
Trevor Harvey
Chief Executive Officer
Stelrad Group plc
Condensed consolidated interim statement of changes in equity
for the six months ended 30 June 2024
Attributable to the owners of the parent
Issued share capital Merger reserve Retained earnings Foreign currency Total
£'000 £'000 £'000 £'000 £'000
At 31 December 2022 (audited) 127 (114,469) 227,849 (62,058) 51,449
Profit for the year - - 15,424 - 15,424
Other comprehensive expense for the year - - (730) (1,734) (2,464)
Total comprehensive income/(expense) - - 14,694 (1,734) 12,960
Share-based payment charge - - 515 - 515
Dividends paid (note 9) - - (9,729) - (9,729)
At 31 December 2023 (audited) 127 (114,469) 233,329 (63,792) 55,195
Profit for the period - - 8,024 - 8,024
Other comprehensive expense for the period - - (707) (1,910) (2,617)
Total comprehensive income/(expense) - - 7,317 (1,910) 5,407
Share-based payment charge - - 336 - 336
Dividends paid (note 9) - - (6,011) - (6,011)
At 30 June 2024 (not audited) 127 (114,469) 234,971 (65,702) 54,927
Attributable to the owners of the parent
Issued share capital Merger reserve Retained earnings Foreign currency Total
£'000 £'000 £'000 £'000 £'000
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 9) - - (6,011) - (6,011)
At 30 June 2023 (not audited) 127 (114,469) 229,553 (64,741) 50,470
Stelrad Group plc
Condensed consolidated interim statement of cash flows
for the six months ended 30 June 2024
Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended 31 December 2023
(audited)
£'000 £'000 £'000
Operating activities
Profit before tax 11,723 10,261 19,182
Adjustments to reconcile profit before tax to net cash flows:
Depreciation of property, plant and equipment 5,777 5,672 11,615
Amortisation of intangible assets 252 184 457
(Gain) / loss on disposal of property, plant and equipment (83) (11) 11
Share-based payment charge 336 300 515
Finance income (113) (41) (182)
Finance costs 4,057 3,579 7,681
Working capital adjustments:
(Increase) / decrease in trade and other receivables (7,622) (821) 8,237
(Increase) / decrease in inventories (8,170) 6,877 12,884
Increase / (decrease) in trade and other payables 8,954 (9,687) (20,364)
(Decrease) / increase in provisions (2,195) (427) 2,214
Movement in other financial instruments (394) 427 319
Decrease in other pension provisions - (5) (7)
Difference between pension charge and cash contributions (366) (1,263) (1,674)
12,156 15,045 40,888
Income tax paid (3,987) (4,083) (7,497)
Interest received 113 41 182
Net cash flows from operating activities 8,282 11,003 33,573
Investing activities
Proceeds from sale of property, plant, equipment and intangible assets 184 72 352
Purchase of property, plant and equipment (1,858) (3,329) (6,586)
Purchase of intangible assets - - (507)
Net cash flows used in investing activities (1,674) (3,257) (6,741)
Financing activities
Transaction costs related to refinancing - - (500)
Proceeds from external borrowings 5,087 1,100 -
Repayment of external borrowings (2,200) - (8,350)
Payment of lease liabilities (1,408) (1,236) (2,619)
Interest paid (3,778) (3,058) (6,428)
Dividends paid (6,011) (6,011) (9,729)
Net cash flows used in financing activities (8,310) (9,205) (27,626)
Net decrease in cash and cash equivalents (1,702) (1,459) (794)
Net foreign exchange difference (381) (619) (405)
Cash and cash equivalents at start of period 21,442 22,641 22,641
Cash and cash equivalents at end of period 19,359 20,563 21,442
Stelrad Group plc
Notes to the condensed consolidated interim financial statements
for the six months ended 30 June 2024
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 2024 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 2023, 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 2023 Annual Report and
Accounts as described on pages 103 to 112 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 2024.
The 2023 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 2024 and the
comparative financial statements for the six months ended 30 June 2023 have
not been audited. However, the financial statements for the six months ended
30 June 2024 and the six months ended 30 June 2023 have been reviewed by the
auditor, PricewaterhouseCoopers LLP. The comparative financial statements
for the year ended 31 December 2023 have been extracted from the 2023 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 2023 Annual Report and Accounts. The statutory accounts for the year
ended 31 December 2023, which were approved by the Board of Directors on 8
March 2024 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.
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 £84.0 million of a £100 million loan facility. The
remainder of the facility and significant cash balances of £19.4 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 for the period to 31 December 2025 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 2024, but
do not have a material impact on the consolidated financial statements of the
Group. These include:
· Classification of Liabilities as Current or Non-current -
Amendments to IAS 1
· Lease liability in a Sale and Leaseback - Amendments to IFRS 16
· Non-current liabilities with Covenants - Amendments to IAS 1
· Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
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)
Lack of exchangeability - Amendments to IAS 21 1 January 2025
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.
The judgements used in the condensed consolidated interim financial statements
are detailed in the Group's 2023 Annual Report and Accounts on pages 112 to
114 of that report, which can be found on the Group's website at
www.stelradplc.com (http://www.stelradplc.com) .
No new judgements have been applied to the condensed consolidated interim
financial statements in the six months ended 30 June 2024.
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 in the Group's 2023 Annual Report and
Accounts on page 114 of that report. 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.
The estimates and assumptions used in the condensed consolidated interim
financial statements are detailed in the Group's 2023 Annual Report and
Accounts on page 114 of that report, which can be found on the Group's website
at www.stelradplc.com (http://www.stelradplc.com) .
No new estimates and assumptions have been applied to the condensed
consolidated interim financial statements in the six months ended 30 June
2024.
4 Principal risks
The Board has undertaken a review of the principal risks affecting the Group
for the six months ended 30 June 2024. 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 2023
(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 and exceptional items.
Revenue by geographical market Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended 31 December 2023 (audited)
£'000 £'000 £'000
UK & Ireland 69,052 70,106 139,422
Europe 66,821 76,494 149,063
Turkey & International 7,243 10,443 19,708
Total revenue 143,116 157,043 308,193
The revenue arising in the UK, being the Company's country of domicile, was
£66,893,000 (six months ended 30 June 2023: £67,650,000; year ended 31
December 2023: £133,323,000).
Adjusted operating profit by geographical market Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended 31 December 2023
(audited)
£'000 £'000 £'000
UK & Ireland 15,080 11,470 24,485
Europe 3,769 4,926 9,061
Turkey & International 899 666 1,348
Central costs (4,012) (3,111) (5,606)
Adjusted operating profit 15,736 13,951 29,288
Exceptional items - (81) (2,466)
Amortisation of customer relationships (69) (71) (141)
Operating profit 15,667 13,799 26,681
Non-current operating assets Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended
31 December 2023
(audited)
£'000 £'000 £'000
UK 16,597 18,618 17,547
The Netherlands 18,863 21,452 20,581
Italy 25,379 26,675 26,818
Other - Europe 802 1,133 1,052
Turkey 25,460 25,961 26,500
Total 87,101 93,839 92,498
In the year ended 31 December 2023 the exceptional items relate to a
£2,908,000 restructuring exercise undertaken in quarter four of the year in
order to drive cost savings for future periods, partially offset by
exceptional income related to the acquisition of Radiators SpA of £442,000.
All exceptional items have been presented as such because they are one-off in
nature and separate disclosure allows the underlying trading performance of
the group to be better understood.
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 2023: none; year ended 31 December 2023: none).
6 Other operating income/(expenses)
Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended
31 December 2023 (audited)
£'000 £'000 £'000
Net gain/(loss) on disposal of property, plant and equipment 83 11 (11)
Foreign currency gains 571 1,060 1,736
Net losses on forward derivative contracts (220) (919) (689)
Sundry other expenses - environmental claim - - (104)
Sundry other income 190 160 267
624 312 1,199
7 Income tax expense
The major components of income tax expense are as follows:
Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended 31 December 2023 (audited)
£'000 £'000 £'000
Consolidated income statement
Current income tax:
Current income tax charge 3,552 3,932 7,214
Adjustments in respect of current income tax charge of previous period - 177 10
Deferred tax:
Relating to origination and reversal of temporary differences 147 (1,664) (3,466)
Relating to change in tax rates - (172) -
Income tax expense reported in the income statement 3,699 2,273 3,758
Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended 31 December 2023 (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 (200) (143) (206)
Current tax on monetary items forming part of net investment and on hedges of 105 205 158
net investment
Income tax expensed to other comprehensive (expense)/income (95) 62 (48)
The taxation charge has been calculated by applying the Directors' best
estimate of the annual effective tax rate to the profit for the period.
8 Earnings per share
Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended 31 December 2023 (audited)
£'000 £'000 £'000
Net profit for the period attributable to owners of the parent 8,024 7,988 15,424
Exceptional - 81 2,466
items
Amortisation of customer relationships 69 71 141
Tax on exceptional items - (19) (651)
Tax on amortisation of customer relationships (19) (20) (39)
Adjusted net profit for the period attributable to owners of the parent 8,074 8,101 17,341
Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended
31 December 2023 (audited)
Basic weighted average number of shares in issue 127,352,555 127,352,555 127,352,555
Effect of dilutive potential ordinary shares 753,370 - -
Diluted weighted average number of shares in issue 128,105,925 127,352,555 127,352,555
Earnings per share
Basic earnings per share (pence per share) 6.30 6.27 12.11
Diluted earnings per share (pence per share) 6.26 6.27 12.11
Adjusted earnings per share
Basic earnings per share (pence per share) 6.34 6.36 13.62
Diluted earnings per share (pence per share) 6.30 6.36 13.62
9 Dividends paid and proposed
Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended
31 December 2023
(audited)
£'000 £'000 £'000
Declared and paid during the period
Equity dividend on ordinary shares:
Final dividend for 2023: 4.72p per share (2022: 4.72p per share) 6,011 6,011 6,011
Interim dividend for 2023: 2.92p per share (2022: 2.92p) - - 3,718
6,011 6,011 9,729
Six months ended 30 June 2024 (not audited) Six months ended 30 June 2023 (not audited) Year ended
31 December 2023
(audited)
£'000 £'000 £'000
Dividend proposed (not recognised as a liability)
Equity dividend on ordinary shares:
Final dividend for 2023: 4.72p per share (2022: 4.72p per share) - - 6,011
Interim dividend for 2024: 2.98p per share (2023: 2.92p per share) 3,795 3,719 -
10 Financial instruments
a) Financial instruments - other - not interest bearing
30 June 2024 (unaudited) 31 December 2023 (audited)
£'000 £'000
Financial assets
Financial instruments at fair value through profit or loss
Derivatives not designated as hedges - foreign exchange forward contracts 83 -
Total instruments at fair value through profit or loss 83 -
Current 83 -
Non-current - -
30 June 2024 (unaudited) 31 December 2023 (audited)
£'000 £'000
Financial liabilities
Financial instruments at fair value through profit or loss
Derivatives not designated as hedges - foreign exchange forward contracts - 318
Total instruments at fair value through profit or loss - 318
Current - 318
Non-current - -
Financial instruments through profit or loss reflect the 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 instruments - interest-bearing loans and borrowings
Effective interest rate Maturity 30 June 2024 (not audited) 31 December 2023 (audited)
% £'000 £'000
Current interest-bearing loans and borrowings
Lease liabilities 2,295 2,469
2,295 2,469
Non-current interest-bearing loans and borrowings
Lease liabilities 6,473 7,402
Revolving credit facility - GBP SONIA + 2.25% 9 Nov 2026 44,700 46,900
Revolving credit facility - Euro Euribor + 2.25% 9 Nov 2026 15,261 10,399
Term loan Euribor + 2.25% 9 Nov 2026 24,032 24,563
Unamortised loan costs (856) (1,037)
89,610 88,227
Total interest-bearing loans and borrowings 91,905 90,696
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.
During the year ended 31 December 2023, the £76.027 million revolving credit
facility and the €28.346 million term loan facility were extended by two
years to 9 November 2026 by exercising the two-year extension option included
in the facility agreement.
The RCF and term loan facilities are secured on the assets of certain
subsidiaries within the Group.
c) Changes in liabilities arising from financing activities
1 January 2024 (audited) Cash flows Non-cash changes 30 June 2024 (unaudited)
£'000 £'000 £'000
Revolving credit facility - GBP 46,900 (2,200) - 44,700
Revolving credit facility - Euro 10,399 5,087 (225) 15,261
Term loan 24,563 - (531) 24,032
Lease liabilities 9,871 (906) (197) 8,768
Cash and cash equivalents (21,442) 1,702 381 (19,359)
Net liabilities arising from financing activities 70,291 3,683 (572) 73,402
11 Contingent liabilities
Termo Teknik Ticaret ve Sanayi A.S. has issued letters of guarantee and
letters of credit to its steel suppliers amounting to $22,456,000 (31 December
2023: $18,309,000) and $11,487,000 (31 December 2023: $10,204,000)
respectively. Termo Teknik Ticaret ve Sanayi A.S. has also issued letters of
guarantee denominated in Turkish Lira totalling TL24,383,000 (31 December
2023: TL14,876,000).
The Group enters into various forward currency contracts to manage the risk of
foreign currency exposures on certain purchases and sales. The total amount of
unsettled forward contracts as at 30 June 2024 is £17,390,000 (31 December
2023: £12,197,000) on purchases and £18,100,000 (31 December 2023:
£20,750,000) on sales.
The fair value of the unsettled forward contracts held at the balance sheet
date, determined by reference to their market values, is an asset of £83,000
(31 December 2023: liability of £318,000).
As part of the £100 million loan facility, entered into in November 2021, and
amended on 8 July 2022, 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.
12 Pensions and other post-employment plans
30 June 2024 (not audited) 31 December 2023
(audited)
£'000 £'000
Net employee defined benefit liability
Turkish scheme 4,165 3,148
Italian scheme 655 860
Other retirement obligations 45 45
4,865 4,053
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 £4,165,000 (31 December 2023: £3,148,000). There are no
assets held in this plan (31 December 2023: 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 £655,000 (31
December 2023: £860,000).
UK scheme
The UK has one defined contribution pension scheme.
There were no outstanding contributions (31 December 2023: £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
Principal actuarial assumptions
Italian scheme Turkish scheme Italian scheme Turkish scheme
30 June 2024 (not audited) 30 June 2024 (not audited) 31 December 2023 (audited) 31 December 2023 (audited)
Discount rate (per annum) 3.2% 27.5% 3.2% 25.0%
Future salary increases (per annum) n/a 24.0% n/a 22.0%
Quantitative sensitivity analysis
30 June 2024 (not audited) 30 June 2024 (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 (218) 242 232 (210)
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.
13 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.
14 Impairment assessment of goodwill
Included within intangible assets of £4,990,000 (31 December 2023:
£5,251,000) is goodwill of £2,673,000 (31 December 2023: £2,732,000) and
customer relationships of £1,519,000 (31 December 2023: £1,623,000). The
goodwill is not amortised. The customer relationships are amortised over their
estimated useful lives. Both the goodwill and the customer relationships
relate to the acquisition of Radiators SpA.
All of the goodwill recognised is allocated to a single cash-generating unit
("CGU"), being the Radiators SpA division. This represents the lowest level in
the Group at which goodwill is monitored for internal management purposes.
Goodwill is not amortised but is subject to annual impairment testing. IAS 36
also requires an entity to assess at the end of each reporting period whether
there is an indication that an asset or cash-generating unit ("CGU") may be
impaired. An impairment indicator has been identified due to a decline in
performance of Radiators SpA compared to budget. Therefore, an impairment
review has been carried out at 30 June 2024.
The impairment test carried out at 31 December 2023 was revisited and the
assumptions were assessed and updated where necessary. This included a
consideration of volume assumptions and an analysis of volumes in comparison
to recent trading levels. Potential market recovery has not been factored in.
Impairment tests on the carrying amounts of goodwill are performed by
analysing the carrying amount allocated to each CGU against its value in use.
Value in use is calculated for each CGU as the net present value of that CGU's
discounted future pre-tax cash flows covering a three-year period. These
pre-tax cash flows are based on budgeted cash flows information for a period
of three years.
Terminal growth rates of 2% have been applied beyond this, based on historical
macroeconomic performance and projections of the sector served by the CGUs.
A pre-tax discount rate of 15.2% has been applied in determining the
recoverable amounts of CGUs. The pre-tax discount rate is estimated based on
the Group's risk adjusted cost of capital. Another key assumption is EBITDA,
which is included in the terminal value at a margin of 7.7%.
The Group has applied sensitivities to assess whether any reasonably possible
changes in assumptions could cause an impairment that would be material to
these consolidated financial statements. Details of the sensitivity analysis
are disclosed in relation to Radiators SpA because it is sensitive to changes
in assumptions. The base case scenario for Radiators SpA has headroom of £2.6
million. A change in EBITDA margin of 0.7% percentage points, holding all
other assumptions constant, would erode the headroom to zero for Radiators
SpA. A change in discount rate of 1.0%, holding all other assumptions
constant, would erode the headroom to zero for Radiators SpA. A reasonably
possible change to the EBITDA margin of 1.0% would give rise to an impairment
of £1.2 million.
When assessing for impairment of goodwill, management has considered the
impact of climate change, particularly in the context of the risks and
opportunities identified within the Task Force on Climate-related Financial
Disclosures Report on pages 36 to 39 of the 2023 Annual Report, and has not
identified any material short-term impacts from climate change that would
impact the carrying value of goodwill. Over the longer term, the risks and
opportunities are more uncertain, and management will continue to assess the
quantitative impact of risks at each balance sheet date.
Other sensitivities were considered; details are not provided as there are no
other reasonably possible changes that would be material to these consolidated
financial statements.
There is no impairment of goodwill at 30 June 2024.
RECONCILIATION OF ALTERNATIVE PERFORMANCE MEASURES AND GLOSSARY OF TERMS
The Group uses some alternative performance measures to monitor and assess the
underlying performance of the business. These measures include adjusted
operating profit and adjusted profit for the year. These measures are deemed
useful as they aid comparability year on year. The use of alternative
performance measures compared to statutory IFRS measures does give rise to
limitations, including a lack of comparability across companies and the
potential for them to present a more favourable view. Further, these measures
are not a substitute for IFRS measures of profit. Alternative performance
measures are defined in the glossary of terms below. Alternative performance
measures are reconciled to the appropriate financial statements line item
being disclosed.
Reconciliation of adjusted profit for the period and adjusted earnings per
share
Six months ended 30 June 2024 Six months ended 30 June 2023
£'000 £'000
Profit for the period 8,024 7,988
Adjusted for:
Exceptional items - 81
Amortisation of customer relationships 69 71
Tax on exceptional items - (19)
Tax on amortisation of customer relationships (19) (20)
Adjusted profit for the period 8,074 8,101
Basic weighted average number of shares in issue 127,352,555 127,352,555
Diluted weighted average number of shares in issue 128,105,925 127,352,555
Earnings per share
Basic earnings per share (pence per share) 6.30 6.27
Diluted earnings per share (pence per share) 6.26 6.27
Adjusted earnings per share
Basic earnings per share (pence per share) 6.34 6.36
Diluted earnings per share (pence per share) 6.30 6.36
Reconciliation of adjusted operating profit and EBITDA
Six months ended 30 June 2024 Six months ended 30 June 2023
£'000 £'000
Operating profit 15,667 13,799
Adjusted for:
Exceptional items - 81
Amortisation of customer relationships 69 71
Adjusted operating profit 15,736 13,951
Adjusted for:
Depreciation 5,777 5,672
Amortisation (excluding customer relationships) 183 113
EBITDA 21,696 19,736
Reconciliation of cash flow from operations, adjusted cash flow from
operations and free cash flow
Six months ended 30 June 2024 Six months ended 30 June 2023
£'000 £'000
EBITDA (see reconciliation above) 21,696 19,736
Adjusted for:
Exceptional items - (81)
Loss/(gain) on disposal of property, plant and equipment (83) (11)
Share-based payments 336 300
Working capital adjustments (9,793) (4,899)
Net capital expenditure (3,082) (4,493)
Cash flow from operations 9,074 10,552
Income tax paid (3,987) (4,083)
Interest paid - net (3,665) (3,017)
Free cash flow 1,422 3,452
Reconciliation of net debt and leverage before leases liabilities
Six months ended 30 June 2024 Six months ended 30 June 2023
£'000 £'000
Total interest-bearing loans and borrowings 91,905 100,700
Cash and cash equivalents (19,359) (20,563)
Adjusted for:
Unamortised loan costs 856 768
Lease liabilities (8,768) (10,495)
Net debt before leases liabilities 64,634 70,410
EBITDA - six months ended 30 June (see reconciliation above) 21,696 19,736
EBITDA - half two prior year 21,567 20,243
EBITDA - LTM 43,263 39,979
Debt leverage ratio before leases liabilities 1.49 1.76
Adjusted cash flow from operations: cash flow from operations before
exceptional items and the impact of exceptional items on working capital.
Adjusted EPS: adjusted earnings per share is calculated on adjusted profit for
the period divided by the weighted average number of shares in issue.
Adjusted operating profit: operating profit before exceptional items and
amortisation of customer relationships.
Adjusted profit for the period: earnings before exceptional items,
amortisation of customer relationships and tax thereon.
Business capital employed: the sum of property, plant and equipment,
technology and software costs, trade and other receivables, inventories, other
current financial assets, provisions, net employee defined benefit
liabilities, trade and other payables and other current financial liabilities.
Cash flow from operations: EBITDA, less exceptional items, plus or minus
movements in operating working capital, less share-based payment expense, less
net investments in property, plant and equipment, less technology and software
costs, less finance lease payments.
Cash flow from operations conversion: calculated by dividing cash flow from
operations by adjusted operating profit.
Contribution: revenue from sale of the Group's products less any cost of
direct materials, variable distribution costs, variable selling costs, direct
labour costs and other variable costs.
EBITDA: profit before interest, taxation, depreciation, amortisation and
exceptional items.
Free cash flow: cash flow from operations less tax paid less net interest
paid.
Return on capital employed: adjusted operating profit as a percentage of
business capital employed.
RMI: repair, maintenance and improvement activities.
1 BRG Building Solutions, May 2024. In the 20 European countries for which
2023 steel panel radiator share data is available (which represented 95% of
the European market in 2022).
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