IMMEDIATE RELEASE

Tuesday 6 September 2022

THE ALUMASC GROUP PLC

("ALUMASC")

FULL YEAR RESULTS ANNOUNCEMENT

STRONG PERFORMANCE ACROSS ALL DIVISIONS; DELIVERY OF STRATEGIC PRIORITIES

Alumasc (ALU.L), the premium sustainable building products, systems and solutions Group, announces results for the year ended 30 June 2022.

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

"These results mark a pivotal moment for Alumasc. I am delighted to report this excellent set of results across our core businesses, with the strong sustainability-linked and export sales demonstrating our growth potential. With the disposal of Levolux on 26 August, we now have a simplified business model and can focus our energies on growing our core businesses, with their respected brands and significant market opportunities. Despite the current macroeconomic uncertainty, FY23 trading to date has remained robust and order books are strong, and we remain confident in the Group's future performance."

Financial Highlights: Strong performance from continuing operations:

·      Revenues from continuing operations up 14.9% to £89.4m (2021: £77.8m)

·      Group underlying operating profit up 26.9% to £13.3m (2021: £10.5m)

·      Underlying operating margin increased by 140bps to 14.9% (2021: 13.5%)

·      Underlying profit before tax up 27.0% to £12.7m (2021: £10.0m)

·      Export sales of £13.7m (2021: £7.6m), representing 15% (2021: 10%) of total revenue

·      Net bank debt of £4.7m (2021: £0.9m)

·      Underlying EPS up 27.1% to 28.6p (2021: 22.5p)

·      Basic EPS up 30.1% to 26.8p (2021: 20.6p)

·      Final dividend up 6.4% to 6.65p (2021: 6.25p), with full year dividend up 5.3% to 10.0p (2021: 9.5p)

 

Operational Highlights: Delivery of strategic priorities

·      Disposal of Levolux post year end delivers a simplified business model and a focus on core activities

·      Benefits of cost efficient operating structure and volume growth driving margin improvement

·      Water Management Division delivered record revenues of £47.6m, up 24% from 2021, and operating revenues of £8.8m

·      Building Envelope Division's continuing activities delivered a 4% increase in revenues to £29.4m and underlying operating profit sustained at £3.6m

·      Housebuilding Products grew its revenue by 12% to £12.4m and an operating profit of £2.4m, with an operating margin of 19.7%

·      Pension contributions reduced from £2.3m to £1.2m pa from October 2022, following triennial review

·      Growth investment opportunities continue to be appraised, alongside a growing pipeline of potential acquisitions

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

Outlook:

·      Alumasc is repositioned to focus on its strong brands, long-term customer relationships across diverse markets and organic and inorganic growth opportunities, supported by cost efficiencies

·      Despite the current uncertain macroeconomic outlook, the Board believes Alumasc's simplified business model, clear brands strategy and robust start to FY23 provides confidence in the future.

  

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

Rosie Driscoll                                       

 

Notes to Editors:

1      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.

2      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

Chair's Statement

I am pleased to present my first report as Chair, following the retirement of John McCall on 31 December 2021. On behalf of Alumasc's stakeholders, I would like to once again record my sincere thanks to John for his leadership, contribution and unwavering support to Alumasc over many years.

In another year of unprecedented challenges, including continued Covid disruption, the war in Ukraine, cost inflation not seen for a generation and labour shortages, Alumasc's business has demonstrated strong momentum and resilience, delivering underlying profits from continuing operations substantially ahead of a successful prior year.

Performance

Revenues grew by 15% from £77.8 million to £89.4 million* and underlying pre-tax profits from £10.0 million to £12.7 million*. 

Alumasc's Net Debt increased to £4.7 million, compared to £0.9 million last year. This reflects higher inventory levels to protect against material shortages as well as Capex of £2.6 million, repaying pandemic related government support of £0.7 million, dividend payments of £3.4 million and pension contributions of £2.6 million. Our available bank credit facilities have recently been increased to £29.0m, to allow Alumasc to invest both for organic and inorganic growth.

*From continuing operations, see Note 5 for a reconciliation to statutory profits.

Strategy - organic growth

Alumasc's divisions have been encouraged to reset their plans to deliver faster and more ambitious growth. As a result, the divisions have invested in additional high-quality people to accelerate product development and sales and we expect to reap the benefits in the coming years. In addition, following the successful cost reductions achieved from streamlining our operations in 2020, Alumasc is examining the potential to drive further efficiencies across the Group.

Strategy - corporate transactions

Following a strategic review, the Alumasc Board agreed that Levolux, with its focus on installation, was non-core and it would be better positioned under new ownership. Levolux was sold on 26 August 2022 to Talrus Limited, a company associated with leading private investors, Rcapital. They are well placed to support the Levolux business and management team, and we wish the Levolux team and Talrus well.

Alumasc is also actively looking for synergistic acquisitions to supplement its organic growth.

ESG

Our contribution to environmental sustainability through the energy and water efficient products that we develop and sell was recognised by the London Stock Exchange awarding Alumasc its Green Economy Mark in the year. This is awarded to companies that derive the majority of their revenues from environmentally friendly solutions and is appropriate recognition of the many Alumasc colleagues who strive daily to produce solutions to combat climate change for our customers and planet.

Pension scheme

The defined benefit pension scheme deficit has further reduced in the year from £4.6 million to £2.1 million. I would like to thank both our Management Team and the Pension Scheme Trustees for the collaborative approach they have adopted to make further inroads to the deficit for the benefit of Scheme Members, through a combination of Company pension contributions, sensible asset investment decisions and the impact of gilt yields on liability calculations. Agreement has also been reached with the Trustees to reduce the Company's pension contributions to £1.2 million pa (previously £2.3 million) until the next triennial valuation in 2025, in recognition of the reduced scheme deficit.

Dividends

I am pleased to confirm that the Board continues to pursue a progressive dividend policy. An interim dividend of 3.35p per share was paid in April 2022 and our proposed final dividend, if approved by shareholders, is 6.65p, making a total distribution for the year of 10.0p per share (2020/21 9.5p per share).

Board

John McCall and Jon Pither, having given a combined nearly 70 years of loyal service to Alumasc, retired during the year. On behalf of all our stakeholders, I thank them for their immense contribution and wish them long and happy retirements.

Stephen Beechey took on the role of Remuneration Committee Chair following Jon's retirement. The Board was very pleased to welcome Karen McInerney to the Board as a Non-executive Director and Chair of the Audit Committee in the year. Karen brings a wealth of financial, treasury and risk management experience from having worked in a small listed company which is now a FTSE 250 group and we are already benefitting from her insights.

Looking ahead and Alumasc's people

Whilst economic and geopolitical conditions continue to be unpredictable and will doubtless lead to some volatility, Alumasc has a clear long-term strategy of organic and inorganic growth focused on sustainable building products.

ur people have demonstrated remarkable resilience and adaptability in the past two and a half years, and I am sure they will continue to do so in the times ahead to deliver a strong performance for our various stakeholders. The Board and I thank our staff colleagues for their continued hard work and commitment.

Vijay Thakrar

Chair

6 September 2022

 

Chief Executive's Review

Financial Highlights and Overview

 

	2021/22	2020/21	% change
Group performance from continuing operations:
Revenue (£m)	89.4	77.8	+15%
Underlying profit before tax (£m) *	12.7	10.0	+27%
Statutory profit before tax (£m)	12.0	9.5	+27%
Underlying earnings per share (pence) *	28.6	22.5	+27%
Basic earnings per share (pence)	26.8 6	20.6	+30%
Dividends per share (pence)	10.0	9.5	+5%

*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. Our number one priority is always the health, safety and wellbeing of our people and visitors to sites. We have complied with, as a minimum, government regulations.  Unannounced HSE visits have confirmed this with very positive feedback being received. 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 very proud of our incredible people and all that they have achieved.

Overview of performance

Despite the prior year delivering a record result assisted by circa £2.5 million of pent up revenue demand from the Covid affected lockdown year of 19/20, I am pleased to report a further record year driven by record revenue (since the focus on only premium Building Products began in 2016) which increased by 15% over the prior year.

The year was particularly affected by significant raw material and freight cost increases, in many cases well ahead of inflation. These were successfully recovered through sales price increases.

The star performer of the year was undoubtedly the Water Management Division. Following its prior year record 27% profit growth to £6.1 million it grew a further 43% to £8.8 million, increasing its operating margin to 18.4% from 15.9%. This was an outstanding performance and was driven by a 24% revenue increase to £47.6 million.

The remaining two divisions had credible performances against a difficult background of increasing global supply chain challenges, almost achieving the same results as the previous financial year. Both the divisions grew their sales albeit with margins down slightly against the prior year. New products again played a major role, particularly at the Housebuilding Products Division which in the past 18 months launched a record number of products. This was again supported by its industry leading next day service, both of which have significantly contributed to its performance.

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

UK revenue growth from continuing operations was 9% which we believe was at a faster growth rate than the UK construction market. For instance, there is no doubt that market share was taken both in the UK Roofing market and the UK market in which Gatic Slotdrain operates.

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

Compared to the prior year, in which export revenues were 10% of Group revenues, this year export revenues from continuing operations reached 15% and grew by just over £6.0 million (80%) assisted by Gatic Cover work on the Chek Lap Kok Airport third runway in Hong Kong.

3.      Grow profit at a faster rate than revenue by improving operating margins

The Group's operating profit from continuing operations grew by £2.8 million (27%) to £13.3 million.

Executing our priorities in FY21/22

Management accelerated the pace of strategic development during its 2022 financial year:

1.   Levolux divestment

Following a strategic review it became clear that Levolux was no longer core to the development of the Group. Its business model is different to the rest of the Group's, with a focus on design and installation, despite management's best efforts to be a supply only company which is not what the customers want.

Levolux was sold on 26 August 2022 to Talrus Limited who are well placed to support the Levolux business and management team to return the business to sustainable profit.

2.   Implementation of a more cost-efficient operating structure

The Group's relentless focus on cost efficiency has supported the improvement in underlying operating margin from continuing operations, from 8.4% in the 2018 financial year to 14.9% in 2022. Further efficiencies across the facilities will continue to be sought.

3.   Prioritising and focusing investment to drive profitable growth

Capital expenditure was £2.6 million, very slightly ahead of depreciation.

Once again investment has been focused on our businesses with the greatest manufacturing activity: our Water Management business and our Housebuilding Products business. We continue to invest 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 our Housebuilding Products Division, including to support new product launches. The benefit of the investments is evident in the relatively strong performances of these businesses. There has also been a further reduction in our carbon emissions brought about by the additional investment in more efficient machinery at Timloc along with the Group's recent introduction of electric vehicles to the company fleet.

4. Proactive management of our portfolio of businesses

The Group continues to seek to grow through bolt-on acquisitions. With the Group's platform simplified and focused following the disposal of Levolux, we are well placed to leverage our strong financial position and capitalise on the opportunities presented by our growing pipeline of acquisition targets.

5. 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 who target these criteria.  An example of this is its innovative Roofing solutions, such as Olivine, which can actually reduce CO₂ 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 significantly contributed to the energy conservation and air tightness within new build housing with its ventilation products, cavity closers, cavity stop socks and radiator seal. It is constantly innovating and launching new products that meet or exceed the latest legislation including the latest uplift in Building Regulations (Part F and Part L). A recent example of this is the new InVentive Roof Tile Vent Range, a significant product launch for 2022/23 which opens a new channel with Roofing Merchants.

The division is well placed to assist housebuilders with the introduction of housing to the Future Homes Standard in 2025 and further changes in legislation.

All divisions are totally committed to, and insist on, the use of recycled and recyclable material where appropriate. Alumasc is very proud to be able to state that 75% of the Group's products are made from readily recyclable material and 26% of the Group's raw materials are sourced from recycled material.

The Housebuilding Products Division is already operating at a carbon neutral level and there are plans in place for the rest of the Group to follow suit over time.

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.

Overview of performance

Continuing operations:

Revenue analysis

Revenue grew by £11.6 million (15%) compared to the prior year. This was the resultant benefit of investing in high quality Roofing salespeople, launching new products, winning market share, growing Gatic SlotDrain sales and winning the Gatic Covers project at Chek Lap Kok Airport in Hong Kong.

Gross margin

Alumasc's Gross Margin fell by 0.5 percentage points, to 37.3%, following a successful pass through of raw material price increases.

Net fixed and operating expenses                                  

Net fixed and operating expenses increased by £1.5 million during the year mainly due to increased sales resource, marketing, product managers and inflationary pay increases.

Underlying operating profit

Underlying operating profit was £13.3 million compared with £10.5 million in the prior year. 

Underlying profit before tax

Underlying profit before tax was £12.7 million (2020/21: £10.0 million).

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 £0.5 million net cost in the prior year. Further details are given in the Financial Review.

Discontinued operations:

The Levolux trading loss, and the £14.9 million non-cash write down of the associated assets held for sale, resulted in a loss after tax from discontinued operations of £16.7 million (2020/21: £0.2 million profit).

Levolux - discontinued/divested/held for sale

Following its substantial turnaround in the prior year Levolux fell back with a loss which was very disappointing. This was principally linked to the reduction in commercial activity in the UK and USA, in some cases the result of main contractors delaying the placing of orders to try to obtain lower prices during the above mentioned period of significant cost increases. This was all against a background in which Covid-19 affected activity and, in particular, during further lockdowns in North America. A strategic review determined that Levolux should be divested. Therefore, following a sales process Levolux was sold on 26 August 2022 for a nominal initial consideration of £1 together with £1 million of deferred consideration which is repayable from proceeds in excess of £1 million arising from any subsequent disposal.

Profit after tax for the year

The Group's resulting overall statutory loss after tax for the year was £7.0 million (2020/21: £7.6 million profit).

Divisional review                                                      

(a)    Water Management

 

Revenue: £47.6 million (2020/21: £38.4 million)

Underlying operating profit*: £8.8 million (2020/21: £6.1 million)

Underlying operating margin*: 18.4% (2020/21: 15.9%)

Operating profit: £8.7 million (2020/21: £6.0 million)

 

* Prior to brand amortisation charges of £0.1 million in both years

 

Water Management produced a record profit of £8.8 million which was £2.7 million (43%) higher than the previous year. This followed the prior year record growth of £1.3 million (27%) versus the 19/20 year.

The drivers of the improvement were revenue related (which increased by £9.2 million (24%)) and product portfolio management, including new product launches, general efficiency improvement and tight cost control. Significant material cost increases were passed on in the year. The performance in this division was assisted by the winning of the contract to supply the third runway with Gatic Covers at Chek Lap Kok Airport in Hong Kong.

Water Management's operating profit return on sales increased to 18.4% from a prior year of 15.9%.  This was a very encouraging performance.

(b)    Building Envelope

Revenue*: £29.4 million (2020/21: £28.4 million)

Underlying operating profit*: £3.6 million (2020/21: £3.8 million)

Underlying operating margin*: 12.2% (2020/21: 13.2%)

Operating profit*: £3.1 million (2020/21: £3.8 million

 

* From continuing operations. Underlying figures presented prior to restructuring costs of £0.5 million in 2021/22

 

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

Alumasc Roofing's performance was strong and in particular within the Refurbishment sector. The five new salespeople recruited in the prior year significantly strengthened some of the more weak areas of sales in the UK whilst technical services staffing was increased across the country. It went from strength to strength and increased its revenue stream whilst also securing additional market share. This business now has a very strong and capable sales force. Significant cost increases were passed on in the year.

(c)     Housebuilding Products

 

Revenue: £12.4 million (2020/21: £11.1 million)

Underlying operating profit*: £2.4 million (2020/21: £2.6 million)

Underlying operating margin*: 19.7% (2020/21: 23.0%)

Operating profit: £2.4 million (2020/21: £2.5 million)

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

Timloc, our Housebuilding Products Division, had another strong 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 saw continued growth of recently launched new products and launched further new products including FrStop cavity stop socks, Non-combustible products and a number of Roofline Products.  A very exciting full launch of its new Tile Vent Range will take place in Q1 of the new financial year, with early indications of success encouraging.

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 is well positioned to benefit from the long term growth drivers in its 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 that Alumasc's strong strategic and market positions underpin its established track record over many years of outperforming the UK construction market, together with:

• the outstanding Water Management Division's performance which is really benefitting from both its UK and export re-focused strategy, as well as its extensive online offering;

 

• the strong Roofing performance where it enters the new year with a very healthy order book;

 

• the strong performance of the Housebuilding Products Division against a structural market shortage of housing in the UK;

 

• focused investments in new products, manufacturing capability and automation;

 

• investments in sales resources and product managers to grow the business both in the UK and internationally;

 

• actions taken to deliver operational efficiencies across the Group; and

 

• close alignment to the sustainability agenda.

 

Demand remains strong entering the new financial year, which has started in line with management's expectations.

Notwithstanding uncertainty over the current macroeconomic outlook, a strong platform is now in place which provides the Board with confidence for another strong year.

G Paul Hooper

Chief Executive

6 September 2022

 

Financial Review

 

Reconciliation of underlying to statutory profit before tax from continuing operations

The underlying profit before tax from continuing operations for the 2021/22 financial year of £12.7 million reconciles to the statutory profit before tax from continuing operations of £12.0 million as follows:

	2021/22 £m	2020/21 £m
Underlying profit before tax	12.7	10.0
Brand amortisation	(0.1)	(0.1)
Net IAS 19 defined benefit pension scheme costs	(0.1)	(0.2)
Restructuring costs	(0.5)	(0.1)
IAS 19 past service cost in respect of GMP equalisation	-	(0.1)
Statutory profit before tax	12.0	9.5

 

The reconciling items were:

·      Amortisation of acquired brands of £0.1 million (2020/21: £0.1 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 £0.1 million (2020/21: £0.2 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.

 

·      One-off restructuring costs of £0.5 million (2020/21: £0.1 million), reflecting the cost of exiting the Group's remaining roofing installation business and following changes in the estimated cost of several reorganisation projects, which were announced during the 2019/20 financial year.

 

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

Taxation

The Group's underlying effective tax rate on continuing operations was 19.4% (2020/21: 19.5%), slightly above the UK statutory corporation tax rate of 19% due to certain costs that are disallowable for tax purposes. We expect the Group's underlying tax rate to be approximately 21% in the 2022/23 financial year, due to the planned increase in the main UK corporation tax rate from 19% to 25% from 1 April 2023.

The Group's effective tax rate on statutory profit before tax was 20.6% (2020/21: 22.6%). Reconciliations from the actual to statutory rates of tax are provided in note 8. The reconciling items mainly relate to the tax treatment of the one-off items in the Group's income statement and the deferred tax impact of the planned increase in the corporation tax rate to 25% from 1 April 2023.

 

Earnings per share

 

Underlying earnings per share from continuing operations for the year was 28.6 pence (2020/21: 22.5 pence). This increase is consistent with the increased underlying profit before tax for the year.

Basic earnings per share from continuing operations of 26.8 pence (2020/21: 20.6 pence) reflected the increase in underlying profit before tax for the year.

 

 

Dividends

 

The Board have recommended to shareholders a final dividend of 6.65 pence per share (2020/21: 6.25 pence), which will absorb an estimated £2.4 million 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 4 November 2022 to members on the share register on 30 September 2022.

Together with the interim dividend of 3.35p (2020/21: 3.25p) paid to shareholders on 6 April 2022, this will bring the total distribution for the year to 10.0 pence per share (2020/21: 9.5 pence), which is covered 2.9 times (2020/21: 2.4 times) by underlying earnings per share from continuing operations.

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

Summarised Cash Flow Statement
				2021/22 £m	2020/21 £m
Underlying operating profit from continuing operations				13.3	10.5
Underlying depreciation/amortisation				2.7	2.7
Underlying EBITDA				16.0	13.2
Change in working capital				(4.0)	0.6
Deferred VAT repaid				(0.7)	(1.1)
Operating cash flow from continuing operations				11.3	12.7
Discontinued operation				(2.3)	(1.0)
Operating cash flow from continuing and discontinued operations				9.0	11.7
Capital expenditure				(2.6)	(2.0)
Interest				(0.4)	(0.2)
Tax				(1.6)	(0.2)
Pension deficit funding				(2.6)	(2.6)
Lease payments				(0.9)	(0.9)
Purchase of own shares				(0.5)	-
Dividend payments				(3.4)	(1.9)
Sub total				(3.0)	3.9
Non-underlying payments				(0.8)	(0.5)
Movement in net bank debt				(3.8)	3.4
Net bank debt at the year end				4.7	0.9

 

Cashflows and net debt

The Group's cash management activities during the year were focused on repayment of the final tranches of Covid-related VAT and pension deferrals, and the management of working capital during a period of strong demand coupled with significant price inflation and continued supply chain disruption.

The Group's operating cashflow from continuing operations was £11.3 million (2020/21: £12.7 million), after a cash outflow into working capital of £4.7 million, which includes payment of £0.7 million of VAT deferred from 2019/20 (2020/21: £0.5 million outflow, including £1.1 million of deferred VAT payments). Operating cashflow from continuing operations as a percentage of underlying operating profit was 85% (2020/21: 121%), reflecting selective investment in inventory to maintain customer service and manage cost price increases, coupled with the cost price inflation and strong revenue growth in the period. As a consequence, average trade working capital as a percentage of revenue was 18.1% over 2021/2022 (2020/21: 13.9%). After a £2.3 million cash outflow from discontinuing operations (2020/21: £1.0 million outflow), the total operating cash inflow from continuing and discontinued operations was £9.0 million (2020/21: £11.7 million).

Capital expenditure was £2.6 million (2020/21: £2.0 million), representing 104% of depreciation (2020/21: 86%).  The main investments were on capacity and efficiency improvements at our Housebuilding Products facility in Howden, East Yorkshire, and at Water Management. 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 £1.6 million were made in the year (2020/21: £0.2 million). The prior year included a £0.4 million receipt of tax overpayments from 2018/19.

The Group recorded a net cash outflow for the year of £3.8 million (2020/21: £3.4 million inflow), increasing net debt at 30 June 2022 to £4.7 million (30 June 2021: £0.9 million).

Statement of financial position and return on investment

Group net assets decreased by £10.4 million in the year to £25.7 million at 30 June 2022, a consequence of the write down of assets held for sale in relation to the Levolux business, partially offset by 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 from continuing operations divided by capital invested) was 25.8% (2020/21: 18.4%), reflecting the improved operating performance.

 

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. Mortality and inflation assumptions have been aligned to updated actuarial information. The IAS 19 defined benefit pension scheme deficit at 30 June 2022, before deferred taxes, was £2.1 million (30 June 2021: £4.6 million). Scheme assets decreased in the year by £25.4 million to £87.2 million.  Scheme liabilities decreased by £27.9 million to £89.3 million, due to an increase in the discount rate.

 

Payments into the scheme in the year were £2.6 million (2020/21 £2.6 million), including £0.2 million (2020/21 £0.4 million) of payments deferred from 2019/20 under a COVID-19 cash conservation scheme agreed with the trustees.

 

Future contributions are agreed with the scheme's trustees, based on actuarial valuations rather than the IAS 19 deficit. Following the triennial review in March 2022, the Group has agreed reduced annual payments of £1.2 million from 1 October 2022. These payments are designed to enable the scheme to reach a fully funded position, using prudent assumptions about the future, over a reasonable timescale.

 

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 Group entered into a £25.0 million committed revolving credit facility which expires in August 2025 and two further single year extension periods to August 2026 and August 2027. A further £20 million is available through an uncommitted accordion facility.

 

Alumasc's current banking facilities comprise:

 

· An unsecured committed three-year revolving credit facility of £25.0 million, with an expiry date of August 2025 and a further two one year extension periods;

· 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 2022 and 2021:

 

                                                                      Covenant             30 June 2022             30 June 2021

Net debt: EBITDA                                               <2.5                                0.4                                0.1

Interest cover                                                        >3.5                              31.7                              42.1

 

 

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 including stress test scenarios modelled on both a resumption of Government lockdowns and a 20% reduction in revenue.

Under the stress test scenarios, there remained adequate headroom in banking facilities and no breach of banking covenants over the 13-month period to September 2023.  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

6 September 2022

 

The contents of this announcement have been extracted from the annual report and accounts for the year ended 30 June 2022 which will be dispatched to shareholders on or around 22 September 2022 and will be available at www.alumasc.co.uk.

PRINCIPAL RISKS AND UNCERTAINTIES

Risks and uncertainties	Mitigating actions taken
Climate Change   Risk/Impact Potential to impact our supply chain and increase volatility in the prices of raw materials, and other supplies. Sudden climate changes events, such as increased severe weather conditions and storms could impact our supply chains and shipments.  Regulations increasing costs could be imposed on manufacturing, certain processes, fuels/goods used, impacting prices for products that customers require.	·      Improving partnerships and relationships in our supply chain to combat disruption and potential price increases. ·      Greater resilience by using suppliers from different geographical locations. ·      Ensuring suppliers and logistics partners understand the risks of climate change. ·      Strategic buying of core products and careful stocking. ·      Development of targets for our Scope 1, 2 and 3 emissions. ·      Investment in new technology to manufacture new products to address the needs of climate change, with improved energy efficiency. ·      Strategy includes helping customers address climate change, by selling and creating innovative new products with sustainable qualities and eco-friendly credentials.
Geo-political uncertainty/Inflation Risk/Impact   Macroeconomic uncertainty on a global basis due to the pandemic in countries following a zero covid policy in China and other countries, and following the Russian invasion of Ukraine and subsequent war in Ukraine. Markets are not settled post Brexit and ongoing logistics delays continue. Inflation and interest rates resulting in increased prices for raw material, energy supplies and services, also impacting pay and other costs.	·      Strategic positioning in export markets/sectors anticipated to grow faster than the UK construction market. ·      Revenues are derived from a variety of end-use construction markets - this provides resilience. ·      Development of added value systems and solutions that are 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 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. ·      Robust management has ensured cost increases are passed on to customers.
Supply chain/Inflation Risk/Impact   International supply chain risks have increased through local lockdowns due to the Covid-19 pandemic, skilled staff shortages, increased tariffs/ duties, Brexit risks in Europe and together political/global volatility, and shortages of skilled logistics staff.	·      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 driver shortages have been managed and delivery times agreed/managed with customers. Shortages of ships for cargo transportation also impact delivery times. Delays in logistics are due to shortage of transportation/staff and a steep rise in demand post Covid. ·      Regular supplier quality, value for money and risk reviews. ·      Avoidance of strategic dependence on single sources of supply. ·      Contingency plans in place 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 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 Risk/Impact   Cyber security risks and Business Interruption risks are increasing globally and have increased during the Covid-19 pandemic and following the Russian invasion of Ukraine.	·      IT disaster recovery plans are in place for all businesses and tested regularly - reviews are being held with each business to ensure that the Recovery Time Objective (RTO) is adequate for the business. ·      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.
Credit risk   Risk/Impact   The risk is that credit is extended and customers are unable to settle invoices. The Group manages 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, where possible. ·      Due to Covid-19 and related uncertainties credit risks have increased, which has also been an area impacted by local lockdowns due to the pandemic. ·      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.
Covid-19 pandemic   Risk/Impact   The pandemic is still impacting our customers' and suppliers' businesses and the supply chain Impact in countries overseas impacting customer and suppliers - with lockdowns. There is an established approach for our divisions and processes incorporated into business as usual. Adverse impact on the welfare of staff.	·      The primary focus has been 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 have moved to a hybrid working model where appropriate. All manufacturing sites have been operational with additional Covid-19 protocols in place. ·      Exports and internet sales have been buoyant and helped us to connect with new customers/market share. ·      Some business opportunities and mitigations used during the pandemic (including use of video conferencing) continue to provide ways to trade efficiently and improve margin/revenue due to cost reduction/efficiencies. Best practices and new ways of working that proved to be effective will be adopted going forward. ·      With new ways of working the business is very agile and can quickly implement any new 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 & safety risks   Risk/Impact   Health & safety incident could occur despite a strong culture and previous management performance.	·      Health & safety and the wellbeing of staff is the main 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 & safety best practice days are held twice a year, chaired by the Chief Executive. ·      Annual audits of health & safety are conducted in all Group businesses by independent consultants and other specialist advisers. ·      Health & Safety training is provided, and implementation is monitored. ·      Specific focus on improving safety of higher risk operations, with external consultancy support as needed. ·      Very serious near misses are reported to the Board.
Staff recruitment and retention risks   Risk/Impact   Potential lack of skilled employees being available for recruitment and risk of loss due to inflation in the jobs market. Risk of not being able to take- on/retain key skilled staff.	·      Remuneration packages are appropriate to the position: staff are encouraged and supported to grow their careers through training and development. ·      Board and Executive Committee focus on staff retention and reward, supported by HR and external advice. ·      Employee numbers and changes monitored in monthly subsidiary Board meetings. ·      Retention plans for key, high performing, and high-potential employees. ·      The Remuneration Committee considers retention and motivation when considering the remuneration framework. ·      Succession planning.
Product/service differentiation relative to competition not developed or maintained legislative and media risks Risk/Impact Failure to innovate and have an agile and entrepreneurial but compliant business behaviour. Increasing regulation and media focus in products/service have impacted the risk profile.	·      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 is planned at Group level and carried out 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. ·      Devolved structure allows an agile approach to business and an ability to meet increasing demand for products. ·      Employed new product managers to help identify gaps in the market and to ensure we have a leading edge portfolio of products and services.
Loss of key customers   Risk/Impact   The risk is the loss of markets or customers. The Group operates credit insurance (see credit risk) to cover the potential impact of loss of revenue. Service and client relationship need to be maintained to retain and grow the business.	·      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 understand and adapt to changing and emerging customer needs.
Legacy defined benefit pension obligations Risk/Impact   The long-term funding of the pension scheme removes funds that need to be re-invested into new technology to grow the business. The pension scheme's obligations need to reduce by investments and by the maturity of the Scheme to prevent it holding back the business.	·      Continue to grow the business so that 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 advisers. ·      Investment performance and risk/return balance overseen by an Investment Committee that receives specialist investment advice. ·      The Trustees are pursuing a lower risk investment strategy to match liability risks and reduce future volatility.
Product warranty/ recall risks Risk/Impact   Risk is one of product recall with subsequent cost and reputational risks, however the Group does not have a history of significant warranty claims or product recalls.	·      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.

consolidated STATEMENT of comprehensive income

For the year ended 30 June 2022

		Year ended 30 June 2022			Year ended 30 June 2021 (restated)*
		Underlying	Non-underlying	Total	Underlying	Non-underlying	Total
Continuing operations:	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	4	89,381	-	89,381	77,805	-	77,805
Cost of sales		(56,015)	-	(56,015)	(48,364)	-	(48,364)
Gross profit		33,366	-	33,366	29,441	-	29,441
Net operating expenses
Net operating expenses before non-underlying items		(20,033)	-	(20,033)	(18,935)	-	(18,935)
IAS 19 past service pension cost	5	-	-	-	-	(150)	(150)
Other non-underlying items	5	-	(634)	(634)	-	(128)	(128)
Net operating expenses		(20,033)	(634)	(20,667)	(18,935)	(278)	(19,213)
Operating profit	4, 5	13,333	(634)	12,699	10,506	(278)	10,228
Net finance costs		(608)	(60)	(668)	(489)	(268)	(757)
Profit before taxation		12,725	(694)	12,031	10,017	(546)	9,471
Tax expense	8	(2,469)	48	(2,421)	(1,953)	(165)	(2,118)
Profit for the year from continuing operations		10,256	(646)	9,610	8,064	(711)	7,353
Discontinued operations:
(Loss)/profit after taxation for the period from discontinued operations	6	(1,577)	(15,080)	(16,657)	401	(168)	233
Profit/(loss) for the year		8,679	(15,726)	(7,047)	8,465	(879)	7,586
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit pensions, net of tax				(25)			10,393
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				480			(385)
Exchange differences on retranslation of foreign operations				161			(46)
				641			(431)
Other comprehensive gain for the year, net of tax				616			9,962
Total comprehensive (loss)/profit for the year, net of tax				(6,431)			17,548
Earnings per share				Pence			Pence
Basic earnings per share
-  Continuing operations				26.8			20.6
-  Discontinued operations				(46.5)			0.6
	10			(19.7)			21.2
Diluted earnings per share
-  Continuing operations				26.4			20.2
-  Discontinued operations				(46.5)			0.6
	10			(20.1)			20.8

 

*The results for the year to 30 June 2021 have been re-presented to show the Levolux business as a discontinued operation. See note 6 for details

 

Reconciliations of underlying to statutory profit and earnings per share are provided in notes 5 and 10 respectively.

 

consolidated statement of financial position

At 30 June 2022

	Notes	2022	2022	2021	2021
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment - owned assets		12,573		11,734
Property, plant and equipment - right-of-use assets		4,926		5,469
Goodwill	7	8,526		18,705
Other intangible assets		2,126		3,321
Deferred tax assets	8	529		1,145
			28,680		40,374
Current assets
Inventories		13,394		10,871
Trade and other receivables		18,786		21,389
Derivative financial assets		325		-
Cash at bank		8,284		4,999
			40,789		37,259
Total assets			69,469		77,633
Liabilities
Non-current liabilities
Interest bearing loans and borrowings		(13,000)		(5,936)
Lease liability		(4,251)		(4,811)
Employee benefits payable		(2,114)		(4,581)
Provisions		(1,061)		(1,267)
Deferred tax liabilities	8	(1,730)		(966)
			(22,156)		(17,561)
Current liabilities
Trade and other payables		(19,031)		(21,011)
Lease liability		(881)		(795)
Provisions		(1,360)		(834)
Corporation tax payable		(309)		(1,019)
Derivative financial liabilities		-		(268)
			(21,581)		(23,927)
Total liabilities			(43,737)		(41,488)
Net assets			25,732		36,145
Equity
Share capital		4,517		4,517
Share premium	11	445		445
Capital reserve - own shares	11	(601)		(406)
Hedging reserve	11	263		(217)
Foreign currency reserve	11	216		55
Profit and loss account reserve		20,892		31,751
Total equity			25,732		36,145

 

The financial statements were approved by the Board of Directors and authorised for issue on 6 September 2022

 

Paul Hooper                                                        Simon Dray                        
Director                                                                  Director                                 

 

6 September 2022               Company number 1767387