REG - Alumasc Group Plc - Final Results
03/09/2024 07:00
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RNS Number : 5981C Alumasc Group PLC 03 September 2024
IMMEDIATE RELEASE
Tuesday 3 September 2024
THE ALUMASC GROUP PLC
("ALUMASC" or the "GROUP")
FULL YEAR RESULTS ANNOUNCEMENT
DELIVERY OF STRATEGIC PRIORITIES DRIVING MARKET OUTPERFORMANCE WITH FURTHER
UPGRADE TO 2024 PROFIT
Alumasc (ALU.L), the premium sustainable building products, systems and
solutions Group, announces results for the year ended 30 June 2024.
HIGHLIGHTS (continuing operations):
· Record underlying(*) pre-tax profit grew by 16.1% to £13.0m
(2023: £11.2m), ahead of our recently upgraded expectations
o 5.5% contribution from ARP, net of attributable interest
o 10.6% organic growth, reflecting strong operational execution and
investments in people and processes
· Revenue grew by 13.0% to £100.7m (2023: £89.1m)
o 6.5% organic growth sales increase, against an estimated 2.9% decline in
UK construction over 2024, with growth in all three Group divisions driven by
a focus on sustainable solutions and effective new product development
o ARP, acquired in December 2023, delivered a 6.5% contribution to revenues,
while developing cross-selling and purchasing synergies
· Group underlying operating margin(*) of 14.1% (2023: 13.6%),
progressing towards 15-20% target margin range, with all divisions
contributing to the improvement
· Strong cash performance: operating cash conversion(*) of 120%
(2023: 104%) and net bank debt(*) of £7.2m, after net £8.5m outflow on
acquisition of ARP, representing a leverage multiple(*) of 0.5x
· Pension derisking continuing: £0.8m IAS 19 surplus at year end
(2023: £4.3m deficit)
· Basic earnings per share 24.3p (2023: 23.3p), underlying earnings
per share(*) 26.9p (2023: 25.0p)
· Progressive dividend policy reflects Board's continued confidence
in outlook
o Final dividend proposed at 7.3p (2023: 6.9p) per share, contributing to a
total dividend of 10.75p (2023: 10.3p) per share, within our medium term
objective of 2.5-3.0 times earnings cover
STRATEGIC POSITIONING: LEADERSHIP IN ENVIRONMENTAL SOLUTIONS DRIVING FUTURE
GROWTH
Market leading positions in sustainable products, with
· >80% of portfolio aligned with strong environmental growth
drivers
· Achievements during the year:
o Further 4.7% reduction in scope 1, 2 and business travel carbon intensity
o Full scope 3 calculations well underway
DIVISIONAL HIGHLIGHTS
Water Management
· Strong performance, assisted by ARP contribution and export sales
growth
· Revenue +21% to £48.3m (2023: £39.8m); underlying operating
profit(*) +32% to £7.6m (2023: £5.8m)
· Organic growth (excluding ARP): revenue +7%, underlying operating
profit* +16%
· Underlying operating margin* 15.8% (2023: 14.5%)
Building Envelope
· Delivering on investment in technical sales and customer support
capabilities
· Revenue +9% to £37.6m (2023: £34.6m); underlying operating
profit(*) +13% to £4.6m (2023: £4.1m)
· Underlying operating margin* 12.3% (2023: 11.8%)
Housebuilding Products
· Very strong performance against a very challenging new build
housing market backdrop, driven by investment in new product development
· Revenue +1% to £14.8m (2023: £14.7m); underlying operating
profit(*) +7% to £3.8m (2023: £3.5m)
· Underlying operating margin* 25.3% (2023: 23.9%)
OUTLOOK
The strong performance during the full year reflects Alumasc's focus on
sustainable products which are recognised as highly effective solutions to the
growing challenge of climate change across the built environment.
The management team continues to progress with its long-term growth strategy,
to accelerate organic growth, drive margin improvement and enhance delivery
through value-accretive investment which continues to underpin the future
growth ambitions for Alumasc.
Alumasc's performance against the backdrop of challenging markets during 2024
shows the business's quality, and as we progress into 2025 we have a clear
line of sight of our growth plans, capacity to invest and opportunity to
deliver significant shareholder value.
While demand headwinds in Alumasc's commercial markets are likely to persist
for the remainder of 2024, we are encouraged by early indicators of easing in
planning, improving consumer confidence and the interest rate outlook which
suggests an improved trading outlook in due course. With the positive trading
momentum Alumasc has carried into the new financial year, and the improving
economic environment, the Board is optimistic for another year of growth.
Commenting on the results reported today, Paul Hooper, Chief Executive, said:
"We are extremely pleased to report a further upgrade to our 2024 profit, with
underlying profit before tax* of £13.0m, 16% ahead of the prior year. All
three divisions saw organic revenue and strong profit growth, a result of
continued delivery on our strategic priorities and Alumasc's position as a
market leader in the provision of sustainable products, which provide
efficient solutions to the challenges presented by our changing climate.
Sustainability is at the core of what the construction industry needs to do to
address climate change and the Group is well placed to benefit from these
long-term growth drivers. This environmental focus, together with an effective
commercial strategy, has enabled us to continue to outperform the wider UK
construction market.
Since we completed the strategic acquisition of ARP Group and welcomed our new
colleagues, the business has performed extremely well, bringing exciting
synergies and opportunities for cross-selling to the business.
Alumasc's performance against the backdrop of challenging markets during 2024
shows the business's quality and as we progress into 2025 we have a clear line
of sight of our ambitious growth plans, capacity to invest and opportunity to
deliver significant shareholder value."
* Alternative performance measures: see Note 1
Enquiries:
The Alumasc Group plc
+44 (0)1536 383844
Paul Hooper (Chief Executive)
Simon Dray (Group Finance Director)
Peel Hunt (Broker)
+44 (0)207 418 8831
Mike Bell
Ed Allsopp
Cavendish Capital Markets Ltd (Nominated Adviser) +44
(0)207 220 0561
Julian Blunt
Edward Whiley
Camarco (Financial PR)
alumasc@camarco.co.uk
Ginny Pulbrook
+44 (0)203 757 4992
Rosie Driscoll
Tilly
Butcher
Notes to Editors:
Alumasc is a UK-based supplier of premium sustainable building products,
systems and solutions. Almost 80% of Group sales are driven by building
regulations and specifications (architects and structural engineers) because
of the performance characteristics offered.
The Group has three business segments with strong positions and brands in
their individual markets. The three segments are: Water Management; Building
Envelope; and Housebuilding Products.
Strategic Report
Chair's Statement
Record profits, delivering strategically and ambitious going forward
Despite geopolitical and economic uncertainty, Alumasc delivered organic
revenue and strong profit growth in all three divisions. Together with an
encouraging performance from ARP in the first six months of our ownership,
this resulted in a record Group profit, with underlying profit before tax
(UPBT*) of £13.0 million (2022/23: £11.2 million), and an underlying
operating margin* of 14.1% (2022/23: 13.6%). Statutory profit before tax from
continuing operations was £11.7 million (2022/23: £10.5 million).
Performance - financial and environmental
The record UPBT* of £13.0 million arose from higher revenues (now above £100
million), from a strategic focus on environmentally sustainable solutions, new
product development, investment in people and processes, the ARP acquisition,
and driving efficiencies.
Our underlying operating margin* of 14.1% (2022/23 13.6%) is progressing
towards our target of 15% - 20%, with all three divisions contributing to the
improvement. Operating cashflow was once again strong at £16.2 million
(2022/23 £12.2 million), enabling us to continue to invest in strategic
initiatives.
Our environmentally focused product portfolio continues to benefit from long
term growth drivers, helping us to outperform the general UK construction
market. We saw a further 4.7% reduction in our scope 1, 2 and business travel
GHG emissions intensity (70% reduction since we began reporting it in FY18).
Our full scope 3 emission calculations are well underway as we support our
divisions on the Group's pathway to Net Zero.
Strategy and ambitions
We aspire to grow revenues faster than the UK construction sector, while
increasing operating margins to accelerate profit growth and deliver superior
shareholder value. To this end, Alumasc continues to make clear and sustained
progress towards each of our four strategic objectives:
· Organic revenue growth (+6.5%);
· Operating margin improvement (+50bps);
· Sustainable product revenues (which represented over 85% of Group
revenue); and
· Value-enhancing investments to support our longer-term growth
objectives.
Investments continued in support of our commercial strategy, in sales/customer
support and new product development. In addition to the ARP acquisition, we
invested £3.6 million of capital in organisational capability, including
automation of access cover manufacturing at our Halstead site, and in
providing better information to support commercial decision-making through ERP
and CRM upgrades.
We have been pursuing this growth-focused strategy for around three years now,
and aspire to grow revenues faster than the UK construction sector while
increasing operating margins to accelerate profit growth and deliver superior
shareholder value.
Pension scheme
Alumasc continues to work constructively with the Trustees of the defined
benefit pension scheme to fund and derisk the scheme. On an
accounting/"technical" basis, the June 2024 surplus of £0.8 million compares
to the June 2023 deficit of £4.3 million. Alumasc continues to contribute
£1.2 million p.a. to the scheme until the next formal actuarial valuation
exercise in 2025 while working constructively with the Trustees to help reduce
the scheme's volatility and its dependence on the Group.
Dividends
Reflecting the Board's confidence, a final dividend of 7.3p per share will be
recommended to shareholders, payable on 1 November 2024. If approved, when
added to the interim dividend of 3.45p paid in April 2024, this would
represent a total dividend per share of 10.75p per share (2023:10.3p), in
accordance with our progressive dividend policy and medium term objective of
2.5 to 3.0 times cover.
Our people - past, present and future
It is Alumasc's people who deliver our purpose of providing building products
for a sustainable future. On behalf of all stakeholders, I thank all our
colleagues (past, present and future) for their dedication and commitment.
In December 2023 we welcomed new colleagues with the ARP acquisition in
Leicester, who are already making a strong contribution to the group.
Sadly, as we increase automation with modern machinery at our facility in
Halstead, we recently announced the planned closure of our long-standing site
in Dover. Our thanks go to the staff affected by this for their
professionalism and dedication over many years of service.
Outlook
While we still expect market headwinds to persist in the near term before
commercial conditions strengthen materially, including anticipated further
interest rate reductions, Alumasc is confident in its future prospects. Our
recent track record of consistently delivering profitable growth; investments
in people/processes/new products/ARP; the evolving regulatory/environmental
and construction/housebuilding landscape; and our self help measures cause us
to be optimistic about the delivery of our medium term aspirations, as market
conditions improve.
Vijay Thakrar
Chair
3 September 2024
* a reconciliation of underlying to statutory profit before tax is provided in
note 5.
Chief Executive's Review
Financial Highlights and
Overview
2023/24 2022/23 % change
Group performance from continuing operations:
Revenue (£m) 100.7 89.1 +13%
Underlying profit before tax (£m) * 13.0 11.2 +16%
Statutory profit before tax (£m) 11.7 10.5 +11%
Underlying earnings per share (pence) * 26.9 25.0 +8%
Basic earnings per share (pence) 24.3 23.3 +4%
Dividends per share (pence) 10.75 10.3 +4%
*A reconciliation of underlying to statutory profit before tax is provided in
note 5.
Overview of Performance
Against a challenging background, it is very encouraging to report a record
Group performance in 2024. Revenue grew by 13% to £100.7 million and
underlying profit before tax by 16% to £13.0 million. The operating margin
grew to 14.1% (from 13.6%), with all divisions contributing to the
improvement, and represents further progress towards our medium term ambition
of 15%-20%. All of the above was achieved despite a slowdown in overall UK
construction activity and, in particular, a significant slowdown in UK house
construction activity.
Group sales included £5.8 million from ARP, the Water Management business
acquired in late December 2023. Organic sales growth was 6.5%, significantly
outperforming the estimated 2.9% decline in overall UK construction activity
over 2024. There was encouragingly strong growth in export activity following
the investment in export sales representation, which was achieved despite the
limited call-offs from the significant project at Chek Lap Kok airport in Hong
Kong. This mitigated some UK project delays which impacted the Water
Management division's domestic revenues. Non-UK sales represented 10.0% of
total Group revenue (2022/23: 5.6%).
The ARP business has performed very well in the six months following its
acquisition. Cross-selling opportunities are being taken, and work is well
underway to realise the substantial purchasing synergies presented by the
acquisition, which will benefit the Group from next year.
Divisional review
(a) Water Management
Revenue: £48.3 million (2022/23: £39.8 million)
Underlying operating profit*: £7.6 million (2022/23: £5.8 million)
Underlying operating margin*: 15.8% (2022/23: 14.5%)
Operating profit: £6.8 million (2022/23: £5.6 million)
* Prior to restructuring costs of £0.6 million (2022/23: £0.1 million) and
acquired IA amortisation charges of £0.2 million (2022/23: £0.1 million)
The Water Management Division grew its revenue by £8.5 million (21%), a very
commendable achievement. Included in this was the excellent first six months'
contribution from ARP of £5.8 million, together with strong organic growth of
7%. Underlying operating margins improved to 15.8% (2022/23: 14.5%),
reflecting the volume growth and continued focus on operational excellence.
Underlying operating profit grew 32%, with 16% organic growth and 16% from
ARP.
Several government-backed projects assisted in a healthy UK growth of Gatic's
special access covers. This activity was supplemented by first successes from
our new export sales personnel in particular in Latin America for Colombia,
Peru and Mexico. Chep Lap Kok airport in Hong Kong had limited pull through of
the £7.0 million contract originally awarded in 2022. Drainage products had a
quieter year, with delays to some larger UK projects, although we anticipate
an improved performance in the next financial year.
ARP, acquired in late December 2023, has performed very well. We have been
impressed by the skill and dedication of its team and look forward to working
with them to deliver the significant synergies this acquisition presents.
(b) Building Envelope
Revenue: £37.6 million (2022/23: £34.6 million)
Underlying operating profit*: £4.6 million (2022/23: £4.1 million)
Underlying operating margin*: 12.3% (2022/23: 11.8%)
Operating Profit: £4.6 million (2022/23: £4.1 million)
* No adjustments in 2023/24 or 2022/23
The Building Envelope division grew its revenue by £3.0 million (9%) and
underlying operating profit by £0.5 million (13%), driven by its previous
investment in high calibre technical sales staff. A strategic focus on
developing new and improved systems which enhance sustainability is helping
the division gain share: in particular carbon absorbing membranes, and Bio
Solar systems which combine cost reduction and energy generation to enhance
payback.
Legislation drivers on heat loss reduction, green technologies and suburban
environments assisted in the increase in demand. Long term warranties,
beneficial life cost cycles and enhanced customer support in technical and
customer service complete the offer to the high-end market.
Benefits continue to accrue from very strong and long-standing relationships
with specifiers, surveyors, multi building owners, contractors and suppliers.
Work is ongoing to continually improve the performance of the product range
and thus enhance divisional margins.
(c) Housebuilding Products
Revenue: £14.8 million (2022/23: £14.7 million)
Underlying operating profit*: £3.8 million (2022/23: £3.5 million)
Underlying operating margin*: 25.3% (2022/23: 23.9%)
Operating profit: £3.8 million (2022/23: £3.3 million)
* Prior to restructuring costs of £nil (2022/23: £0.2 million)
During a challenging housebuilding market in 2023, where the CPA reported a
decline in new starts of 18%, it was a very creditable achievement for our
Housebuilding Products Division, Timloc, to grow its revenue. This was through
'self-help' including the increased sales of both Inventive roof tile vents
and roofline products to roofing merchants, where Timloc has now established
itself in this adjacent channel. This, combined with Timloc's excellent
reputation for its industry leading next day service, has led to more
merchants stocking Timloc's expanding product range.
In addition to its excellent sales performance, Timloc grew its overall
underlying operating profit by £0.3 million (7%) to £3.8 million. This
resulted in a 25.3% underlying operating margin, 1.4 percentage points ahead
of the prior year and driven by product mix and improved efficiencies.
Additional new products are being developed and further investments are also
planned in operational capability (including automation), external sales and
additional NPD resource. Timloc will be very well placed when the
housebuilding market eventually recovers. The interest rate outlook and the
commitments from the new UK Government on building targets and easing planning
restrictions provide some encouraging early signs.
Strategic review
The Group continued to progress its long-term growth strategy.
Championing sustainable building products
· Resilient performance demonstrates the structural demand underpin
for environmental solutions
· Building Envelope establishing itself as a leader in sustainable
roofing systems
· Scope 3 GHG calculations, EPD and net zero programme underway,
SBTi accreditation later in year
· Product development targeting new environmental/safety
legislation (including Building Regulations Part B/L/F, Biodiversity Net Gain,
Building Safety Act 2023 and building decarbonisation)
Accelerating organic revenue growth
· 6.5% organic growth (vs decline in UK general construction market
activity)
· New products continue to be a key part of our growth strategy,
and 16% of FY24 sales were from products launched in the last three years
· UK sales robust
o Investment in new product development, sales, technical service and
support
· Strong growth in export sales
o Investment in Water Management division's overseas sales resource
Driving margin improvement
· Operating margin* 14.1% (2022/23: 13.6%)
· Further progress towards 15-20% Group operating margin target
· Drop-through from additional volumes
· Continual efficiency improvements
· Investment in common ERP/CRM platform to enhance commercial
decision making
· Delivery commenced on ARP synergies, with further benefits to
come in FY25
· Relocation of access cover production from Dover site to Halstead
from January 2025:
o Automates currently manual manufacturing processes;
o £0.8 million annualised cash saving;
o Net cost circa £3.3 million (spend to 30 June 2024 £2.7 million).
Value-accretive investment to underpin our future growth ambitions
· Strong financial position enabled continued investment despite
challenging commercial markets
· Key revenue investments:
o Technical sales and customer service resource at Building Envelope;
o New product development at Housebuilding Products
· Acquisition of ARP strengthens our presence in rainwater
management, and helps accelerate our growth ambitions
· £3.6 million capital spend in year includes:
o CNC machines to automate access covers manufacturing at Halstead
o ERP and CRM investments to improve efficiency and commercial decision
making
Outlook
· Demand headwinds unlikely to alleviate until 2025
· Medium term drivers strong:
· Supportive environmental and building safety regulations
· New Government housebuilding targets
· Strong business model and significant capacity to invest
· Opportunity to deliver significant shareholder value.
The strong performance during the year reflects Alumasc's portfolio of highly
effective solutions to the growing challenge of climate change across the
built environment.
The management team continues to progress with its long-term growth strategy,
to accelerate organic growth, drive margin improvement and enhance delivery
through value-accretive investments which continue to underpin our future
growth ambitions.
Alumasc's performance against the backdrop of challenging markets during 2024
shows the business's quality, and as we progress into 2025 we have a clear
line of sight of our growth plans, capacity to invest and opportunity to
deliver significant shareholder value.
While demand headwinds in Alumasc's commercial markets are likely to persist
for the remainder of 2024, the positive trading momentum has continued into
the new financial year, and the Board is optimistic for another year of
growth.
G Paul Hooper
Chief Executive
3 September 2024
Financial Review
Performance (continuing operations)
The Group delivered a strong financial performance in FY24, despite continued
macro-economic uncertainty and demand headwinds in the majority of its
commercial markets, reflecting the strength of the Group's sustainable product
portfolio, its consistent focus on strategic execution and ongoing investments
in growth capability and efficiency.
Strong organic and inorganic growth
Group revenue was £100.7 million, 13.0% higher than 2022/23 (£89.1 million).
This comprised 6.5% from organic growth and a 6.5% contribution from ARP,
which was acquired at the end of December 2023. Year-on-year net inflationary
price changes were negligible.
Gross profit was £38.3 million (2022/23: £32.7 million), with gross margin
130 basis points ahead at 38.0% (2022/23: 36.7%). Commodity raw material cost
prices were broadly stable over the year, although labour costs remain high,
and prices continued to rise for some specialist materials; and the increase
reflects the Group's active and disciplined management of prices and costs.
Underlying operating profit* was £14.2 million (2022/23: £12.1 million),
representing an underlying operating margin* of 14.1%, a 50 basis point
improvement on the prior year (2022/23: 13.6%). The Group aims to grow
revenues while strengthening margins, and this year represents further
progress towards its medium term 15-20% operating margin target range.
Underlying profit before tax* grew by 16.1% to £13.0 million (2022/23: £11.2
million). ARP contributed 5.5% (£0.6 million) of the increase, after interest
charges on the acquisition consideration. Organic growth was 10.6%.
Statutory profit before tax from continuing operations - calculated after
deduction of non-underlying items - was £11.7 million (2022/23: £10.5
million).
* A reconciliation of underlying to statutory profit before tax is provided in
note 5.
Non-underlying items
The Board reports underlying profit and underlying earnings as an alternative
performance measure, for internal performance analysis, planning and employee
compensation arrangements. This measure excludes certain items such as
amortisation of acquired intangible assets, pension scheme finance costs,
acquisition expenses and restructuring costs, which are non-trading and/or
exceptional by their size and incidence. The non-underlying items in the
current and prior financial year were:
£m FY24 FY23
Amortisation of acquired intangible assets 0.2 0.1
Restructuring costs 0.5 0.3
Acquisition expenses 0.3 0.2
Non-underlying operating expenses 1.0 0.6
IAS 19 pension scheme finance costs 0.2 0.1
Non-underlying finance costs 0.2 0.1
Total non-underlying items 1.2 0.7
- Amortisation of acquired intangible assets of £0.2 million
(2022/23: £0.1 million) is a non-cash charge arising from the application of
accounting standards, to write off the estimated value of brands and other
intangibles associated with acquired businesses over their estimated useful
life.
- Current year restructuring costs of £0.5 million were incurred in
reorganising the Water Management division's sales and commercial teams (£0.2
million) and in the planned closure of the division's Dover site and
relocation of its operations to Halstead (£0.3 million). The £0.3 million
charge in the prior year charge relates mainly to the resolution of a
commercial dispute.
- Acquisition expenses of £0.3 million (2022/23: £0.2 million)
relate primarily to the acquisition of ARP, completed in December 2023.
- IAS19 pension scheme finance costs of £0.2 million (2022/23: £0.1
million) are non-cash charges related to the Group's legacy defined benefit
scheme, and are calculated by actuaries to reflect the notional financing cost
of the Group's pension deficit.
Taxation
The Group's underlying effective tax rate was 25.5% (2022/23: 20.0%), compared
to the average UK corporation tax rate for the year of 25.0% (2022/23: 20.5%).
The Group's effective tax rate varies in line with the UK tax rate and the
balance of available reliefs, non-taxable income and expenses. The Group's
underlying effective tax rate for FY25 is expected to be around 25.4%.
The Group's effective tax rate on statutory profit before tax was 25.5%
(2022/23: 24.9%). A reconciliation of this rate to the average UK corporation
tax rate for the year is included in Note 7.
Earnings per share
Basic earnings per share from continuing operations was 24.3p (2022/23:
23.3p), and underlying earnings per share from continuing operations was 26.9p
(2022/23: 25.0p) (note 9).
Dividends
The Board have recommended to shareholders a final dividend of 7.3 pence per
share (2022/23: 6.9 pence), which will absorb an estimated £2.6 million of
shareholders' funds. This has not been accrued in these accounts as it was
proposed after the end of the financial year. Subject to shareholder approval
at the Annual General Meeting on 24 October 2024, it will be paid on 1
November 2024 to members on the share register on 27 September 2024.
Together with the interim dividend of 3.45 pence per share (2022/23: 3.40
pence) paid to shareholders on 8 April 2024, this will bring the total
distribution for the year to 10.75 pence per share (2022/23: 10.3 pence),
which is covered 2.5 times (2022/23: 2.4 times) by underlying earnings per
share. This is consistent with our medium-term dividend cover objective of 2.5
to 3.0 times cover.
Cash flows and net debt
Underlying operating cash flow
£m FY24 FY23
Underlying operating profit 14.2 12.1
Depreciation and underlying amortisation 2.9 2.9
Share-based payments 0.3 0.2
Working capital movements 0.9 (0.9)
Underlying operating cash flow 18.3 14.3
Pension deficit funding (1.2) (1.6)
Cash generated by underlying operating activities 17.1 12.7
Operating cash conversion 120% 105%
Non-underlying cash flows (0.9) (0.5)
Cash generated by operating activities 16.2 12.2
Cash generated by underlying operating activities - before non-underlying cash
flows - was £17.1 million, £4.4 million higher than the prior year (2022/23:
£12.7 million), representing 120% (2022/23: 105%) of underlying operating
profit, against a Group target of at least 100%.
The challenges of volume growth, and some disruption to global supply chains
from the Red Sea crisis, were well managed, and there was a £0.9 million
inflow from working capital in the year (2022/23: £0.9 million outflow).
Annual pension payments of £1.2 million (2022/23: £1.6 million) reflected
the reduction in contributions from October 2022 agreed with the trustees.
Cash outflows in respect of non-underlying items were £0.9 million (2022/23:
£0.5 million).
Movement in net bank debt
£m FY24 FY23
Cash generated by operating activities 16.2 12.2
Capital expenditure (3.6) (2.7)
Interest (1.1) (0.8)
Tax (2.1) (0.5)
Lease principal repaid (0.8) (0.8)
Other cash flows (0.3) (0.1)
Free cash flow 8.3 7.3
Acquisition of businesses (including cash acquired) (8.5) -
Disposal of businesses (including cash disposed) - (1.7)
Purchase of own shares (0.5) (0.1)
Dividend payments (3.7) (3.6)
(Increase)/decrease in net bank debt (4.4) 1.9
Capital expenditure was £3.6 million (2022/23: £2.7 million), representing
124% (2022/23: 93%) of depreciation/amortisation. This higher-than-usual spend
supported important strategic initiatives, including:
- £2.3 million of machinery, tooling and building work at the Group's
site in Halstead, Essex, to allow relocation of access cover manufacturing
from Dover, and automation of the currently largely manual process; and
- £0.4 million to update the Enterprise Resource Planning ('ERP')
software used at the Group's sites in Burton Latimer, Northants and St
Helen's, Merseyside. Five of the Group's seven sites - representing over 80%
of Group revenues - have now upgraded to the Group's common ERP platform,
strengthening the internal control environment while allowing improved
efficiency and better data to support sales, customer service and commercial
decision-making. The remaining sites will be upgraded to the new system over
the next two years.
Interest payments of £1.1 million (2022/23: £0.8 million) increased due to
the higher debt following the acquisition of ARP.
Tax payments were £2.1 million, £1.6 million higher than the prior year
(2022/23: £0.5 million), due to the benefit in the prior year from
super-deductions on capital allowances.
After repayment of £0.8 million (2022/23: £0.8 million) lease liabilities
and other payments of £0.3 million (2022/23: £0.1 million), free cash flow
was £8.3 million (2022/23: £7.3 million).
The net cash paid for the ARP acquisition, including cash acquired, net debt
and working capital adjustments and the first earn-out payment, was £8.5
million in the year (2022/23: £nil). The final £0.75 million earn-out
payment - payable in January 2025, subject to ARP achieving certain financial
performance targets in the year to November 2024 - has been accrued in full.
There was a £1.7 million cash outflow in the prior year on the disposal of
Levolux.
Cash paid to acquire shares in the Group, to fulfil the vesting of employee
share options, totalled £0.5 million (2022/23: £0.1 million); and dividend
payments in the year were £3.7 million (2022/23: £3.6 million).
The net increase in debt in the year was £4.4 million (2022/23: £1.9 million
reduction).
Net debt
£m FY24 FY23
Net bank debt 7.2 2.8
IFRS 16 lease liabilities 5.9 5.3
Total (IFRS 16) debt 13.1 8.1
Net bank debt at 30 June 2024, on which the Group's banking covenants are
based, was £7.2 million (2023: £2.8 million). Total debt, including lease
liabilities, was £13.1 million (2023: £8.1 million).
Financial position
Group net assets at 30 June 2024 were £33.5 million (2023: £25.7 million).
Pensions
The Group accounts for its legacy defined benefit pension retirement
obligations in accordance with IAS 19 Employee Benefits, based on the market
value of scheme assets and a valuation of scheme liabilities using a discount
rate based on AA rated corporate bond yields at year end. Mortality and
inflation rates assumptions have been aligned with updated actuarial
information. The IAS 19 defined benefit scheme net surplus at 30 June 2024,
before deferred taxes, was £0.8 million (2023: £4.3 million deficit).
Investment gains increased scheme assets by £3.1 million to £74.6 million,
and scheme liabilities decreased by £2.0 million. The scheme surplus has been
recognised on the Group balance sheet, as the Group has an unconditional right
to recover any surplus on settlement of the scheme's liabilities.
The contribution rate is agreed with the Trustees based on actuarial
valuations rather than the IAS 19 deficit. Following the triennial review in
March 2022, the Group agreed to reduce its annual contributions to £1.2
million from October 2022. The Group's initial objective is to enable the
scheme to reach a position of low dependency (where the scheme is expected to
be able to meet its future liabilities using prudent investment assumptions,
with a low likelihood of requiring further deficit repair contributions from
the Group) over a reasonable timescale.
Banking facilities and covenants
The Group's treasury function aims to ensure the availability of sufficient
liquidity to meet the Group's operational and strategic needs, at optimal
cost. The Group projects facility utilisation and compliance with the
associated covenants during its short-term forecasting, annual budgeting and
strategic planning exercises, to ensure adequate headroom is maintained,
taking account of the Group's expected performance and investment plans.
At 30 June 2024, the Group's banking facilities comprised:
- An unsecured committed £25.0 million revolving credit facility,
which expires in August 2026 with a one year extension option. The Group
exercised this option in August 2024, extending the facility expiry to August
2027;
- An uncommitted £20.0 million accordion facility, which would allow
the Group to increase its revolving credit facility to £45.0 million if
exercised and approved; and
- Overdraft facilities, repayable on demand, of £4.0 million.
Facility headroom against committed facilities at 30 June 2024 was £17.7
million (2023: £22.1 million).
The covenants associated with these facilities are set out below, together
with the reported figures at 30 June 2024 and 2023:
30 June 2024 30 June 2023
Covenant
Net debt: EBITDA <2.5 0.5 0.2
Interest cover >3.5 15.6 18.9
Return on investment
The Group defines its invested capital as shareholders' funds, including
historic goodwill but excluding net bank debt, pension deficit (net of tax)
and lease liabilities. The Group's post-tax return on invested capital
(underlying operating profit after tax, divided by invested capital) was 26.0%
(2022/23: 26.1%), substantially in excess of the Group's weighted average cost
of capital, which the Group estimates to be circa 11%.
Capital structure and capital allocation
The Group aims to create value by delivering strong and sustainable financial
returns well in excess of its cost of capital. It achieves this by investing
the capital provided by its cash-generative operations and its strong balance
sheet in a disciplined manner consistent with its long-term strategy. The
Board's capital allocation priorities are:
- Maintaining debt at a prudent level, with a gearing ratio (net debt
to EBITDA) below 1.5x, while:
- Investing in organic growth, principally through capital expenditure
and investment in organisational capabilities, particularly in research and
development, manufacturing capacity and efficiency, and sales, customer
support and marketing resources;
- Providing regular returns to shareholders through a progressive
dividend policy, which aims to increase dividends broadly in line with
earnings, while maintaining a prudent level of cover; and
- Investing in inorganic growth, identifying bolt-on acquisition
targets in current or adjacent markets, which complement the Group's existing
businesses and deliver synergies.
Simon Dray
Group Finance Director
3 September 2024
PRINCIPAL RISKS AND UNCERTAINTIES
Risks and uncertainties Mitigating actions taken
Climate change • Improving partnerships and relationships in our supply chain to combat
disruption and potential price increases
• Greater resilience and reduced direct shipment costs by using
Risk/impact suppliers from different geographical locations
Potential to impact our supply chain and increase volatility in the prices of • Ensuring suppliers and logistics partners understand the risks of
raw materials, and other supplies. climate change
Sudden climate change events, such as increased severe weather conditions and • Strategic buying of core products and careful stocking
storms, could impact our supply chains and shipments, and business processes.
• Development of targets for reducing our Scope 1, 2 and 3 greenhouse
Regulations increasing costs could be imposed on manufacturing, certain gas emissions
processes, fuels/goods used, impacting prices for products that customers
require. • Investment in new technology to manufacture new products to address
the needs of climate change, with improved energy efficiency
• Our strategy includes helping customers address climate change, by
selling and creating innovative products with sustainable qualities and
eco-friendly credentials. Our products have energy saving and low carbon
qualities that can be part of low carbon and net zero solutions
• Providing environmental data for our customers, employees, investors
and stakeholders and developing End Producer Declarations for Alumasc
manufactured products
• Greater use of electric vehicles
Geopolitical and macroeconomic uncertainty and conflict • Strategic positioning in export markets/sectors anticipated to grow
faster than the UK construction market
• Constantly seeking new markets and receiving revenues from a variety
Risk/impact of end-use construction markets - thus providing resilience
• Development of added value systems and solutions that are underpinned
by legislation, building regulation and/or specified by architects and
Macroeconomic uncertainty triggered by invasion, war, and conflicts on a engineers
global basis and global geopolitical uncertainty causing economic risk.
• Continuous development and introduction of innovative green products,
Inflationary pressures on raw material, energy supplies and services, pay and systems, solutions, and services that are market leading and differentiated
other costs could impact our strategic ambition to increase organic growth. against the competition. The strength of our products and our specialist sales
force, and our increased export sales help us outperform against difficult
market conditions
• Increasing supply chain flexibility
• Limited exposure to currency risk, mainly the euro and US dollar.
These exposures are for the most part hedged, with hedging percentages
increased to manage potential foreign exchange volatility
• Robust management has ensured cost increases are passed on to
customers
Supply chain/inflation • Annual strategic reviews, including supplier, quality, reliability,
and sustainability
• Brand and product strength has allowed cost increases to be largely
Risk/impact recovered through higher prices
• Regular key supplier visits, good relationships maintained including
quality control reviews and training. Opportunity to integrate/use/adopt cost
International supply chain risks increased following the pandemic and efficient supply chains and raw material procurement from ARP Group Holdings
significant geopolitical uncertainty due to international tension and Ltd (acquired December 2023)
conflicts. The residual issue is price inflation, skilled staff shortages,
increased tariffs/ duties, post Brexit risks in the EU and geopolitical • Supply chain flexibility to avoid strategic dependence on single
uncertainty following the wars/conflicts in Ukraine and the Middle East. sources of supply
• Supplier questionnaires and export checks are completed to ensure
compliance with Group policies, including anti-bribery, anti-modern slavery
and ESG
• Training provided on customs duties, particularly on managing evolving
arrangements post Brexit
• In part offset by product innovation and increasing market share for
these new products
Cyber security and business interruption • IT disaster recovery plans are in place for all businesses and tested
regularly
• Awareness training and management briefings held on cyber security
Risk/impact risks and actions taken as preventative measures
• New security protocols and software are installed and continually
updated to mitigate evolving cyber threats
Cyber security risks and business interruption risks are increasing globally.
• Cyber security reviews are conducted on a regular basis with our
The risk of a cyber threat from increased failure/and/or ICT cyber-crime could security partners
cause interruption or loss of sales, market share and potentially damage our
reputation for reliable service. • Critical plant and equipment are identified, with associated
breakdown/recovery plans in place
• Employee awareness of potential risks are mitigated through cyber
security training and our layered system of network security against
cyber-attacks and/or security breaches. Our infrastructure is always being
reviewed
• Further systems are being implemented to improve resilience, support
growth plans and drive efficiency. Implementation risks are mitigated via the
use of third-parties, qualified project managers, and increased user testing
Credit risk • Most credit risks are insured
• Large export contracts are backed by letters of credit, performance
bonds, guarantees or similar, where possible
Risk/impact
• Any risks taken above insured limits are subject to strict delegated
authority limits
The risk is that credit is extended, and customers are unable to settle • Credit checks performed when accepting new customers/new work
invoices. The Group manages credit risks and the contribution from the UK
Government Export Credit Scheme for overseas opportunities has supported • The Group employs experienced credit controllers and aged debt reports
export opportunities. are reviewed at monthly subsidiary Board meetings
Health & Safety risks • Health & Safety and the wellbeing of staff is a core value of
management and the first Board agenda item
• Health & Safety commitment communicated to all levels of the
Risk/impact business
• Risk assessments are carried out and safe systems of work documented
and communicated
Health & Safety incident/ injury could occur despite a strong culture and
previous performance. • Near miss reporting and remediation is conducted at all sites
Consequential reputational risk and legal costs. • All safety incidents and significant near misses are reported at Board
level monthly, with appropriate remedial action taken
• Group Health & Safety best practice days are held twice a year,
chaired by the Chief Executive
• Annual external audits of Health & Safety are conducted in all
Group businesses by independent consultants and other specialist advisers
• Health & Safety training is provided, and implementation is
monitored, there has been a focus on increasing the number of staff being
trained in Health & Safety across the business
• Specific focus on improving safety of higher risk operations, with
external consultancy support as needed
Staff recruitment and retention risks • Remuneration packages are appropriate to the position: staff are
encouraged and supported to grow their careers through training and
development
Risk/impact • Remuneration Committee considers retention and motivation when
considering the remuneration framework
• Board and Executive Committee focus on staff retention and reward,
Potential lack of skilled employees and skilled people being available for supported by HR and external advice
recruitment and risk of loss due to wage inflation and the cost-of-living
crisis impacting staff. Risk of not being able to take on/retain key skilled • Employee numbers and changes monitored in monthly subsidiary Board
staff. meetings
• Competitive salaries offered, along with training and development
opportunities
• Retention plans for key, high-performing, and high-potential employees
• Succession planning for key roles
Product/service differentiation relative to competition not developed or • A devolved operating model with both Group and local management
maintained responsible for developing a deep knowledge of our specialist markets and
identifying opportunities and emerging market trends
• Innovation best practice is planned at Group level and carried out
Risk/impact more regularly in each business. New product ideas are discussed as part of
the businesses' strategy
• Annual Group strategy meetings encourage innovation and 'blue sky'
Failure to innovate. New products are required to grow and maintain thinking
competitive advantage
• New product introduction/development KPI used to monitor progress
• Monitoring the market for potentially new and/or disruptive
technologies
• Customer feedback considered in the design and/or supply of additional
products and services
• Devolved structure allows an agile approach to business and an ability
to meet increasing demand for products
• Employed new product managers to help identify gaps in the market and
to ensure we have a leading-edge portfolio of products and services
Loss of key customers • We have strong established brands that are recognised and specified by
our customers
• Cross selling of products encouraged to grow revenues, and to
Risk/impact introduce customers to all our product ranges
• Develop and maintain strong customer relationships through service
excellence and dedicated account management
The risk is the loss of markets or customers. Risk of loss of customers to
competitors, project delays and reduced spending. • Product, system, and service differentiation and reliability
Any deterioration of relationships with customers could adversely impact our • Project tracking and enquiry/quote conversion rate KPI
revenue and impact our organic growth ambitions.
• Continued investment in customer relationship management (CRM)
software
• Organisational and business agility to understand and adapt to
changing and emerging customer needs
• Developing new products for new customers/markets
• Outstanding service and innovative products protect and help to retain
customers
• The Group operates credit insurance to cover the potential impact of
bad debts. Service and client relationships also need to be maintained to
retain and grow the business
Legacy defined benefit pension obligations • Continue to grow the business so that the relative affordability of
pension deficit contributions is improved over time
• Continue to maintain constructive relationship with Pension Trustees
Risk/impact to enable active management of scheme liabilities and assets to
reduce/eliminate the deficit
• Affordable pension funding commitments agreed to eliminate the deficit
The long-term funding of the pension scheme removes funds that would otherwise over a reasonable timeframe
be re-invested to grow the business. The funding may be affected by poor
investment performance of pension fund investments or changes in the discount • Regular review at Group Board level
rate applied.
• Use of specialist advisers
• Investment performance and risk/return balance overseen by an
Investment Committee that receives specialist investment advice
• The Trustees are pursuing a lower risk investment strategy to match
liability risks and reduce future volatility
Product warranty/ recall risks • Robust internal quality systems, compliance with relevant legislation,
building regulations and industry standards (e.g., ISO, BBA etc.), and product
testing, as appropriate, meeting global standards
Risk/impact • Group insurance programme to cover larger potential risks
• Back-to-back warranties obtained from suppliers where possible
Risk is one of product recall with subsequent cost and reputational risks;
however, the Group does not have a history of significant warranty claims or
product recalls.
consolidated STATEMENT of comprehensive income
For the year ended 30 June 2024
Year ended 30 June 2024 Year ended 30 June 2023
Underlying Non-underlying Underlying Non-underlying
Total Total
Continuing operations: Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 4 100,724 - 100,724 89,135 - 89,135
Cost of sales (62,444) - (62,444) (56,406) - (56,406)
Gross profit 38,280 - 38,280 32,729 - 32,729
Net operating expenses
Net operating expenses before non-underlying items (24,043) - (24,043) (20,620) - (20,620)
Other non-underlying items 5 - (1,041) (1,041) - (585) (585)
Net operating expenses (24,043) (1,041) (25,084) (20,620) (585) (21,205)
Operating profit 4, 5 14,237 (1,041) 13,196 12,109 (585) 11,524
Net finance costs (1,266) (195) (1,461) (937) (48) (985)
Profit before taxation 5 12,971 (1,236) 11,735 11,172 (633) 10,539
Tax expense 7, 9 (3,308) 321 (2,987) (2,234) 48 (2,186)
Profit for the year from continuing operations 9,663 (915) 8,748 8,938 (585) 8,353
Discontinued operations:
Loss after taxation for the year from discontinued operations - - - - (1,750) (1,750)
Profit/(loss) for the year 9,663 (915) 8,748 8,938 (2,335) 6,603
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit pensions, net of tax
3,083
(2,796)
Items that are or may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges, net of tax
(38) (285)
Exchange differences on retranslation of foreign operations
(30) (18)
(68) (303)
Other comprehensive profit/(loss) for the year, net of tax 3,015 (3,099)
Total comprehensive profit for the year, net of tax 11,763 3,504
Earnings per share Pence Pence
Basic earnings per share
- Continuing operations 24.3 23.3
- Discontinued operations - (4.9)
9 24.3 18.4
Diluted earnings per share
- Continuing operations 24.1 23.1
- Discontinued operations - (4.9)
9 24.1 18.2
Reconciliations of underlying to statutory profit and earnings per share are
provided in notes 5 and 9 respectively.
consolidated statement of financial position
At 30 June 2024
Notes 2024 2024 2023 2023
£'000 £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment - owned assets 15,670 13,227
Property, plant and equipment - right-of-use assets 5,569 5,007
Goodwill 6 12,678 8,526
Other intangible assets 6,621 2,073
Employee benefit asset 794 -
Deferred tax assets 7 - 1,081
41,332 29,914
Current assets
Inventories 13,153 11,561
Trade and other receivables 21,518 20,748
Cash at bank 6,410 5,995
41,081 38,304
Total assets 82,413 68,218
Liabilities
Non-current liabilities
Interest bearing loans and borrowings (13,662) (8,848)
Lease liability (4,769) (4,366)
Employee benefit obligations - (4,323)
Provisions (1,880) (1,185)
Deferred tax liabilities 7 (3,772) (1,614)
(24,083) (20,336)
Current liabilities
Trade and other payables (21,519) (19,120)
Lease liability (1,078) (868)
Provisions (307) (612)
Derivative financial liabilities (81) (30)
Deferred consideration (755) -
Corporation tax payable (1,052) (1,505)
(24,792) (22,135)
Total liabilities (48,875) (42,471)
Net assets 33,538 25,747
Equity
Share capital 4,517 4,517
Share premium 10 445 445
Capital reserve - own shares 10 (321) (577)
Hedging reserve 10 (60) (22)
Foreign currency reserve 10 168 198
Profit and loss account reserve 28,789 21,186
Total equity 33,538 25,747
The financial statements were approved by the Board of Directors and
authorised for issue on 3 September 2024
Paul Hooper
Simon Dray
Director
Director
Company number 1767387
consolidated STATEMENT of cash flows
For the year ended 30 June 2024
Year ended Year ended
30 June 30 June
2024 2023
Notes £'000 £'000
Operating activities
Operating profit 13,196 11,524
Adjustments for:
Depreciation 2,663 2,681
Amortisation 478 247
Loss on disposal of property, plant and equipment 4 1
(Increase)/decrease in inventories (199) 1,833
Decrease in receivables 610 1,897
Increase/(decrease) in trade and other payables 470 (3,948)
Movement in provisions (78) (624)
Cash contributions to retirement benefit schemes (1,200) (1,567)
Share based payments 251 182
Cash generated by operating activities of continuing operations 16,195 12,226
Tax paid (2,073) (530)
Net cash inflow from operating activities 14,122 11,696
Investing activities
Purchase of property, plant and equipment (3,131) (2,545)
Payments to acquire intangible fixed assets (505) (194)
Proceeds from sales of property, plant and equipment 8 24
Acquisition of subsidiary (10,730) -
Cash acquired on acquisition of subsidiary 2,223 -
Loss on disposal of subsidiary - (1,750)
Net cash outflow from investing activities (12,135) (4,465)
Financing activities
Bank interest paid (909) (671)
Equity dividends paid 8 (3,724) (3,599)
Draw down/(repayment) of amounts borrowed 4,700 (4,000)
Principal paid on lease liabilities (837) (765)
Interest paid on lease liabilities (176) (154)
Purchase of own shares (647) (51)
Exercise of share options 129 -
Refinancing costs (78) (262)
Net cash outflow from financing activities (1,542) (9,502)
Net increase/(decrease) in cash at bank and bank overdraft 445 (2,271)
Net cash at bank and bank overdraft brought forward 5,995 8,284
Net increase/(decrease) in cash at bank and bank overdraft 445 (2,271)
Effect of foreign exchange rate changes (30) (18)
Net cash at bank and bank overdraft carried forward 6,410 5,995
consolidated STATEMENT of changes in equity
For the year ended 30 June 2024 Notes Share capital Share Capital reserve - Profit
premium own shares Foreign and loss account
Hedging currency reserve Total equity
reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2022 4,517 445 (601) 263 216 20,892 25,732
Profit for the year - - - - - 6,603 6,603
Exchange differences on retranslation of foreign operations - - - - (18) - (18)
Net loss on cash flow hedges - - - (355) - - (355)
Tax on derivative financial liability - - - 70 - - 70
Actuarial loss on defined benefit pensions, net of tax - - - - - (2,796) (2,796)
Tax on share options - - - - - (21) (21)
Acquisition of own shares - - (72) - - - (72)
Own shares used to satisfy exercise of share awards - - 96 - - - 96
Share based payments - - - - - 182 182
Dividends 8 - - - - - (3,599) (3,599)
Exercise of share based incentives - - - - - (75) (75)
At 1 July 2023 4,517 445 (577) (22) 198 21,186 25,747
Profit for the year - - - - - 8,748 8,748
Exchange differences on retranslation of foreign operations - - - - (30) - (30)
Net loss on cash flow hedges - - - (51) - - (51)
Tax on derivative financial liability - - - 13 - - 13
Actuarial gain on defined benefit pensions, net of tax - - - - - 3,083 3,083
Tax on share options - - - - - 19 19
Acquisition of own shares - - (647) - - - (647)
Own shares used to satisfy exercise of share awards - - 903 - - - 903
Share based payments - - - - - 251 251
Dividends 8 - - - - - (3,724) (3,724)
Exercise of share based incentives - - - - - (774) (774)
At 30 June 2024 4,517 445 (321) (60) 168 28,789 33,538
1 basis of preparation
The Alumasc Group plc is incorporated and domiciled in England and Wales. The
Company's ordinary shares are traded on the Alternative Investment Market
("AIM").
The Group's financial statements consolidate those of the parent company and
all of its subsidiaries as of 30 June 2024. All subsidiaries have a reporting
date of 30 June.
All transactions and balances between Group companies are eliminated on
consolidation, including unrealised gains and losses on transactions between
Group companies. Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or
disposed of during the year are recognised from the effective date of
acquisition, or up to the effective date of disposal, as applicable.
The financial information included within this announcement does not
constitute statutory accounts within the meaning of section 435 of the
Companies Act 2006. The financial information for the year ended 30 June
2024 has been extracted from the statutory accounts on which an unqualified
audit opinion has been issued. The statutory accounts for the year ended 30
June 2024 will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
The Group financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), International Financial
Reporting Standards Interpretations Committee ("IFRS IC") interpretations and
those provisions of the Companies Act 2006 applicable to companies reporting
under IFRS. The Group financial statements have been prepared on the going
concern basis and adopting the historical cost convention. The Group's
accounting policies remain consistent with the previous financial year.
Going concern
At 30 June 2024 the Group had cash and cash equivalents of £6.4 million and
had utilised £13.7 million of the committed £25.0 million revolving credit
facility. This provided total headroom of some £17.7 million against
committed facilities and, together with £4.0 million overdraft facilities,
there is headroom of some £21.7 million against total facilities at 30 June
2024. In August 2024 the Group exercised the second of its two single year
extension options, which extended the expiry date of its £25.0 million
committed revolving credit facility to August 2027.
In assessing going concern to take account of the continued uncertainties
caused by the current challenging macroeconomic environment, the Group has
modelled a base case trading scenario on a "bottom up" basis. The Group has
also modelled stress test scenarios which assume 10% and 20% reductions in
revenue, with no cost reduction or cash conservation measures. Under the
lowest point in these stress tested scenarios, the Group retains adequate
headroom against its total banking facilities for the next 13 months to the
end of September 2025, with no breach of banking covenants across this period.
For the same period the Group has modelled an additional scenario (a reverse
stress test) that would lead to a breach of its banking covenants. It is
considered that the risk of such a scenario arising is remote. Management have
also identified a number of mitigating actions that the Group would take to
remain within its banking facilities and comply with the associated covenants
throughout the period.
Having taken into account all of the aforementioned comments, actions and
factors in relation to going concern, and in light of the bank facility
headroom under various scenarios, the Directors consider that the Group has
adequate resources to continue trading for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the
financial statements.
Alternative performance measures
The Group uses a range of non-IFRS performance measures to monitor the
performance of the business. The Group believes these provide information on
the ongoing trading of the business to help investors and other stakeholders
evaluate the performance of the business and are measures commonly used by
certain investors for evaluating the performance of the Group. In particular,
the Group uses measures that reflect the underlying performance on the basis
that this aids the user in understanding the core business performance of the
Group.
The Group reports underlying profit and underlying earnings in addition to the
financial information prepared under IFRS. The Board believes that underlying
profit and underlying earnings provide additional and consistent measures of
underlying performance by removing items that are not closely related to the
Group's day-to-day trading activities and which would typically be excluded in
assessing the value of the business.
Underlying profit and underlying earnings are used by the Board for internal
performance analysis, planning and employee compensation arrangements.
'Underlying profit' and 'underlying earnings' are not defined terms under
IFRS, and may therefore not be comparable with similarly titled measures
reported by other companies. They are therefore not intended to be a
substitute for, or superior to, IFRS measures of profit and earnings. A
reconciliation of underlying to IFRS profit and earnings are included in notes
5 and 9 respectively.
The Group also uses the following non-IFRS measures on a consistent basis and
they are defined as follows:
Underlying operating margin:
Underlying operating margin is defined as underlying operating profit as a
percentage of revenue
Underlying EBITDA:
Underlying EBITDA is underlying operating profit before interest, taxation,
depreciation and amortisation. See below for definition of underlying
operating profit.
Underlying operating cash conversion:
Underlying operating cash conversion is cash generated by operating activities
before non-underlying cash flows, as a percentage of underlying operating
profit.
Net bank debt:
Net debt as defined under the Group's banking facility agreement before the
impact of IFRS 16: Leases.
Leverage ratio:
The leverage ratio is the ratio of net bank debt to underlying EBITDA and is
consistent with the calculation of the Group's banking covenants.
2 judgments and estimates
The main sources of estimation uncertainty that could have a significant risk
of causing material adjustment to the carrying amounts of assets and
liabilities at 30 June 2024 within the next financial year are the valuation
of defined benefit pension obligations and the valuation of the Group's
acquired goodwill.
The assumptions applied in determining the defined benefit pension obligation
are particularly sensitive. Advice is taken from a qualified actuary to
determine appropriate assumptions at each reporting date. The actuarial
valuation involves making assumptions about discount rate, mortality rates and
future pension increases. Due to the complexity of the valuation, the
underlying assumptions and the long term nature of these plans, such estimates
are subject to significant uncertainty.
Goodwill is tested at least annually for impairment, with appropriate
assumptions and estimates built into the value in use calculations to
determine if an impairment of the carrying value is required.
3 Summary of material accounting policies
The accounting policies adopted are consistent with those of the previous
financial year. The following new standards, amendments and interpretations
are effective for the period beginning on or after 1 July 2023 and have been
adopted for the Group financial statements where appropriate with no material
impact on the disclosures and results made by the Group:
· Definition of Accounting Estimates (Amendments to IAS 8); and
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
4 segmental analysis
In accordance with IFRS 8 "Operating Segments", the segmental analysis below
follows the Group's internal management reporting structure.
The Chief Executive reviews internal management reports on a monthly basis,
with performance being measured based on the segmental operating result as
disclosed below. Performance is measured on this basis as management believe
this information is the most relevant when evaluating the impact of strategic
decisions because of similarities between the nature of products and services,
routes to market and supply chains in each segment.
Inter-segment transactions are entered into applying normal commercial terms
that would be available to third parties. Segment results, assets and
liabilities include those items directly attributable to a segment.
Unallocated assets comprise cash and cash equivalents, deferred tax assets,
income tax recoverable and corporate assets that cannot be allocated on a
reasonable basis to a reportable segment. Unallocated liabilities comprise
borrowings, employee benefit obligations, deferred tax liabilities, income tax
payable and corporate liabilities that cannot be allocated on a reasonable
basis to a reportable segment.
2023/24 2022/23
Revenue Segmental operating Revenue Segmental operating
result result
£'000 £'000 £'000 £'000
Water Management 48,316 7,628 39,841 5,765
Building Envelope 37,602 4,627 34,559 4,084
Housebuilding Products 14,806 3,750 14,735 3,518
Trading 100,724 16,005 89,135 13,367
Unallocated costs (1,768) (1,258)
Total from continuing operations 100,724 14,237 89,135 12,109
£'000 £'000
Segmental operating result 14,237 12,109
Acquired intangible asset amortisation (see note 5) (239) (70)
Restructuring & legal costs (see note 5) (453) (262)
Acquisition costs (see note 5) (349) (253)
Total operating profit from continuing operations 13,196 11,524
Year to 30 June 2024 Capital expenditure
Segment Assets
Property, Other
Segment Liabilities Plant & Intangible Deprecia-tion Amortisa-tion
Equipment Assets
£'000 £'000 £'000 £'000 £'000 £'000
Water Management 40,462 (11,354) 2,202 271 1,352 405
Building Envelope 17,106 (9,353) 77 213 157 25
Housebuilding Products 16,165 (6,926) 991 21 1,129 48
Trading 73,733 (27,633) 3,270 505 2,638 478
Unallocated 8,680 (21,242) 7 - 25 -
Total 82,413 (48,875) 3,277 505 2,663 478
Year to 30 June 2023 Capital expenditure
Segment Assets
Property, Other
Segment Liabilities Plant & Intangible Deprecia-tion Amortisa-tion
Equipment Assets
£'000 £'000 £'000 £'000 £'000 £'000
Water Management 31,118 (8,261) 1,774 70 1,285 200
Building Envelope 11,258 (8,958) 301 30 331 5
Housebuilding Products 16,489 (7,549) 1,381 94 1,025 42
Trading 58,865 (24,768) 3,456 194 2,641 247
Unallocated 9,353 (17,703) 8 - 40 -
Total 68,218 (42,471) 3,464 194 2,681 247
Sales to external customers by geographical segment
United North Middle Far Rest of
Kingdom Europe America East East World Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Year to 30 June 2024 90,622 3,044 85 664 5,309 1,000 100,724
Year to 30 June 2023 84,079 2,515 126 769 944 702 89,135
Segment revenue by geographical segment represents revenue from external
customers based upon the geographical location of the customer.
All non-current assets are held within the United Kingdom.
5 UNDERLYING to profit before tax reconciliation
2023/24 2022/23
Operating profit Profit before tax Operating profit Profit before tax
£'000 £'000 £'000 £'000
Underlying operating profit & profit before tax from continuing operations 14,237 12,971 12,109 11,172
Acquired intangible asset amortisation (239) (239) (70) (70)
IAS 19 net pension scheme finance costs - (195) - (48)
Restructuring & legal costs (453) (453) (262) (262)
Acquisition costs (349) (349) (253) (253)
Profit before tax from continuing operations 13,196 11,735 11,524 10,539
Underlying operating loss of Levolux - - (350) (350)
Write back of assets held for sale - - 350 350
Loss on disposal of Levolux - - - (1,750)
Operating profit & profit/(loss) before tax 13,196 11,735 11,524 8,789
In the presentation of underlying profits, management disclose the
amortisation of acquired intangible assets and IAS 19 pension costs
consistently as non-underlying items because they are material non-cash and
non-trading items that would typically be excluded in assessing the value of
the business.
In addition, management has presented the following specific items that arose
in 2023/24 and 2022/23 financial years as non-underlying as they are
non-recurring items that are judged to be significant enough to affect the
understanding of the year-on-year evolution of the underlying trading
performance of the business:
- One-off restructuring and legal costs representing the costs of
a restructuring of the Water Management division, including the planned
closure of the division's site in Dover and relocation of its activities to
the division's site in Halstead, and a restructuring of the division's sales
and commercial teams. Prior year costs relate to the resolution of a
commercial dispute; and
- Acquisition expenses relating to professional fees incurred in
the Group's acquisition activities, primarily in connection with the
acquisition of ARP Group which completed on 21 December 2023
The Group anticipates incurring further restructuring costs of approximately
£800,000 in 2024/25 in connection with the closure of the Dover site, which
should be offset by the profit on sale of the land and buildings.
Impact on cashflow
Of the £1,236,000 (2022/23: £633,000) non-underlying expenses recognised,
£942,000 (2022/23: £515,000) was settled in cash. The remaining £294,000
(2022/23: £118,000) relates to non-cash amortisation of acquired brands, IAS
19 pension costs and surplus provision releases.
6 GOODWILL
2024 2023
£'000 £'000
Cost:
At 1 July 9,249 19,428
Additions 4,152 -
Disposals - (10,179)
At 30 June 13,401 9,249
Impairment:
At 1 July 723 10,902
Disposals - (10,179)
At 30 June 723 723
Net book value at 30 June 12,678 8,526
Goodwill acquired through acquisitions has been allocated to cash generating
units for impairment testing as set out below:
2024 2023
£'000 £'000
Alumasc Roofing (Building Envelope) 3,820 3,820
Timloc (Housebuilding Products) 2,264 2,264
Rainclear (Water Management) 225 225
Wade (Water Management) 2,217 2,217
ARP (Water Management) 4,152 -
At 30 June 12,678 8,526
Impairment testing of acquired goodwill
The Group considers each of the operating businesses that have goodwill
allocated to them, which are those units for which a separate cashflow is
computed, to be a cash generating unit (CGU). Each CGU is reviewed annually
for impairment. In assessing whether an asset has been impaired, the carrying
amount of the CGU is compared to its recoverable amount. The recoverable
amount is the higher of its fair value less costs to sell and its value in
use. In the absence of any information about the fair value of a CGU, the
recoverable amount is deemed to be its value in use. Each of the CGUs are
either operating segments as shown in note 4, or sub-sets of those operating
segments.
For the purpose of impairment testing, the recoverable amount of CGUs is based
on value in use calculations. The value in use is derived from discounted
management cash flow forecasts for the businesses, based on budgets and plans
covering a five year period. The growth rate used to extrapolate the cash
flows beyond this period was 1% (2023: 1%) for each CGU.
Key assumptions included in the recoverable amount calculation are the
discount rate applied and the cash flows generated by:
(i) Revenues
(ii) Gross margins
(iii) Overhead costs
Each assumption has been considered in conjunction with the local management
of the relevant operating businesses who have used their past experience and
expectations of future market and business developments in arriving at the
figures used.
The pre-tax rate used to discount the cash flows of these cash generating
units with on-balance sheet goodwill was 15% (2023: 15%). This rate was based
on the Group's estimated weighted average cost of capital (WACC) of 11% (2023:
11%), which was risk-adjusted for each CGU taking into account both external
and internal risks. The Group's WACC in 2024 was in line with the rate used in
2023.
The surplus headroom above the carrying value of goodwill at 30 June 2024 was
significant for all CGU's, with no impairment arising from either a 2%
increase in the discount rate; a growth rate of -1% used to extrapolate the
cash flows; or a reduction of 25% in the cash flow generated in the terminal
year.
Business Combinations
On 21 December 2023 the Group acquired the entire issued share capital of ARP
Group Limited ("ARP"), a manufacturer and distributor of specialist metal
rainwater and architectural aluminium products, for an initial cash and debt
free consideration of £8.5 million together with a £1.5 million adjustment
for net debt and working capital. Contingent consideration of up to £1.5
million is payable subject to ARP's profit for the two years ending 30
November 2024. The first payment of £750,000 was made in January 2024 and the
final payment is due in January 2025 and has been accrued in full.
ARP's consolidated unaudited results for the year ended February 2023 showed
revenue of £10.8 million and adjusted EBITDA of £1.3 million. Reported net
assets at completion were £4.6 million, including £2.2 million of net cash.
In addition to the cash consideration above, the group incurred £349,000 of
acquisition costs relating to stamp duty and legal fees.
From the date of acquisition to 30 June 2024 ARP reported revenue of
£5,786,000 and profit of £973,000. Interest on debt attributable to the
transaction was £0.4 million. If the combination had taken place at the
beginning of the year, 1 July 2023, the revenue for the Group for the 2023/24
financial year would have been £105,594,000 and the profit before taxation
would have been £11,972,000.
An analysis of the provisional fair value of the ARP net assets acquired and
the fair value of the consideration paid is set out below:
Fair value Fair value to group
Book value adjustments
£'000 £'000 £'000
Net assets at date of acquisition:
Property, plant and equipment 2,403 - 2,403
Intangible assets 26 - 26
Inventories 1,548 (155) 1,393
Trade and other receivables 1,966 (30) 1,936
Cash 2,223 - 2,223
Trade and other payables (1,797) - (1,797)
Income tax payable (111) - (111)
Lease liabilities (1,450) - (1,450)
Provisions (42) (426) (468)
Deferred tax liabilities (193) (1,124) (1,317)
Net Assets 4,573 (1,735) 2,838
Goodwill 4,152
Brand acquired on acquisition 3,354
Customer relationship acquired on acquisition 1,141
11,485
Satisfied by:
Completion consideration 8,500
Net debt and working capital adjustments - paid 1,480
Net debt and working capital adjustments - accrued 5
Contingent consideration - paid 750
Contingent consideration - accrued 750
Total purchase consideration 11,485
7 tax expense
(a.) Tax on profit
Tax charged in the statement of comprehensive income
2023/24 2022/23
£'000 £'000
Current tax:
UK corporation tax 2,062 1,704
Overseas tax 200 (6)
Amounts (over)/under provided in previous years (199) 175
Total current tax 2,063 1,873
Deferred tax:
Origination and reversal of temporary differences 639 404
Amounts under/(over) provided in previous years 285 (206)
Rate change adjustment - 115
Total deferred tax 924 313
Total tax expense 2,987 2,186
Tax recognised in other comprehensive income
Deferred tax:
Actuarial gains/(losses) on pension schemes 1,029 (932)
Cash flow hedge (12) (70)
Tax charged/(credited) to other comprehensive income 1,017 (1,002)
4,004 1,184
Total tax charge in the statement of comprehensive income
(b.) Reconciliation of the total tax charge
The total tax rate applicable to the tax expense shown in the statement of
total comprehensive income of 25.5% (2022/23: 24.9%) is higher than the
standard rate of corporation tax in the UK of 25.0% (2022/23: 20.5%).
The differences are reconciled below:
2023/24 2022/23
£'000 £'000
Profit before tax from continuing operations 11,735 10,539
Loss before tax from discontinued operations - (1,750)
Accounting profit before tax 11,735 8,789
Current tax at the UK standard rate of 25.0% (2022/23: 20.5%) 2,934 1,802
Expenses not deductible for tax purposes 226 486
Income not taxable (139) (186)
Overseas tax rates (120) -
Rate change adjustment - 115
Tax (over)/under provided in previous years - current tax (199) 175
Tax under/(over) provided in previous years - deferred tax 285 (206)
2,987 2,186
(c.) Unrecognised tax losses
The Group has tax capital losses in the UK amounting to £16.3 million (2023:
£16.3 million) that relate to prior years. Under current legislation these
losses are available for offset against future chargeable gains. The capital
losses are able to be carried forward indefinitely. Revaluation gains on land
and buildings amount to £1 million (2023: £1 million). These have been
offset in the prior year against the capital losses detailed above. A deferred
tax asset has not been recognised in respect of the net capital losses carried
forward of £15.3 million (2023: £15.3 million) as they do not meet the
criteria for recognition.
(d.) Deferred tax
A reconciliation of the movement in deferred tax during the year is as
follows:
Acquired intangible assets Hedging Share options Total Pension
Accelerated Short term deferred tax liability deferred tax
capital temporary (asset)/ liability
allowances differences
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2022 1,446 (135) 529 62 (172) 1,730 (529)
Charged/(credited) to the statement of comprehensive income - current year
216 (36) (18) - (23) 139 380
(Credited)/charged to the statement of comprehensive income - prior year
(14) 25 (217) - - (206) -
(Credited)/charged to equity - - - (70) 21 (49) (932)
At 30 June 2023 1,648 (146) 294 (8) (174) 1,614 (1,081)
Charged/(credited) to the statement of comprehensive income - current year
491 (22) (60) - (21) 388 251
Charged to the statement of comprehensive income - prior year
220 65 - - - 285 -
Acquisition of subsidiary 193 - 1,124 - - 1,317 -
(Credited)/charged to equity - - - (12) (19) (31) 1,029
At 30 June 2024 2,552 (103) 1,358 (20) (214) 3,573 199
Deferred tax assets and liabilities are presented as non-current in the
consolidated statement of financial position.
Deferred tax assets have been recognised where it is probable that they will
be recovered. Deferred tax assets of £3.8 million (2023: £3.8 million) in
respect of net capital losses of £15.3 million (2023: £15.3 million) have
not been recognised,
8 dividends
2023/24 2022/23
£'000 £'000
Interim dividend for 2024 of 3.45p paid on 8 April 2024 1,242 -
Final dividend for 2023 of 6.90p paid on 3 November 2023 2,482 -
Interim dividend for 2023 of 3.40p paid on 6 April 2023 - 1,217
Final dividend for 2022 of 6.65p paid on 4 November 2022 - 2,382
3,724 3,599
A final dividend of 7.3 pence per equity share, at a cash cost of £2,624,000,
has been proposed for the year ended 30 June 2024, payable on 1 November 2024.
This dividend has not been accrued in the financial statements as it was
proposed after the year end.
9 earnings per share
Basic earnings per share is calculated by dividing the net profit for the
period attributable to ordinary equity shareholders of the parent by the
weighted average number of ordinary shares in issue during the period. Diluted
earnings per share is calculated by dividing the net profit attributable to
ordinary equity shareholders of the parent by the weighted average number of
ordinary shares in issue during the period, after allowing for the exercise of
outstanding share options. The following sets out the income and share data
used in the basic and diluted earnings per share calculations:
2023/24 2022/23
£'000 £'000
Net profit attributable to equity holders of the parent - continuing 8,748 8,353
operations
Net loss attributable to equity holders of the parent - discontinued - (1,750)
operations
8,748 6,603
000s 000s
Weighted average number of shares 35,964 35,806
Dilutive potential ordinary shares - employee share options 296 386
36,260 36,192
2023/24 2022/23
Basic earnings per share: Pence Pence
Continuing operations 24.3 23.3
Discontinued operations - (4.9)
24.3 18.4
Diluted earnings per share: 2023/24 2022/23
Pence Pence
Continuing operations 24.1 23.1
Discontinued operations - (4.9)
24.1 18.2
Calculation of underlying earnings per share:
2023/24 2022/23
£'000 £'000
Reported profit before taxation from continuing operations 11,735 10,539
Brand amortisation 239 70
IAS 19 net pension scheme finance costs 195 48
Restructuring & legal costs 453 262
Acquisition costs 349 253
Underlying profit before taxation from continuing operations 12,971 11,172
Tax at underlying Group tax rate of 25.5% (2022/23: 20.0%) (3,308) (2,234)
Underlying earnings from continuing operations 9,663 8,938
Weighted average number of shares 35,964 35,806
Basic underlying earnings per share from continuing operations 26.9p 25.0p
Diluted underlying earnings per share from continuing operations 26.6p 24.7p
10 movements in equity
Share capital and share premium
The balances classified as share capital and share premium are the proceeds of
the nominal value and premium value respectively on issue of the Company's
equity share capital net of issue costs.
Capital reserve - own shares
The capital reserve - own shares relates to 180,846 (2023: 322,418) ordinary
own shares held by the Company. The market value of shares at 30 June 2024 was
£345,416 (2023: £475,567). These are held to help satisfy the exercise of
awards under the Company's Long Term Incentive and Executive Share Option
Plans. During the year 520,255 (2023: 52,630) shares with an original cost of
£903,000 (2023: £96,000) were used to satisfy the exercise of awards. A
Trust holds the shares in its name and shares are awarded to employees on
request by the Group. The Group bears the expenses of the Trust.
Hedging reserve
This reserve records the post-tax portion of the gain or loss on a hedging
instrument in a cash flow hedge that is determined to be an effective hedge.
Foreign currency reserve
This foreign currency reserve is used to record exchange differences arising
from the translation of the financial statements of foreign subsidiaries.
* Non-underlying items comprise brand amortisation and IAS 19 pension
costs in all years. Further details of the 2022/23 and 2023/24 non underlying
items can be found in note 5 of the Report and Accounts 2024.
** Underlying operating profit after tax from continuing operations
calculated using the underlying tax rate, as a percentage of average capital
invested from continuing operations.
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