Tuesday 7 February 2023
The Alumasc Group plc
Interim results
Confidence in delivering full year expectations
Alumasc (ALU.L) the sustainable building products, systems and solutions Group today announces results for the six months ended 31 December 2022.
Commenting on the interim results, Paul Hooper, Chief Executive of Alumasc said:
"This was a strong first half performance, against a comparative that included significant sales to Chek Lap Kok airport in Hong Kong. While the short term market remains uncertain, we enter the second half with encouraging momentum and a record half year order book, which includes the next phase of the Chek Lap Kok project, giving us confidence in the delivery of our expectations for the full year."
Financial Overview: continuing operations
· Group revenues up by 5% to £45.0m (H1 FY22: £42.6m), with organic growth and pricing offsetting significant export orders in the first half of the prior year:
o Building Envelope delivered a 29% increase in revenues to £18.3m (H1 FY22: £14.2m).
o Housebuilding Products delivered a 24% increase in revenues to £7.0m (H1 FY22: £5.7m).
o Water Management delivered revenues of £19.6m (H1 FY22: £22.8m), reflecting significant export project sales in the prior half year.
· Underlying(1) operating margin(2) of 13.4% (H1 FY22: 15.3%):
o Building Envelope underlying operating margin of 14.1% (H1 FY22: 13.3%).
o Housebuilding Products underlying operating margin of 23.0% (H1 FY22: 19.3%).
o Water Management underlying operating margin of 12.8% (H1 FY22: 18.1%), reflecting the prior year divisional mix benefitting from large export orders.
· Underlying(1) profit before tax of £5.6m (H1 FY22: £6.3m).
· Reported profit before tax of £5.3m (H1 FY22: £6.2m).
· Underlying(1) earnings per share of 12.3p (H1 FY22: 14.1p).
· Dividend per share increased to 3.40p (H1 FY22: 3.35p) reflecting the Board's confidence in the future performance of the business.
Outlook
· Building Envelope and Housebuilding Products had strong first half performances and good momentum going into the second half.
· Water Management has seen lower first half export volumes, but a stronger performance is expected in H2 as a result of the next phase of the Chek Lap Kok airport project and other overseas project phasing.
· Whilst market conditions remain uncertain in the near term, the Group continues to demonstrate its ability to outperform underlying markets through innovation and service, as well as manage costs and improve efficiency.
· As a result, the Board remains confident in the Group achieving its full year expectations.
· With a clear strategy and the majority of revenues directly linked to sustainability benefits to its customers, the Group remains well positioned to deliver long term market outperformance.
Notes:
(1) A reconciliation of underlying to statutory profit is provided in note 4 to the interim financial statements
(2) Underlying operating margin: underlying operating profit as a percentage of sales
Enquiries:
The Alumasc Group plc | +44 (0) 1536 383844 |
Paul Hooper, Chief Executive | |
Simon Dray, Group Finance Director | |
| |
Peel Hunt (Broker) | |
Mike Bell | +44 (0) 20 7418 8831 |
Ed Allsopp | |
finnCap (Nominated Adviser) | |
Julian Blunt, Edward Whiley | + 44 (0)207 220 0561 |
| |
Camarco (Financial PR) | |
Ginny Pulbrook | + 44 (0)203 757 4992 |
Rosie Driscoll | + 44 (0)203 757 4981 |
| |
REVIEW OF INTERIM RESULTS
Chief Executive's Statement
Group sales from continuing operations for the six months ended 31 December 2022 were £45.0m (2021: £42.6m). UK sales were strong, increasing by £6.7m (18%). In particular, the Building Envelope and Housebuilding Products Divisions had strong first half performances driven by very good sales, the result of efforts in taking market share and the launch of new products into existing and adjacent markets.
As expected, Export sales in the period were lower, due to the timing of several significant contracts in Asia. The prior period included c.£2.8m of sales of Gatic access and drainage products into a number of projects, notably Chek Lap Kok airport in Hong Kong. This project was successfully completed in the prior year, and the next phase is due to commence in the final quarter of this financial year. Export sales outside Asia were also lower, due to project timings and in particular to the temporary slowing of sales to the Middle East caused by the FIFA World Cup in Qatar, but are expected to recover in the second half of the year.
The results of Levolux, which was sold by the Group on 26 August 2022, have been excluded from continuing operations in the current and prior period, and presented as discontinued operations.
Operational Review
Water Management
| H1 FY23 | H1 FY22 |
Revenue | £19.6m | £22.8m |
Underlying operating profit | £2.5m | £4.1m |
Underlying operating margin | 12.8% | 18.1% |
Operating profit | £2.5m | £4.1m |
Following two successive years of record performance, the Water Management Division fell back predominantly due to the timing of several significant projects, including at Chek Lap Kok airport in Hong Kong, which delivered c.£2.8m of sales to the prior period. Export sales are expected to recover in the second half of the financial year, as the next phase of the Chek Lap Kok development starts.
UK sales were strong, with several large projects for Gatic Slotdrain and Access Covers and another very good performance by our Architectural Aluminium business, Skyline, which benefitted from the successful introduction of a number of new products to complement the existing ranges.
With its greater exposure to self-build projects, Rainclear had a slower performance than the prior period, due to pressure on household income. However, it mitigated some of these effects through work with regional housebuilders, and the high profile launches of its new canopy and veranda ranges, both of which are showing early promise.
Building Envelope
Continuing operations | H1 FY23 | H1 FY22* |
Revenue | £18.3m | £14.2m |
Underlying operating profit | £2.6m | £1.9m |
Underlying operating margin | 14.1% | 13.3% |
Operating profit | £2.6m | £1.9m |
* The results for the half year to 31 December 2021 have been re-presented to show the Levolux business as a discontinued operation.
The Building Envelope Division had a very strong first half year, growing its revenue by 29%, the result of investment in high quality employees and some new products, including a very successful flat to pitch roof system along with the successfully increased promotion of the CO2 reducing product, Olivine.
Previously weaker areas of the UK have improved significantly following the strengthened representation in those areas. A good level of Academy work was won in the year. Some reasonably significant cost increases were successfully passed on. The Roofing business continues to focus on high end specification offers supported by the highest standards, and a customer focused service level which delivers low carbon systems combined with safety in installation, all supported by long term warranties. This has allowed the business to increase market share in its core areas.
Housebuilding Products
| H1 FY23 | H1 FY22 |
Revenue | £7.0m | £5.7m |
Underlying operating profit | £1.6m | £1.1m |
Underlying operating margin | 23.0% | 19.3% |
Operating profit | £1.4m | £1.1m |
Timloc, our Housebuilding Products business, had an outstanding first half, growing its revenue by 24%. This was achieved through the extended distribution of its existing products and the continued growth of new products, including the significant launch of its new range of Tile Vents. These have been very well received by the marketplace for their quality and service proposition and take Timloc into a new distribution channel of roofing merchants.
Despite the challenges of cost increases, which were successfully passed on, the Housebuilding Products Division managed to increase its operating margin to a record 23.0%. Improved efficiencies, outstanding next day service and rigorous cost controls contributed significantly to this performance.
Timloc's continued investment and focus on sustainability, including being the first building products company to become a carbon neutral manufacturer, leaves it well positioned to support the Housebuilders drive to build carbon zero homes. During 2022 Timloc moved all of its company vehicles to fully electric.
Strategic Overview
The significant improvement in the Group's performance across the last two years emanate from the execution of the Group's strategy which includes the stated objectives of:
Short-term:
· Continuing to simplify, streamline and reduce fixed costs across the Group.
Long-term:
· Drive organic growth across the Group by increasing market share and entering adjacent categories.
· Continual efficiency improvements.
· Geographical expansion within selected territories.
· New product development focused on environmental and sustainable solutions.
· Bolt-on M&A to expand products and markets.
· Use of sustainable materials with recycled and fully recyclable materials.
We have managed to streamline the business and have removed reasonable levels of cost in the last three years, while continuing to invest in capacity and capability. The Group's full year operating margin from its continuing operations increased from 8.4% in FY20 to 14.9% in FY22, and our medium term target is to increase this to between 15% and 20%.
The Group has continued to progress its long-term strategy to deliver profitable growth through leveraging its strong strategic positions in sustainable building products, and to outperform the UK construction market while continuing development of export markets. The Group's 18% increase in UK revenues is testament to that.
Alumasc is also in a very strong position to benefit from the move towards sustainable construction and green buildings, both in terms of its own actions and through the development of its portfolio of products to manage energy consumption in buildings, to produce a greener built environment, and to manage the scarce resource of water. Many internal initiatives have also been taken to act in an environmentally sustainable manner, including the sourcing of electricity from renewable sources for 100% of the Group's supply. The Group's Net Zero planning is underway.
Financial Review
Discontinued operations
The Group sold Levolux Ltd on 26 August 2022, for an initial consideration of £1. Additional consideration, contingent on a subsequent sale of the business, is unlikely to be paid and has not been included in the loss on disposal. Levolux's trading results up to the date of disposal, which were formerly reported within the Building Envelope division, have been presented within discontinued operations, together with the loss arising on disposal. Results for H1 FY22 have been re-presented accordingly.
Tax rate and earnings per share
The Group's underlying tax rate was 21.2%, above the H1 FY22 rate of 19.4% reflecting the increase of UK corporation tax rate from 19% to 25% which comes into effect from April 2023, part way through our financial year ending 30 June 2023. Underlying earnings per share for the period were 12.3p, 12.8% lower than H1 FY22 (14.1p), reflecting the lower underlying profit before tax and the higher effective tax rate. Basic earnings per share were 7.5p (H1 FY22: 11.2p).
Cash flows and net debt
| | | | H1 FY23 | H1 FY22 | ||
Underlying operating profit from continuing operations | | 6.0 | 6.5 | ||||
Underlying depreciation/amortisation | | | | 1.4 | 1.3 | ||
Underlying EBITDA | | | | 7.4 | 7.8 | ||
Change in working capital | | | | (1.9) | (2.1) | ||
Deferred VAT paid | | | | - | (0.6) | ||
Operating cash flow from continuing operations | | | | 5.5 | 5.1 | ||
| | | | | | ||
Discontinued operation | | | | - | (0.7) | ||
Operating cash flow from continuing and discontinued operations | | | | 5.5 | 4.4 | ||
| | | | | | ||
Capital expenditure | | | | (1.4) | (1.4) | ||
Interest | | | | (0.3) | (0.2) | ||
Tax | | | | (0.1) | (1.3) | ||
Pension deficit funding | | | | (1.0) | (1.3) | ||
Lease payments | | | | (0.4) | (0.4) | ||
Dividend payments | | | | (2.4) | (2.2) | ||
Purchase of own shares | | | | (0.1) | (0.4) | ||
Sub total | | | | (0.2) | (2.8) | ||
| | | | | | ||
Cash outflow on Levolux disposal | | | | (1.7) | - | ||
Other non-underlying payments | | | | (0.2) | (0.3) | ||
Net cash flow |
|
|
| (2.1) | (3.1) | ||
| | | | | | ||
Net bank debt at 31 December | | | 6.8 | 4.1 |
| ||
The Group's operating cash inflow was £5.5m (H1 FY22: £4.4m). Operating cash inflow from continuing operations as a percentage of underlying operating profit was 92% (H1 FY22: 78%). Supply chain disruption and cost price inflation eased over the period, allowing partial reversal of the selective inventory investments made over FY22 to maintain customer service. Provided these pressures continue to ease, this trend will continue in H2 FY23. Average trade working capital as a percentage of sales for the half year was 19.4% (H1 FY22: 14.6%).
Capital expenditure was £1.4m (H1 FY22: £1.4m), representing 111% of depreciation (H1 FY22: 111%). Key investments were made on capacity/capability upgrades (£0.9m), tooling for new products (£0.4m) and system upgrades (£0.1m).
Tax paid of £0.1m included the benefit of the capital allowance super-deduction, which is in place until April 2023.
The £1.0m (H1 FY22: £1.3m) of pension fund payments reflects the £1.1m reduction in annual employer contributions, from 1 October 2022, agreed at the latest triennial valuation.
The disposal of Levolux, which completed on 26 August 2022, led to a £1.7m cash outflow in the period, which represented transaction costs together with cash held by Levolux on disposal.
The net cash outflow for the period was £2.1m (H1 FY22: £3.1m). Net bank debt at December 2022 was £6.8m (December 2021: £4.1m).
Pensions and net assets
The Group's IAS19 pension deficit increased to £8.4m at December 2022 (June 2022: £2.1m, December 2021: £2.5m), as a result of market volatility reducing the value of the scheme's growth assets. This reduction exceeds the reduction in liabilities over the period, driven by the increase in bond yields, which was partially hedged, as intended, by matching assets. The deficit remains within performance scenarios considered at the 2022 triennial valuation, and the Group continues to expect the lower level of contributions agreed with trustees to bring the scheme to a fully funded position over a reasonable timeframe.
Group net assets decreased in the period by £5.0m to £20.7m, as the retained profit was exceeded by the increase in pension deficit, payment of the final dividend for FY22 and the loss on disposal of Levolux. Post tax return on investment (rolling twelve month underlying operating profit from continuing operations divided by capital invested) was 23.1% (December 2022: 19.0%, June 2022: 25.8%).
Interim Dividend
The Board has decided to declare an increased interim dividend of 3.40p (H1 FY22: 3.35p) per ordinary share, payable on 6 April 2023 to shareholders on the register on 24 February 2023.
Outlook
The Group has entered the second half with encouraging momentum, and a record half year order book fortified by the £7.0 m+ Chek Lap Kok Airport project. As a result, the Board remains confident in the Group achieving its full year expectations.
Whilst market expectations remain uncertain in the near term, the Group continues to demonstrate its ability to outperform underlying markets, through innovation and service, as well as manage costs and improve efficiency. With the majority of revenues directly linked to sustainability benefits to its customers, the Board remains confident in the significant opportunity available to the Group over the longer term.
Paul Hooper, Chief Executive
7 February 2023
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
for the half year to 31 December 2022
|
| Half year to 31 December 2022 | Half year to 31 December 2021 (restated)* | Year to 30 June 2022 | ||||
|
|
| |
| | | | |
|
| Underlying | Non-underlying |
Total | Underlying | Non-underlying |
Total |
Total |
|
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) |
Continuing operations: | Notes | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
| |
| | | | |
Revenue | 5 | 44,953 | - | 44,953 | 42,649 | - | 42,649 | 89,381 |
Cost of sales |
| (28,449) | - | (28,449) | (26,889) | - | (26,889) | (56,015) |
Gross profit |
| 16,504 | - | 16,504 | 15,760 | - | 15,760 | 33,366 |
|
|
| |
| | | | |
Net operating expenses |
|
|
|
| | | | |
Net operating expenses before non-underlying items |
|
(10,499) |
- |
(10,499) |
(9,224) |
- |
(9,224) |
(20,033) |
Other non-underlying items | 4 | - | (229) | (229) | - | (35) | (35) | (634) |
Net operating expenses |
| (10,499) | (229) | (10,728) | (9,224) | (35) | (9,259) | (20,667) |
|
|
|
|
| | | | |
Operating profit | 4, 5 | 6,005 | (229) | 5,776 | 6,536 | (35) | 6,501 | 12,699 |
|
|
|
|
| | | | |
Net finance costs | 7 | (419) | (24) | (443) | (265) | (67) | (332) | (668) |
Profit before taxation |
| 5,586 | (253) | 5,333 | 6,271 | (102) | 6,169 | 12,031 |
|
|
|
|
| | | | |
Tax expense | 8 | (1,184) | 337 | (847) | (1,217) | (34) | (1,251) | (2,421) |
Profit for the period from continuing operations |
| 4,402 | 84 | 4,486 | 5,054 | (136) | 4,918 | 9,610 |
|
|
|
|
| | | | |
Discontinued operations: |
|
|
|
| | | | |
Loss after taxation for the period from discontinued operations | 6 |
- |
(1,795) |
(1,795) |
(816) |
(84) |
(900) |
(16,657) |
|
|
|
|
| | | | |
|
|
|
|
| | | | |
Profit/(loss) for the period |
| 4,402 | (1,711) | 2,691 | 4,238 | (220) | 4,018 | (7,047) |
Other comprehensive income: |
|
| |
| | | | |
|
|
| |
| | | | |
Items that will not be reclassified to profit or loss: |
|
| |
| | | | |
Actuarial (loss)/gain on defined benefit pensions, net of tax |
|
| |
(5,404) | | |
616 | (25) |
|
|
| |
| | | | |
Items that are or may be reclassified subsequently to profit or loss: |
|
| |
| | | | |
Effective portion of changes in fair value of cash flow hedges, net of tax |
|
| |
(27) | | |
83 | 480 |
Exchange differences on retranslation of foreign operations |
|
| |
12 | | |
10 |
161 |
|
|
| | (15) | | | 93 | 641 |
|
|
| |
| | | | |
Other comprehensive (loss)/gain for the period, net of tax |
|
| | (5,419) | | | 709 | 616 |
|
|
| |
| | | | |
Total comprehensive (loss)/profit for the period, net of tax |
|
| | (2,728) | | | 4,727 | (6,431) |
|
| | |
| | | | |
Earnings per share:
|
| | | Pence | | | Pence | Pence |
|
| | |
| | | | |
Basic earnings per share |
| | |
| | | | |
- Continuing operations | 11 |
| | 12.5 | | | 13.7 | 26.8 |
- Discontinued operations |
|
| | (5.0) | | | (2.5) | (46.5) |
| 11 |
| | 7.5 | | | 11.2 | (19.7) |
|
| | |
| | | | |
Diluted earnings per share |
| | |
| | | | |
- Continuing operations |
|
| | 12.4 |
| | 13.5 | 26.4 |
- Discontinued operations |
|
| | (5.0) |
| | (2.5) | (46.5) |
| 11 |
| | 7.4 |
| | 11.0 | (20.1) |
|
| | |
| | | | |
|
| | |
| | | | |
* The results for the half year to 31 December 2021 have been re-presented to show the Levolux business as a discontinued operation.
Reconciliations of underlying to statutory profit and earnings per share are provided in notes 4 and 11 respectively.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
at 31 December 2022
|
| 31 December | 31 December | 30 June |
|
| 2022 (Unaudited) | 2021 (Unaudited) | 2022 (Audited) |
| Notes | £'000 | £'000 | £'000 |
Assets | | | | |
Non-current assets | | | | |
Property, plant and equipment - owned assets |
| 12,733 | 12,368 | 12,573 |
Property, plant and equipment - right of use assets |
| 4,444 | 5,081 | 4,926 |
Goodwill |
| 8,526 | 18,705 | 8,526 |
Other intangible assets |
| 2,035 | 3,152 | 2,126 |
Deferred tax assets |
| 2,094 | 630 | 529 |
|
| 29,832 | 39,936 | 28,680 |
Current assets |
|
| | |
Inventories |
| 14,376 | 13,488 | 13,394 |
Trade and other receivables |
| 15,462 | 16,895 | 18,786 |
Derivative financial assets |
| 314 | - | 325 |
Cash at bank | 12 | 5,962 | 2,878 | 8,284 |
|
| 36,114 | 33,261 | 40,789 |
|
|
| | |
Total assets |
| 65,946 | 73,197 | 69,469 |
|
|
| | |
Liabilities |
|
| | |
Non-current liabilities |
|
| | |
Interest bearing loans and borrowings | 12 | (12,782) | (6,963) | (13,000) |
Lease liability |
| (3,696) | (4,475) | (4,251) |
Employee benefits payable |
| (8,375) | (2,520) | (2,114) |
Provisions |
| (811) | (1,251) | (1,061) |
Deferred tax liabilities |
| (1,907) | (1,010) | (1,730) |
|
| (27,571) | (16,219) | (22,156) |
Current liabilities |
|
| | |
Trade and other payables |
| (15,259) | (16,449) | (19,031) |
Lease liability |
| (881) | (1,145) | (881) |
Provisions |
| (1,033) | (471) | (1,360) |
Corporation tax payable |
| (491) | (419) | (309) |
Derivative financial liabilities |
| - | (165) | - |
|
| (17,664) | (18,649) | (21,581) |
|
|
| | |
Total liabilities |
| (45,235) | (34,868) | (43,737) |
|
|
| | |
Net assets |
| 20,711 | 38,329 | 25,732 |
| | | | |
Equity | | | | |
Share capital |
| 4,517 | 4,517 | 4,517 |
Share premium |
| 445 | 445 | 445 |
Capital reserve - own shares |
| (587) | (435) | (601) |
Hedging reserve |
| 236 | (134) | 263 |
Foreign currency reserve |
| 228 | 65 | 216 |
Profit and loss account reserve |
| 15,872 | 33,871 | 20,892 |
Total equity |
| 20,711 | 38,329 | 25,732 |
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
for the half year to 31 December 2022
|
| Half year to | Half year to | Year to |
|
| 31 December | 31 December | 30 June |
| | 2022 (Unaudited) | 2021 (Unaudited) | 2022 (Audited) |
| Notes | £'000 | £'000 | £'000 |
Operating activities | | | | |
Operating profit from continuing operations | | 5,776 | 6,501 | 12,699 |
Adjustments for: | |
| | |
Depreciation | | 1,249 | 1,137 | 2,459 |
Amortisation | | 98 | 90 | 257 |
Loss/(gain) on disposal of property, plant and equipment | | 12 | 17 | (18) |
Increase in inventories | | (982) | (2,617) | (2,573) |
Decrease/(increase) in receivables | | 3,324 | 3,175 | (2,536) |
(Decrease)/increase in trade and other payables | | (3,796) | (3,218) | 279 |
Movement in provisions | | (577) | (379) | (298) |
Cash contributions to retirement benefit schemes | | (967) | (1,307) | (2,561) |
Share based payments | | 130 | 50 | 118 |
Cash generated by operating activities of continuing operations | | 4,267 | 3,449 | 7,826 |
| |
| | |
Operating loss from discontinued operations | | - | (1,097) | (2,125) |
Depreciation/amortisation | | - | 113 | 224 |
Movement in working capital from discontinued operations | | - | 259 | (438) |
Cash utilised by operating activities of discontinued operations | | - | (725) | (2,339) |
| | | | |
Tax paid |
| (139) | (1,320) | (1,615) |
Net cash inflow from operating activities | | 4,128 | 1,404 | 3,872 |
| |
| | |
Investing activities | |
| | |
Purchase of property, plant and equipment | | (1,378) | (1,361) | (2,449) |
Payments to acquire intangible fixed assets | | (7) | (5) | (123) |
Proceeds from sales of property, plant and equipment |
| - | - | 22 |
Payments for disposal costs of discontinued operation |
| (1,686) | - | - |
Net cash outflow from investing activities | | (3,071) | (1,366) | (2,550) |
| |
| | |
Financing activities | |
| | |
Bank interest paid | | (264) | (141) | (356) |
Equity dividends paid | | (2,381) | (2,233) | (3,434) |
Draw down of amounts borrowed |
| - | 1,000 | 7,000 |
Principal paid on lease liabilities |
| (362) | (352) | (713) |
Interest paid on lease liabilities |
| (80) | (83) | (169) |
Purchase of own shares |
| (54) | (430) | (526) |
Exercise of share based payments |
| 12 | 70 | - |
Refinancing costs |
| (262) | - | - |
Net cash (outflow)/inflow from financing activities | | (3,391) | (2,169) | 1,802 |
| |
| | |
Net (decrease)/increase in cash at bank and bank overdrafts | | (2,334) | (2,131) | 3,124 |
|
|
| | |
Net cash at bank and bank overdraft brought forward | | 8,284 | 4,999 | 4,999 |
Net (decrease)/increase in cash at bank and bank overdraft | | (2,334) | (2,131) | 3,124 |
Effect of foreign exchange rate changes | | 12 | 10 | 161 |
Net cash at bank and bank overdraft carried forward | 12 | 5,962 | 2,878 | 8,284 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the half year to 31 December 2022 |
| ||||||
|
| | | | | | |
| Share | Share | Capital reserve - |
Hedging |
Foreign currency | Profit and loss account | |
| capital | premium | own shares | reserve | reserve | reserve | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
At 1 July 2022 | 4,517 | 445 | (601) | 263 | 216 | 20,892 | 25,732 |
Profit for the period | - | - | - | - | - | 2,691 | 2,691 |
Exchange differences on retranslation of foreign operations | - | - | - | - | 12 | - | 12 |
Net loss on cash flow hedges | - | - | - | (10) | - | - | (10) |
Tax on derivative financial liability | - | - | - | (17) | - | - | (17) |
Share based payments | - | - | - | - | - | 130 | 130 |
Actuarial loss on defined benefit pension schemes, net of tax | - | - | - | - | - | (5,404) | (5,404) |
Acquisition of own shares | - | - | (55) | - | - | - | (55) |
Own shares used to satisfy exercise of share awards | - | - | 69 | - | - | - | 69 |
Exercise of share based incentives | - | - | - | - | - | (56) | (56) |
Dividends | - | - | - | - | - | (2,381) | (2,381) |
At 31 December 2022 | 4,517 | 445 | (587) | 236 | 228 | 15,872 | 20,711 |
| Share | Share | Capital reserve - |
Hedging |
Foreign currency |
Profit and loss account |
|
| capital | premium | own shares | reserve | reserve | reserve | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
At 1 July 2021 | 4,517 | 445 | (406) | (217) | 55 | 31,751 | 36,145 |
Profit for the period | - | - | - | - | - | 4,018 | 4,018 |
Exchange differences on retranslation of foreign operations | - | - | - | - | 10 | - | 10 |
Net gain on cash flow hedges | - | - | - | 103 | - | - | 103 |
Tax on derivative financial liability | - | - | - | (20) | - | - | (20) |
Share based payments | - | - | - | - | - | 50 | 50 |
Actuarial gain on defined benefit pension schemes, net of tax | - | - | - | - | - | 616 | 616 |
Own shares used to satisfy exercise of share awards | - | - | 402 | - | - | - | 402 |
Acquisition of own shares | - | - | (431) | - | - | - | (431) |
Exercise of share based incentives | - | - | - | - | - | (331) | (331) |
Dividends | - | - | - | - | - | (2,233) | (2,233) |
At 31 December 2021 | 4,517 | 445 | (435) | (134) | 65 | 33,871 | 38,329 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the half year to 31 December 2022
1. Basis of preparation
The condensed consolidated interim financial statements of The Alumasc Group plc and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) in conformity with the requirements of the Companies Act 2006 that are effective at 31 December 2022.
The condensed consolidated interim financial statements have been prepared using the accounting policies set out in the statutory accounts for the financial year to 30 June 2022 and in accordance with AIM Rule 18, and the same accounting policies will be adopted in the 2023 annual financial statements.
The consolidated financial statements of the Group as at and for the year ended 30 June 2022 are available on request from the Company's registered office at Burton Latimer, Kettering, Northants, NN15 5JP or on the website www.alumasc.co.uk.
The comparative figures for the financial year ended 30 June 2022 are not the Company's statutory accounts for that financial year but have been extracted from those accounts. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The condensed consolidated interim financial statements for the half year ended 31 December 2022 are not statutory accounts and have been neither audited nor reviewed by the Group's auditors. They do not contain all of the information required for full financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 June 2022.
These condensed consolidated interim financial statements were approved by the Board of Directors on
7 February 2023.
The Group performed ahead of the Base Case trading scenario modelled as part of the 30 June 2022 year end Going Concern review, and also compared to the stress testing performed. On the basis of the Group's financing facilities and current financial plans and sensitivity analyses, the Board is satisfied that the Group has adequate resources to continue in operational existence for twelve months from the date of signing this report and accordingly continues to adopt the going concern basis in preparing these condensed consolidated interim financial statements.
2. Estimates
The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expense. Actual results may differ from these estimates.
Except as described below, in preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 June 2022, namely the valuation of defined benefit pension obligations and the recognition of revenue and profit on contracts with customers where revenue is recognised over time.
During the six months ended 31 December 2022, management reassessed and updated its estimates in respect of retirement benefit obligations based on market data available at 31 December 2022. The resulting impact was a £7.2 million pre-tax actuarial loss, calculated using IAS 19 conventions, recognised in the six month period to 31 December 2022.
3. Risks and uncertainties
A summary of the Group's principal risks and uncertainties was provided on pages 46 to 49 of Alumasc's Report and Accounts for the year ended 30 June 2022. The Board considers these risks and uncertainties remain relevant to the current financial year.
Specific risks and uncertainties relating to the Group's performance in the second half year are:
- Continued inflation and interest increases, negatively impacting the Group's construction markets;
- Prolonged period of bad weather impacting the Group's construction markets; and
- Potential impact of the current geopolitical uncertainty globally.
4. Underlying to statutory profit reconciliation
Profit before tax | Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 |
| £'000 | £'000 | £'000 |
| |
| |
| |
| |
Underlying profit before tax from continuing operations | 5,586 | 6,271 | 12,725 |
|
| | |
Brand amortisation | (35) | (35) | (70) |
IAS 19 net pension scheme finance costs | (24) | (67) | (60) |
Restructuring costs | (194) | - | (564) |
|
| | |
Reported profit before tax from continuing operations | 5,333 | 6,169 | 12,031 |
Operating profit | Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 |
| £'000 | £'000 | £'000 |
| |
| |
Underlying operating profit from continuing operations | 6,005 | 6,536 | 13,333 |
|
| | |
Brand amortisation | (35) | (35) | (70) |
Restructuring costs | (194) | - | (564) |
|
| | |
Reported operating profit from continuing operations | 5,776 | 6,501 | 12,699 |
In the presentation of underlying profits, management disclose 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 would typically be excluded in assessing the value of the business.
In addition, management has presented certain items as non-underlying as they are non-recurring items that are judged to be significant enough to affect the understanding of the underlying trading performance of the business. In the period to December 2022, these related to one-off professional fees incurred in resolving a commercial dispute.
5. Segmental analysis
In accordance with IFRS 8 Operating Segments, the segmental analysis below follows the Group's internal management reporting structure.
Revenue | Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 |
| £'000 | £'000 | £'000 |
| |
| |
| |
| |
Water Management | 19,581 | 22,783 | 47,564 |
Building Envelope | 18,324 | 14,197 | 29,389 |
Housebuilding Products | 7,048 | 5,669 | 12,428 |
|
| | |
Group Revenue | 44,953 | 42,649 | 89,381 |
Operating profit | Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 |
| £'000 | £'000 | £'000 |
| |
| |
| |
| |
Water Management | 2,510 | 4,118 | 8,753 |
Building Envelope | 2,589 | 1,894 | 3,580 |
Housebuilding Products | 1,622 | 1,096 | 2,447 |
Unallocated central costs | (716) | (572) | (1,447) |
|
|
|
|
Underlying operating profit from continuing operations | 6,005 | 6,536 | 13,333 |
|
| | |
Non-underlying items | (229) | (35) | (634) |
|
| | |
Operating profit from continuing operations | 5,776 | 6,501 | 12,699 |
6. Discontinued operations
Discontinued operations relate to the Levolux business which was divested by the Group on 26 August 2022 and therefore disclosed as held for sale at 30 June 2022. At the year end the discontinued operation had liabilities of £3,859,000. The assets held for resale were written down to a value equivalent to the liabilities to reflect the sales proceeds of £1 received on 26 August 2022. In the period to 31 December 2022, a further loss on disposal of £1,795,000 was recorded, representing cash held by Levolux at the date of disposal, other related write downs and transaction costs.
The results of Levolux included in the condensed consolidated interim statement of comprehensive income are as follows:
| Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 |
| £'000 | £'000 | £'000 |
|
| | |
Revenue | 436 | 3,620 | 7,820 |
|
|
| |
Underlying operating loss | - | (1,013) | (1,957) |
Brand amortisation | - | (84) | (168) |
Write down of goodwill | - | - | (10,179) |
Write down of brand | - | - | (874) |
Write down of Assets held for sale | - | - | (3,859) |
Loss on disposal | (1,795) | - | - |
Loss before taxation | (1,795) | (1,097) | (17,037) |
Tax credit | - | 197 | 380 |
|
| | |
Loss after taxation | (1,795) | (900) | (16,657) |
7. Finance expenses
| Half year to | Half year to | Year to |
| 31 December | 31 December | 30 June |
| 2022 | 2021 | 2022 |
| £'000 | £'000 | £'000 |
|
| | |
Finance costs - Bank overdrafts | 12 | 19 | 48 |
- Revolving credit facility | 327 | 163 | 391 |
- Interest on lease liabilities | 80 | 83 | 169 |
| 419 | 265 | 608 |
- IAS 19 net pension scheme finance costs | 24 | 67 | 60 |
| 443 | 332 | 668 |
8. Tax expense
| Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 |
| £'000 | £'000 | £'000 |
| | | |
Current tax: |
| | |
UK corporation tax - continuing operations | 438 | 868 | 1,094 |
- discontinued operations | - | (197) | (380) |
Overseas tax | 10 | 54 | 207 |
Amounts over provided in previous years | - | - | (16) |
Total current tax | 448 | 725 | 905 |
|
| | |
Deferred tax: |
| | |
Origination and reversal of temporary differences | 399 | 329 | 833 |
Amounts under provided in previous years | - | - | 78 |
Rate change adjustment | - | - | 225 |
Total deferred tax | 847 | 329 | 1,136 |
|
| | |
Total tax expense | 847 | 1,054 | 2,041 |
|
| | |
Tax charge on continuing operations | 847 | 1,251 | 2,421 |
Tax credit on discontinued operations | - | (197) | (380) |
| | | |
Total tax expense | 847 | 1,054 | 2,041 |
Deferred tax recognised in other comprehensive income: |
| | |
Actuarial (losses)/gains on pension schemes | (1,801) | 205 | (9) |
Cash flow hedge | 17 | 20 | 113 |
Tax (credited)/charged to other comprehensive income | (1,784) | 225 | 104 |
| | | |
Total tax (credit)/charge in the statement of comprehensive income | (937) | 1,279 | 2,145 |
9. Dividends
The Directors have approved an interim dividend per share of 3.40 pence (2021/22: 3.35 pence) which will be paid on 6 April 2023 to shareholders on the register at the close of business on 24 February 2023. The cash cost of the dividend is expected to be £1,217,000. In accordance with accounting requirements, as the dividend was approved after the statement of financial position date, it has not been accrued in the interim consolidated financial statements. A final dividend per share of 6.65 pence in respect of the 2021/22 financial year was paid at a cash cost of £2,381,000 during the six months to 31 December 2022.
10. Share Based Payments
During the period the Group awarded 225,000 options (2021/22: 160,000) under the Executive Share Option Scheme ("ESOS"). These options have an exercise price of 150 pence and require certain criteria to be fulfilled before vesting. 15,380 existing options were exercised during the period (2021/22: 78,810) and 104,620 existing options lapsed (2021/22: 41,190).
Total awards granted under the Group's Long Term Incentive Plans ("LTIP") amounted to 307,264 (2021/22: 214,020). LTIP awards have no exercise price but are dependent on certain vesting criteria being met. 22,175 existing LTIP awards were exercised during the period (2021/22: 228,511) and 48,717 existing LTIP awards lapsed (2021/22: 109,713).
11. 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:
| Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 |
| £'000 | £'000 | £'000 |
| | | |
Net profit attributable to equity holders - continuing operations | 4,486 | 4,918 | 9,610 |
Net profit attributable to equity holders - discontinued operations | (1,795) | (900) | (16,657) |
| 2,691 | 4,018 | (7,047) |
| 000s | 000s | 000s | |
| | | | |
Basic weighted average number of shares | 35,806 | 35,821 | 35,825 | |
Dilutive potential ordinary shares - employee share options | 334 | 549 | 586 | |
Diluted weighted average number of shares | 36,140 | 36,370 | 36,411 | |
|
| | | |
| Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 | |
| Pence | Pence | Pence | |
Basic earnings per share: | | | | |
Continuing operations | 12.5 | 13.7 | 26.8 | |
Discontinued operations | (5.0) | (2.5) | (46.5) | |
| 7.5 | 11.2 | (19.7) | |
Diluted earnings per share: | | | | |
Continuing operations | 12.4 | 13.5 | 26.4 | |
Discontinued operations | (5.0) | (2.5) | (46.5) | |
| 7.4 | 11.0 | (20.1) | |
11. Earnings per share (continued)
Calculation of underlying earnings per share: |
| |||
|
| |||
| Half year to 31 December 2022 | Half year to 31 December 2021 | Year to 30 June 2022 |
|
| £'000 | £'000 | £'000 |
|
| | | |
|
Reported profit before taxation from continuing operations | 5,333 | 6,169 | 12,031 |
|
Brand amortisation | 35 | 35 | 70 |
|
IAS 19 net pension scheme finance costs | 24 | 67 | 60 |
|
Restructuring costs | 194 | - | 564 |
|
|
| | |
|
Underlying profit before taxation from continuing operations | 5,586 | 6,271 | 12,725 |
|
Tax at underlying Group tax rate of 21.2% (2021/22 first half year: 19.4%; full year: 19.4%) | (1,184) | (1,217) | (2,469) |
|
Underlying earnings from continuing operations | 4,402 | 5,054 | 10,256 |
|
|
| | |
|
Weighted average number of shares | 35,806 | 35,821 | 35,825 |
|
Underlying earnings per share from continuing operations | 12.3p | 14.1p | 28.6p |
|
12. Movement in borrowings
|
Cash at bank /bank overdrafts |
Bank loans |
Net bank cash/(debt) |
Lease liabilities |
Total borrowings |
| £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | |
At 1 July 2022 | 8,284 | (13,000) | (4,716) | (5,132) | (9,848) |
Cash flow movements | (2,334) | 262 | (2,072) | 362 | (1,710) |
Non-cash movements | - | (44) | (44) | 193 | 149 |
Effect of foreign exchange rates | 12 | - | 12 | - | 12 |
|
|
|
|
|
|
At 31 December 2022 | 5,962 | (12,782) | (6,820) | (4,577) | (11,397) |
| Cash at bank /bank overdrafts |
Bank loans |
Net bank cash/(debt) |
Lease liabilities |
Total borrowings |
| £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
| |
At 1 July 2021 | 4,999 | (5,936) | (937) | (5,606) | (6,543) |
Cash flow movements | (2,131) | (1,000) | (3,131) | 352 | (2,779) |
Non-cash movements | - | (27) | (27) | (366) | (393) |
Effect of foreign exchange rates | 10 | - | 10 | - | 10 |
|
|
|
|
|
|
At 31 December 2021 | 2,878 | (6,963) | (4,085) | (5,620) | (9,705) |
13. Related party disclosure
The Group has a related party relationship with its Directors and with its UK pension schemes. There has been no material change in the nature of the related party transactions described in note 29 of Alumasc's Report and Accounts for the year ended 30 June 2022.
Responsibility Statement
The Directors confirm that, to the best of their knowledge, the condensed consolidated interim financial statements have been prepared in accordance with Alternative Investment Market ("AIM") Rule 18.
On behalf of the Board
Paul Hooper Simon Dray
Chief Executive Group Finance Director
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