7 September 2021

IMMEDIATE RELEASE

THE ALUMASC GROUP PLC

("ALUMASC")

FULL YEAR RESULTS ANNOUNCEMENT

STRONG PERFORMANCE ACROSS ALL DIVISIONS; WELL-POSITIONED TO BENEFIT FROM LONG-TERM GROWTH DRIVERS

Alumasc (ALU.L), the premium sustainable building products, systems and solutions Group, announces results for the year ended 30 June 2021.

Commenting on the results reported today, Paul Hooper, Chief Executive, said:

"After a record first half performance, in which volume growth was supplemented by around £2.5m of sales delayed from 2020 by the initial Covid-19 lockdown, the numbers today reflect the determined efforts by Alumasc employees across the Group to ensure the underlying momentum was maintained throughout the second half.

I am delighted to report this excellent set of results to our shareholders and believe Alumasc is well-positioned to benefit from the long-term growth drivers in our market."

Financial Highlights:

·      Double-digit growth in revenues from continuing operations: £90.5m (2019/20: £76.0m): +19.0%

·      Group underlying operating profit £11.0m (2019/20: £4.2m): +162% reflecting both strong growth and the benefit of structural cost and efficiency gains

·      Underlying operating margin: 12.2% (2019/20: 5.5%)

·      Reported PBT £9.8 million (2019/20: £2.7 million)

·      Robust balance sheet with net bank debt of £0.9m (2020: £4.3m).  Headroom c.£23m

·      Underlying EPS: 23.7p (2019/20: 8.2p): +189%

·      Basic EPS: 21.2p (2019/20: 6.3p)

·      Final dividend: 6.25p (2019/20: nil)

o  Full year dividend 9.5p (2019/20: 2.0p)

 

Operational Highlights: Strong performance in all divisions

·      Water Management Division delivered an excellent performance with operating profit of £6.1m (2019/20: £4.8m), indicative of the potential for the business as market conditions normalise

·      Building Envelope Division saw a significant revenue increase of £7.8m (+24%) and a £5.2m operating profit improvement, including a £1.4m turnaround at Levolux, resulting in the division achieving a double-digit underlying margin of 10.4%

·      Housebuilding Products (Timloc) had an outstanding year growing its revenue by 22% and operating profit by 105% versus a Covid affected prior year

o  Operating margin 23% (2019/20: 13.7%)

o  Long-term growth drivers remain strong

·      The Alumasc portfolio is aligned to environmental growth drivers, with c.80% of sales derived from environmental solution products

Outlook:

·      Alumasc remains well-positioned to deliver sustainable growth, underpinned by a clear strategy and strong market positions:

o  Water Management is benefitting from both its UK and export-focussed strategy

o  Building Envelope entered the new year with a strong order book, supported by the benefits of the recent restructuring

o  Housebuilding Products (Timloc) continues to innovate and develop new products, against a favourable UK housebuilding backdrop

·      The Group's cost savings programme, liquidity management, strong balance sheet and improved commercial positioning underpin a robust platform that positions Alumasc to benefit from the long-term growth drivers in our markets

·      The Board is cognisant of the potential for short-term disruption to our customers' operations from shortages of building materials, labour and road haulage, and delays in the global container shipping industry

·      Notwithstanding these risks, the Board believes Alumasc's strong platform provides confidence for another year of progress

Enquiries:

The Alumasc Group plc	+44 (0)1536 383844
Paul Hooper (Chief Executive)
Simon Dray (Group Finance Director)
Peel Hunt (Broker)	+44 (0)207 418 8831
Mike Bell
Ed Allsopp
finnCap (NOMAD)	+44 (0)207 220 0561
Julian Blunt
Camarco (Financial PR)	[email protected]
Ginny Pulbrook	+44 (0)203 757 4992
Daniel Sherwen	+44 (0)203 781 9241

 

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

This has been an extremely successful year for Alumasc.

There have been several reasons for this:

·      Our industry -principally UK construction - was fortunate to be able, indeed encouraged, to continue operating, despite the presence of the Covid pandemic throughout the year. We pursued this opportunity enthusiastically while abiding by, and in many cases exceeding, the stringent rules introduced to manage the attendant risks.

 

·      Following the temporary closures that did occur, both of our own operations and of those of our customers, during the latter part of the prior financial year, a number of projects resumed during the year under review, creating demand arguably above the underlying level. This demand was not easy to accommodate, particularly within the Covid rulebook and with Brexit looming. However, the combination of prudent stock building and magnificent co-operation from our workforce enabled us to sustain a high level of service in response. We believe that gains in market share were won as a result.

 

·      During the year prior to that under review, Alumasc had significantly streamlined its business, reducing the number of operating/manufacturing sites from ten to six and taking costs out of the business amounting to some £2.4 million per annum in the process. As a result, a higher proportion of the margins earned on healthy sales was converted to profit and profit margins rose as a result.

 

·      Finally, and perhaps most significantly, our management teams and their colleagues throughout the company responded with calmness and determination to the very uncertain conditions brought about by the pandemic and made this outcome possible. I thank them all on behalf of fellow Shareholders and Directors.

Performance

Revenues of £90.5 million were £14.5 million (19.0%) ahead of the prior year, which was badly affected by Covid. They were very slightly ahead of the previous "pre-pandemic" year. Roofing Products grew by a remarkable 62% year on year and Housebuilding Products by 22%, both arguably benefitting from the demand that was building during the interruptions suffered in the prior year. Levolux was the only business that saw a reduction in sales, reflecting both the weakness in commercial activity in the period and the intentional focusing of that business to a narrower, more selective market.

Profit, however, was well ahead, not just of the depressed prior year but also of the earlier year, not so affected. Trading Profit of £12.9 million, hence trading margins, were double that of the earlier year, reflecting the reduction in costs referred to above and further efficiencies achieved during the intervening period. See note 4.

Similar improvements in the group's profit have benefitted cash and more than recovered the group's capacity to pay dividends.

Alumasc's focus on the prudent management of cash has reduced net bank debt from £5.1 million two years ago to £4.3 million one year ago at the height of the Pandemic's impact, and further to £0.9 million at 30 June 2021. With debt facilities in excess of £20 million, this places the group in a strong position for further development.

 

 

 

 

Dividend

The unpredictable consequences of Covid led your Board to suspend dividend payments in the conservation of cash during the first half of last year; and payments were only resumed, albeit at a low level by historical standards, as the year progressed. It is enormously gratifying to be able to recover this year's dividend payment above pre-pandemic levels and your Board is recommending an increase in the final dividend to 6.25p per share (2020: 2p per share), making a total for the year of 9.5p. This compares with a total of 2p in 2019/20, and 7.35p in the earlier "pre-pandemic" year.

Strategy and Corporate Activity

The principal focus has been operational during the year, always within the strategic framework set out in this and previous reports. Hence, it has been a quiet year in the corporate sphere. There has, however, been progress on the twin fronts of outperforming our sector and evolving our sustainable credentials, illustrated by the ESG Statement in the full Annual report and accounts.

Pensions

There has been significant progress also in reducing the pensions legacy, partly due to the impact of rising gilt yields on our liabilities, and partly to an excellent investment performance.

The Boardroom

Following six years in the post, David Armfield resigned his non-executive directorship during the year in order to concentrate on his other activities. I am grateful to David for his wise support during his time with Alumasc and wish him every success.

In March this year, Simon Dray was appointed to the vacant position of Group Finance Director and is a welcome addition to our team. His broad experience is well matched to our strategic targets and public company responsibilities.

Prospects

It is never easy to follow such success, particularly when an element of that success was due to an abnormal carry over of demand from the prior year. However, demand from our markets remains buoyant, including an anticipated partial recovery from the much depressed commercial sector, which unsurprisingly was most affected by the events of the past year and a half.

The principal area of concern, therefore, relates to the availability of materials and human resources to meet this demand and the cost implications of shortages, which may dampen demand in certain areas, possibly permanently delaying some projects already in the pipeline. At present, the industry understands and is absorbing these rising costs and additional capacity has a way of soon following on the heels of unsatisfied demand.

It is therefore reasonable to anticipate another strong performance from Alumasc in the coming year, as the UK economy recovers from its recent misfortunes.

 

 

John McCall
Chairman

 

 

Chief Executive's Review

Financial Highlights and Overview

 

 

	2020/21	2019/20	% change
Group performance:
Revenue (£m) *	90.5	76.0	+19%
Underlying profit before tax (£m) *	10.5	3.7	+187%
Statutory profit before tax (£m)	9.8	2.7	+263%
Underlying earnings per share (pence) *	23.7	8.2	+189%
Basic earnings per share (pence)	21.2	6.3	+237%
Dividends per share (pence)	9.5	2.0	+375%

* A reconciliation of underlying to statutory profit before tax is provided in note 5

Covid-19

The response of our employees to the challenges faced this year has been exceptional.  Covid-19 has brought many difficult challenges but our number one priority is always the health, safety and wellbeing of our people and visitors to sites.  The actions taken to comply, as a minimum, with government advice has resulted in several unannounced HSE visits that have confirmed the actions taken with very positive feedback being received.  During the year we had one small Covid-19 outbreak involving less than 20 people.  Swift management action contained this with a full return to work within 10 days.  Our new norm allowed us to adapt our working practices to have more people working from home while maintaining a good premium customer service.  I am immensely proud of our incredible people and all that they have achieved.

Overview of performance

Following an outstanding and record performance in H1, which included around £2.5 million of pent-up demand revenue carried forward from the prior year Covid affected lockdown, Alumasc's underlying momentum was maintained throughout H2, despite the effects of Brexit.  Growth was achieved in all three divisions against a backdrop of resilient building and construction activity along with market share gains.  In addition, raw material and shipping cost increases to date have been successfully recovered through sales price increases.

Close control of costs and the benefit of the restructuring implemented in FY 2020 have also contributed to the improved profitability.  Levolux delivered a substantially improved performance during the financial year, returning to consistent profitability on improved tendering and contract management disciplines and a streamlined cost base.

The star performer of the year was undoubtedly the Building Envelope Division which turned a prior year loss of £0.9 million into a £4.3 million profit.  This was a testament to several factors, but both parts of this division, Roofing and Levolux, contributed significantly.  As you will see in the section on this division it was really a volume/market share increase that improved Roofing's performance while Levolux had a significant turnaround into profit from a prior year loss assisted by significant cost reductions and efficiency improvements.

The remaining two divisions had record performances, both driven by volume/market share gains and operational efficiencies.  New products were also important and, in particular, for the Housebuilding Products Division which launched a record number, supported by its industry leading service, with some considerable success. 

 

 

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

Although the impact of Covid-19 makes any analysis of the most recent year difficult when compared with the consistent outperformance of the previous years we have however gained market share and grown the business.

2.      Augment UK revenue growth through the development of selected export markets

Compared to the prior year in which export revenues were 15% of Group revenues, during the year under review export revenues were 14% of Group revenue. However, actual export sales grew by £1.1 million (10%). Export sales at AWMS (Gatic and Wade) were marginally behind the prior year, due to a large one-off European order in 2019/20.  However sales to the Far East grew strongly, supported by investment in both sales and marketing. The year end export order book for AWMS stood at £1.7 million, versus £1.2 million at the prior year end.

Meanwhile, Levolux accelerated its export revenue by a strong 32%. At the start of the new financial year a second 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 grew from a Covid affected prior year 5.5% to 12.2% (and also improved on underlying operating margins in 2019 of 6.5%) representing a pleasing result.  This movement into a 'double-digit percentage' return has been achieved earlier than expected.  The prior year's structural £2.4 million cost savings have been a significant contribution along with increased sales.

Executing our priorities in FY20/21

Management accelerated the pace of strategic development during its 2021 financial year:

1.   Levolux business improvement plan

The objective of this plan was to return Levolux to sustainable profit.  At the start of the 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 has increased Levolux's existing market reach and leverages existing strong customer relationships.  This is the second year of this new division's formation.

This objective is being achieved and examples where the 'cross-sell' and single expert service has been welcomed by specifiers and clients are growing.  There are several examples of this including the new DWP Welsh Valleys offices.

• Leverage core strengths.  Focus on design and supply activities as we do in the rest of the Alumasc Group. In-house installation will only be offered where this service is particularly valuable to customers and Levolux. Over time this will improve margin mix and enhance profit margins.

This objective is being achieved 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 £4.7 million (+32% v PY). This objective was achieved with a US-based Senior VP appointed.

• Reduce overhead.  We announced a significant restructuring of the existing Levolux operational and overhead cost base, including a relocation of sites, with fixed cost savings achieved of £1.8 million in the Group's 2019/20 financial year versus a target £1.0 million, and further significant annualised savings of £0.7 million. These benefits have assisted the 2020/21 financial year.

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. This will continue to be a focus going forward.

3.   Implementation of a more cost-efficient operating structure

Following the move in the prior year 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 £0.6 million per annum has been saved in leased property costs.  The objective to move to six facilities from ten has also been achieved. 

Total annualised cost savings of £2.4 million were achieved in the prior year versus a target of £2.0 million and these structural cost savings have assisted the current year.

4.   Prioritising and focusing investment to drive profitable growth

 Capital expenditure was £2.0 million, slightly below depreciation which was £2.3 million.

Once again investment has been focused on our businesses with the greatest manufacturing activity: our Water Management business and Timloc.  Within this was a continued 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, including 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. 

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 target 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 recyclable 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 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.

All divisions have plans in place to work towards the Net Zero government led construction targets by 2050.

Overview of performance

Revenue analysis

Revenue grew by £14.5 million (19%) compared to a prior year Covid affected performance.  This included some carry over of pent-up demand from the Covid-disrupted prior year but also, significantly, benefitted from investing in high quality Roofing salesmen, launching new products and winning market share.

Gross margin

Alumasc's Gross Margin grew by 6.2 percentage points, to 35.9%, a very strong performance and a great testament to the management actions taken in saving costs, increasing efficiencies and growing margins.

Net fixed and operating expenses                                  

Net fixed and operating expenses increased by £1.9 million (excluding any furlough benefit in FY20) during the year mainly due to increased sales resource and variable remuneration.

Underlying operating profit

Underlying operating profit was £11.0 million compared with £4.2 million in the prior year.  This was a very strong performance with all 3 divisions performing significantly better than the prior year.

Bank interest

Bank interest of £0.3 million was similar to the prior year. 

Underlying profit before tax

Underlying profit before tax was £10.5 million (2019/20: £3.7 million - Covid affected).

Non-underlying, non-recurring items 

Non-underlying and non-recurring items amounted to a £0.7 million net cost in the period compared with a £1.3 million net cost in the prior year. Further details are given in the Financial Review.

Coronavirus Job Retention Scheme

Government grant income of £0.1 million was repaid during the period in relation to Coronavirus Job Retention Scheme income that had been claimed in the previous financial period for employees that have, unfortunately, subsequently been made redundant.

 

Profit after tax for the year

The Group's resulting overall statutory profit after tax for the year was £7.6 million (2019/20: £2.3 million).

Divisional review                                              

(a)    Water Management

 

 

Revenue: £38.4 million (2019/20: £33.7 million)

Underlying operating profit*: £6.1 million (2019/20: £4.8 million)

Underlying operating margin*: 15.9% (2019/20: 14.3%)

Operating profit: £6.0 million (2019/20: £4.6 million)

 

* Prior to restructuring costs of £0.1 million in 2019/20 and brand amortisation charges of £0.1 million in both years

 

 

Water Management produced a record profit of £6.1 million which was £1.3 million (27%) higher than the previous year.

The drivers of the improvement were revenue related (which increased by £4.7 million (14%)) and 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 15.9% from a prior year of 14.3%.  This was a very encouraging performance and is indicative of improved margins.

(b)    Building Envelope

 

Revenue: £41.0 million (2019/20: £33.2 million)

Underlying operating profit / (loss)*: £4.3 million (2019/20: £(0.9) million)

Underlying operating margin*: 10.4% (2019/20: (2.8)%)

Operating profit / (loss): £4.1 million (2019/20: £(1.4) million)

 

* Prior to restructuring costs of £0.3 million in 2019/20 and brand amortisation charges of £0.2 million in both years

 

The Building Envelope division sells principally into the high end UK commercial and residential new build construction market.

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 showed in the year with an outstanding £1.4 million turnaround from a £0.9 million loss to an encouraging £0.5 million profit.  This was the result of following the very effective turnaround plan.

Alumasc Roofing's performance was outstanding and driven strongly within the Refurbishment sector.  Five new salespeople were recruited and significantly strengthened some of our historically under-represented markets in the UK whilst technical services staffing was increased across the country.  It went from strength to strength and with the pressure of Covid-19 encouraging more external work, particularly for schools and health boards, Roofing benefited and increased its revenue stream whilst also securing additional market share.

(c)     Housebuilding Products

 

Revenue: £11.1 million (2019/20: £9.1 million)

Underlying operating profit*: £2.6 million (2019/20: £1.2 million)

Underlying operating margin*: 23.0% (2019/20: 13.7%)

Operating profit: £2.5 million (2019/20: £1.2 million)

 

* Prior to restructuring costs of £0.1 million in 2020/21

 

Timloc, our Housebuilding Products Division, had an outstanding year growing its revenue by 22% and PBIT by 105% (versus a Covid affected prior year).  In addition, during a challenging year, Timloc continued to launch new products, improve efficiencies and maintain 100% OTIF to customers.  Timloc continues to receive very positive feedback from its customers on its excellent service and promotes this through its '#TrustTimloc to deliver' strapline.

New product development is an important factor in Timloc's success and during the year it successfully launched a number of new products including Rad-Seal face-fix, FR60 fire rated cavity closer and FRSTOP cavity stop socks.

With its constant focus on improving efficiencies, new product development and customer service Timloc is well positioned to maximise opportunities presented by the housebuilding sector.

Outlook

Alumasc's cost savings programme, liquidity management, strong balance sheet and improved commercial positioning underpin a robust platform that positions Alumasc to benefit from the long-term growth drivers in our markets.  Alumasc's primary aim is to manage the long-term sustainability of the business and to focus on its key strategic objectives, growing revenues faster than the UK construction market and being a supplier of sustainable building products.

The Board believes Alumasc remains well positioned to deliver sustainable earnings progression, underpinned by a clear strategy and strong market positions, together with:

 

• Water Management benefiting from both its UK and export-focussed strategy, and a growing online offering;

 

• Building Envelope entered the new year with a strong order book, supported by specification cross-selling and restructuring benefits;

 

• Housebuilding Products continues to innovate and develop new products, against a favourable backdrop of structural UK housing shortage; and

 

• the major restructuring of the Levolux business within the Building Envelope Division.

 

Further investment opportunities exist in:

 

• sales resource and manufacturing capacity

 

• bolt-on M&A to expand capabilities, product range and routes to market.

 

Demand remains strong entering the new financial year, which has started in line with management's expectations. The Board is however cognisant of the potential for short-term disruption to our customers' operations from shortages of building materials, labour and road haulage, and delays in the global container shipping industry.

Notwithstanding these risks, a strong platform is now in place which should provide the Board with confidence for another strong year.

 

 

 

 

 

Paul Hooper

Chief Executive

7 September 2021

 

 

 

 

Financial Review

 

Reconciliation of underlying to statutory profit before tax

The underlying profit before tax for the 2020/21 financial year of £10.5 million reconciles to the statutory profit before tax of £9.8 million as follows:

	2020/21 £m	2019/20 £m
Underlying profit before tax	10.5	3.7
Brand amortisation	(0.2)	(0.2)
Net IAS 19 defined benefit pension scheme costs	(0.3)	(0.3)
IAS 19 past service cost in respect of GMP equalisation	(0.1)	-
Restructuring & relocation costs	(0.1)	(0.8)
Net gain from business disposals	-	0.3
Statutory profit before tax	9.8	2.7

 

The reconciling items were:

·      Amortisation of acquired brands of £0.2 million (2019/20: £0.2 million). This is a non-cash charge arising from the application of accounting standards, to write off the estimated value of brands associated with acquired businesses over their anticipated useful life.
 

·      Net IAS 19 defined benefit pension scheme costs of £0.3 million (2019/20: £0.3 million) are also non-cash charges. These relate to the Group's legacy defined benefit pension scheme, which was closed to future accrual in 2009. The value of the charge is determined by actuarial assessment and represents the notional financing cost of the Group's pension deficit.
 

·      A one-off IAS 19 past service cost of £0.1 million (2019/20: £nil), representing an increase in the estimated cost of guaranteed minimum pension equalisation between men and women, following a High Court ruling in November 2020.
 

·      One-off restructuring and relocation costs of £0.1 million (2019/20: £0.8 million) following changes in the estimated cost of several material reorganisation projects, which were announced during the 2019/20 financial year. 
 

·      The net gain from business disposals was recognised in the prior year following the receipt of £0.3 million of deferred consideration relating to the divestment of the Alumasc Facades business.
 

Taxation

The Group's underlying effective tax rate was 19.5% (2019/20: 20.3%), 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 2021/22 financial year.

The Group's effective tax rate on statutory profit before tax was 22.6% (2019/20: 16.4%). 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 and the deferred tax impact of the increase in future tax rate from 19% to 25% from 1 April 2023.

 

Earnings per share

 

Underlying earnings per share for the year was 23.7 pence (2019/20: 8.2 pence). This increase is consistent with the increased underlying profit before tax for the year.

Basic earnings per share of 21.2 pence (2019/20: 6.3 pence) reflected both the increase in underlying profit before tax for the year and the lower level of non-underlying costs in 2020/21 relative to 2019/20.

 

 

Dividends

 

The Board have recommended to shareholders a final dividend of 6.25 pence per share (2019/20: 2.0 pence), which will absorb an estimated £2.2m of shareholders' funds. This has not been accrued in these accounts as it was proposed after the end of the financial year. Subject to shareholder approval at the Annual General Meeting, it will be paid on 29 October 2021 to members on the share register on 24 September 2021.

Together with the interim dividend of 3.25p (2019/20: nil) paid to shareholders on 6 April 2021, this will bring the total distribution for the year to 9.5 pence per share (2019/20: 2.0 pence), which is covered 2.5 times (2019/20: 4.1 times) by underlying earnings per share.

The Board continues to follow a progressive distribution policy, where dividends rise broadly in line with earnings, while maintaining sensible cover.

Summarised Cash Flow Statement
				2020/21 £m	2019/20 £m
EBITDA *				13.8	6.2
Change in working capital				(0.7)	0.7
VAT (paid)/deferred				(1.1)	1.8
Operating cash flow				12.0	8.7
Capital expenditure				(2.0)	(1.7)
Interest				(0.2)	(0.3)
Tax				(0.2)	(0.1)
Pension deficit funding				(2.6)	(2.3)
Finance lease payments				(0.9)	(0.5)
Dividend payments				(1.9)	(1.6)
Sub total				4.2	2.2
Non-underlying payments				(0.8)	(1.4)
Net cash flow				3.4	0.8
Net bank debt at the year end				0.9	4.3
* EBITDA: Underlying operating profit from continuing operations before interest, tax, depreciation and amortisation

 

Cashflows and net debt

At the onset of the Covid-19 pandemic in the UK, in the second half of financial year 2019/20, the Group undertook a series of measures to conserve cash, including agreements to defer £1.8 million of VAT and £0.6 million of pension payments.  The Group's cash management activities in financial year 2020/21 have been focused on repaying these deferred amounts as they fall due, along with managing the working capital demands of a period of strong growth.

The Group's operating cashflow was £12.0 million (2019/20: £8.7 million), after a cash outflow into working capital of £1.8 million, which includes payment of £1.1 million of VAT deferred from 2019/20 (2019/20: £2.5 million inflow, with £1.8 million of VAT payment deferral).  The remaining £0.7 million VAT deferral will be repaid in the first half of 2021/22. Trade working capital as a percentage of revenue was 13.9% at 30 June 2021 (30 June 2020: 17.7%).

Capital expenditure was £2.0 million (2019/20: £1.7 million), representing 86% of depreciation (2019/20: 87%).  The main investments were on upgrading equipment at our Housebuilding Products facility in Howden, East Yorkshire, and tooling at our Water Management division. The Board see further opportunities for targeted investments to deliver organic growth, and expect capital expenditure to remain above depreciation for the medium term.

Tax payments of £0.2 million were made in the year (2019/20: £0.1 million).  The current year payment is stated net of a £0.4 million (2019/20: £nil) tax refund relating to financial year 2018/19.

The Group recorded a net cash inflow for the year of £3.4 million (2019/20: £0.8m), reducing net debt at 30 June 2021 to £0.9 million (30 June 2020: £4.3 million).

Statement of financial position and return on investment

Group net assets increased by £16.3 million in the year to £36.1 million at 30 June 2021, a consequence of the profit retained for the year and a reduction in the pension deficit.

The Group defines its capital invested as the sum of shareholders' funds, including historic goodwill but excluding net bank debt, pension deficit (net of tax) and lease liabilities. Post tax return on investment (underlying operating profit divided by capital invested) was 19.8% (2019/20: 7.2%), reflecting the improved operating performance and close management of capital employed during the year.

 

Pensions

The Group accounts for its defined benefit retirement obligations in accordance with IAS 19 Employee Benefits, based on the market value of scheme assets and a valuation of scheme liabilities using a discount rate based on AA corporate bond yields at year end. The IAS 19 defined benefit pension scheme deficit at 30 June 2021 was £4.6 million (30 June 2020: £19.3 million). Scheme assets increased by £9.2 million, on a strong investment performance and £2.6 million of deficit reduction payments made by the Group in the period.  Scheme liabilities decreased by £5.5 million, with an increase in the discount rate offsetting an increase in inflation.  As funding levels rise, the scheme is adopting a lower risk investment strategy, in which interest rate and inflation risks are more closely hedged, which should reduce volatility in the deficit valuation going forward.

 

The deficit reduction payments are agreed between the Group and the scheme's trustees, based on triennial actuarial valuations.  At the last review on 31 March 2019, Alumasc agreed to pay £2.3m annually under a seven year recovery plan.  As part of its Covid-19 cash conservation measures, the Group agreed with the trustees to defer £0.6 million of deficit reduction payments due in financial year 2019/20.  £0.4 million of this was repaid over financial year 2020/21, and the remaining £0.2 million will be repaid in the first half of financial year 2021/22.

 

Banking facilities and covenants

 

The Group maintains facilities with its banking partners to ensure the availability of sufficient liquidity to meet the Group's operational and strategic needs, at optimal cost. The Group projects facility utilisation and compliance with the associated covenants during its short-term forecasting, annual budgeting and strategic planning exercises to ensure adequate headroom is maintained.

 

During the year, the expiry date of the Group's revolving credit facility was extended by one year.  Alumasc's current banking facilities comprise:

 

· An unsecured committed three-year revolving credit facility of £20.0 million, with a revised expiry date of April 2023 and a further one year extension period;

· Overdraft facilities, repayable on demand, of £4.0 million.

 

The covenants associated with these facilities are set out below, together with the reported figures at 30 June 2021 and 2020:

 

 

                                                                      Covenant             30 June 2021             30 June 2020

Net debt: EBITDA                                            <3.5*                                0.1                                0.8

Interest cover                                                     >2.5*                              42.1                              17.3

 

* changes to <2.5 and >4 from 31 December 2021.

 

Going Concern

 

In assessing the Group's ability to continue as a going concern, the Board has considered medium-term forecasts based on the Group's approved budget and three year plan. The Board has also considered stress test scenarios modelled on both a resumption of Government lockdowns and a 20% reduction in revenue for the period to September 2022.

Under the stress test scenarios, there remained adequate headroom in banking facilities and no breach of banking covenants over the period covered by the models. The Board also took note of the Group's further ability to reduce its cost base and/or conserve cash resources at short notice if necessary.

A reverse stress test scenario, that would lead to a breach of the Group's banking covenants, was also modelled. The Board considered the risk of such a scenario arising to be remote.

Having taken into account the scenario models above, 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.

 

 

Simon Dray

Group Finance Director

7 September 2021

 

 

The contents of this announcement have been extracted from the annual report and accounts for the year ended 30 June 2021 which will be dispatched to shareholders on or around 23 September 2021 and will be available at www.alumasc.co.uk.

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

Risks and uncertainties	Mitigating actions taken
COVID-19   Comment   The Coronavirus pandemic is still impacting our customers' businesses and the way we work. As the duration of the pandemic is uncertain, concerns remain over the potential risk of future lockdowns and restrictions returning together with possibly new variants of Covid-19.	·      The company took swift action in 2020 and managed costs and cash flow intensively. Capital expenditure and non-essential new hires were delayed. ·      The primary focus was on the health and wellbeing of staff and additional communication channels were established. In addition, a new wellbeing app has been made available to all staff to help to mitigate stress at home and in the workplace. ·      Staff, where possible, switched to working from home without disruption. All manufacturing sites have been operational with additional Covid-19 protocols this financial year. ·      Supply chain remained resilient. ·      Exports and internet sales have been expanding and helped to gain new customers/market share. ·      Some business opportunities and mitigations used during the pandemic (including use of TEAMS) continue to provide ways to trade efficiently and improve margin/revenue. Best practices and new ways of working, that proved to be effective, will be adopted going forward. ·      All Government guidelines on Health & Safety, including social distancing were implemented and continue to be followed on all sites. ·      With new ways of working the business is very agile and can quickly implement Government guidelines to protect employees and customers from Covid-19. There is now greater use of IT and other flexible ways of working have been adopted.
Health and safety risks   Comment   The Group has a strong overall track record of health and safety management performance, with the number of lost time accidents significantly reduced.	·      Health and safety is the number one priority of management and the first Board agenda item. ·      Risk assessments are carried out and safe systems of work documented and communicated. ·      All safety incidents and significant near misses are reported at Board level monthly, with appropriate remedial action 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 and other specialist advisers. ·      Specific focus on improving safety of higher risk operations, with external consultancy support as needed.
Staff recruitment and retention risks   Comment   Including recruitment, retention, succession, people development. Risk of loss of skills, ability to innovate and improve.	·      Increasing focus of Board and Executive Committee on staff retention and reward, supported by HR and external advice. ·      Competitive remuneration/incentive rates paid to attract and retain talented employees. ·      Employee numbers and changes monitored in monthly subsidiary Board meetings. ·      Retention plans for key, high performing, and high-potential employees. ·      Training and development programmes. ·      The Remuneration Committee considers retention and motivation when considering the Remuneration framework. ·      Succession planning.
Product/service differentiation relative to competition not developed or maintained   Comment   Innovation, an agile and entrepreneurial spirit is encouraged in all Group companies. Constantly looking for innovation for new products, particularly those that contribute to sustainability within the built environment.	·      A devolved operating model with both group and local management responsible for developing a deep knowledge of our specialist markets and identifying opportunities and emerging market trends. ·      Innovation best practice planned at Group level and more regularly in each business. New product ideas are discussed as part of the businesses' strategy. ·      Annual Group strategy meetings encourage innovation and "blue sky" thinking. ·      New product introduction/development KPI used to monitor progress. ·      Monitoring the market for potentially new and/or disruptive technologies. ·      Customer feedback considered in the design and /or supply of additional products and services. ·      Agile approach to business and an ability to meet increasing demand for products.
Loss of key customers   Comment   Generally, the Group has a good track record of customer retention and has a diversified customer base.	·      Cross selling of products encouraged to grow revenues, and to introduce customers to all our product ranges. ·      Develop and maintain strong customer relationships through service excellence and dedicated account management. ·      Product, system and service differentiation and reliability. ·      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.
Legacy defined benefit pension obligations   Comment   Alumasc's pension obligations are material relative to its market capitalisation and shareholders' funds.	·      Continue to grow the business so the relative affordability of pension deficit contributions is improved over time.  Active management of scheme liabilities and assets to reduce deficit, with particular success during the year. ·      Continue to maintain constructive relationship with Pension Trustees. ·      Affordable pension funding commitments agreed and met. ·      Regular review at Group Board level. ·      Use of specialist advisors. ·      Investment performance and risk/return balance overseen by an Investment Committee. ·      The Trustees are pursuing a lower risk investment strategy to match liability risks and reduce future volatility.
Supply chain risks   Comment   International supply chain risks could increase through local lockdowns due to the Covid-19 pandemic, increased tariffs/duties, Brexit risks in Europe and political/global volatility.	·      Annual strategic reviews, including supplier, quality, reliability and sustainability. ·      Regular key supplier visits, good relationships maintained including quality control reviews and training. ·      Logistics delays due to post Brexit driver shortages have been managed and delivery times agreed/managed with customers. ·      Regular supplier quality, value for money and risk reviews. ·      Avoidance of strategic dependence on single sources of supply. ·      Contingency plans to manage Brexit and Asian sourcing risks. ·      Supplier questionnaires and export checks are completed to ensure compliance with Group policies including anti-bribery and anti-modern slavery. ·      Training has been provided on customs duties, particularly on managing new arrangements post Brexit. ·      Brand and product strength generally enable increases in raw material prices to be passed on through selling prices.
Cyber security and Business Interruption Comment   Cyber security risks and Business Interruption risks are increasing globally and have increased during the Covid-19 pandemic.	·      IT disaster recovery plans are in place for all businesses and tested regularly. ·      Business continuity plans are in place, or being evolved where we are relocating operations, at each business. ·      Awareness training and management briefings held on cyber security risks and actions taken as preventative measures. ·      New security protocols and software are installed and continually reviewed to help mitigate Cyber threats. ·      Regular reviews of cyber security, including external penetration testing and reviews with external IT professionals. ·      Critical plant and equipment are identified, with associated breakdown/recovery plans in place. ·      Business interruption insurance to cover residual risks. ·      Further systems are being implemented to underpin the business strategic growth plans and drive efficiency. Implementation risks are mitigated via the use of third-parties, qualified project managers and increased user-testing.
Economic uncertainty and Brexit risks   Comment   Due to the ongoing pandemic, there is still macroeconomic uncertainty on a global basis. Markets are also not completely settled post Brexit, and this has had an impact on logistics, raw material prices and supplies. This is challenging the housebuilding /house-sales/construction industry. Government spending on infrastructure projects needs to be maintained.	·      Strategic positioning in markets/sectors anticipated to grow faster than the UK construction market. ·      Development of export sales opportunities, especially for Levolux (particularly in North America) and Alumasc Water Management (in Asia and the Middle East). ·      Revenues are derived from a variety of end-use construction markets. ·      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 limited exposure to currency risk, mainly 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 is in place for key residual risk areas, including increased inventory of materials/products imported from the EU.
Product warranty /recall risks   Comment   The Group does not have a history of significant warranty claims or product recall.	·      Robust internal quality systems, compliance with relevant legislation, building regulations and industry standards (e.g. ISO, BBA etc), and product testing, as appropriate. ·      Group insurance programme to cover larger potential risks. ·      Back-to-back warranties obtained from suppliers where possible. ·      Specific local risk management procedures in Group brands that also install (and supply) building products (i.e. Levolux and Blackdown).
Credit risk   Comment   The Group has good recent record in managing credit risks and the contribution from the UK Government Export Credit Scheme for overseas opportunities has supported export opportunities.	·      Most credit risks are insured, including all contracting credit risk. ·      Large export contracts are backed by letters of credit, performance bonds, guarantees or similar. ·      Due to Covid-19 and related uncertainties credit risks have increased. ·      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 2021

 

		Year ended 30 June 2021			Year ended 30 June 2020
		Underlying	Non-underlying	Total	Underlying	Non-underlying	Total
Continuing operations:	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	4	90,465	-	90,465	75,992	-	75,992
Cost of sales		(57,950)	-	(57,950)	(53,413)	-	(53,413)
Gross profit		32,515	-	32,515	22,579	-	22,579
Net operating expenses
Net operating expenses before non-underlying items		(21,511)	-	(21,511)	(19,386)	-	(19,386)
Other operating income	5	-	-	-	968	-	968
IAS 19 past service pension cost	5	-	(150)	(150)	-	-	-
Other non-underlying items	5	-	(296)	(296)	-	(1,045)	(1,045)
Net operating expenses		(21,511)	(446)	(21,957)	(18,418)	(1,045)	(19,463)
Operating profit	4, 5	11,004	(446)	10,558	4,161	(1,045)	3,116
Net finance costs		(489)	(268)	(757)	(496)	(261)	(757)
Profit before taxation		10,515	(714)	9,801	3,665	(1,306)	2,359
Tax expense	7	(2,050)	(165)	(2,215)	(744)	302	(442)
Profit for the year from continuing operations		8,465	(879)	7,586	2,921	(1,004)	1,917
Discontinued operations:
Profit after taxation for the period from discontinued operations		-	-	-	-	339	339
Profit for the year		8,465	(879)	7,586	2,921	(665)	2,256
Other comprehensive income:
Items that will not be recycled to profit or loss:
Actuarial gain/(loss) on defined benefit pensions, net of tax				10,393			(6,473)
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				(385)			176
Exchange differences on retranslation of foreign operations				(46)			11
				(431)			187
Other comprehensive gain/(loss) for the year, net of tax				9,962			(6,286)
Total comprehensive profit/(loss) for the year, net of tax				17,548			(4,030)
Earnings per share				Pence			Pence
Basic earnings per share
-  Continuing operations				21.2			5.4
-  Discontinued operations				-			0.9
	9			21.2			6.3
Diluted earnings per share
-  Continuing operations				20.8			5.4
-  Discontinued operations				-			0.9
	9			20.8			6.3
Alternative Performance Measures:
Underlying earnings per share (pence)				23.7			8.2

 

Reconciliations of underlying to statutory profit and earnings per share are provided in notes 5 and 9 respectively.

 

 

consolidated statement of financial position

At 30 June 2021

 

 

	Notes	2021	2021	2020	2020
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment - owned assets		11,734		11,089
Property, plant and equipment - right-of-use assets		5,469		5,856
Goodwill	6	18,705		18,705
Other intangible assets		3,321		3,352
Deferred tax assets	7	1,145		3,661
			40,374		42,663
Current assets
Inventories		10,871		8,596
Trade and other receivables		21,389		16,270
Corporation tax receivable		-		325
Derivative financial assets		-		207
Cash at bank		4,999		16,143
			37,259		41,541
Total assets			77,633		84,204
Liabilities
Non-current liabilities
Interest bearing loans and borrowings		(5,936)		(19,909)
Lease liability		(4,811)		(5,244)
Employee benefits payable		(4,581)		(19,269)
Provisions		(1,267)		(1,182)
Deferred tax liabilities	7	(966)		(1,007)
			(17,561)		(46,611)
Current liabilities
Trade and other payables		(21,011)		(15,311)
Lease liability		(795)		(680)
Provisions		(834)		(1,194)
Corporation tax payable		(1,019)		-
Derivative financial liabilities		(268)		-
Bank overdraft		-		(567)
			(23,927)		(17,752)
Total liabilities			(41,488)		(64,363)
Net assets			36,145		19,841
Equity
Share capital		4,517		4,517
Share premium	10	445		445
Capital reserve - own shares	10	(406)		(416)
Hedging reserve	10	(217)		168
Foreign currency reserve	10	55		101
Profit and loss account reserve		31,751		15,026
Total equity			36,145		19,841

 

The financial statements were approved by the Board of Directors and authorised for issue on 7 September 2021

 

Paul Hooper                        Simon Dray
Director                                  Director

7 September 2021

Company number 1767387

consolidated STATEMENT of cash flows

For the year ended 30 June 2021

 

		Year ended	Year ended
		30 June	30 June
		2021	2020
	Notes	£'000	£'000
Operating activities
Operating profit		10,558	3,116
Adjustments for:
Depreciation		2,146	1,851
Amortisation		361	313
Impairment of assets		-	300
(Gain)/loss on disposal of property, plant and equipment		(16)	4
IAS 19 past service pension cost	5	150	-
(Increase)/decrease in inventories		(2,275)	1,892
(Increase)/decrease in receivables		(5,119)	5,114
Increase/(decrease) in trade and other payables		5,287	(4,564)
Movement in provisions		(275)	(1,229)
Cash contributions to retirement benefit schemes		(2,614)	(2,254)
Share based payments		397	-
Cash generated by operating activities		8,600	4,543
Tax paid		(161)	(93)
Net cash inflow from operating activities		8,439	4,450
Investing activities
Purchase of property, plant and equipment		(1,666)	(1,342)
Payments to acquire intangible fixed assets		(330)	(417)
Proceeds from sales of property, plant and equipment		46	143
Net proceeds from sale of business activity		-	339
Net cash outflow from investing activities		(1,950)	(1,277)
Financing activities
Bank interest paid		(207)	(297)
Equity dividends paid		(1,878)	(1,574)
(Repayment)/draw down of amounts borrowed		(14,000)	12,000
Principal paid on lease liabilities		(692)	(346)
Interest paid on lease liabilities		(178)	(153)
Refinancing costs		(65)	-
Net cash (outflow)/inflow from financing activities		(17,020)	9,630
Net (decrease)/increase in cash at bank and bank overdraft		(10,531)	12,803
Net cash at bank and bank overdraft brought forward		15,576	2,762
Net (decrease)/increase in cash at bank and bank overdraft		(10,531)	12,803
Effect of foreign exchange rate changes		(46)	11
Net cash at bank and bank overdraft carried forward		4,999	15,576