TIDMALU
RNS Number : 2806Y
Alumasc Group PLC
08 September 2020
8 September 2020
IMMEDIATE RELEASE
THE ALUMASC GROUP PLC
("ALUMASC")
FULL YEAR RESULTS ANNOUNCEMENT
RESILIENT PERFORMANCE DELIVERS RETURN TO DIVID PAYMENTS
Alumasc (ALU.L), the premium sustainable building products,
systems and solutions Group, announces results for the year ended
30 June 2020.
Commenting on the results reported today, Paul Hooper, Chief
Executive, said:
"The Group responded quickly to the COVID-19 outbreak to protect
the business, its employees and all our stakeholders. The result of
this swift action led to the Group reporting a strong recovery from
June onwards, with July 2020 being a record performance for the
month and August 2020 performance also being very strong at both
revenue and profits level. Management remains appropriately
cautious given the limited visibility as to how the wider economic
situation will evolve but is cautiously confident in its ability to
deliver operationally in the uncertain macroeconomic climate."
Financial Highlights: Strong cash generation
-- Group revenues GBP76.0m (2018/19: GBP90.1m) reflecting the
impact of COVID-19 on the final quarter
-- Underlying* PBT GBP3.7m (2018/19: GBP5. 6m), also reflecting the impact of COVID-19
-- Group's underlying* operating margins reduced from 6.5% to
5.5% representing a creditable result against such a sharp decline
in revenue
-- Underlying* earnings per share 8.2p (2018/19:12.4p)
-- Final dividend of 2 pence per share (2018/19: 4.4 pence) -
return to dividend payments reflects the Group's resilience, strong
cash position and underlying strength
-- Focus on cash management has resulted in a lower level of net
bank debt of GBP4.3 million (30 June 2019: GBP5.1 million).
Operational Highlights: Well positioned post COVID-19
-- Water management division delivered an exceptional
performance with higher profits than the prior year as a result of
a strong portfolio management and cost reductions
-- Building envelope division successfully restructured Levolux
taking significant cost out of the business, Roofing enters new
financial year with a significant order book and strong sales
-- Housebuilding products saw a strong performance including
many product leaders in H1 until the well documented slow down as a
result of COVID-19; business well positioned in current financial
year due to latent housebuilding demand
-- Total annualised cost savings of GBP2.4m achieved in the year
versus a target of GBP2.0m with the move from ten properties to six
and targeted cost reductions.
Outlook:
-- Looking ahead the Board is cautiously optimistic given the
strong start to the new financial year across the Group. The Board
believes that Alumasc's strong strategic and market positions,
which underpin its established track record over many years of
outperforming the UK construction market, will enable the Group to
deliver solid returns in the medium term.
*A summary of non-underlying items and a reconciliation to
reported operating profit and profit before tax is provided in note
5
Enquiries:
The Alumasc Group plc +44 (0)1536 383844
Paul Hooper (Chief Executive)
Helen Ashton (Company Secretary)
Peel Hunt (Broker) +44 (0)207 418 8831
Mike Bell
Ed Allsopp
finnCap (NOMAD) +44 (0)207 220 0561
Julian Blunt
Camarco alumasc@camarco.co.uk
Ginny Pulbrook +44 (0)203 757 4992
Tom Huddart +44 (0)203 757 4991
LEI: 2138002MV11VKZFJ4359
Notes to Editors:
Alumasc is a UK-based supplier of premium sustainable building
products, systems and solutions. Almost 80% of group sales are
driven by building regulations and specifications (architects and
structural engineers) because of the performance characteristics
offered.
The Group has three business segments with strong positions and
brands in their individual markets. The three segments are: Water
Management; Building Envelope; and Housebuilding Products.
Strategic Report
Chairman's Statement
Build Back Better Build Back Greener Build Back Faster
These words, deployed by the Prime Minister on 30 June 2020 as a
central theme to his New Deal for the Nation, might have been
devised as a strapline for Alumasc.
Summary
The wide range of actions taken in recent years to reposition
Alumasc as a supplier of sustainable building products from a
tighter, service oriented operating base, was proceeding well in
the first 8 months of the past financial year: the assimilation of
Wade, the restructuring of operations, the cost reduction
programme, product innovation, corporate simplification, relisting
on AIM, were all making good progress when the unforeseen asteroid
of COVID-19 struck us all in the Spring of this year.
The Construction Industry was affected as severely as most, with
widespread closures in response to the Government's lockdown
request in March and minimal activity on sites that were able to
remain open despite the blanket call.
Fortunately, Alumasc was already well advanced in a
well-publicised programme to reduce its cost base by GBP2 million
per annum but responded swiftly to combat this unprecedented
threat, temporarily closing several of its businesses and requiring
the large majority of employees either to work from home or to
furlough pending developments. Action to conserve cash included an
intense focus on debt collection and working capital controls more
generally, the deferral of VAT payments and the cancellation of the
interim dividend that would otherwise have been paid in April
2020.
The result of this broad range of policy and mitigation actions
has been outstanding: The loss of GBP14 million of revenues, mainly
as a direct result of retrenchment by the industry in the face of
COVID-19, resulted in a year on year fall of GBP1.4 million in
trading profit, confirming the effectiveness of the reduction in
the cost base and the squeeze on discretionary expenditure that
followed; and the Group's net bank borrowings of GBP4.3 million at
30 June 2020, against total facilities of GBP24 million, were
GBP0.8 million lower than at the previous year end.
While disappointing given our expectations after the first 8
months of the year, this is a highly creditable and reassuring
outcome in the circumstances.
The encouraging news is that by May, there were signs that the
industry was keen to resume activity within the health guidelines
being applied and, by the end of June, all construction sites were
again active and Alumasc operations fully operational.
While it is impossible for COVID-19 not to take centre stage in
any report on the past 12 months, the long term redirecting of
Alumasc towards the supply of premium, sustainable building
products proceeds methodically and with considerable effect. We
remain genuinely excited at the prospects for our Group and its
positioning in the sustainable environment that continues to
evolve.
The year under review
This year more than most, I refer you to the Chief Executive's
report that follows for a detailed review of our activities.
I would like to highlight just three achievements which have
relevance for the future: firstly, the significant reduction in our
cost base which underpins future performance without diminishing
opportunity. Secondly, the continuing drive towards sustainable
operations and a sustainable, or "green", product range. Thirdly,
the immediate and determined response by all our employees, for
which I unhesitatingly offer the gratitude of all stakeholders, in
the face of an existential threat.
Not only have we come through that test but we have done so in a
manner that demonstrates our resilience and our strengths and
enables the Board to recommend a return to dividend payments in
respect of the full year. The Board is recommending a final
dividend payment in respect of the Financial Year ending on 30 June
2020 of 2p per share (2019: 4.4p), making a total for the year of
2p per share (2019: 7.35p), payable to shareholders on the Register
on 25 September 2020.
Strategic Developments
Fortunately as it turned out, the focus of the past year was
always to be on the delivery of results from previous policy and
actions. Hence, there were no major projects that might have
diverted from the total commitment required to counter
COVID-19.
It would be wrong, however, to downplay the progress towards
outperformance and sustainability, our twin strategic goals, now
solidly embedded in in our strategy, business model and year on
year targets.
Corporate Actions
Following the high activity level of recent years, the only
Corporate Action of significance in the year took place in April
with the reset of the Group's capital base for the purpose of
greater flexibility. Shareholders voted overwhelmingly in favour of
this action, with 99.9% of votes cast in favour.
The Boardroom
The appointment of two Non-executive Directors earlier in 2019
was followed by the appointment of two Executives as Directors in
September 2019 and we thank Gilbert Jackson and Michael Leaf for
their contribution and support in a turbulent first year.
In February this year, Andrew Magson, our long-serving Finance
Director, notified his intention to leave Alumasc to develop the
next stage of his career outside the Group and the exercise to fill
this vacancy is well advanced, with a shortlist established. When
the imposition of COVID-19 controls inevitably interrupted this
process, we swiftly moved to provide full and effective cover and
support to the Finance team, in particular through the input of
Vijay Thakrar, our Non-Executive Director with 33 years experience
in major accounting firms, 22 years as a Partner. While this is no
long term solution, we are fortunate to have been able to draw on
Vijay's ideal experience and background to assist in these unusual
circumstances.
Prospects
Managing the unpredicted and unpredictable effects of the
COVID-19 pandemic has required a combination of very short term -
daily almost - assessment of market conditions, up and down, with a
firm eye on longer term and, hopefully, more permanent goals. While
some things will undoubtedly change for ever, greater investment in
many of the projects targeted by Alumasc - schools, hospitals,
prisons, infrastructure - is seen both as part of the solution to
the "problem" and as meriting much greater emphasis in their own
right. This can only encourage the Board to believe that the
changes of recent years have been right for Alumasc and will
position it well in coming years.
John McCall
Chairman
Chief Executive's Review
Financial Highlights and Overview
2019/20 2018/19 % change
Group performance:
Revenue (GBPm) * 76.0 90.1 -16%
Underlying profit before tax (GBPm)
* 3.7 5.6 -34%
Statutory profit before tax (GBPm) 2.7 3.9 -31%
Underlying earnings per share (pence)
* 8.2 12.4 -34%
Basic earnings per share (pence) 6.3 10.1 -38%
Dividends per share (pence) 2.0 7.35 -73%
* Revenue and profit from continuing operations excludes the
revenues and profits of Alumasc Facades prior to its disposal on 31
October 2018 and its classification as a discontinued operation and
non-underlying item. A reconciliation of underlying to statutory
profit before tax is provided in note 5 to the Group financial
statements.
In recent years, the Alumasc strategy has been to re-position
the Group to become a dedicated supplier of premium building
products to the UK construction industry, while actively seeking
opportunities to grow internationally. Simultaneously, the Group
has built on its strengths as a supplier of sustainable systems and
products and has delivered substantial operational efficiencies.
For instance, it achieved its stated objectives during the year to
move from ten operating sites to six. Total annualised cost savings
of GBP2.4 million were achieved in the year versus an original
target of GBP2.0 million.
In line with other businesses Alumasc was affected by COVID-19,
particularly in April and May during lockdown. Nevertheless, the
Group is pleased to report a strong recovery from June onwards so
far, with July 2020 being a record for the month and August 2020
trading also very strong. However, management remains appropriately
cautious given the limited visibility as to how the wider economic
situation will evolve and with the potential for a second wave of
COVID-19.
Overview of performance
Alumasc's performance for the year was resilient against the
difficult backdrop that included the run up to the December general
election. Our second half year was severely impacted by the
COVID-19 pandemic and subsequent lockdown from 23 March 2020, with
immediate impact on all of our operations in some form. Further
detail is provided in the separate COVID-19 section. While our
newly formed Building Envelope division suffered a loss in the year
when Levolux was significantly restructured, it is encouraging to
report that, despite the impact of COVID-19, it returned to profit
in the final two months.
The star performer in the year was the Water Management Division
(AWMS), delivering a higher profit than the prior year even despite
the lockdown. This is testament to several factors, including the
strength of its brand and quality of its sustainable systems in the
market place, and the excellent technical support given to
customers. The business also took swift action to ensure that
adequate pricing was achieved commensurate with the trading
environment. Simultaneously, unprofitable products were withdrawn
and significant cost savings were made which were further enhanced
by ongoing synergies achieved from the integration of Wade,
acquired in January 2018. Not only has the product range been
enhanced but the spare capacity in AWMS Wade (Halstead) allowed for
Slotdrain manufacturing to be moved from rented facilities in Dover
to the Alumasc owned Halstead facility. The overall cost savings
are estimated to be circa GBP0.9 million. In addition, other
savings were made across the division. Throughout the lockdown, our
specialist drainage and rainwater distributor, Rainclear, stayed
operational, taking significant market share. Pleasingly, its
online business grew by 64%.
Our Housebuilding Products division also performed at record
levels up until the lockdown and succeeded in launching several new
products into its industry leading service model.
Strategy and performance against strategic objectives
Alumasc's strategy is to:
1. Build leading positions in specialist markets to grow
revenues faster than the UK construction market
The impact of COVID-19 makes any analysis of the most recent
year unreliable when compared with the consistent outperformance of
the previous years.
2. Augment UK revenue growth through the development of selected export markets
Compared to the prior year in which export revenues were 10% of
Group revenues, during the year under review, export revenue
accelerated to become 15% of Group revenue. Increased export
investment in both Sales and Marketing for AWMS (Gatic and Wade)
grew export sales for this business and the year-end export order
book for AWMS stood at GBP4.8 million (versus GBP1.0 million in the
prior year). Included in this was the win of this division's
largest ever export order for Gatic at Hong Kong Chek Lap Kok's
third runway.
Meanwhile, Levolux accelerated its export revenue by 14% and
grew its year end export order book by 7% to GBP3.5 million. At the
end of the final quarter, an experienced US Senior VP of Sales has
been appointed in the USA. We anticipate good further growth in the
USA from this development.
3. Grow profit at a faster rate than revenue by improving operating margins
The Group's underlying operating margins reduced from 6.5% to
5.5%, representing a creditable result against such a sharp decline
in revenue. Prior to the lockdown on 23 March, the Group was close
to achieving its stated objective to improve its operating margin
by around 2 percentage points, having at that stage improved by 1.8
percentage points year to date at the end of February 2020. The
targeted cost savings plans of GBP2.0 million announced a year ago
were exceeded with circa GBP2.4 million cost savings actually
delivered, underpinning the Group's performance prior and
subsequent to lockdown.
Executing our priorities in FY2020
Management accelerated the pace of strategic development during
its 2020 financial year:
1. Levolux business improvement plan
The objective of this plan was to return Levolux to sustainable
profit. At the end of the prior year the Board announced a refocus
of the business to those areas where it could clearly differentiate
and add most value to customers and therefore shareholders. This
included concentration on developing the more profitable areas of
the business, simplifying operational delivery and reducing risk.
The key elements have been:
-- Integrated sales approach. Incorporate Levolux solar shading,
screening and balconies as major constituents in a new "Alumasc
Building Envelope" division, providing integrated solutions for
developers and specifiers seeking high quality roofing and walling
systems. A new, collaborative divisional sales approach increases
Levolux's existing market reach and leverages existing strong
customer relationships.
This objective is being achieved and examples where the
'cross-sell' and single expert service has been welcomed by
specifiers and clients are growing. This has been particularly
apparent in the second half year as the new concept developed;
-- Leverage core strengths. Focus on design and supply
activities as is the case in the rest of the Alumasc Group.
In-house installation will only be offered where this service is
particularly valuable to customers and Levolux. The expectation
over time is that this will improve margin mix and enhance profit
margins.
This objective is being achieved, particularly in the second
half of the year with the order book strengthening for supply only
projects.
-- Export opportunities. Invest in local technical sales
resources to accelerate growth in the profitable Levolux business
in North America. Current revenues in this market are circa GBP3.0
million per annum.
This objective was achieved with a US-based Senior VP appointed
in the final quarter of the year.
-- Reduce overhead. We announced a significant restructuring of
the existing Levolux operational and overhead cost base, with fixed
cost savings of GBP1.0 million targeted in the Group's 2019/20
financial year, and further significant annualised savings expected
in 2020/21. This includes the relocation of sites.
The above was achieved with year on year savings of GBP1.8
million being achieved, significantly ahead of the target. In
addition, Levolux moved out of its two leasehold facilities into
the Alumasc freehold facility in St Helens. Alumasc continues to
believe that Levolux, as part of the Building Envelope division,
has a great future potential and continues to be one of the Group's
strongest brands.
2. Develop further opportunities for specification cross selling
There remains a significant future opportunity for the Group
from offering an integrated "Building Envelope" of exterior
building products facilitating the integration of walling, roofing,
balconies, solar shading and integrated aluminium detailing. This
not only provides a full external envelope solution but also
mitigates both client's and contractor's risks by ensuring that the
horizontal and vertical planes are detailed to remove tolerance and
interfacing detail issues. Closer working between divisions has led
to cross-selling opportunities, for example the Water Management
Division sale of 3 systems with the Building Envelope's Roofing
refurbishment system at Nottingham Trent University. This will
continue to be a focus going forward.
3. Implementation of a more cost-efficient operating structure
Following the move of the AWMS Gatic Slotdrain manufacturing
from a leased facility in Dover to the freehold AWMS's Wade
facility and the restructuring of Levolux described above, some
GBP0.6 million per annum has been saved in leased property costs.
The objective to move to six facilities from ten has also been
achieved.
Following the prior year simplification of the pensions
structure we will have saved around GBP100k per annum in pension
scheme running costs.
Total annualised cost savings of GBP2.4 million were achieved in
the year versus a target of GBP2.0 million.
4. Prioritising and focusing investment to drive profitable growth
Following two years in which combined capital expenditure
exceeded depreciation by GBP2.7 million, an investment of GBP1.7
million in the year under review was around GBP0.3 million below
depreciation following a deliberate moderation of spending when the
impact of the COVID-19 pandemic became apparent.
Once again investment was focused on our businesses with the
greatest manufacturing activity: our Water Management business and
Timloc. Within this was an investment in tooling at strategic
suppliers for the Water Management business which has improved
manufacturing efficiencies and significantly lowered the carbon
footprint of our suppliers along with ensuring continuity of
supply. Investment continued at Timloc, to support new product
launches. The benefit of the investments is evident in the
relatively strong performances of these businesses. Investment in
new people was directed into expanding the sales reach, notably in
the Building Envelope division where previously weaker areas of the
UK now have a stronger senior sales representation. Growing Levolux
and Water Management divisional export sales have also been a
focus.
5. Proactive management of our portfolio of businesses
The Group continues to seek to grow through bolt-on acquisitions
and there are no plans to make divestments. Whilst recent focus has
been on navigating the challenges associated with COVID-19, the
acquisition strategy remains relevant.
6. Remaining closely aligned with the sustainability agenda
With the ever increasing low carbon and sustainable agenda
Alumasc is in a perfect position to increase supply solutions to
its customers that meet these criteria. Not only does it have
strong positions in energy management through its presence in solar
shading, which can reduce the energy consumption required to cool a
building, but it also has innovative Roofing solutions, such as
Olivine, which can actually reduce CO(2) in the environment. Within
the Water Management division, the increasing scarcity of water can
be managed very successfully. There are examples where both
Divisions combine to provide a 'Blue Roof'. This, in effect,
produces an equivalent to an attenuation tank on a flat roof
allowing the controlled egress into the water effluent systems
while saving clients the significant alternative cost of an
attenuation tank installation. Our Housebuilding Products division
has also significantly contributed to the energy management within
housing with its sealed ventilation systems, cavity closer and
radiator seals. It is constantly innovating and launching new
products that deliver sustainable solutions for our clients.
All divisions are totally committed to, and insist on, the use
of recycled material where appropriate. Alumasc is very proud to be
able to state that 75% of the Group's products are sourced from
recycled material.
The relentless pursuit of both innovative energy and water
management solutions combined with the increasing use of recycled
material will continue. Alumasc is already very well placed in this
regard. Our bespoke approach to product and specification means
customers will be able to meet more stringent environmental
criteria in the years ahead.
Overview of performance
(a) Continuing Operations
Revenue analysis
With so many variables created by the COVID-19 impact we have
decided to suspend our comparator to the UK construction market. In
the year some revenue reduction took place from the review of
profitability by product and the subsequent targeted product
deletion and price adjustment actions particularly in The Water
Management Division. During this time it is believed that market
shares have been held and, in some cases, they have grown partly
due to the availability of high quality products with professional
service at a time when competitors were closed.
Gross margins
Until the lockdown in March (i.e. to February 2020) the Group's
Gross Margin was running at 30.3%, 1.2% ahead of the prior year.
Remarkably, despite the significant disruption of the lockdown, by
the end of June the full year Gross Margin was 29.7%, just 0.1%
behind the prior year, a great testament to the management action
taken and to the strength of Alumasc's brands. This overall
performance was assisted by price increases to recover rising costs
and the action taken on cost reductions.
Net fixed and operating expenses
Net fixed and operating expenses reduced by GBP2.4 million
(excluding any furlough benefit) during the year. However, there
was a small percentage of sales increase in the cost areas despite
the impact of lockdown on sales. This would have been much higher
were it not for the swift action taken in March 2020.
Underlying operating profit
Underlying operating profit was GBP4.2 million compared with
GBP5.9 million in the prior year. The reduction was brought about
by the impact of COVID-19 and the resultant temporary shutdown of
our Housebuilding division and two thirds of the Water Management
division. Around 5 weeks of trading were lost following the
shutdown by many builders merchants and the cessation of some site
activity. Alumasc took swift action and initially had to furlough
293 (68%) employees while a further 83 (19%) moved to work from
home. Site activity did not really return in any meaningful way
until June when the effect was still a slowdown in activity with
contractors having to abide by COVID-19 safety requirements. June
was a strong month for the Group and by the end of June only 38
staff (9%) remained furloughed.
Bank interest
Bank interest of GBP0.3 million was similar to the prior year.
This was assisted by swift actions to conserve cash during and
beyond the lockdown period and is despite the decision taken by the
Board in May to fully draw down the GBP20.0 million committed
Revolving Credit Facility.
Underlying profit before tax
Underlying profit before tax was GBP3.7 million (2018/19: GBP5.6
million) reflecting the impact of COVID-19 and the subsequent
lockdown on reduced revenue.
Non-underlying, non-recurring items
Non-underlying and non-recurring items (relating to continuing
operations) amounted to a GBP1.3 million net cost in the period
compared with a GBP4.6 million net cost in the prior year. In
2019/20, the larger items in this category were restructuring and
relocation costs of GBP0.8 million, mainly associated with the
continued cost reduction programme at Levolux. Further details are
given in the Financial Review.
(b) Discontinued Operations and profit (after tax) for the
year
The net gain from discontinued operations was GBP0.3 million,
reflecting the deferred consideration sales proceeds received in
the current financial year in accordance with the Alumasc Facades
business sale agreement. The Group's resulting overall statutory
profit (after tax) for the year was GBP2.3 million (2018/19: GBP3.6
million).
Divisional review
(a) Water Management
Revenue: GBP33.7 million (2018/19: GBP38.9 million)
Underlying operating profit*: GBP4.8 million (2018/19: GBP4.3 million)
Underlying operating margin*: 14.3% (2018/19: 10.9%)
Operating profit: GBP4.6 million (2018/19: GBP3.6 million)
* Prior to restructuring costs of GBP0.1 million in 2019/20 (GBP0.6 million in 2018/19) and
brand amortisation charges of GBP0.1 million in both years
Despite the COVID-19/lockdown challenges in the final quarter
this division actually produced a higher profit (GBP567k (13%))
than the year before.
The drivers of the improvement were not revenue related (which
reduced by GBP5.2 million (13%)) but by selective price increases,
product portfolio management, cost reductions (partly brought about
by the move of Gatic Slotdrain manufacturing from Dover to Wade's
freehold facility), and general efficiency improvement and tight
cost control.
Water Management's operating profit return on sales increased to
14.3% from a prior year of 10.9%. This was a very encouraging
performance and is indicative of improved margins.
(b) Building Envelope
Revenue: GBP33.2 million (2018/19: GBP39.8 million)
Underlying operating (loss) / profit*: GBP(0.9) million (2018/19:
GBP0.6 million)
Underlying operating margin*: (2.8)% (2018/19: 1.4%)
Operating loss: GBP(1.4) million (2018/19: GBP(2.1) million)
* Prior to restructuring costs of GBP0.3 million in 2019/20
(GBP2.5 million in 2018/19) and brand amortisation charges of
GBP0.2 million in both years
The division sells principally into the UK commercial new build
construction market which, following the previous year, continued
to experience falling demand through the year, accelerated
inevitably in the final quarter.
As described above Levolux's turnaround was generally on track
though affected in the first half year by below expected
performance in a handful of construction contracts entered into
prior to the restructuring of the business. Levolux's restructuring
has taken significant cost out of the business and when combined
with a more selective strategy for work that it will target with a
focus on supply only, along with a stronger push into export
markets, the benefits began to show through in the final
quarter.
Alumasc Roofing's performance was resilient in the refurbishment
sector. This was the most successful element of the division's
performance and, while Roofing did not manage to match its prior
year's performance, it enters the new financial year with a
significant order book and with its strongest sales team ever. This
bodes well for the new financial year.
(c) Housebuilding Products
Revenue: GBP9.1 million (2018/19: GBP11.4 million)
Operating profit: GBP1.2 million (2018/19: GBP1.7 million)
Operating margin: 13.7% (2018/19: 15.2%)
Timloc, our Housebuilding products business, continued to
perform well up until the lockdown, with further operational
improvements in turn benefitting margins. However, the impact of
lockdown on this particular sector has been well documented.
New product development continues to be an important factor in
Timloc's success and it launched a new product virtually in every
month of the first half year including AdaptAir, the Ducting to
Airbrick Adaptor , which not only has a cost saving benefit for
housebuilders but also improves Health and Safety on site by taking
out the requirement for core drilling.
Timloc receives very positive feedback from its customers on its
excellent service and promotes this through its #TrustTimloc to
deliver strapline.
With its constant focus on improving efficiencies, new product
development and customer service Timloc is well positioned as
housebuilders recommence work on site post lockdown and the
housebuilding sector catches up with significant latent demand.
Outlook
In light of the COVID-19 impact on construction activity, the
Board is taking a cautious view on 2020/21. However, the
significant GBP2.4 million of cost savings taken in the last
financial year should stand the Group in good stead for what could
be uncertain times. Notwithstanding this the Group has had an
excellent start to the new financial year.
The Board believes that Alumasc's strong strategic and market
opportunities, which underpin its established track record over
many years of outperforming the UK construction market, together
with:
-- the excellent Water Management division's performance which
is really benefitting from both its UK and export re-focused
strategy, as well as its extensive online offering;
-- the formation of the Building Envelope division to drive
specification cross-selling;
-- the major restructuring of the Levolux business within the
Building Envelope division;
-- focused investments in new products, manufacturing capability
and automation;
-- investments in sales resources to grow the business both in
the UK and internationally;
-- lower fixed costs and actions taken to deliver operational
efficiencies across the Group; and
-- close alignment to the sustainability agenda
position Alumasc to grow organically in the current financial
year and beyond.
As ever, the Board is confident in its ability to deliver
operationally but cannot ignore the unknowns ahead with regards to
the macroeconomic climate.
Financial Review
Reconciliation of underlying to statutory profit before tax
Underlying profit before tax for the 2019/20 financial year of
GBP3.7 million exceeded statutory profit before tax of GBP2.7
million for the reasons shown in the table below:
2019/20 2018/19
GBPm GBPm
Underlying profit before tax 3.7 5.6
Brand amortisation (0.2) (0.2)
Net IAS 19 defined benefit pension
scheme costs (0.3) (1.2)
Restructuring & relocation costs (0.8) (3.0)
AIM listing costs - (0.2)
Net gain from business disposals
(pre-tax) 0.3 2.9
Statutory profit before tax 2.7 3.9
======== ========
The reconciling items were:
-- Amortisation of acquired brands of GBP0.2 million (2018/19:
GBP0.2 million). This is a non-cash charge determined by management
judgment in applying accounting standards. It does not affect the
economic value of the Group.
-- Net IAS 19 defined benefit pension scheme costs of GBP0.3
million (2018/19: GBP1.2 million) are also non-cash charges. These
relate to the Group's legacy defined benefit pension scheme, which
has been closed to future accrual for over ten years. The value of
the charge is determined by actuarial assessment and the 2019/20
charge represents the non-cash notional financing cost of the
Group's pension deficit due to the time value of money. In the
2018/19 financial year, the charge to the income statement was
higher than usual, due to a one-off GBP1.1 million increase in
liabilities relating to guaranteed minimum pension equalisation
between men and women. This was partly offset by a one-off
actuarial gain of GBP0.3 million arising from the merger of the
Group's pension schemes during the prior year.
-- One-off restructuring and relocation costs of GBP0.8 million
(2018/19: GBP3.0 million) mainly associated with the continued cost
reduction programme at Levolux, with costs incurred due to
relocating certain functions and operations from two leased sites
to our freehold property at St Helens and staff changes, see note
5. The cost in the prior year related to the redundancy and
operational costs of relocating Gatic Slotdrain production from
Dover to Wade's freehold factory in Essex and the aforementioned
Levolux relocation. All of these actions helped to enable Alumasc
to reduce fixed costs by circa GBP2.4 million in the 2019/20
financial year.
-- The net gain from business disposals reflects the deferred
consideration sales proceeds of GBP0.3 million received in the
2019/20 financial year in accordance with the Alumasc Facades
business sale agreement. The prior year comparator represents the
gain on sale of the Alumasc Facades business on 31 October 2018,
together with its operating profit from the beginning of the
2018/19 financial year to the date of disposal.
Taxation
The Group's underlying effective tax rate was 20.3% (2018/19:
20.4%), slightly above the UK statutory rate of tax of 19%
applicable to the Group's financial year due to certain costs that
are disallowable for tax purposes. We expect the Group's underlying
tax rate to be circa 20% in the 2020/21 financial year.
The Group's effective tax rate on statutory profit before tax
was 16.4% (2018/19: 7.4%). Reconciliations from the actual to
statutory rates of tax are provided in note 7. The reconciling
items chiefly relate to the tax treatment of the one-off items in
the Group's income statement described above.
Earnings per share
Underlying earnings per share for the year was 8.2 pence
(2018/19: 12.4 pence). This reduction is consistent with the lower
underlying profit before tax for the year for the reasons described
in the operational review.
Basic earnings per share of 6.3 pence (2018/19: 10.1 pence)
reflected the reduction in underlying profit before tax for the
year, partially offset by the lower level of net one-off costs in
2019/20 relative to 2018/19 described above.
Dividends
The Board is recommending to shareholders a final dividend of 2
pence per share (2018/19: 4.4 pence), applicable to members on the
share register on 25 September and to be paid on 30 October. The
interim dividend for 2019/20, that was due to be paid on 7 April
2020 at a cash cost of GBP1.1 million, was cancelled as part of the
Group's COVID-19 cash conservation programme, making a total
dividend for the year of 2 pence per share (2018/19: 7.35p).
Investment in growth, cash flow and net debt
Summarised Cash Flow Statement
2019/20 2018/19
GBPm GBPm
EBITDA * 6.2 7.4
Change in working capital 2.5 (1.2)
Operating cash flow 8.7 6.2
Capital expenditure (1.7) (2.4)
Interest (0.3) (0.2)
Tax (0.1) (0.6)
Pension deficit funding (2.3) (3.2)
Finance lease payments (0.5) -
Dividend payments (1.6) (2.6)
Sub total 2.2 (2.8)
Facades / other (1.4) 2.5
Net cash flow 0.8 (0.3)
============= ========
Net bank debt at the year end 4.3 5.1
============= ========
* EBITDA: Underlying operating profit from continuing
operations before interest, tax, depreciation and amortisation
As per the Group's announcements on 27 March and 1 April 2020,
the Group responded quickly to the COVID-19 outbreak to protect the
business, its employees and all our stakeholders. At this time, the
Group also acted promptly and decisively to conserve cash in light
of uncertainties caused by the pandemic, including suspending
dividends, defined benefit pension contributions (in agreement with
the pension scheme trustees) and capital expenditure, imposing very
tight controls over operating expenditure and accessing government
support in the UK (such as the Job Retention Scheme and tax
deferrals). Strong focus has been given to cash collections from
debtors while creditors have continued to be paid on a
timely/agreed basis to protect supplier relationships.
As a result of all of these actions, the Group recorded a net
cash inflow for the year of GBP0.8 million and at 30 June 2020 the
Group continued to have a modest level of net debt of GBP4.3
million (30 June 2019: GBP5.1 million).
The net cash inflow in the year was after capital investment of
GBP1.7 million, which was GBP0.3 million below the depreciation
charge for the year, and a working capital inflow of GBP2.5
million, both reflecting the cash conservation measures introduced
in the last quarter of the financial year.
Statement of financial position and return on investment
The Group's net assets and shareholders' funds reduced from
GBP25.4 million at the beginning of the financial year to GBP19.8
million at 30 June 2020, with the impact of pension scheme
actuarial losses and the payment of the prior year's final dividend
in October 2019 more than offsetting retained profit after tax for
the year.
The Group defines its capital invested as the sum of
shareholders' funds, excluding net bank debt, pension deficit (net
of tax) and lease liabilities. Following the adoption of IFRS16,
Leases, the Group's capital invested increased by GBP5.0 million,
reflecting the Group's leased properties being brought onto the
statement of financial position for the first time. Post tax return
on investment, with property leases included as part of capital
invested for the whole 12 month period, was 7.2% (2018/19: 10.2%,
re-stated to include property leases), reflecting the lower
underlying profit in the year.
Pensions
The Group's IAS 19 defined benefit pension scheme deficit for
accounting purposes at 30 June 2020 was GBP19.3 million (30 June
2019: GBP13.0 million), with an increase in the valuation of gross
pension liabilities due to reduced gilt yields partially offset by
a good investment performance, including the benefit of interest
rate hedging within the investment portfolio.
The formal triennial valuation of the merged Alumasc Group
Pension Scheme at 31 March 2019 was finalised during the financial
year. This showed a significantly improved deficit of GBP22.4
million compared with GBP33.0 million in 2016, reflecting cash
contributions from Alumasc, above target investments returns,
mortality experience and changes to future mortality expectations
in the intervening period.
Banking facilities
Alumasc's banking facilities were renewed as a matter of routine
during the year and comprise:
-- An unsecured committed three-year revolving credit facility
of GBP20.0 million, with an initial expiry date of April 2022 and
two single year extension periods;
-- Overdraft facilities, repayable on demand, of GBP4.0 million.
Going Concern and COVID-19
In assessing Going Concern to take account of the uncertainties
caused by COVID-19, the Group has modelled a Base Case (BC) trading
scenario on a "bottom up" basis. Given the continuing uncertainty
regarding the impact of COVID-19 (including potential further waves
of the pandemic) on the economy, customer behaviour and ultimately
on the Group's performance, the Group has also modelled
increasingly stressed scenarios compared to BC (which assume 10%
("Mid Case") and 20% ("Low Case") revenue reductions from BC, along
with increasingly conservative assumptions in these scenarios
regarding cash collections from debtors). Under the lowest point in
these stress tested scenarios (which exists during April 2021), the
Group retains headroom of at least GBP6.7 million against its total
banking facilities for the next 13 months to September 2021.
The Group has been in regular dialogue with its main bankers,
HSBC, as its scenario plans have developed and has pro-actively and
transparently shared the aforementioned scenario models. While they
show headroom of GBP6.7 million at the lowest point in the Low Case
scenario for the next 13 months, they did indicate potential Bank
covenant breaches at the two testing points in the period, December
2020 and June 2021, due to the impact of COVID-19 on revenues and
profits in the Mid and Low case scenarios modelled. Although
current trading levels would suggest that the sensitised scenarios
are unlikely to materialise, given the uncertainties caused by the
pandemic formal agreement was reached with HSBC to relax the
relevant covenant testing for the tests arising in December 2020
and June 2021 to levels that the Board are satisfied can be met in
light of the scenarios modelled and relevant cost saving measures
that would be implemented in such scenarios.
Having taken into account all of the aforementioned comments,
actions and factors in relation to going concern and the potential
impact of COVID-19, and in light of the bank facility headroom
under various scenarios, the Directors consider that the Group has
adequate resources to continue trading for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the financial statements. See note 1 for the full Going
Concern assessment.
Introduction of new accounting standards
The Group implemented IFRS 16 during the financial year and
details of the impact are provided in note 12. In essence, the
impact was to bring the Group's leased properties onto the
statement of financial position for the first time. This increased
both property, plant and equipment and lease liabilities each by
GBP5.0 million on 1 July 2019 when the new accounting standard was
adopted. Therefore, the Group's capital invested also increased by
GBP5.0 million, with no change to shareholders' funds at the date
of adoption. The full year impact on the Group's income statement
was an increase in EBITDA by GBP0.5 million; increase in
depreciation charge by GBP0.4 million and increased financing
charges by GBP0.2 million, thereby reducing profit before tax by
GBP0.1 million.
Paul Hooper
Chief Executive
8 September 2020
The contents of this announcement have been extracted from the
annual report and accounts for the year ended 30 June 2020 which
will be dispatched to shareholders on or around 23 September 2020
and will be available at www.alumasc.co.uk.
Principal risks and uncertainties
Risks and uncertainties Mitigating actions taken
COVID-19
Comment * The company took swift action and closely monitored
its working capital and introduced a number of
The Coronavirus pandemic prudent cost control measures to conserve cash. This
initially impacted a number included delaying capital expenditure and
of our clients' business;
some closed (but not all)
or could not accept delivery, * temporarily freezing non-essential new hires. The
until our customers opened business also utilised the UK Government job
their businesses. retention scheme, as needed.
Government guidelines:
Although initially exempting
the Construction Industry, * The health and wellbeing of staff was a primary
some customers were concerned concern and additional communication channels were
about social distancing established.
and new ways of working,
leading to some temporary
closures/delay. * Costs were saved through the elimination of travel
New ways of working have and subsistence expenses to de-minimis amounts.
been required under Government
guidelines to protect
employees and customers * Where possible, staff switched to working from home
from COVID-19 and we continue without disruption. Three manufacturing sites were
to monitor this. temporarily closed. Timloc re-opened on 14 April 2020
and AWMS (Burton Latimer and Halstead) on 27 April
2020 on a phased basis.
* Contingency measures were implemented. Parts of our
business (Gatic, Levolux, Rainclear and Roofing)
traded throughout the UK lockdown and our
manufacturing sites were closed for a few weeks (as
our customers had closed their sites).
* Supply chain remained resilient and pre-Brexit
stocking of products ensured demand could be met.
* Exports and internet sales continued during the UK
lockdown period.
* Some opportunities and mitigations used during the
pandemic that improve the business are being
implemented. Best practices and new ways of working
have been put in place.
* All Government guidelines on Health & Safety,
including social distancing were implemented and
continue to be followed on all sites.
* Ongoing monitoring of the COVID-19 pandemic and
external assurance provided to ensure compliance with
Government regulations and best practice.
-------------------------------------------------------------
Economic, construction
market and Brexit risks * Strategic positioning in markets/sectors anticipated
Comment to grow faster than the UK construction market.
As a result of COVID-19
there is macroeconomic * Development of export sales opportunities, especially
uncertainty on a global for Levolux (particularly in North America) and
basis. In addition, markets Alumasc Water Management (particularly in Asia, the
could be volatile post Middle and Far East).
Brexit, and this may have
an impact on housebuilding/house-sales/
construction industry. * Revenues are derived from a variety of end use
Government spending on construction markets.
infrastructure projects
needs to be maintained.
* Development of added value systems and solutions that
are either required by legislation, building
regulation and/or specified by architects and
engineers.
* Continuous development and introduction of innovative
green products, systems, solutions and services that
are market leading and differentiated against the
competition.
* The Group has exposure to currency risk, particularly
the Euro and US Dollar. These exposures are for the
most part hedged, with hedging percentages increased
in 2019 to manage potential FX volatility associated
with Brexit.
* Brexit developments being monitored closely, strong
relationships monitored and regular dialogue with key
European suppliers. Contingency planning for key
residual risk areas, including increased inventory of
materials/products imported from the EU.
-------------------------------------------------------------
Risks and uncertainties Mitigating actions taken
Health and safety risks
* Health and safety is the number one priority of
Comment management and the first Board agenda item.
The Group has a strong
overall track record of * Risk assessments are carried out and safe systems of
health and safety performance, work documented and communicated.
with the number of lost
time accidents significantly
reduced. * All safety incidents and significant near misses are
reported at Board level monthly. Appropriate remedial
action is taken.
* Group health and safety best practice days are held
twice a year, chaired by the Chief Executive.
* Annual audits of health and safety are conducted in
all Group businesses by independent consultants.
* Specific focus on improving safety of higher risk
operations, with external consultancy support as
needed.
-------------------------------------------------------------
Staff retention and recruitment
risks * Increasing focus of Board and Executive Committee on
Comment staff retention and reward, supported by HR and
head-hunter advice.
Including recruitment,
retention, succession
and people development. * Market competitive remuneration/incentive
Risk of loss of skills, arrangements.
ability to innovate and
improve.
* Employee numbers and changes monitored in monthly
subsidiary Board meetings.
* Key, high performing and high potential employees
identified and monitored.
* Training and development programmes.
* The Remuneration Committee considers retention and
motivation when considering the Remuneration
framework.
* Succession planning.
-------------------------------------------------------------
Product/service differentiation
relative to competition * A devolved operating model with both Group and local
not developed or maintained management responsible for developing a deep
knowledge of our specialist markets and identifying
Comment opportunities and emerging market trends.
Innovation and an entrepreneurial
spirit are encouraged * Innovation best practice days held annually at Group
in all Group companies. level and more regularly in each business.
Over 15% of Group revenues
relate to products launched
in the last three years. * Annual Group strategy meetings encourage innovation
and "blue sky" thinking.
* New product introduction/development KPI used to
monitor progress.
* Monitoring the market for potentially new and/or
disruptive technologies, increased use of IT and
manufacturing machinery.
* Customer feedback used to trigger the design and /or
supply of additional products and services.
* Development of low carbon products.
-------------------------------------------------------------
Loss of key customers.
Comment * Develop and maintain strong customer relationships.
Generally the Group has
a good track record of * Product, system and service differentiation and
customer retention and reliability.
has a diversified customer
base.
* Project tracking and enquiry/quote conversion rate
KPI.
* Increasing use of, and investment in, customer
relationship management (CRM) software.
* Organisational and business agility to adapt to
changing and emerging customer needs.
* Customer satisfaction process.
-------------------------------------------------------------
Risks and uncertainties Mitigating actions taken
Legacy defined pension
obligations * Continue to grow the business so the relative
affordability of pension deficit contributions is
Comment improved over time. The pension deficit increased
during the year due to market performance.
Alumasc's pension obligations
are material relative
to its market capitalisation * Maintain constructive relationship with Pension
and shareholders' funds. Trustees.
* Meet agreed pension funding commitments.
* Regular review at Group Board level.
* Use of specialist advisors.
* Investment performance and risk/return balance
overseen by an Investment Committee.
* Monitor and seek opportunities to reduce gross
pension liabilities. The Alumasc Group Pension Scheme
as part of its investment strategy uses derivatives
to partly mitigate inflation and interest rate risk.
--------------------------------------------------------------
Supply chain risks
* Annual strategic reviews, including supplier, quality,
Comment reliability and sustainability.
International supply
chain risks could increase * Regular key supplier visits, good relationships
through local lockdowns maintained including quality control reviews and
due to the COVID-19 pandemic, training.
increased tariffs/duties,
Brexit risks in Europe
and political/global volatility. * Regular supplier quality, value for money and risk
reviews.
* Avoidance of strategic dependence on single sources
of supply.
* Contingency plans to manage Brexit risks.
* Continuing to monitor China sourcing risks.
* Supply questionnaires and export checks are completed
to ensure compliance.
* Training is scheduled to be provided on customs
duties, particularly on managing new arrangements
post Brexit.
--------------------------------------------------------------
Cyber security and Business
Interruption * IT disaster recovery plans are in place, with close
to real time back up arrangements.
Comment
Cyber security risks * Business continuity plans in place or being evolved
and Business Interruption where we are relocating operations.
risks are increasing globally
and have increased during
the COVID-19 pandemic * Awareness training and management briefings held on
. cyber security risks and actions taken on
preventative measures.
* Regular reviews of cyber security, including external
penetration testing and reviews with external IT
professionals.
* Energy supply and contingency arrangements reviewed
periodically.
* Critical plant and equipment are identified, with
associated breakdown/recovery plans, including
assessment of engineering spares held on site.
* Business interruption insurance to cover residual
risks.
* Review of Cyber security with an external party to
ensure we have the appropriate protections in place.
--------------------------------------------------------------
Risks and uncertainties Mitigating actions taken
Product warranty/recall
risks * Robust internal quality systems, compliance with
relevant legislation, building regulations and
Comment industry standards (e.g. ISO, BBA, etc.), and product
testing, as appropriate.
The Group does not have
a history of significant
warranty claims or product * Group insurance programme to cover larger potential
recall. risks.
* Back to back warranties obtained from suppliers where
possible.
* Specific local risk management procedures in Group
brands that also install (as well as supply) building
products (i.e. Levolux and Blackdown).
-------------------------------------------------------------
Credit risk
* Most credit risks are insured, including all
Comment contracting credit risk.
The Group has good recent
record in managing credit * Large export contracts are backed by letters of
risks and the contribution credit, performance bonds, guarantees or similar.
the UK Government Export
Credit Scheme for overseas
opportunities. * Any risks taken above insured limits are subject to
strict delegated authority limits.
* Credit checks when accepting new customers/new work.
* The Group employs experienced credit controllers and
aged debt reports are reviewed in monthly Board
meetings.
-------------------------------------------------------------
consolidated STATEMENT of comprehensive income
For the year ended 30 June 2020
Year to 30 June 2020 Year to 30 June 2019
Non-underlying Non-underlying
Underlying Total Underlying Total
Continuing operations: Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4 75,992 - 75,992 90,104 - 90,104
Cost of sales (53,413) - (53,413) (63,255) - (63,255)
---------- -------------- --------- ---------- -------------- --------
Gross profit 22,579 - 22,579 26,849 - 26,849
Net operating expenses
Net operating expenses
before non-underlying
items (19,386) - (19,386) (20,984) - (20,984)
Other operating income 5 968 - 968 - - -
IAS 19 past service
pension cost & settlement
gain 5 - - - - (787) (787)
Other non-underlying
items 5 - (1,045) (1,045) - (3,439) (3,439)
Net operating expenses (18,418) (1,045) (19,463) (20,984) (4,226) (25,210)
Operating profit 4, 5 4,161 (1,045) 3,116 5,865 (4,226) 1,639
Finance expenses (496) (261) (757) (281) (373) (654)
---------- -------------- --------- ---------- -------------- --------
Profit before taxation 3,665 (1,306) 2,359 5,584 (4,599) 985
Tax expense 7 (744) 302 (442) (1,139) 883 (256)
---------- -------------- --------- ---------- -------------- --------
Profit for the period
from continuing operations 2,921 (1,004) 1,917 4,445 (3,716) 729
Discontinued operations:
Profit after taxation
for the period from
discontinued operations - 339 339 - 2,912 2,912
Profit for the period 2,921 (665) 2,256 4,445 (804) 3,641
========== ============== ========= ========== ============== ========
Other comprehensive
income:
Items that will not
be recycled to profit
or loss:
Actuarial (loss)/gain
on defined benefit
pensions, net of tax (6,473) 123
--------- --------
Items that are or
may be recycled subsequently
to profit or loss:
Effective portion
of changes in fair
value of cash flow
hedges, net of tax 176 263
Exchange differences
on retranslation of
foreign operations 11 4
187 267
--------- --------
Other comprehensive
(loss)/gain for the
period, net of tax (6,286) 390
--------- --------
Total comprehensive
(loss)/profit for
the period, net of
tax (4,030) 4,031
========= ========
Earnings per share Pence Pence
Basic earnings per
share
- Continuing operations 5.4 2.0
- Discontinued operations 0.9 8.1
9 6.3 10.1
========= ========
Diluted earnings per
share
- Continuing operations 5.4 2.0
- Discontinued operations 0.9 8.1
9 6.3 10.1
========= ========
Alternative Performance
Measures:
Underlying earnings
per share (pence) 8.2 12.4
========= ========
Reconciliations of underlying to statutory profit and earnings
per share are provided in notes 5 and 9 respectively.
consolidated statement of financial position
At 30 June 2020
As restated* As restated*
Notes 2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment
- owned assets 11,089 11,693
Property, plant and equipment
- right-of-use assets 5,856 -
Goodwill 6 18,705 18,705
Other intangible assets 3,352 3,416
Deferred tax assets 7 3,661 2,202
-------- ------------
42,663 36,016
Current assets
Inventories 8,596 10,488
Trade and other receivables 16,270 21,384
Corporation tax receivable 325 283
Derivative financial assets 207 -
Cash at bank 16,143 7,999
-------- ------------
41,541 40,154
Total assets 84,204 76,170
======== ============
Liabilities
Non-current liabilities
Interest bearing loans and borrowings (19,909) (7,857)
Lease liability 12 (5,244) -
Employee benefits payable (19,269) (12,951)
Provisions (1,182) (1,272)
Deferred tax liabilities 7 (1,007) (954)
-------- ------------
(46,611) (23,034)
Current liabilities
Trade and other payables (15,311) (20,111)
Lease liability 12 (680) -
Provisions (1,194) (2,333)
Derivative financial liabilities - (10)
Bank overdraft (567) (5,237)
-------- ------------
(17,752) (27,691)
Total liabilities (64,363) (50,725)
======== ============
Net assets 19,841 25,445
======== ============
Equity
Called up share capital 4,517 4,517
Share premium 10 445 445
Capital reserve - own shares 10 (416) (416)
Hedging reserve 10 168 (8)
Foreign currency reserve 10 101 90
Profit and loss account reserve 15,026 20,817
-------- ------------
Total equity 19,841 25,445
======== ============
*See note 1 for details of restatement
The financial statements were approved by the Board of Directors
and authorised for issue on 8 September 2020
Paul Hooper
Director
8 September 2020
Company number 1767387
consolidated STATEMENT of cash flows
For the year ended 30 June 2020
Year to Year to
30 June 30 June
2020 2019
Notes GBP'000 GBP'000
Operating activities
Operating profit 3,116 1,639
Adjustments for:
Depreciation 1,851 1,335
Amortisation 313 514
Impairment of assets 300 -
Loss/(gain) on disposal of property, plant
and equipment 4 (17)
IAS 19 past service pension cost 5 - 1,111
IAS 19 settlement gain on merger of pension
schemes 5 - (324)
Decrease/(increase) in inventories 1,892 (1,722)
Decrease/(increase) in receivables 5,114 (48)
(Decrease)/increase in trade and other payables (4,564) 1,229
Movement in provisions (1,229) 1,637
Cash contributions to retirement benefit
schemes (2,254) (3,202)
Share based payments - (65)
-------- --------
Cash generated by operating activities of
continuing operations 4,543 2,087
Operating profit from discontinued operation - 163
Depreciation and amortisation - 60
Movement in working capital from discontinued
operation - (396)
Cash generated by operating activities of
discontinued operation - (173)
Tax paid (93) (634)
Net cash inflow from operating activities 4,450 1,280
-------- --------
Investing activities
Purchase of property, plant and equipment
- continuing operations (1,342) (2,296)
Purchase of property, plant and equipment
- discontinued operations - (15)
Payments to acquire intangible fixed assets (417) (115)
Proceeds from sales of property, plant and
equipment 143 116
Net proceeds from sale of business activity 339 3,886
Net cash (outflow)/inflow from investing
activities (1,277) 1,576
-------- --------
Financing activities
Bank interest paid (297) (232)
Equity dividends paid (1,574) (2,628)
Draw down/(repayment) of amounts borrowed 12,000 (1,500)
Principal paid on lease liabilities (346) -
Interest paid on lease liabilities (153) -
Refinancing costs - (156)
Purchase of own shares - (238)
Net cash inflow/(outflow) from financing
activities 9,630 (4,754)
-------- --------
Net increase/(decrease) in cash at bank
and bank overdraft 12,803 (1,898)
Net cash at bank and bank overdraft brought
forward 2,762 4,656
Net increase/(decrease) in cash at bank
and bank overdraft 12,803 (1,898)
Effect of foreign exchange rate changes 11 4
Net cash at bank and bank overdraft carried
forward 15,576 2,762
======== ========
consolidated STATEMENT of changes in equity
For the year ended 30 June 2020
Hedging Foreign Profit Total equity
Capital reserve reserve currency and loss
Share - reserve account
Notes Share capital premium own shares reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2018 4,517 445 (241) (271) 86 19,809 24,345
Profit for the
period - - - - - 3,641 3,641
Exchange differences
on retranslation
of foreign
operations - - - - 4 - 4
Net gain on cash
flow hedges - - - 317 - - 317
Tax on derivative
financial liability - - - (54) - - (54)
Actuarial gain on
defined benefit
pensions, net of
tax - - - - - 123 123
Dividends 8 - - - - - (2,628) (2,628)
Share based payments - - - - - (65) (65)
Own shares used to
satisfy exercise
of share awards - - 63 - - - 63
Acquisition of own
shares - - (238) - - - (238)
Exercise of share
based incentives - - - - - (63) (63)
At 1 July 2019 4,517 445 (416) (8) 90 20,817 25,445
Profit for the
period - - - - - 2,256 2,256
Exchange differences
on retranslation
of foreign
operations - - - - 11 - 11
Net gain on cash
flow hedges - - - 217 - - 217
Tax on derivative
financial asset - - - (41) - - (41)
Actuarial loss on
defined benefit
pensions, net of
tax - - - - - (6,473) (6,473)
Dividends 8 - - - - - (1,574) (1,574)
Exercise of share
based incentives - - - - - - -
At 30 June 2020 4,517 445 (416) 168 101 15,026 19,841
------------- -------- --------------- --------- ---------- --------- -------------
NOTES
1 basis of preparation
The Alumasc Group plc is incorporated and domiciled in England
and Wales. The Company's ordinary shares are traded on the
Alternative Investment Market ("AIM").
The financial information included within this announcement does
not constitute statutory accounts within the meaning of section 435
of the Companies Act 2006 (the "Act"). The financial information
for the year ended 30 June 2020 has been extracted from the
statutory accounts on which an unqualified audit opinion has been
issued.
The statutory accounts for the year ended 30 June 2020 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting.
The Group financial statements have been prepared in accordance
with International Financial Reporting Standards as endorsed by the
European Union ("IFRS"), International Financial Reporting
Standards Interpretations Committee ("IFRS IC") interpretations and
those provisions of the Companies Act 2006 applicable to companies
reporting under IFRS. The Group financial statements have been
prepared on the going concern basis and adopting the historical
cost convention. The Group's accounting policies remain consistent
with the previous financial year with the exception of the adoption
of IFRS 16. The impact on the financial statements of the adoption
of IFRS 16 is set out in note 12.
Following a review performed in the year, cash at bank and bank
overdraft balances have been restated to be correctly presented on
a gross basis in accordance with IAS 32. There is no change in net
assets or reported profits.
Going concern and COVID-19
As per the Group's announcements on 27 March and 1 April 2020,
the Group responded quickly to the COVID-19 outbreak to protect the
business, its employees and other stakeholders and temporarily
closed the Timloc manufacturing facility, part of the Housebuilding
Products division, and the AWMS and Wade manufacturing facilities,
part of the Water Management division. The remaining parts of the
Group continued to trade, serving customers from existing
inventories and supplies from overseas and, in accordance with
Government guidelines, all facilities were re-opened by 27 April
2020. The majority of the Group's employees are now back at work
(including working from home where possible) and the Group's
performance during May and June 2020 was stronger than expected
when UK Lockdown was implemented, as set out in the Group's trading
update of 23 July 2020. The Group's revenues during July and August
2020 have exceeded Management's forecasts put together as part of
the Group's scenario planning.
At 30 June 2020 the Group had cash and cash equivalents of
GBP15.7m and a fully drawn down committed GBP20m revolving credit
facility, which runs initially to April 2022 and has two annual
extension periods to April 2024. This provided total headroom of
some GBP15.7m against committed facilities and, together with GBP4m
overdraft facilities which last to August 2021, there is headroom
of some GBP19.7m against total facilities at 30 June 2020.
As also announced on 27 March and 1 April 2020, the Group acted
promptly and decisively to conserve cash in light of uncertainties
caused by the pandemic, including suspending dividends, defined
benefit pension contributions (in agreement with the pension scheme
trustees) and capital expenditure, imposing very tight controls
over operating expenditure and accessing government support in the
UK (such as the Job Retention Scheme and tax deferrals). Strong
focus has been given to cash collections from debtors while
creditors have continued to be paid on a timely/agreed basis to
protect supplier relationships. As a result, on 8 September 2020
the Group had headroom of c.GBP15m against its committed banking
facilities and cGBP19m against its total banking facilities. The
Group continues to manage its cash flows very closely going
forward, with cash re-forecasts continuing to be performed on a
weekly basis.
In assessing going concern to take account of the uncertainties
caused by Covid-19, the Group has modelled a Base Case (BC) trading
scenario on a "bottom up" basis. Given the continuing uncertainty
regarding the impact of COVID-19 (including potential further waves
of the pandemic) on the economy, customer behaviour and ultimately
on the Group's performance, the Group has also modelled
increasingly stressed scenarios compared to BC (which assume 10%
("Mid Case") and 20% ("Low Case") revenue reductions from BC, along
with increasingly conservative assumptions in these scenarios
regarding cash collections from debtors). Under the lowest point in
these stress tested scenarios (which exists during April 2021), the
Group retains headroom of at least GBP6.7m against its total
banking facilities for the next 13 months to September 2021.
The Group has been in regular dialogue with its main bankers,
HSBC, as its scenario plans have developed and has pro-actively and
transparently shared the aforementioned scenario models. While they
show headroom of GBP6.7m at the lowest point in the Low Case
scenario for the next 13 months, they did indicate potential Bank
covenant breaches at the two testing points in the period, December
2020 and June 2021, due to the impact of COVID-19 on revenues and
profits in the Mid and Low case scenarios modelled. Although
current trading levels would suggest that the sensitised scenarios
are unlikely to materialise, given the uncertainties caused by the
pandemic formal agreement was reached with HSBC to relax the
relevant covenant testing for the tests arising in December 2020
and June 2021 to levels that the Board are satisfied can be met in
light of the scenarios modelled and relevant cost saving measures
that would be implemented in such scenarios.
The Group has modelled an additional scenario (a reverse stress
test) that would lead to a breach of its banking covenants which
assumes no cost saving measures are implemented in the Low Case. It
is considered that the risk of such a scenario arising is remote.
Management has also identified a number of mitigating actions that
the Group would take to stay within its banking facilities
throughout the period.
In addition to the above scenarios, the Group has also modelled
the impact of a second wave of the pandemic on the BC forecast
occurring at various points through the assessment period, October
2020, January 2021 or April 2021. The model assumes a similar
impact as the first wave on revenue, profitability and working
capital cycles along with a similar recovery period. In all these
modelled scenarios the Group continues to operate within its
banking facilities and complies with bank covenant tests.
Given the unprecedented nature of the COVID-19 events, it is
difficult to predict future trading and cashflows with certainty.
The actual scenarios which materialise in the period ahead will
undoubtedly be different to the scenarios modelled. In the event
that the actual position is worse than modelled in the BC, the
Directors consider that the headroom in the Group's banking
facilities and the further mitigation actions available would
enable the Group to respond to such downside. Having taken into
account all of the aforementioned comments, actions and factors in
relation to going concern and the potential impact of COVID-19, and
in light of the bank facility headroom under various scenarios, the
Directors consider that the Group has adequate resources to
continue trading for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the
financial statements.
2 judgments and estimates
The main source of estimation uncertainty that could have a
significant risk of causing material adjustment to the carrying
amounts of assets and liabilities at 30 June 2020 within the next
financial year are the valuation of defined benefit pension
obligations, the valuation of the Group's acquired goodwill, the
recognition of revenues and profit on contracts with customers
where revenue is recognised over time.
Measurement of defined benefit pension obligations requires
estimation of future changes in inflation, mortality rates and the
selection of a suitable discount rate.
Goodwill is tested at least annually for impairment, with
appropriate assumptions and estimates built into the value in use
calculations to determine if an impairment of the carrying value is
required. See note 6 for further disclosure of the assumptions and
estimates applied.
Revenue and associated margin recognised over time on contracts
with customers is recognised using the input method under the new
standard and therefore progressively as costs are incurred, having
regard to latest estimates of cost to complete and expected project
margins. Contract revenue includes an assessment of contract
variations when their recovery is considered highly probable.
Judgment is therefore required in the application of the Group's
policy regarding revenue and profit recognition relating to
estimates of costs to complete contracts, the final profit margin
on those contracts and the inclusion of potential contract
variations prior to these being fully agreed.
In the application of the new leasing standard, IFRS 16, a
right-of-use asset and lease liability have been recognised based
on the discounted payments required under the lease, taking into
account the lease term. The lease term is based on the
non-cancellable period of the lease together with periods covered
by an option to extend the lease where it is considered reasonably
certain that options to extend will be exercised. Judgement is
required in determining whether options to extend or terminate the
lease will be exercised. Lease liabilities are measured at
amortised cost using the effective interest rate method. Management
in the adoption of IFRS 16 at 1 July 2019 also applied judgement
related to the assessment of the incremental borrowing rate (IBR)
used to discount future lease rentals to present value. The IBR has
been considered on a lease by lease basis and the weighted average
rate applied by the Group at transition was 3.1%.
3 Summary of significant accounting policies
Except as described below, the accounting policies adopted are
consistent with those of the previous financial year.
Changes in accounting policy
The following new standards, amendments and interpretations are
effective for the period beginning on or after 1 July 2019 and have
been adopted for the Group financial statements:
IFRIC 23 Uncertainty over Income Tax Treatments
The Group has applied IFRIC 23, which is effective for periods
beginning on or after 1 January 2019, from 1 July 2019 with no
impact on the disclosures made by the Group.
IFRS 16 Leases
The Group has applied IFRS 16 using the modified retrospective
approach and therefore the comparative information has not been
restated and continues to be reported under IAS 17 and IFRIC 4. The
impact of adopting the standard on 1 July 2019 was, in broad terms,
to bring the Group's property leases on to the
consolidated statement of financial position. Previously these
were treated as operating leases and were 'off balance sheet'. More
specifically the impact of adoption was:
- The recognition of a right of use asset and lease liability of
GBP5,027,000 on the date of adoption with no impact on reserves at
that stage;
- The total annual charge to the income statement increased by
GBP68,000, reducing profit for the period by this figure in the
current financial year to 30 June 2020;
- The operating profit cashflow increased by GBP499,000 with the
cashflow generated by financing activities decreasing by the same
value;
- EBITDA increased by GBP570,000 as the former lease expense was
re-classified as a depreciation charge and interest cost in the
year; and
- Given the Group's definition of capital invested which is used
to calculate return on investment ("ROI") and the exclusion of net
bank debt and other long term liabilities such as pension
liabilities and lease liabilities from the same, the asset base by
which the underlying operating profit after underlying tax is
divided by to calculate ROI has increased by GBP5,027,000. This has
had the impact of reducing underlying return on capital invested
from 11.4% (on the old basis) to 7.2% in the current year.
The Group has applied the practical expedients whereby a single
discount rate can be used across a portfolio of leases with
reasonably similar characteristics and applied the exemption not to
recognise right-of-use assets and liabilities for leases with less
than 12 months of the lease term remaining as of the date of
initial application.
4 segmental analysis
In accordance with IFRS 8 "Operating Segments", the segmental
analysis below follows the Group's internal management reporting
structure.
The Chief Executive reviews internal management reports on a
monthly basis, with performance being measured based on the
segmental operating result as disclosed below. Performance is
measured on this basis as management believes this information is
the most relevant when evaluating the impact of strategic decisions
because of similarities between the nature of products and
services, routes to market and supply chains in each segment.
Inter-segment transactions are entered into applying normal
commercial terms that would be available to third parties. Segment
results, assets and liabilities include those items directly
attributable to a segment. Unallocated assets comprise cash and
cash equivalents, deferred tax assets, income tax recoverable and
corporate assets that cannot be allocated on a reasonable basis to
a reportable segment. Unallocated liabilities comprise borrowings,
employee benefit obligations, deferred tax liabilities, income tax
payable and corporate liabilities that cannot be allocated on a
reasonable basis to a reportable segment.
Revenues and operating results from this business have been
excluded from the segmental analysis below. This business was
formerly part of the Group's Roofing & Walling operating
segment in prior years. Due to changes to internal management
reporting responsibilities to the Chief Operating Decision Maker in
respect of the Roofing and Levolux businesses, these businesses are
now included within the Building Envelope segment. The Group sold
the Alumasc Facades business on 31 October 2018. This has been
treated as a discontinued operation.
Segmental
operating
Revenue result
GBP'000 GBP'000
Full Year to 30 June 2020
Water Management 33,715 4,824
Building Envelope 33,209 (939)
Housebuilding Products 9,068 1,243
------- ----------
Trading 75,992 5,128
Unallocated costs (967)
Total from continuing operations 75,992 4,161
======= ==========
GBP'000
Segmental operating result
Brand amortisation 4,161
Restructuring & relocation costs (see note 5) (238)
(807)
Total operating profit from continuing operations 3,116
========
Capital expenditure
-------------------------
Segment Property, Other Deprecia-tion Amortisa-tion
Segment Liabilities Plant & Intangible
Assets Equipment Assets
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Water Management 26,645 (7,244) 1,813 264 785 100
Building Envelope 22,267 (8,346) 162 17 175 173
Housebuilding Products 13,051 (5,687) 361 29 798 39
Trading 61,963 (21,277) 2,336 310 1,758 312
Unallocated/discontinued 22,241 (43,086) 19 131 93 1
Total 84,204 (64,363) 2,355 441 1,851 313
======= ============= =========== ============ ============== ==============
Segmental
operating
Revenue result
GBP'000 GBP'000
Full Year to 30 June 2019
Water Management 38,902 4,257
Building Envelope 39,804 554
Housebuilding Products 11,398 1,732
------- -----------
Trading 90,104 6,543
Unallocated costs (678)
Total from continuing operations 90,104 5,865
======= ===========
GBP'000
Segmental operating result 5,865
Brand amortisation (238)
Past service cost in respect of GMP equalisation
(see note 5) (1,111)
Settlement gain on merger of pension schemes (see
note 5) 324
Restructuring & relocation costs (see note 5) (3,021)
AIM re-listing costs (see note 5) (180)
Total operating profit from continuing operations 1,639
=======
Capital expenditure
-------------------------
Segment Property, Other Deprecia-tion Amortisa-tion
Segment Liabilities Plant & Intangible
Assets Equipment Assets
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Water Management 26,945 (7,171) 1,279 49 650 188
Building Envelope 27,355 (12,853) 211 55 221 290
Housebuilding Products 10,003 (3,191) 1,041 11 399 36
Trading 64,303 (23,215) 2,531 115 1,270 514
Unallocated & discontinued 6,630 (22,273) 78 - 125 -
Total 70,933 (45,488) 2,609 115 1,395 514
======= ============= =========== ============ ============== ==============
Analysis by geographical segment 2019/20
United North Middle Far Rest of
Kingdom Europe America East East World Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sales to external
customers 64,816 4,147 3,184 1,485 1,587 773 75,992
Segment non-current
assets 38,996 - - - 6 - 39,002
Analysis by geographical segment 2018/19
United North Middle Far Rest of
Kingdom Europe America East East World Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sales to external
customers 80,677 2,695 3,149 972 2,392 219 90,104
Segment non-current
assets 33,814 - - - - - 33,814
Segment revenue by geographical segment represents revenue from
external customers based upon the geographical location of the
customer. The analyses of segment non-current assets are based upon
location of the assets and exclude discontinued operations.
5 UNDERLYING to Statutory profit before tax reconciliation
2019/20 2018/19
------------------ ------------------
Operating Profit Operating Profit
profit before profit before
tax tax
GBP'000 GBP'000 GBP'000 GBP'000
Underlying operating profit/profit
before tax 4,161 3,665 5,865 5,584
Brand amortisation (238) (238) (238) (238)
IAS 19 net pension scheme finance
costs - (261) - (373)
IAS 19 Past service cost in respect
of GMP equalisation - - (1,111) (1,111)
IAS 19 Settlement gain on merger
of pension schemes - - 324 324
Restructuring & relocation costs (807) (807) (3,021) (3,021)
AIM re-listing costs - - (180) (180)
Continuing operations 3,116 2,359 1,639 985
Profits/gains relating to discontinued
operations - 339 163 2,945
Statutory operating profit/profit
before tax 3,116 2,698 1,802 3,930
========= ======= ========= =======
In the presentation of underlying profits, management treats the
amortisation of acquired brands and IAS 19 pension costs
consistently as non-underlying items because they are material
non-cash and non-trading items that typically would be excluded in
assessing the value of the business.
In addition, management has presented the following specific
items that arose in 2019/20 and 2018/19 financial years as
non-underlying as they are non-recurring items that are judged to
be significant enough to affect the understanding of the
year-on-year evolution of the underlying trading performance of the
business:
- One-off costs of material restructuring and relocation of
separate businesses within the Group in both 2019/20 and 2018/19,
including costs associated with the departure and recruitment of a
Group Finance Director during the current financial year;
- The one off prior year IAS 19 past service pension cost
relating to Guaranteed Minimum Pension ("GMP") equalisation between
men and women, following a High Court decision on 26 October
2018;
- The one off prior year settlement gain arising from the merger
of the Group's pension schemes on 5 March 2019; and
- The one-off prior year professional fees incurred in
connection with the re-listing of Alumasc's shares from the main
market to the Alternative Investment Market ("AIM") on 25 June
2019.
Included within underlying operating profit for the current
financial year is other operating income of GBP968k in relation to
Coronavirus Job Retention Scheme government support.
6 GOODWILL
2020 2019
GBP'000 GBP'000
Cost:
At 1 July and 30 June 19,428 19,428
======= =======
Impairment:
At 1 July and 30 June 723 723
====== ======
Net book value at 30 June 18,705 18,705
====== ======
Goodwill acquired through acquisitions has been allocated to
cash generating units for impairment testing as set out below:
2020 2019
GBP'000 GBP'000
Alumasc Roofing 3,820 3,820
Timloc 2,264 2,264
Levolux 10,179 10,179
Rainclear 225 225
Wade 2,217 2,217
------- -------
At 30 June 18,705 18,705
======= =======
Impairment testing of acquired goodwill
The Group considers each of the operating businesses that have
goodwill allocated to them, which are those units for which a
separate cashflow is computed, to be a cash generating unit (CGU).
Each CGU is reviewed annually for indicators of impairment. In
assessing whether an asset has been impaired, the carrying amount
of the CGU is compared to its recoverable amount. The recoverable
amount is the higher of its fair value less costs to sell and its
value in use. In the absence of any information about the fair
value of a CGU, the recoverable amount is deemed to be its value in
use. Each of the CGUs are either operating segments as shown in
note 4, or sub-sets of those operating segments.
For the purpose of impairment testing, the recoverable amount of
CGUs is based on value in use calculations. The value in use is
derived from discounted management cash flow forecasts for the
businesses, based on budgets and plans covering a five year period.
The growth rate used to extrapolate the cash flows beyond this
period was 1% (2019: 1%) for each CGU.
Key assumptions included in the recoverable amount calculation
are the discount rate applied and the cash flows generated by:
(i) Revenues
(ii) Gross margins
(iii) Overhead costs
Each assumption has been considered in conjunction with the
local management of the relevant operating businesses who have used
their past experience and expectations of future market and
business developments, including COVID-19, in arriving at the
figures used.
The range of pre-tax rates used to discount the cash flows of
these cash generating units with on-balance sheet goodwill was
between 11% and 12% (2019: between 11% and 12%). These rates were
based on the Group's estimated weighted average cost of capital
(W.A.C.C.), which was risk-adjusted for each CGU taking into
account both external and internal risks. The Group's W.A.C.C. in
2020 was similar to the rate used in 2019.
The surplus headroom above the carrying value of goodwill at 30
June 2020 was significant in the case of Timloc, Rainclear, Wade
and Alumasc Roofing, with no impairment arising from either a 2%
increase in the discount rate; a growth rate of -1% used to
extrapolate the cash flows; or a reduction of 25% in the cash flow
generated in the terminal year.
The surplus headroom above the carrying value of goodwill at 30
June 2020 for Levolux was not significant and the following change
to each of the key assumptions would lead to an impairment:
- a 4% increase in the discount rate;
- a growth rate of -1% used to extrapolate the cash flows;
- a 40% reduction in the cash flow generated in the terminal year.
7 tax expense
(a.) Tax on profit on ordinary activities
Tax charged in the statement of comprehensive income
2019/20 2018/19
GBP'000 GBP'000
Current tax:
UK corporation tax - continuing operations 22 (69)
- discontinued operations - 33
Overseas tax 48 3
Amounts over provided in previous years (19) (21)
Total current tax 51 (54)
======= =======
Deferred tax:
Origination and reversal of temporary differences 450 406
Amounts over provided in previous years (157) (20)
Rate change adjustment 98 (43)
------- -------
Total deferred tax 391 343
Total tax expense 442 289
======= =======
Tax charge on continuing operations 442 256
Tax charge on discontinued operations - 33
Total tax expense 442 289
=== ===
Tax recognised in other comprehensive income
Deferred tax:
Actuarial (losses)/gains on pension schemes (1,838) 24
Cash flow hedge 41 54
Tax (credited)/charged to other comprehensive income (1,797) 78
======= ===
Total tax (credit)/charge in the statement of comprehensive
income (1,355) 367
======= ===
(b.) Reconciliation of the total tax charge
The total tax rate applicable to the tax expense shown in the
statement of total comprehensive income of 16.4% is lower than
(2018/19: 7.4% was lower than) the standard rate of corporation tax
in the UK of 19% (2018/19: 19.0%).
The differences are reconciled below:
2019/20 2018/19
GBP'000 GBP'000
Profit before tax from continuing operations 2,359 985
Profit before tax from discontinued operations 339 2,945
Accounting profit before tax 2,698 3,930
Current tax at the UK standard rate of 19.0% (2018/19:
19.0%) 513 747
Expenses not deductible for tax purposes 71 265
Use of capital losses (64) (639)
Rate change adjustment 98 (43)
Tax over provided in previous years - current tax (19) (21)
Tax over provided in previous years - deferred
tax (157) (20)
442 289
======= =======
(c.) Unrecognised tax losses
The Group has agreed tax capital losses in the UK amounting to
GBP16.3 million (2019: GBP16.6 million) that relate to prior years.
Under current legislation these losses are available for offset
against future chargeable gains. The capital losses are able to be
carried forward indefinitely. Revaluation gains on land and
buildings amount to GBP1 million (2019: GBP1 million). These have
been offset in the prior year against the capital losses detailed
above. A deferred tax asset has not been recognised in respect of
the net capital losses carried forward of GBP15.3 million (2019:
GBP15.6 million) as they do not meet the criteria for
recognition.
(d.) Deferred tax
A reconciliation of the movement in deferred tax during the year
is as follows:
Pension
Accelerated Short term Total deferred
capital temporary deferred tax
allowances differences Brands Hedging tax liability asset
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2018 435 (30) 556 (56) 905 (2,574)
Charged/(credited)
to the statement
of comprehensive
income - current
year 125 (36) (74) - 15 348
Credited to the statement
of comprehensive
income - prior year (20) - - - (20) -
Charged to equity - - - 54 54 24
At 30 June 2019 540 (66) 482 (2) 954 (2,202)
============ ============= ======= ======== =============== ==========
Charged to the statement
of comprehensive
income - current
year 170 (12) 11 - 169 379
Credited to the statement
of comprehensive
income - prior year (160) 3 - - (157) -
Charged/(credited)
to equity - - - 41 41 (1,838)
At 30 June 2020 550 (75) 493 39 1,007 (3,661)
============ ============= ======= ======== =============== ==========
Deferred tax assets and liabilities are presented as non-current
in the consolidated statement of financial position.
Deferred tax assets have been recognised where it is probable
that they will be recovered. Deferred tax assets of GBP3.1 million
(2019: GBP2.7 million) have not been recognised in respect of net
capital losses of GBP16.3 million (2019: GBP16.6 million), see note
7 (c).
(e.) Factors affecting the tax charge in future periods
A UK corporation rate of 19% (effective 1 April 2020) was
substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. This will increase
the company's future current tax charge accordingly. The deferred
tax asset at 30 June 2020 has been calculated at 19% (2019:
17%).
8 dividends
2019/20 2018/19
GBP'000 GBP'000
Final dividend for 2019 of 4.4p paid on 31 October
2019 1,574 -
Interim dividend for 2019 of 2.95p paid on 8
April 2019 - 1,045
Final dividend for 2018 of 4.4p paid on 31 October
2018 - 1,583
1,574 2,628
======= =======
A final dividend of 2.0 pence per equity share, at a cash cost
of GBP715,000, has been proposed for the year ended 30 June 2020,
payable on 30 October 2020. In accordance with IFRS accounting
requirements this dividend has not been accrued in these
consolidated financial statements. The interim dividend for 2020,
that was due to be paid on 7 April 2020 at a cash cost of
GBP1,055,000, was cancelled as part of the Group's COVID-19 cash
conservation programme.
9 earnings per share
Basic earnings per share is calculated by dividing the net
profit for the period attributable to ordinary equity shareholders
of the parent by the weighted average number of ordinary shares in
issue during the period. Diluted earnings per share is calculated
by dividing the net profit attributable to ordinary equity
shareholders of the parent by the weighted average number of
ordinary shares in issue during the period, after allowing for the
exercise of outstanding share options. The following sets out the
income and share data used in the basic and diluted earnings per
share calculations:
2019/20 2018/19
GBP'000 GBP'000
Net profit attributable to equity holders of
the parent - continuing operations 1,917 729
Net profit attributable to equity holders of
the parent - discontinued operations 339 2,912
2,256 3,641
======= =======
000s 000s
Weighted average number of shares 35,764 35,956
Dilutive potential ordinary shares - employee
share options 55 153
35,819 36,109
======= =======
Basic earnings per share: Pence Pence
Continuing operations 5.4 2.0
Discontinued operations 0.9 8.1
6.3 10.1
===== =====
Diluted earnings per share: 2019/20 2018/19
Pence Pence
Continuing operations 5.4 2.0
Discontinued operations 0.9 8.1
6.3 10.1
======= =======
Calculation of underlying earnings per share:
2019/20 2018/19
GBP'000 GBP'000
Reported profit before taxation from continuing
operations 2,359 985
Brand amortisation 238 238
IAS 19 net pension scheme finance costs 261 373
Pension GMP equalisation - 1,111
Winding up lump sums - (324)
Restructuring & relocation costs 807 3,021
AIM re-listing costs - 180
Underlying profit before taxation from continuing
operations 3,665 5,584
Tax at underlying Group tax rate of 20.3% (2018/19:
20.4%) (744) (1,139)
------- -------
Underlying earnings from continuing operations 2,921 4,445
------- -------
Weighted average number of shares 35,764 35,956
Underlying earnings per share from continuing
operations 8.2p 12.4p
======= =======
10 movements in equity
Share capital and share premium
The balances classified as share capital and share premium are
the proceeds of the nominal value and premium value respectively on
issue of the Company's equity share capital net of issue costs.
Capital reserve - own shares
The capital reserve - own shares relates to 369,245 (2019:
369,245) ordinary own shares held by the Company. The market value
of shares at 30 June 2020 was GBP265,856 (2019: GBP348,936). These
are held to help satisfy the exercise of awards under the Company's
Long Term Incentive Plans. During the prior year 42,166 shares with
a cost of GBP63,000 were used to satisfy the exercise of awards and
250,000 shares with a cost of GBP238,000 were purchased by the
Trust. No shares were exercised in the current financial period. A
Trust holds the shares in its name and shares are awarded to
employees on request by the Group. The Group bears the expenses of
the Trust.
Hedging reserve
This reserve records the post-tax portion of the gain or loss on
a hedging instrument in a cash flow hedge that is determined to be
an effective hedge.
Foreign currency reserve
This foreign currency reserve is used to record exchange
differences arising from the translation of the financial
statements of foreign subsidiaries.
11 related party disclosure
The Group's principal actively trading subsidiaries at 30 June
2020 are listed below:
Country of % of equity interest
Principal subsidiaries Principal activity incorporation and votes held
2020 2019
Alumasc Building Products
Limited Building products England 100 100
Levolux Limited Building products England 100 100
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made at
arms-length market prices. Outstanding balances at the year end are
unsecured and settlement occurs in cash. There have been no
guarantees provided or received for any related party
receivables.
Transactions with other related parties
Key management personnel are determined as the Directors of The
Alumasc Group plc.
12 IFRS 16 IMPACT of transition
Transition
The Group applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial application
is recognised in retained earnings at 1 July 2019.
Impact on year to 30 June 2020
On transition to IFRS 16, the Group recognised an additional
GBP5.0 million of right-of-use assets and lease liabilities with no
net amount required to be recognised in retained earnings. In
summary, the impact on the statement of financial position at 30
June 2020 is set out below. The impact on the statement of
comprehensive income is to reduce the reported profit for the
period by GBP68,000, being an improvement in operating profit of
GBP85,000, offset by an increase in interest expense of GBP153,000.
The net impact on the Group's cash flows is GBPnil, however cash
flows from operating activities have improved by GBP499,000 with
cash flows from financing activities reducing by the same
amount.
As would As reported
have been under IFRS
reported Effect 16
As at 30 June 2020: GBP'000 GBP'000 GBP'000
Property, plant & equipment 11,089 5,856 16,945
Lease liabilities - (5,924) (5,924)
Other net assets 8,820 - 8,820
Net Assets 19,909 (68) 19,841
========= ======= ===========
When measuring lease liabilities, the group discounted lease
payments using its incremental borrowing rate at 1 July 2019. The
weighted-average rate applied is 3.1%.
The following reconciles the operating lease commitment
disclosed at 30 June 2019 with the amount recognised on the balance
sheet at 1 July 2019:
1 July 2019
GBP'000
Operating lease commitment at 30 June 2019 as disclosed
in the groups consolidated financial statements 9,055
Lease commitment adjustment* (1,589)
Discounted using the incremental borrowing rate at 1
July 2019 (1,629)
Recognition exemption for:
* Short term leases (438)
* Leases of low-value assets (372)
Lease liabilities recognised at 1 July 2019 5,027
===========
*On adoption of IFRS 16, the Directors conducted a review of
lease commitments and identified an overstatement of lease
commitments of GBP1,589,000 which has been adjusted in the
reconciliation above.
Financial Summary 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- -----------
Income Statement Summary
Continuing operations:
Revenue 63,028 69,950 73,005 88,368 87,048 90,104 75,992
Underlying operating
profit 5,099 6,341 7,010 8,703 6,224 5,865 4,161
Underlying operating
margin 8.1% 9.1% 9.6% 9.8% 7.2% 6.5% 5.5%
Net interest cost on
borrowings (521) (592) (215) (132) (212) (281) (343)
Interest on lease
liabilities - - - - - - (153)
Underlying profit before
tax 4,578 5,749 6,795 8,571 6,012 5,584 3,665
Non-underlying items* (1,168) (1,434) (1,502) (888) (1,082) (4,599) (1,306)
Profit before taxation 3,410 4,315 5,293 7,683 4,930 985 2,359
Taxation (706) (1,120) (1,319) (1,492) (967) (256) (442)
Profit for the year from
continuing
operations 2,704 3,195 3,974 6,191 3,963 729 1,917
Discontinued operations -
(Loss)/profit
after tax 1,337 1,181 2,510 349 354 2,912 339
-------------------------- ------------- ------------ ---------- ---------- ----------- -----------
Profit for the year 4,041 4,376 6,484 6,540 4,317 3,641 2,256
-------------------------- ------------- ------------ ---------- ---------- ----------- ----------- -----------
Underlying earnings per
share from
continuing operations
(pence) 9.7 12.6 15.1 19.1 13.4 12.4 8.2
Basic earnings per share
(pence) 11.3 12.3 18.2 18.3 12.0 10.1 6.3
Dividends per share
(pence) 5.0 6.0 6.5 7.15 7.35 7.35 2.0
Balance Sheet Summary at
30 June
Shareholders' funds 17,042 15,929 16,580 20,437 24,421 25,445 19,841
Net debt/(cash) 7,666 (914) (8,632) (6,076) 4,812 5,095 4,333
Lease liabilities - - - - - - 5,924
Pension deficit (net of
tax) 14,338 16,748 18,588 17,095 12,566 10,749 15,608
Discontinued operations (11,769) (3,708) (479) (334) (714) 359 -
Capital Invested -
continuing operations 27,277 28,055 26,057 31,122 41,085 41,648 45,706
-------------------------- ------------- ------------ ---------- ---------- ----------- ----------- -----------
Underlying return on
capital invested
(post-tax)** 14.8% 17.9% 20.5% 24.2% 13.8% 10.2% 7.2%
Underlying tax rate 24.2% 22.0% 20.8% 20.6% 20.2% 20.4% 20.3%
Notes
* Non-underlying items comprise brand amortisation and IAS 19 pension
costs in all years. Further details of the 2018/19 and 2019/20 non underlying
items can be found in note 5 of the Report and Accounts 2020.
** Underlying operating profit after tax from continuing operations
calculated using the underlying tax rate, as a percentage of average
capital invested from continuing operations. (2018/19 re-stated to include
lease liabilities)
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END
FR FLFEAATIDIII
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