REG - Vic Plumbing - Full Year Results
06/12/2022 07:01
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RNS Number : 6653I Victorian Plumbing Group plc 06 December 2022
Victorian Plumbing Group PLC
Full year results for the year ended 30 september 2022
Results ahead of expectations, with H2 revenue growth as the Group
demonstrates continued trading momentum and further market share gains,
supported by a robust balance sheet
Board proposes maiden ordinary full year dividend of 1.1p and an additional
special dividend of 1.7p
Victorian Plumbing Group plc ('Victorian Plumbing', 'the Group'), the UK's
leading online specialist bathroom retailer, announces its full year results
for the year ended 30 September 2022 ('2022').
2022 2021 Change
Revenue £269.4m £268.8m -%
Gross profit(1) £121.0m £130.5m (7%)
Gross profit margin(2) 45% 49% (4ppts)
Adjusted EBITDA(3) £19.5m £40.1m (51%)
Adjusted EBITDA margin(4) 7% 15% (8ppts)
Operating profit £12.1m £20.0m (40%)
Net cash £45.5m £32.7m 39%
Adjusted diluted earnings per share(10) 3.9p 9.3p (58%)
Ordinary full year dividend per share 1.1p - -
Special dividend per share 1.7p - -
Financial highlights
● H2 revenue up 6% on last year with revenue for the full year broadly flat at
£269.4 million (2021: £268.8 million); an increase of 78% when compared to
FY19, pre-Covid-19
● Further market share gains establishing Victorian Plumbing's position as the
UK's No.1 bathroom retailer(13)
● Gross profit margin increased in H2 to 45% (H1: 44%) with gross profit for the
year of £121.0 million (2021: £130.5 million) and a gross profit margin of
45% (2021: 49%)
● Adjusted EBITDA of £19.5 million (2021: £40.1 million) with adjusted EBITDA
margin of 7% (2021: 15%)
● Robust, debt-free balance sheet with closing net cash position
of £45.5m (2021: £32.7m)
● Free cash flow(11) of £14.3 million (2021: £32.6 million). Operating cash
conversion(6) of 73% (2021: 81%)
● The Board proposes a maiden ordinary full year dividend of 1.1p per share and
a special dividend of 1.7p per share with a total cash distribution to
shareholders of £9.0m
Operational and strategic highlights
● Average order value(8) up 3% to £306 (2021: £297), against a tough market
backdrop that saw total orders(7) reduce by 3% to 880,000 (2021: 906,000) with
an increase of +2% in H2
● Marketing spend as a percentage of revenue increased to 28% (2021: 26%)
reflecting strategic increased investment during H1 FY22 to drive demand as
the UK emerged from Covid-19 related lockdown restrictions, resulting in
significant market share gains
● Trustpilot rating(9) of 'Excellent' with an increased average score of 4.5
(2021: 4.3)
● Further progress in our strategic growth areas of 'Trade' and 'Adjacent
categories':
o Trade revenue grew 25% to £52.8m (2021: £42.1m), representing 20% of
total revenue (2021: 16%). During H1 2022 we also launched our first ever
targeted trade radio campaign
o Increased our range of tiles by 56% and lighting by 53% since September
2021, which has driven an increase in revenue from these categories of 23% in
2022. Planned increase in warehouse space will facilitate further growth in
these categories
● Investment in technology platform to drive future growth:
o Final testing of website re-platform, which will enhance the customer
journey
o Development and testing of new Trade app, to drive engagement and repeat
business from Trade customers
● Good progress on securing new warehouse facilities to support efficiency
opportunities and future capacity growth
Current Trading and Outlook
● The Group has had a strong start to FY23 with 10% revenue growth to date,
whilst maintaining H2 gross profit margin and with lower marketing spend
versus the comparative period last year
● We are conscious of the current macroeconomic conditions and will continue to
monitor consumer behaviour and tailor our pricing and marketing approach
accordingly
● We continue to focus on our long-term goals and are making good progress on
all of our strategic growth areas. Underpinned by our market share gains we
are confident in the future growth prospects of the Group.
Mark Radcliffe, Founder and Chief Executive Officer of Victorian Plumbing
Group plc, said:
"Following a tough first half of the financial year, we have returned to
growth in the second half, increasing our market share and establishing our
position as the UK's No.1 bathroom retailer. Our distinctive brand and
extensive choice of quality bathroom products - including quality own-brand
ranges and an unrivalled suite of third-party options - remain compelling
drivers in attracting consumers to Victorian Plumbing, whilst the strength of
our supply chain and our strategic investment in inventory means that the
majority of our products have high availability.
"As a highly cash generative business with a strong balance sheet and growing
momentum through 2022 and into 2023, we see the macro operating and economic
environment as an opportunity to further strengthen our market position and we
enter the new financial year as the UK's No. 1 bathroom retailer with
confidence and real excitement in our plans for further progress."
Analyst presentation
A presentation for analysts will be held at 09:00am GMT, Tuesday 6 December
2022. If you wish to attend, please contact FTI Consulting via
VictorianPlumbing@fticonsulting.com
(mailto:VictorianPlumbing@fticonsulting.com) .
-ENDS-
For further information, please contact:
Victorian Plumbing Group plc via FTI Consulting
Mark Radcliffe, Chief Executive Officer +44 20 3727 1000
Paul Meehan, Chief Financial Officer
FTI Consulting (Financial PR) +44 20 3727 1000
Alex Beagley, Eleanor Purdon, Harriet Jackson, Amy Goldup VictorianPlumbing@fticonsulting.com
Houlihan Lokey UK Ltd (Nominated Adviser) +44 20 7484 4040
Sam Fuller, Tim Richardson
Barclays Bank PLC (Joint Broker) +44 20 7623 2323
Nicola Tennent, Stuart Muress
Numis Securities Limited (Joint Broker) +44 20 7260 1000
Luke Bordewich, Tom Jacob, Oliver Steele
About Victorian Plumbing Group
Victorian Plumbing is the UK's leading online specialist bathroom retailer,
offering a wide range of over 32,000 products to B2C and Trade customers.
Victorian Plumbing offers its customers a one-stop shop solution for the
entire bathroom with more than 130 own and third-party brands across a wide
spectrum of price points.
The Group's product design and supply chain strengths are complemented by its
creative and brand-focused marketing strategy, which predominantly focuses on
online channels to drive significant and growing traffic to its website.
Headquartered in Skelmersdale, Lancashire, the Group employs over 550 staff
across seven locations in Skelmersdale, Manchester and Birmingham.
Cautionary statement
This announcement of annual results does not constitute or form part of and
should not be construed as an invitation to underwrite, subscribe for, or
otherwise acquire or dispose of any Victorian Plumbing Group plc (the
"Company") shares or other securities in any jurisdiction nor is it an
inducement to enter into investment activity nor should it form the basis of
or be relied on in connection with any contract or commitment or investment
decision whatsoever. It does not constitute a recommendation regarding any
securities. Past performance, including the price at which the Company's
securities have been bought or sold in the past, is no guide to future
performance and persons needing advice should consult an independent financial
advisor. This announcement may include statements that are, or may be deemed
to be, "forward-looking statements" (including words such as "believe",
"expect", "estimate", "intend", "anticipate" and words of similar meaning). By
their nature, forward-looking statements involve risk and uncertainty since
they relate to future events and circumstances, and actual results may, and
often do, differ materially from any forward-looking statements. Any
forward-looking statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save as required
by applicable law, the Company undertakes no obligation to publicly revise any
forward-looking statements in this announcement, whether following any change
in its expectations or to reflect events or circumstances after the date of
this announcement.
Summary of performance
Units 2022 2021 Change
Income statement
Revenue £m 269.4 268.8 -%
Gross profit((1)) £m 121.0 130.5 (7%)
Gross profit margin((2)) % 45% 49% (4ppts)
Adjusted EBITDA((3)) £m 19.5 40.1 (51%)
Adjusted EBITDA margin((4)) % 7% 15% (8ppts)
Profit before tax £m 11.8 19.7 (40%)
Earnings per share
Diluted earnings per share((5)) pence 2.9 4.5 (36%)
Adjusted diluted earnings per share((10)) pence 3.9 9.3 (58%)
Cash flow
Free cash flow((11)) £m 14.3 32.6 (56%)
Operating cash conversion((6)) % 73% 81% (8ppts)
Net cash and cash equivalents £m 45.5 32.7 39%
Key performance indicators
Total orders((7)) '000 880 906 (3%)
Active customers((12)) '000 608 638 (5%)
Average order value((8)) £ 306 297 3%
Average Trustpilot rating((9)) Score / 5 4.5 4.3 5%
Marketing spend as a % of revenue % 28% 26% (2ppts)
Trade revenue as a % of total % 20% 16% 4ppts
(1) Gross profit is defined as revenue less cost of sales. Cost
of sales includes all direct costs incurred in purchasing products for resale
along with packaging, distribution and transaction costs.
(2) Gross profit margin is defined as gross profit as a
percentage of revenue.
(3) Adjusted EBITDA is defined as operating profit before
depreciation, amortisation, exceptional items and IFRS 2 share-based payments.
(4) Adjusted EBITDA margin is defined as adjusted EBITDA as a
percentage of revenue.
(5) Diluted EPS has been calculated as per note 9.
(6) Operating cash conversion is free cash flow as a percentage
of adjusted EBITDA.
(7) Total orders is defined as the total number of orders
dispatched to customers in the period.
(8) Average order value is defined as revenue divided by total
orders in the period.
(9) The average Trustpilot rating is defined as the monthly
average of all ratings made through Trustpilot.
(10) Adjusted diluted earnings per share is defined as adjusted net
income divided by the weighted average number of shares for diluted EPS.
Adjusted net income is defined as net income before exceptional items and IFRS
2 share-based payment and after adjusting for the tax impact of those items.
(11) Free cash flow is cash generated from operating activities
before exceptional items and taxation less capital expenditure and cash flows
relating to leases.
(12) Active customers are the number of unique customers who placed
an order in the period.
(13) Mintel UK Bathrooms & Bathrooms Accessories Report 2022.
Summary of operating performance
This has been a year of ongoing change in consumer behaviour as the UK moved
out of the final stages of restrictions related to Covid-19 into a more normal
environment in the second half of the financial year. Since the Spring,
consumers have been facing a series of headwinds, in particular, general
inflation and energy prices.
Throughout the year, the business has continued to execute on its strategy to
ensure that we provide the most extensive and price competitive choice of
high-quality bathroom products to UK consumers.
This meant that we returned to revenue growth in the second half of FY22 and
secured our position as the No. 1 retailer of bathroom products in the UK. Our
commitment to provide the most extensive choice of high quality bathroom
products and the best customer experience sets us up well for the next phase
of our growth.
Revenue was in line with last year at £269.4 million (2021: £268.8 million)
reflecting a decrease in total orders of 3% and an increase of 3% in the
average order value. Adjusted EBITDA decreased by 51% to £19.5 million (2021:
£40.1 million) and adjusted EBITDA margin decreased to 7% (2021: 15%).
Against tougher Covid-19 impacted revenue comparisons, relative performance in
H1 of the financial year was impacted by pressures on margin from the higher
cost of product and inbound container shipping costs, coupled with a strategic
decision to be more proactive in our marketing investment to successfully grow
market share.
Our second half performance has shown growing momentum, with a return to
revenue growth (+6%) alongside a more normalised marketing spend. Margin
improved as we saw some benefit from reduced container shipping rates,
alongside careful management of price increases offset partially by a weaker
dollar exchange rate. These factors are supporting real momentum for the
business going into FY23.
Our strategic focus
Our strategy covers three growth horizons: core B2C, trade and adjacent
products.
Our core market is retailing bathroom products and accessories to consumers
in the UK through our market leading online platform. The shift to online in
consumers' buying behaviour for bathroom products and accessories continues
and there is still some way to go before this transition reaches maturity. We
are particularly well placed to continue to gain further market share through
these structural tailwinds and by taking share from traditional physical
retailers and other online competitors, leveraging our market and brand
position and our strong balance sheet.
In the medium term there is a potential further opportunity to translate our
domestic success into carefully selected international markets.
Our second growth horizon focuses on the B2B opportunity to retail bathroom
products and accessories to Trade customers. In the year ended 30 September
2022, 20% (2021:16%) of our revenue came from Trade accounts, compared with
an estimated 30-40% of the market. The Victorian Plumbing brand has
historically been mainly consumer-focused. By broadening our marketing
approach, such as via targeted radio advertising, expanding our focus to
provide relevant products to Trade customers and in particular by providing
the best platform to browse and order tailored for Trade customers' needs, we
believe we can make further meaningful market share gains in this area.
Finally, our third horizon focuses on adjacent products that consumers look
for when renovating a bathroom. Given our position in the bathroom product and
accessories market, we have an exciting opportunity to expand our reach into
products that often come later in the buying journey, such as tiles and
lighting. We have made good progress in 2022 in expanding these adjacent
product ranges. Increasing their prominence on our website will allow
consumers to use Victorian Plumbing for everything they need to complete
their bathrooms.
Strengthening our competitive position
We have strengthened our position as the UK's largest bathroom specialist and
we have continued to strengthen our competitive moat over the past year.
Our investment in marketing has delivered as planned. Consumers continue to
respond positively to the bold, distinctive and quirky Victorian Plumbing
brand. We complement our creative offline content by investing in increasingly
targeted digital performance-based marketing. This ongoing and relentless
marketing strategy has led to a brand awareness score of 63% (2021: 64%).
As an e-commerce retailer, we continue to benefit from the ongoing structural
shift in consumer buying behaviour from offline to online. Online sales of
bathroom products and accessories remains at only 31% of the total UK market
according to Mintel. We expect our addressable market to grow even further in
the coming years.
Audience, defined as the number of unique visitors visiting our platform
measured through Google Analytics, increased by 3% to 2.67 million on average
each month (2021: 2.59 million).
We have retained our bold brand marketing approach in TV, outdoor and radio
campaigns. We are confident that the recent work on a new creative campaign,
which will launch later in 2022 will further enhance our brand offering and
put us firmly front of mind for consumers considering the purchase of a
bathroom product.
A one-stop shop for bathroom products and accessories
Offering customers a wide selection of products across a variety of price
points ensures that we are the true one-stop solution for bathroom related
purchases. As at 30 September 2022, we have increased the number of available
products to more than 32,000, from over 130 brands, ensuring there is
something available, affordable and suitable for everyone.
Relationships that we have developed over time with well-known third-party
brands such as Grohe and Duravit enable us to complement our own brand
offerings, which are exclusively available on the Victorian Plumbing website.
We have developed over 25 own brands using our in-house development team and
these remain popular with customers. In the year to 30 September 2022, 75% of
revenue generated (2021: 76%) came from own brand products.
Agile supply chain
Whilst we have not been immune to the widely reported global supply challenges
of recent years, the deep and trusted relationships that we have built with
our global suppliers over our 20 years of trading, have enabled us to navigate
these challenges well and secure sufficient inventory to satisfy customer
demand. This, together with our strong balance sheet, has allowed us to be
bold when attracting consumers to site, safe in the knowledge that we have
available stock to satisfy orders.
Equally, the local experts and partners that we work with on the ground in
China ensure that we are always aware of any potential issues that may arise,
giving us time to pivot to alternatives as and when needed. This, alongside
the work they do on auditing our suppliers' factories, gives us confidence in
the availability of products together with their quality and reliability.
Seamless customer journey
Our customers' experience with us throughout their buying journey is of
paramount importance to us. We are extremely proud that we continue to be
ranked "Excellent" by TrustPilot and have increased our average rating in the
year to 4.5 (2021: 4.3) out of 5.
We received a record number of reviews in the year ended 30 September 2022 and
have surpassed 175,000 reviews in total to date. The "Excellent" rating we
have across this volume of reviews is testament to the work that our
colleagues do, whether providing the on-site experience for the customer,
speed and efficiency of delivery, quality of product or swift resolution of
any customer questions throughout the process.
Development of our technology platform
The systems that drive the performance of the business are primarily bespoke
platforms that we continue to improve each year. Our growing technology and
infrastructure team help to facilitate this continual development to ensure we
remain best in class across e-commerce retail platforms.
There has been significant work over the last 12 months and beyond to
completely re-platform our website to improve its functionality and
scalability and this is due for launch imminently.
Following the release of the re-platformed website, we will be launching an
app that will enable our Trade consumers to browse and purchase products
efficiently.
In addition, the technology team have developed more intuitive methods for
forecasting our demand and purchasing requirements and also collating
additional product information to enhance our offering further.
Entrepreneurial approach
Our entrepreneurial approach and our desire to trial new ideas has played a
key part in the success of the business to date.
We will continue to be entrepreneurial, knowing that it gives us a competitive
edge, whilst maintaining robust and appropriate monitoring and reporting
procedures.
ESG
Taking responsibility is one of our core values, and we are clear that every
one of us has a role to play in making a positive difference to the
environment and the communities in which we operate.
In our first full year post IPO, we adopted an ESG strategy which is centred
around three focus areas: governance and ethics, diversity and inclusion, and
environmental sustainability.
Areas that we have made particular progress on during the year include
establishment of an employee engagement committee and the roll out of an
improved benefits package to employees. We continue to work with suppliers to
reduce the levels of plastic packaging and have been working with a third
party to provide a baseline assessment of Scope 3 emissions from which we can
establish a strategy for moving towards net zero.
Whilst we have made good progress this year against all of these focus areas,
we are mindful that we must retain a critical and progressive approach to
each.
Our people
The growth that the business has experienced in recent years has only been
made possible by the hard work, dedication and ability of the employees that
work here. As a Board we are constantly impressed by the way that employees
across the business respond to any challenge that comes their way and deal
with it in a professional manner with the ultimate view of always finding a
solution. We are proud of the values-led, principles-driven culture that is
deep-rooted throughout Victorian Plumbing, and it is this culture that
underpins our ability to adapt to change in all circumstances.
Over the last 12 months we have placed significant emphasis on listening to
feedback from colleagues through many different forums and have worked hard to
make our benefits and rewards package one that both attracts and retains the
best talent.
The response from our regular employee engagement surveys suggests that the
work done to date is having a positive impact and we remain committed to
building on the recent good work that has been done to further improve the
culture across the business and help fuel our future growth.
We would like to thank our employees, customers, suppliers and other
stakeholders for their continued support this year. Whilst we are mindful of
the current macroeconomic conditions that consumers are battling against, we
remain confident in our ability to continue to execute our strategic plan,
underpinned by our strong financial position, to take further market share in
the forthcoming year and consolidate our position as the UK's No.1 bathroom
retailer.
Financial review
Whilst navigating many external challenges in the year, we are pleased to
report a stronger second half performance, strong operating cash generation
and significant market share gains in the year to 30 September 2022.
Change%
2022 2021
£m £m
Revenue 269.4 268.8 -%
Cost of sales (148.4) (138.3) (7%)
Gross profit 121.0 130.5 (7%)
Underlying costs (101.5) (90.4) (12%)
Adjusted EBITDA 19.5 40.1 (51%)
Depreciation and amortisation (3.5) (3.0) (17%)
Share-based payments (3.9) (7.7) 49%
Exceptional items - (9.4) n/a
Operating profit 12.1 20.0 (40%)
Revenue
In 2022, revenue was in line with the previous year at £269.4 million (2021:
£268.8 million) through an increase in average order value and a small
decrease in the number of total orders.
The shift in consumer buying behaviour towards online channels continues,
although the first half started more slowly than the comparative period in
2021 as consumer behaviour changed with the lifting of all UK Covid-19 related
lockdown restrictions. In the second half of 2022, those comparative periods
in 2021 had already started to normalise and the business has returned to
modest growth. The Group continues to capitalise on the opportunity to serve
customers through this structural long-term shift and has increased market
share again this year. Total orders in the year decreased by 3% to 880,000
(2021: 906,000) and our active customer base decreased by 5% to 608,000 (2021:
638,000).
Average order value ('AOV') increased by 3% to £306 (2021: £297). The
majority of this increase resulted from price increases necessary to offset
ongoing product and distribution cost inflation. The Group generated 75% of
revenue from own brand products in the year (2021: 76%).
Gross profit
Gross profit decreased by 7% to £121.0 million (2021: £130.5 million) and
gross profit margin decreased by four percentage points to 45% (2021: 49%),
reflecting both a softer demand environment in 2022 but also the ongoing
supply chain and product inflation including distribution costs.
We define gross profit as revenue less cost of sales. Cost of sales includes
all direct costs incurred in purchasing products for resale along with
packaging, distribution and transaction costs.
Cost of sales increased by 7% to £148.4 million (2021: £138.3 million)
reflecting inflation both in product costs but also freight and distribution
costs. The disruption caused by Covid-19 impacted our supply chain throughout
the year, causing increases in the cost of raw materials, transport and
packaging. The strength of the Group's supplier relationships and the agility
of our team ensured robust sourcing processes and good product availability.
Furthermore, the pricing power of the Group, particularly on own brand
products, allowed us to increase prices to partially protect gross margin,
which increased in the second half of 2022.
Gross margin from own brand products decreased to 50% (2021: 53%), whilst
gross margin from third-party products decreased to 31% for the year (2021:
33%).
Underlying costs
Underlying costs, which we define as administrative expenses before
depreciation and amortisation, exceptional items and share-based payments,
increased by 12% to £101.5 million (2021: £90.4 million).
Change
2022 2021 %
£m £m
Marketing costs 76.2 69.7 (9%)
People costs excluding share-based payments 16.1 13.8 (17%)
Property costs 5.1 4.1 (24%)
Other overheads 4.1 2.8 (46%)
Underlying costs 101.5 90.4 (12%)
Growing our brand awareness and increasing traffic to our site remains a focus
for the Group. Marketing costs increased by 9% to £76.2 million (2021:
£69.7million), which resulted in an increase in marketing costs as a
percentage of revenue to 28% (2021: 26%) and enabled us to take further share
in a challenging market.
People costs, excluding share-based payments but including costs relating to
agency staff and contractors, increased by 17% to £16.1 million (2021: £13.8
million). This was partly as a result of ongoing pay inflation in the UK but
also as a result of an increased number of full-time equivalent employees
('FTEs') across warehouse operations and the technology team. Total FTEs
increased by 8% year on year to 572 (2021: 532).
Property costs increased by 24% to £5.1 million (2021: £4.1 million). The
majority of this increase was as a result of both the Group increasing its
warehouse capacity on a short-term basis and the increased costs of leased
warehouse space in general. Other overheads increased by 46% to £4.1 million
(2021: £2.8 million) as a result of annualisation of listed company costs and
increases due to additional website hosting costs.
Adjusted EBITDA
Significant items of income and expense that do not relate to the trading of
the Group are disclosed separately. Share-based payment charges are an example
of such items.
The table below provides a reconciliation from operating profit to adjusted
EBITDA, which is a non-GAAP metric used by the Group to assess the operating
performance.
Change
2022 2021 %
£m £m
Operating profit 12.1 20.0 (40%)
Share-based payments (including associated NI) 3.9 7.7 49%
Exceptional items - 9.4 n/a
Adjusted operating profit 16.0 37.1 (57%)
Depreciation and amortisation 3.5 3.0 (17%)
Adjusted EBITDA 19.5 40.1 (51%)
Adjusted EBITDA decreased by 51% to £19.5 million (2021: £40.1 million) and
adjusted EBITDA margin decreased by eight percentage points to 7% (2021: 15%).
Exceptional items
Total fees incurred in 2021 of £9.8 million were in relation to the IPO, of
which £9.4 million was expensed through the income statement as an
exceptional item, with the balance of £0.4 million being charged to the share
premium account.
Share-based payments
The Group incurred share-based payment charges (including associated NI) of
£3.9 million (2021: £7.7 million). The majority of the charge recognised
relates to shares awarded to management on the June 2021 IPO.
Depreciation and amortisation
Depreciation and amortisation increased by £0.5 million to £3.5 million
(2021: £3.0 million). The Group continues to invest in its platform and
bespoke inventory management systems, with £2.2 million of internal salaries
capitalised during the 2022 financial year (2021: £1.2 million). The
increased investment over the last two years has resulted in an increase in
the amortisation charge.
Operating profit
Operating profit decreased by 40% to £12.1 million (2021: £20.0 million).
Operating profit margin decreased by three percentage points to 4% (2021: 7%).
Profit before taxation
Profit before taxation decreased by 40% to £11.8 million (2021: £19.7
million). This decrease results from the operating profit performance while
net finance costs remained flat at £0.3 million (2021: £0.3 million).
Interest charged on the Group's lease arrangements under IFRS 16 decreased to
£0.2 million (2021: £0.3 million).
In June 2021 the Group signed a new revolving credit facility (the 'RCF') with
HSBC. The RCF has a total commitment of £10.0 million and a termination date
of June 2024. The facility remained undrawn throughout the financial year.
Interest on the undrawn RCF in the year was £0.1 million (2021: £nil).
Taxation
The Group tax charge of £2.6m (2021: £5.4m) represents an effective tax rate
of 22% (2021: 27%) which is higher than the standard rate of UK tax of 19% due
to share-based payments. The 2021 rate was higher than the standard rate of
tax primarily due to the level of non-deductible exceptional items relating to
the IPO.
Earnings per share
Diluted earnings per share ('EPS') from continuing operations, was 2.9 pence
per share (2021: 4.5 pence per share).
The adjusted diluted earnings per share from continuing operations decreased
by 58% to 3.9 pence per share (2021: 9.3 pence per share). The table shows the
effect on the Group's diluted earnings per share of the exceptional items and
share-based payments.
2022 2021 Change
£m £m %
Profit for EPS 9.2 14.3 (36%)
Share-based payments (including associated NI) 3.9 7.7 49%
Exceptional items - 9.4 n/a
Tax effect (0.7) (1.9) 63%
Adjusted profit for EPS 12.4 29.5 (58%)
Weighted average number of ordinary shares for diluted EPS (millions)
315.9 315.8 -%
Adjusted earnings per share (pence) 3.9 9.3 (58%)
Cash flow and net cash
2022 2021
£m £m
Adjusted EBITDA 19.5 40.1
Movement in working capital (1.2) (3.2)
Capital expenditure (2.9) (3.2)
Lease payments - principal (0.9) (0.8)
Lease payments - interest (0.2) (0.3)
Free cash flow 14.3 32.6
Cash conversion 73% 81%
The Group continues to achieve strong cash generation with free cash flow of
£14.3 million (2021: £32.6 million), resulting in cash conversion of 73%
(2021: 81%). Changes in working capital resulted in a cash outflow of £1.2
million in the year, largely as a result of the decision to further increase
our stock holding to minimise the risk of stock-outs, therefore providing a
better and more dependable experience for customers. This was partially offset
by an increase in payables.
Capital expenditure of £2.9 million (2021: £3.2 million) included £2.2
million of capitalised salaries included in intangible assets relating to
development of the Group's platform and bespoke inventory management systems
(2021: £1.2 million).
At the year end the Group had net cash of £45.5 million (2021: £32.6
million).
Events after the reporting period
There have been no material events to report after the end of the reporting
period.
Dividend
Victorian Plumbing generates significant operating cashflows and the
underlying priority is to reinvest into the business and drive further
profitable growth. Recognising that most growth opportunities do not require
significant capital other than warehouse optimisation and reflecting
confidence in the strength, future growth prospects and cash generation of the
business, the Board has decided to implement a dividend policy with an aim to
maintain a dividend cover ratio of c. 3.0-3.5x. Additionally, the Board may
from time to time conclude that it has surplus cash at which point it will
consider further returns to shareholders.
The Board is recommending a full year ordinary dividend of 1.1 pence per share
(2021: nil). In addition to this, reflecting the strong year end cash
position, the Board considers it appropriate to recommend a special dividend
of 1.7 pence per share (2021: nil). This would bring the total dividends to
2.8 pence per share (2021: nil) and a total cash distribution to shareholders
of £9.0m, subject to shareholders' approval at the AGM on 2 March 2023. The
dividends will be paid on 10 March 2023 to shareholders on the register of
members at the close of business on 10 February 2023.
Mark
Radcliffe
Paul Meehan
Chief Executive Officer
Chief Financial Officer
6 December
2022 6
December 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Note 2021
2022 £m
£m
Revenue 4 269.4 268.8
Cost of sales (148.4) (138.3)
Gross profit 121.0 130.5
Administrative expenses before separately disclosed items 5 (105.0) (93.4)
Adjusted operating profit 16.0 37.1
Separately disclosed items:
Share-based payments 19 (3.9) (7.7)
Exceptional items 6 - (9.4)
Operating profit 5 12.1 20.0
Finance costs (0.3) (0.3)
Profit before tax 11.8 19.7
Income tax expense 7 (2.6) (5.4)
Profit for the year 9.2 14.3
Basic earnings per share (pence) 9 3.3 5.3
Diluted earnings per share (pence) 9 2.9 4.5
All amounts relate to continuing operations.
There are no items to be recognised in the statement of comprehensive income
and hence, the Group has not presented a separate statement of other
comprehensive income.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 SEPTEMBER 2022
Note 2021
£m
2022
£m
Assets
Non-current assets
Intangible assets 10 3.3 2.7
Property, plant and equipment 11 1.4 1.7
Right-of-use assets 12 4.5 5.3
Derivative financial instruments 0.7 -
Deferred tax asset 0.1 -
10.0 9.7
Current assets
Inventories 33.9 32.4
Trade and other receivables 13 5.1 4.9
Tax recoverable - 1.0
Cash and cash equivalents 45.5 32.7
84.5 71.0
Total assets 94.5 80.7
Equity and liabilities
Equity attributable to the owners of the Company
Share capital 17 0.3 0.3
Share premium 11.2 11.2
Capital redemption reserve 0.1 0.1
Capital reorganisation reserve (320.6) (320.6)
Retained earnings 353.0 339.8
Total equity 44.0 30.8
Liabilities
Non-current liabilities
Lease liabilities 15 4.1 4.9
Deferred tax liability - 0.1
4.1 5.0
Current liabilities
Trade and other payables 14 37.9 36.0
Contract liabilities 7.1 7.9
Lease liabilities 15 0.9 0.9
Provisions 0.2 0.1
Corporation tax 0.3 -
46.4 44.9
Total liabilities 50.5 49.9
Total equity and liabilities 94.5 80.7
The financial statements were approved by the Board of Directors on 6 December
2022 and authorised for issue.
Paul Meehan
Chief Financial Officer
Victorian Plumbing Group plc
Registered number: 13379554
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Share capital Share premium Capital reorganisation reserve Share-based payment reserve Retained earnings Total equity
£m £m £m £m £m £m
Balance at 1 October 2020 - - - - 13.0 13.0
Comprehensive income
Profit for the year - - - - 14.3 14.3
Transactions with owners
Employee share schemes - value of employee services (note 19) - - - - 6.5 6.5
Tax impact of employee share schemes - - - - 0.7 0.7
Capital transaction - Group restructure, share-for-share exchange and issue of 0.3 11.2 (320.6) 0.1 320.2 11.2
Victorian Plumbing Group plc shares
Dividends paid on ordinary shares (note 8) - - - - (14.9) (14.9)
Total transactions with owners recognised directly in equity 0.3 11.2 (320.6) 0.1 312.5 3.5
Balance at 30 September 2021 0.3 11.2 (320.6) 0.1 339.8 30.8
Comprehensive income
Profit for the year - - - - 9.2 9.2
Transactions with owners
Employee share schemes - value of employee services (note 19) - - - - 3.9 3.9
Tax impact of employee share schemes - - - - 0.1 0.1
Total transactions with owners recognised directly in equity - - - - 4.0 4.0
Balance at 30 September 2022 0.3 11.2 (320.6) 0.1 353.0 44.0
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Note 2022 2021
£m £m
Cash flows from operating activities
Cash generated from operating activities before exceptional operating items 18.3 36.9
Cash outflow from exceptional operating items - (9.1)
Cash generated from operating activities 20 18.3 27.8
Income tax paid (1.4) (3.4)
Net cash generated from operating activities 16.9 24.4
Cash flows from investing activities
Purchase of intangible assets 10 (2.6) (1.8)
Purchase of property, plant and equipment 11 (0.3) (1.4)
Amounts paid in respect of related party loans - 5.9
Net cash (used in)/generated by investing activities (2.9) 2.7
Cash flows from financing activities
Dividends paid 8 - (14.9)
Finance arrangement fees 16 (0.1) (0.1)
Proceeds from the issue of shares, net of costs - 11.2
Payment of interest portion of lease liabilities 15 (0.2) (0.3)
Payment of principal portion of lease liabilities 15 (0.9) (0.8)
Net cash used in financing activities (1.2) (4.9)
Net increase in cash and cash equivalents 12.8 22.2
Cash and cash equivalents at the beginning of the year 32.7 10.5
Cash and cash equivalents at the end of the year 45.5 32.7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Basis of preparation
The consolidated financial statements have been prepared in accordance with
UK-adopted International Accounting Standards. The consolidated financial
statements have been prepared on the going concern basis and on the historical
cost convention modified for the revaluation of certain financial instruments.
The financial information set out in this document does not constitute the
statutory accounts of the Group for the financial years ended 30 September
2022 or 30 September 2021 but is derived from the 2022 Annual Report and
Financial Statements. The Annual Report and Financial Statements for 2022 will
be delivered to the Registrar of Companies in due course. The auditors have
reported on those accounts and have given an unqualified report, which does
not contain a statement under Section 498 of the Companies Act 2006.
Going concern
The Group's ability to continue as a going concern is dependent on maintaining
adequate levels of resources to continue to operate for the foreseeable
future. When assessing the going concern of the Group, the Directors have
reviewed the year to date financial results, as well as detailed financial
forecasts for the period up to 31 December 2023. The assumptions used in the
financial forecasts are based on the Group's historical performance and
management's extensive experience of the industry. Taking into consideration
the wider economic environment, the forecasts have been assessed and stress
tested to ensure that a robust assessment of the Group's working capital and
cash requirements has been performed.
The Group has sufficient liquidity headroom through the forecast period. The
Directors therefore have reasonable expectation that the Group has the
financial resources to enable it to continue in operational existence for the
period to 31 December 2023. Accordingly, the Directors conclude it is
appropriate that these consolidated financial statements be prepared on a
going concern basis.
2. Accounting policies, estimates and judgements
The accounting policies applied by the Group in these consolidated financial
statements are the same as those applied by the Group in its consolidated
financial statements as at and for the year ended 30 September 2022 unless
stated below.
Judgements in applying accounting policies and key sources of estimation
uncertainty
2a) Significant judgements in applying the entity's accounting policies
Share-based payments
Share-based payment arrangements in which the Group receives goods or services
as consideration for its own equity instruments are accounted for as
equity-settled share-based payment transactions. The fair value of services
received in return for share options is calculated with reference to the fair
value of the award on the date of grant. A Black-Scholes model has been used
where appropriate to calculate the fair value and the Directors have therefore
made estimates with regard to the inputs to that model and the period over
which the share award is expected to vest (note 19) of the consolidated Group
financial statements.
On 15 April 2020, 845 ordinary A shares were issued in VIPSO Ltd at a price of
£0.10 per share, which is the nominal value of the shares. Of the 845 shares
issued, 800 of the A ordinary shares were issued to the existing shareholders
by way of bonus issue so as not to dilute their existing holding. These shares
are considered outside the scope of IFRS 2, on the basis that these
shareholders do not receive any additional value for their shares. This is
considered to be a key judgement.
2b) Key sources of estimation uncertainty
Refund liability
The refund liability that is recognised within the historical financial
information relates to the obligation to refund some or all of the
consideration received from a customer. The liability is measured at the
amount the Group ultimately expects it will have to return to the customer.
The refund liability therefore requires management to estimate the amount
expected to be returned to customers after the reporting date. The refund
liability is estimated using historical rates of the level of refunds relative
to revenue. The table below shows the percentage of average quarterly sales in
the period and the impact that increasing the refund rate by 1% of quarterly
sales would have on the consolidated statement of comprehensive income.
2022 2021
Refund liability (£m) 1.0 0.9
Revenue (£m) 269.4 268.8
Refund liability % average quarterly sales 1.3% 1.3%
Impact of increasing the refund rate by 1% of quarterly sales on PBT (£m) (0.7) (0.7)
Warranty provision
The Group provides for the cost expected to be incurred in order to replace
damaged or faulty items that existed at the time of sale. The provision
related to these assurance-type warranties are recognised when the product is
sold. Initial recognition is based on historical experience.
The table below shows the percentage of average quarterly sales in the period
and the impact that increasing the warranty rate by 0.5% of quarterly sales
would have on profit before tax ('PBT').
2022 2021
Warranty provision (£m) 0.2 0.1
Revenue (£m) 269.4 268.8
Warranty provision % average quarterly sales 0.2% 0.2%
Impact of increasing the warranty provision by 0.5% of quarterly sales on PBT (0.3) (0.3)
(£m)
2c) Other judgements and estimates
Intangible assets
Intangible assets include capitalised internal salaries and third-party costs
for computer software development. The Group capitalises salary costs for
product development projects. Initial capitalisation of costs is based on
management's judgement that technological and economic feasibility is
confirmed, usually when a product development project has reached a defined
milestone according to an established project management model. In determining
the amounts to be capitalised, management makes assumptions regarding the
proportion of time spent by employees on projects, as well as assumptions
relating to expected future cash generation of the project and the expected
period of benefits.
Revenue cut-off
The Group's management information systems are configured to recognise revenue
upon dispatch of the inventory items from the Group's warehouse, which may not
be aligned to when control has transferred to the customer. Management
therefore performs an assessment in order to capture items that may have been
dispatched from the Group's warehouse but not delivered by the reporting date,
and subsequently defers the recognition of revenue and associated costs into
the following year. This gives rise to deferred income, which is recognised as
a contract liability, and associated inventory in the consolidated statement
of financial position. The assessment performed by management includes
assumptions, which management believes are reasonable, in order to identify
items that fit the criteria for deferral. Management limits the review to a
fixed number of distributors and extrapolates the shipment delay identified in
the distributors tested to the remaining distributors.
3. Segmental information
IFRS 8 'Operating Segments' requires the Group to determine its operating
segments based on information which is provided internally. Based on the
internal reporting information and management structures within the group, it
has been determined that there is only one operating segment, being the Group,
as the information reported includes operating results at a consolidated Group
level only (the 'Operating group'). There is also considered to be only one
reporting segment, which is the Group, the results of which are shown in the
consolidated statement of comprehensive income.
Management has determined that there is one operating and reporting segment
based on the reports reviewed by the Senior Leadership Team ('SLT') which is
the chief operating decision-maker ('CODM'). The SLT is made up of the
Executive Directors and Key Management and is responsible for the strategic
decision-making of the Group.
Adjusted EBITDA
Operating costs, comprising administrative expenses, are managed on a Group
basis. The SLT measures the overall performance of the Operating group by
reference to the following non-GAAP measure:
· Adjusted EBITDA, which is EBITDA (earnings before interest, tax,
depreciation and amortisation) less exceptional items and IFRS 2 charges in
respect of share-based payments along with associated national insurance.
This adjusted profit measure is applied by the SLT to understand the earnings
trends of the Operating group and is considered an additional, useful measure
under which to assess the true operating performance of the Operating group.
In addition to annual bonuses which are linked to the Operating group's
financial performance, the Operating group has implemented a number of
longer-term share-based payment incentives linked to changes in ownership of
the Operating group rather than the achievement of individual or Company
specific financial performance targets.
The Directors believe that these items and adjusted measures of performance
should be separately disclosed in order to assist in the understanding of
financial performance achieved by the Operating group and for consistency with
prior years.
2022 2021
£m £m
Operating profit 12.1 20.0
Depreciation of property, plant and equipment 0.6 0.6
Depreciation of right-of-use assets 0.9 0.8
Amortisation 2.0 1.6
Exceptional items - 9.4
Share-based payments (including associated NI) 3.9 7.7
Adjusted EBITDA 19.5 40.1
4. Revenue
An analysis of revenue by class of business is as follows:
2022 2021
£m £m
Online 267.7 267.9
Showroom 1.7 0.9
269.4 268.8
All revenue arose within the United Kingdom.
5. Operating profit
Expenses by nature including exceptional items:
2022 2021
£m £m
Employee costs (excluding share-based payments) 15.2 12.6
Share-based payments 3.9 7.7
Agency and contractor costs 0.8 1.1
Marketing costs 76.2 69.7
Property costs 5.1 4.1
Computer costs 1.6 1.2
Depreciation of property, plant and equipment (note 11) 0.6 0.6
Depreciation of right-of-use assets (note 12) 0.9 0.9
Amortisation charge (note 10) 2.0 1.6
Other costs 2.6 11.0
Total administrative expenses 108.9 110.5
Share-based payments (note 19) (3.9) (7.7)
Included within exceptional items (note 6) - (9.4)
Total administrative expenses before separately disclosed items 105.0 93.4
6. Exceptional items
2022 2021
£m £m
IPO costs - 9.4
IPO costs for the year ended 30 September 2021 relate to costs incurred in
respect of the Group's listing on AIM in June 2021.
7. Taxation
2022 2021
£m £m
Corporation tax
Current tax on profits for the year 3.1 5.4
Adjustments in respect of previous periods (0.3) -
Total current tax 2.8 5.4
Deferred tax
Adjustments in respect of previous periods (0.1) -
Effect of changes in tax rates (0.1) -
Total deferred tax (0.2) -
Taxation on profit 2.6 5.4
Factors affecting tax charge for the year
The tax assessed for the period is higher (2021: higher) than the standard
rate of corporation tax in the UK of 19% (2021: 19%). The differences are
explained below:
2022 2021
£m £m
Profit on ordinary activities before tax 11.8 19.7
Profit on ordinary activities multiplied by standard rate of corporation tax 2.2 3.7
in the UK of 19% (2021: 19%)
Effects of:
Expenses not deductible for tax purposes - 1.4
Share options 0.8 0.3
Adjustments to tax charge in respect of prior periods (0.4) -
Total tax charge for the year 2.6 5.4
Taxation on items taken directly to equity was a credit of £0.1m (2021:
£0.7m credit) relating to tax on share-based payments.
Factors that may affect future tax charges
The rate of corporation tax in the UK throughout the period was 19%. Changes
to the UK corporation tax rates were substantively enacted as part of the
Finance Act 2021 on 24 May 2021. The rate applicable from 1 April 2023 will
increase from 19% to 25%. Deferred taxes at the reporting date have been
measured using these enacted tax rates.
8. Dividends
2022 2021
£m £m
Dividends paid - 14.9
The Board is recommending a final dividend for the year ended 30 September
2022 of 1.1 pence per share and a special dividend of 1.7 pence per share
which is subject to Shareholder approval at the Annual General Meeting on 2
March 2023. If approved by the Shareholders, the dividend will be paid on 10
March 2023 to all shareholders on the Register of Members on 10 February 2023.
9. Earnings per share
Basic and diluted earnings per share
Basic earnings per share ('EPS') is calculated by dividing the profit for the
period attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to ordinary
equity holders of the parent by the weighted average number of ordinary shares
outstanding during the year plus the number of incremental ordinary shares,
calculated using the treasury stock method, that would be issued on conversion
of all the dilutive potential ordinary shares into ordinary shares.
The following table reflects the income and share data used in the EPS
calculations:
Weighted average number of ordinary shares Total earnings Pence per share
£m
Year ended 30 September 2022
Basic EPS 275,832,944 9.2 3.3
Diluted EPS 315,898,691 9.2 2.9
Year ended 30 September 2021
Basic EPS 267,781,231 14.3 5.3
Diluted EPS 315,755,339 14.3 4.5
The number of shares in issue at the start of the year is reconciled to the
basic and diluted weighted average number of shares below:
2022 2021
Weighted average number of shares for basic EPS 275,832,944 267,781,231
Dilutive impact of unvested shares in relation to share awards 40,065,747 47,970,764
Impact of ordinary shares held in ESOT - 3,344
Weighted average number of shares for diluted EPS 315,898,691 315,755,339
The average market value of the Group's shares for the purposes of calculating
the dilutive effect of share-based incentives was based on quoted market
prices for the period during which the share-based incentives were
outstanding.
Adjusted earnings per share ('Adjusted EPS')
Adjusted basic and diluted earnings per share figures are calculated by
dividing adjusted profit after tax for the year by the weighted average number
of shares in issue (as set out above).
2022 2021
£m £m
Profit for the year 9.2 14.3
Exceptional items - 9.4
Share-based payments 3.9 7.7
Tax effect (0.7) (1.9)
Total adjusted profit for the year 12.4 29.5
Adjusted basic earnings per share (pence) 4.5 11.0
Adjusted diluted earnings per share (pence) 3.9 9.3
10. Intangible assets
Computer software
£m
Cost
At 30 September 2020 5.7
Additions 1.8
At 30 September 2021 7.5
Additions 2.6
At 30 September 2022 10.1
Accumulated amortisation
At 30 September 2020 3.2
Charge for the year 1.6
At 30 September 2021 4.8
Charge for the year 2.0
At 30 September 2022 6.8
Net book value
At 30 September 2020 2.5
At 30 September 2021 2.7
At 30 September 2022 3.3
Computer software comprises both internal salaries and external development
capitalised in relation to the Group's bespoke operational software. The Group
capitalised internal salaries of £2.2 million in the year ended 30 September
2022 (2021: £1.2 million) for development of computer software.
For the year to 30 September 2022, the amortisation charge of £2.0 million
(2021: £1.6 million) has been charged to administrative expenses in the
income statement.
11. Property, plant and equipment
Leasehold improvements Plant and machinery Fixtures Office Total
£m £m and fittings equipment £m
£m £m
Cost
At 30 September 2020 - 0.7 1.0 0.9 2.6
Additions 0.1 0.7 0.2 0.5 1.5
At 30 September 2021 0.1 1.4 1.2 1.4 4.1
Additions - 0.1 - 0.2 0.3
Disposals - (0.1) (0.4) (0.1) (0.6)
At 30 September 2022 0.1 1.4 0.8 1.5 3.8
Accumulated depreciation
At 30 September 2020 - 0.4 0.9 0.5 1.8
Charge for the year - 0.3 0.1 0.2 0.6
At 30 September 2021 - 0.7 1.0 0.7 2.4
Charge for the year - 0.2 0.1 0.3 0.6
Disposals - (0.1) (0.4) (0.1) (0.6)
At 30 September 2022 - 0.8 0.7 0.9 2.4
Net book value
At 30 September 2020 - 0.3 0.1 0.4 0.8
At 30 September 2021 0.1 0.7 0.2 0.7 1.7
At 30 September 2022 0.1 0.6 0.1 0.6 1.4
12. Right-of-use assets
Right-of-use assets
£m
Cost
At 30 September 2020 8.1
Additions 0.6
Modifications (0.4)
Disposals (0.1)
At 30 September 2021 8.2
Modifications 0.1
At 30 September 2022 8.3
Accumulated depreciation
At 30 September 2020 2.1
Charge for the year 0.9
On disposals (0.1)
At 30 September 2021 2.9
Charge for the year 0.9
At 30 September 2022 3.8
Net book value
At 30 September 2020 6.0
At 30 September 2021 5.3
At 30 September 2022 4.5
During the period the Group renewed the lease on one of its properties that
had expired; this represents a modification under IFRS 16. The right-of-use
asset was increased by £0.1 million to reflect the value of the asset after
the modification and the corresponding lease liability increased by £0.1
million.
13. Trade and other receivables
2022 2021
£m £m
Trade receivables 2.0 2.3
Right-of-return asset 0.3 0.3
Accrued income 1.3 0.9
Prepayments 1.5 1.4
5.1 4.9
The Group provides against trade receivables using the forward-looking
expected credit loss model under IFRS 9. An impairment analysis is performed
at each reporting date. Trade receivables, accrued income, and other
receivables expected credit losses have been reviewed by management and have
been determined to have an immaterial impact on these balances.
14. Trade and other payables
2022 2021
£m £m
Trade payables 26.2 23.5
Other taxation and social security 6.9 8.8
Refund liability 0.8 0.9
Other payables 1.2 1.2
Accruals 2.8 1.6
37.9 36.0
15. Lease liabilities
Lease liability
£m
At 30 September 2020 6.4
Additions 0.6
Modifications (0.4)
Interest expense 0.3
Lease payment (1.1)
At 30 September 2021 5.8
Modifications 0.1
Interest expense 0.2
Lease payment (1.1)
At 30 September 2022 5.0
During the period the Group renewed the lease on one of its properties that
had expired; this represents a modification under IFRS 16. The right-of-use
asset was increased by £0.1 million to reflect the value of the asset after
the modification and the corresponding lease liability increased by £0.1
million.
The Group had total cash outflows for leases of £1.1 million (2021: £1.1
million). The Group also had non-cash additions to right-of-use assets and
lease liabilities of £nil (2021: £0.6 million).
Lease liabilities as at 30 September were classified as follows:
2022 2021
£m £m
Current 0.9 0.9
Non-current 4.1 4.9
Total 5.0 5.8
16. Borrowings
2022 2021
£m £m
Amounts drawn under revolving credit facility - -
Unamortised debt issue costs (0.1) (0.1)
(0.1) (0.1)
On 7 June 2021, the Group signed into a new Revolving Credit Facility (the
'RCF'). The RCF has total commitments of £10 million and a termination date
of June 2024. The facility is secured by a debenture dated 7 June 2021.
Interest on the RCF is charged at SONIA plus a margin of between 2.3% and 2.8%
depending on the consolidated leverage of the Group. A commitment fee of 40%
of the margin applicable to the RCF is payable quarterly in arrears on
unutilised amounts of the RCF. There is no requirement to settle all, or part,
of the debt earlier than the termination date. At 30 September 2021 the Group
had not utilised the RCF.
Unamortised debt issue costs of £0.1 million (2021: £0.1 million) are
included in prepayments (note 13).
17. Share capital
2022 2021
£m £m
Allotted, called up and fully paid
325,062,985 ordinary shares of 0.1p 0.3 0.3
18. Own shares held
The Employee Share Option Trust purchases shares to fund the Share Incentive
Plan. At 30 September 2022, the trust held 635,504 (2021: 635,504) ordinary
shares with a book value of £636 (2021: £636). The market value of these
shares as at 30 September 2022 was £0.2 million (2021: £1.6 million).
Number of shares £
ESOT shares reserve
Own shares held at 30 September 2022 and 30 September 2021 635,504 636
19. Share-based payments
The Group operates four share plans being the Share Incentive Plan ('SIP'), a
Deferred Bonus Plan ('DBP'), a Long-Term Incentive Plan ('LTIP') and a
Sharesave scheme (SAYE). In addition, both prior to and following Admission to
AIM in June 2021, the Group awarded shares to the Chairman and certain members
of Key Management which had restrictions placed against them that bring the
awards into the scope of IFRS 2.
All share-based incentives carry a service condition. Such conditions are not
taken into account in the fair value of the service received. The fair value
of services received in return for share-based incentives is measured by
reference to the fair value of share-based incentives granted. Monte Carlo or
Black-Scholes pricing models have been used where appropriate to calculate the
fair value of share-based incentives with market conditions.
Sensitivity analysis has been performed in assessing the fair value of the
share-based incentives. There are no changes to key assumptions that are
considered by the Directors to be reasonably possible, which give rise to a
material difference in the fair value of the share-based incentives.
The total charge in the year was £3.9m (2021: £7.7m) with a Company charge
of £1.8m (2021: £0.7m). This included associated national insurance ('NI')
at 15.1% (2021: 13.8%), which management expects to be the prevailing rate
when the awards are exercised, and apprenticeship levy at 0.5%, based on the
share price at the reporting date.
2022 2021
£m £m
Share Incentive Plan ('SIP') 0.2 0.1
A ordinary growth shares award - April 2020 - 0.4
Management incentive Plan award (MIP) - December 2020 - 4.4
IPO restricted share awards 3.4 1.6
Deferred bonus plan - February 2022 0.3 -
Long term incentive plan - March 2022 - -
Sharesave scheme - March 2022 - -
Total IFRS 2 charge 3.9 6.5
National insurance and apprenticeship levy on applicable schemes - 1.2
Total charge 3.9 7.7
During the year, the Directors in office in total had gains of £nil (2021:
£5.9m) arising on the exercise of share-based incentive awards.
Share Incentive Plan (SIP)
The Group operates a Share Incentive Plan scheme that was made available to
all eligible employees following Admission to AIM in June 2021. On 27 July
2021, all eligible employees were awarded free shares valued at £3,600 each
based on the closing share price on 26 July 2021 of £2.67. A total of 635,504
shares were awarded under the scheme, subject to a three-year service period
(the 'Vesting Period').
The SIP awards have been valued using the Black-Scholes model and the
resulting share-based payments charge spread evenly over the Vesting Period.
The SIP shareholders are entitled to dividends over the Vesting Period. No
performance criteria are applied to the vesting of SIP shares. Fair value at
the grant date was measured to be £2.67.
2022 2021
number number
Outstanding at 1 October 576,732 -
Shares awarded - 635,504
Forfeited (149,758) (58,772)
Outstanding at 30 September 426,974 576,732
The total charge in the year, included in operating profit, in relation to
these awards was £0.2m (2021: £0.1m). The Company charge for the year was
£nil (2021: £nil).
A ordinary shares
On 15 April 2020 (the 'grant date'), 845 A ordinary shares in VIPSO Ltd, the
former ultimate parent company, were issued at a price of £0.10 per share
which was the nominal value of the shares. Of the 845 shares issued, 800 of
the A ordinary shares were issued to the existing shareholders by way of bonus
issue so as not to dilute their existing holding. These 800 shares are
considered outside the scope of IFRS 2, on the basis that these shareholders
do not receive any additional value for their shares.
The remaining 45 A ordinary shares were awarded to certain members of Key
Management (together the 'A ordinary shareholders'). In order to realise value
from the shares awarded, a participant must remain employed until an 'Exit'
event is achieved. The equity value on 'Exit' must also be in excess of the
equity hurdle which has been set at £130 million. The 'Exit' requirement is a
non-market performance vesting condition and the hurdle amount is considered
to be a market-based performance condition.
On 27 May 2021 the Group undertook a reorganisation, through which the A
ordinary shareholders exchanged their shares for an equivalent value in
Victorian Plumbing Group plc. After all of the steps relating to the
reorganisation were executed, the A ordinary shareholders had exchanged their
45 A ordinary shares in VIPSO Ltd for 7,222,969 ordinary shares in Victorian
Plumbing Group plc. The share-for-share exchange does not represent a
modification of the award under IFRS 2 as the value of the award, and the
related service and performance conditions, remained unchanged.
On 11 June 2021 the A ordinary shareholders entered into a deed (the 'deed'),
which would become effective on Victorian Plumbing Group plc's Admission to
AIM, to modify the terms of the award. The performance condition would no
longer be relevant since an Exit event would have already occurred. The
service condition for the A ordinary shareholders was modified so as to
restrict the number of shares that vest on Admission.
On 22 June 2021 Victorian Plumbing Group plc was admitted to AIM, which was an
Exit event under the terms of the award. On Admission 1,059,369 shares vested.
The deed agreed to by the A ordinary shareholders took effect.
2022 2021
Number
Number
Outstanding at 1 October 2021/6 May 2021 (incorporation) 6,163,600 -
Restricted shares awarded on share-for-share exchange - 7,222,969
Vested (616,360) (1,059,369)
Outstanding and unvested at 30 September 2022 5,547,240 6,163,600
The total charge in the year, included in operating profit, in relation to
these awards was £nil (2021: £0.4 million). The Company charge for the year
was £nil (2021: £nil). The restricted share awards outstanding at 30
September 2022 have a weighted average remaining vesting period of 2.8 years.
Management Incentive Plan (MIP)
An Executive Director was awarded share options under a management incentive
plan prior to Admission.
On 2 December 2020, VIPSO Ltd (the former ultimate parent company of the
Group) awarded eight nil cost ordinary share options and nine nil cost A
ordinary share options under the MIP. All of the options awarded were to vest
on the earlier of an 'Exit' event or three years from the date of grant.
Options would be forfeited if the employee leaves the Group before the options
vest, unless under exceptional circumstances.
On 27 May 2021 the Group undertook a reorganisation, through which the options
granted under the MIP were converted to be options over ordinary shares and
ordinary deferred shares in Victorian Plumbing Group plc. After all of the
steps relating to the reorganisation were executed, the participant of the MIP
had exchanged its eight ordinary shares and none A ordinary shares in VIPSO
Ltd for 3,219,948 ordinary share options in Victorian Plumbing Group plc. The
exchange does not represent a modification of the award under IFRS 2 as the
value of the award, and the related service and performance conditions
remained unchanged.
On 11 June 2021 the MIP participant entered into a deed ('the MIP deed'),
which would become effective on Victorian Plumbing Group plc's Admission to
AIM, to modify the terms of the award. All of the options would convert when
the performance condition was satisfied (i.e. on Admission) resulting in the
participant being awarded ordinary shares. However, 30% of the shares would
remain restricted and subject to a service condition (the 'restricted
shares').
On 22 June 2021 Victorian Plumbing Group plc was admitted to AIM which was an
Exit event under the terms of the award. The deed agreed to by the MIP
participants took effect.
On Admission the options converted to 3,219,948 ordinary shares and 2,253,964,
or 70%, of those shares vested at an average price of £2.62.
2022 2021
Number
Number
Outstanding at 1 October 2021/6 May 2021 (incorporation) 965,984 -
Restricted shares awarded on share-for-share exchange - 3,219,948
Vested (289,795) (2,253,964)
Outstanding and unvested at 30 September 2022 676,189 965,984
The market value per ordinary share for the restricted shares awarded under
the MIP that vested in the year was £0.58. The restricted share awards
outstanding under the MIP at 30 September 2022 have a weighted average
remaining vesting period of 1.3 years.
The total charge in the year, included in operating profit, in relation to
these awards was £nil (2021: £4.4m). The Company charge for the year was
£nil (2021: £0.1m).
IPO restricted share awards
The Chairman and certain members of Key Management have been granted
restricted share awards. The restricted share awards do not have a performance
condition attached to them but the extent to which they vest depends on a
service condition being satisfied. The restricted shares are forfeited if the
employee leaves the Group before the vesting date, unless under exceptional
circumstances.
Grant date Share price at grant date Employee contribution per share Vesting period (years) Risk-free rate Dividend yield Volatility Fair value per restricted share
£ % % %
22/06/2021 2.62 £0.001 5.0 - - - 2.62
22/06/2021 2.62 £0.001 4.0 - - - 2.62
10/08/2021 2.59 nil 2.1 - - - 2.59
The number of restricted shares outstanding at 30 September 2022 was as
follows:
2022 2021
Number
Number
Outstanding at 1 October 2021/6 May 2021 (incorporation) 3,442,858 -
Awarded 208,334 3,651,522
Forfeited (38,168) -
Vested (569,477) (208,664)
Outstanding and unvested at 30 September 2022 3,043,547 3,442,858
The market value per ordinary share for restricted shares that vested in the
year was £0.58. The IPO restricted share awards outstanding at 30 September
2022 have a weighted average remaining vesting period of 2.3 years.
The total charge in the year, included in operating profit, in relation to
these awards was £3.4m (2021: £1.6m). The Company charge for the year was
£1.8m (2021: £0.6m).
Deferred Bonus Plan
The Group operates a Deferred Bonus Plan ('DBP') for the senior leadership
team and certain key employees. It is both a cash bonus plan and a
discretionary employee share plan under which a proportion of a participant's
annual bonus is deferred into an award over shares. Awards under the plan
are contingent on the satisfaction of pre-set internal targets relating to
financial and operational objectives. A nil cost option will be granted
following determination of performance against targets, with 40% of the award
vesting immediately, 30% after 1 year and 30% after 2 years. Awards are
potentially forfeitable during that period should the employee leave
employment.
During the year the Group made awards over 1,893,219 ordinary shares under the
DBP scheme, subject to the satisfaction of certain performance criteria to be
determined by the Remuneration Committee. The fair value of the award was
determined to be £1.02, being the average Market Value of a Share over the
five business days ending on 31 January 2022.
2022
Number
Outstanding at 30 September 2021 -
Options granted in the year 1,893,219
Outstanding at 30 September 2022 1,893,219
The total charge in the period, included in operating profit, in relation to
these awards was £0.3m (2021: £nil). The Company charge for the period was
£nil (2021: £nil).
Long Term Incentive Plan
The Group operates a Long-Term Incentive Plan Award ('LTIP') for the CEO and
CFO. The extent to which awards vest will depend upon the satisfaction of
the Group's financial and operational performance in the financial year of the
award date (the "Performance Conditions").
The LTIP awards are subject to performance conditions based on Adjusted EPS
(75% of award) and absolute Total Shareholder Return ("TSR") (25% of award).
Awards vest 3 years after grant subject to EPS and Absolute TSR performance
conditions, with a two-year post-vesting holding period applying.
On 29 March 2022 the Group awarded 323,472 nil cost options under the LTIP
scheme. The fair value for the EPS element of the award at £0.52 was based
on the share price at the grant date. The fair value of the TSR element was
calculated using a Monte Carlo simulation and has been fixed at £0.106.
2022
Number
Outstanding at 30 September 2021 -
Options granted in the year 323,472
Outstanding at 30 September 2022 323,472
The total charge in the year, included in operating profit, in relation to
these awards was £nil (2021: £nil). The Company charge for the period was
£30k (2021: £nil).
Sharesave scheme
The Group operates a Sharesave ('SAYE') scheme for all employees under which
employees are granted an option to purchase ordinary shares in the Company at
up to 20% less than the market price at invitation, in three years' time,
dependent on their entering into a contract to make monthly contributions into
a savings account over the relevant period. Options are granted and are linked
to a savings contract with a term of three years. These funds are used to fund
the option exercise. No performance criteria are applied to the exercise of
Sharesave options. The assumptions used in the measurement of the fair value
at grant date of the Sharesave plan are as follows:
Grant date Share price at grant date Exercise price Expected volatility Option life years Risk-free rate Non-vesting condition Fair value per option
£ £ % % %
Dividend yield
%
30/03/2022 0.51 0.57 67 3.17 1.42 0 0 0.22
Expected volatility is estimated by considering the historical 3.17 year
volatility of the FTSE AIM retailers.
2022 2022
Number of share options Weighted average exercise price £
Outstanding at 1 October 2021 - -
Options granted in the year 443,747 0.57
Options lapsed in the year - -
Outstanding at 30 September 2022 443,747 0.57
Exercisable at 30 September 2022 - -
The total charge in the year, included in operating profit, in relation to
these awards was £16k (2021: £nil). The Company charge for the period was
£nil (2021: £nil).
20. Cash generated from operating activities
2022 2021
£m £m
Cash flows from operating activities
Profit before taxation for the financial year 11.8 19.7
Adjustments for:
Amortisation of intangible assets (note 10) 2.0 1.6
Depreciation of property, plant and equipment (note 11) 0.6 0.6
Depreciation of right-of-use assets (note 12) 0.9 0.9
Share-based payments 3.9 7.7
Fair value profit on financial derivatives (0.7) -
Finance costs 0.3 0.3
Increase in inventories (1.5) (9.4)
Increase in receivables (0.2) (0.8)
Increase in payables 1.1 7.3
Increase/(Decrease) in provisions 0.1 (0.1)
Cash generated from operating activities 18.3 27.8
21. Post balance sheet events
There have been no material events to report after the end of the reporting
period.
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