REG - Victorian Plumbing - HALF YEAR RESULTS
28/05/2024 07:00
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RNS Number : 9612P Victorian Plumbing Group PLC 28 May 2024
Victorian Plumbing Group PLC
HALF year results for the SIX MONTHS ENDED 31 mARCH 2024
Further profitable growth in market share despite a subdued trading
environment, whilst investing for a transformational year.
Victorian Plumbing Group plc ("Victorian Plumbing", the "Group"), the UK's
leading bathroom retailer((1)), announces its half year results for the six
months ended 31 March 2024 ("H1 2024").
H1 2024 H1 2023 Change
Revenue £144.6m £146.8m (1%)
Gross profit((2)) £72.3m £66.8m 8%
Gross profit margin((3)) 50% 46% 4%pts
Adjusted EBITDA((4)) £13.2m £9.9m 33%
Adjusted EBITDA margin((5)) 9% 7% 2%pts
Operating profit £7.0m £5.5m 27%
Adjusted PBT((6)) £11.5m £8.2m 40%
Adjusted PBT margin((7)) 8% 6% 2%pts
Operating cash conversion((8)) 65% 66% (1%pt)
Net cash £36.1m £40.9m (12%)
Adjusted diluted earnings per share((9)) 2.7p 1.9p 42%
Interim dividend 0.52p 0.45p 16%
Financial highlights
· Resilient H1 2024 revenue down 1% to £144.6m (H1 2023: £146.8m) or flat on a
like-for-like ("LFL") basis((10)) when adjusting for the impact of Easter
timing.
· Gross profit up 8% to £72.3m (H1 2023: £66.8m); gross profit margin
increased 4%pts to 50% (H1 2023: 46%), representing the highest gross margin
since listing in 2021, underpinned by own brand sales.
· Gross profit margin improvement drove a 33% increase in adjusted EBITDA to
£13.2m (H1 2023: £9.9m); adjusted EBITDA margin increased 2%pts to 9% (H1
2023: 7%).
· Adjusted PBT increased 40% to £11.5m (H1 2023: £8.2m); adjusted PBT margin
increased 2%pts to 8% (H1 2023: 6%).
· Operating cash conversion remained robust at 65% (H1 2023: 66%), with free
cash flow((11)) up 32% to £8.6m (H1 2023: £6.5m).
· Net cash (excluding IFRS 16) of £36.1m (H1 2023: £40.9m, FY 2023: £46.4m),
reflecting strong operating cash conversion, offset by dividend payment
(£3.1m) and warehouse transformation spend (£15.2m).
· Adjusted diluted EPS of 2.7p (H1 2023: 1.9p), reflecting a 42% increase.
· Interim dividend of 0.52p per share (H1 2023: 0.45p per share), reflecting a
16% increase, in line with capital allocation policy.
Operational and strategic highlights
· Total orders((12)) increased 2% to 494,000 (H1 2023: 482,000) reflecting
continued market share gains in a subdued trading environment((13)).
· Customers continue to purchase proportionately more of our own brand products,
reducing average order value ("AOV")((14)) by 4% to £293 (H1 2023: £305);
own brand products represented 79% of total revenue (H1 2023: 77%), which is
supportive to gross margin.
· Further progress in strategic growth areas of 'trade' and 'expansion
categories':
o Trade revenue increased 9% to £32.3m (H1 2023: £29.6m) and now
represents 22% of total revenue (H1 2023: 20%).
o Expansion category revenue for tiles, lighting and décor increased 19% to
£5.6m (H1 2023: £4.7m).
· Lower shipping costs and a shift to own brand products have contributed to
improved gross margins.
· Marketing spend as a % of revenue broadly unchanged at 29%.
· Customer satisfaction increased with an average Trustpilot score((15)) of 4.6
(H1 2023: 4.5, FY 2023: 4.5), whilst maintaining a Trustpilot rating of
'Excellent'.
· Fit-out of our new 544,000 square feet purpose-built distribution centre in
Leyland, Lancashire (the "DC") is on time and within budget, with the DC set
to be fully operational before the end of the financial year.
Investment in people, brand and technology:
· Bolstered our dedicated Trade team during H1 2024, helping us to attract new
trade customers and to drive further growth in trade revenue.
· Our first foray into sports sponsorship, together with continued investment in
brand across TV and outdoor advertising, has helped increase brand
awareness((16)).
· Ongoing development of our app will enhance efficiency and engagement for both
trade customers and consumers.
Acquisition of Victoria Plum
As announced, the Group acquired Victoria Plum on 17 May 2024 for £22.5m on a
cash free, debt free basis, subject to adjustment for normalised working
capital (the "Acquisition"). The purchase price represents c.0.5x Victoria
Plum's estimated annual revenue and reflects the significant strategic value
of the Victoria Plum brand and associated intellectual property.
For the six months ended 31 March 2024, unaudited management accounts indicate
that Victoria Plum held c.£10m of stock at provisional book value, cash of
c.£3m, deposits with suppliers of c.£2m and tangible fixed assets of c.£1m.
Current trading and outlook
As customers continue to seek value, demand for 'big ticket' discretionary
items is unchanged. The Group has continued to take market share organically;
LFL revenue in April and the early part of May 2024 has been in line with H1
2024 trends, with order volume growth offset by lower AOVs.
The decline in AOV has shown early signs of levelling off, indicative of a
slowdown in the shift by consumers to buy more of our own brand product range.
Additionally, comparative shipping cost tailwinds have diminished over recent
weeks, with both factors stabilising gross margin.
Looking forward, the Group will benefit from revenue growth as a result of
further market share gains from the acquisition of Victoria Plum, albeit
tempered by a continuation of recent trading trends in the market. While the
ongoing Victoria Plum cost reduction programme is finalised, losses from the
business will have a marginal impact on Group profitability in H2 2024,
therefore adjusted EBITDA in FY 2024 is expected to be broadly in line with
current consensus. The Acquisition is expected to be EPS accretive from FY
2025. Net cash (excluding IFRS 16) at the full year is expected to be in the
range of £5m to £7m, reflecting the impact of the Acquisition and investment
in the DC.
Mark Radcliffe, Founder and Chief Executive Officer of Victorian Plumbing,
said:
"I am pleased with the Group's performance in the first half, having increased
profitability and consolidated our leading position as the UK's number one
bathroom retailer. At the same time, we have embarked upon a year of
transformational change with significant investment in our people, technology
and operations.
"Our new distribution centre, once operational, will remove space constraints,
enabling us to deliver on our strategic plans in expansion categories and our
trade proposition. Moreover, the recent acquisition of Victoria Plum
represents another exciting strategic milestone and provides a unique
opportunity to accelerate our growth.
"Continued investment in our brand, epitomised by our three-year partnership
with Bolton Wanderers Football Club, alongside our unrelenting approach to
online marketing and an ever-improving customer experience, provides strong
foundations for the future.
"This robust first half performance, our unchanged momentum into the rest of
the year and the exciting developments scheduled for H2 2024, gives the Board
confidence in our profitable growth strategy as we continue to deliver
long-term value for all stakeholders."
Analyst and investor webinar
A webinar for analysts and investors will be held today, 28 May 2024, at
09.00am BST. If you wish to join the webinar, please contact FTI Consulting
via: VictorianPlumbing@fticonsulting.com
(mailto:VictorianPlumbing@fticonsulting.com) .
For further information please contact:
Victorian Plumbing Group plc via FTI Consulting
Mark Radcliffe, Chief Executive Officer +44 20 3727 1000
Daniel Barton, Chief Financial Officer
FTI Consulting (Financial PR) +44 20 3727 1000
Alex Beagley, Harriet Jackson, Amy Goldup VictorianPlumbing@fticonsulting.com
(mailto:VictorianPlumbing@fticonsulting.com)
Houlihan Lokey Advisory Limited (Nominated Adviser) +44 20 7839 3355
Sam Fuller, Tim Richardson
Barclays Bank PLC (Joint Broker) +44 20 7623 2323
Nicola Tennent, Stuart Muress
Deutsche Numis (Joint Broker) +44 20 7260 1000
Luke Bordewich, Oliver Steele
About Victorian Plumbing
Victorian Plumbing is the UK's leading bathroom retailer, offering a wide
range of over 44,000 products to B2C and trade customers. Now, through either
the Victorian Plumbing or Victoria Plum brand offerings, customers can access
a one-stop shop solution for the entire bathroom with more than 140 own and
third party brands across a wide spectrum of price points.
The Group's product design and supply chain strengths are complemented by its
creative and brand-focused marketing strategy to drive significant and growing
traffic to its platforms.
Headquartered in Skelmersdale, the Group employs over 700 people across nine
other locations, including sites in Leyland, Doncaster,
Manchester and Birmingham.
Cautionary statement
This announcement of half year results does not constitute or form part of and
should not be construed as an invitation to underwrite, subscribe for, or
otherwise acquire or dispose of any Victorian Plumbing Group plc (the
"Company") shares or other securities in any jurisdiction nor is it an
inducement to enter into investment activity nor should it form the basis of
or be relied on in connection with any contract or commitment or investment
decision whatsoever. It does not constitute a recommendation regarding any
securities. Past performance, including the price at which the Company's
securities have been bought or sold in the past, is no guide to future
performance and persons needing advice should consult an independent financial
advisor. This announcement may include statements that are, or may be deemed
to be, "forward-looking statements" (including words such as "believe",
"expect", "estimate", "intend", "anticipate" and words of similar meaning). By
their nature, forward-looking statements involve risk and uncertainty since
they relate to future events and circumstances, and actual results may, and
often do, differ materially from any forward-looking statements. Any
forward-looking statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save as required
by applicable law, the Company undertakes no obligation to publicly revise any
forward-looking statements in this announcement, whether following any change
in its expectations or to reflect events or circumstances after the date of
this announcement.
Summary of performance
Units H1 2024 H1 2023 Change
Income statement
Revenue £m 144.6 146.8 (1%)
Gross profit £m 72.3 66.8 8%
Gross profit margin % 50% 46% 4%pts
Adjusted EBITDA £m 13.2 9.9 33%
Adjusted EBITDA margin % 9% 7% 2%pts
Profit before tax £m 5.9 5.6 5%
Adjusted PBT £m 11.5 8.2 40%
Adjusted PBT margin % 8% 6% 2%pts
Earnings per share
Adjusted diluted EPS pence 2.7 1.9 42%
Statutory diluted EPS pence 1.4 1.3 8%
Interim dividend per share pence 0.52 0.45 16%
Cash flow
Free cash flow £m 8.6 6.5 32%
Operating cash conversion % 65% 66% (1%pt)
Net cash and cash equivalents £m 36.1 40.9 (12%)
Key performance indicators
Total orders '000 494 482 2%
Active customers((17)) '000 357 352 1%
Average order value £ 293 305 (4%)
Average Trustpilot score / 5.0 4.6 4.5 N/A
Marketing spend as a % of revenue % 29% 28% 1%pt
Trade revenue as a % of total revenue % 22% 20% 2%pts
Own brand as a % of total revenue % 79% 77% 2%pts
(1) Mintel (2023) Bathrooms & Bathrooms Accessories UK.
(2) Gross profit is defined as revenue less cost of sales. Cost of
sales includes all direct costs incurred in purchasing products for resale
along with packaging, distribution and transaction costs (which include mark
to market movements on forward currency contractual arrangements in line with
the Group's treasury policy).
(3) Gross profit margin is defined as gross profit as a percentage
of revenue.
(4) Adjusted earnings before interest, tax, depreciation and
amortisation ("EBITDA") is defined as operating profit before depreciation,
amortisation, exceptional items and IFRS 2 share-based payments (including
associated National Insurance ("NI")).
(5) Adjusted EBITDA margin is defined as adjusted EBITDA as a
percentage of revenue.
(6) Adjusted profit before tax ("PBT") is defined as adjusted
EBITDA less finance costs/(income), depreciation and amortisation.
(7) Adjusted PBT margin is defined as adjusted PBT as a percentage
of revenue.
(8) Operating cash conversion is free cash flow as a percentage of
adjusted EBITDA.
(9) Adjusted diluted earnings per share ("EPS") is defined as total
adjusted profit after tax for the period divided by the total issued share
capital. Total adjusted profit after tax for the period is defined as profit
for the period before exceptional items and IFRS 2 share-based payments and
after adjusting for the tax impact of those items.
(10) LFL adjustments are made to enable a meaningful and balanced
comparison of metrics, eliminating distortion that has otherwise been caused
by factors varying between the comparator time periods.
(11) Free cash flow is cash generated from operating activities before
exceptional items and taxation, less routine capital expenditure and cash
flows relating to routine leases.
(12) Total orders is defined as the total number of orders dispatched
to customers in the period.
(13) Construction Products Association (April 2024) Spring Forecasts.
(14) AOV is defined as revenue divided by total orders in the period.
(15) The average Trustpilot score is defined as the monthly average of
all scores on Trustpilot.
(16) YouGov UK Awareness Score, calculated as the monthly average of
scores during the relevant period.
(17) Active customers are the number of unique customers who placed an
order in the period.
CEO Statement
Overview
The business has continued to deliver on its strategy to grow profitably,
achieving order growth of 2% and taking further market share against an
unchanged 'Repair, Maintenance and Improvement' ("RMI") macroeconomic
backdrop. Order growth has been offset by AOV decline of 4% as the mix of
sales has shifted to the Group's higher margin own brand range. The consumer
continues to choose Victorian Plumbing as the UK's number one bathroom
retailer as a result of our fair pricing, unrivalled high quality product
range, excellent availability and service. Order levels have increased beyond
the highs achieved during the Covid period, and our Trustpilot rating has
remained 'Excellent' while delivering this continued growth.
The continuation of a steady shift to own brand products, and the benefit
arising from it, has supported the continued improvement in profitability
through H1 2024, with a 1% decline in revenue achieving strong adjusted EBITDA
growth. I am pleased our commitment to provide the most extensive choice of
high quality bathroom products and the best customer experience continues to
result in a successful and sustainable financial performance, irrespective of
wider market conditions.
Summary of performance
Outperforming the wider RMI market, we reported broadly flat revenue
of £144.6m (H1 2023: £146.8m) adjusting for Easter impacts, reflecting an
increase in total orders of 2% and a decline in AOV of 4%.
This outcome, together with continued tailwinds from a reduction in shipping
costs, resulted in gross profit increasing 8% to £72.3m (H1 2023: £66.8m),
and gross margin improvement of 4%pts to 50% (H1 2023: 46%). Marketing costs
as a % of revenue were broadly unchanged at 29.5% (H1 2023: 28.4%), with
online marketing spend flat on an absolute basis and a £0.9m increase in
brand spend. People, property and other underlying costs grew by 9% to
£16.5m, driven predominantly by the April 2023 National Living Wage increase
of 10%.
Adjusted EBITDA increased 33% to £13.2m (H1 2023: £9.9m) and adjusted
EBITDA margin increased to 9% (H1 2023: 7%). Operating profit increased 27%
to £7.0m (H1 2023: £5.5m); a financial performance that is testament to
the resilience of our business model and competitive advantage, and which
underpins our confidence in delivering short, medium and long-term profitable
growth.
Our strategic focus
We continue to leverage our leading market and brand position and our strong
cash generation to deliver on our clear strategic objectives, which remain
unchanged and focus on three growth horizons: core B2C, expansion categories
and trade.
Our core growth horizon is retailing bathroom products and accessories
to consumers in the UK through our market leading online platform.
Consumers are continuing to shift online to purchase bathroom products and
accessories and there is still a considerable way to go before this transition
reaches maturity. We are particularly well placed to continue to gain further
market share in the short-term through these structural tailwinds and by
taking share from traditional physical retailers, omni-channel players and
other online competitors.
Following the successful re-platforming of our website in December 2022, we
further enhanced the front end in June 2023 to improve the buying journey
around our expansion categories. More recently, we have launched 'product
detail pages' that better showcase the different options and specifications
available to purchase within a selected range, and the search functionality
has been developed to incorporate the latest advances in AI.
Our second horizon focuses on expansion categories. Given our position in the
bathroom product and accessories market, we have an exciting opportunity to
expand our reach into products that often come later in a consumer's buying
journey, such as tiles, lighting and décor, and kitchens. We were very
pleased to see our expansion category revenue increase by 19% to £5.6m (H1
2023: £4.7m), despite the space constraints that we continue to operate
within prior to the new DC being operational.
Finally, our third growth horizon focuses on the B2B opportunity to retail
bathroom products and accessories to trade customers. During H1 2024, our
trade revenue grew 9% to £32.3m (H1 2023: 29.6m), representing 22% (H1 2023:
20%) of our total revenue, compared with an estimated 50:50 split across the
wider market((18)). Whilst we primarily target smaller independent traders,
the Victorian Plumbing brand has historically been consumer focused and so we
believe we can make meaningful market share gains in this area by broadening
our marketing approach, such as via targeted radio advertising, expanding the
range of relevant products we offer to trade customers and by continually
improving the platforms so that they are more tailored to suit trade
customers' needs. The soft launch of the Victorian Plumbing app in October
2023 further enhances our proposition in this regard and, along with the
investment into our dedicated Trade team during H1 2024, means we are well
placed to attract trade customers and drive further growth in trade revenue.
Strengthening our competitive position
We have retained our position as the UK's leading bathroom retailer, we have
continued to strengthen our competitive moat and we have improved the customer
journey through innovative technology improvement and category expansion.
Our continued investment in marketing enhances brand awareness and supports
customer acquisition, as consumers continue to respond positively to the bold
and distinctive Victorian Plumbing brand. Our three-year partnership with
Bolton Wanderers Football Club as its title and front of shirt sponsor further
improves our brand awareness, not least given the recent run to the 2024
English Football League One Play Off Final at Wembley, as well as positioning
us as a prominent employer in the North West.
We also complement our creative offline content by investing in increasingly
targeted digital performance-based marketing. This ongoing and relentless
marketing strategy, together with our bold marketing campaign to 'Boss Your
Bathroom', has maintained our strong brand awareness score of 61% (H1 2023:
60%).
As an online retailer, we continue to benefit from the ongoing structural
shift in consumer buying behaviour from offline to online. Online sales
represented c.27% of total retail sales in 2023((19)), and we expect our
addressable market to grow even further in the coming years.
(18) Euromonitor International (2022) State of the Industry
Presentation.
(19) Office for National Statistics (2023) Internet sales as a
percentage of total retail sales (ratio) (%).
A one-stop shop for bathroom products and accessories
Offering customers a wide selection of products across a variety of price
points ensures that we are the true one-stop shop solution when considering a
bathroom-related purchase. At 31 March 2024, we stocked more than 34,000
products from over 130 brands, ensuring there is something available,
affordable and suitable for everyone. No other UK bathroom retailer can
match this breadth of product offer.
The relationships that we have developed over time with well-known third party
brands enable us to complement our own brand offerings, which are exclusively
available on the Victorian Plumbing website. We have developed over 25 own
brands using our in-house product development team, and these are increasingly
popular with customers. In the period, 79% of revenue generated (H1 2023: 77%)
came from own brand product ranges, including Stonehouse Studio, our in-house
tile range. This unique own brand proposition alongside established well-known
third party brands helps to ensure that profitability is maintained
irrespective of wider market conditions and is testament to the resilience of
the business model.
Agile supply chain
Geopolitical tensions have resulted in shipping costs starting to increase.
However, by leveraging the positive working relationships we have with our
shipping partners, as well as those built with our global suppliers over 20
years of trading, we have avoided supply chain disruption - also evidencing
the benefit of scale we have achieved in recent years.
We also now work closely with tile, lighting and décor manufacturers, many of
whom are based in Southern Europe, to expand this category at margins that
are closely aligned with the existing Group margin.
Seamless customer journey
We are extremely proud that we continue to be rated 'Excellent' by Trustpilot
and have improved our average score in the period to 4.6 out of 5.0 (H1 2023:
4.5).
We received a record number of reviews via Trustpilot during the period and
have now surpassed 220,000 reviews in total, the highest of any specialist
bathroom retailer on the site. The 'Excellent' rating we have across this
volume of reviews is testament to the work that our colleagues do, whether
that's in providing the buying experience for our customers, the speed and
efficiency of delivery, quality of product or the swift resolution of any
customer questions.
Development of technology platform
Our growing Technology Development and Infrastructure teams work hard to
facilitate the continual development of our bespoke technology platforms to
ensure we remain best in class across online retail.
There has been significant work over the last 18 months and beyond to
completely re-platform our website to improve its functionality and
scalability, introduce a newly designed structure to give prominence to our
expansion categories, enhance our search functionality to include AI features
and introduce other developments, such as improved courier software to enhance
the customer experience. These targeted developments have supported an
improvement in user conversion of 0.6%pts to 3.4% in H1 2024 (H1 2024: 2.8%).
The Victorian Plumbing app, designed with both trade and consumer in mind, was
released successfully in October 2023 and will enable our customers to browse
and purchase products more efficiently. Initial uptake of the app following
its soft launch has been encouraging, and we will continue to develop
functionality ahead of a fuller launch later in 2024.
In addition, the Technology Development team continues to enhance our existing
warehouse management system alongside the larger project to transform
warehouse operations, with the DC due to be operational by the end of the
financial year. By performing this work in-house, we can better control costs,
improve quality, and provide more certainty over the benefits that the
improved technology brings.
New distribution centre
We achieved legal completion on the 20-year lease to operate from the DC on 4
October 2023. This building will enable us to grow our core offering,
expansion categories and trade proposition. A semi-automated design, together
with new ways of working and improved processes, will result in improved
efficiency in our operations which will aid the progression of our
profitability, most notably in 2025 and beyond.
As at 28 May 2024, we are approximately two-thirds of the way through the
c.£26m capital expenditure fit-out (including software development), with
much of the racking now in place. We have begun the task to transition from
our existing infrastructure to the DC and are now 'double running' to ensure
no variation in the customer experience. The project remains on time and
within budget and we look forward to updating the market at the full year
results once we are fully operational and beginning to reap the benefits of
another landmark investment in the Group's future.
ESG
Taking responsibility is one of our core values, and we are clear that every
one of us has a role to play in making a positive difference to the
environment and communities in which we operate. Our ESG strategy is centred
around three focus areas: environmental sustainability, diversity and
inclusion, and governance and ethics.
We have made progress during the period with our people priorities through,
for example, the continuation of our support for our chosen charity, Emmaus -
the charity working to end homelessness. We are running a programme of
employee volunteering days and have supported the development of our Mental
Health Champions with training recognised by MHFA England, as well as helping
our workforce more broadly by providing enhanced employee benefits.
All our electricity contracts are now 100% renewable, and we continue to work
with suppliers to reduce the levels of plastic packaging on our products. We
are installing photovoltaic panels on the new DC to ensure we are maximising
the renewable energy source opportunities available to us.
Our people
As a Board, we continue to be impressed by the commitment of our people -
collectively, their innovation and hard work have been the driving force
behind the growth and success experienced by the Group over recent years. We
are proud of the values-led, principles-driven culture that is deep-rooted
throughout Victorian Plumbing, and it is this culture that underpins our
ability to adapt to change and respond positively to challenges.
We warmly welcome the Victoria Plum team to our Group, and thank all our
employees, contractors, customers, suppliers and other stakeholders for their
continued support. Whilst we are mindful of the macroeconomic conditions that
many of our customers are facing, we remain confident in our ability to
continue to execute our strategy, underpinned by our strong financial
position, to take further market share and further consolidate our position as
the UK's number one bathroom retailer.
Current trading and outlook
As customers continue to seek value, demand for 'big ticket' discretionary
items is unchanged. The Group has continued to take market share organically;
LFL revenue in April and the early part of May 2024 has been in line with H1
2024 trends, with order volume growth offset by lower AOVs.
The decline in AOV has shown early signs of levelling off, indicative of a
slowdown in the shift by consumers to buy more of our own brand product range.
Additionally, comparative shipping cost tailwinds have diminished over recent
weeks, with both factors stabilising gross margin.
Looking forward, the Group will benefit from revenue growth as a result of
further market share gains from the acquisition of Victoria Plum, albeit
tempered by a continuation of recent trading trends in the market. While the
ongoing Victoria Plum cost reduction programme is finalised, losses from the
business will have a marginal impact on Group profitability in H2 2024,
therefore adjusted EBITDA in FY 2024 is expected to be broadly in line with
current consensus. The Acquisition is expected to be EPS accretive from FY
2025. Net cash (excluding IFRS 16) at the full year is expected to be in the
range of £5m to £7m, reflecting the impact of the Acquisition and investment
in the DC.
Financial review
Introduction
The performance of the Group continued to be strong through H1 2024 with
ongoing momentum in both profit and cash generation.
H1 2024 H1 2023 Change
£m £m %
Revenue 144.6 146.8 (1%)
Cost of sales (72.3) (80.0) (10%)
Gross profit 72.3 66.8 8%
Gross profit margin (%) 50% 46% 4%pts
Underlying costs (59.1) (56.9) 4%
Adjusted EBITDA 13.2 9.9 33%
Adjusted EBITDA margin (%) 9% 7% 2%pts
Depreciation and amortisation (2.3) (1.8) 28%
Share-based payments (1.6) (2.2) (27%)
Exceptional items (2.3) (0.4) 475%
Operating profit 7.0 5.5 27%
Finance (costs)/income (1.1) 0.1 (1,200%)
Profit before tax 5.9 5.6 5%
Adjusted profit before tax 11.5 8.2 40%
Revenue
Revenue declined from £146.8m to £144.6m during H1 2024. Order volume grew
by 2% to 494,000 (H1 2023: 482,000) and AOV declined by 4% to £293 (H1 2023:
£305).
Order growth reflects continued market share gain, driven by our unrelenting
approach to online marketing, as well as improved brand awareness. The average
number of items per basket remained stable YOY at 3.1.
The reduction in AOV is a continuation of the trend experienced in H2 2023 as
customers continue to shift away from more expensive third party brands to our
own brand product range, which carries a higher margin. The split between own
brand vs. third party brands in revenue was 79% vs. 21% (H1 2023: 77% vs.
23%). Importantly, the Group has not passed on any price increases during the
period as it looks to support the consumer during a difficult and uncertain
period and to ensure our pricing remains competitive.
Trade revenue, driven by higher order volumes and flat AOV, grew by 9% to
£32.3m (H1 2023: £29.6m) and now represents 22% of total revenue (H1 2023:
20%). Consumer revenue declined by 4% to £112.3m (H1 2023: £117.2m) and
represents 78% of total revenue (H1 2023: 80%). A decline in consumer revenue
is again symptomatic of customers trading down the range, resulting in lower
AOV.
Revenue continued to grow at pace in our expansion categories, albeit from a
small base given the space constraints we continue to face until the DC is
operational, which is expected by the end of the financial year. Tiles,
lighting and décor revenue grew by 19% to £5.6m (H1 2023: £4.7m),
delivering a gross margin that is consistent with the wider core bathroom
range.
Gross profit
We define gross profit as revenue less cost of sales. Cost of sales includes
all direct costs incurred in purchasing products for resale along with
packaging, distribution, and transaction costs (which include mark to market
movements on forward currency contractual arrangements in line with our
treasury policy).
Cost of sales reduced by 10% to £72.3m (H1 2023: £80.0m). Gross profit
margin increased to 50% (H1 2023: 46%; H2 2023: 49%), with gross profit for
the period increasing by 8% to £72.3m (H1 2023: £66.8m). In addition to
reduced shipping costs, the improvement in gross profit also reflects the
product mix change throughout the year. Gross margin from own brand products
increased to 55% (H1 2023: 51%), and gross margin from third party products
increased to 31% (H1 2023: 29%).
We are proud to partner with some of the industry's leading names which,
alongside our own brand offering, allows us to provide consumers with a wide
range of price points. This dynamic is a compelling component of our unique
ungeared operating model, protecting shareholder return and building the
foundation for future growth.
Underlying costs
Underlying costs, which we define as administrative expenses before
depreciation and amortisation, exceptional items and share-based payments,
increased by 4% to £59.1m (H1 2023: £56.9m).
H1 2024 H1 2023 Change
£m £m %
Marketing costs 42.6 41.7 (2%)
People costs (excluding share-based payments) 10.5 9.4 (12%)
Property and other overhead costs 6.0 5.8 (3%)
Underlying costs 59.1 56.9 (4%)
Growing our brand awareness and increasing traffic to our site remains a focus
for the Group. Total marketing costs increased by 2% to £42.6m (H1 2023:
£41.7m) and represented 29.5% (H1 2023: 28.4%) of total revenue. Online
marketing costs held flat during the period at £38.6m representing 26.7% (H1
2023: 26.3%) of total revenue. Investment in brand spend, including our
three-year partnership with Bolton Wanderers Football Club and TV and outdoor
advertising, increased to £4.0m (H1 2023: £3.1m) representing 3% (H1 2023:
2%) of total revenue.
People costs, excluding share-based payments but including costs relating to
agency staff, increased 12% to £10.5m (H1 2023: £9.4m). This is in line with
expectations given continued inflationary pressure from increases to the
National Living Wage in a tight labour market felt, in particular, in our
Warehouse and Customer Services teams, together with investments in certain
other areas such as our dedicated Trade team. Overall FTE increased to 665 (H1
2023: 585).
Property and other overhead costs increased 3% to £6.0m (H1 2023: £5.8m).
Profit
Operating profit to adjusted EBITDA
Operating costs, comprising administrative expenses, are managed on a Group
basis. The Executive Leadership Team ("ELT") measures the overall performance
of the Group by reference to adjusted EBITDA, a non-GAAP measure. This
adjusted profit measure is applied by the ELT to understand earnings trends
and is considered an additional, useful measure under which to assess its true
operating performance.
H1 2024 H1 2023 Change
£m £m %
Operating profit 7.0 5.5 27%
Amortisation 1.3 1.1 18%
Depreciation of property, plant and equipment 0.3 0.3 0%
Depreciation of right-of-use asset (not included in exceptional items) 0.4 0.4 0%
Depreciation of right-of-use asset (included in exceptional items as 'double 0.3 - N/A
running')
Warehouse transformation costs 2.3 0.4 475%
Share-based payments (including associated NI) 1.6 2.2 (27%)
Adjusted EBITDA 13.2 9.9 33%
Adjusted EBITDA increased by 33% to £13.2m (H1 2023: £9.9m) and adjusted
EBITDA margin increased by 2%pts to 9% (H1 2023: 7%).
Adjusted EBITDA to adjusted PBT
The ELT also measures the overall performance of the Group by reference to
adjusted PBT, a non-GAAP measure. This adjusted profit measure is applied by
the ELT as an alternative profitability measure, which incorporates the impact
of capital investment and the financing structure of the Group.
H1 2024 H1 2023 Change
£m £m %
Adjusted EBITDA 13.2 9.9 33%
Amortisation (1.3) (1.1) 18%
Depreciation of property, plant and equipment (0.3) (0.3) 0%
Depreciation of right-of-use asset (0.7) (0.4) 75%
Depreciation of right-of-use asset (included in exceptional items as 'double 0.3 - N/A
running')
Finance income 0.5 0.2 67%
Finance costs (1.6) (0.1) 700%
Finance costs (included in exceptional items as 'double running') 1.4 - N/A
Adjusted PBT 11.5 8.2 40%
Adjusted PBT increased by 40% to £11.5m (H1 2023: £8.2m) and adjusted PBT
margin increased by 2%pts to 8% (H1 2023: 6%). Adjusted PBT benefited from
£0.5m of finance income as return on cash held on the balance sheet.
Exceptional items
H1 2024 H1 2023 Change
£m £m %
Warehouse transformation costs: double running and non-recurring costs - 2.3 0.4 475%
operating expenditure
Double running - depreciation of right-of-use assets 0.3 - N/A
Exceptional items recognised within administrative expenses 2.6 0.4 550%
Double running - finance costs 1.4 - N/A
Exceptional items recognised within finance costs 1.4 - N/A
Total exceptional items 4.0 0.4 900%
On 4 October 2023, the Group entered into a 20-year lease agreement for the DC
and commenced a period of fit-out. In accordance with IFRS 16, a lease
liability of £41.7m has been recognised, with a corresponding right-of-use
asset recognised in non-current assets.
For the duration of the fit-out, the DC will not be generating economic
benefit for the Group. Therefore, operating expenditure incurred during the
fit-out period, together with non-recurring transformation costs such as
associated legal and professional fees, totalling £2.3m (H1 2023: £0.4m) has
been recognised as 'warehouse transformation costs' in the consolidated
statement of comprehensive income. During H1 2024, associated exceptional cash
outflows of £1.2m (H1 2023: £0.1m) have been incurred and recognised in the
consolidated statement of cash flows.
The depreciation of properties considered to be non-underlying during the
fit-out period has been recognised as 'double running - depreciation of
right-of-use assets'. No associated cash flows have been recorded.
The imputed interest recognised against IFRS 16 lease liabilities for property
considered to be non-underlying during the fit-out period have been recognised
as 'double running - finance costs'. Associated cash outflows of £1.4m have
been expended for double running - finance costs during the period (H1 2023:
£nil).
These costs are being treated as exceptional to enable better LFL comparison.
The double running costs incurred are temporary and will not continue once the
warehouse transformation is complete.
H1 2024 H1 2023
£m £m
Cash flows from operating activities
Cash outflow from exceptional items: warehouse transformation costs (1.2) (0.1)
Cash flows from investing activities
Purchase of intangible assets: assets under construction (0.2) -
Purchase of property, plant and equipment: assets under construction (12.2) -
Cash flows from financing activities
Payment of interest portion of lease liabilities: double running - finance (1.4) -
costs
Payment of principal portion of lease liabilities (0.2) -
Cash flows from exceptional items (15.2) (0.1)
Share-based payments
The Group incurred share-based payment charges (including associated NI) of
£1.6m (H1 2023: £2.2m). Share-based payment charges for the period include
£0.8m (H1 2023: £1.3m) for schemes relating to the Group's IPO in June 2021,
along with £0.8m (H1 2023: £0.9m) for ongoing schemes put in place post IPO.
Depreciation and amortisation
The Group continues to invest in its platform and the development of bespoke
in-house systems, with £2.0m intangible assets capitalised during H1 2024 (H1
2023: £1.3m). Depreciation and amortisation increased by £0.5m to £2.3m (H1
2023: £1.8m). Depreciation of right-of-use assets included in exceptional
items as 'double running' in H1 2024 was £0.3m (H1 2023: £nil).
Finance income
Finance income of £0.5m during the period compares to a finance income of
£0.2m in H1 2023 due to, inter alia, cash being placed on deposit to take
advantage of recent high interest rates. Finance costs included in exceptional
items as 'double running' in H1 2024 were £1.4m (H1 2023: £nil).
Taxation
The Group tax charge of £1.4m (H1 2023: £1.4m) represents an effective tax
rate of 24% (H1 2023: 25%).
Earnings per share
Diluted EPS from continuing operations was 1.4 pence (H1 2023: 1.3 pence).
Adjusted diluted EPS grew by 42% to 2.7 pence (H1 2023: 1.9 pence).
Assets under construction
The warehouse transformation has given rise to £11.8m (H1 2023: £nil) of
additions during the period (split as £0.2m intangibles and £11.6m property,
plant and equipment) recognised as an asset under construction given the
fit-out of the DC is ongoing and the building is not yet generating economic
benefit. Of these additions, £12.4m were settled in cash during H1 2024.
Cash flow and net cash
The Group continues to achieve strong cash generation with an increase in free
cash flow of 32% to £8.6m (H1 2023: £6.5m), resulting in robust operating
cash conversion of 65% (H1 2023: 66%).
H1 2024 H1 2023 Change
£m £m %
Adjusted EBITDA 13.2 9.9 33%
Movement in working capital (0.6) (1.3) 54%
Repayment of lease liabilities (excluding non-underlying leases) (0.5) (0.6) 17%
Capital expenditure (excluding assets under construction) (2.0) (1.5) (27%)
VAT not yet recovered on assets under construction 1.0 - N/A
Non-underlying movements in working capital (2.5) - N/A
Free cash flow 8.6 6.5 32%
Operating cash conversion 65% 66% (1%pt)
Underlying changes in working capital resulted in a cash outflow of £0.6m (H1
2023: £1.3m). This movement is reflective of the short-term timing
differences in receiving cash from our third party merchant services provider
over the Easter public holiday.
Capital expenditure of £2.0m (H1 2023: £1.5m) included £1.7m (H1 2023:
£1.2m) of capitalised salaries relating to development of the Group's
platform and bespoke inventory management systems.
At the end of H1 2024, the Group had net cash (excluding IFRS 16 related
liabilities) of £36.1m (H1 2023: £40.9m; FY 2023 £46.4m).
Events after the reporting period
As announced on 17 May 2024, Victorian Plumbing Limited, a subsidiary of
Victorian Plumbing, acquired 100% of the issued share capital of AHK Designs
Ltd, trading as Victoria Plum. The purchase price for the Acquisition was
£22.5m, on a cash free, debt free basis, subject to adjustment for normalised
working capital, funded from the Group's existing cash reserves. The purchase
price represents c.0.5x Victoria Plum's estimated annual revenue and reflects
the significant strategic value of the Victoria Plum brand and its associated
intellectual property.
Unaudited management accounts indicate that annualised revenues of the
Victoria Plum business had reduced from c.£100m to c.£40m in the six months
ended 31 March 2024 and that annualised adjusted EBITDA losses had improved
from c.£6m to c.£1m during the same period. A cost reduction programme is in
progress, which will see the ongoing workforce of Victoria Plum reduce from
c.400 at the end of September 2023 to c.150. The Group's current expectation
is that the acquired business will be broadly break even by the end of 2024.
Given the date of the Acquisition, the initial accounting for the business
combination is incomplete at the time of writing. For the six months ended 31
March 2024, unaudited management accounts indicate that Victoria Plum held
c.£10m of stock at provisional book value, cash of c.£3m, deposits with
suppliers of c.£2m and tangible fixed assets of c.£1m. The required
disclosures per IFRS 3 Business Combinations will be provided at the full year
announcement.
Dividend
Victorian Plumbing has a robust balance sheet, generates significant operating
cashflows and the underlying priority is to reinvest into the business and
drive further profitable growth. Recognising that most growth opportunities do
not require significant capital, other than warehouse optimisation, and
reflecting confidence in the Group's ongoing strength, future growth prospects
and cash generation, Victorian Plumbing operates a capital allocation policy
with an aim of maintaining a dividend cover ratio of c.3.0-3.5x. The policy
includes the consideration that the Board may from time to time conclude that
it has surplus cash, at which point it will consider further returns to
shareholders.
The Board has declared an interim dividend of 0.52 pence per share (H1 2023:
0.45 pence per share), which represents a total cash distribution to
shareholders of £1.7m (H1 2023: £1.5m). The dividend will be paid on 16
August 2024 to shareholders on the register of members at the close of
business on 19 July 2024.
Mark Radcliffe Daniel Barton
Chief Executive Officer Chief Financial Officer
28 May 2024 28 May 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 MARCH 2024
Note Six months Six months Year to 30 September 2023
to 31 March 2024 to 31 March 2023 £m
£m £m
Revenue 144.6 146.8 285.1
Cost of sales (72.3) (80.0) (150.5)
Gross profit 72.3 66.8 134.6
Administrative expenses 4 (65.3) (61.3) (119.3)
Operating profit 7.0 5.5 15.3
Finance income 0.5 0.2 0.6
Finance costs (1.6) (0.1) (0.3)
Profit before tax 5.9 5.6 15.6
Income tax expense 6 (1.4) (1.4) (3.8)
Profit for the period 4.5 4.2 11.8
Basic earnings per share (pence) 8 1.5 1.5 4.1
Diluted earnings per share (pence) 8 1.4 1.3 3.7
All amounts relate to continuing operations.
There are no items to be recognised in the statement of other comprehensive
income and hence the Group has not presented a separate statement of other
comprehensive income.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
Note Six months to 31 March 2024 Six months to 31 March 2023 Year to 30 September 2023
£m £m £m
Assets
Non-current assets
Intangible assets 9 4.7 3.5 4.0
Property, plant and equipment 10 16.3 1.3 4.9
Right-of-use assets 11 48.5 4.1 4.3
Derivative financial instruments - - 0.4
Deferred tax asset - 0.3 -
69.5 9.2 13.6
Current assets
Inventories 33.2 36.0 34.2
Trade and other receivables 12 7.3 5.2 4.8
Corporation tax recoverable 0.4 0.2 -
Cash and cash equivalents 36.1 40.9 46.4
77.0 82.3 85.4
Total assets 146.5 91.5 99.0
Equity and liabilities
Equity attributable to the owners of the Company
Share capital 16 0.3 0.3 0.3
Share premium 11.2 11.2 11.2
Capital redemption reserve 0.1 0.1 0.1
Capital reorganisation reserve (320.6) (320.6) (320.6)
Retained earnings 360.5 350.3 357.8
Total equity 51.5 41.3 48.8
Liabilities
Non-current liabilities
Lease liabilities 14 42.9 3.8 3.8
Derivative financial instruments - 0.1 -
Deferred tax liability 1.2 - -
Provisions 1.9 - -
46.0 3.9 3.8
Current liabilities
Trade and other payables 13 38.7 39.2 38.0
Contract liabilities 7.0 6.2 5.4
Lease liabilities 14 3.1 0.7 1.0
Provisions 0.2 0.2 0.2
Corporation tax payable - - 1.8
49.0 46.3 46.4
Total liabilities 95.0 50.2 50.2
Total equity and liabilities 146.5 91.5 99.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 MARCH 2024
Share capital Share premium Capital redemption reserve Capital reorganisation reserve Retained earnings Total equity
£m £m £m £m £m £m
Balance at 1 October 2022 0.3 11.2 0.1 (320.6) 353.0 44.0
Comprehensive income
Profit for the period - - - - 4.2 4.2
Transactions with owners
Dividends paid - - - - (9.1) (9.1)
Employee share schemes - value of employee services - - - - 2.2 2.2
Total transactions with owners recognised directly in equity - - - - (6.9) (6.9)
Balance at 31 March 2023 0.3 11.2 0.1 (320.6) 350.3 41.3
Comprehensive income
Profit for the period - - - - 7.6 7.6
Transactions with owners
Dividends paid - - - - (1.5) (1.5)
Employee share schemes - value of employee services - - - - 1.3 1.3
Tax impact of employee share schemes - - - - 0.1 0.1
Total transactions with owners recognised directly in equity - - - - (0.1) (0.1)
Balance at 30 September 2023 0.3 11.2 0.1 (320.6) 357.8 48.8
Comprehensive income
Profit for the period - - - - 4.5 4.5
Transactions with owners
Dividends paid - - - - (3.1) (3.1)
Employee share schemes - value of employee services - - - - 1.3 1.3
Total transactions with owners recognised directly in equity - - - - (1.8) (1.8)
Balance at 31 March 2024 0.3 11.2 0.1 (320.6) 360.5 51.5
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 MARCH 2024
Note Six months to 31 March 2024 Six months to 31 March 2023 Year to 30 September 2023
£m £m £m
Cash flows from operating activities
Cash generated from operating activities before exceptional items 19 12.6 8.6 19.8
Cash outflow from exceptional items (1.2) (0.1) (0.6)
Cash outflow from share-based payments (0.1) - -
Cash generated from operating activities 11.3 8.5 19.2
Income tax paid (2.5) (2.1) (2.1)
Interest received on cash deposits 0.5 0.2 0.6
Net cash generated from operating activities 9.3 6.6 17.7
Cash flows from investing activities
Purchase of intangible assets (2.0) (1.3) (3.0)
Purchase of property, plant and equipment (12.4) (0.2) (2.0)
Net cash used in investing activities (14.4) (1.5) (5.0)
Cash flows from financing activities
Dividends paid (3.1) (9.1) (10.6)
Finance arrangement fees - - (0.1)
Payment of interest portion of lease liabilities (1.5) (0.1) (0.2)
Payment of principal portion of lease liabilities (0.6) (0.5) (0.9)
Net cash used in financing activities (5.2) (9.7) (11.8)
Net decrease in cash and cash equivalents (10.3) (4.6) 0.9
Cash and cash equivalents at the beginning of the period 46.4 45.5 45.5
Cash and cash equivalents at the end of the period 36.1 40.9 46.4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Basis of preparation
Victorian Plumbing Group plc is a public limited company which is listed on
the Alternative Investment Market ("AIM") of the London Stock Exchange and is
domiciled and incorporated in the United Kingdom under the Companies Act 2006.
Its registered office is 22 Grimrod Place, Skelmersdale, Lancashire, WN8 9UU.
These condensed consolidated interim financial statements ("interim financial
statements") were approved by the Board for issue on 28 May 2024, and have
been prepared as at, and for the six months ended, 31 March 2024. The
comparative financial information presented has been prepared as at, and for
the six months ended, 31 March 2023.
These interim financial statements do not constitute statutory accounts within
the meaning of Section 434 of the Companies Act 2006. The interim financial
statements for the half year ended 31 March 2024 are neither audited nor
reviewed by the Company's auditors. The consolidated financial statements of
the Group as at, and for the year ended, 30 September 2023 are available on
request from the Company's registered office and via the Company's website.
The report of the auditors on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain any statement under
Section 498 of the Companies Act 2006.
These interim financial statements have been prepared in accordance with IAS
34 Interim Financial Reporting issued by the IASB and adopted for use in the
UK. They do not include all the information required for full annual financial
statements and should be read in conjunction with the consolidated financial
statements of the Group as at and for the year ended 30 September 2023, which
were prepared in accordance with International Financial Reporting Standards
(IFRSs) in conformity with the requirements of the Companies Act 2006.
Going concern
After making appropriate enquiries and considering the impact of the recent
Acquisition of AHK Designs Ltd, trading as Victoria Plum, on 17 May 2024, the
Directors have a reasonable expectation that the Group has adequate resources,
in light of the level of cash generation, to continue in operational existence
for at least twelve months from the date of approval of the condensed
consolidated interim financial information. For this reason, they have adopted
the going concern basis in preparing this condensed consolidated interim
financial information.
2. Accounting policies, estimates and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including the expectations of future events that
are believed to be reasonable under the circumstances.
In preparing these interim financial statements, the significant judgements
made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 30 September 2023.
3. Segmental information
IFRS 8 Operating Segments requires the Group to determine its operating
segments based on information which is provided internally. Based on the
internal reporting information and management structures within the Group, it
has been determined that there is only one operating segment, being the Group,
as the information reported includes operating results at a consolidated Group
level only (the "Operating Group"). There is also considered to be only one
reporting segment, which is the Group, the results of which are shown in the
consolidated statement of comprehensive income.
Management has determined that there is one operating and reporting segment
based on the reports reviewed by the ELT, which is the chief operating
decision-maker ("CODM"). The ELT is made up of the Executive Directors and key
management and is responsible for the strategic decision-making of the Group.
Adjusted EBITDA
Operating costs, comprising administrative expenses, are managed on a Group
basis. The ELT measures the overall performance of the Operating Group by
reference to adjusted EBITDA. This adjusted profit measure is applied by the
ELT to understand the earnings trends of the Operating Group and is considered
an additional, useful measure under which to assess its true operating
performance.
The Directors believe that these items and adjusted measures of performance
should be separately disclosed in order to assist in the understanding of
financial performance achieved by the Operating Group and for consistency with
prior years.
Six months to 31 March Six months to 31 March 2023
2024 £m
£m
Operating profit 7.0 5.5
Amortisation of intangibles 1.3 1.1
Depreciation of property, plant and equipment 0.3 0.3
Depreciation of right-of-use assets (not included in exceptional items) 0.4 0.4
Depreciation of right-of-use assets (included in exceptional items) 0.3 -
Warehouse transformation costs 2.3 0.4
Share-based payments (including associated NI) 1.6 2.2
Adjusted EBITDA 13.2 9.9
Adjusted PBT
The ELT also measures the overall performance of the Operating Group by
reference to adjusted PBT, a non-GAAP measure. This adjusted profit measure is
applied by the ELT as an alternative profitability measure, which incorporates
the capital investment and the financing structure of the Group.
Six months to 31 March Six months
2024 to 31 March
£m 2023
£m
Adjusted EBITDA 13.2 9.9
Amortisation of intangibles (1.3) (1.1)
Depreciation of property, plant and equipment (0.3) (0.3)
Depreciation of right-of-use assets (0.7) (0.4)
Depreciation of right-of-use assets (included in exceptional items) 0.3 -
Finance income 0.5 0.2
Finance costs (1.6) (0.1)
Finance costs (included in exceptional items) 1.4 -
Adjusted PBT 11.5 8.2
4. Operating profit
Expenses by nature:
Six months to 31 March Six months to 31 March 2023
2024 £m
£m
Employee costs (excluding share-based payments) 10.0 8.7
Agency and contractor costs 0.5 0.7
Share-based payments (including associated NI) 1.6 2.2
Marketing costs 42.6 41.7
Property costs 3.2 3.1
Computer costs 1.2 1.2
Depreciation of property, plant and equipment 0.3 0.3
Depreciation of right-of-use assets 0.7 0.4
Amortisation of intangibles 1.3 1.1
Warehouse transformation costs 2.3 0.4
Other costs 1.6 1.5
Total administrative expenses 65.3 61.3
Share-based payments (including associated NI) (1.6) (2.2)
Exceptional items within administrative expenses (2.6) (0.4)
Total administrative expenses before separately disclosed items 61.1 58.7
5. Exceptional items
Six months to 31 March Six months to 31 March
2024 2023
£m £m
Warehouse transformation costs: double running and non-recurring costs - 2.3 0.4
operating expenditure
Double running - depreciation of right-of-use assets 0.3 -
Exceptional items recognised within administrative expenses 2.6 0.4
Double running - finance costs 1.4 -
Exceptional items recognised within finance costs 1.4 -
Total exceptional items 4.0 0.4
On 4 October 2023, the Group entered into a 20-year lease agreement for the DC
and commenced a period of fit-out. In accordance with IFRS 16, a lease
liability of £41.7m has been recognised, with a corresponding right-of-use
asset recognised in non-current assets.
For the duration of the fit-out, the DC will not be generating economic
benefit for the Group. Therefore, operating expenditure incurred during the
fit-out period, together with non-recurring transformation costs such as
associated legal and professional fees, totalling £2.3m (H1 2023: £0.4m) has
been recognised as 'warehouse transformation costs' in the consolidated
statement of comprehensive income. During H1 2024, associated exceptional cash
outflows of £1.2m (H1 2023: £0.1m) have been incurred and recognised in the
consolidated statement of cash flows.
The depreciation of properties considered to be non-underlying during the
fit-out period has been recognised as 'double running - depreciation of
right-of-use assets'. No associated cash flows have been recorded.
The imputed interest recognised against IFRS 16 lease liabilities for property
considered to be non-underlying during the fit-out period have been recognised
as 'double running - finance costs'. Associated cash outflows of £1.4m have
been expended for double running - finance costs during the period (H1 2023:
£nil).
These costs are being treated as exceptional to enable better LFL comparison.
The double running costs incurred are temporary and will not continue once the
warehouse transformation is complete.
Six months to 31 March 2024 Six months to 31 March 2023
£m £m
Cash flows from operating activities
Cash outflow from exceptional items: warehouse transformation costs (1.2) (0.1)
Cash flows from investing activities
Purchase of intangible assets: assets under construction (0.2) -
Purchase of property, plant and equipment: assets under construction (12.2) -
Cash flows from financing activities
Payment of interest portion of lease liabilities: double running - finance (1.4) -
costs
Payment of principal portion of lease liabilities (0.2) -
Cash flows from exceptional items (15.2) (0.1)
6. Taxation
Six months to 31 March Six months to 31 March
2024 2023
£m £m
Corporation tax
Current tax on profits for the period 0.3 1.2
Total current tax 0.3 1.2
Deferred tax
Origination and reversal of timing differences 1.1 0.2
Total deferred tax 1.1 0.2
Taxation on profit 1.4 1.4
Factors affecting tax charge for the period
The Group tax charge of £1.4m (H1 2023: £1.4m) represents an effective tax
rate of 24% (H1 2023: 25%). The tax assessed for the period is lower (2023:
higher) than the standard rate of corporation tax in the UK of 25% (2023:
22%). The differences are explained below:
Six months to 31 March 2024 Six months to 31 March 2023
£m £m
Profit before tax 5.9 5.6
Profit multiplied by the blended standard rate of corporation tax for the full 1.5 1.2
year in the UK of 25% (2023: 22%)
Effects of:
Tax effect of accelerated capital allowances (0.2) -
Expenses not deductible for tax purposes - 0.1
Share options 0.1 0.1
Total tax charge for the period 1.4 1.4
7. Dividends
Six months to 31 March 2024 Six months to 31 March 2023 Six months to 31 March 2024 Six months to 31 March 2023
Pence per share Pence per share £m £m
Final ordinary dividend recognised as distributions in the period 0.95 1.10 3.1 3.6
Special dividend recognised as distributions in the period - 1.80 - 5.5
Interim ordinary dividend recognised as distributions in the period - - - -
Total dividend paid in the period 0.95 2.90 3.1 9.1
Interim ordinary dividend 0.52 0.45 1.7 1.5
Final ordinary dividend - - - -
Total ordinary dividend 0.52 0.45 1.7 1.5
Special dividend - - - -
Total dividend 0.52 0.45 1.7 1.5
The Board has declared an interim dividend of 0.52 pence per share (2023: 0.45
pence per share), which is a total cash distribution of £1.7m and will be
paid out of the Company's available distributable reserves on 16 August 2024,
to shareholders on the register of members at 19 July 2024. In accordance with
IAS 1 Presentation of Financial Statements, dividends are recorded only when
paid and are shown as a movement in equity rather than as a charge to the
consolidated statement of comprehensive income.
8. Earnings per share
Basic and diluted earnings per share
Basic EPS is calculated by dividing the profit for the period attributable to
ordinary equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period.
Diluted EPS is calculated by dividing the profit attributable to ordinary
equity holders of the parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of ordinary
shares that would be issued on conversion of all the dilutive potential
ordinary shares into ordinary shares.
The following table reflects the income and share data used in the EPS
calculations:
Weighted average number of ordinary shares Total earnings Pence per share
£m
Half year ended 31 March 2024
Basic EPS 291,952,115 4.5 1.5
Diluted EPS 325,791,272 4.5 1.4
Half year ended 31 March 2023
Basic EPS 282,060,246 4.2 1.5
Diluted EPS 322,972,802 4.2 1.3
Year ended 30 September 2023
Basic EPS 284,604,317 11.8 4.1
Diluted EPS 317,483,119 11.8 3.7
The number of shares in issue at the start of the year is reconciled to the
basic and diluted weighted average number of shares below:
Weighted average number of shares
Weighted average number of shares for basic EPS 291,952,115
Dilutive impact of unvested shares in relation to restricted share awards 33,839,157
Weighted average number of shares for diluted EPS 325,791,272
The average market value of the Group's shares for the purposes of calculating
the dilutive effect of share-based incentives was based on quoted market
prices for the period during which the share-based incentives were
outstanding.
Adjusted diluted earnings per share
Adjusted diluted EPS is an Alternative Performance Measure ("APM") and has
been calculated using profit for the purpose of basic EPS, adjusted for total
adjusting items and the tax effect of those items.
Six months to 31 March 2024 Six months to 31 March 2023
£m £m
Profit for the period 4.5 4.2
Exceptional items 4.0 0.4
Share-based payments 1.6 2.2
Tax effect (1.4) (0.5)
Total adjusted profit for the period 8.7 6.3
Number Number
Total issued share capital for the purposes of adjusted diluted EPS 326,334,279 325,227,984
Adjusted diluted EPS 2.7 1.9
9. Intangible assets
Computer Assets under construction Total
software £m £m
£m
Cost
At 30 September 2022 10.1 - 10.1
Additions 1.3 - 1.3
At 31 March 2023 11.4 - 11.4
Additions 1.5 0.2 1.7
At 30 September 2023 12.9 0.2 13.1
Additions 1.8 0.2 2.0
At 31 March 2024 14.7 0.4 15.1
Accumulated amortisation
At 30 September 2022 6.8 - 6.8
Charge for the period 1.1 - 1.1
At 31 March 2023 7.9 - 7.9
Charge for the period 1.2 - 1.2
At 30 September 2023 9.1 - 9.1
Charge for the period 1.3 - 1.3
At 31 March 2024 10.4 - 10.4
Net book value
At 30 September 2022 3.3 - 3.3
At 31 March 2023 3.5 - 3.5
At 31 March 2024 4.3 0.4 4.7
Computer software comprises both internal salaries and external development
capitalised in relation to the Group's bespoke operational software. The Group
capitalised internal salaries of £1.7m in the six months ended 31 March 2024
(H1 2023: £1.2m) for development of computer software. Assets under
construction represent costs incurred in the development of software for the
warehouse transformation project.
For the six-month period to 31 March 2024, the amortisation charge of £1.3m
(H1 2023: £1.1m) has been charged to administrative expenses in the income
statement.
10. Property, plant and equipment
Leasehold improvements Plant and machinery Fixtures Office Assets under construction £m Total
£m £m and fittings equipment £m
£m £m
Cost
At 30 September 2022 0.1 1.4 0.8 1.5 - 3.8
Additions - 0.1 - 0.1 - 0.2
At 31 March 2023 0.1 1.5 0.8 1.6 - 4.0
Additions - - - 0.1 3.9 4.0
Disposals - (0.2) (0.3) (0.5) - (1.0)
At 30 September 2023 0.1 1.3 0.5 1.2 3.9 7.0
Additions - 0.1 - - 11.6 11.7
At 31 March 2024 0.1 1.4 0.5 1.2 15.5 18.7
Accumulated depreciation
At 30 September 2022 - 0.8 0.7 0.9 - 2.4
Charge for the period - 0.1 0.1 0.1 - 0.3
At 31 March 2023 - 0.9 0.8 1.0 - 2.7
Charge for the period - 0.1 - 0.2 - 0.3
Disposals - (0.1) (0.3) (0.5) - (0.9)
At 30 September 2023 - 0.9 0.5 0.7 - 2.1
Charge for the period - 0.2 - 0.1 - 0.3
At 31 March 2024 - 1.1 0.5 0.8 - 2.4
Net book value
At 30 September 2022 0.1 0.6 0.1 0.6 - 1.4
At 31 March 2023 0.1 0.6 - 0.6 - 1.3
At 31 March 2024 0.1 0.3 - 0.4 15.5 16.3
Assets under construction wholly represent capital expenditure for the fit-out
of the new DC. This project remains ongoing as at 31 March 2024.
11. Right-of-use assets
Right-of-use assets
£m
Cost
At 30 September 2022 8.3
Modifications -
At 31 March 2023 8.3
Modifications 0.7
At 30 September 2023 9.0
Additions 44.8
Modifications 0.1
At 31 March 2024 53.9
Accumulated depreciation
At 30 September 2022 3.8
Charge for the period 0.4
At 31 March 2023 4.2
Charge for the period 0.5
At 30 September 2023 4.7
Charge for the period 0.7
At 31 March 2024 5.4
Net book value
At 30 September 2022 4.5
At 31 March 2023 4.1
At 31 March 2024 48.5
On 4 October 2023, the Group entered into a 20-year lease agreement for the
DC. An addition of £44.8m has been recognised as a right-of-use asset, in
accordance with IFRS 16 Leases, representing the discounted future cashflows
under the contract including stamp duty paid and an asset retirement
obligation.
During the period, the Group renewed the lease on one of its properties that
had expired; this represents a modification under IFRS 16. The right-of-use
asset was increased by £0.1m to reflect the value of the asset after the
modification and the corresponding lease liability increased by £0.1m.
12. Trade and other receivables
Six months ended 31 March 2024 Six months ended 31 March 2023
£m £m
Trade receivables 4.4 2.0
Right-of-return asset 0.2 0.4
Accrued income 0.9 0.9
Prepayments 1.8 1.9
7.3 5.2
The Group provides against trade receivables using the forward-looking
expected credit loss model under IFRS 9 Financial Instruments. An impairment
analysis is performed at each reporting date. Trade receivables, accrued
income and other receivables expected credit losses have been reviewed by
management and have been determined to have an immaterial impact on these
balances. Accrued income relates to rebates earned but not yet received.
13. Trade and other payables
Six months ended 31 March 2024 Six months ended 31 March 2023
£m £m
Trade payables 23.4 25.2
Other taxation and social security 7.6 8.3
Refund liability 0.8 1.1
Other payables 1.6 1.3
Accruals 5.3 3.3
38.7 39.2
14. Lease liabilities
Lease liability
£m
At 30 September 2022 5.0
Finance costs 0.1
Lease payment (0.6)
At 31 March 2023 4.5
Modifications 0.7
Finance costs 0.1
Lease payment (0.5)
At 30 September 2023 4.8
Modifications 0.1
Additions 41.7
Finance costs (not included in exceptional items) 0.1
Finance costs (included in exceptional items) 1.4
Lease payment (2.1)
At 31 March 2024 46.0
On 4 October 2023, the Group entered into a 20-year lease agreement for the
DC. An addition of £44.8m has been recognised as a right-of-use asset, in
accordance with IFRS 16 Leases, representing the discounted future cashflows
under the contract including stamp duty paid and an asset retirement
obligation.
During the period, the Group renewed the lease on one of its properties that
had expired; this represents a modification under IFRS 16. The right-of-use
asset was increased by £0.1m to reflect the value of the asset after the
modification and the corresponding lease liability increased by £0.1m. The
Group had total cash outflows for leases of £2.1m (H1 2023: £0.6m).
Lease liabilities as at 31 March were classified as follows:
Six months ended 31 March 2024 Six months ended 31 March 2023
£m £m
Non-current 42.9 3.8
Current 3.1 0.7
Total 46.0 4.5
15. Borrowings
Six months ended 31 March 2024 Six months ended 31 March 2023
£m £m
Amounts drawn under revolving credit facility - -
Unamortised debt issue costs (0.1) (0.1)
(0.1) (0.1)
On 6 July 2023, we successfully completed an extension of the Group's
Revolving Credit Facility ("RCF"), which has total commitments of £10.0m and
a termination date of 31 December 2025. The facility is secured by a debenture
dated 7 June 2021. Interest on the RCF is charged at Sterling Overnight Index
Average ("SONIA") plus a margin based on the consolidated leverage of the
Group. A commitment fee of 40% of the margin applicable to the RCF is payable
quarterly in arrears on unutilised amounts of the RCF. There is no requirement
to settle all, or part, of the debt earlier than the termination date. At 31
March 2024, the Group had not utilised the RCF.
Unamortised debt issue costs of £0.1m (H1 2023: £0.1m) are included in
prepayments.
16. Ordinary share capital
Six months ended 31 March 2024 Six months ended 31 March 2023
£ £
Allotted, called up and fully paid
326,334,279 ordinary shares of 0.1p 326,334 325,228
The share capital of the Group is represented by the share capital of the
parent company, Victorian Plumbing Group plc (the "Parent Company"). The
Parent Company was incorporated on 6 May 2021 to act as the holding company of
the Group. Prior to this the share capital of the Group was represented by the
share capital of the previous parent, VIPSO Limited.
On 1 December 2023, the Parent Company issued and allotted 1,044,056 new
ordinary shares of £0.001 each in the Parent Company in connection with the
Victorian Plumbing Deferred Bonus Plan (the "DBP") and Long-Term Incentive
Plan (the "LTIP").
On 28 December 2023, the Parent Company issued and allotted 62,239 new
ordinary shares of £0.001 each in the Company in connection with the DBP.
17. Own shares held
The Employee Share Option Trust ("ESOT") purchases shares to fund the Share
Incentive Plan (the "SIP"). At 31 March 2024, the ESOT held 635,504 (H1 2023:
635,504) ordinary shares with a book value of £636 (H1 2023: £636). The
market value of these shares as at 31 March 2024 was £0.5m (H1 2023:
£0.5m).
Number of shares £
ESOT shares reserve
Own shares held at 30 September 2023 and 31 March 2024 635,504 636
18. Share-based payments
The Group operates four share plans being the SIP, a Sharesave scheme
("SAYE"), the DBP and the LTIP. In addition, both prior to and following
Admission to AIM in June 2021, the Group awarded shares to the Chairman and
certain members of key management which had restrictions placed against them
that bring the awards into the scope of IFRS 2 Share-Based Payment (the
"Restricted Share Awards").
All share-based incentives carry a service condition. Such conditions are not
taken into account in the fair value of the service received. The fair value
of services received in return for share-based incentives is measured by
reference to the fair value of share-based incentives granted. The estimate of
the fair value of the share-based incentives is measured using the
Black-Scholes pricing model or Monte Carlo simulation, as appropriate for each
scheme.
Sensitivity analysis has been performed in assessing the fair value of the
share-based incentives. There are no changes to key assumptions that are
considered by the Directors to be reasonably possible, which give rise to a
material difference in the fair value of the share-based incentives.
The total charge in the period was £1.6m (H1 2023: £2.2m). This included
associated NI at 13.8% (H1 2023: 13.8%), which management expects to be the
prevailing rate when the awards are exercised, and apprenticeship levy at
0.5%, based on the share price at the reporting date.
Six months ended 31 March 2024 Six months ended 31 March 2023
£m £m
SIP 0.1 0.1
SAYE - -
DBP 0.4 0.5
LTIP 0.1 0.1
Restricted Share Awards 0.8 1.2
Total IFRS 2 charge 1.4 1.9
NI and apprenticeship levy on applicable schemes 0.2 0.3
Total charge 1.6 2.2
19. Cash generated from operating activities
Six months ended 31 March 2024 Six months ended 31 March 2023
Cash flows from operating activities £m £m
Profit before taxation 5.9 5.6
Adjustments for:
Amortisation of intangible assets 1.3 1.1
Depreciation of property, plant and equipment 0.3 0.3
Depreciation of right-of-use assets (not included in exceptional items) 0.4 0.4
Depreciation of right-of-use assets (included in exceptional items) 0.3 -
Warehouse transformation costs 2.3 0.4
Share-based payments (including NI) 1.6 2.2
Finance income (0.5) (0.2)
Finance costs (not included in exceptional items) 0.2 0.1
Finance costs (included in exceptional items) 1.4 -
Adjusted EBITDA 13.2 9.9
Fair value loss on financial derivatives 0.4 0.8
Decrease/(increase) in inventories 1.0 (2.1)
Increase in receivables (2.5) (0.1)
Increase in payables 0.5 0.1
Cash generated from operating activities before exceptional items 12.6 8.6
Free cash flows Six months ended 31 March 2024 Six months ended 31 March 2023
£m £m
Cash generated from operating activities before exceptional items 12.6 8.6
Repayment of lease liabilities (excluding non-underlying leases) (0.5) (0.6)
Purchase of intangible assets (excluding assets under construction) (1.8) (1.3)
Purchase of property, plant and equipment (excluding assets under (0.2) (0.2)
construction)
VAT not yet recovered on assets under construction 1.0 -
Non-underlying movements in working capital (2.5) -
Free cash flows 8.6 6.5
Adjusted EBITDA 13.2 9.9
Cash conversion 65% 66%
VAT not yet recovered on assets under construction relates to timing
differences on warehouse transformation expenditure.
20. Events after the reporting period
On 17 May 2024, Victorian Plumbing Limited, a subsidiary of Victorian
Plumbing, acquired 100% of the issued share capital of AHK Designs Ltd,
trading as Victoria Plum. The purchase price for the Acquisition was £22.5m,
on a cash free, debt free basis, subject to adjustment for normalised working
capital, funded from the Group's existing cash reserves. The purchase price
represents c.0.5x Victoria Plum's estimated annual revenue and reflects the
significant strategic value of the Victoria Plum brand and its associated
intellectual property.
Unaudited management accounts indicate that annualised revenues of the
Victoria Plum business had reduced from c.£100m to £40m in the six months
ended 31 March 2024 and that annualised adjusted EBITDA losses had improved
from £6m to £1m during the same period. A cost reduction programme is in
progress, which will see the ongoing workforce of Victoria Plum fall from
c.400 at the end of September 2023 to c.150. The Group's current expectation
is that the acquired business will be broadly break even by the end of 2024.
Given the date of the Acquisition, the initial accounting for the business
combination is incomplete at the time of writing. For the six months ended 31
March 2024, unaudited management accounts indicate that Victoria Plum held
c.£10m of stock at provisional book value, cash of c.£3m, deposits with
suppliers of c.£2m and tangible fixed assets of c.£1m. The required
disclosures per IFRS 3 Business Combinations will be provided at the full year
announcement.
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. END IR DGGDUBXDDGSRRecent news on Victorian Plumbing
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