REG - Victorian Plumbing - HALF YEAR RESULTS
17/05/2022 07:00
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RNS Number : 6825L Victorian Plumbing Group plc 17 May 2022
Embargoed until 7:00am, 17 May 2022
Victorian Plumbing Group PLC
HALF year results for the SIX MONTHS ENDED 31 mARCH 2022
Victorian Plumbing Group plc ('Victorian Plumbing', 'the Group'), the UK's
leading online specialist bathroom retailer, announces its half year results
for the six months ended 31 March 2022 ('H1 2022')
Six-months to 31 March 2022 Six-months to 31 March 2021 Six-months to 31 March 2020 H1 2022 H1 2022
(unaudited) (audited) (unaudited) Year-on-year Two-year
% growth %*
Revenue £133.9m £140.7m £96.0m (5%) 39%
Gross profit(1) £58.5m £69.0m £40.8m (15%) 43%
Gross profit margin(2) 44% 49% 43% (5%pts) 1%pts
Adjusted EBITDA(3) £6.7m £20.1m £8.8m (67%) (24%)
Adjusted EBITDA margin(4) 5% 14% 9% (9%pts) (4%pts)
Operating profit £2.9m £14.6m £7.7m (80%) (62%)
Net cash £33.7m £22.3m £4.7m 51% 617%
Adjusted basic earnings per share(10) 1.4p 5.6p 2.4p (75%) (42%)
* Two-year growth included to contextualise the effect of Covid-19 upon
trading.
Financial results
· Revenue growth of 39% on a two-year basis, reflecting a
significant increase in our customer base and consumer appreciation of our
customer proposition, product range and availability
· Revenue was down 5% year-on-year to £133.9m (H1 2021: £140.7m),
lapping a tough comparable period resulting from market outperformance during
Covid-19 related lockdowns
· As expected, gross profit margin(2) decreased by five percentage
points to 44% (H1 2021: 49%). This decrease was largely due to continued
supply chain pressures and our careful approach to managing price rises during
a period of inflationary cost pressures. Gross profit(1) of £58.5m was up 43%
on a two-year basis and down 15% year-on-year
· Adjusted EBITDA(3) reduced by 67% year-on-year to £6.7m (H1
2021: £20.1m) and adjusted EBITDA margin(4) reduced by nine percentage points
to 5% (H1 2021: 14%). The decline in adjusted EBITDA margin reflects both the
reduction in gross profit margin and a strategic increase in marketing
activity which has enabled us to take market share
· Net cash £33.7m (H1 2021: £22.3m). Cash conversion(6) of 21%
(H1 2021: 85%) reflecting an investment in stock, to mitigate ongoing global
supply chain risks
· Adjusted basic earnings per share(5) was 1.4 pence per share (H1
2021: 5.6 pence per share)
Operational and strategic highlights
Over the past 18 months we have managed a step change in the scale of our
business and have done so whilst continuing to offer consumers the widest
choice of products and availability, at competitive prices:
· Total orders(7) for the six months ended 31 March 2022 were
453,000, a 31% increase from pre-pandemic levels (H1 2020: 345,000), and just
7% down from H1 2021 during which the UK was under severe Covid-19
restrictions (H1 2021: 486,000)
· Average order value(8) up 2% to £296 (H1 2021: £289)
· We have increased our customer satisfaction with an average
Trustpilot TrustScore(9) of 4.4 (H1 2021: 4.3)
We have invested in our technology platform, which will enable us to drive
future growth:
· Work continues on the development and testing of our website
re-platform. This will give us the opportunity to enhance our customer journey
over the coming months
· Work also continues on the development and testing of our new
Trade app., to enhance efficiency and engagement for Trade customers
We are also making good progress in our strategic areas of 'Trade' and
'Adjacent categories':
· Trade revenue grew by 18% to £24.6m (H1 2021: £20.9m),
representing 18% of total revenue (H1 2021: 15%). During H1 2022, we launched
our first ever targeted trade radio campaign
· We have increased our tile range by 38% since September 2021 and
increased the number of products in our lighting range to 753 (Sept 2021: 502)
Outlook
Revenues in H1 2022 were in line with recent guidance and reflect the lower
demand compared to the same period last year when the UK was in a lockdown
environment. The Group focused on increasing market share and invested more
heavily in marketing in the early part of H1 2022 to successfully drive market
share gains. That marketing spend has now normalised as planned.
The Group expects to deliver modest year-on-year revenue growth through the
second half, as previously guided in the AGM statement on 24 February 2022.
There are well reported ongoing inflationary cost pressures and we remain
acutely aware that our customers are also managing these pressures. The Group
will therefore continue its careful approach to price rises through the second
half of the financial year.
Mark Radcliffe, Founder and Chief Executive Officer of Victorian Plumbing
Group plc, said:
"Victorian Plumbing remains the go-to online retailer for consumers who are
looking for bathroom products. Our market-leading proposition and our
innovative and proactive approach to marketing have enabled us to continue
growing our market share, even against a challenging market backdrop.
"Following a nine-month period during which the economy was opening up after
Covid-19 restrictions and discretionary spending has been more focused on
leisure activities, our relentless focus on investing in quality and
innovation has resulted in revenue growing 39% on a two-year basis.
"I am pleased with the progress we have made with our technological
developments, and I am excited about the opportunities presented by our new
website. This new platform will enable us to further penetrate our core market
and provide the best possible base for us to further expand our trade and
adjacent product areas.
"We continue to be focused on our long-term goals. We are making good progress
on all of our strategic initiatives and are confident in the future growth
prospects of the Group."
Analyst and investor webinar
A webinar for analysts and investors will be held today, 17 May 2022, at
9.00am BST. If you wish to join the webinar, please contact FTI Consulting
via: VictorianPlumbing@fticonsulting.com
(mailto:VictorianPlumbing@fticonsulting.com) .
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 VictorianPlumbing@fticonsulting.com
(mailto:VictorianPlumbing@fticonsulting.com)
Eleanor Purdon
Sam Macpherson
Amy Goldup
Houlihan Lokey UK Limited (Nominated Adviser and Financial Adviser) +44 20 7484 4040
Sam Fuller
Tim Richardson
About Victorian Plumbing
Victorian Plumbing is the UK's leading online retailer of bathroom products
and accessories, offering a wide range of over 24,000 products to B2C and
trade customers. Victorian Plumbing offers its customers a one-stop shop
solution for the entire bathroom with more than 125 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 500 staff
across seven locations in Skelmersdale, Manchester and Birmingham.
For more information, please visit
https://www.victorianplumbingplc.com/about-us/
(https://www.victorianplumbingplc.com/about-us/)
Cautionary statement
This announcement of half year 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 H1 2022 H1 2021 H1 2020 H1 2022 H1 2022
(unaudited) (audited) (unaudited) Year-on-year Two-year
% growth %*
Income statement
Revenue £m 133.9 140.7 96.0 (5%) 39%
Gross profit((1)) £m 58.5 69.0 40.8 (15%) 43%
Gross profit margin((2)) % 44% 49% 43% (5%pts) 1%pts
Adjusted EBITDA((3)) £m 6.7 20.1 8.8 (67%) (24%)
Adjusted EBITDA margin((4)) % 5% 14% 9% (9%pts) (4%pts)
Profit before tax £m 2.7 14.5 7.6 (81%) (64%)
Earnings per share
Basic earnings per share((5)) pence 0.7 4.4 2.4 (84%) (71%)
Adjusted basic earnings per share((10)) pence 1.4 5.6 2.4 (75%) (42%)
Cash flow
Free cash flow((11)) £m 1.4 17.0 7.9 (92%) (82%)
Cash conversion((6)) % 21% 85% 90% (64%pts) (69%pts)
Net cash and cash equivalents £m 33.7 22.3 4.7 51% 617%
Key performance indicators
Total orders((7)) '000 453 486 345 (7%) 31%
Active customers((12)) '000 339 367 265 (8%) 28%
Average order value((8)) £ 296 289 278 2% 6%
TrustPilot TrustScore ((9)) /5 4.4 4.3 4.6 2% (4%)
Marketing spend as a % of revenue % 30% 27% 27% (3%pts) (3%pts)
* Two-year growth included to contextualise the short-term effect of Covid-19
upon trading.
(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 a non-GAAP measure. Adjusted EBITDA is
operating profit before depreciation, amortisation, exceptional items and IFRS
2 share-based payments along with associated national insurance.
(4) Adjusted EBITDA margin is defined as adjusted EBITDA as a
percentage of revenue.
(5) Basic EPS has been calculated for the comparative periods
using the weighted average number of shares in issue immediately prior to the
IPO in June 2021.
(6) Cash conversion is operating 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 Trustpilot TrustScore is defined as the overall
measurement of reviewer satisfaction, based on all the service and location
reviews the business receives.
(10) Adjusted basic earnings per share is defined as adjusted net
income divided by the weighted average number of shares for basic EPS.
Adjusted net income is defined as net income before exceptional items and IFRS
2 share-based payment charges and associated NI 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 is the number of unique customers who placed
an order in the period.
Summary of operating performance for the six months ended 31 March 2022
We have maintained the step change in scale gained through the previous
financial year with a resilient sales performance through H1 2022 against a
backdrop of lower customer demand following the end of the UK's Covid-19
lockdown restrictions.
Revenue of £133.9m for H1 2022 was down by 5% (H1 2021: £140.7m) as we
annualised the toughest pandemic-impacted comparatives. Revenue remains strong
on a two-year basis, up 39% (H1 2020: £96.0m) demonstrating that market share
gains made through the pandemic are here to stay. Adjusted EBITDA decreased to
£6.7m (H1 2021: £20.1m; H1 2020: £8.8m) and adjusted EBITDA margin
decreased to 5% (H1 2021: 14%; H1 2020: 9%).
Our commitment to growing our market share is unwavering. Through H1 2022 we
invested more in our brand and our digital performance-based marketing to
successfully grow our market share. Our bold brand creative continues to be
well received by consumers and is reflected in the awareness of the Victorian
Plumbing brand at 63% (2021: 64%)((1)).
Audience, defined as the number of unique visitors visiting our platform
measured through Google Analytics, remains 40% ahead of pre-pandemic levels
(H1 2020: 1.95 million). Although our audience reduced slightly (6%) to 2.72
million on average each month (H1 2021: 2.89 million), this level of unique
visitors was 1.9 times larger than our nearest competitor according to
Similarweb (H1 2021: 1.9 times).
Total orders amounted to 453,000 in H1 2022; a 7% decline year-on-year (H1
2021: 486,000) but up 31% on a two-year basis. Average order value increased
by 2% to £296 year-on-year, and by 6% on a two-year basis (H1 2021: £289; H1
2020: £278).
Providing the largest choice of quality products
Customers can use our platform to browse an extensive choice of quality
products across a wide range of price points, meaning Victorian Plumbing
offers customers a one-stop solution for bathrooms. Throughout H1 2022,
consumers could choose from over 24,000 products, across more than 125 own and
third-party brands.
The Victorian Plumbing website is the only place that customers can purchase
products from our stable of own brands. We have over 20 brands that include
products designed by our in-house development team and these continue to be
extremely popular with consumers. In H1 2022, 75% of revenue (H1 2021: 76%)
was generated from own brand products.
The experience that customers have with us is always front of mind. We
continue to be ranked 'Excellent' by Trustpilot, and have increased our
TrustScore to 4.4 stars (H1 2021: 4.3) across over 150,000 reviews.
A strong supply chain challenged by inflation
One of our primary objectives is to provide our customers with a wide choice
of immediately available products. We held an increased level of stock through
the first half of the year to combat disruption caused to our supply chain,
most notably the unpredictability of transit time for stock to arrive from the
Far East. We believe this investment helped us to outperform our competitors
through the period.
As expected, rising costs throughout the supply chain from product, inbound
shipping and outbound distribution have adversely impacted our gross profit
margin by 5 percentage points in the first half of the year.
Our strategic focus
Our strategy has been developed with reference to three commercial growth
horizons covering: core B2C, Trade, and Adjacent products.
Our core market is retailing bathroom products and accessories to consumers in
the UK through our online platform. The level of consumer demand for bathroom
products has fallen from the highs of 2021, but the pandemic has driven some
structural changes that provide good opportunities for growth. We are well
placed to continue to gain market share in the short term through both these
structural tailwinds and by taking share from traditional physical retailers
and other online competitors by leveraging our market and brand position.
In the medium term, we remain encouraged that, with strategic planning and
execution, there is a valuable further opportunity to translate our domestic
success into carefully selected international market expansion.
Our second horizon focuses on the opportunity to retail bathroom products and
accessories to Trade customers, an area in which we are currently
underpenetrated. In H1 2022 revenue generated from trade accounts increased by
18% to £24.6m (H1 2021: £20.9m), representing 18% of our total revenue. We
are progressing well with the development of our dedicated mobile app for
Trade customers.
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. Expanding these adjacent product ranges and increasing their
prominence on our website will allow consumers to use Victorian Plumbing for
everything they need to complete their bathrooms. During the period, we
expanded our design team to give ourselves capacity to design additional tile
ranges and increased the product choice in tiles by 38% since September 2021.
ESG
"Taking responsibility" is one of our core values, and we are focused on
making a positive difference to our communities and the wider environment in
which we operate.
The UK government has a target to become net carbon zero by 2050 and Victorian
Plumbing has a role to play in reaching this goal. There are two strands to
our commitments around the environment, which are: to help consumers make more
sustainable choices; and to work towards achieving net zero carbon emissions.
During the first half of the year we started collating data on our scope 3
emissions, which is the next step as we work towards defining our net zero
carbon strategy.
(1) YouGov prompted brand awareness - February 2022.
Comparative as of February 2021
Financial review
The performance of the Group was robust through H1 2022 against a backdrop of
lower customer demand and given that we are comparing against a prior year
period during which the UK was under severe Covid-19 restrictions.
Six-months to 31 March 2022 £m Six-months to 31 March 2021 £m Six-months to 31 March 2020 £m
(unaudited) (audited) (unaudited) H1 2022 H1 2022
Year-on-year Two-year
% growth %
Revenue 133.9 140.7 96.0 (5%) 39%
Cost of sales (75.4) (71.7) (55.2) (5%) (37%)
Gross profit 58.5 69.0 40.8 (15%) 43%
Underlying costs (51.8) (48.9) (32.0) (6%) (62%)
Adjusted EBITDA 6.7 20.1 8.8 (67%) (24%)
Depreciation and amortisation (1.7) (1.4) (1.1) (21%) (55%)
Share-based payments (2.1) (3.5) - 40% n.m
Exceptional items - (0.6) - n.m n.m
Operating profit 2.9 14.6 7.7 (80%) (62%)
Revenue
Revenue for H1 2022 was £133.9m, which represents an increase of 39% compared
to pre-pandemic performance (H1 2020: £96.0m). We have been able to
consolidate our share of the bathroom market, with revenue down just 5%
year-on-year despite a reduction in customer demand.
Total orders in the period decreased by 7% year-on-year to 453,000 (H1 2021:
486,000) but remained 31% up on a two-year basis. Average order value ('AOV')
increased by 2% to £296 (H1 2021: £289). This increase resulted from price
uplifts which occurred during the second half of last financial year. With
cost-of-living pressures building for consumers we have been cautious about
increasing prices on our products through the first half.
Gross profit and gross profit margin
Gross profit reduced by 15% to £58.5m (H1 2021 £69.0m) but remained 43% up
on a two-year basis (H1 2020: £40.8m). Gross margin for H1 2022 reduced by
five percentage points from exceptional levels seen last year to 44% (H1 2021:
49%; H1 2020: 43%). 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.
Year-on-year cost of sales increased by 5% to £75.4 million (H1 2021:
£71.7m) despite a reduction in total orders. Throughout H1 2022 we have seen
significant cost increases relating to shipping, distribution, packaging and,
to a lesser extent, raw materials. The strength of the Group's supplier
relationships and the proactiveness of our purchasing team have ensured good
product availability for consumers. Nonetheless this cost inflation coupled
with a period of lower consumer demand has impacted our gross margin and is
likely to continue to do so for the remainder of the year.
Gross margin from own brand products, which represent 75% of revenue (H1 2021:
76%) decreased to 49% (H1 2021: 54%), whilst gross margin from third-party
products decreased to 29% for the period (H1 2021: 31%).
Underlying costs
Underlying costs, which we define as administrative expenses before
depreciation and amortisation, exceptional items and share-based payments,
increased by 6% to £51.8m (H1 2021: £48.9m) and were up 63% on a two-year
basis (H1 2020: 32.0m).
Six-months to 31 March 2022 £m Six-months to 31 March 2021 £m Six-months to 31 March 2020 £m
(unaudited) (audited) (unaudited) H1 2022 H1 2022
Year-on-year Two-year
% growth %
Marketing costs 40.2 38.4 25.8 (5%) (56%)
People costs excluding share-based payments 8.0 6.6 4.2 (21%) (90%)
Property costs 2.5 2.1 1.2 (19%) (108%)
Other overheads 1.1 1.8 0.8 39% (38%)
Underlying costs 51.8 48.9 32.0 (6%) (62%)
Marketing costs increased by 5% to £40.2m which was equivalent to 30% of
revenue (H1 2021: 27%; H1 2020: 27%). During H1 2022 the Group invested more
in marketing and successfully grew market share in a market that was seeing a
reduction in customer demand compared to the prior year.
People costs, excluding share-based payments but including costs relating to
agency staff and contractors, increased by 21% to £8.0m (H1 2021: £6.6m; H1
2020: £4.2m). Total full-time equivalent employees ('FTEs') increased by 9%
year-on-year to 568 (H1 2021: 520), with the majority of the increase being in
our technology team as we develop our platform. The average cost per FTE
increased by 8% through a small change in staff mix and through salary
inflation in our warehouse and customer service teams.
Property costs increased by 19% to £2.5m and were 108% up on two years ago.
Property costs include short term agreements for warehouse space (outside the
scope of IFRS16) along with rates for all of the Group's properties. The
year-on-year increase relates to short term warehouse space, the cost of which
continues to increase given the demand in the market. Other overheads of
£1.1m were 39% lower than the prior year, largely due to £0.6m of
exceptional costs relating to the IPO which were incurred in H1 2021.
Adjusted EBITDA
Significant items of income and expense that do not relate to the trading of
the Group are disclosed separately. Examples of such items are exceptional
items and share-based payment charges, as these primarily relate to the
changing ownership of the Group.
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.
Six-months to 31 March 2022 £m Six-months to 31 March 2021 £m Six-months to 31 March 2020 £m
(unaudited) (audited) (unaudited) H1 2022 H1 2022
Year-on-year Two-year
% growth %
Operating profit 2.9 14.6 7.7 (80%) (62%)
Share-based payments 2.1 3.5 - 40% n.m
Exceptional items - 0.6 - n.m n.m
Adjusted operating profit 5.0 18.7 7.7 (73%) (35%)
Depreciation and amortisation 1.7 1.4 1.1 (21%) (55%)
Adjusted EBITDA 6.7 20.1 8.8 (67%) (24%)
Adjusted EBITDA for H1 2022 totalled £6.7m (H1 2021: £20.1m; H1 2020:
£8.8m) with adjusted EBITDA margin of 5% (H1 2021: 14%; H1 2020: 9%).
Share-based payments
The Group incurred share-based payment charges (including associated NI) of
£2.1m (H1 2021: £3.5m). Share-based payment charges for the year include
£1.9m for schemes relating to the Group's IPO in June 2021, along with £0.3m
for ongoing schemes put in place post IPO.
Depreciation and amortisation
Depreciation and amortisation increased by £0.3m to £1.7m (H1 2021: £1.4m;
H1 2020: £1.1m). The Group continues to invest in its platform and bespoke
inventory management systems, with £1.3m capitalised during H1 2022 (H1 2021:
£0.8m).
Operating profit
Operating profit decreased by 80% to £2.9m (H1 2021: £14.6m; H1 2020:
£7.7m). Operating profit margin decreased by eight percentage points to 2%
(H1 2021: 10%; H1 2020: 8%).
Profit before taxation
Profit before taxation for the period was £2.7m (H1 2021: £14.5m; H1 2020:
£7.6m). This decrease resulting from the operating profit performance while
net finance costs amounted to £0.2m (H1 2021: £0.1m; H1 2020: £0.1m).
Taxation
The Group tax charge of £0.7m (H1 2021: £2.9m; H1 2020: £1.3m) represents
an effective tax rate of 25% (H1 2021: 20%; H1 2020: 17%).
Earnings per share
Basic earnings per share ('EPS') from continuing operations, which is
calculated for both the current and comparative year based upon the weighted
average number of shares in issue immediately prior to the IPO, was 0.7 pence
per share (H1 2021: 4.4 pence per share; H1 2020: 2.4 pence per share).
The adjusted basic earnings per share from continuing operations was 1.4 pence
per share (H1 2021: 5.6 pence per share; H1 2020: 2.4 pence per share). The
table shows the effect on the Group's basic earnings per share of the
exceptional items and share-based payments.
Six-months to 31 March 2022 £m Six-months to 31 March 2021 £m Six-months to 31 March 2020 £m
(unaudited) (audited) (unaudited) H1 2022 H1 2022
Year-on-year Two-year
% growth %
Profit for EPS 2.0 11.6 6.3 (83%) (68%)
Share-based payments (including associated NI) 2.1 3.5 - 40% n.m
Exceptional items - 0.6 - n.m n.m
Tax effect (0.4) (0.8) - 50% n.m
Adjusted profit for EPS 3.7 14.9 6.3 (75%) (41%)
Weighted average number of ordinary shares for basic EPS (millions) 273.5 265.6 265.6 3% 3%
Adjusted earnings per share (pence) 1.4 5.6 2.4 (75%) (42%)
Cash flow and net cash
Six-months to 31 March 2022 Six-months to 31 March 2021 Six-months to 31 March 2020
(unaudited) (audited) (unaudited) H1 2022 H1 2022
Year-on-year Two-year
% growth %
Adjusted EBITDA 6.7 20.1 8.8 (67%) (24%)
Movement in working capital* (3.2) (0.7) 0.5 (357%) (740%)
Capital expenditure (1.5) (1.9) (1.0) 21% (50%)
Lease payments - principal (0.5) (0.4) (0.3) (25%) (67%)
Lease payments - interest (0.1) (0.1) (0.1) - -
Free cash flow 1.4 17.0 7.9 (92%) (82%)
Cash conversion 21% 85% 90% (64%pts) (69%pts)
* Movement in working capital excludes national insurance relating to
share-based payments which are excluded from Adjusted EBITDA
Changes in working capital resulted in a cash outflow of £3.2 million in the
period. Global supply chains continued to be disrupted in H1 2022 and we made
the decision to increase our stock holding to decrease the risk of stock-outs,
therefore providing a better and more dependable experience for customers.
This increase in stock holding across the period resulted in a working capital
outflow of £2.9 million.
Capital expenditure of £1.5m (H1 2021: £1.9m; H1 2020: £1.0m) included
£1.1m of capitalised salaries relating to development of the Group's platform
and bespoke inventory management systems (H1 2021: £0.5m; H1 2020: £0.2m).
At the period end the Group had net cash of £33.7m (H1 2021: £22.3m; H1
2020: £4.7m).
Events after the reporting period
There have been no material events to report after the end of the reporting
period.
Dividend
No interim dividend has been declared. The current intention of the Board is
to pay a dividend in relation to the financial year ending 30 September 2022.
Mark Radcliffe Paul
Meehan
Chief Executive Officer
Chief Financial Officer
17 May 2022
17 May
2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 MARCH 2022
Note Six months to 31 March 2022 Six months to 31 Year to 30 September 2021
£m March 2021 £m
£m
Revenue 4 133.9 140.7 268.8
Cost of sales (75.4) (71.7) (138.3)
Gross profit 58.5 69.0 130.5
Administrative expenses before separately disclosed items 5 (53.9) (50.3) (93.4)
Other operating income 0.4 - -
Adjusted operating profit 5.0 18.7 37.1
Separately disclosed items:
Share-based payments 20 (2.1) (3.5) (7.7)
Exceptional items 6 - (0.6) (9.4)
Operating profit 2.9 14.6 20.0
Finance costs 7 (0.2) (0.1) (0.3)
Profit before tax 2.7 14.5 19.7
Income tax expense 8 (0.7) (2.9) (5.4)
Profit for the period 2.0 11.6 14.3
Basic earnings per share (pence) 10 0.7 4.4 5.3
Diluted earnings per share (pence) 10 0.6 4.4 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
AS AT 31 MARCH 2022
Note Six months to 31 March 2022 Six months to 31 March 2021 Year to 30 September 2021
£m £m £m
Assets
Non-current assets
Intangible assets 11 3.1 2.5 2.7
Property, plant and equipment 12 1.6 1.7 1.7
Right-of-use assets 13 4.9 5.7 5.3
9.6 9.9 9.7
Current assets
Inventories 35.3 26.0 32.4
Trade and other receivables 14 4.4 9.4 4.9
Tax recoverable 0.5 1.7 1.0
Cash and cash equivalents 33.7 22.3 32.7
73.9 59.4 71.0
Total assets 83.5 69.3 80.7
Equity and liabilities
Equity attributable to the owners of the Company
Share capital 18 0.3 - 0.3
Share premium 11.2 - 11.2
Deferred share capital 0.1 - 0.1
Capital reorganisation reserve (320.6) - (320.6)
Retained earnings 344.0 24.8 339.8
Total equity 35.0 24.8 30.8
Liabilities
Non-current liabilities
Lease liabilities 7,16 4.5 5.5 4.9
Deferred taxation liability 0.1 (0.7) 0.1
4.6 4.8 5.0
Current liabilities
Trade and other payables 15 36.7 29.7 36.0
Contract liabilities 6.1 8.5 7.9
Lease liabilities 7,16 0.9 0.7 0.9
Derivative financial instruments - 0.6 -
Provisions 0.2 0.2 0.1
43.9 39.7 44.9
Total liabilities 48.5 44.5 49.9
Total equity and liabilities 83.5 69.3 80.7
The financial statements were approved by the Board of Directors on 17 May
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 SIX MONTHS ENDED 31 MARCH 2022
Share capital Share premium Capital reorganisation reserve Deferred share capital Retained earnings Total equity
£m £m £m £m £m £m
Balance at 1 October - - - - 13.0 13.0
2020
Comprehensive income
Profit for the period - - - - 11.6 11.6
Transactions with owners
Dividends paid (note 9) - - - - (2.9) (2.9)
Employee share schemes - value of employee services (note 20) - - - - 2.8 2.8
Tax impact of employee share schemes - - - - 0.3 0.3
Balance at 31 March 2021 - - - - 24.8 24.8
Comprehensive income
Profit for the period - - - - 2.7 2.7
Transactions with owners
Dividends paid (note 9) - - - - (12.0) (12.0)
Employee share schemes - value of employee services (note 20) - - - - 3.7 3.7
Tax impact of employee share schemes - - - - 0.4 0.4
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 (note 18)
Balance at 30 September 2021 0.3 11.2 (320.6) 0.1 339.8 30.8
Comprehensive income
Profit for the period - - - - 2.0 2.0
Transactions with owners
Employee share schemes - value of employee services (note 20) - - - - 2.2 2.2
Balance at 31 March 2022 0.3 11.2 (320.6) 0.1 344.0 35.0
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 MARCH 2022
Note Six months to 31 March 2022 Six months to 31 March 2021 Year to 30 September 2021
£m £m £m
Cash flows from operating activities
Cash generated from operating activities before exceptional operating items 3.5 19.5 36.9
Cash outflow from exceptional operating items (0.1) (0.1) (9.1)
Cash generated from operating activities 21 3.4 19.4 27.8
Income tax paid (0.2) (2.8) (3.4)
Net cash generated from operating activities 3.2 16.6 24.4
Cash flows from investing activities
Purchase of intangible assets 11 (1.3) (0.8) (1.8)
Purchase of property, plant and equipment 12 (0.2) (1.1) (1.4)
Amounts received in respect of related party loans - 0.5 5.9
Net cash (used in)/generated by investing activities (1.5) (1.4) 2.7
Cash flows from financing activities
Dividends paid 9 - (2.9) (14.9)
Finance arrangement fees 7 (0.1) - (0.1)
Proceeds from the issue of shares, net of costs 18 - - 11.2
Payment of interest portion of lease liabilities 7,16 (0.1) (0.1) (0.3)
Payment of principal portion of lease liabilities 16 (0.5) (0.4) (0.8)
Net cash used in financing activities (0.7) (3.4) (4.9)
Net increase in cash and cash equivalents 1.0 11.8 22.2
Cash and cash equivalents at the beginning of the period 32.7 10.5 10.5
Cash and cash equivalents at the end of the period 33.7 22.3 32.7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Basis of preparation
Victorian Plumbing Group plc is a public limited company which is listed on
the Alternative Investment Market ('AIM') of the London Stock Exchange and is
domiciled and incorporated in the United Kingdom under the Companies Act 2006.
Its registered office is 22 Grimrod Place, Skelmersdale, Lancashire, WN8 9UU.
These condensed consolidated interim financial statements ('interim financial
statements') were approved by the Board for issue on 17 May 2022, and have
been prepared as at, and for the six months ended, 31 March 2022. The
comparative financial information presented has been prepared as at, and for
the six months ended, 31 March 2021.
These interim financial statements do not constitute statutory accounts within
the meaning of Section 434 of the Companies Act 2006. The interim financial
statements for the half year ended 31 March 2022 are neither audited nor
reviewed by the Company's auditors. The interim financial statements for the
half year ended 31 March 2021 were audited as part of the Group's admission to
the AIM in June 2021. The consolidated financial statements of the Group as
at, and for the year ended, 30 September 2021 are available on request from
the Company's registered office and via the Company's website. The report of
the auditors on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under Section 498 of the
Companies Act 2006.
These interim financial statements have been prepared in accordance with IAS
34, "Interim Financial Reporting" issued by the IASB and adopted for use in
the UK. They do not include all of the information required for full annual
financial statements and should be read in conjunction with the consolidated
financial statements of the Group as at and for the year ended 30 September
2021, which were prepared in accordance with international Financial Reporting
Standards (IFRSs) in conformity with the requirements 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 of 12 months to 31 May 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.
Liquidity and financing
At 31 March 2022, the Group held instantly accessible cash and cash
equivalents of £33.7 million. The Group also has access to a revolving credit
facility of £10.0 million with HSBC which was undrawn at 31 March 2022 and
does not expire until June 2024. There is a sufficient level of
liquidity/financing headroom post stress testing across the going concern
forecast period to 31 May 2023, as outlined in more detail below.
Approach to stress testing
The going concern analysis reflected the actual trading to March 2022, as well
as detailed financial forecasts for the period up to 31 May 2023. The Group
has taken a measured approach to its forecasting. The Group has balanced the
expected trading conditions with opportunities available in a growing market
which is transitioning online.
The Group has prepared a series of severe-but-plausible downside scenarios,
and a worst case being the combination of them all. The combined worst case
scenario still results in sufficient cash forecast to be held throughout the
period to 31 May 2023 to cover the Group's liabilities as they fall due,
without utilisation of the Group's revolving credit facilities.
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 May 2023. Accordingly, the Directors conclude it is appropriate
that these interim consolidated financial statements be prepared on a going
concern basis.
2. Accounting policies, estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including the expectations of future events that
are believed to be reasonable under the circumstances.
In preparing these interim financial statements, the significant judgements
made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 30 September 2021.
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.
Six months Six
to months
31 March to
2022 31 March
£m 2021
£m
Operating profit 2.9 14.6
Depreciation of property, plant and equipment 0.3 0.2
Depreciation of right-of-use assets 0.5 0.4
Amortisation 0.9 0.8
Exceptional items - 0.6
Share-based payments (including associated NI) 2.1 3.5
Adjusted EBITDA 6.7 20.1
4. Revenue
An analysis of revenue by class of business is as follows:
Six Six months
months to 31 March
to 31 March 2021
2022 £m
£m
Online 133.2 140.5
Showroom 0.7 0.2
133.9 140.7
All revenue arose within the United Kingdom.
5. Operating profit
Expenses by nature including exceptional items:
Six Six months
months to 31 March 2021
to 31 March £m
2022
£m
Employee costs (excluding share-based payments) 7.5 6.2
Share-based payments (including associated NI) 2.1 3.5
Agency and contractor costs 0.5 0.6
Marketing costs 40.2 38.4
Depreciation of property, plant and equipment (note 12) 0.3 0.2
Depreciation of right-of-use assets (note 13) 0.5 0.4
Amortisation charge (note 11) 0.9 0.8
(Gain)/loss on foreign exchange (0.2) 0.4
Other costs 4.2 3.9
Total administrative expenses 56.0 54.4
Share-based payments (note 20) (2.1) (3.5)
Included within exceptional items (note 6) - (0.6)
Total administrative expenses before separately disclosed items 53.9 50.3
6. Exceptional items
Six Six months
months to 31 March
to 31 March 2021
2022 £m
£m
IPO costs - 0.6
IPO costs relate to costs incurred in respect of the Group's listing on AIM in
June 2021.
7. Net finance costs
Six Six
months months
to 31 March to 31
2022 March
£m 2021
£m
Amortised debt issue costs 0.1 -
Interest charge on lease liabilities 0.1 0.1
0.2 0.1
8. Taxation
Six Six months
months to 31 March
to 31 March 2021
2022 £m
£m
Corporation tax
Current tax on profits for the period 0.7 3.4
Total current tax 0.7 3.4
Deferred tax
Origination and reversal of timing differences - (0.5)
Total deferred tax - (0.5)
Taxation on profit 0.7 2.9
Factors affecting tax charge for the period
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:
Six Six months
months to 31 March 2021
to 31 March 2022 £m
£m
Profit before tax 2.7 14.5
Profit multiplied by standard rate of corporation tax in the UK of 19% (2021: 0.5 2.8
19%)
Effects of:
Expenses not deductible for tax purposes - 0.1
Share options 0.2 -
Total tax charge for the period 0.7 2.9
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.
Tax recoverable
Tax recoverable represents overpaid corporation tax and Section 455 tax which
has been paid and is to be reclaimed.
9. Dividends
Six months Six months to 31 March 2021
to 31 March £m
2022
£m
Dividends paid - 2.9
In previous years certain shareholders waived their right to receive dividends
and therefore the dividends paid were not based on the total number of
ordinary shares in issue at the time. No dividends were paid to the
shareholders of Victorian Plumbing Group plc during the half year ended 31
March 2022.
10. 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 period.
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 period 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
Half year ended 31 March 2022
Basic EPS 273,509,210 2.0 0.7
Diluted EPS 321,186,798 2.0 0.6
Year ended 30 September 2021
Basic EPS 267,781,231 14.3 5.3
Diluted EPS 315,755,339 14.3 4.5
Weighted average number of shares
Number of ordinary shares in issue at 30 September 2021 273,509,210
Weighted average number of shares for basic EPS 273,509,210
Dilutive impact of unvested shares in relation to restricted share awards 47,677,589
Weighted average number of shares for diluted EPS 321,186,798
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 period by the weighted average
number of shares in issue (as set out above).
Six months to 31 March 2022 Six months to 31 March 2021
£m £m
Profit for the period 2.0 11.6
Exceptional items - 0.6
Share-based payments 2.1 3.5
Tax effect (0.4) (0.8)
Total adjusted profit for the period 3.7 14.9
Adjusted basic earnings per share (pence) 1.4 5.6
Adjusted diluted earnings per share (pence) 1.2 5.6
11. Intangible assets
Computer software
£m
Cost
At 30 September 2020 5.7
Additions 0.8
At 31 March 2021 6.5
Additions 1.0
At 30 September 2021 7.5
Additions 1.3
At 31 March 2022 8.8
Accumulated amortisation
At 30 September 2020 3.2
Charge for the period 0.8
At 31 March 2021 4.0
Charge for the period 0.8
At 30 September 2021 4.8
Charge for the period 0.9
At 31 March 2022 5.7
Net book value
At 30 September 2020 2.5
At 31 March 2021 2.5
At 31 March 2022 3.1
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 £1.1 million in the six months ended 31
March 2022 (H1 2021: £0.5 million) for development of computer software.
For the six month period to 31 March 2022, the amortisation charge of £0.9
million (H1 2021: £0.8 million) has been charged to administrative expenses
in the income statement.
12. 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 - 0.6 0.2 0.3 1.1
At 31 March 2021 - 1.3 1.2 1.2 3.7
Additions 0.1 0.1 - 0.2 0.4
At 30 September 2021 0.1 1.4 1.2 1.4 4.1
Additions - 0.1 - 0.1 0.2
At 31 March 2022 0.1 1.5 1.2 1.5 4.3
Accumulated depreciation
At 30 September 2020 - 0.4 0.9 0.5 1.8
Charge for the period - 0.1 - 0.1 0.2
At 31 March 2021 - 0.5 0.9 0.6 2.0
Charge for the period - 0.2 0.1 0.1 0.4
At 30 September 2021 - 0.7 1.0 0.7 2.4
Charge for the period - 0.1 0.1 0.1 0.3
At 31 March 2022 - 0.8 1.1 0.8 2.7
Net book value
At 30 September 2020 - 0.3 0.1 0.4 0.8
At 31 March 2021 - 0.8 0.3 0.6 1.7
At 31 March 2022 0.1 0.7 0.1 0.7 1.6
13. Right-of-use assets
Right-of-use assets
£m
Cost
At 30 September 2020 8.1
Additions 0.1
At 31 March 2021 8.2
Additions 0.5
Modifications (0.4)
Disposals (0.1)
At 30 September 2021 8.2
Additions -
Modifications 0.1
At 31 March 2022 8.3
Accumulated depreciation
At 30 September 2020 2.1
Charge for the period 0.4
At 31 March 2021 2.5
Charge for the period 0.5
On disposals (0.1)
At 30 September 2021 2.9
Charge for the period 0.5
At 31 March 2022 3.4
Net book value
At 30 September 2020 6.0
At 31 March 2021 5.7
At 31 March 2022 4.9
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.
14. Trade and other receivables
Six months ended 31 March 2022 Six months ended 31 March 2021
£m £m
Trade receivables 2.2 1.9
Amounts owed by related parties - 5.4
Right-of-return asset 0.3 0.4
Accrued income 0.8 0.8
Prepayments 1.1 0.9
4.4 9.4
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, amounts owed by
related parties and other receivables expected credit losses have been
reviewed by management and have been determined to have an immaterial impact
on these balances.
15. Trade and other payables
Six months ended 31 March 2022 Six months ended 31 March 2021
£m £m
Trade payables 25.2 19.4
Other taxation and social security 7.0 6.8
Refund liability 0.8 1.2
Other payables 1.1 0.9
Accruals 2.6 1.4
36.7 29.7
16. Lease liabilities
Lease liability
£m
At 30 September 2020 6.4
Additions 0.2
Interest expense 0.1
Lease payment (0.5)
At 31 March 2021 6.2
Additions 0.4
Modifications (0.4)
Interest expense 0.2
Lease payment (0.6)
At 30 September 2021 5.8
Modifications 0.1
Interest expense 0.1
Lease payment (0.6)
At 31 March 2022 5.4
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 £0.6 million (H1 2021: £0.5
million). The Group also had non-cash additions to right-of-use assets and
lease liabilities of £0.1 million (H1 2021: £0.2 million).
Lease liabilities as at 31 March were classified as follows:
Six Six months ended March 2021
months ended March £m
2022
£m
Current 0.9 0.7
Non-current 4.5 5.5
Total 5.4 6.2
17. Borrowings
Six Six months ended
months ended 31 March 2022 31 March 2021
£m £m
Amounts drawn under revolving credit facility - -
Unamortised debt issue costs (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 31 March 2022 the Group had
not utilised the RCF.
Unamortised debt issue costs of £0.1 million (H1 2021: £nil) are included in
prepayments (note 14).
18. Ordinary share capital
Six months ended 31 March 2022 Six months ended 31 March 2021
£ £
Allotted, called up and fully paid
325,062,985 ordinary shares of 0.1p (H1 2021: £nil) 325,063 -
Nil ordinary shares of £1.00 (H1 2021: 800) - 800
Nil A ordinary shares of £0.10 (H1 2021: 845) - 85
325,063 885
The share capital of the Group is represented by the share capital of the
parent company, Victorian Plumbing Group plc. The Company was incorporated on
6 May 2021 to act as the holding company of the Group. Prior to this the share
capital of the Group was represented by the share capital of the previous
parent, VIPSO Limited.
19. Own shares held
The Employee Share Option Trust purchases shares to fund the Share Incentive
Plan. At 30 September 2021, the trust held 635,504 (2020: nil) ordinary shares
with a book value of £636 (2020: £nil). The market value of these shares as
at 30 September 2021 was £1.6 million (2020: £nil). During FY21 the ESOT
purchased 635,504 shares of the Company at a cost of £636, representing 0.2%
of issued share capital.
Number of shares £
ESOT shares reserve
Own shares held at 30 September 2021 and 31 March 2022 635,504 636
On 27 July 2021, Victorian Plumbing Group plc issued 635,504 ordinary shares
of 0.1p each to eligible employees in connection with the Share Incentive Plan
('SIP'). On the same date, the ordinary shares were acquired by the Employee
Share Option Trust ('ESOT') at nominal value.
20. Share-based payments
The Group operates four share plans being the Share Incentive Plan ('SIP'), a
Management Incentive Plan ('MIP'), a Deferred Bonus Plan ('DBP') and a
Long-Term Incentive Plan ('LTIP'). 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. The estimate of
the fair value of the share-based incentives is measured using the
Black-Scholes pricing model or Monte Carlo simulation, as appropriate for each
scheme.
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 period was £2.1m (H1 2021: £3.5m) with a Company
charge of £1.0m (H1 2021: £nil). This included associated national insurance
('NI') at 15.1% (H1 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.
Six months ended 31 March 2022 Six months ended 31 March 2021
£m £m
Share Incentive Plan ('SIP') 0.2 -
A ordinary growth shares award - April 2020 - 0.3
Management incentive Plan award - December 2020 - 2.5
IPO restricted share awards 1.9 -
Deferred bonus plan - October 2021 0.1 -
Long term incentive plan - October 2021 - -
Total IFRS 2 charge 2.2 2.8
National insurance and apprenticeship levy on applicable schemes (0.1) 0.7
Total charge 2.1 3.5
During the period, the Directors in office in total had gains of £nil (H1
2021: £nil) arising on the exercise of share-based incentive awards.
Share Incentive Plan
The Group operates a Share Incentive Plan ('SIP') 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').
Six months ended 31 March 2022 Six months ended 31 March 2021
number number
Outstanding at 1 October 2021 576,732 -
Forfeited (100,155) -
Outstanding at 31 March 2022 476,577 -
The total charge in the period, included in operating profit, in relation to
these awards was £0.2m (H1 2021: £nil). The Company charge for the period
was £nil (H1 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.
Six months ended 31 March 2022
Number
Outstanding and unvested at 1 October 2021 and 31 March 2022 6,163,600
The total charge in the period, included in operating profit, in relation to
these awards was £nil (H1 2021: £0.3m). The Company charge for the period
was £nil (H1 2021: £nil).
Management Incentive Plan
An Executive Director was awarded share options under a management incentive
plan ('MIP') 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 the steps
relating to the reorganisation were executed, the participant of the MIP had
exchanged its eight ordinary shares and nine 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.
Six months ended 31 March 2022
Number
Outstanding and unvested at 1 October 2021 and 31 March 2022 965,984
The weighted average market value per ordinary share for the restricted shares
awarded under the MIP that vested in the year was £2.62.
The total charge in the period, included in operating profit, in relation to
these awards was £nil (H1 2021: £2.5m). The Company charge for the period
was £nil (H1 2021: £nil).
IPO restricted share awards
During FY21, the Chairman and certain members of Key Management were 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 31 March 2022 was as follows:
Six months ended 31 March 2022
Number
Outstanding at 30 September 2021 3,442,858
Forfeited (38,168)
Outstanding and unvested at 31 March 2022 3,404,690
The total charge in the period, included in operating profit, in relation to
these awards was £1.9m (H1 2021: £nil). The Company charge for the period
was £1.0m (H1 2021: £nil).
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 period the Group awarded 1,893,219 nil cost options under the DBP
scheme. 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.
Six months ended 31 March 2022
Number
Outstanding at 30 September 2021 -
Options granted in the period 1,893,219
Outstanding at 31 March 2022 1,893,219
The total charge in the period, included in operating profit, in relation to
these awards was £0.1m (H1 2021: £nil). The Company charge for the period
was £nil (H1 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.
Six months ended 31 March 2022
Number
Outstanding at 30 September 2021 -
Options granted in the period 323,472
Outstanding at 31 March 2022 323,472
21. Cash generated from operating activities
Six months ended 31 March 2022 Six months ended 31 March 2021
£m £m
Cash flows from operating activities
Profit before taxation for the financial period 2.7 14.5
Adjustments for:
Amortisation of intangible assets (note 11) 0.9 0.8
Depreciation of property, plant and equipment (note 12) 0.3 0.2
Depreciation of right-of-use assets (note 13) 0.5 0.4
Share-based payments (including NI) 2.1 3.5
Finance costs 0.2 0.1
Increase in inventories (2.9) (3.0)
Decrease in receivables 0.5 0.1
(Decrease)/Increase in payables (1.0) 2.8
Increase in provisions 0.1 -
Cash generated from operating activities 3.4 19.4
22. Post balance sheet events
There have been no events between the half year-end date and the date of this
report which represent a reportable event after the reporting period under IAS
10.
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