FULL YEAR RESULTS ANNOUNCEMENT

IMMEDIATE RELEASE

11 September 2018

THE ALUMASC GROUP PLC - FULL YEAR RESULTS ANNOUNCEMENT

Alumasc (ALU.L), the premium building products, systems and solutions group, announces results for the year ended 30 June 2018.

Paul Hooper, Chief Executive, said:

"We are delighted to report a strong fourth quarter performance in 2017/18, following the challenges experienced in the third quarter. Alumasc remains well positioned to outperform the UK construction market given its robust business model, strong market positions and focus on key strategic growth drivers." 

Financial Review:

·      Revenues £98.4m (2016/17: £104.8m) due to severe weather in Q3 and the impact of the Carillion liquidation

·      Underlying profit before tax £6.5m (2016/17: £9.0m)

·      Basic earnings per share of 12.0 pence (2016/17: 18.3 pence)

·      Progressive dividend policy reflected in the payment of a full year dividend of 7.35 pence per share, an increase of 2.8% (2016/17: 7.15 pence)

·      Net debt of £4.8m (2017: net cash of £6.1m) reflecting investment in the acquisition of Wade International and the new Timloc factory

An important year for strategic development:

·      Continued investment in capacity for growth:

o  Commissioning of 88,000 sq. ft factory for Timloc in January 2018

o  Investment of £0.3m in commercial resources to drive and support growth

 

·      Improving quality of earnings through pro-active portfolio management:

o  Acquisition of Wade International in January 2018 for £8m

o  Disposal of Scaffold & Construction Products in July 2017 for £0.9m

 

·      Leveraging further synergy between group businesses:

o  Wade acquisition complements Harmer and Gatic drainage brands

o  Including Alumasc Roofing, some 60% of the group revenue now contributes to Alumasc's "Rain to Drain" strategy

o  "Building envelope" specification selling of almost all the group's products, led by Alumasc Roofing's specification sales team

 

·      Implementation of a simpler and more cost efficient operating structure:

o  Fewer, larger and more modern operating locations

o  Refreshing of the plc Board

o  Proposed merger of the two legacy defined benefit pension schemes

o  Simplification of the group's legal structure

o  Consideration of moving the group's stock exchange listing to AIM

Outlook:

The group's strong performance in the final quarter of the year, coupled with an action plan for growth, gives the Board confidence that Alumasc has a resilient business model and a strategy to generate growth this year and beyond.

 

Enquiries:

The Alumasc Group plc:
Paul Hooper (Chief Executive)	Tel:  01536 383821
Andrew Magson (Group Finance Director)	Tel:  01536 383844
Camarco:
Ginny Pulbrook	Tel: 020 3757 4992
Tom Huddart	Tel: 020 3757 4991
	Email: [email protected]

Notes to Editors:

Alumasc is a UK-based supplier of premium 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 four business segments with strong positions and brands in the individual markets. The four segments are: Architectural Screening, Solar Shading & Balconies; Roofing & Walling; Water Management; and Housebuilding & Ancillary Products.

 

 

Strategic Report

Chairman's Statement

Our Strategy

In recent years, Alumasc has been repositioned to become a dedicated supplier of premium building products to the UK construction industry and to seek opportunities to expand internationally.

From this tightly defined base, Alumasc is focused on driving growth through a combination of market share gains, innovation, market development and complementary acquisitions, such as Wade International purchased in January 2018. These strands in turn rely upon the quality of our products and marketing, the development of new products and services which genuinely complement the portfolio and the patient nurturing of a small number of overseas markets where we have identified that our products have potential.

In conjunction with this market-led approach, we recognise that opportunities exist for operational efficiencies as the shape and scope of our business changes.

This strategy will enable our group to outperform against the industry benchmark.

 

The Year Under Review

Following six years of uninterrupted growth, progress towards these strategic goals was partially disrupted in the year under review by the reversal in the group's financial performance. However, we continued to make the planned investment which underpins the group's longer term development.

The reasons which lay behind the financial reversal included the exceptionally hard and disruptive winter season, unusually bringing many building activities to a halt; the bankruptcy of a major player in the construction industry, which sent shockwaves across most sectors; and the more illusive hesitancy that accompanies the economic and political uncertainties in the UK associated with Brexit. As anticipated a year ago, we also experienced lower export sales, reflecting project timing after last year's record. This should now begin to recover as the project pipeline grows.

While severely impacting profit for the year under review, none of these factors is viewed as undermining the group's underlying strategy. Moreover, where possible, lessons have been learnt and actions taken to diminish their impact in the future.

Meanwhile investment in support of the group's longer term development have continued, including rehousing Timloc, the group's successful housebuilding products business, in new, bespoke manufacturing premises; and the acquisition of Wade International, a synergistic and significant addition to our water management division. We also continued to invest in people to support our growth plans.

 

Development

Furthermore, the Board's firm belief in the strength of Alumasc's strategic position has led to a string of decisions for action which we believe will underpin and accelerate further progress. These include:

·      relocation of a second principal group operation into new manufacturing facilities, freeing it to achieve its planned potential;

·      a more streamline and cost-effective operational structure;

·      the proposed merger of the group's two pension schemes, thereby reducing costs and enabling simplification of the group's presently complex legal structures;

·      consideration of moving the group's listing to AIM to assist the pursuit of the strategy; and

·      a review of the group Board to ensure that the skills and experience are in place to oversee and progress the group's strategy.

 

Board Succession

Philip Gwyn, a director of The Alumasc Group since its flotation in 1986, retired from the Board at the end of June this year. Philip's contribution to the direction and development of Alumasc has been immense and I would like to express my personal thanks to him for his wisdom and enthusiasm over many years.

We have appointed a recruitment firm to identify a new Non-Executive director with appropriate skills and experience and the process is well advanced.

 

Outlook

As set out above, we believe that many of the factors which held back the group's financial performance in the year under review were external and do not undermine our strategy. Indeed, we continue to invest for the longer term and to take actions designed to underpin and accelerate the group's progress. While some of the economic factors which impacted the last year remain, the group's strong performance in the final quarter of that year, coupled with the action plan outlined above, gives your Board confidence that Alumasc has a resilient business model and a strategy to generate growth this year and beyond.

 

 

John McCall
Chairman

 

Chief Executive's Strategic and Performance Overview

Overview

 

The 2017/18 financial year was an important one for Alumasc in terms of strategic development. However, as reported in May, largely due to external circumstances beyond our control, trading during the year was more challenging than expected.

 

In the financial year to 30 June 2018, Alumasc reported underlying earnings per share of 14.4 pence (2016/17: 20.1 pence) and basic earnings per share of 12.0 pence (2016/17: 18.3 pence) from revenues of £98.4 million (2016/17: £104.8 million).

 

Most of the shortfall in financial performance relative to the prior financial year occurred during the third quarter when trading momentum was disrupted by severe weather and a cautious approach from building contractor customers in committing to new work against an uncertain economic and political background, both in the UK and in export markets, leading to project delays. This was exacerbated by the fall-out from the insolvency of Carillion in late January, which further impacted confidence and the availability of credit across much of the UK construction sector in the following months. Pleasingly though, the financial year ended strongly, with a record trading performance delivered by our specialist building products businesses in the final quarter, including the benefit of some larger construction projects delayed from earlier in the year. 

 

Strategic development

 

2017/18 was a significant year for Alumasc's strategic development as we:

 

1.     Continued to invest in capacity for growth.

 

Examples of this were:

 

·      the successful commissioning of a new 88,000 square foot manufacturing and warehousing facility at Timloc, our housebuilding products business, in January 2018;

·      the investment of £0.3 million in additional commercial resources to drive and support growth, with particular focus on Levolux, our bespoke solar shading, screening and balconies business, where significant long term opportunities are available in the North American and balconies markets.

 

2.     Improved the quality of the group's earnings through the proactive management of our portfolio of businesses.

 

Examples of this were:

 

·      the acquisition of Wade International, a high-quality specialist drainage business for £8.0 million on 31 January 2018. In its full financial year to 30 June 2018, Wade generated operating profits of £1.3 million from revenues of £5.3 million at operating margins of above 20%;

·      the disposal of the scaffolding products business, SCP, in July 2017 for net sale proceeds of £0.9 million. In 2016/17 SCP traded at a break-even level from revenues of £4.2 million.

 

3.     Leveraged further synergy between group businesses.

 

The acquisition of Wade was highly complementary to Alumasc's existing water management activities. This division will now account for almost 40% of group revenues. When combined with Alumasc Roofing, some 60% of the group now participates in the group's "rain to drain" strategy which enables water to be managed, controlled and attenuated as it flows through and around buildings.

 

In addition, our specification sales teams are now in a position to offer a broader building envelope of exterior building product solutions to customers, comprising roofing, walling, balconies and water management systems.

 

4.     Continued to implement a simpler and more cost-efficient operating structure across the group.

 

The combination of:

 

·      the commissioning of the 88,000 square foot Timloc factory last January, described above;

·      the acquisition of Wade with a modern 52,000 square foot freehold factory; and

·      the intention for Alumasc Water Management Solutions to relocate to new manufacturing facilities in the next two years

 

will provide the group with a more modern, larger and flexible footprint which will enable us to consolidate our operations on to fewer sites, thereby enabling us to improve manufacturing and supply chain efficiency and reduce duplication of overheads.

 

Further, the initiatives outlined in the Chairman's Statement comprising:

 

·      the continued refreshing and renewal of the group board;

·      the proposed merger of the group's two legacy defined benefit pension schemes and the consequential rationalisation of the group's legal structure, together unlocking significant administrative cost saving potential; and

·      considering whether to re-list the group's shares on the Alternative Investment Market (AIM)

 

are also consistent with the broader themes of simplification and cost efficiency that we believe will help us build a future for Alumasc as a more focused, dynamic and entrepreneurial group.

 

Performance overview

 

Group revenues were £98.4 million compared with £104.8 million in the prior financial year. The shortfall mostly related to the poor third quarter trading performance described above which was attributable largely to external events. In addition, and as foreseen in our outlook statement last September, the 2017/18 financial year did not benefit from as strong a contribution from larger construction projects (with revenues of £500,000 or more), including export projects, when compared with the prior financial year. These projects make a significant marginal profit contribution to overheads and therefore can have a material impact on the group's overall operating profits and margins. At the time of writing, early signs are that the current 2018/19 financial year should see a greater revenue and profit contribution from larger projects than was the case in 2017/18.

 

UK sales were similar to those in the prior year, but export sales were 27% lower. This illustrates the impact of larger contracts on the group's overall financial performance for the year, with no contract in the year under review coming close to the scale of the £3.1 million revenue North American power station screening project which had benefited Levolux in the prior year.

 

Despite some inflationary input cost pressure in the first half of the financial year, profit contribution margins after variable costs recovered to levels similar to those in the prior year, but gross margins after variable costs and operational fixed costs reduced from 31.3% to 30.6% reflecting an adverse operational gearing impact from lower sales (including the large project impact described above); investment in operational support resources at Levolux ahead of growth anticipated to flow from the significant increase in project quotation levels during the current year; and additional property costs relating to the new Timloc factory commissioned at the half year stage.

 

Selling, general and administrative costs were well controlled with further investment in sales resources to drive continued growth in the business over the medium term largely offset by savings elsewhere.

 

The resulting underlying profit before tax was £6.5 million compared with £9.0 million in the prior financial year at underlying operating margins of 6.8% (2016/17: 8.7%).

 

Non-underlying items, analysed in the financial review, together amounted to a net cost of £1.1 million during the year (2016/17 £0.9 million), and therefore statutory profit before tax was £5.4 million (2016/17: £8.1 million).

 

Whilst the financial performance for the year was below our initial expectations, we believe the reasons for the shortfall relate to specific circumstances during the year and that the group's strategy and business model remain robust.

 

Operational review

 

Architectural Screening, Solar Shading & Balconies

Revenue: £22.0 million (2016/17: £24.4 million)

Underlying operating profit*: £0.8 million (2016/17: £2.0 million)

Underlying operating margin*: 3.6% (2016/17: 8.2%)

Operating profit: £0.6 million (2016/17: £1.8 million)

 

* Prior to brand amortisation charges of £0.2m in both years

 

Levolux's financial performance in the year reflected a significantly lower level of sales from larger projects with greater than £500,000 revenue. In part, this was anticipated after a strong prior year performance, but it also reflected project delays attributed to broader economic and political uncertainties which in turn prolonged the decision-making process of property developers and building contractors, exacerbated by the credit issues experienced across the UK construction industry following the failure of Carillion in January.

 

Alumasc has nonetheless continued to invest to unlock Levolux's significant future growth potential: both in its embryonic UK balconies and balustrading business and in its North American business, also at a relatively early stage of development. The investment in people resources, including sales, estimators, designers and project managers absorbed in the income statement amounted to some £0.2 million in the year.

 

This investment enabled quotations for new work in the balconies and balustrading business to increase by five-fold compared with the prior year to over £60 million, and to more than double to £40 million in the North American business. These quotation figures validate our belief in the medium to longer term opportunity in these markets and reflect Levolux's growing brand presence. Our focus now is to strengthen the existing commercial infrastructure in place to increase order conversion rates.

 

The outlook for larger project revenues in the 2018/19 financial year currently looks stronger than it did a year ago, including in the UK core solar shading and screening business.

 

Roofing & Walling

Revenue: £31.2 million (2016/17: £34.0 million)

Operating profit: £1.8 million (2016/17: £2.8 million)

Operating margin: 5.8% (2016/17: 8.2%)

 

Alumasc Roofing experienced a challenging year with weaker than expected demand in the UK new build construction market, exacerbated by some of our contractor customers taking a cautious approach before committing to new developments in view of the broader economic uncertainties, and a number also experiencing credit issues either directly or indirectly in the months following the failure of Carillion.

 

Nonetheless, Alumasc Roofing has adapted well both in winning refurbishment work, particularly in the Academies sector, and in developing new products such as surfacing systems to exploit available market opportunities.

 

Alumasc has continued to invest in talented sales resources both to increase revenues in regions of the UK where we are currently under-represented and to develop increased specification system selling of a broader building envelope of Alumasc exterior building products, including water management systems, walling systems and balconies.

 

Following the £0.3 million overhead cost saving initiative of August 2017, Alumasc Facades posted a robust financial performance for the year despite reduced public funding for exterior wall insulation (EWI) systems in England and Wales and delays to projects in Scotland under the HEEPs and SEEP funding regimes due to adverse weather conditions in the third quarter of the year and with installing contractors challenging some awards of work by local authorities, causing further delay. 

 

Demand was subdued for high rise projects following the Grenfell Tower tragedy a year ago, but there are now promising signs of increasing demand from specifiers for high quality EWI systems, including those that have always been supplied by Alumasc, particularly now those that utilise a combination of fire retardant render and mineral wool solutions.

 

Water Management

Revenue: £34.5 million (2016/17: £32.6 million)

Underlying operating profit*: £3.6 million (2016/17: £4.1 million)

Underlying operating margin*: 10.3% (2016/17: 12.6%)

Operating profit: £3.3 million (2016/17: £4.0 million)

 

* Prior to Wade acquisition costs of £0.2m in 2017/18 and brand amortisation charges of £0.1m in both years

 

This was an important year for the strategic development of this division.

 

The acquisition of Wade International for £8.0 million on 31 January 2018 added a high quality, market leading range of surface water drainage solutions backed by a highly respected brand to complement our existing range of water management solutions. In addition to Alumasc Roofing, these comprise Alumasc Rainwater systems; Skyline soffit and coping systems; Harmer roof and through building drainage systems; and Gatic drainage systems for areas outside the building. Wade has performed well, in line with expectations, since acquisition and we now believe that the export potential for this business, especially when combined with Gatic's existing strong presence in the Middle and Far East, is greater than anticipated prior to acquisition.

 

With the acquisition of Wade, Alumasc has significantly enhanced its ability to provide full "rain to drain" solutions to manage the flow, control and attenuation of water through and around buildings.

 

Within the division, Alumasc Water Management Solutions (AWMS) had a resilient year despite some under recovery of input cost inflation in the first-half, with demand from building merchant customers remaining robust for solutions serving the new housebuilding and refurbishment sectors.

 

Rainclear, which has proven to be an excellent acquisition since joining Alumasc in 2012, continues to go from strength to strength, providing a specialist route to market for specialist installers in need of advice and strong customer service in the supply and use of high quality metal Rainwater systems.

 

Gatic, which sells mostly into large infrastructure projects, experienced some project delays and competitive margin pressure in its civil drainage business, but benefited from more solid demand for engineered access covers. After a record prior year for export sales, the year under review was more difficult and this impacted both revenues, marginal profit contribution and therefore operating margins. However, at the time of writing, the outlook for larger projects, including exports, in the 2018/19 financial year looks more positive.

 

Housebuilding & Ancillary Products

Revenue: £10.5 million (2016/17: £9.6 million)

Underlying operating profit*: £1.7 million (2016/17: £1.6 million)

Underlying operating margin*: 15.8% (2016/17: 16.5%)

Operating profit: £1.4 million (2016/17: £1.6 million)

 

* Prior to factory move costs of £0.3m in 2017/18

 

2017/18 was a key year for the development of Timloc as the business relocated from two capacity constrained sites to a new single, purpose built, 88,000 square foot leased facility in Howden, East Yorkshire, close to the M62 motorway. The relocation process was seamless, and a great credit to the management team and all the workforce.

 

Timloc continues to benefit from a positive UK new build housing market. Revenue growth of 9.6% exceeded market growth again as Timloc's customer service driven model of supplying its building distribution customers with excellent next day delivery customer service at attractive carriage paid prices being a great success, resulting in the business expanding its product portfolio to existing customers.

 

Alumasc continues to invest in Timloc enabling the business to introduce new products, such as expanding the relatively new Above the Roofline range, which is gaining further traction, and to increase automation and manufacturing efficiency.

 

Timloc expects to recover increased property costs of circa £0.5 million within its first year of operating the new factory and to continue its trajectory of profitable growth from that point onwards.

 

Outlook

 

For the most part, Alumasc continues to operate in an uncertain UK economic and political environment, with the UK construction industry forecast to contract by one to two percent in 2018 and grow only by low single digit percentages in each of the following two years.

 

Against this background Alumasc remains well positioned to outperform the UK construction market over the medium term, given its robust business model, strong market positions and focus on the key strategic growth drivers of:

 

·      managing the scarce resources of water and energy in the built environment, including developing international markets for these solutions;

·      providing bespoke solutions tailored to customer needs supported by excellent customer service;

·      developing high quality products and solutions and new business streams such as balconies and other new products that ease the construction process and lower the installed and life cycle costs of buildings; together with

·      the acquisition of high-quality complementary businesses such as Wade.

 

 

 

Paul Hooper

Chief Executive

 

 

 

Financial Review

 

Reconciliation of underlying to statutory profit before tax

Underlying profit before tax of £6.5 million exceeded statutory profit before tax of £5.4 million as reconciled in the table below:

	2017/18 £m	2016/17 £m
Underlying profit	6.5	9.0
Brand amortisation	(0.2)	(0.3)
IAS 19 net pension scheme finance costs	(0.5)	(0.6)
Loss on disposal of the SCP business	(0.2)	-
Profit on disposal of available-for-sale assets	0.4	-
Timloc relocation costs	(0.3)	-
Wade acquisition costs	(0.2)	-
Statutory profit	5.4	8.1

 

The reconciling items were:

·      Amortisation of acquired brands £0.2 million (2016/17: £0.3 million). This is a non-cash charge determined by management judgment in applying accounting standards. It does not affect the economic value of the group. The reduction in the charge compared to the prior year relates to the Rainclear brand becoming fully amortised in the earlier part of the year. This more than offsets the initial post-acquisition charge relating to the Wade brand acquired in January 2018. The full year amortisation charge relating to the Wade brand in 2018/19 and thereafter is expected to be £0.1 million pa. Details of the valuation of the Wade brand and other fair value adjustments made to the balance sheet of Wade at acquisition are set out in note 6 to the financial statements.

 

·      IAS19 net pension scheme finance costs of £0.5 million (2016/17: £0.6 million). This is a non-cash charge determined by a pensions actuary. It represents a year's unwind of the discount to present values of the group's pension deficit using AA-rated corporate bond yields as the discount rate. This charge is outside management's control. The year on year reduction in the charge relates to a lower corporate bond yield applicable at the beginning of the 2017/18 financial year.

 

·      The loss on disposal of £0.2 million from the sale of the Scaffold and Construction Products business in July 2017 related to a non-transferable lease commitment that became onerous when the business was sold, and the legal costs of selling the business. These costs were excluded from underlying earnings as they were non-recurring costs.

 

·      The profit of £0.4 million on disposal of an available-for-sale asset relates to the disposal of the group's long standing 20% trade investment in Amorim Isolamentos, a Portuguese cork producer. The gain on sale was excluded from underlying earnings as it was a non-recurring item.

 

·      The £0.3 million cost of relocating the Timloc factory, described in more detail in the Chief Executive's review, was excluded from underlying earnings as it was a one-off cost.

 

·      The £0.2 million cost, relating mainly to legal fees and stamp duty, associated with the acquisition of Wade International in January 2018 was also excluded from underlying earnings as it was a one-off cost.

Taxation

The group's underlying effective tax rate was 20.2% (2016/17: 20.6%), slightly above the weighted average UK statutory rate of tax applicable to the group's financial year of 19% due to certain costs that are disallowable for tax purposes.

The group's effective tax rate on statutory profit before tax was 19.7% (2016/17: 19.5%), also above the weighted average UK statutory rate of tax applicable to the group's financial year, as a number of the non-underlying costs set out in the table above are not allowable for tax purposes.

We expect the group's underlying tax rate to be circa 20% in the 2018/19 financial year.

Earnings per share

Underlying earnings per share for the year was 14.4 pence (2016/17: 20.1 pence). The reduction was broadly consistent with the lower underlying profit before tax for the year for the reasons described in the Chief Executive's review.

Basic earnings per share of 12.0 pence (2016/17: 18.3 pence) reflected the reduction in statutory profit before tax for the year for the reasons described in the Chief Executive's review; together with the year on year change in the items shown in the reconciliation of underlying to statutory profit before tax, above; and changes in the group's overall tax rate for the year also described above.

Dividends

The Board has decided to recommend to shareholders an increased final dividend of 4.4 pence per share (2016/17: 4.3 pence), applicable to members on the share register on 5 October and to be paid on 31 October.

This takes the total dividend for the year to 7.35 pence (2016/17: 7.15 pence), an increase of 2.8%.

Alumasc's distributable reserves, available for the payment of dividends to shareholders, amount to £9.4 million, without pension trustee consent, increasing to a maximum of £23.4 million with pension trustee consent. The approximate cash cost of the proposed final dividend for the 2017/18 financial year, which under accounting conventions is not yet deducted from these distributable reserves, is £1.6 million.

Alumasc does not have any dividend blocks in its active trading subsidiaries and therefore would expect to replenish parent company distributable reserves annually with dividends paid from the future profits generated by those subsidiary companies.

Alumasc has a progressive dividend policy that seeks to grow the dividend broadly in line with underlying earnings growth, having regard to the extent to which dividend payments are covered by underlying earnings after taking into account pension scheme funding commitments.

Investment in growth, cash flow and net debt

Summarised Cash Flow Statement
				2017/18 £m	2016/17 £m
EBITDA *				8.2	10.5
Underlying change in working capital				(2.7)	(3.7)
Short term changes in working capital on large construction contracts				0.7	(1.7)
Operating cash flow				6.2	5.1
Replacement capital expenditure				(1.3)	(0.9)
Interest				(0.2)	(0.1)
Tax				(0.7)	(0.8)
Pension deficit funding				(3.2)	(3.3)
Dividend payments				(2.6)	(2.4)
Sub total				(1.8)	(2.4)
Expansion capital expenditure				(2.0)	(0.2)
Wade acquisition consideration				(8.0)	-
SCP and Amorim disposal proceeds & others				0.9	0.1
Net cash flow				(10.9)	(2.5)
Net (debt)/cash at year end				(4.8)	6.1
* EBITDA: Underlying earnings before interest, tax, depreciation and amortisation

 

The group's overall net cash outflow for the year was £10.9 million. This included an investment of £10.0 million to grow the business, including £8.0 million for the acquisition of Wade International and £2.0 million relating to capital investment in excess of the depreciation charge for the year, including the fit-out cost of the new Timloc leased factory.

At 30 June 2018 the group had a modest level of net debt of £4.8 million (30 June 2017: net cash of £6.1 million).

The group invested a net £2.0 million in working capital during the year, mainly relating to:

·      the strong final quarter trading performance where cash from sales made in the weeks prior to the year end was not collected until after 30 June; and

·      the earlier phasing of inventory purchases to mitigate cost inflationary pressure during the year, which resulted in a lower than usual level of trade creditors at 30 June 2018.

Our rolling average working capital as a percentage of sales ratio increased to 13.6% in 2017/18 from 11.3% in the prior year reflecting the impact of numerous construction project delays beyond the group's control during the year which made working capital management more challenging than usual, and the earlier phasing of inventory purchases during the year already described.

Balance sheet and return on investment

The group's net assets and shareholders' funds increased from £20.4 million at the beginning of the financial year to £24.4 million at 30 June 2018, mainly reflecting the net actuarial gain on the pension deficit described below, together with retained profit after tax and dividend payments for the year.

The group defines its capital invested as the sum of shareholders' funds, together with the pension deficit (net of tax) and net debt. On this basis, capital invested increased from £31.5 million at the beginning of the financial year to £41.8 million at 30 June 2018, largely reflecting the acquisition of Wade International during the year for £8.0 million and investments in working capital and in property, plant and equipment to grow the business, all as described above.

The combination of the lower profit in the year and higher average capital invested led to a reduction in underlying post-tax return on investment from 25.0% in the prior year to 14.5% in 2017/18, still well ahead of our estimated weighted average cost of capital.

Pensions

The valuation of Alumasc's pension deficit for accounting purposes at 30 June 2018 using IAS 19 valuation conventions was £15.1 million. This was an improvement on the previous financial year end valuation of £20.6 million, largely reflecting the benefit of pension deficit recovery payments made by the group during the year of £2.7 million, together with actuarial gains arising from the slightly higher AA corporate bond discount rates and slightly lower long term inflation rates prevailing at 30 June 2018; together with more favourable current mortality assumptions.

The group is taking an increasingly pro-active approach in managing its legacy defined pension obligations. Initiatives include:

·      A proposal to merge the group's two legacy defined benefit pension schemes to reduce ongoing administration costs and improve efficiency. The merger is planned to take place in time to be reflected in the next formal triennial valuation of the schemes as at 31 March 2019.

·      Taking opportunities to reduce gross scheme liabilities should scheme members, with independent advice as appropriate, choose to leave including the greater pension freedoms now available to them.

·      Improving the efficiency of returns on scheme assets by switching approximately half of the return seeking portfolio, or approximately 15% of total assets invested, from actively managed to passive global equity index tracker schemes at significantly lower ongoing management costs.

·      Reducing the volatility of scheme valuations through the use of derivatives and insurance products to hedge pension liabilities.

Banking facilities

Alumasc's banking facilities comprise:

·      An unsecured committed five-year revolving credit facility of £12.5 million, expiring in August 2020

·      Overdraft facilities, repayable on demand, of £3.5 million.

Going concern and viability

After due enquiry and based on the information available at the date of this report, the Board believes that Alumasc will remain a going concern and financially viable over the period to 30 June 2021.

 

Andrew Magson

Group Finance Director

 

 

 

Responsibility Statement

We confirm that to the best of our knowledge:

·      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

 

·      the strategic report includes a fair review of the development and performance of the business and the position of the group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's position and performance, business model and strategy.

On behalf of the Board

 

Paul Hooper                                                          Andrew Magson

Chief Executive                                                     Group Finance Director

 

The contents of this announcement, including the responsibility statement above, have been extracted from the annual report and accounts for the year ended 30 June 2018 which will be despatched to shareholders on or around 27 September 2018 and will be available at www.alumasc.co.uk. Accordingly the responsibility statement makes reference to the financial statements of the company and the group and to the relevant narratives appearing in that annual report and accounts rather than the contents of this announcement.

 

consolidated STATEMENT of comprehensive income

For the year ended 30 June 2018

 

 

		2017/18	2016/17
	Notes	£'000	£'000
Revenue	4	98,407	104,761
Cost of sales		(68,304)	(72,022)
Gross profit		30,103	32,739
Selling, general & administrative expenses		(24,023)	(23,864)
Operating profit	4, 5	6,080	8,875
Finance expenses		(706)	(752)
Profit before taxation	5	5,374	8,123
Tax expense	7	(1,057)	(1,583)
Profit for the period		4,317	6,540
Other comprehensive income
Items that will not be recycled to profit or loss:
Actuarial gain/(loss) on defined benefit pensions, net of tax		2,280	(792)
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		(220)	170
Exchange differences on retranslation of foreign operations		2	34
		(218)	204
Other comprehensive gain/(loss) for the period, net of tax		2,062	(588)
Total comprehensive profit for the period, net of tax		6,379	5,952
Earnings per share:		Pence	Pence
Basic earnings per share	9	12.0	18.3
Diluted earnings per share	9	11.9	18.0

 

 

 

Alternative performance measures:
Underlying profit before tax (£'000)	5	6,456	9,011
Underlying earnings per share (pence)	9	14.4	20.1

 

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 2018

 

	Notes	2018	2018	2017	2017
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		10,661		5,315
Goodwill	6	18,705		16,488
Other intangible assets		3,913		2,364
Available-for-sale assets		-		17
Deferred tax assets	7	2,574		3,501
			35,853		27,685
Current assets
Inventories		10,440		10,508
Trade and other receivables		23,755		22,459
Cash and cash equivalents		4,656		9,014
			38,851		41,981
Total assets			74,704		69,666
Liabilities
Non-current liabilities
Interest bearing loans and borrowings		(9,468)		(2,938)
Employee benefits payable		(15,140)		(20,596)
Provisions		(1,525)		(890)
Deferred tax liabilities	7	(905)		(595)
			(27,038)		(25,019)
Current liabilities
Trade and other payables		(22,413)		(23,497)
Provisions		(100)		(157)
Corporation tax payable		(405)		(494)
Derivative financial liabilities		(327)		(62)
			(23,245)		(24,210)
Total liabilities			(50,283)		(49,229)
Net assets			24,421		20,437
Equity
Called up share capital		4,517		4,517
Share premium	10	445		445
Capital reserve - own shares	10	(241)		(541)
Hedging reserve	10	(271)		(51)
Foreign currency reserve	10	86		84
Profit and loss account reserve		19,885		15,983
Total equity			24,421		20,437

 

 

 

 

Paul Hooper                          Andrew Magson
Director                                  Director 

 

11 September 2018

Company number 176738

 

 

 

consolidated STATEMENT of cash flows

For the year ended 30 June 2018

 

		2017/18	2016/17
		£'000	£'000
Operating activities
Operating profit		6,080	8,875
Adjustments for:
Depreciation		1,204	958
Amortisation		434	425
Gain on disposal of property, plant and equipment		(18)	(2)
Loss on disposal of business		218	-
Gain on disposal of available-for-sale assets		(426)	-
Decrease/(increase) in inventories		528	(270)
Increase in receivables		(1,618)	(2,700)
Decrease in trade and other payables		(1,200)	(1,994)
Increase/(decrease) in provisions		242	(585)
Cash contributions to retirement benefit schemes		(3,203)	(3,200)
Share based payments		160	157
Cash generated by operating activities		2,401	1,664
Tax paid		(679)	(800)
Net cash inflow from operating activities		1,722	864
Investing activities
Purchase of property, plant and equipment		(3,042)	(909)
Payments to acquire intangible fixed assets		(229)	(147)
Proceeds from sales of plant and equipment		26	4
Acquisition of subsidiary undertaking, prior to payment for cash acquired		(7,807)	-
Net proceeds from sale of business activity		767	-
Proceeds from sale of available-for-sale assets		443	-
Net cash outflow from investing activities		(9,842)	(1,052)
Financing activities
Interest paid		(185)	(120)
Equity dividends paid		(2,594)	(2,368)
Draw down of revolving credit facility		6,500	1,000
Exercise of share based incentives		39	116
Net cash inflow/(outflow) from financing activities		3,760	(1,372)
Net decrease in cash and cash equivalents		(4,360)	(1,560)
Net cash and cash equivalents brought forward		9,014	10,540
Net decrease in cash and cash equivalents		(4,360)	(1,560)
Effect of foreign exchange rate changes		2	34
Net cash and cash equivalents carried forward		4,656	9,014