REG - Stelrad Group PLC - Preliminary announcement of final results
14/03/2022 07:01
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RNS Number : 5556E Stelrad Group PLC 14 March 2022
Stelrad Group plc - preliminary announcement of final results for the year
ended 31 December 2021
Strong results, ahead of expectations, following successful admission to the
London Stock Exchange.
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 audited financial results for
the 12 months ended 31 December 2021.
Results summary
2021 2020 Increase/ (decrease)
%
Revenue, £m 272.3 196.6 38.5
Adjusted operating profit, £m * 33.2 15.6 112.3
Adjusted operating profit margin, % * 12.2 7.9 4.3pp
Adjusted profit after tax, £m * 21.6 5.7 281.0
Adjusted Earnings per share, pence * 16.92 4.44 281.0
Statutory operating profit, £m 26.6 19.5 36.0
Statutory profit after tax, £m 14.7 8.7 68.5
Statutory earnings per share, pence 11.51 6.83 68.5
Adjusted free cash flow, £m * 18.2 12.5 46.5
Net debt (excluding lease liabilities), £m 40.9 58.5 (30.1)
Dividend per share, pence 0.96 - n/a
*Adjusted figures are stated before exceptional items, foreign exchange
differences and tax thereon where applicable.
Financial and operational highlights
· Good progress across all territories during 2021:
- UK & Ireland - 45.8% revenue growth, 150.5% growth in adjusted
operating profit.
- Europe - 30.4% revenue growth, 31.6% growth in adjusted operating
profit.
- Turkey & International - 43.7% revenue growth, 137.9% growth
in adjusted operating profit.
· Total sales volume increased by 20% versus 2020 and was 9% higher
than in 2019, the last pre-pandemic year.
· Profitability enhanced by further production transfers to
low-cost Turkish facility and an improved mix of premium steel panel radiators
where volumes rose by 15% versus 2020 and 23% relative to 2019.
· Proactive price optimisation in light of substantial increases in
steel prices.
· Completed a six-year, c£25 million programme of incremental
investment into Stelrad's three main operational facilities.
· Successful IPO on the London Stock Exchange's Main Market.
Commenting on the Group's performance, Trevor Harvey, Chief Executive Officer,
said:
"2021 was a pivotal year for Stelrad and, following our successful IPO in
November and a robust end to the year from a trading perspective, we enter
2022 with strong momentum. Macro trends such as the ongoing focus on
decarbonisation and the growing appeal of premium steel panel radiators
continue to provide a positive backdrop for our business and support ongoing
demand for our products. As a result, the Group remains confident in its
ability to deliver on its long-term growth plans."
Current trading and outlook
Trading since the period end has remained broadly in line with management
expectations with some reduction in overall volumes more than offset by
increased revenues and improving margins.
The Group's market leading products and brands, coupled with unrivalled access
to specifiers, mean that the Group remains very well positioned versus its
competitors across all key geographies.
Notwithstanding supply chain challenges impacting the building products
sector, including the situation in Ukraine, expectations for the year remain
unchanged and the Group remains well placed to build on the strong momentum
generated in 2021.
For further information:
Media enquiries
Stelrad Group plc +44 (0)191 261 3301
Trevor Harvey, Chief Executive Officer
George Letham, Chief Financial Officer
Powerscourt stelrad@powerscourt-group.com (mailto:Stelrad@powerscourt-group.com)
James White / Genevieve Ryan +44 (0)7855 432 699
Notes to Editors
Stelrad Group plc is a leading specialist manufacturer and distributor of
steel panel radiators in the UK, Europe and Turkey, selling an extensive range
of standard and premium steel panel radiators, low surface temperature (LST)
radiators, towel warmers, decorative steel tubular radiators and other steel
"column" radiators to more than 500 customers annually.
The Group has four core brands: Stelrad, Henrad, Hudevad and Termo Teknik,
which had approximately 16.6 per cent. share by volume of total markets in the
UK, Europe, and Turkey in 2020, including 50.2 per cent. market share in the
UK. In 2020, the Group held top 3 share positions in 11 countries and was #1
in the UK, Ireland, the Netherlands, Belgium and Denmark.
It is headquartered in Newcastle upon Tyne in the United Kingdom with
manufacturing and distribution facilities at Mexborough in the UK, Nuth in the
Netherlands and Çorlu in Turkey, employing 1,326 employees across the
business, during 2021.
The origins of the Group date back to the 1930s and, today, Stelrad enjoys
long established commercial relationships with many of its customers, having
served each of its top five customers for over twenty years.
Chair's statement
Overview
It is a pleasure to be addressing you as Chair of Stelrad Group plc, following
our successful flotation on the London Stock Exchange in November 2021.
Despite the impact of the Covid-19 pandemic across the world, Stelrad's
impressive progress continued in 2021 as we achieved a record financial
performance.
This underlines the resilience of Stelrad's business model and the robustness
of our strategy in the face of an unpredictable trading environment and
volatility in commodity prices. I believe this resilience positions us well to
capitalise on the opportunities of the future, as economies recover
post-pandemic and decarbonisation initiatives increasingly influence the
specification of tomorrow's heating systems.
Purpose
We define our purpose as helping to heat homes sustainably, recognising the
valuable role that the Group has to play, both now and in the future, in the
specification and supply of heating products that contribute effectively to
environmental and social improvement.
People
Our main priority over the last two years has been the safety and wellbeing of
our employees and their families. We are extremely grateful to our dedicated
and loyal teams for their commitment during this unprecedented period of
global disruption and for their outstanding contribution to ensuring a safe
working environment whilst generating such exceptional business performance.
Performance and results
Stelrad's strong set of results reflects the underlying resilience of the
business despite the pandemic, with a 39% rise in Group revenue to £272.3
million alongside adjusted operating profit more than doubling to £33.2
million underlining the quality of our business.
The Group made good progress in all territories during 2021 with UK &
Ireland, Europe and Turkey & International all delivering strong revenue
and profit growth. This performance was aided by the supportive backdrop of
the continued focus on decarbonisation and the move towards higher added value
premium steel panel radiators. We completed our six-year programme of
upgrading our three main facilities, which has seen a total of £25 million
invested in our best-in-class manufacturing capabilities.
Dividends
The Group's strong financial results led the Board to recommend a final
dividend of 0.96 pence per share, to be paid on a pro rata basis relating to
the period between listing and 31 December 2021. Subject to approval by
shareholders at the Annual General Meeting on 16 May 2022, the final dividend
will be paid on 27 May 2022 to shareholders on the register on 29 April 2022.
Strategy
Our strong results in 2021 were driven by clear commercial and operational
strategies developed, over many years, in pursuit of four key objectives:
growing market share, improving product mix, optimising routes to market and
positioning effectively for decarbonisation. We are confident the Group will
have increased its overall market share in 2021, a year which saw us complete
our significant programme of operational investment to provide the platform
for future profitable growth.
2021 showed increasing contribution to performance from higher added value
premium steel panel and design radiators. In addition, the Group continues to
adapt quickly and effectively to evolving routes to market, with changes in
distributor ownership and digital transformation set to affect the heating
products supply chain over the longer term.
2021 was also notable for Stelrad's introduction of new products and expansion
of product ranges particularly well adapted to lower temperature systems, in
readiness for the transition to low and zero carbon heat sources anticipated
over the coming years, as we strive to achieve our purpose of helping to heat
homes sustainably.
Environmental, social and governance ("ESG") objectives
Stelrad is committed to high standards of corporate responsibility,
sustainability and employee engagement. We aim to consider fully the long-term
impact of all our business operations. To that end, we have set up a task
force, led by the Chief Executive Officer, to develop our ESG strategy more
fully during the course of 2022, in line with our purpose of helping to heat
homes sustainably.
To ensure sustainability remains at the heart of what we do, the task force
will conduct a detailed review of the Group's activities in order to develop a
comprehensive ESG strategy. This will build on our existing work to redefine
our ambitions and targets and identify how we can better contribute to
supporting wider international goals and will be fully aligned with our
corporate aims, objectives and values.
Board
I would like to take this opportunity to welcome our independent Non-Executive
Directors Terry Miller, Nicola Bruce and Martin Payne to the Board and look
forward to Stelrad benefiting from their experience and expertise over the
coming years.
Governance
The Group is committed to high levels of corporate governance, in line with
its status as a company with a premium listing on the Main Market of the
London Stock Exchange. Our compliance with the 2018 edition of the UK
Corporate Governance Code is set out in the Governance Report.
Summary
Stelrad has continued to progress despite the disruption of the Covid-19
pandemic and our first Annual Report as a listed company underlines the
strength of the business during challenging times. This strength is founded on
a coherent and robust strategy for profitable long-term growth, substantial
investment in our operational assets and the hard work and innovation of our
experienced and dedicated people.
With the inevitable changes decarbonisation and digital transformation will
bring, the Group is well positioned to maximise its opportunities as markets
evolve, motivated by our core purpose to help to heat homes sustainably both
now and in the future.
Bob Ellis
Chair
14 March 2022
Chief Executive Officer's review
Overview
This financial year has been one of significant progress by the Stelrad Group,
which culminated in November 2021 with our successful listing on the premium
segment of the London Stock Exchange.
The Group delivered substantial organic revenue growth in 2021, increasing by
38.5% from £196.6 million in 2020 to £272.3 million, whilst adjusted
operating profit rose by 112.3% to £33.2 million (2020: £15.6 million).
Satisfying performance against KPIs
In addition to revenue and profit growth, the Group also performed strongly
against its other key metrics.
Sales volume increased by 20% versus 2020 and was 9% higher than in 2019, the
last pre-pandemic year. This reflects Stelrad's progress in all of its key
territories. The UK & Ireland delivered revenue growth of 45.8% and
adjusted operating profit growth of 150.5% while, for Europe, revenue and
adjusted operating profit were up 30.4% and 31.6% respectively. In our
Turkey & International markets, revenue grew by 43.7% while adjusted
operating profit rose by 137.9%.
Our growth in these metrics across all geographies was driven by volume
recovery and timely, proactive price optimisation as steel prices rose
substantially. Profitability was enhanced by further production transfers to
our low-cost Turkish facility, and an improved mix of premium steel panel and
design radiators.
As compared to 2020, Stelrad achieved very satisfying volume growth of 15% in
higher added value premium steel panel radiators, representing an increase of
23% when compared to 2019. This is the outcome of our clear strategy to
develop and grow this profitable segment, enabling us to fully capitalise on
the Group's sustainable competitive advantage in this product category,
notably in the UK, where total market volume is high, premium steel
penetration is low and Stelrad has a strong leadership position.
Investment for the future
In 2021, Stelrad completed a six-year, c£25 million programme of incremental
investment into its three main operational facilities. Our goals were to
increase production flexibility, capacity and productivity, along with
improving product quality. As a result, during 2021, we benefited from further
transfers of production from our mainland European sites to the Group's lowest
cost facility in Turkey.
The investment in our operational facilities is crucial to the Group improving
the health, safety and wellbeing of our employees as demonstrated by our sites
in the UK and Netherlands (as of January 2022) currently having both operated
for over one full year without any lost time accidents. The Group is now
focused on utilising the successes in the UK and Netherlands to further reduce
the risk of lost time accidents in Turkey.
The transfer of production to Turkey combined with an improved premium steel
panel product mix, drove a 4% increase in contribution per radiator versus
2020, an increase of 23% relative to 2019. Low-cost manufacturing remains an
essential enabling strategy for market share growth and positions Stelrad as
a natural consolidator of the radiator market over the longer term.
Following the creation of our European Distribution Centre in the Netherlands
in 2019, we have also continued to pursue our strategy of making our products
readily available for our customers, with 2021 investments in our warehousing
facilities in Turkey and the UK. In the Danish market, where we gained market
leadership in 2020, we established a new commercial and distribution hub to
provide improved logistics for local customers.
Product range innovation
Stelrad has one of the radiator market's most comprehensive and innovative
ranges of products. 2021 saw the addition of new electric and fan assisted
radiators in the form of the Dahlia E and Vento ranges and further expansion
of higher heat output vertical and triple panel, triple convector K3 steel
panel ranges. These will form an increasingly important part of the Group's
offer as we ensure we continue to provide heat emitters suitable for low and
zero carbon heating systems, regardless of heat source. As countries look to
decarbonise homes and meet long-term net zero carbon commitments, we have a
significant opportunity to help heat homes sustainably and, in so doing, build
a stronger business for all Stelrad stakeholders.
Embracing digital transformation
In the private residential RMI segment, routes to market are evolving and
sustained progress is being made by multichannel players, which combine a
network of physical retail outlets with a strong online presence. Stelrad is
well positioned to benefit from the opportunities arising from digital
transformation, both through supply to the leading players in the specialist
online and multichannel segment and through a programme of increasing
investment in its own digital presence in the business to consumer (B2C)
market.
The Group also continues to invest in Building Information Modelling to ensure
specifiers in new build and commercial segments can easily incorporate Stelrad
products into their building and heating system designs.
Trevor Harvey
Chief Executive Officer
14 March 2022
Finance and business review
Group overview
The following table summarises the Group's results from operations for the
years ended 31 December 2021 and 31 December 2020.
2021 2020 Increase / (decrease) Increase / (decrease)
£m £m £m %
Revenue 272.3 196.6 75.7 38.5
Adjusted operating profit 33.2 15.6 17.6 112.3
Exceptional items (9.6) - (9.6) -
Foreign exchange differences 3.0 3.9 (0.9) (23.6)
Operating profit 26.6 19.5 7.1 36.0
Net finance costs (10.3) (10.3) - 1.0
Profit before tax 16.3 9.2 7.1 77.7
Income tax expense (1.6) (0.5) (1.1) (240.4)
Profit for the year 14.7 8.7 6.0 68.5
Earnings per share (p) 11.51 6.83 4.68 68.5%
Adjusted Earnings per share (p)((1)) 16.92 4.44 12.48 281.0%
Dividend per share (p) 0.96 -
((1)) Adjusted earnings per share is calculated on adjusted profit after tax,
being earnings before exceptional items and foreign exchange differences and
tax on exceptional items and foreign exchange differences.
Financial overview
Revenue for the year was £272.3 million, an increase of £75.7 million, or
38.5%, on last year (2020: £196.6 million). This was principally as a result
of increased sales volumes which were exceptionally low in Q2 2020 due to the
Covid-19 pandemic, and implementation of selling price increases in 2021,
recovering a significant rise in steel prices.
Adjusted operating profit for the year was £33.2 million, an increase of
£17.6 million, or 112.3%, compared to last year (2020: £15.6 million).
This was principally as a result of an increase in sales volumes, the transfer
of production to lower cost facilities, a growth in premium panel sales
volumes and the benefit of increased selling prices, partially offset by the
impact of steel price rises. The Group benefited from its normal policy of
forward purchasing steel in Turkey when steel prices increased rapidly during
2021 to unprecedented levels.
Statutory operating profit for the year was £26.6 million (2020: £19.5
million), including exceptional costs of £9.6 million (2020: £nil) and the
impact of foreign exchange gains of £3.0 million (2020: £3.9 million). The
Group's effective tax rate in the year benefited from the one-off recognition
of UK deferred tax assets.
Profit attributable to shareholders increased by £6.0 million, or 68.5%, to
£14.7 million (2020: £8.7 million). Earnings per share was 11.51 pence
(2020: 6.83 pence) and adjusted earnings per share was 16.92 pence (2020: 4.44
pence).
There was a significant devaluation of the Turkish Lira during 2021. When
the opening reserves and current year profits of the Group were retranslated
at the closing exchange rate, the result was a charge of £26.1 million
through the consolidated statement of comprehensive income in the year.
On 10 November 2021, the Group listed on the premium segment of the London
Stock Exchange, having previously been under private ownership. As part of
this process, the Group repaid all legacy financing arrangements including
shareholder loans. This was funded by a part drawdown on a new £80 million
debt facility, a share capital raise of £25.1 million and existing cash. The
new debt is a revolving credit facility with an initial three-year term, then
two one-year extension options. At 31 December 2021 the Group had cash of
£15.6 million and undrawn available facilities of £23.5 million, with net
debt excluding finance leases of £40.9 million.
Revenue by geographical market
The table below sets out the Group's revenue by geographical market.
Revenue by geographical 2021 2020 Increase / (decrease) Increase / (decrease)
market
£m £m £m %
UK & Ireland 130.4 89.4 41.0 45.8
Europe 118.1 90.6 27.5 30.4
Turkey & International 23.8 16.6 7.2 43.7
Total 272.3 196.6 75.7 38.5
UK & Ireland
The Group's revenue in UK & Ireland for the year was £130.4 million
(2020: £89.4 million), an increase of £41.0 million, or 45.8%. This was
principally as a result of increased sales volumes which were lower in Q2 2020
due to the impact of the Covid-19 pandemic on the UK market. Additionally,
four selling price increases were applied in 2021 following a significant rise
in steel prices.
Europe
The Group's revenue in Europe for the year was £118.1 million (2020: £90.6
million), an increase of £27.5 million, or 30.4%. This was principally as a
result of market share gains through growth in sales volumes with existing
customers and four selling price increases during 2021 due to rising steel
prices.
Turkey & International
The Group's revenue in Turkey & International for the year was £23.8
million (2020: £16.6 million), an increase of £7.2 million, or 43.7%. This
was principally as a result of increased sales volumes which were lower in
2020 due to the Covid-19 pandemic and selling price increases in 2021
following a significant rise in steel prices.
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 2021 2020 Increase / (decrease) Increase / (decrease)
£m £m £m %
UK & Ireland 21.6 8.6 13.0 150.5
Europe 12.9 9.8 3.1 31.6
Turkey & International 2.9 1.2 1.7 137.9
Central costs (4.2) (4.0) (0.2) (5.3)
Total 33.2 15.6 17.6 112.3
UK & Ireland
The Group's adjusted operating profit in the UK & Ireland for the year was
£21.6 million (2020: £8.6 million), an increase of £13.0 million, or
150.5%. This was principally as a result of an increase in sales volumes after
the initial impact of the Covid-19 pandemic on the UK market, increased
premium panel sales volumes, the transfer of additional production to lower
cost facilities and the benefit of increased selling prices, partially offset
by the impact of steel price rises.
Europe
The Group's adjusted operating profit in Europe for the year was £12.9
million (2020: £9.8 million), an increase of £3.1 million, or 31.6%. This
was principally as a result of an increase in sales volumes, the transfer of
additional production to lower cost facilities and the benefit of increased
selling prices, partially offset by the impact of steel price rises.
Turkey & International
The Group's adjusted operating profit in Turkey & International for the
year was £2.9 million (2020: £1.2 million), an increase of £1.7 million, or
137.9%. This was principally as a result of an increase in sales volumes after
the initial impact of the Covid-19 pandemic in Turkey and China and the
benefit of increased selling prices, partially offset by the impact of steel
price rises.
Central costs
Central costs for the year were £4.2 million (2020: £4.0 million), an
increase of £0.2 million, or 5.3%. Costs increased principally as a result
of additional expenditure arising due to the Group being listed, following the
completion of the IPO in November 2021.
Exceptional items
During the year exceptional costs of £9.6 million were incurred (2020: £nil)
relating to professional advisers employed to consider the potential
recapitalisation of the Group and the costs associated with the IPO undertaken
by the Group in the year. These costs are one-off in nature and disclosing
these costs as exceptional allows the true underlying performance of the Group
to be more easily reviewed.
Finance costs
The Group's finance costs for the year were £10.3 million (2020: £10.3
million). The 1.0% decrease was primarily due to a reduction in interest
payable on external loans due to a lower average revolving credit facility
usage during 2021 and the benefit of ongoing repayments on the Group's term
loans. The 2021 finance costs include accrued interest on repaid shareholder
loans which will not recur in future years as a consequence of the Group's new
capital structure.
Income tax expense
The Group's income tax expense for the year was £1.6 million (2020: £0.5
million), an increase of £1.1 million, or 240.4%. The increase was primarily
due to an increase in profits chargeable to taxation and an increase in
overseas tax rates with the tax rate in Turkey increasing from 22% to 25%.
The tax charge for 2021 has been reduced as the Group has recognised
previously unrecognised deferred tax assets relating to tax losses. The
newly recognised losses are all post-April 2017 UK losses and the decision has
been taken to recognise the losses in the year because the new capital
structure of the Group post-IPO means that tax deductible interest will be
lower which, along with higher UK profitability, will lead to these losses
being utilised over a much shorter time frame.
Earnings per share and adjusted earnings per share
Profit attributable to shareholders increased by £6.0 million, or 68.5%, to
£14.7 million (2020: £8.7 million) and earnings per share was 11.51 pence
(2020: 6.83 pence). The weighted average number of shares was 127.4
million. Profit attributable to shareholders before exceptional items,
foreign exchange differences and tax thereon increased by £15.9 million, or
281.0%, to £21.6 million (2020: £5.7 million) and consequently, adjusted
earnings per share was 16.92 pence (2020: 4.44 pence).
Dividends and reserves
The Group is committed to delivering returns for its shareholders. It intends
to adopt a progressive dividend policy targeting an initial annualised 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 expects to pay its
first dividend in May 2022 which, due to the timing of the Group's admission,
will be the only dividend paid in respect of 2021. The 2021 dividend will be
determined on a pro rata basis for the period from admission to 31 December
2021.
The Company successfully submitted an application to the High Court of Justice
of England and Wales (the "Court") to reduce the value of each ordinary share
of the Company from £1.00 to £0.001; the reduction will be credited to the
retained earnings of the Company. Under the same application the Court
approved the removal of the share premium account of the Company in full, with
the reduction credited to the retained earnings of the Company. The Court
approved the application on 25 January 2022.
Cash flows
The following table summarises the Group's cash flow for the years ended 31
December 2021 and 31 December 2020.
2021 2020 Increase / (decrease)
£m £m £m
EBITDA ((1)) 40.6 23.5 17.1
Gain on disposal of property plant and equipment (0.2) (0.1) (0.1)
Working capital adjustments (8.7) 0.8 (9.5)
Net capital expenditure (9.9) (9.9) -
Adjusted cash flow from operations 21.8 14.3 7.5
Income tax paid (3.7) (1.9) (1.8)
Interest received 0.1 0.1 -
Adjusted free cash flow 18.2 12.5 5.7
2021 2020 Increase / (decrease)
£m £m £m
Adjusted cash flow from operations (£'000) 21.8 14.3 7.5
Adjusted operating profit (£'000) 33.2 15.6 17.6
Adjusted cash flow from operations conversion (%) 65.8 91.6 (25.8)
((1)) EBITDA is profit before interest, taxation, depreciation, amortisation,
exceptional items and foreign exchange differences.
The Group's adjusted free cash flow for the year was £18.2 million (2020:
£12.5 million), an increase of £5.7 million. This reflected an increase in
the profitability of the Group and increased working capital, due to the
replenishment of inventories as the 31 December 2020 inventory levels were
exceptionally low.
The Group's adjusted cash flow from operations for the year was £21.8 million
(2020: £14.3 million), an increase of £7.5 million. This was principally
as a result of an increase in the profitability of the Group partially offset
by an increase in working capital, linked to an increase in inventories, and
higher income tax paid in 2021. Adjusted operating profit for the year was
£33.2 million (2020: £15.6 million), an increase of £17.6 million. This
was principally as a result of an increase in the profitability of the
Group. Adjusted cash flow from operations conversion for the year was 65.8%
(2020: 91.6%), a reduction of 25.8pp, due to the significant impact of
replenishment of inventories during 2021 and the higher level of capital
expenditure related to the incremental development capital expenditure
programme, which was completed in 2021.
On 10 November 2021, the Group listed on the premium segment of the London
Stock Exchange, having previously been under private ownership. As part of
this process, the Group repaid all legacy financing arrangements including
shareholder loans funded by a part draw down on a new £80 million revolving
credit facility, of which £56.5 million was drawn at 31 December 2021, a
share capital raise of £25.1 million and existing cash.
Capital expenditures
The Group's capital expenditures mainly relate to investment in operating
plant and equipment. The following table sets out the Group's capital
expenditure, including right-of-use assets, net of transfers from assets under
construction.
2021 2020
£m £m
Freehold land and buildings 0.7 1.0
Leasehold buildings 0.6 0.5
Assets under construction ((1)) 2.0 (1.4)
Plant and equipment 5.2 8.8
Fixtures and fittings 1.2 0.7
Total 9.7 9.6
((1)) The significant parts of the assets under construction relate to plant
and equipment.
Since 2015, approximately £25 million of development capital expenditure has
been invested by the Group in an incremental programme across all three of its
manufacturing plants to provide flexibility and improve quality, capacity and
productivity. The incremental capital expenditure programme was completed in
the current financial year.
Key capital expenditure in the year ended 31 December 2021 related to:
investment in an additional hybrid production line and robotic systems at the
manufacturing site in Turkey; production line upgrades at the UK manufacturing
site; and vertical welding line upgrades at the manufacturing site in the
Netherlands. Investments in warehousing facilities have also been made in
Turkey and the UK.
Net debt
During the year ended 31 December 2021, the Group refinanced and repaid all
legacy financing arrangements and shareholder loans, replacing them with a new
three-year revolving credit facility of £80 million.
At 31 December 2021, statutory net debt (including IFRS 16 leases) of £50.2
million comprises £56.5 million drawn down against the revolving credit
facility and £9.3 million finance leases net of £15.6 million cash.
At 31 December 2020, statutory net debt (including IFRS 16 leases) of £69.1
million comprised £67.6 million shareholder loans, a £1.8 million ABL
revolving credit facility, £9.2 million ABL and Lombard term loans and £10.6
million finance leases net of £20.1 million cash.
2021 2020
£m £m
Revolving credit facility 56.5 -
ABL revolving credit facility - 1.8
ABL and Lombard term loans - 9.2
Shareholder loans - 67.6
Cash (15.6) (20.1)
Net debt before finance leases 40.9 58.5
Finance leases 9.3 10.6
Net debt 50.2 69.1
George Letham
Chief Financial Officer
14 March 2022
Consolidated income statement
for the year ended 31 December 2021
Unaudited
2021 2020
Notes £'000 £'000
Continuing operations
Revenue 4 272,285 196,565
Cost of sales (192,279) (139,372)
Gross profit 80,006 57,193
Selling and distribution expenses (35,478) (31,265)
Administrative expenses (excluding exceptional items) (11,584) (11,741)
Exceptional items 4 (9,589) -
Administrative expenses (21,173) (11,741)
Other operating income 5 3,204 5,356
Other operating expenses - (19)
Operating profit 4 26,559 19,524
Finance income 141 68
Finance costs 6 (10,379) (10,405)
Profit before tax 16,321 9,187
Income tax expense 7 (1,661) (488)
Profit for the year 14,660 8,699
Notes 2021 2020
Earnings per share
Basic 8 11.51p 6.83p
Diluted 8 11.51p 6.83p
Adjusted earnings per share
Basic 8 16.92p 4.44p
Diluted 8 16.92p 4.44p
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Unaudited
2021 2020
Notes £'000 £'000
Profit for the year 14,660 8,699
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 5,192 1,337
operations and qualifying hedges of net investments in foreign operations
Income tax effect 7 (1,235) (286)
Exchange differences on translation of foreign operations (26,072) (8,890)
Net other comprehensive expense that may be reclassified to profit or loss in (22,115) (7,839)
subsequent periods
Other comprehensive expense not to be reclassified to profit or loss in
subsequent periods:
Remeasurement losses on defined benefit plans (141) (317)
Income tax effect 7 35 70
Net other comprehensive expense not to be reclassified to profit or loss in (106) (247)
subsequent periods
Other comprehensive expense for the year, net of tax (22,221) (8,086)
Total comprehensive (expense)/income for the year, net of tax attributable to (7,561) 613
owners of the parent
Consolidated balance sheet
as at 31 December 2021
Unaudited
2021 2020
Notes £'000 £'000
Assets
Non-current assets
Property, plant and equipment 10 53,694 61,024
Trade and other receivables 13 10 17
Deferred tax assets 7 6,284 4,342
59,988 65,383
Current assets
Inventories 12 56,781 30,986
Trade and other receivables 13 46,731 39,024
Income tax receivable 104 70
Cash and cash equivalents 15,563 20,083
119,179 90,163
Total assets 179,167 155,546
Equity and liabilities
Equity
Share capital 16 127,353 65
Share premium 16 13,391 198
Merger reserve (114,469) 940
Retained 57,814 43,260
earnings
Foreign currency reserve (57,177) (35,062)
Total equity attributable to owners of the parent 26,912 9,401
Non-current liabilities
Interest-bearing loans and borrowings 11 62,865 85,785
Deferred tax liabilities 7 126 -
Provisions 15 158 203
Net employee defined benefit liabilities 1,728 2,529
64,877 88,517
Current liabilities
Trade and other payables 14 83,883 53,658
Interest-bearing loans and borrowings 11 1,794 3,347
Income tax payable 1,522 431
Provisions 15 179 192
87,378 57,628
Total liabilities 152,255 146,145
Total equity and liabilities 179,167 155,546
Consolidated statement of changes in equity
for the year ended 31 December 2021
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 1 January 2020 65 198 940 34,808 (27,223) 8,788
Profit for the year - - - 8,699 - 8,699
Other comprehensive expense for the year - - - (247) (7,839) (8,086)
Total comprehensive income/(expense) - - - 8,452 (7,839) 613
At 31 December 2020 (Unaudited) 65 198 940 43,260 (35,062) 9,401
Profit for the year - - - 14,660 - 14,660
Other comprehensive expense for the year - - - (106) (22,115) (22,221)
Total comprehensive income/(expense) - - - 14,554 (22,115) (7,561)
Shares issued on incorporation 50 - - - - 50
"C" share redemption (13) - - - - (13)
Noosa share reorganisation (50) 50 - - - -
Share for share exchange - old (2) (248) 250 - - -
Share for share exchange - new 115,659 - (115,659) - - -
Shares issued 11,644 13,391 - - - 25,035
At 31 December 2021 127,353 13,391 (114,469) 57,814 (57,177) 26,912
Consolidated statement of cash flows
for the year ended 31 December 2021
Unaudited
2021 2020
Notes £'000 £'000
Operating activities
Profit before tax 16,321 9,187
Adjustments to reconcile profit before tax to net cash flows:
Depreciation of property, plant and equipment 10 7,409 7,921
Gain on disposal of property, plant and equipment (213) (142)
Finance income (141) (68)
Finance costs 6 10,379 10,405
Working capital adjustments:
Increase in trade and other receivables (17,380) (6,373)
(Increase)/decrease in inventories (31,695) 3,681
Increase in trade and other payables 40,291 3,549
Increase in provisions 158 8
Movement in other financial assets and liabilities - (33)
Decrease in other pension provisions (59) (39)
Difference between pension charge and cash contributions (22) 5
25,048 28,101
Income tax paid (3,734) (1,927)
Interest received 141 68
Net cash flows from operating activities 21,455 26,242
Investing activities
Proceeds from sale of property, plant and equipment 487 474
Purchase of property, plant and equipment 10 (8,646) (8,640)
Net cash flows used in investing activities (8,159) (8,166)
Financing activities
Transaction costs related to refinancing (1,171) (153)
Proceeds from external borrowings 56,500 -
Repayment of external borrowings (11,001) (6,999)
Repayment of shareholder loans (76,528) -
Settlement of deferred consideration (202) -
Payment of lease liabilities (1,666) (1,723)
Share capital issued 25,085 -
Share capital repaid - "C" shares (13) -
Interest paid (779) (684)
Net cash flows used in financing activities (9,775) (9,559)
Net increase in cash and cash equivalents 3,521 8,517
Net foreign exchange difference (8,041) (3,664)
Cash and cash equivalents at 1 January 20,083 15,230
Cash and cash equivalents at 31 December 15,563 20,083
Notes to the consolidated financial statements
for the year ended 31 December 2021
1 Group reorganisation
On 10 November 2021, the Company acquired the entire shareholding of Noosa
Holdings Jersey Limited by way of a share for share exchange. Also on 10
November 2021, Noosa Holdings Jersey Limited made a dividend in specie of its
investment in Stelrad Radiator Group Limited leaving the Company with two
direct subsidiaries. The insertion of the Company on top of the existing Noosa
Holdings Jersey Limited group does not constitute a business combination under
IFRS 3 Business Combinations and instead has been accounted for as a common
control transaction.
Under merger accounting principles, the assets and liabilities of the
subsidiaries are consolidated at book value in the consolidated financial
statements. The consolidated reserves of the Group have been adjusted to
reflect the statutory share capital of the Company with the difference between
the statutory share capital of the Company and that of Noosa Holdings Jersey
Limited presented as the merger reserve.
These consolidated financial statements of the Group are the first set of
financial statements for the newly formed Group and the prior period has been
presented as a continuation of the former Noosa Holdings Jersey Limited group
on a consistent basis as if the Group reorganisation had taken place at the
start of the earliest period presented. The prior period comparatives are
those of the former Noosa Holdings Jersey Limited group since no substantive
economic changes have occurred.
2 Basis of preparation
The results for the year ended 31 December 2021, including comparative
financial information, have been prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act
2006 (IFRS) and the applicable legal requirements of the Companies Act 2006.
In addition to complying with international accounting standards in conformity
with the requirements of the Companies Act 2006, the financial statements also
comply with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
Stelrad Group plc ("the Company") has adopted all IFRS in issue and effective
for the year.
While the financial information included in this preliminary announcement has
been prepared in accordance
with the recognition and measurement criteria of IFRS, this announcement does
not itself contain sufficient
information to comply with IFRS. The Company expects to publish full financial
statements that comply with
IFRS in March 2022.
The financial information set out above does not constitute the Company's
statutory accounts for the years
ended 31 December 2021 but is derived from those accounts. Statutory accounts
for 2021 will be delivered in due course. The auditors have reported on those
accounts: their report was unqualified, did not draw attention to any matters
by way of emphasis and did not contain statements under s498 (2) or (3) of the
Companies Act 2006.
The financial information presented in respect of the year ended 31 December
2021 has been prepared on a basis consistent with the financial information
presented for the year ended 31 December 2020.
Going concern
Having considered the Group's current trading, cash flow generation and debt
maturity and applying severe but plausible stress testing scenarios including
the impacts of Covid-19, the Directors have concluded that it is appropriate
to prepare the consolidated financial statements on a going concern basis.
Under a severe but plausible downside scenario, the Group remains within its
debt facilities and its financial covenants until 31 December 2024. Based on
this going concern review, the Directors have concluded that, at the time of
approving the financial statements, the Group will be able to continue to
operate within its existing facilities and is well placed to manage its
business risks successfully.
Prior year comparatives
The financial statements for the year ended 31 December 2020, forming the
comparative figures of the financial statements for the year ended 31 December
2021, are referenced as unaudited. Prior to the reorganisation, the Group was
not in existence in its current form, as outlined in note 1. As Stelrad
Group plc was not incorporated until October 2021, technically an audit of the
comparatives in accordance with the Companies Act 2006 was not performed and
hence no audit opinion was issued in respect of the consolidated financial
statements of Stelrad Group plc for the year ended 31 December 2020.
However, a statutory audit was performed and an audit opinion was issued on
the consolidated financial statements of Noosa Holdings Jersey Limited for the
year ended 31 December 2020 and on the consolidated financial statements of
Stelrad Radiator Group Limited for the year ended 31 December 2020, which are
publicly available. In addition, as part of the process of Admission to
listing on the Official List and to trading on the London Stock Exchange, an
accountant's report, undertaken by PricewaterhouseCoopers LLP, in accordance
with the Standards for Investment Reporting 2000 issued by the Auditing
Practices Board in the United Kingdom, was issued on the historical
information included in the Prospectus. The accountant's report, dated 5
November 2021, included an unqualified opinion on the historical information
presented.
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 does
not consider that it has made any judgements which would have a significant
effect on the amounts recognised in the consolidated financial statements.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, which have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances
arising beyond the control of the Group. Such changes are reflected in the
assumptions when they occur.
Rebates
A proportion of rebates is paid to the end consumers of goods sold.
Uncertainties exist over provisions made as, until claims are made by end
consumers, the Group cannot be certain which consumers have purchased which
products. Due to this uncertainty it is therefore judgemental what contractual
rates, if any, will apply to goods sold.
Significant management judgement is required in order to assess the provision
required at the balance sheet date. Management is able to utilise market
information and historical/current data and trends in order to make an
appropriate provision.
A reasonably possible change in the estimates surrounding rebates would not
result in a material impact to the financial statements.
4 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.
During the year ended 31 December 2021, the Group, led by the CODM, amended
the way that it reports segments. Previously, there was deemed to be only one
reportable segment, being the manufacture and distribution of radiators.
Adjusted operating profit is earnings before interest, tax, amortisation,
exceptional items and foreign exchange differences.
Unaudited
Revenue by geographical market 2021 2020
£'000 £'000
UK & Ireland 130,405 89,430
Europe 118,063 90,566
Turkey and International 23,817 16,569
Total revenue 272,285 196,565
Unaudited
Adjusted operating profit by geographical market 2021 2020
£'000 £'000
UK & Ireland 21,589 8,618
Europe 12,929 9,821
Turkey and International 2,898 1,218
Central costs (4,247) (4,034)
Adjusted operating profit 33,169 15,623
Exceptional items (9,589) -
Foreign exchange differences 2,979 3,901
Operating profit 26,559 19,524
Unaudited
Non-current operating assets 2021 2020
£'000 £'000
UK 20,237 20,083
The Netherlands 23,606 26,841
Turkey 8,362 12,805
Other 1,489 1,295
Total 53,694 61,024
The exceptional items in the year ended 31 December 2021 are costs relating to
professional advisers employed by the Group to explore the potential sale of
the Group and to subsequently execute the IPO. These costs are one-off in
nature and disclosing these costs as exceptional allows the true underlying
performance of the Group to be more easily reviewed. There were no
exceptional items in the year ended 31 December 2020.
The revenue information above is based on the locations of the customers. All
revenue arises from the sale of goods.
One customer has revenues in excess of 10% of revenue (2020: one).
5 Other operating income
Unaudited
2021 2020
£'000 £'000
Net gain on disposal of property, plant and equipment 213 142
Foreign currency gains 2,575 3,306
Net gains on forward derivative contracts 404 595
Sundry other income 12 9
Government grant income - 1,304
3,204 5,356
6 Finance costs
Unaudited
2021 2020
£'000 £'000
Interest on bank loans 370 449
Interest on ultimate shareholder loans 9,117 9,230
Amortisation of loan issue costs 178 80
Interest expense on defined benefit liabilities 260 263
Finance charges payable on lease liabilities 127 148
Other finance charges 327 235
10,379 10,405
7 Income tax expense
The major components of income tax expense are as follows:
Unaudited
2021 2020
£'000 £'000
Consolidated income statement
Current income tax:
Current income tax charge 4,179 1,711
Adjustments in respect of current income tax charge of previous year (68) (59)
Deferred tax:
Relating to origination and reversal of temporary differences (2,095) (853)
Relating to change in tax rates (355) (311)
Income tax expense reported in the income statement 1,661 488
Unaudited
2021 2020
£'000 £'000
Consolidated statement of comprehensive income
Tax related to items recognised in other comprehensive income/(expense) during
the year:
Deferred tax on actuarial loss (35) (70)
Current tax on monetary items forming part of net investment and on hedges of 1,235 286
net investment
Income tax expensed to other comprehensive income/(expense) 1,200 216
Reconciliation of tax expense and the accounting profit at the tax rate in the
United Kingdom of 19% (2020: 19%):
Unaudited
2021 2020
£'000 £'000
Profit before tax 16,321 9,187
Profit before tax multiplied by standard rate of corporation tax in the UK of 3,101 1,746
19% (2020: 19%):
Adjustments in respect of current income tax charge of previous year (68) (59)
Non-deductible expenses 2,715 1,640
Differences arising due to tax losses (3,052) (527)
Other timing differences (271) (428)
Benefit of overseas investment incentives (1,723) (1,974)
Effect of changes in overseas tax rates (102) (180)
Effect of different overseas tax rates 1,314 401
Effect of changes in UK deferred tax rate (253) (131)
Total tax expense reported in the income statement 1,661 488
Deferred tax
Deferred tax relates to the following:
Consolidated balance sheet Consolidated income statement
Unaudited Unaudited
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Capital allowances 579 530 (42) 1,336
Pension 414 526 134 67
Fixed asset fair value adjustments (491) (465) (41) (542)
Losses available for offsetting against future income 4,440 2,846 1,659 435
Other temporary differences 1,216 905 740 (134)
Deferred tax credit 2,450 1,162
Net deferred tax assets 6,158 4,342
Reflected in the balance sheet as:
Deferred tax assets
Continuing operations 6,284 4,342
Deferred tax liabilities
Continuing operations (126) -
Deferred tax assets, net 6,158 4,342
Reconciliation of deferred tax assets, net
Unaudited
2021 2020
£'000 £'000
Opening balance as at 1 January 4,342 3,292
Tax income recognised in income statement 2,450 1,162
Tax income recognised in other comprehensive income/(expense) 35 70
Exchange adjustment (669) (182)
Closing balance as at 31 December 6,158 4,342
The Group offsets tax assets and liabilities if it has a legally enforceable
right to set them off and they are levied by the same tax authority. Deferred
tax assets in respect of losses of £581,000 (2020: £619,000) have been
recognised in respect of one (2020: one) loss making subsidiary company; these
are recognised on the grounds of future projected performance.
Deferred tax asset recognition
During the year the Group has chosen to recognise previously unrecognised
deferred tax assets in relation to tax losses. The newly recognised losses
are all post-April 2017 UK losses and the decision has been taken to recognise
the losses in the year because the new capital structure of the Group post-IPO
means that tax deductible interest will be lower which, along with higher UK
profitability, will lead to these losses being utilised over a much shorter
time frame.
The deferred tax assets have been analysed in detail at the year end and the
recognition of assets, in particular those in respect of tax losses, has been
scrutinised in detail with modelling undertaken to ensure that they are likely
to be utilised over a period of time where profitability can be estimated with
reasonable certainty.
Unrecognised deferred tax balances
Unaudited
2021 2020
£'000 £'000
Capital allowances 29 22
Losses available for offsetting against future income 1,904 3,930
1,933 3,952
The Group has tax losses which arose in the United Kingdom of £8,653,000
(2020: £20,684,000) that are available indefinitely for offsetting against
future taxable profits of the companies in which the losses arose. Deferred
tax assets have not been recognised in respect of these losses as they arose
prior to April 2017 and have arisen in subsidiaries that are not profit making
and there are no other tax planning opportunities or other evidence of
recoverability in the near future.
Changes in the corporate income tax rate
The UK Government has announced its intention to increase the UK corporation
tax rate to 25% by 1 April 2023. This rate change has now been substantively
enacted. When recognising deferred tax within the balance sheet, the Group has
used a blended rate which represents the rate at which deferred tax is
expected to unwind.
8 Earnings per share
Unaudited
2021 2020
£'000 £'000
Net profit for the period attributable to owners of the parent 14,660 8,699
Exceptional items 9,589 -
Foreign exchange differences (2,979) (3,901)
Tax on exceptional items and foreign exchange differences 282 858
Adjusted net profit for the period attributable to owners of the parent 21,552 5,656
Unaudited
2021 2020
Basic weighted average number of shares in issue 127,352,555 127,352,555
Diluted weighted average number of shares in issue 127,352,555 127,352,555
Earnings per share
Basic earnings per share (pence per share) 11.51 6.83
Diluted earnings per share (pence per share) 11.51 6.83
Adjusted earnings per share
Basic earnings per share (pence per share) 16.92 4.44
Diluted earnings per share (pence per share) 16.92 4.44
The number of shares in issue is as at IPO as this reflects the underlying
number of shares. The 2020 comparatives have been adjusted to align with the
number of shares at IPO to allow for comparability.
9 Dividends
The Board is recommending a dividend of 0.96 pence per share (2020: nil),
which, if approved, will mean a total dividend payment of £1,223,000.
The proposed final dividend is subject to approval by shareholders at the
Annual General Meeting and has not been included as a liability in these
consolidated financial statements.
10 Property, plant and equipment
Freehold land and buildings Leasehold buildings Assets under construction Plant and equipment Fixtures and fittings Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2020 23,223 10,082 4,987 46,798 6,967 92,057
Additions 26 523 6,568 2,175 271 9,563
Transfers 971 - (8,016) 6,583 462 -
Disposals - - (16) (814) (466) (1,296)
Exchange adjustment (491) 574 (111) (1,781) (220) (2,029)
At 31 December 2020 (Unaudited) 23,729 11,179 3,412 52,961 7,014 98,295
Additions 138 546 6,379 1,724 863 9,650
Transfers 550 - (4,400) 3,521 329 -
Disposals - - (32) (163) (593) (788)
Exchange adjustment (2,589) (706) (591) (10,137) (694) (14,717)
At 31 December 2021 21,828 11,019 4,768 47,906 6,919 92,440
Accumulated depreciation and impairment
At 1 January 2020 8,162 920 - 16,977 4,595 30,654
Depreciation charge 859 1,146 - 4,887 1,029 7,921
Disposals - - - (545) (419) (964)
Exchange adjustment (13) 66 - (261) (132) (340)
At 31 December 2020 (Unaudited) 9,008 2,132 - 21,058 5,073 37,271
Depreciation charge 850 1,151 - 4,688 720 7,409
Disposals - - - (90) (424) (514)
Exchange adjustment (556) (160) - (4,340) (364) (5,420)
At 31 December 2021 9,302 3,123 - 21,316 5,005 38,746
Net book value
At 31 December 2021 12,526 7,896 4,768 26,590 1,914 53,694
At 31 December 2020 (Unaudited) 14,721 9,047 3,412 31,903 1,941 61,024
At 1 January 2020 15,061 9,162 4,987 29,821 2,372 61,403
The carrying value of right-of-use assets within property, plant and
equipment, by line item, at the year end is:
Unaudited
2021 2020
£'000 £'000
Leasehold buildings 7,814 8,937
Plant and equipment 911 1,240
Fixtures and fittings 638 511
9,363 10,688
Right-of-use asset additions within property, plant and equipment, by line
item, during the year are:
Unaudited
2021 2020
£'000 £'000
Leasehold buildings 543 407
Plant and equipment 79 357
Fixtures and fittings 382 159
1,004 923
Depreciation of right-of-use assets within property, plant and equipment, by
line item, during the year is:
Unaudited
2021 2020
£'000 £'000
Leasehold buildings 1,127 1,141
Plant and equipment 348 295
Fixtures and fittings 204 308
1,679 1,744
Land and buildings with a carrying amount of £10,890,000 (2020: £3,879,000)
are subject to a first charge to secure the Group's bank loan.
No borrowing costs have been capitalised since the assets have not met the
criteria for qualifying assets.
11 Financial liabilities
Financial liabilities - interest-bearing loans and borrowings
Unaudited
Effective interest rate Maturity 2021 2020
% £'000 £'000
Current interest-bearing loans and borrowings
Lease liabilities 1,794 1,660
ABL term loan facility Libor/Euribor + 2.25% 18 Dec 2022 - 561
Lombard facility Libor + 2.50% Jul 2024 - 1,187
Unamortised loan costs - (61)
1,794 3,347
Non-current interest-bearing loans and borrowings
Lease liabilities 7,524 8,955
Ultimate shareholder loans 15% 25 Sep 2033 - 67,411
Deferred consideration - shares - 202
ABL term loan facility Libor/Euribor + 2.25% 18 Dec 2022 - 3,853
ABL revolving credit facility Libor/Euribor + 1.50% 18 Dec 2022 - 1,798
Lombard facility Libor + 2.50% Jul 2024 - 3,626
Revolving credit facility SONIA + 2.25% 9 Nov 2026 56,500 -
Unamortised loan costs (1,159) (60)
62,865 85,785
Total interest-bearing loans and borrowings 64,659 89,132
The ultimate shareholder loans consist of two amounts: i) an amount funded by
the ultimate controlling party of the Group, The Bregal Fund III LP; and ii)
an amount funded by certain managers of the Company. The loan notes issued by
The Bregal Fund III LP were listed on the Channel Islands Securities
Exchange. The shareholder loans were repaid during the year ended 31
December 2021 as part of the Group reorganisation with the loan notes issued
by The Bregal Fund III LP delisted as part of this transaction.
On 10 November 2021, the Group refinanced its external debt as part of the
IPO; consequently the Group had three external debt facilities during the
year:
i) a £32.9 million asset-based lending ("ABL")
facility with the Royal Bank of Scotland Invoice Finance, consisting of a
£28.0 million revolving credit facility and a £4.9 million term loan
facility, which was repaid on 10 November 2021;
ii) a term loan facility with Lombard North Central PLC
("Lombard"), which was repaid on 10 November 2021; and
iii) 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.
The ABL facility was a cross-collateral agreement secured on specific assets
of certain Group companies. Certain companies that are party to the agreement
were able to draw borrowings that were secured on assets elsewhere in the
Group. As part of the facility the Group drew down the following borrowings in
the year:
· a term loan secured on the land and buildings and plant and
machinery of certain Group companies; and
· a revolving credit facility secured on the inventory and
receivables of certain Group companies.
The Lombard facility was secured on the plant and machinery of certain Group
companies.
All of the security held under the ABL and Lombard facilities was released as
part of the refinancing on 10 November 2021.
The £80 million revolving credit facility is secured on the assets of certain
subsidiaries within the Group.
The shareholder loans and accrued interest balances were repaid on 10 November
2021 as part of the Group reorganisation. As a result the ultimate
shareholder loan balance, after including accrued interest, at 31 December
2021 is £nil (2020: £67,411,000). Prior to 10 November 2021 further interest
of £9,117,000 was accrued during 2021 (2020: £9,230,000 further interest was
accrued).
The £202,000 deferred consideration, which arose in 2015 following the sale
of a business, was repaid on 15 October 2021 (2020: £202,000 deferred
consideration outstanding).
12 Inventories
Unaudited
2021 2020
£'000 £'000
Raw materials - cost 18,647 10,756
Work in progress - cost 1,293 829
Finished goods - lower of cost and net realisable value 34,181 16,778
Other consumables 2,660 2,623
56,781 30,986
The cost of inventories recognised as an expense in the year was £192,279,000
(2020: £138,859,000). The provision for the impairment of stocks decreased in
the year giving rise to a credit of £127,000 (2020: credit of £28,000). At
31 December 2021 the provision for the impairment of stocks was £1,534,000
(2020: £1,815,000).
13 Trade and other receivables
Unaudited
2021 2020
£'000 £'000
Current
Trade receivables 42,749 35,658
Other receivables 3,314 2,912
Prepayments 668 454
46,731 39,024
Non-current
Trade receivables 10 17
The table below sets out the movements in the allowance for expected credit
losses of trade receivables:
Unaudited
2021 2020
£'000 £'000
At 1 January 130 105
Charge for the year 108 52
Utilised (23) -
Unused amounts reversed - (23)
Exchange adjustment (11) (4)
At 31 December 204 130
As at 31 December, the details of the provision matrix used to calculate
provisions for trade receivables (with the ageing gross of impairment) are as
follows:
30-90 days
Total Current <30 days >90 days
£'000 £'000 £'000 £'000 £'000
2021
Gross carrying amount 42,963 38,014 1,464 2,645 840
Expected credit loss rate (%) - - 1 4 10
Expected credit loss 204 - 15 106 83
2020 (Unaudited)
Gross carrying amount 35,805 31,771 1,408 1,739 887
Expected credit loss rate (%) - - 1 3 7
Expected credit loss 130 - 14 53 63
14 Trade and other payables
Unaudited
2021 2020
£'000 £'000
Current
Trade payables 57,751 31,331
Other payables and accruals 22,198 16,844
Other taxes and social security 3,858 5,452
Interest payable 76 31
83,883 53,658
15 Provisions
Warranty Unused vacation Total
£'000 £'000 £'000
At 1 January 2020 70 425 495
Arising during the year 26 372 398
Utilised (34) (345) (379)
Unused amounts reversed - (10) (10)
Exchange adjustment (12) (97) (109)
At 31 December 2020 (Unaudited) 50 345 395
Arising during the year 30 397 427
Utilised (28) (223) (251)
Unused amounts reversed - (19) (19)
Exchange adjustment (17) (198) (215)
At 31 December 2021 35 302 337
Current 14 165 179
Non-current 21 137 158
Unused vacation
A provision is recognised in respect of an unused vacation pay liability due
to certain employees in Turkey. The timing of the provision is dependent on
the rate at which employees take additional vacation.
16 Share capital and reserves
During the year, the Company carried out a reorganisation of its share capital
to facilitate a listing to the premium segment of the Official List of the
Financial Conduct Authority and to trade on the London Stock Exchange Main
Market for listed securities. This is described below in the detail on
transactions in the year.
Unaudited Unaudited
2021 2021 2020 2020
Number £ Number £
Authorised, called up and fully paid
Ordinary shares of £1 each 127,352,555 127,352,555 - -
Ordinary "A" shares of £0.01 each - - 200,000 2,000
Ordinary "B" shares of £1 each - - 50,000 50,000
Ordinary "C" shares of £1 each - - 13,000 13,000
127,352,555 65,000
The movements in the ordinary share capital during the year ended 31 December
2021 were as follows:
Shares Share capital
Number £
At 1 January 2021 (Unaudited) 263,000 65,000
Issued on incorporation of Stelrad Group plc 50,000 50,000
Redemption of ordinary "C" shares (13,000) (13,000)
Noosa Holdings Jersey Limited share reorganisation - (49,500)
Share for share exchange:
· Noosa Holdings Jersey Limited (250,000) (2,500)
· Stelrad Group plc 115,658,370 115,658,370
Shares issued 11,644,185 11,644,185
At 31 December 2021 127,352,555 127,352,555
Transactions in the year
On incorporation on 8 October 2021, Stelrad Group plc (the "Company") issued
50,000 ordinary shares with a nominal value of £1 each for a total cash
consideration of £50,000. This was paid up in full on 10 November 2021.
On 15 October 2021, Noosa Holdings Jersey Limited redeemed its 13,000 ordinary
"C" shares at par value.
On 10 November 2021, the following transactions arose:
· Noosa Holdings Jersey Limited redesignated its 200,000
ordinary "A" shares as 200,000 ordinary shares of £0.01 each.
· Noosa Holdings Jersey Limited split its 50,000 ordinary "B"
shares as 50,000 ordinary shares of £0.01 each and 50,000 deferred redeemable
shares of £0.99 each. The 50,000 deferred redeemable shares of £0.99 each
were immediately redeemed with the credit applied to share premium.
· The Company acquired 100% of the ordinary shares of Noosa
Holdings Jersey Limited by way of a share for share exchange by issuing
115,658,370 ordinary shares of £1 each to the shareholders of Noosa Holdings
Jersey Limited.
· The Company issued an additional 11,644,185 ordinary shares of
£1 each at a value of £2.15 giving rise to a share premium of £13,391,000.
Subsequent to the year end, on 25 January 2022, a capital reduction
application was approved by the courts, reducing the value of ordinary shares
in issue from £1 to £0.001. Under the same application the courts approved
the reduction of the Company's share premium account in full. The reduction of
share capital and share premium will be transferred to retained earnings.
17 Commitments and contingencies
Commitments
Amounts contracted for but not provided in the financial statements amounted
to £1,389,000 (2020: £657,000) for the Group. All amounts relate to
property, plant and equipment.
Contingent liabilities
Termo Teknik Ticaret ve Sanayi A.S. has issued letters of guarantee and
letters of credit to its steel suppliers amounting to $30,089,000 (2020:
$6,814,000) and $40,518,000 (2020: $29,256,000) respectively. Termo Teknik
Ticaret ve Sanayi A.S. has also issued letters of guarantee denominated in
Turkish Lira totalling TL9,497,000 (2020: TL7,002,000).
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 31 December 2021 is £nil (2020: £nil).
The fair value of the unsettled forward contracts held at the balance sheet
date, determined by reference to their market values, is a liability of £nil
(2020: £nil).
As part of the new £80 million revolving credit facility, entered into in
November 2021, 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.
18 Related party disclosures
Prior to admission to the London Stock Exchange on 10 November 2021, the
ultimate controlling party was The Bregal Fund III LP.
The ultimate shareholder loans bore interest at 15% and consisted of two
amounts: i) an amount funded by the ultimate controlling party of the Group,
The Bregal Fund III LP; and ii) an amount funded by certain managers of the
Company.
The value of the loans at 31 December 2020 was £67,411,000, including accrued
interest of £28,000 (The Bregal Fund III LP: £56,932,000; managers:
£10,479,000).
During 2021 interest was accrued totalling £9,117,000 (2020: £9,230,000)
(The Bregal Fund III LP: £7,700,000 (2020: £7,795,000); managers:
£1,417,000 (2020: £1,435,000)).
The value of the loans at 31 December 2021 was £nil, due to repayment of the
shareholder loans and all accrued interest totalling £76,528,000 (The Bregal
Fund III LLP: £64,632,000; managers: £11,896,000) as part of the Group
reorganisation on 10 November 2021.
The Group owed deferred consideration to shareholders related to the sale of a
business of £nil (2020: £202,000 (The Bregal Fund III LP: £171,000;
managers: £31,000)). The deferred consideration to shareholders was repaid
on 15 October 2021.
Under the ownership agreement, before the Group reorganisation, the Group was
charged a monitoring fee of £200,000 per annum by Bregal Capital LLP, which
was the management company of the ultimate controlling party of the Group, The
Bregal Fund III LP. An amount of £nil (2020: £nil) was accrued for this at
the year end.
During the year the Group spent £9,000 (2020: £24,000) on purchases from
Polypal Netherlands BV (whose ultimate controlling party is also The Bregal
Fund III LP); the balance outstanding at the year end was £nil (2020: £nil).
The key management personnel are considered to be the Executive Directors of
the Group. The following table highlights the remuneration that is recorded in
the income statement in respect of these personnel, including Company social
security costs:
Unaudited
2021 2020
£'000 £'000
Short-term employment benefits 2,175 2,388
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