REG - Eurocell plc - HALF YEAR REPORT FOR SIX MONTHS ENDED 30 JUNE 2024
04/09/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240904:nRSD7812Ca&default-theme=true
RNS Number : 7812C Eurocell plc 04 September 2024
4 September 2024
EUROCELL PLC (Symbol: ECEL)
HALF YEAR REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2024
Increased first half profits; full year expectations unchanged; good early
momentum with strategic initiatives
Eurocell plc, the market leading, vertically integrated UK manufacturer,
recycler and distributor of PVC window, door and roofline products, today
announces its results for the six months ending 30 June 2024.
Summary
• Adjusted profit before tax up 33% on lower sales, driven by proactive gross
margin management and reduced input costs
• Full year expectations unchanged, despite trading conditions remaining
challenging, with continuing macroeconomic uncertainty impacting key markets
• Good early momentum with new strategic initiatives and remain well positioned
for when markets recover
• Driving shareholder returns through a combination of a progressive ordinary
dividend and share buybacks
• Strong balance sheet and liquidity following completion of £10 million share
buyback programme in H1 and new £5 million buyback launched today
Key financial performance measures H1 2024 H1 2023 Change
Revenue (£ million) 175.7 184.4 (5)%
Underlying measures ((1))
Adjusted operating profit (£ million) 9.3 7.6 22%
Adjusted profit before tax (£ million) 8.0 6.0 33%
Adjusted basic earnings per share (pence) 5.6 4.3 30%
Reported measures
Operating profit (£ million) 8.9 5.1 75%
Profit before tax (£ million) 7.6 3.5 117%
Basic earnings per share (pence) 5.3 2.6 104%
Capital investment (£ million) 4.5 3.8 18%
Net cash generated from operating activities (£ million) 21.9 20.9 5%
Net debt, pre-IFRS 16 (£ million) ((2)) 4.3 15.2 72%
Net debt (£ million) ((2)) 60.9 75.8 20%
Interim dividend per share (pence) 2.2 2.0 10%
Financial headlines
• Group sales 5% below H1 2023, with volumes down 3%, driven by:
- Profiles sales down 9%: subdued RMI((3)) activity and continuing weak new
build housing market
- Branch Network sales down 2%: good early progress with strategic initiatives,
but underlying RMI volumes down
• Adjusted profit before tax up 33% vs H1 2023, reflecting:
- Proactive gross margin management combined with the benefit of lower input
costs, including electricity, recycling feedstock and PVC resin prices
- Partially offset by lower Group sales volumes and competitive pressure on
selling prices in the branches
- Continued labour and other overhead cost inflation
• Net cash generated from operating activities up 5% vs H1 2023, reflecting
continued focus on cash management
- Includes net inflow from working capital of £0.9 million (H1 2023: £4.2
million)
• Strong balance sheet, with pre-IFRS 16 net debt of £4.3 million (31 December
2023: net cash of £0.4 million)
- Average pre-IFRS 16 net debt of £0.5 million in H1 (H1 2023: £16.2 million)
• In line with updated capital allocation policy, driving shareholder returns
through a combination of an interim dividend of 2.2 pence per share up 10%
(2023: 2.0 pence per share) and, following completion of a £10 million share
buyback programme in H1, a further buyback of up to £5 million launched today
Operational and sustainability headlines
• Q2 2023 restructuring and headcount reduction delivered H1 2024 operating cost
savings of c.£2 million
• Continuing programme of operational improvements
• Strong on sustainability as the leading UK-based recycler of PVC windows, with
the proportion of recycled material used in production improving to 33% (H1
2023: 32%)
New strategy headlines
• Good early progress with new strategic initiatives, including:
- Branch network expansion: locations identified for 8 new sites, with 2 to be
opened in Q4 2024 and 6 in Q1 2025
- Windows and doors sales initiative: 35 branches added progressively to the
programme by 30 June 2024, with plans now accelerated to have c.100 branches
live by year end
- Garden room sales: 230 units sold in H1 2024 at a total value of £3.6 million
(H1 2023: 147 units, £2.2 million)
Darren Waters, Chief Executive of Eurocell plc said:
"Trading conditions continue to be tough in 2024, with ongoing macroeconomic
uncertainty impacting our key markets, exacerbated by wet weather and the
General Election. Customers remain cautious, resulting in lower investment in
home improvements and subdued activity levels in the residential construction
market. As a result, H1 sales were 5% below H1 2023.
"However, first half adjusted profit before tax was up 33% on H1 2023, as we
continue to proactively manage our gross margin and cost base, which has
supported a reduction in input cost pricing, and our expectations for the full
year remain unchanged.
"Earlier this year we launched our new strategy, which identified a pathway to
building a £500 million revenue business, generating a 10% operating margin,
over a five-year period. We have good early momentum with our new strategic
initiatives and are becoming increasingly confident that, whilst this is an
ambitious target, it is achievable.
"The UK construction market continues to have attractive medium and
long-term growth prospects, driven by the structural deficit in new build
housing and an ageing housing stock that requires increased repair and
maintenance. Overall, we believe the progression of our strategy, together
with the actions we have taken on cost and cash flow over the last eighteen
months, leave the business well positioned to drive sustainable growth in
shareholder value."
Notes
(1) Non-underlying items in H1 2024 of £0.4 million relate to strategic IT
projects which are classified as an expense as they use cloud computing.
Non-underlying items of £2.5 million in H1 2023 include restructuring costs
of £1.8 million and £0.7 million of cloud computing costs relating to
strategic IT projects.
(2) Net debt is bank overdrafts, borrowings and lease liabilities less cash and
cash equivalents. Pre-IFRS 16 net debt excludes lease liabilities and is
provided as our financial covenants are measured on this basis.
(3) RMI is repair, maintenance and improvement.
Analyst presentation
There will be an audiocast presentation for analysts and investors at 9am
today. The presentation can be accessed remotely via a live audiocast link as
follows: https://streamstudio.world-television.com/782-2007-40172/en
(https://streamstudio.world-television.com/782-2007-40172/en)
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fprotect-eu.mimecast.com%2Fs%2FFKTACo9lsDv8z2I1Q00D%3Fdomain%3Dstreamstudio.world-television.com&data=05%7C01%7Cmichael.scott%40eurocell.co.uk%7C8a789d16156347ddfbb008da7a0415bf%7Cd8cead8f16534fbcb96c198805455a37%7C0%7C0%7C637956455214532926%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=0GH1JgVmZLZAgoQSYTlH3Wh09kVoGW%2F4tTNzXZswQ5k%3D&reserved=0)
Alternatively, you can join via conference call as follows:
United Kingdom +44 (0) 20 3481 4247
United Kingdom (toll free) 0800 260 6466
Conference ID 8000246
A copy of the presentation will be made available from 7am today on the
Group's web site: https://investors.eurocell.co.uk/investors/
(https://investors.eurocell.co.uk/investors/) . Following the presentation, a
recording of the audiocast will also be made available on the Group's web site
(link above).
CHIEF EXECUTIVE'S REVIEW
INTRODUCTION
Trading conditions in our key markets have remained challenging, with
continuing macroeconomic uncertainty impacting activity levels in both the RMI
and new build housing markets, leading to first half sales below H1 2023.
However, we continue to focus on closely managing costs and cash flow and have
seen a reduction in input cost pricing in 2024. We have also made good early
progress with our new strategic initiatives. As a result, first half profits
are up on H1 2023.
Further details of our financial and operating performance, together with an
update on the progress of the early stages of our strategy, are set out below.
FINANCIAL RESULTS
Sales for H1 were £175.7 million, down 5% on H1 2023, with volume 3% lower.
Adjusted profit before tax for H1 was £8.0 million, up 33% on H1 2023, driven
by lower raw material and electricity costs, partially offset by the impact of
lower volumes and competitive pressure on selling prices in the branches.
Net cash generated from operations was £21.9 million, up 5% on H1 2023,
reflecting improved profitability and our continuing focus on cash management,
with a net inflow from working capital for H1 2024 of £0.9 million. This
compares to a net inflow from working capital of £4.2 million in H1 2023,
which included the impact of a significant reduction in stocks.
Good cash flow management also underpinned the successful completion of a £10
million share buyback programme in the first half of the year (see Capital
Allocation below).
Further information on our financial performance is included in the Divisional
and Chief Financial Officer's Reviews.
OPERATIONAL PERFORMANCE
Production
Overall Equipment Effectiveness ('OEE', a measure which takes into account
machine availability, performance and yield) was 71% in H1 2024 (H1 2023:
78%). This was below our target of 75%, reflecting the impact of lower
production volumes in the first half. We have a continuing programme of
operational improvements (see Business Effectiveness below) and expect OEE to
improve as volumes increase.
Recycling
We are the leading UK-based recycler of PVC windows, saving the equivalent of
c.3 million windows from landfill each year. We have made further progress in
H1 2024, with our use of recycled material increasing to 33% of materials
consumed in production, compared to 32% in H1 2023, driving lower carbon
emissions and cost savings compared to the use of virgin material.
Recycling feedstock purchase prices peaked in H1 2023 but are now lower,
reflecting the action we have taken to secure additional sources of supply
(see Chief Financial Officer's Review).
Furthermore, we are finding more ways of using all the waste product generated
by our plants and expect to progressively reduce waste sent to landfill.
Health and safety
The safety and well-being of our employees, contractors and branch customers
is our number one priority.
Health and safety is the first agenda item for key internal meetings. We have
enhanced the reporting of near misses and unsafe acts and conditions, as part
of a proactive approach to risk management, with the aim of reducing the
likelihood of future workplace injuries. This, when combined with the
effective and timely implementation of corrective and preventive action,
supports our positive and improving safety culture.
Following good safety results in 2023, we have delivered another improved
performance in H1 2024. Our Lost Time Injury Frequency Rate ('LTIFR') was 2.0
in H1 2024, compared to 5.7 in 2023 (full year).
DIVISIONAL PERFORMANCE - PROFILES
H1 2024 H1 2023 Change
£m £m %
Third-party revenue 72.6 79.5 (9)%
Inter-segmental revenue 32.7 34.9 (6)%
Total revenue 105.3 114.4 (8)%
Adjusted((1)) operating profit 8.5 4.9 74%
Operating profit 8.5 3.4 150%
(1) Adjusted performance measures are stated before non-underlying items.
Profiles third-party revenue for H1 was £72.6 million, 9% below H1 2023,
reflecting subdued RMI activity and a weak new build housing market. We have
selectively acquired a small number of new fabricator accounts over the last
18 months, leading to modest market share gains.
Cost of living pressures, interest rate increases and falling house prices
have all had a significant adverse impact on our end markets.
Profiles adjusted operating profit for H1 was £8.5 million, up 74% on last
year (H1 2023: £4.9 million), reflecting the benefit of lower input costs and
selling price increases, partially offset by lower sales volumes and ongoing
overhead cost inflation (particularly labour). Reported operating profit in H1
2023 includes non-underlying costs of £1.5 million.
Further information on non-underlying items is included in the Chief Financial
Officer's Review. A summary of our strategy for Profiles is set out below.
DIVISIONAL PERFORMANCE - BUILDING PLASTICS (BRANCH NETWORK)
H1 2024 H1 2023 Change
£m £m %
Third-party revenue 103.1 104.9 (2)%
Inter-segmental revenue 0.2 0.2 -
Total revenue 103.3 105.1 (2)%
Adjusted((1)) operating profit 2.2 3.4 (36)%
Operating profit 1.8 2.4 (26)%
(1) Adjusted performance measures are stated before non-underlying items.
Third-party revenues in the Branch Network for H1 were £103.1 million, 2%
below H1 2023.
Although underlying RMI volumes in the branches were down in H1 2024, with
homeowners holding back on discretionary expenditure against a backdrop of
macroeconomic uncertainty, we have made good early progress with our strategic
initiatives for garden rooms, windows and doors. However, increased
competition for limited underlying demand continues to drive pressure on
selling prices in the branch network.
Branch Network adjusted operating profit for H1 was £2.2 million, down 36% on
last year (H1 2023: £3.4 million), reflecting lower sales volumes,
competitive pressure on margins and ongoing labour cost inflation, partially
offset by lower input costs and selling price increases.
Reported operating profit includes non-underlying costs of £0.4m in relation
to cloud computing costs incurred on strategic IT projects involving 'Software
as a Service' arrangements and internal resourcing costs, which are expensed
as incurred rather than being capitalised as intangible assets. Reported
operating profit in H1 2023 includes non-underlying costs of £1.0 million.
Further information on non-underlying items is included in the Chief Financial
Officer's Review. A summary of our strategy for the Branch Network is set out
below.
STRATEGY
Earlier this year we launched our ambitious new strategy, which reset our
objectives for the business. We identified a pathway to building a £500
million revenue, £50 million operating profit business, generating a 10%
operating margin, over a five-year period. Our strategy is built around four
pillars: Customer Growth, Business Effectiveness, People First and ESG
Leadership. The following paragraphs describe these pillars and the
initiatives which support them, together with our early progress, which has
been encouraging.
Customer Growth
Our aim is to become the trade customer's preferred choice, in all markets and
segments where we operate. We believe the biggest opportunity for growth will
come from expansion of the branch network, including the sale of windows and
doors, plus our extended living spaces range of garden rooms and extensions.
This is all underpinned by an increased investment in digital marketing, to
raise awareness of our products and home improvement solutions and thereby
acquire new customers.
Branch Network
We believe that the optimum branch network size is at least 250 branches. We
expect to add c.30 new branches over the next three to four years. Potential
locations have been identified for an initial 8 new sites, primarily in the
South of England, 2 which will be opened in Q4 of this year and 6 in Q1 2025.
We will supplement this with a number of branch relocations, where location or
size does not offer the required growth opportunity, in order to optimise our
existing estate. The relocation of our Staples Corner and Greenford branches
to a new site in Wembley was successfully completed in April. This included a
refreshed branch exterior and was supported with strong pre-opening
recruitment and marketing campaigns, and sales have started well. A further
three relocations are planned for the second half.
We are aiming to sell more windows and doors through the branches. Following
an improvement in our window and door proposition, we ran an initial trial
across 6 branches in Q4 2023, and the results exceeded our expectations. We
have now established a comprehensive staff training programme and developed an
efficient central order processing function. A further 9 branches were added
into the programme in April and another 20 in June, making 35 in total by the
end of H1. The results continue to be good, so we have accelerated our plans
and now expect to have c.100 branches live by the end of the year, with a
roll-out across the remaining network to be completed in 2025. The project
also provides incremental growth opportunities for our fabricator partners,
and we are working successfully with them to secure additional capacity.
Extended living spaces
Extended living spaces comprises garden rooms and extensions. With our strong
customer proposition, experienced sales professionals and efficient end-to-end
processes, we believe there is a good opportunity to gain market share and
drive growth with these products.
For example, since launching our garden room range three years ago, we have
steadily built a strong market presence, competing well with the established
participants. We sold 230 garden rooms in H1 2024 at a total value of £3.6
million (H1 2023: 147 units, £2.2 million), and with a strong order pipeline
we are well placed to achieve our target for the year.
We launched our extensions range in Q4 2023. We are using modern methods of
construction that join together in an innovative kit form, thereby creating a
cost-effective, energy-efficient building solution for homeowners who are
looking to convert and extend their properties, with installation times of
weeks not months. We received orders for 32 extensions in H1 2024 with a total
sales value of £0.9m, in line with our plans, and enquiry levels are growing
steadily.
Profiles
In Profiles, following a period of strong growth, we believe we are now the
leading supplier of rigid PVC profile to the UK market.
Whilst we have selectively added a small number of new fabricators over the
last 18 months, our strategy for Profiles remains to protect our existing
business and maintain our value-added service propositions that support our
customers. We will continue to leverage our leading position with
housebuilders and commercial developers to ensure we maintain specifications
to support a robust pipeline of work for our fabricator customers. We are
recognised across the industry as the leading technical systems house, and we
will continue to leverage this advantage too.
As described above, the windows and doors initiative in our branch network
also provides growth opportunities, as it pulls through increased profile
sales via our fabricator partners and increased composite door sales through
our entrance doors business (Vista Panels).
Business Effectiveness
Our objective is to make Eurocell a lean and efficient business. We are
upgrading our business systems and streamlining processes to increase
efficiencies and improve customer experience.
As previously announced, we are in the process of replacing our Enterprise
Resource Planning ('ERP') system. The first stage of this process is to
implement a new trade counter system in the branch network. Having now
selected Intact IQ as our new trade counter system, we expect to transition in
the first half of 2025. This will transform the way we interact and transact
with our customers in the branches.
The second stage is to implement an ERP system to support all other functions
of the business, including manufacturing, recycling, warehousing, distribution
and finance. We have now selected IFS as our new ERP system and we estimate
the transition will be completed around mid-2026.
We are also embedding a continuous improvement philosophy, which is already
highlighting significant opportunities for efficiencies, particularly in our
manufacturing and recycling operations.
Our initiative to sell more doors and windows through our branches will
utilise spare capacity in our rigid extrusion manufacturing operations and
entrance door business, thereby making us more efficient.
People First
The good progress we are making in the business is testament to the
commitment, hard work and dedication of our teams in every part of the Group,
and I would like to offer, on behalf of the Executive Committee and the Board,
my sincere thanks to them all.
With the People First pillar, our objective is to make Eurocell a great place
to work, through a relentless focus on health and safety, an enhanced employee
value proposition, improved levels of engagement and effective talent
management.
For health and safety, we are focused on improving relevant leadership skills
and providing appropriate safety education. In terms of our employee value
proposition, we are developing a wellbeing framework, recognition schemes and
better induction and onboarding programmes. Key priorities for employee
engagement include a new internal communications framework, colleague forums
and stepping up community and charity work. During H1 2024, we launched a new
careers website: "Eurocell & You", which is already driving significantly
increased candidate traffic. Finally, effective talent management includes
talent development, succession planning and an increasing use of
apprenticeships.
ESG Leadership
We want to earn a reputation for being a truly responsible company. Eurocell
is already a leader in PVC recycling, which is preventing millions of windows
being sent to landfill. But that is just one aspect of ESG and, looking ahead,
we aim to excel in all areas.
We are now working with CEN-ESG, a specialist ESG consultancy, to support the
development of our ESG strategy and improve our ESG data and disclosures. The
results of our work so far includes:
• A materiality assessment, which helped us determine the most important
sustainability topics to the business. With this analysis we surveyed a
selection of employees, suppliers, customers, banks and shareholders
• A baseline carbon footprint for the business (Scope 1, 2 and 3), identifying
key decarbonisation levers
We have used the outputs from this work to define ESG objectives and targets
and develop a sustainability strategy, supported by appropriate governance and
internal controls. Our focus for the remainder of 2024 will be to complete the
work to determine a path to reach Net Zero by our target date of 2045, albeit
this will be heavily dependent on reduced emissions in our raw material supply
chain. We intend to submit our targets to SBTi for independent verification
later this year, and once approved we will publish our Transition Plan.
CAPITAL ALLOCATION
The Board has assessed how it enhances shareholder returns and, going forward,
will drive returns through a combination of a progressive ordinary dividend
and supplementary distributions (currently via share buybacks). Following
completion of a £10 million share buyback programme in H1, we have today
announced an interim dividend for 2024 of 2.2p, up 10% on 2023, and a further
share buyback of up to £5 million.
BOARD CHANGES
As previously announced, after nine years of service, Frank Nelson stepped
down from the Board following the AGM in May 2024, and Kate Allum resigned
from the Board in July 2024 to pursue other opportunities. Alison Littley
assumed the role of Senior Independent Non-executive Director and Chair of the
Remuneration Committee.
We would like to thank Frank and Kate for their past contributions to the
Group.
SUMMARY AND OUTLOOK
Trading conditions continue to be tough in 2024, with ongoing macroeconomic
uncertainty impacting our key markets, exacerbated by wet weather and the
General Election. Customers remain cautious, resulting in lower investment in
home improvements and subdued activity levels in the residential construction
market. As a result, H1 sales were 5% below H1 2023.
However, first half adjusted profit before tax was up 33% on H1 2023, as we
continue to proactively manage our gross margin and cost base, which has
supported a reduction in input cost pricing, and our expectations for the full
year remain unchanged.
Earlier this year we launched our new strategy, which identified a pathway to
building a £500 million revenue business, generating a 10% operating margin,
over a five-year period. We have good early momentum with our new strategic
initiatives and are becoming increasingly confident that, whilst this is an
ambitious target, it is achievable.
The UK construction market continues to have attractive medium and long-term
growth prospects, driven by the structural deficit in new build housing and an
ageing housing stock that requires increased repair and maintenance. Overall,
we believe the progression of our strategy, together with the actions we have
taken on cost and cash flow over the last eighteen months, leave the business
well positioned to drive sustainable growth in shareholder value.
Darren Waters
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
H1 2024 H1 2023
£m £m
Revenue 175.7 184.4
Gross profit 92.2 84.8
Gross margin % 52.5% 46.0%
Overheads (70.4) (65.1)
Adjusted((1)) EBITDA 21.8 19.7
Depreciation and amortisation (12.5) (12.1)
Adjusted((1)) operating profit 9.3 7.6
Finance costs (1.3) (1.6)
Adjusted((1)) profit before tax 8.0 6.0
Taxation (1.9) (1.2)
Adjusted((1)) profit after tax 6.1 4.8
Adjusted((1)) basic earnings per share (pence) 5.6 4.3
Non-underlying items (0.4) (2.5)
Tax on non-underlying items 0.1 0.6
Reported operating profit 8.9 5.1
Reported profit before tax 7.6 3.5
Reported profit after tax 5.8 2.9
Reported basic earnings per share (pence) 5.3 2.6
(1) See alternative performance measures.
INTRODUCTION
Trading conditions remain challenging, with the weak trends experienced last
year in the RMI and new house building markets continuing through into 2024,
resulting in our first half sales falling below the comparative period.
However, we are proactively managing our gross margin and cost base, with
lower input costs driving H1 2024 profits ahead of the first half of 2023.
We continue to focus on closely managing working capital and delivered solid
cash flow generation for the period. Having completed a £10 million share
buyback programme in the first half, our debt remains low and we have a strong
balance sheet with good liquidity.
We have made encouraging early progress with our new strategic initiatives,
which together with the actions we have taken on cost and cash flow over the
last eighteen months, leave us increasingly confident in realising our
ambitions and we remain well positioned to take advantage of a recovery in our
end markets, when it comes.
REVENUE
Revenue for H1 was £175.7 million, 5% down on H1 2023 (£184.4 million), with
volumes down 3%. Sales include the impact of selling price increases, but
average sales pricing in the branch network remains lower than prior year (see
Gross Margin below).
GROSS MARGIN
Gross margin was 52.5% in H1, up from 46.0% in H1 2023. Although increased
competition for limited demand continues to drive pressure on selling prices
in the branch network, we have benefited from a reduction in input cost
pricing, including electricity, recycling feedstock, and PVC resin prices.
We operate a rolling 12-month forward hedging policy for electricity. In H1
2023 we were paying rates locked in during H1 2022, when wholesale energy
prices peaked. We are now benefitting from the lower wholesale prices
experienced in 2023 and are substantially hedged for the remainder of this
year.
For our recycling business, in 2023 a weaker RMI market and fewer window
replacements restricted feedstock availability, resulting in a significant
increase in purchase prices. However, we have made good progress securing
additional sources of feedstock, which, alongside reduced demand and lower
virgin resin prices, saw prices ease towards the end of last year, with
further reductions in H1 2024.
Whilst there are only a limited number of PVC resin and certain other key raw
material suppliers, we have successfully identified alternative sources and
introduced other initiatives to drive competitive tension in our supply chain.
DISTRIBUTION AND ADMINISTRATIVE EXPENSES (OVERHEADS)
Underlying overheads for H1 were £70.4 million, 8% higher than H1 2023
(£65.1 million). We have continued to experience inflation in our overhead
cost base, particularly for labour, which we have offset with selling price
increases. Overheads also include the impact of a normalisation of variable
pay and share-based payments charges, partially offset by the annualisation of
cost savings secured through our Q2 2023 restructuring and headcount reduction
programme.
DEPRECIATION AND AMORTISATION (D&A)
D&A for H1 was £12.5 million, compared to £12.1 million in H1 2023.
ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are used alongside statutory measures to
facilitate a better understanding of financial performance and comparison with
prior periods, and to provide audited financial information against which the
Group's bank covenants, which are all measured on a pre-IFRS 16 basis, can be
assessed.
Adjusted EBITDA, adjusted operating profit and adjusted profit before tax all
exclude non-underlying items. Adjusted profit after tax and adjusted earnings
per share exclude non-underlying items and the related tax effect. Pre-IFRS 16
EBITDA is stated inclusive of operating lease rentals under IAS 17 Leases.
Pre-IFRS 16 net debt is defined as total borrowings and lease liabilities less
cash and cash equivalents, excluding the impact of IFRS 16 Leases.
We classify some material items of income and expense as non-underlying when
the nature and infrequency merit separate presentation. Alongside statutory
measures, this facilitates a better understanding of financial performance and
comparison with prior periods.
NON-UNDERLYING ITEMS
Non-underlying items for H1 relate to £0.4 million of cloud computing costs
incurred on strategic IT projects involving 'Software as a Service'
arrangements and internal resourcing costs, which are expensed as incurred
rather than being capitalised as intangible assets. Such items are considered
to be non-underlying in nature because they relate to multi-year programmes to
deliver strategic IT implementations which are material in size. Our strategic
IT projects comprise a new customer-facing website and an employee management
system (both now substantially complete) and, most significantly, the
replacement of our Enterprise Resource Planning (ERP) system, with overall
spend estimated to be in the region of £10 million over the next three years.
Non-underlying items in 2023 of £2.5 million included restructuring costs of
£1.8 million, comprising redundancy payments and related employee benefit
termination costs in connection with our Q2 2023 restructuring and headcount
reduction programme and £0.7 million of strategic IT project cloud computing
costs.
FINANCE COSTS AND TAXATION
Finance costs for H1 were £1.3 million (H1 2023: £1.6 million).
The underlying tax charge for H1 2024 was £1.9 million (H1 2023: £1.2
million). The effective tax rate on underlying profit before tax for H1 2024
of 24% (H1 2023: 19%) is slightly lower than the standard corporation tax rate
for the period of 25% (H1 2023: blended rate of 23.5%) due to the benefit of
Patent Box relief.
PROFIT BEFORE TAX AND EARNINGS PER SHARE
Adjusted profit before tax for H1 was £8.0 million, compared to £6.0 million
in H1 2023, driven by the net impact of lower input costs, partially offset by
lower volumes and margin pressure in the branches. Reported profit before tax
for H1 was £7.6 million, compared to £3.5 million in H1 2023.
Adjusted basic and diluted earnings per share were 5.6 pence, compared to 4.3
pence in H1 2023. Reported basic and diluted earnings per share for H1 were
5.3 pence, compared to 2.6 pence in H1 2023.
DIVIDENDS AND SHARE BUYBACKS
As set out in the Chief Executive's Review, the Board is focused on driving
shareholder returns through a combination of a progressive ordinary dividend
and supplementary distributions (currently via share buybacks), whilst always
seeking to maintain a strong financial position.
On 3 September 2024, the Board approved an interim dividend for the six months
ended 30 June 2024 of 2.2 pence per share (£2.3 million), an increase of 10%
compared to H1 2023. The interim dividend will be paid on 11 October 2024 to
shareholders on the register at the close of business at 13 September 2024 and
shares will be marked ex-dividend on 12 September 2024.
Taking into account expected organic investment requirements and our good cash
flow management, we launched a £5 million share buyback programme in January
2024, subsequently extended by a further £5 million in May, with the total
£10 million programme completed in June. We have today launched a further
buyback of up to £5 million.
CAPITAL EXPENDITURE
Capital expenditure for H1 2024 was £4.5 million (H1 2023: £3.8 million),
largely maintenance in nature.
CASH FLOW
Net cash generated from operating activities was £21.9 million for the
period, compared to £20.9 million in H1 2023.
This includes a net inflow from working capital for H1 2024 of £0.9 million,
comprised of an increase in stocks (£1.3 million), an increase in trade and
other receivables (£5.7 million) and an increase in trade and other payables
(£7.9 million). This compares to a net inflow from working capital of £4.2
million in H1 2023, which included the impact of a major stock reduction
initiative. The increase in receivables and payables since December 2023
reflects a seasonal uplift in volumes.
Net cash generated from operating activities also includes net tax paid of
£1.1 million (H1 2023: £1.4 million).
Other cash flow items comprise payments for capital investments of £5.0
million, including the net movement in our capital creditor of £0.5 million
(H1 2023: £4.1 million, including the net capital creditor movement of £0.3
million) and financing costs of £0.4 million (H1 2023: £0.8 million). The
principal elements of lease payments of £7.0 million (H1 2023: £7.0 million)
are presented within cash flows arising from financing activities. The finance
elements of lease payments were £0.9 million (H1 2023: £0.8 million).
Dividends of £3.8 million (being the 2023 final dividend) were paid to
shareholders during the period (H1 2023: £8.1 million, being the 2022 final
dividend). Shares with a total consideration (including transaction costs) of
£10 million were purchased under the share buyback programme as at the 30
June 2024.
NET DEBT
Net debt on a pre-IFRS 16 basis at 30 June 2024 was £4.3 million (30 June
2023: £15.2 million, 31 December 2023: net cash of £0.4 million). Reported
net debt on a post-IFRS 16 basis at 30 June 2024 was £60.9 million (30 June
2023: £75.8 million, 31 December 2023: £58.2 million).
BANK FACILITIES
Our activities are funded via our £75 million unsecured, sustainable
Revolving Credit Facility, which matures in 2027. The facility is provided by
Barclays, NatWest and Bank of Ireland, and is competitively priced. In terms
of sustainability, modest adjustments to the margin are applied based on our
achievement against annual targets for usage of recycled material in our
products, waste recycled and carbon emissions. We operate comfortably within
the terms of the facility and in compliance with our financial covenants,
which are measured on a pre-IFRS 16 basis.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group are set out in the
2023 Annual Report (pages 68-72). These risks remain unchanged and are as
follows:
· Macroeconomic and market conditions
· Cyber security
· Health and safety
· Supply chain risk
· Sustainability and climate change
· Managing change
· ERP system implementation
· Operational and regulatory compliance
Michael Scott
Chief Financial Officer
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF YEAR REPORT
We confirm that to the best of the Directors' knowledge:
• The condensed set of financial statements has been prepared in accordance with
UK-adopted International Accounting Standard 34 and;
• The interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last Annual Report that could do so.
By Order of the Board
Darren Waters Michael Scott
Chief Executive Officer Chief Financial Officer
3 September 2024 3 September 2024
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2024
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023
(Unaudited) (Unaudited) (Audited)
Underlying ((1)) Non-underlying Total Underlying ((1)) Non-underlying Total Underlying ((1)) Non-underlying Total
Note £m £m £m £m £m £m £m £m £m
Revenue 6 175.7 - 175.7 184.4 - 184.4 364.5 - 364.5
Cost of sales (83.5) - (83.5) (99.6) - (99.6) (190.7) - (190.7)
Gross profit 92.2 - 92.2 84.8 - 84.8 173.8 - 173.8
Distribution costs (12.6) - (12.6) (12.6) - (12.6) (25.3) (0.1) (25.4)
Administrative expenses (70.3) (0.4) (70.7) (64.9) (2.5) (67.4) (130.5) (3.4) (133.9)
Other income - - - 0.3 - 0.3 0.4 - 0.4
Operating profit 6 9.3 (0.4) 8.9 7.6 (2.5) 5.1 18.4 (3.5) 14.9
Finance expense (1.3) - (1.3) (1.6) - (1.6) (3.2) - (3.2)
Profit before tax 8.0 (0.4) 7.6 6.0 (2.5) 3.5 15.2 (3.5) 11.7
Taxation 7 (1.9) 0.1 (1.8) (1.2) 0.6 (0.6) (2.9) 0.8 (2.1)
Profit for the period and total comprehensive income 6.1 (0.3) 5.8 4.8 (1.9) 2.9 12.3 (2.7) 9.6
Basic earnings per share 8 5.6p 5.3p 4.3p 2.6p 11.0p 8.6p
Diluted earnings per share 8 5.6p 5.3p 4.3p 2.6p 11.0p 8.6p
(1) Non-underlying items are detailed in Note 5.
CONDENSED COnsolidated Statement of Financial Position
As at 30 June 2024
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
Note £m £m £m
Assets
Non-current assets
Property, plant and equipment 9 59.5 60.5 59.9
Right-of-use assets 9 53.7 56.8 55.1
Intangible assets 9 15.2 16.0 15.8
Total non-current assets 128.4 133.3 130.8
Current assets
Inventories 48.0 53.5 46.7
Trade and other receivables 50.3 54.5 45.3
Corporation tax 0.2 1.0 0.6
Cash and cash equivalents 1.5 2.1 0.4
Total current assets 100.0 111.1 93.0
Total assets 228.4 244.4 223.8
Liabilities
Current liabilities
Trade and other payables (49.4) (49.2) (41.6)
Lease liabilities (12.1) (13.2) (12.9)
Bank overdraft (1.4) - -
Provisions (0.2) (0.2) (0.2)
Total current liabilities (63.1) (62.6) (54.7)
Non-current liabilities
Borrowings (4.4) (17.3) -
Lease liabilities (44.5) (47.4) (45.7)
Provisions (1.3) (1.0) (1.1)
Deferred tax (8.3) (6.8) (8.0)
Total non-current liabilities (58.5) (72.5) (54.8)
Total liabilities (121.6) (135.1) (109.5)
Net assets 106.8 109.3 114.3
Equity attributable to equity holders of the Parent
Share capital 0.1 0.1 0.1
Share premium account 22.2 22.2 22.2
Treasury shares (0.8) (0.7) (0.1)
Share-based payment reserve 1.4 1.2 0.9
Share buyback reserve ((1)) (1.3) - -
Retained earnings 85.2 86.5 91.2
Total equity 106.8 109.3 114.3
(1) Share buyback reserve is a holding reserve for shares awaiting
cancellation as part of the share buyback programme.
CONDENSED Consolidated Cash Flow Statement
For the six months ended 30 June 2024
Six months ended 30 June 2024 Six months ended 30 June 2023 Year
ended 31 December 2023
(Unaudited) (Unaudited) (Audited)
Note £m £m £m
11 23.0 22.3 54.2
Cash generated from operations
Income taxes paid (1.1) (1.4) (1.4)
Net cash generated from operating activities 21.9 20.9 52.8
Investing activities
Purchase of property, plant and equipment (5.0) (4.0) (9.0)
Purchase of intangible assets - (0.1) (0.1)
Net cash flow arising on sale of business - 0.8 0.8
Net cash used in investing activities (5.0) (3.3) (8.3)
Financing activities
Purchase of own shares held as treasury shares - (0.7) (0.7)
Share buyback (10.0) - -
Repayment of bank borrowings - (3.0) (21.0)
Proceeds from bank borrowings 5.0 - -
Bank borrowings arrangement costs (0.1) (0.2) (0.2)
Principal elements of lease payments (7.0) (7.0) (13.8)
Finance elements of lease payments (0.9) (0.8) (1.8)
Finance expense paid (0.4) (0.8) (1.4)
Dividends paid to equity shareholders (3.8) (8.1) (10.3)
Net cash used in financing activities (17.2) (20.6) (49.2)
Net decrease in cash and cash equivalents (0.3) (3.0) (4.7)
Cash and cash equivalents at beginning of period 0.4 5.1 5.1
Cash and cash equivalents at end of period 0.1 2.1 0.4
CONDENSED Consolidated Statement of Changes in Equity
For the six months ended 30 June 2024 (Unaudited) Share Share-based Share
Share premium Treasury payment buyback Retained Total
capital account shares reserve reserve earnings equity
£m £m £m £m £m £m £m
Balance at 1 January 2024 0.1 22.2 (0.1) 0.9 - 91.2 114.3
Comprehensive income for the period
Profit for the period - - - - - 5.8 5.8
Total comprehensive income for the period - - - - - 5.8 5.8
Contributions by and distributions to owners
Share-based payments - - - 0.5 - - 0.5
Exercise of share options - - 0.1 - - (0.1) -
Purchase of own shares - - (0.8) - (9.1) (0.1) (10.0)
Cancellation of shares - - - - 7.8 (7.8) -
Dividends paid - - - - - (3.8) (3.8)
Total transactions with owners recognised directly in equity - - (0.7) 0.5 (1.3) (11.8) (13.3)
Balance at 30 June 2024 0.1 22.2 (0.8) 1.4 (1.3) 85.2 106.8
For the six months ended 30 June 2023 (Unaudited) Share Share-based Share
Share premium Treasury payment buyback Retained Total
capital account shares reserve reserve earnings equity
£m £m £m £m £m £m £m
Balance at 1 January 2023 0.1 22.2 - 0.9 - 91.7 114.9
Comprehensive income for the period
Profit for the period - - - - - 2.9 2.9
Total comprehensive income for the period - - - - - 2.9 2.9
Contributions by and distributions to owners
Share-based payments - - - 0.3 - - 0.3
Purchase of own shares - - (0.7) - - - (0.7)
Dividends paid - - - - - (8.1) (8.1)
Total transactions with owners recognised directly in equity - - (0.7) 0.3 - (8.1) (8.5)
Balance at 30 June 2023 0.1 22.2 (0.7) 1.2 - 86.5 109.3
For the year ended 31 December 2023 (Audited) Share Share-based Share
Share premium Treasury payment buyback Retained Total
capital account shares reserve reserve earnings equity
£m £m £m £m £m £m £m
Balance at 1 January 2023 0.1 22.2 - 0.9 - 91.7 114.9
Comprehensive income for the year
Profit for the year - - - - - 9.6 9.6
Total comprehensive income for the year - - - - - 9.6 9.6
Contributions by and distributions to owners
Exercise of share options - - 0.6 (0.8) - 0.2 -
Share-based payments - - - 0.8 - - 0.8
Purchase of own shares - - (0.7) - - - (0.7)
Dividends paid - - - - - (10.3) (10.3)
Total transactions with owners recognised directly in equity - - (0.1) - - (10.1) (10.2)
Balance at 31 December 2023 0.1 22.2 (0.1) 0.9 - 91.2 114.3
EXPLANATORY NOTES
1 GENERAL INFORMATION AND BASIS OF PREPARATION
Eurocell plc (the 'Company') and its subsidiaries (together the 'Group') is a
publicly listed company incorporated and domiciled in England, United Kingdom.
The registered office is Eurocell Head Office and Distribution Centre, High
View Road, South Normanton, Alfreton, Derbyshire, DE55 2DT.
The Group is principally engaged in the extrusion of PVC window and building
products to the new and replacement window market and the sale of building
materials across the UK.
The half year report for the six months ended 30 June 2024 reflects the
results of the Company and its subsidiaries. It has been prepared in
accordance with UK-adopted IAS 34 Interim Financial Reporting and the
Disclosure and Transparency rules of the United Kingdom's Financial Conduct
Authority, and includes the condensed consolidated interim financial
statements (the 'interim financial statements').
The interim financial statements do not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006. They do not include all the
information required for full financial statements and should be read in
conjunction with the 2023 Annual Report, which was prepared in accordance with
UK-adopted international accounting standards and with the requirements of the
Companies Act 2006.
The comparative figures for the year ended 31 December 2023 have been
extracted from the Group's audited financial statements for that year. Those
financial statements are included in the 2023 Annual Report and have been
delivered to the Registrar of Companies. The auditor's report was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their audit
report, and (iii) did not contain a statement under Section 498 (2) or (3) of
the Companies Act 2006.
The interim financial statements are unaudited, but have been reviewed by the
auditors in accordance with the Auditing Practices Board guidance on Review of
Interim Financial Information.
The Group is affected by seasonality. Sales are usually slower during the
first quarter of the year, with September to November typically representing
the peak sales period for the Group. Demand in the second half of the year is
therefore usually higher than in the first half.
The half year report was approved by the Board of Directors on 3 September
2024.
2 GOING CONCERN
The interim financial statements have been prepared on a going concern basis.
The Group funds its activities through a £75 million Revolving Credit
Facility, provided by Barclays, NatWest and Bank of Ireland, which matures in
May 2027. The facility includes two key financial covenants, which are tested
at 30 June and 31 December on a pre-IFRS 16 basis. These are that net debt
should not exceed 3 times adjusted EBITDA (Leverage), and that adjusted EBITDA
should be at least 4 times the interest charge on the debt (Interest Cover).
At 30 June 2024 the Group has complied with all of its covenants, and it
expects to do so for the next measurement period, being 31 December 2024, and
going forward.
In assessing going concern, the Directors have considered financial
projections for the period to December 2026, which is consistent with the
Board's strategic planning horizon and reflects a period of at least 12 months
from the date of approval of the interim financial statements. These forecasts
have been compiled based on the best estimates of the Group's commercial and
operational teams. This includes a severe but plausible 'Downside' scenario,
which reflects demand for the Group's products being severely weakened.
In all scenarios tested, including sensitivities reducing sales forecasts to
10% below management's estimates for the period 2024 - 26, key raw material
prices increasing by 33% over that period and both scenarios combined, the
Group operates with significant headroom on its RCF facility and remains
compliant with its original covenants.
After reviewing the Group's projected financial performance and financing
arrangements, the Directors consider that the Group has adequate resources to
continue operating and that it is therefore appropriate to continue to adopt
the going concern basis in preparing this half year report.
3 ACCOUNTING POLICIES AND ESTIMATES
The interim financial statements have been prepared in accordance with the
accounting policies and presentation that were applied in the Group's audited
financial statements for the year ended 31 December 2023.
A number of new or amended accounting standards became applicable for the
current reporting period. The adoption of these standards did not lead the
Group to change its accounting policies or make retrospective adjustments. The
Group does not intend to adopt any standard, revision or amendment before the
required implementation date.
Critical accounting estimates and judgements
The preparation of the interim financial statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. The significant judgements, estimates and assumptions relevant
to the preparation of the interim financial statements are consistent with
those described on page 141 of the 2023 Annual Report.
4 FINANCIAL INSTRUMENTS
The Group is exposed to financial risks through its use of the following
financial instruments:
· Trade and other receivables;
· Cash and cash equivalents;
· Deferred consideration;
· Trade and other payables;
· Bank overdrafts;
· Floating-rate bank loans; and
· Lease liabilities
The relevant financial risks are: credit risk, market risk, foreign exchange
risk and liquidity risk.
The Group estimates that the fair value of these financial assets and
liabilities is approximate to their carrying amount. Further information in
relation to the Group's exposure to financial risks is included on pages 141
to 144 of the 2023 Annual Report.
5 NON-UNDERLYING ITEMS
Amounts included in the Consolidated Statement of Comprehensive Income are as
follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December 2023
2024 2023
(Unaudited) (Unaudited) (Audited)
£m £m £m
Restructuring costs - 1.8 2.7
Cloud computing expenses 0.4 0.7 0.8
Total non-underlying expenses 0.4 2.5 3.5
Taxation (0.1) (0.6) (0.8)
Impact on profit after tax 0.3 1.9 2.7
Cloud computing expenses
Cloud computing expenses of £0.4 million (H1 2023: £0.7 million; FY 2023:
£0.8 million) relate to costs incurred on strategic IT projects involving
'Software as a Service' arrangements and internal resourcing costs which are
expensed as incurred rather than being capitalised as intangible assets.
Such items are considered to be non-underlying in nature because they relate
to multi-year programmes to deliver strategic IT implementations which are
material in size, with overall spend estimated to be in the region of £10
million over the next three years. Our strategic IT projects comprise a new
customer-facing website and an employee management system (both now
substantially complete) and, most significantly, the replacement of the
Group's Enterprise Resource Planning ('ERP') system.
Prior year non-underlying items
Restructuring costs in 2023 related to redundancy payments and related
employee benefit termination costs, with 119 roles impacted at a one-off cost
of £2.7 million. These costs were classified as non-underlying as they
related to roles that no longer exist within the organisation and therefore
would not re-occur in future reporting periods. Also included is a credit of
£0.2 million in respect of the release of a provision relating to a
restructuring exercise announced in 2022 and completed in early 2023.
Impact on cash flow
All of the non-underlying expenses incurred in H1 2024 were settled in cash at
30 June 2024.
Of the £2.5 million non-underlying expenses recognised in H1 2023, £1.3
million was settled in cash at 30 June 2023 and £1.1 million was settled by
31 December 2023. The remaining £0.1 million related to non-cash asset
impairment charges.
6 SEGMENTAL INFORMATION
The Group organises itself into a number of operating segments that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. Internal
reporting provided to the chief operating decision-maker, which has been
identified as the executive management team including the Chief Executive
Officer and the Chief Financial Officer, reflects this structure.
The Group has aggregated its operating segments into three reported segments,
as these business units have similar products, production processes, types of
customer, methods of distribution, regulatory environments and economic
characteristics:
• Profiles - extrusion and sale of PVC window and building products to the new
and replacement window market across the UK. This segment includes Vista
Panels, S&S Plastics and Eurocell Recycle North.
• Building Plastics - sale of plastic building materials across the UK.
• Corporate - represents costs relating to the ultimate parent company and
includes the assets and related amortisation in respect of acquired intangible
assets.
Inter-segmental sales, which are eliminated on consolidation, are transacted
on an arm's-length basis and relate to manufactured products distributed by
the Building Plastics division.
Six months ended 30 June 2024 (Unaudited) Building Corporate Total
Profiles Plastics
£m £m £m £m
Revenue
Total revenue 105.3 103.3 - 208.6
Inter-segmental revenue (32.7) (0.2) - (32.9)
Total revenue from external customers 72.6 103.1 - 175.7
Adjusted EBITDA 15.4 6.7 (0.3) 21.8
Amortisation of intangible assets - - (0.6) (0.6)
Depreciation of property, plant and equipment (3.8) (0.6) (0.4) (4.8)
Depreciation of right-of-use assets (3.1) (3.9) (0.1) (7.1)
Adjusted operating profit/(loss) 8.5 2.2 (1.4) 9.3
Non-underlying operating expenses - (0.4) - (0.4)
Operating profit/(loss) 8.5 1.8 (1.4) 8.9
Finance expense (1.3)
Profit before tax 7.6
Six months ended 30 June 2023 (Unaudited) Building Corporate Total
Profiles Plastics
£m £m £m £m
Revenue
Total revenue 114.4 105.1 - 219.5
Inter-segmental revenue (34.9) (0.2) - (35.1)
Total revenue from external customers 79.5 104.9 - 184.4
Adjusted EBITDA 11.5 7.6 0.6 19.7
Amortisation of intangible assets - - (0.8) (0.8)
Depreciation of property, plant and equipment (3.6) (0.6) (0.4) (4.6)
Depreciation of right-of-use assets (3.0) (3.6) (0.1) (6.7)
Adjusted operating profit/(loss) 4.9 3.4 (0.7) 7.6
Non-underlying operating expenses (1.5) (1.0) - (2.5)
Operating profit/(loss) 3.4 2.4 (0.7) 5.1
Finance expense (1.6)
Profit before tax 3.5
Year ended 31 December 2023 (Audited) Profiles Building Plastics Corporate Total
£m £m £m £m
Revenue
Total revenue 219.8 210.0 - 429.8
Inter-segmental revenue (64.9) (0.4) - (65.3)
Total revenue from external customers 154.9 209.6 - 364.5
Adjusted EBITDA 25.5 17.4 0.2 43.1
Amortisation of intangible assets - - (1.7) (1.7)
Depreciation of property, plant and equipment (7.3) (1.2) (0.8) (9.3)
Depreciation of right-of-use assets (6.3) (7.3) (0.1) (13.7)
Adjusted operating profit/(loss) 11.9 8.9 (2.4) 18.4
Non-underlying operating expenses (1.8) (0.7) (1.0) (3.5)
Operating profit/(loss) 10.1 8.2 (3.4) 14.9
Finance expense (3.2)
Profit before tax 11.7
As at 30 June 2024 (Unaudited) Building Corporate Total
Profiles Plastics
£m £m £m £m
Segment assets 127.7 85.0 15.7 228.4
Segment liabilities (53.6) (50.7) (4.6) (108.9)
Borrowings (4.4)
Deferred tax (8.3)
Total liabilities (121.6)
Total net assets 106.8
As at 30 June 2023 (Unaudited) Building Corporate Total
Profiles Plastics
£m £m £m £m
Segment assets 139.2 87.4 17.8 244.4
Segment liabilities (59.9) (48.1) (3.0) (111.0)
Borrowings (17.3)
Deferred tax (6.8)
Total liabilities (135.1)
Total net assets 109.3
As at 31 December 2023 (Audited) Profiles Building Corporate Total
Plastics
£m £m £m £m
Segment assets 126.9 78.5 18.4 223.8
Segment liabilities (53.3) (43.7) (4.5) (101.5)
Borrowings -
Deferred tax liability (8.0)
Total liabilities (109.5)
Total net assets 114.3
Geographical information
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
Revenue Non-current assets Revenue Non-current assets Revenue Non-current assets
£m £m £m £m £m £m
United Kingdom 174.7 128.4 183.5 133.3 362.5 130.8
Republic of Ireland 1.0 - 0.9 - 2.0 -
Total 175.7 128.4 184.4 133.3 364.5 130.8
As at 30 June 2024 the Group employed 2,039 people in the UK, and 9 people in
the Republic of Ireland.
7 TAXATION
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
£m £m £m
Current tax
Current tax on profit for the period 1.6 0.6 2.0
Adjustments in respect of prior years (0.1) - (1.1)
Total current tax 1.5 0.6 0.9
Deferred tax
Origination and reversal of temporary differences 0.1 0.2 0.4
Adjustment in respect of prior years 0.2 (0.2) 0.8
Total deferred tax 0.3 - 1.2
Total tax expense 1.8 0.6 2.1
The reasons for the difference between the actual current tax charge for the
period and the standard rate of corporation tax in the United Kingdom applied
to profits for the period are as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
£m £m £m
Profit before tax 7.6 3.5 11.7
Expected tax expense based on the standard rate of corporation tax in the UK 1.9 0.8 2.7
of 25.0% (2023: blended rate of 23.5%)
Expenses not deductible for tax purposes - - 0.4
Patent Box claim (0.2) (0.2) (0.5)
Adjustments in respect of prior years (0.2) - (1.1)
Deferred tax impact of share-based payments - - 0.1
Tax effect of accelerated capital allowances - - (0.7)
Current tax expense 1.5 0.6 0.9
The reasons for the difference between the total tax charge for the period and
the standard rate of corporation tax in the United Kingdom applied to profits
for the period are as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
£m £m £m
Profit before tax 7.6 3.5 11.7
Expected tax expense based on the standard rate of corporation tax in the UK 1.9 0.8 2.7
of 25.0% (2023: blended rate of 23.5%)
Expenses not deductible for tax purposes - 0.2 0.2
Patent Box claim (0.2) (0.2) (0.5)
Adjustments to tax charge in respect of prior years 0.1 (0.2) (0.3)
Total tax expense 1.8 0.6 2.1
Changes in tax rates and factors affecting the future tax charge
In calculating the half year tax charge, the expected effective tax rate for
the full year has been applied to the half year underlying profit, with the
exception of the remeasurement of deferred tax liabilities, which has been
applied in full.
There are no material uncertain tax provisions.
Tax included in Other Comprehensive Income
The tax credit arising on share-based payments within Other Comprehensive
Income is £nil (2023: £nil).
Based on the current investment plans of the Group, and assuming the rates of
capital allowances on capital expenditure continue into the future, there is
little prospect of any significant part of the deferred tax liability becoming
payable over the next three years.
Tax residency
Eurocell plc and its subsidiaries are all registered in the United Kingdom and
are resident in the UK for tax purposes. The Group has two branches in the
Republic of Ireland, with combined annual revenues of c.£2.0 million (2023:
£2.0 million), total assets of less than £50,000 (2023: less than £50,000)
and nine (2023: eight) full time employees. For tax purposes these two trading
locations form a single branch within Eurocell Building Plastics Limited, and
therefore any profits generated are subject to tax in the Republic of
Ireland.
The tax charge in relation to the Group's Republic of Ireland operations in
2023 was €nil and no tax payments were made during the year. This is due
to utilisation of losses brought forward. No deferred tax assets are
recognised on unutilised losses due to the uncertainty of future profits in
the Republic of Ireland.
8 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the
period attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period. Adjusted earnings per share
excludes the impact of non-underlying items.
Diluted earnings per share is calculated by adjusting the earnings and number
of shares for the effects of dilutive options. In the event that a loss is
recorded for the period, share options are not considered to have a dilutive
effect.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
£m £m £m
Profit attributable to ordinary shareholders excluding non-underlying items 6.1 4.8 12.3
Profit attributable to ordinary shareholders 5.8 2.9 9.6
Number Number Number
Weighted average number of shares - basic 109,684,688 112,059,272 111,885,083
Dilutive impact of share options granted 96,520 101,200 53,451
Weighted average number of shares - diluted 109,781,208 112,160,472 111,938,534
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
Pence Pence Pence
Basic earnings per share 5.3 2.6 8.6
Adjusted basic earnings per share 5.6 4.3 11.0
Diluted earnings per share 5.3 2.6 8.6
Adjusted diluted earnings per share 5.6 4.3 11.0
9 NON-CURRENT ASSETS (Unaudited)
Property, plant and equipment Right-of-use assets Intangible assets
£m £m £m
At 31 December 2023 59.9 55.1 15.8
Additions 4.5 5.8 -
Disposals (0.1) (0.1) -
Depreciation and amortisation (4.8) (7.1) (0.6)
At 30 June 2024 59.5 53.7 15.2
10 DIVIDENDS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
£m £m £m
Dividends paid during the period
Interim dividend for 2023 of 2.0p per share - - 2.2
Final dividend for 2023 of 3.5p per share (2022: 7.2p per share) 3.8 8.1 8.1
3.8 8.1 10.3
Dividends proposed
Interim dividend for H1 2024 of 2.2p per share 2.3 2.2 -
(H1 2023: 2.0p per share)
Final dividend for 2023 of 3.5p per share - - 3.8
2.3 2.2 3.8
11 RECONCILIATION OF PROFIT AFTER TAX TO CASH GENERATED FROM OPERATIONS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
£m £m £m
Profit after tax 5.8 2.9 9.6
Taxation 1.8 0.6 2.1
Finance expense 1.3 1.6 3.2
Operating profit 8.9 5.1 14.9
Adjustments for:
Depreciation of property, plant and equipment 4.8 4.6 9.3
Depreciation of right-of-use assets 7.1 6.7 13.7
Amortisation of intangible assets 0.6 0.8 1.7
Impairment of tangible and right-of-use assets - 0.1 0.3
Prepaid cloud computing costs now expensed - 0.5 -
Share-based payments 0.5 0.3 0.8
(Increase)/decrease in inventories (1.3) 6.4 13.2
(Increase)/decrease in trade and other receivables (5.7) (4.5) 6.0
Increase/(decrease) in trade and other payables 7.9 2.3 (5.8)
Increase in provisions 0.2 - 0.1
Cash generated from operations 23.0 22.3 54.2
12 RELATED PARTY TRANSACTIONS
The remuneration of Executive and Non-executive Directors is disclosed in the
2023 Annual Report.
Transactions with key management personnel
Kellmann Recruitment Limited is controlled by T Kelly, a close family member
of M Kelly who was a Director of Eurocell plc until 11 May 2023. The fees paid
to Kellman Recruitment Limited relate to recruitment services, and are agreed
on an arms' length basis, at rates that are consistent with other similar
suppliers of recruitment services to the Group.
The following amounts were paid to Kellman Recruitment for services provided
during the periods below, up to 11 May 2023:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Kellmann Recruitment Limited - recruitment services - 109 103
Amounts outstanding at the period end were £nil (30 June 2023: £nil; 31
December 2023: £nil).
13 CAPITAL COMMITMENTS
The Group is committed to a further £2.6 million of capital investment in
2024.
14 EVENTS AFTER THE BALANCE SHEET DATE
The Directors are not aware of any material events that have occurred after 30
June 2024 which would require disclosure under IAS 10.
Independent review report to Eurocell plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Eurocell plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Half Year Report of
Eurocell plc for the 6 month period ended 30 June 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the condensed consolidated statement of financial position as at
30 June 2024;
· the condensed consolidated statement of comprehensive income for
the period then ended;
· the condensed consolidated cash flow statement for the period then
ended;
· the condensed consolidated statement of changes in equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Report of Eurocell
plc have been prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Report, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Year Report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Report, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Report based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
3 September 2024
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR QKNBDOBKDOCKRecent news on Eurocell
See all newsREG - Eurocell plc - Transaction in Own Shares
AnnouncementREG - Eurocell plc - Transaction in Own Shares
AnnouncementREG - Eurocell plc - Transaction in Own Shares
AnnouncementREG - Eurocell plc - Holding(s) in Company
AnnouncementREG - Eurocell plc - Transaction in Own Shares
Announcement