TIDMENTU
RNS Number : 8045A
entu (UK) plc
29 March 2017
ENTU (UK) PLC
("Entu" or the "Group")
Results for the Year Ended 31 October 2016
Entu (UK) plc, the home improvements group providing energy
efficiency products and services to homeowners and businesses
across the UK, announces its results for the 12 months ended 31
October 2016.
Key Points
-- EBITDA in line with expectations at GBP2.7m (2015: GBP7.6m).
-- Fundamental restructuring programme undertaken to reduce risk
and focus on core Home Improvements business.
-- Adjusting for non-recurring items, underlying margins were
steady at 31.3% (2015: 31.6%) and underlying EBITDA was unchanged
at GBP2.4m (2015: GBP2.4m).
-- The restructuring programme, a detailed balance sheet review
and revisions to accounting policies resulted in exceptional
charges of GBP4.6m and contributed to losses on discontinued
operations of GBP3.8m, with the Group reporting an overall loss for
the year of GBP5.6m (2015: profit GBP2.7m).
-- No final dividend proposed. Group will return to the dividend list as soon as possible.
-- Immediate priorities are improving EPS, generating cash and
strengthening controls in the core business.
-- Positioned for a return to growth in 2018.
Year Ended 31 October 2016 2015
Audited GBPm GBPm
--------------------------------------------- ------- ------
Underlying Results(1)
Revenue 87.7 89.6
Gross margin 31.3% 31.6%
EBITDA 2.4 2.4
Continuing Operations
EBITDA before exceptional items 2.7 7.6
Operating profit before exceptional
items 2.5 7.2
Operating (loss)/profit after exceptional
items (2.1) 6.7
Overall Results
(Loss)/profit for the year (5.6) 2.7
Basic (LPS)/EPS (8.6)p 4.2p
Net cash inflow from operations 1.4 1.2
Net decrease in cash and cash equivalents (0.7) (4.3)
Cash and cash equivalents 0.8 1.4
(1) Underlying results exclude exceptional and other
non-recurring items, but include overheads allocated
to discontinued businesses which have been or will
be absorbed back into continuing operations. Underlying
and reported revenues are the same. A reconciliation
between underlying and reported results is set out
in Note 31 to the Financial Statements.
Chief Executive, Ian Blackhurst, commented:
"This has been a very difficult year for the Group. Our
challenges began in September 2015 when, following the Government's
surprise reduction in solar feed-in-tariffs, we were forced to
close our Solar business, leaving the Group with an overhead base
designed for a larger business set on growth.
We had hoped that targeted acquisitions and organic growth in
new, commercial business streams would cover the overhead base, but
by the half year it was clear that this would not materialise
quickly enough and we acted decisively to scale back on
acquisitions, close underperforming businesses and execute a
radical restructuring programme to improve operational efficiency
and reduce costs in our core Home Improvements business.
The restructuring programme also highlighted operational
weaknesses that we are addressing by strengthening our management
team and improving controls and processes across the Group.
Despite all the challenges, our core Home Improvements business
remains a UK market leader, and the underlying performance and cash
generating ability of the Group remains substantially unchanged.
There is still much work to do in 2017 and our immediate priorities
are to focus on our core strengths, improve returns in our Home
Improvements Division and reposition the business for growth in
2018."
For further information, please contact:
Entu
Ian Blackhurst, Chief Executive Officer 020 7457 2020
Neill Skinner, Chief Financial Officer
Zeus Capital Limited (Broker and Nominated
Adviser)
John Gould 020 3829 5000
Dominic King
Andrew Jones
Instinctif Partners (Public Relations)
Helen Tarbet 020 7457 2020
James Gray
Notes to Editors
Entu (UK) plc (AIM: ENTU) is a leading home improvement group
providing energy efficiency products and services to homeowners and
businesses in the UK.
Headquartered in Cheshire, Entu has national presence through a
network of strong regional brands such as Weatherseal, Penicuik and
Zenith. The Group operates three business segments: home
improvement products, energy generation and energy saving products
and repairs and renewals services.
Entu operates in a growing marketplace with myriad
opportunities. Entu's primary strategy is to focus on driving
organic growth from its diversified, fully integrated product
portfolio, and also, over time, through the development of new
product and service offerings, in particular, energy efficiency
products and services.
The Group was admitted to AIM in October 2014.
CHAIRMAN'S STATEMENT
Review of the Year
During the year, we have taken difficult, but necessary, actions
to focus on improving returns and cash generation in our core Home
Improvements business and to reduce risk across the Group.
Shortly before the last year end we closed our Solar business
because of the Government's unexpected decision to reduce
substantially the feed-in-tariffs for solar energy, rendering that
business uneconomic. This left the Group with an overhead base that
had been established for a larger and growing business which, as I
said last year, either had to be absorbed by acquisitions and
growth in new business streams, or cut back to fit a refocussed
Home Improvements business. Our preference was to absorb these
excess overheads through growth, but we did not consider any of the
available acquisition opportunities sufficiently attractive and the
new business streams did not produce the growth we were hoping for.
Consequently, we restructured operations and cut overheads
aggressively to create a robust platform that was fit for purpose
and allow the Group to make a sensible return in due course.
In addition to closing our Solar business last year, we also
sold our under-performing Norwood Interiors kitchens business, and
this year, as part of a wide-ranging restructure of our operations,
we closed our Europlas business to create greater focus and to
improve returns across the Group. We also sold Astley Façades
Limited ("Astley"), which we acquired in March 2015 and grew faster
than expected, creating an increased working capital requirement
and risk profile that no longer matched the Group's strategy going
forward.
Finally, we undertook a detailed review of all our subsidiary
company balance sheets to remove any remnants of those discontinued
businesses, in order to provide a stable platform from which to
trade forward. This is discussed in more detail in the "Financial
Review".
Results
Group revenue from continuing operations was GBP87.7m (2015:
GBP89.6m) and operating profit from continuing operations before
exceptional items was GBP2.5m (2015: GBP7.2m).
After exceptional items of GBP4.6m (2015: GBP0.5m), the Group
made an operating loss of GBP2.1m (2015: profit GBP6.7m) and with
losses on discontinued operations of GBP3.8m (2015: GBP3.0m), the
overall loss for the year was GBP5.6m (2015: profit of GBP2.7m).
This provided a basic loss per share of 8.6p (2015: earnings per
share of 4.2p).
Dividend
The Board declared and paid an interim dividend for the year of
0.5p per share. However, in the light of the restructuring of the
Group and the final results for the year, the Board has
reconsidered the dividend policy and, as announced on 7 February
2017, determined that it is not appropriate to recommend a final
dividend for the year ended 31 October 2016. The Board intends that
Entu return to the dividend list as soon as possible and the
Directors will assess future dividends as the Group's balance sheet
and distributable reserves strengthen.
Board
There have been several changes to the Board during the year. On
14 January 2016, Geoff Stevens stepped down as Chief Financial
Officer and assumed the role of Non-Executive Director. After the
conclusion of last year's Annual General Meeting, Geoff was
appointed Chairman of the Audit Committee and became a member of
the Remuneration Committee. On the same date, and following an
extensive external search, it was announced that Neill Skinner had
joined the Board as Chief Financial Officer on a full time
basis.
Following the restructuring exercise, the Group announced on 19
July 2016 that Andrew Corless, Chief Operating Officer (appointed
14 January 2016), had resigned from the Board to pursue new
opportunities.
Darren Cornwall stood down from the Board with effect from 15
April 2016 to work on a more flexible basis. Darren continues to
work for the Group developing opportunities which have the scope to
add value to the Group's product and service offering as well as
assisting in margin improvement plans for execution in the coming
months. Darren also provided project support in the corporate
transactions described in the
"Review of the Year".
People
On behalf of the Board, I wish to thank all our people for their
hard work, professionalism and commitment in delivering the
restructuring programme and putting in place the changes necessary
to improve the Group's return and cash generation.
Strategy
Whilst the focus in the past year has been on disposals and
closures, the immediate focus is on securing gains from operational
efficiencies and organic growth to return the Group to an
acceptable level of profitability.
In the longer term it remains the Board's strategy to make
selective acquisitions, and to enter commercial partnerships and
distribution agreements in the product and geographical areas in
which we currently operate, providing always that we can see a
sensible return within a modest timescale.
However, the core strategy in the medium term remains unchanged.
Entu is one of the UK's leading home energy efficiency groups
providing energy efficiency products and services to homeowners and
businesses nationwide. We are aiming to build a business that
anticipates a broadening of its sales channels and is well placed
to serve them, with an increasing range of products, through an
efficient and established infrastructure.
The Board intends to take advantage of these new opportunities
in time, but in the short term, we need to focus on our core
business, improve returns, strengthen our balance sheet and ensure
that the risks inherent in the Group remain properly managed and
controlled.
David M Forbes
Chairman
CHIEF EXECUTIVE'S STATEMENT
Overview
This has been a challenging year for the Group. In September
2015, the Government announced a surprise and substantial reduction
in solar feed-in-tariffs, and we were forced to close our
profitable Solar business, a major contributor to our Energy
Generation and Savings Division.
This, along with the sale of our Norwood kitchens business
earlier in the year, resulted in a significant loss of revenue and
contribution, and left us with GBP3.6m of central overheads
designed for a larger business set on growth that would need to be
absorbed by our continuing operations.
We had planned for targeted acquisitions and organic growth in
new, commercial business streams, mainly in the Energy Generation
and Savings Division, to cover these central overheads. However,
the pipeline of acquisition targets did not offer any sufficiently
attractive opportunities and growth in the new, commercial business
streams was slower than planned.
Therefore, in May we acted decisively to restructure the Home
Improvements Division, scale back our acquisition activity and
close underperforming commercial business streams in the Energy
Generation and Savings Division. These actions resulted in an
exceptional charge of GBP1.9m in FY2016, and removed GBP2.1m of
cost from the Group on an annualised basis. Combined with the
actions we have taken since the year end, which are discussed under
"Short-Term Priorities" below, we are targeting an overall
annualised saving of GBP4.0m by the end of FY2017.
We have also strengthened our Executive Team with senior
appointments in operations, finance, compliance and human
resources.
Group revenues from continuing operations before exceptional
items were down slightly at GBP87.7m (2015: GBP89.6m), mainly due
to lower finance commissions following a reduction in interest
rates offered on consumer finance products. However, despite the
challenges we faced this year, underlying gross margins were
relatively constant at 31.3% (2015: 31.6%) and underlying EBITDA
was unchanged at GBP2.4m (2015: GBP2.4m).
The overall loss for the year, after exceptional items and
losses on discontinued operations, was GBP5.6m, (2015: profit of
GBP2.7m). The Group's results are discussed in more detail in the
"Financial Review".
The decisive actions we have taken will allow us to focus on our
core strengths, improve returns in our core Home Improvements
Division and reposition the business for growth in 2018.
Divisional Review
Home Improvements
Our Home Improvements Division is one of the UK's largest
providers of replacement windows, doors, conservatories and other
home improvement products and, despite the challenges faced by the
Group, remains a market leader. The Division sells to retail
customers directly through its own brands or indirectly through
partnerships with other home improvement businesses.
We had a slow start to the financial year due to management time
being focussed on stabilising the Group after the rapid exit from
our Solar business in September 2015. However, in the first two
months of 2016, we enjoyed our highest ever rise in new orders,
which reached record levels in the second quarter of the financial
year.
Whilst this was a significant achievement for the sales teams
across the Division, the pressure this order book growth placed on
our installation operations, coupled with the focus brought on the
business through the restructuring exercise, exposed weaknesses in
the Division's operations both in the planning and delivery of new
installations and the clearing down of remedial works. This, in
turn, led to an increase in our debtor position in 2016. Since May,
I have assumed direct responsibility for installation operations
and, although it has taken more time to address all the issues than
expected originally, significant progress has been made.
The transition to a single national sales and marketing function
as part of the restructuring exercise resulted in an inevitable dip
in new orders in the third quarter, but this allowed breathing
space for our installation operations to bring the order book back
into balance with our installation capacity and, by the end of the
fourth quarter, we were back on track.
The Division was also successful in securing FCA authorisation
as a credit broker for consumer finance products provided through
our finance partners.
Energy Generation and Savings
As noted above, our Energy Generation and Saving Division has
seen significant change in the year with the closure of new,
commercial business streams that were under performing and the sale
of Astley. At the year end, the Division comprised our insulation
and new commercial LED lighting installation businesses.
Repairs and Renewals Service Agreements ("RRSA")
The RRSA Division offers customers an annual cover plan on many
of its core products and the division performed in line with
expectations.
Short Term Priorities
We have restructured our business to focus on our core Home
Improvements Division. The decisive actions taken in 2016 have
stabilised the business, and the priorities for 2017 are to improve
returns, increase cash generation further, reduce risk and,
ultimately, create a robust platform that will enable us to return
to sustainable growth in 2018. To deliver this, we have
strengthened our Executive Team with senior appointments in
operations, finance, compliance and human resources, who will focus
on the following priorities in 2017:
-- Deliver GBP4m annualised savings. We delivered GBP2.1m of
annualised savings from the actions we took in 2016. Through
further actions in 2017 to centralise service teams at our Head
Office in the North West, focus installation administration in
three major hub depots and further operational efficiencies, we
plan to deliver a total of an annualised GBP4m of savings by the
end of 2017.
-- Improve operational efficiency. As part of the restructure in
2016, we identified a series of measures to improve the efficiency
of our service and installation teams to reduce the lead times from
sale to installation, which will improve returns and cash
collection.
-- Leverage supply chain. Through tighter quality control
procedures and management of supply contracts, we can reduce
wastage further and reduce inefficiency in operations. We will also
review our contractual arrangements with suppliers to obtain
improved prices and payment terms where we can.
-- Improve cash collection. We have undertaken a series of
measures to improve cash collection, including the implementation
of revised terms and conditions, tighter job completion procedures
and the strengthening of the credit control function. We are also
focussed on clearing the backlog of remedial work that arose during
2016.
-- Strengthen controls and processes. With senior appointments
in finance, compliance and human resources, we will strengthen
controls and processes across the Group to improve management
information systems and reduce risk.
Strategy
Our overall vision to become the UK's leading installer of
energy efficient products for retail and commercial customers
remains unchanged, and the three steps required to deliver this
vision are as follows:
-- Step 1 - Focus on Core Strengths. As noted above, our
immediate priority is to focus on our core strengths and improve
returns, generate cash and reduce risk in our Home Improvements
Division.
-- Step 2 - Leverage Our Core Business. Once we have delivered a
robust platform for growth in our core Home Improvements Division,
we will look for consolidation opportunities around strong national
brands that will allow us to create sales and marketing leverage
through higher sales conversion ratios and operational leverage
driven by a single, national installation service.
-- Step 3 - Build Our Energy Efficiency Offering. We will
continue to invest in a select number of corporate relationships
where we can build our portfolio of energy efficient products and
expand our services into commercial markets in 2017, initially
through outsourced delivery. Our key investment criteria, as well
as producing returns at least equal to our core Home Improvements
business, will be opportunities where we can influence sales
directly and, eventually, absorb delivery capability into our
national installation platform.
To provide greater clarity between our existing core retail
markets and the significant growth opportunities open to us in
commercial markets in 2017, we intend to simplify our internal
segmental reporting of results in 2017 to "Retail" (i.e. B2C) and
"Commercial" (i.e. B2B) to align our segmental analysis more
closely with our expected customer base. Longer term, we also
envisage reporting our national installation service, Job Worth
Doing, as a separate profit centre.
Outlook
The firm and decisive actions we have taken in 2016 leave us
leaner and more focussed. However, there is still much work to do
to improve operational efficiency, clear down our backlog of
remedial work and strengthen our controls and processes. We have
defined plans to reduce costs further, but it remains a challenge
to realise all the potential savings in 2017.
Nevertheless, revenues in the first quarter were ahead of plan
and, if we can hold this level of performance and continue to make
the progress we have already made in reducing costs, we can end the
year in line with expectations with a robust platform for a return
to growth in 2018.
Ian Blackhurst
Chief Executive
FINANCIAL REVIEW
Group Result
Continuing Operations Before Exceptional Items
Revenues were down slightly at GBP87.7m (2015: GBP89.6m) with
nearly all the reduction due to lower finance commissions following
a reduction in the interest rates charged on customer finance
products.
Reported gross profit was also down at GBP27.5m (2015:
GBP29.9m), but this year-on-year comparison does not reflect the
underlying performance of the Group's continuing operations. As
part of a detailed review of subsidiary balance sheets following
the restructuring of the Group (see "Exceptional Items" below) we
identified GBP1.6m of exceptional items that reduce the underlying
comparative to GBP28.3m. On this basis, underlying gross margins
were steady at 31.3% (2015: 31.6%).
As expected, EBITDA was GBP2.7m (2015: GBP7.6m), but again, a
more meaningful year-on-year comparison needs to reflect the
GBP1.6m of exceptional items referred to above. Furthermore, and as
noted in the Chief Executive's Statement, the closure of the Solar
business resulted in GBP3.6m of central overheads being disclosed
as part of discontinued operations in 2015 which remained part of
the continuing business in 2016. Adjusting for both these items in
the 2015 comparative, and adjusting the 2016 result by GBP0.3m for
central overheads allocated to discontinued operations in respect
of Europlas and Astley, results in underlying EBITDA remaining
unchanged at GBP2.4m. Operating profit was GBP2.5m (2015:
GBP7.2m).
Overall Result
Exceptional items were GBP4.6m (2015: GBP0.5m), comprising of
GBP1.9m of restructuring costs and GBP2.7m from the balance sheet
review, resulting in an operating loss after exceptional items of
GBP2.1m (2015: profit GBP6.7m).
After net finance costs of GBP0.2m (2015: GBPnil) and a tax
credit of GBP0.5m (2015: tax charge GBP1.0m), the loss for the year
from continuing operations was GBP1.8m (2015: profit GBP5.7m).
The overall loss for the year was GBP5.6m (2015: profit GBP2.7m)
after losses from discontinued operations of GBP3.8m (2015:
GBP3.0m).
Divisional Results
Year Ended 31 Home Improvements Energy Generation Repairs and Group
October and Saving Renewals
Service Agreements
2016 2015 2016 2015 2016 2015 2016 2015
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- --------- --------- --------- ---------- ---------- ------ ------
Underlying Results(1)
Revenue 77.1 79.2 8.0 7.7 2.6 2.7 87.7 89.6
Gross margin 30.8% 31.6% 18.7% 15.4% 85.5% 76.1% 31.3% 31.6%
EBITDA 0.1 0.5 0.1 (0.2) 2.2 2.1 2.4 2.4
Continuing Operations
EBITDA(2) 0.4 4.6 0.1 0.9 2.2 2.1 2.7 7.6
Operating (loss)/profit(3) (3.9) 3.7 (0.4) 0.9 2.2 2.1 (2.1) 6.7
(1) Underlying results exclude exceptional and other non-recurring
items, but include overheads allocated to discontinued businesses
which have been or will be absorbed back into continuing operations.
Underlying and reported revenues are the same. A reconciliation
between underlying and reported results is set out in Note 31 to
the Financial Statements.
(2) Before exceptional items.
(3) After exceptional items.
Home Improvements
Home Improvement revenues fell by 2.6% to GBP77.1m (2015:
GBP79.2m), largely due to lower finance commissions. Underlying
gross margin was slightly down at 30.8% (2015: 31.6%), again due to
lower finance commissions, and underlying EBITDA was GBP0.1m (2015:
GBP0.5m), with lower gross profit partly offset by overhead
savings.
Operating loss from continuing operations and after exceptional
items was GBP3.9m (2015: profit of GBP3.7m).
Energy Generation and Saving
Revenues were up 4.3% to GBP8.0m (2015: GBP7.7m) due to growth
in our new LED installations business. Underlying gross margin also
was higher at 18.7% (2015: 15.4%), again due to the higher margin
LED business, and underlying EBITDA was GBP0.1m (2015: loss of
GBP0.2m).
Operating loss from continuing operations and after exceptional
items was GBP0.4m (2015: profit GBP0.9m).
Repairs and Renewals Service Agreements ("RRSA")
Revenue was GBP2.6m (2015: GBP2.7m), representing a steady
proportion of Home Improvements revenues at 3.4% (2015: 3.4%).
Operating profit from continuing operations and after exceptional
items increased by 8.5% to GBP2.2m (2015: GBP2.1m).
Exceptional Items
The restructuring of the Group's operations, discussed in the
Chief Executive's Statement, resulted in an exceptional charge of
GBP1.9m in 2016. This charge is made up of redundancy and other
employee related costs of GBP0.8m, full provision for onerous lease
obligations for exited properties and dilapidation costs of
GBP1.0m, and other associated restructuring costs of GBP0.1m.
Following the restructuring of the Group in the year, we
undertook a detailed review of all subsidiary balance sheets and
identified GBP2.7m of additional exceptional charges, bringing the
total exceptional items in respect of continuing operations to
GBP4.6m (2015: GBP0.5m). A detailed breakdown of the exceptional
items in respect of continuing operations is set out in Note 5 to
the Financial Statements.
The balance sheet review also resulted in a further GBP2.5m of
exceptional charges relating to discontinued operations. These are
included in the loss on discontinued operations, and a detailed
breakdown is set out in Note 10 to the Financial Statements.
Interest and Taxation
Net finance costs were GBP0.2m (2015: GBPnil) and the trading
losses in the year resulted in a tax credit of GBP0.9m (2015: tax
charge of GBP1.0m), with GBP0.5m in respect of continuing
operations and GBP0.4m for discontinued operations.
Discontinued Operations
As part of the restructure of the Home Improvements Division, we
closed our regional head offices to create a national sales,
marketing and operational management structure, closed
under-performing depots and exited our Europlas business which
operated predominantly in the South West of England. Although
Europlas turned a small profit, results were declining and there
were significant marketing and operational challenges that
management were unable to address. We decided, therefore, to focus
resources on improving performance in our larger operations in Home
Improvements Division. The loss before taxation on Europlas, after
exceptional costs, was GBP1.6m.
We also decided to sell Astley which we acquired on 27 March
2015 primarily as a platform for our insulation business to expand
into new, commercial markets. In the time that we owned Astley, we
grew the orderbook from GBP2m to GBP21m and secured a number of
high-profile contracts. However, the market for Astley's services
had moved towards larger, construction contracts and, with the need
to restructure the Group and focus on the core Home Improvements
Division, the risk profile no longer fitted within the Group. This
came into sharp focus when an unexpected contractual issue arose in
the late stages of the sale process, as a result of which, we took
the difficult decision to sell the business for GBP1, rather than
fund a lengthy dispute process.
The sale completed on 27 October 2016 and, although this
resulted in a loss on sale of GBP1.7m, and, an overall loss before
taxation for the year of GBP0.7m, Entu made a gross return of
GBP2.7m during its period of ownership, and a net return of GBP0.9m
after loss on sale and disposal costs.
Finally, the Group continued to incur unanticipated costs in
relation to the discontinued Solar business and identified
exceptional items as part of the balance sheet review, resulting in
a loss before taxation, after exceptional costs, of GBP1.9m.
A detailed breakdown of the Group's discontinued operations is
set out in Note 10 to the Financial Statements.
Dividend
As noted in the Chairman's Statement, the Board declared and
paid an interim dividend of 0.5p per share, but in light of the
results for the financial year, and as announced on 7 February
2017, the Board has determined that it is not appropriate to
recommend a final dividend in respect of the 2016 financial year.
The Board will assess its future dividend policy for the Group once
distributable reserves are strengthened.
Accounting Policy Review
We conducted a review of our accounting policies to ensure they
were in line with best practice and appropriate to the business
going forward. This resulted in the accounting for our Repairs and
Renewals Service Agreements and finance commissions being changed
to reflect more appropriately the timing of revenue recognition as
well as other adjustments to bring accounting policies in line
across the Group.
The impact of these adjustments on the results for both 2016 and
2015 was less than GBP0.1m, but resulted in a reduction in opening
reserves of GBP1.6m after a tax credit of GBP0.4m.
A detailed analysis of the impact of the change in accounting
policies is set out in Note 2 to the Financial Statements.
Balance Sheet
The Group's only freehold site in was sold to Ian Blackhurst at
the end of October 2016. The sale price of GBP0.5m, and the future
rental charge, were determined through independent valuers on an
arm's length basis and were approved by the Non-Executive Directors
in advance of the transaction. This allows the Group more
flexibility in its property strategy as support functions become
centred in the North West.
Inventories reduced to GBP1.3m (2015: GBP1.8m) largely due to a
GBP0.5m exceptional charge resulting from the balance sheet review.
Similarly, trade and other receivables fell to GBP8.1m (2015:
GBP14.1m) largely due to exceptional charges resulting from the
balance sheet review and sale of Astley.
Trade payables were GBP18.5m (2015: GBP17.5m) with decreases in
trade creditors and accruals being offset by an increase in
deferred income and advanced payments resulting from the accounting
policy changes and leveraging terms with suppliers.
Overall, net liabilities were GBP8.3m (2015: GBP0.6m) with the
reduction due to losses after exceptional items, discontinued
operations and changes in accounting policies.
Capital Structure
During March 2017, the Group extended it facilities with
Barclays Bank plc, with the renewal of its GBP4m revolving credit
facility for 12-months alongside the Group's existing variable
overdraft facility.
Cash Flow
Net cash generated from operations was GBP1.4m (2015:GBP1.2m).
Cash outflows in relation to the restructuring programme and losses
on discontinued operations were offset by advanced payments of
finance commissions and improved terms from suppliers.
Cash outflows on interest, taxation and the purchase of plant
and equipment were offset by the receipt from the sale of our
Winsford depot. After dividends paid of GBP2.1m (2015: GBP2.7m), of
which GBP1.8m related to the final dividend for 2015 and GBP0.3m to
the 2016 interim dividend, there was net decrease in cash and cash
equivalents of GBP0.7m (2015: net decrease of GBP4.3m).
Short-Term Priorities
This has been a difficult, but necessary year, focussing on
reducing central overheads and building a stable platform for
future growth. The short-term focus will be on improving returns,
generating cash and strengthening controls and processes across the
Group to reduce risk further.
Neill Skinner
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT
2016 2015
Year ended 31 October Restated
Notes GBP000's GBP000's
----------------------------------------------- ----- -------- ---------
Continuing operations
Revenue 4 87,745 89,563
Cost of sales (60,284) (59,645)
Gross profit 27,461 29,918
Administrative expenses (24,994) (22,658)
Operating profit before exceptional items 2,467 7,260
Exceptional items 5 (4,581) (518)
Operating (loss)/profit after exceptional
items (2,114) 6,742
Finance income 8 - 4
Finance costs 8 (219) (27)
(Loss)/profit before taxation (2,333) 6,719
Taxation credit/(charge) 9 512 (973)
(Loss)/profit for the year from continuing
operations 6 (1,821) 5,746
Discontinued operations
Loss for the year from discontinued operations 10 (3,801) (3,032)
(Loss)/ profit for the year 23 (5,622) 2,714
------------------------------------------------ ----- -------- ---------
Continuing basic (loss)/earnings per share
(pence) 12 (2.8) 8.8
Discontinued basic loss per share (pence): 12 (5.8) (4.6)
Total basic (loss)/earnings per share (pence) 12 (8.6) 4.2
------------------------------------------------ ----- -------- ---------
Diluted continuing operations (loss)/earnings
per share (pence) 12 (2.8) 8.8
------------------------------------------------ ----- -------- ---------
Adjusted earnings per share is shown in note 12 to the
accounts.
The notes 1 to 31 are an integral part of these Consolidated
Financial Statements.
There are no other items of comprehensive income for the year
other than the (loss)/profit for the year attributable to the
equity holders.
CONSOLIDATED BALANCE SHEET
At 31 October 2016 2015 2014
Restated Restated
Notes GBP000's GBP000's GBP000's
-------------------------------- ----- -------- ------------- ---------
Assets
Non-current assets
Intangible assets 13 1,141 1,496 1,676
Property, plant and equipment 14 481 948 1,048
Deferred tax asset 19 418 - 19
-------------------------------- ----- -------- ------------- ---------
2,040 2,444 2,743
-------------------------------- ----- -------- ------------- ---------
Current assets
Inventories 15 1,267 1,839 1,751
Trade and other receivables 16 8,103 14,089 10,029
Cash and cash equivalents 17 768 1,435 5,768
-------------------------------- ----- -------- ------------- ---------
10,138 17,363 17,548
-------------------------------- ----- -------- ------------- ---------
Total assets 12,178 19,807 20,291
-------------------------------- ----- -------- ------------- ---------
Equity
Share capital 22 50 50 50
Accumulated losses (8,356) (655) (663)
-------------------------------- ----- -------- ------------- ---------
Total shareholders' deficit (8,306) (605) (613)
-------------------------------- ----- -------- ------------- ---------
Liabilities
Non-current liabilities
Deferred taxation liabilities 19 - 60 40
Provisions 20 403 1,318 1,488
-------------------------------- ----- -------- ------------- ---------
403 1,378 1,528
-------------------------------- ----- -------- ------------- ---------
Current liabilities
Trade and other payables 18 18,465 17,477 17,149
Current taxation liabilities 54 532 1,798
Provisions 20 1,562 1,025 429
-------------------------------- ----- -------- ------------- ---------
20,081 19,034 19,376
-------------------------------- ----- -------- ------------- ---------
Total liabilities 20,484 20,412 20,904
-------------------------------- ----- -------- ------------- ---------
Total shareholders' deficit and
liabilities 12,178 19,807 20,291
-------------------------------- ----- -------- ------------- ---------
The Financial Statements were approved by the Board of Directors
on 28 March 2017 and authorised for issue on 28 March 2017. They
were signed on its behalf by:
Neill Skinner
Chief Financial Officer
28 March 2017
Entu (UK) plc
Registered number 08957339
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 October Share Accumulated Total Shareholders'
Capital Losses Deficit
Notes GBP000's GBP000's GBP000's
--------------------------------------------- ----- -------- ----------- -------------------
At 1 November 2014 (restated) 50 (663) (613)
Profit for the financial year - 2,714 2,714
Transactions with owners:
Dividends 11 - (2,736) (2,736)
Share based payment charge 26 - 30 30
Total transactions with owners recognised
directly in equity - (2,706) (2,706)
--------------------------------------------- ----- -------- ----------- -------------------
At 31 October and 1 November 2015 (restated) 50 (655) (605)
Loss for the financial year - (5,622) (5,622)
Transactions with owners:
Dividends 11 - (2,079) (2,079)
Total transactions with owners recognised
directly in equity - (2,079) (2,079)
--------------------------------------------- ----- -------- ----------- -------------------
At 31 October 2016 50 (8,356) (8,306)
--------------------------------------------- ----- -------- ----------- -------------------
Share Capital
The share capital account includes the nominal value for all
shares issued and outstanding.
Accumulated Losses
The 'Accumulated Losses' column in the Statement of Changes in
Equity includes the accumulated profits and losses arising from the
Consolidated Income Statement and certain items from the
Consolidated Statement of Changes in Equity attributable to equity
shareholders, net of distributions to shareholders.
The notes 1 to 31 are an integral part of these Financial
Statements.
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 October 2016 2015
Notes GBP000's GBP000's
------------------------------------------- ----- -------- --------
Cash flows from operating activities
Cash generated from operations 24 1,382 1,180
Taxation paid (12) (2,216)
Interest received - 4
Interest paid (232) (27)
-------------------------------------------- ----- -------- --------
Net cash generated from/(used in)
operating activities 1,138 (1,059)
-------------------------------------------- ----- -------- --------
Cash flows from investing activities
Purchase of property, plant and equipment 14 (189) (258)
Proceeds from disposal of property
plant and equipment 27 463 -
IPO fees - (1,320)
Acquisition of subsidiary, net of
cash acquired 10 - 1,040
Net cash generated from/(used in)
investing activities 274 (538)
-------------------------------------------- ----- -------- --------
Cash flows from financing activities
Dividends paid to equity shareholders 11 (2,079) (2,736)
-------------------------------------------- ----- -------- --------
Net cash used in financing activities (2,079) (2,736)
-------------------------------------------- ----- -------- --------
Net decrease in cash and cash equivalents (667) (4,333)
Cash and cash equivalents at the beginning
of the year 1,435 5,768
Cash and cash equivalents at the end
of the year 17 768 1,435
-------------------------------------------- ----- -------- --------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Preliminary announcement
While the financial information included in this preliminary
announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS. The accounting policies used are consistent with
those in the Group's Statutory Financial Statements for the year
ended 31 October 2016 which have yet to be published. The key
accounting policies applied by the Group have been set out below.
The preliminary results for the year ended 31 October 2016 were
approved by the Board of Directors on 28 March 2017.
The financial information set out in this preliminary
announcement does not constitute the Group's Statutory Financial
Statements for the year ended 31 October 2016 but is derived from
those Financial Statements which were approved by the Board of
Directors on 28 March 2017. The auditors have reported on the
Group's Statutory Financial Statements and the report was
unqualified and did not contain a statement under section 498 (2)
or 498 (3) Companies Act 2006. The Statutory Financial Statements
for the year ended 31 October 2016 have not yet been delivered to
the Registrar of Companies and will be delivered following the
Company's Annual General Meeting.
General information
Entu (UK) plc ('the Company') and its subsidiaries (together
"the Group") principal activity during the year was the sale of
replacement windows, double glazing, entrance doors, patio doors
and exterior improvement products within the United Kingdom. Other
activities, included within discontinued operations were solar home
improvement products and within the Astley Facades UK group of
companies, the provision of façade facilities for both new build
construction and refurbishment products.
The Company is incorporated and domiciled in the UK. The
Company's registered number is 08957339. The address of its
registered office is 7 Road One, Winsford Industrial Estate,
Winsford, Cheshire CW7 3PZ.
The Company is a public limited company and has its primary
listing on the AIM division of the London Stock Exchange.
The Group Consolidated Financial Statements were authorised for
issue by the Board on 28 March 2017.
Directors
The Directors of the Group during the year ended 31 October 2016
were as follows:
Executive
Ian Blackhurst, Chief Executive Officer
Neill Skinner, full time Chief Financial Officer appointed 14
January 2016.
Andrew Corless, Chief Operating Officer, appointed 14 January
2016, resigned 19 July 2016.
Darren Cornwall, Corporate Development Officer, resigned 15th
April 2016, (see note 27 for services to the Group after he
resigned as Director).
Geoff Stevens resigned as part time Chief Financial Officer 14
January 2016.
Non-Executive
David Forbes, Chairman
Geoff Stevens, appointed 14 January 2016 and appointed Chair of
Audit Committee, 29 March 2016.
Lorraine Clinton, Chair of Remuneration Committee.
1. Accounting policies
The principal accounting policies applied in the preparation of
these Consolidated Financial Statements are set out in this note.
These policies have been consistently applied to all the years
presented, unless otherwise stated.
Basis of preparation
The Consolidated Financial Statements of the Group have been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS as adopted by the
EU), IFRS Interpretations Committee (IFRS IC) Interpretations and
the Companies Act 2006 applicable to companies reporting under
IFRS. The Consolidated Financial Statements have also been prepared
under the historical cost convention. Where it is appropriate to
modify the historical cost convention, for example to value
derivatives at fair value through profit and loss, the Group has a
policy to do so.
The Financial Statements have been prepared in GBP, being the
Group's presentational and functional currency and have been
presented in thousands.
The preparation of Financial Statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of critical complexity, or areas where assumptions
and estimates are significant to the Consolidated Financial
Statements are disclosed in note 2.
During the year ended 31 October 2016 various prior year
adjustments were recorded in order to amend accounting policies, in
order to ensure they were in line with best practice and
appropriate to the business going forwards. See note 2 to the
accounts.
Basis of consolidation
Subsidiaries are defined as entities over which the Group
exercises control. The Group controls an entity when the Group has
power over an entity, is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect these returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases. The Group has applied IFRS 10
retrospectively in accordance with transition provisions of IFRS
10.
The Group applies the acquisition method to account for business
combinations. The cost of an acquisition is measured as the fair
value of the assets given, equity interests issued and liabilities
incurred or assumed at the date of exchange.
The excess of the cost of an acquisition over the fair value of
the Group's share of the identifiable net assets of the subsidiary
acquired is recorded as goodwill. If the cost of the acquisition is
less than the Group's share of net assets of the subsidiary
acquired, the difference is recognised in the statement of
comprehensive income.
Acquisition costs are expensed as incurred and included within
exceptional items.
The accounting periods of the majority of subsidiary
undertakings are coterminous with those of the Company. For
subsidiaries with a different year end than the Parent Company,
adjustments are made for material transactions or balances.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated.
When the Group ceases to have control any retained interest in
the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognised in
profit or loss. In addition, any amounts previously recognised in
other comprehensive income in respect of that entity are accounted
for as if the Group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognised in
other comprehensive income are reclassified to profit and loss.
Adoption of new or amended standards and interpretations in the
current year
Changes in accounting policy and disclosures
New standards, amendments and interpretations
No new standards, amendments or interpretations, effective for
the first time for the financial year beginning on or after 1
November 2015 have had a material impact on the Group or Parent
Company. No standards have been early adopted.
New standards, amendments and interpretations not yet
adopted
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning after 1
November 2015 and have not been applied in preparing these
Financial Statements. None of these are expected to have a
significant effect on the Financial Statements of the Group or
Parent Company, except the following, set out in the following
sections relating to accounting standards.
Standards
IFRS 9
IFRS 9 'Financial Instruments' addresses the classification,
measurement and recognition of financial assets and financial
liabilities. It replaces the guidance in IAS 39 that relates to the
classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and established
three primary measurement categories for financial assets:
amortised cost, fair value through OCI and fair value through the
statement of comprehensive income. The basis of classification
depends on the entity's business model and contractual cash flow
characteristics of the financial asset. Investment in equity
instruments are required to be measured at fair value through the
statement of comprehensive income. Investments in equity
instruments are required to be measured at fair value through the
statement of comprehensive income with the irrevocable option at
inception to present changes in fair value in other comprehensive
income not recycling.
There is now an expected credit losses model that replaces the
incurred loss impairment model used in IAS 39. There were no
changes to classification and measurement except for the
recognition of changes in own credit risk, for liabilities
designated at fair value through profit and loss, recognised in the
statement of other comprehensive income. IFRS 9 relaxes the
requirements for hedge effectiveness by replacing the bright line
effectiveness tests. It requires an economic relationship between
the hedged item and hedging instrument and for the 'hedged ratio'
to be the same as the one management actually uses for risk
management purposes. Contemporaneous documentation is still
required but it is different from that currently prepared under IAS
39. The standard is effective for periods beginning on or after 1
January 2018. Early adoption is permitted, subject to EU
endorsement. The full impact of IFRS 9 has not yet been
assessed.
IFRS 15
IFRS 15 'Revenue from Contracts with Customers' deals with
revenue recognition and establishes principles for reporting useful
information to users of the Financial Statements about the nature,
timing, and uncertainty of revenue and cash flows arising from the
entity's contracts with customers. Revenue is recognised when a
customer obtains control of a good or service and thus has the
ability to direct the use and obtain the benefits from that good or
service. The standard replaces IAS 18 'Revenue'. The standard is
effective for annual periods beginning on or after 1 January 2018
and earlier application is permitted. The full impact of IFRS 15 is
in the process of being assessed.
IFRS 16
IFRS 16 'Leases' addresses the definition of a lease,
recognition and measurement of leases and establishes principles
for reporting useful information to the users of Financial
Statements about the leasing activities of both lessees and
lessors. A key change arising from IFRS 16 is that most operating
leases will be accounted for on balance sheet as lessees. The
standard replaces IAS 17 'Leases' and related interpretations. The
standard is effective for annual periods beginning on or after 1
January 2019 and earlier application is permitted, subject to EU
endorsement and the entity adopting IFRS 15 'Revenue from Contracts
with Customers' at the same time. The full impact of IFRS 16 has
not yet been assessed.
Amendments to accounting standards
Annual improvements 2010-2012 (effective 1 July 2014 and
endorsed for 1 February 2015)
Annual improvements 2011-2013 (effective 1 July 2014 and
endorsed for 1 January 2015)
Amendment to IAS 19 'Employee Benefits' on defined benefit plans
(effective 1 July 2014 and endorsed for 1 February 2015).
The adoption of amendments to these standards has not had a
material impact for the year ended 31 October 2016.
Going concern
The Financial Statements have been prepared on a going concern
basis. For the purpose of considering going concern the Directors
have considered a period of at least 12 months from the date of
approving these Financial Statements and have made the following
assumptions around future trading: (i) revenues over the next 12
months are at similar levels to 2016 reported revenues; (ii)
margins show a modest increase over 2016 following actions taken to
improve operational efficiency and reduce costs in 2016; (iii)
there is no material change to the Group's operating model or
existing supply relationships; (iv) the Group is able to retain the
benefit of the cost savings realised in 2016 following the actions
taken to restructure the Group, as discussed in the "Chief
Executive's Statement"; and (v) the key risks set out in the
"Principal Risks and Uncertainties" section of the "Strategic
Review" will not crystallise or have a material impact upon the
Group within the next 12 months. The Directors have modelled a
series of sensitivities around these assumptions taking into
account reasonable, possible changes in trading performance and
determined that there is sufficient headroom in the Group's
facilities and/or mitigating actions available. The Directors have
no reason to believe that the facilities will not be renewed upon
expiry.
Revenue
The Group recognises revenue from the sale of goods and services
when it has transferred significant risks and rewards of ownership
to the buyer. For most of the Group's products the recognition will
be when the installation is substantially complete. Where
installation is completed in stages, revenue will be recognised by
reference to the stage of completion of the transaction at the
balance sheet date.
The Group receives commissions for introducing finance products
to customers as finance commission income. Finance commission
income is recognised in line with the revenue recognition policy
for the product to which the finance commission relates.
Repairs and Renewals Service Agreement (RRSA) income is spread
over the life of the relevant agreement and amounts received in
advance are treated as deferred income.
Revenue received in advance of the recognition criteria outlined
above is accounted for as deferred income within trade and other
payables in the Financial Statements. Where the revenue recognition
criteria have been met, but revenue has not been invoiced, the
revenue is accrued on the balance sheet within prepayments and
accrued income or other receivables.
Revenue is recognised net of VAT and any sales discounts and
rebates offered.
Exceptional items
Exceptional items are considered by the Directors. The Directors
apply judgement in assessing the particular items, which, by virtue
of their scale and nature should be disclosed separately, as the
Directors consider they are not representative of the underlying
trading of the Group. Exceptional items may include restructuring
expenses, onerous lease and dilapidation provisions, balance sheet
impairments and other non-trading items.
Goodwill
Goodwill represents the excess of the purchase price of a
business combination over the Group's interest in the fair value of
identifiable net assets, liabilities and contingent liabilities
acquired. The purchase price includes the fair value of contingent
consideration where appropriate. Direct costs of acquisition are
recognised immediately as an expense in profit or loss.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the Consolidated
Income Statement. Where the fair value of identifiable assets,
liabilities and contingent liabilities exceeds the fair value of
consideration paid, the excess is credited in full to the
Consolidated Income Statement on the date of acquisition.
Impairments
The carrying values of the Group's assets are reviewed at each
balance sheet date.
Goodwill is allocated to each of the Group's cash generating
units expected to benefit from the business combination. Cash
generating units to which goodwill has been allocated are tested
annually for impairment, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount
of the cash generating unit is less than the carrying amount of the
unit, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro rata on the basis of the carrying amount of
each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a
subsequent period. On disposal of a subsidiary the attributable
amount of goodwill is included in the determination of the profit
or loss on disposal. Impairment charges are included in profit or
loss.
Other assets are reviewed to see if an indication of impairment
exists. If any such indication exists, the assets recoverable
amount is estimated.
The Group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of
assets is impaired. For example, evidence of impairment might
include indications that the asset will fail to generate cash or
other forms of cash benefit to the Group in the future.
Share capital
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset. The Group's ordinary and
deferred shares are classified as equity instruments.
Dividends
Final dividends are recognised when they are approved and become
legally payable. Interim dividends are recognised when paid.
Dividends were paid out of Entu (UK) plc reserves, which had
sufficient positive reserves at the date of the dividend
distribution.
Taxation
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also
recognised on other comprehensive income or directly in equity,
respectively. The current income tax charge is calculated on the
basis of tax laws enacted or substantively enacted at the balance
sheet date in the UK. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax is recognised on temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the Consolidated Financial Statements. However
deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill, deferred income tax is not
accounted for if it arises from the initial recognition of an asset
or liability in a transaction other than a business combination
that at the time of the transaction affects neither the accounting
nor taxable profit nor loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantively
enacted by the balance sheet date and are expected to apply when
the related deferred income tax asset is realised or the deferred
income tax liability is settled. Deferred tax assets are recognised
only to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be
utilised.
Deferred tax income tax assets are recognised only to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised. Deferred
tax income assets are recognised on deductible temporary
differences arising from the investment in subsidiaries, associates
and joint arrangements only to the extent that it is probable that
the temporary difference will reverse in the future and there is
sufficient taxable profit available against which the temporary
difference can be utilised.
Property plant and equipment
Assets are stated at historical cost less accumulated
depreciation and accumulated impairment losses. Historical cost
includes expenditure that is directly attributable to the
acquisition of the item concerned.
Depreciation is charged so as to write off the cost or valuation
of assets, other than land, over their estimated useful lives,
using the straight-line method, on the following basis:
Freehold property 5% per annum
Plant and machinery 33% per annum
Fixtures and fittings 33% per annum
Equipment 33% per annum
Motor vehicles 33% per annum
Depreciation is included within administrative expenses in the
income statement.
Residual values, remaining useful lives and depreciation methods
are reviewed annually and adjusted if appropriate.
Profits or losses on disposal of property, plant and equipment
are included in the profit or loss for the year within
administrative costs.
Trade receivables
Trade receivables are amounts due from customers for merchandise
sold or services performed in the ordinary course of business. If
collection is expected in one year or less (or in the normal
operating cycle if the business if longer) they are classified as
current assets. If not, they are presented as non-current
assets.
Trade receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective
interest rate method, less provision for impairment. A provision
for impairment is made when there is objective evidence that the
Group will not be able to collect all amounts due according to the
original terms of the receivables, and is measured as the
difference between the carrying value and the present value of
estimated future cash flows. Additionally, management use their
judgement to assess the recoverability of debt in the light of
circumstances within individual subsidiaries. Subsequent recoveries
of previously impaired trade receivables are recognised as a credit
to profit as recorded.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less (or in the normal
operating cycle of the business, if longer). If not, they are
presented as non- current liabilities.
Trade payables are not interest bearing, and are stated at fair
value.
Deferred income, payments on account and advance payments are
included within the category of trade and other payables and are
not interest bearing.
Cash and cash equivalents
In the Consolidated Statement of Cash Flows, cash and cash
equivalents include cash in hand, cash deposits held at call with
banks and bank overdrafts. In the consolidated balance sheet where
there is a bank overdraft which is not subject to a bank offset
arrangement, it is included within borrowings in current
liabilities.
Financial instruments
The Group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement.
Financial instruments are recognised on the balance sheet at
fair value when the Group becomes a party to the contractual
provisions of the instrument.
Borrowings
Interest-bearing bank loans and overdrafts are recorded at fair
value, net of direct issue costs and directly attributable
transaction costs, where applicable. Finance charges, are accounted
for on an accruals basis through the income statement.
Operating leases
Payments made under operating leases are recognised in profit
and loss on a straight-line basis over the term of the lease. The
aggregate benefit of lease incentives is recognised as a reduction
of the rental expense over the lease term on a straight-line
basis.
Finance income and costs
Finance income and costs are recognised in the income statement
on an accruals basis.
Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of cost and net realisable value. Cost comprises all
costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition.
It excludes borrowing costs. Weighted average cost is used to
determine the cost of ordinarily interchangeable items. Net
realisable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses.
Discontinued operations
A discontinued operation is a component of the Group's business
that represents a separate major line of business or geographical
area of operations that has been sold, closed, or operations have
ceased.
Discontinued operations are presented in the Consolidated Income
Statement as a single line which comprises the post-tax profit or
loss of the discontinued operations concerned, together with the
post-tax gain or loss recognised on sale or closure.
Prior periods are restated for comparative purposes.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The Chief Operating Decision Maker (CODM), who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Executive Board.
Provisions
A provision is recognised in the balance sheet date if, as a
result of a past event, the Group has a present, legal or
constructive obligation that can be estimated fairly, and it is
probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are not recognised for future
operating losses.
Provisions recognised are the best estimate of the net
expenditure required to settle the obligation at the reporting
date, taking into account the nature of the provision.
Employee benefits and share based payments
Pension schemes
The Group operates post- employment benefit schemes in the form
of contributions to defined contribution schemes but does not
operate a defined benefit pension scheme. A defined contribution
plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or
constructive obligation to pay further contributions if the fund
does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current period and prior
periods. Contributions to defined contribution schemes are charged
to the Consolidated Income Statement on an accruals basis.
Termination benefits
Termination benefits are payable when employment is terminated
by the Group before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these
benefits. The Group recognises termination benefits at the earlier
of the following dates a) when the group can no longer withdraw the
offer of those benefits b) when the entity recognises costs for a
restructuring that is within the scope of IAS 37 and involves the
payment of termination benefits.
Share based payments
The Company offers a Long Term lncentive Plan ('LTIP') and a
Management Incentive Plan ('MIP') for a small senior management
cohort, a Company Share Option Plan ('CSOP') for a wider management
group and an all employee 'Save As You Earn' scheme ('SAYE').
All schemes are subject to a three-year vesting period and are
designed to align employee interests with shareholder
interests.
Under the terms of these share based compensation plans the
entity receives services from employees as consideration for equity
instruments (options) of the Group. The fair value of the employee
services received in exchange for the grant of the options is
recognised as an expense. The total amount to be expensed is
determined by reference to the fair value of the options granted
including any market performance conditions (for example share
price) and excluding non-market conditions (such as profitability)
and including the impact of any non-vesting conditions for example
the requirement of employees to save or hold on to shares for a
specific period of time. At the end of each reporting period, the
Group adjusts the charge in the income statement in respect of
revised estimates of the number of options that are expected to
vest based on the non-market vesting conditions and service
conditions.
2. Prior year adjustments and critical accounting estimates and
judgements
The Group has disclosed certain prior year adjustments relating
to changes to accounting policies or the application of those
accounting policies. This has had a material impact on revenue
recognition and cost of sales within the income statement, as well
as impacting the balance sheets and statement of changes in equity
for the prior two accounting periods, see 'Prior year
adjustments'.
The Group makes certain critical estimates and assumptions
regarding the future. Estimates and judgements are continually
evaluated based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. Future actual experience may
differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed in 'Critical accounting
estimates, judgments and key sources of estimation
uncertainty'.
Prior year adjustments
During the year, the Directors undertook a review of the Group's
revenue recognition policies and the application of those policies.
As a result of this review, the Directors have taken the decision
to change their accounting policies for certain revenue streams to
better reflect industry practices and to align policies more
consistently across the Group.
In accordance with IAS 8, the change in accounting policies has
been applied retrospectively and the comparative financial
information has been restated, as has the opening balance sheet as
at 1 November 2014. The table below sets out the impact of the
changes in accounting policies on both the profit for the year
ended 31 October 2015 and the equity of the Group as at 1 November
2014 and 31 October 2015.
Impact of prior year adjustments on profit and equity of the
Group
Year ended 31 October 2015
GBP000's
------------------------------------------------------ ---------
Profit after tax as previously reported 2,744
Change in RRSA revenue recognition (i) (76)
Change in other home improvements revenue recognition
(ii) 380
Change in finance commission revenue recognition
(iii) (84)
Change in application of deferred commission
accounting policy (iv) (258)
Adjustment to tax in respect of changes to income
recognition (v) 8
-------------------------------------------------------- ---------
Restated profit after tax 2,714
-------------------------------------------------------- ---------
At 31 October 2015 2014
GBP000's GBP000's
------------------------------------------------------ --------- --------
Total equity as previously reported 959 921
Change in RRSA revenue recognition (i) (1,217) (1,141)
Change in other home improvements revenue recognition
(ii) (545) (925)
Change in finance commission revenue recognition
(iii) 124 208
Change in application of deferred commission
accounting policy (iv) (327) (69)
Adjustment to tax in respect of changes to income
recognition (v) 401 393
-------------------------------------------------------- --------- --------
Restated deficit (605) (613)
-------------------------------------------------------- --------- --------
(i) Historically the Group recognised revenue in relation to the
RRSA programme on a cash received basis. However, as the RRSA
programme results in a 12-month commitment to customers the
Directors have determined that it would be appropriate to spread
the revenue over the 12-month contract period.
(ii) On review of recognition of revenue across the Group's
businesses it was concluded that for certain types of installations
in certain subsidiaries, there was a different interpretation of
the point of completion of installation. In some cases, revenue was
being recognised prior to the substantial completion of the
installations. The Directors have determined that a consistent
measurement criteria should be used across the Group to determine
the point at which the substantial risks and rewards of ownership
are deemed to have transferred.
(iii) Historically the Group recognised finance commissions on
receipt from finance providers. There has been limited history of
non-collection of commissions and, therefore, the Directors think
it more appropriate to recognise finance commissions in line with
the revenue recognition policy to which the product associated the
finance commission relates.
(iv) The Group defers sales commissions costs incurred in a
financial year which are considered to be directly related to
revenue transactions which are not recognised until subsequent
financial years. As part of the review of the Group's revenue
recognition policy the Group aligned policies on deferred
commissions across the Group. This has resulted in certain costs
being required to be recognised earlier than previously recognised.
The current and prior years cost of sales numbers have been
restated in this respect.
(v) Taxation charges have been adjusted in respected of changes
to income recognition and deferred commissions.
The overall impact on the restated 2015 Consolidated Income
Statement was to increase revenue by GBP176,000 and increase costs
of sales by GBP214,000, thereby reducing operating profit by
GBP38,000. The changes to revenue recognition and associated cost
of sales led to a small tax reduction of GBP8,000 in the restated
2015 tax charge.
Changes (i)-(iv) impacted on revenue and cost of sales in the
restatement of the 2015 comparative in the Consolidated Income
Statement Change (v) impacted on the tax charge. The overall impact
on profit after tax for the restated 2015 comparative was
GBP30,000. The Consolidated Income Statement for 2015 was also
restated in respect of discontinued operations (see note 10) which
accounts for the remaining differences between originally reported
numbers in 2015 and the restated numbers shown as a comparative for
2015 in the 2016 Consolidated Income Statement.
Impact of prior year adjustments on the Consolidated Balance
Sheets of the Group
At 31 October 2015 As reported Change Change Change Change Change Restated
previously in RRSA in other in finance in deferred In taxation
revenue commission commission
recognition
(i) (ii) (iii) (iv) (v)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Assets
Non-current assets
Intangible assets 1,496 - - - - - 1,496
Property, plant
and equipment 948 - - - - - 948
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
2,444 - - - - - 2,444
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Current assets
Inventories 1,839 - - - - - 1,839
Trade and other
receivables 15,078 - (786) 124 (327) - 14,089
Cash and cash equivalents 1,435 - - - - - 1,435
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
18,352 - (786) 124 (327) - 17,363
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Total assets 20,796 - (786) 124 (327) - 19,807
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Equity
Share capital 50 - - - - - 50
Retained earnings/
(accumulated losses) 909 (1,217) (545) 124 (327) 401 (655)
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Total shareholders'
equity/(deficit) 959 (1,217) (545) 124 (327) 401 (605)
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Liabilities
Non-current liabilities
Deferred taxation
liabilities 60 - - - - - 60
Provisions 1,318 - - - - - 1,318
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
1,378 - - - - - 1,378
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
-
Current liabilities
Trade and other
payables 16,501 1,217 (241) - - - 17,477
Current taxation
liabilities 933 - - - - (401) 532
Provisions 1,025 - - - - - 1,025
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
18,459 1,217 (241) - - (401) 19,034
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Total liabilities 19,837 1,217 (241) - - (401) 20,412
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Total shareholders'
equity/(deficit)
and liabilities 20,796 - (786) 124 (327) - 19,807
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
(i) Changes in accounting policies for RRSA resulted in
increased deferred income, which is included in trade and other
payables category of liabilities.
(ii) Changes in accounting policies for other revenue
recognition had the impact of reducing trade receivables,
prepayments, accrued income and other receivables within the trade
and other receivables category of asset.
(iii) Changes in accounting policies for finance commission had
the impact of increasing the trade and other receivables category
of asset.
(iv) Changes in the accounting for deferred commission had the
impact of decreasing the trade and other receivables category of
asset.
(v) The current taxation liability has been adjusted in respect
of the reduction to tax charges as a consequence of changes to
income recognition and deferred commissions.
At 31 October 2014 As reported Change Change Change Change Change Restated
and previously in RRSA in other in finance in deferred In taxation
1 November 2014 revenue commission commission
recognition
(i) (ii) (iii) (iv) (v)
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Assets
Non-current assets
Intangible assets 1,676 - - - - - 1,676
Property, plant
and equipment 1,048 - - - - - 1,048
Deferred tax asset 19 - - - - - 19
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
2,743 - - - - - 2,743
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Current assets
Inventories 1,751 - - - - - 1,751
Trade and other
receivables 11,060 - (1,170) 208 (69) - 10,029
Cash and cash equivalents 5,768 - - - - - 5,768
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
18,579 - (1,170) 208 (69) - 17,548
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Total assets 21,322 - (1,170) 208 (69) - 20,291
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Equity
Share capital 50 - - - - - 50
Retained earnings/
(accumulated losses) 871 (1,141) (925) 208 (69) 393 (663)
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Total shareholders'
equity/(deficit) 921 (1,141) (925) 208 (69) 393 (613)
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Liabilities
Non-current liabilities
Deferred taxation
liabilities 40 - - - - - 40
Provisions 1,488 - - - - - 1,488
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
1,528 - - - - - 1,528
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Current liabilities
Trade and other
payables 16,253 1,141 (245) - - - 17,149
Current taxation
liabilities 2,191 - - - - (393) 1,798
Provisions 429 - - - - - 429
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
18,873 1,141 (245) - - (393) 19,376
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Total liabilities 20,401 1,141 (245) - - (393) 20,904
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
Total shareholders'
equity/(deficit)
and liabilities 21,322 - (1,170) 208 (69) - 20,291
-------------------------- ----------- -------- ------------ ----------- ------------ ------------ --------
(i) Changes in accounting policies for RRSA resulted in
increased deferred income, which is included in trade and other
payables category of liabilities.
(ii) Changes in accounting policies for other revenue
recognition had the impact of reducing trade receivables,
prepayments, accrued income and other receivables within the trade
and other receivables category of asset. It also had the impact of
increasing the trade and other payables category of liability.
(iii) Changes in accounting policies for finance commission had
the impact of increasing the trade and other receivables category
of asset.
(iv) Changes in the accounting for deferred commission had the
impact of decreasing the trade and other receivables category of
asset.
(v) The current taxation liability has been adjusted in respect
of the reduction to tax charges as a consequence of changes to
income recognition and deferred commissions.
Critical accounting estimates, judgments and key sources of
estimation uncertainty
Impairment of goodwill
The assessment of whether impairment charges are required
against the carrying value of goodwill is made using value in use
calculations. Although these calculations require the use of
estimates including the discount rate, long term growth rate and
forecasts (see note 13) the Directors do not believe there are any
reasonably possible changes to the estimates made which would
result in additional impairment charges. The changes in assumptions
regarding future trading of discontinued operations resulted in the
impairment charges made in the year which have been reflected
within exceptional items within the Group's discontinued operations
results.
Recoverability of trade receivables
The assessment of whether trade receivables are recoverable
requires judgement. An allowance for impairment is made where there
is an identified loss event which, based on experience, is evidence
of a reduction in the recoverability of cash flows. Additionally,
management use their judgement to assess the recoverability of debt
in the light of circumstances within individual subsidiaries.
Deferred income and advance payments
Certain payments made by customers, suppliers, and service
providers are received in advance of when they are due and are
accounted for as creditors within the category deferred income and
advance payments. The Directors made the judgement that this best
represented the form and substance of the deferred income and
advance payments.
Provisions
The Directors recognise a provision on the balance sheet where
the Group has a known liability to transfer economic benefits but
the liability is uncertain in timing or amount. Management uses
judgement in estimating materially accurate outcomes based on
estimates of a range of probabilities for each category of
provision.
3. Financial risk management
General objectives, policies and processes
The Directors of Entu (UK) plc have overall responsibility for
the determination of the Group's risk management objectives and
policies and, whilst retaining ultimate responsibility for them, it
has delegated the authority for designing and operating processes
that ensure the effective implementation of the objectives and
policies to the Group's finance function.
The overall objective of the Directors is to set policies that
seek to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility.
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the method used to measure them. Further
quantitative information in respect of these risks is presented
throughout these Financial Statements.
Financial instruments include trade receivables, trade payables
and cash and cash equivalents which are treated as loans and
receivables or financial liabilities at amortised cost for IFRS 7
classification purposes.
Credit risk
Credit risk is the risk that financial loss arises from the
failure of a customer or counterparty to meet its obligations under
a contract. The Group has dedicated standards, policies and
procedures to control and monitor all such risks. Although the
Group is potentially exposed to credit loss in the event of
non-performance by counterparties, such credit risk is managed
through third party credit rating agencies (for corporate
customers) and internal financial reviews of the counterparties
involved, and by limiting the total amount of exposure to any one
party.
The credit rating awarded to Barclays Bank from a variety of
external agencies is in the range of A to A-.
The Group is also exposed to credit risk in respect of amounts
due from trade receivables. Given the nature of the Group's
operations and customer base there is no concentration of credit
risk to the Group. Therefore, no additional disclosure has been
provided in respect of the credit worthiness of counterparties
given that they are largely individuals and not companies.
Liquidity risk
Group Finance prepares and monitors rolling forecasts of the
Group's liquidity requirements to ensure it has sufficient cash to
meet operational needs while maintaining sufficient headroom
through undrawn borrowing facilities. Such forecasting takes into
account borrowing limits or covenant compliance. Liquidity risk
arises from the Group's management of working capital, being the
risk that the Group will encounter difficulty in meeting its
financial obligations as they fall due. The Group therefore
monitors its risk to a shortage of funds through cash management
procedures and the regular reviews of cash forecasts. The Group's
objective is to maintain a balance in the continuity of its
available funds to allow it to invest as necessary.
Capital risk management
The primary objective of the Group's capital management process
is to ensure that it maintains a strong credit rating and healthy
capital ratios. The Group manages its capital structure and makes
adjustments to suit economic conditions. The Group's financing
decisions are taken by the Board of Directors based on forecasts of
the expected timing and level of capital and operating expenditure
required to meet Group's commitments and development plans.
The Group sets the amount of capital required in proportion to
risk. The Group manages the capital structure and makes adjustments
to it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the dividends
paid to shareholders, return capital to shareholders or issue new
shares. The Group does not seek to maintain any particular capital
ratio, but will consider opportunities on their merits and fund
them in the most effective manner.
Fair value and cash flow interest rate risk
The Group had no outstanding loan balances other than short term
overdrafts and revolving credit facilities during the year.
Therefore, a change in LIBOR of 1%, being the average change in the
LIBOR rate seen over the last 12 months, would change the Group's
loss before tax by an insignificant amount of less than
GBP0.1m.
Financial instruments by category
At 31 October 2016 Loans and Financial
receivables liabilities
at amortised
cost
GBP000's GBP000's
-------------------------- ------------ -------------
Assets
Trade receivables 4,074 -
Cash and cash equivalents 768 -
---------------------------- ------------ -------------
Total assets 4,842 -
---------------------------- ------------ -------------
Liabilities
Trade payables - (10,346)
---------------------------- ------------ -------------
Total liabilities - (10,346)
---------------------------- ------------ -------------
Net assets/(liabilities)* 4,842 (10,346)
---------------------------- ------------ -------------
At 31 October 2015 Loans and Financial
Restated receivables liabilities
at amortised
cost
GBP000's GBP000's
-------------------------- ------------ -------------
Assets
Trade receivables 4,500 -
Cash and cash equivalents 1,435 -
---------------------------- ------------ -------------
Total assets 5,935 -
---------------------------- ------------ -------------
Liabilities
Trade payables - (13,239)
---------------------------- ------------ -------------
Total liabilities - (13,239)
---------------------------- ------------ -------------
Net assets/(liabilities)* 5,935 (13,239)
---------------------------- ------------ -------------
*This represents the net financial instrument balances included
within the consolidated balance sheet net assets and
liabilities.
4. Segmental analysis
The Chief Operating Decision Maker (CODM) has been identified as
the Executive Board which comprises the two Executive
Directors.
The CODM reviews the Group's internal reporting in order to
assess performance and allocate resources. Management has
determined the operating segments based on these reports which
include an allocation of central costs as appropriate.
The CODM considers the business from an operating perspective,
with Home Improvements, Energy Generation and Saving, Repair and
Renewal Service Agreements being the three reporting segments. The
CODM assesses the performance based on operating profit before
exceptional items. Other information provided to the CODM, except
as noted below, is measured in a manner consistent with that of the
Financial Statements.
All revenue, profit and assets of the Group and all segments
arise in the Group's country of domicile, being the United
Kingdom.
Year ended 31 October 2016 Home Energy Generation Repair and Total
Improvements and Savings Renewal Service
Agreements
GBP000's GBP000's GBP000's GBP000's
----------------------------------------- ------------- ----------------- ---------------- -----------------------
Revenue 77,113 8,017 2,615 87,745
----------------------------------------- ------------- ----------------- ---------------- -----------------------
Operating profit before exceptional
items 193 38 2,236 2,467
Exceptional items (4,146) (435) - (4,581)
----------------------------------------- ------------- ----------------- ---------------- -----------------------
Operating (loss)/ profit (3,953) (397) 2,236 (2,114)
Finance costs (219) - - (219)
----------------------------------------- ------------- ----------------- ---------------- -----------------------
(Loss)/profit before taxation-continuing
operations (4,172) (397) 2,236 (2,333)
----------------------------------------- ------------- ----------------- ---------------- -----------------------
Loss for the year from discontinued
operations* (2,258) (1,543) - (3,801)
----------------------------------------- ------------- ----------------- ---------------- -----------------------
*Loss before tax from discontinued operations was GBP4,196,000.
A tax credit of GBP395,000 was utilised in arriving at the loss
after tax of GBP3,801,000.
There was no material inter-segment revenue in the year ended 31
October 2016.
The current year analysis is consistent with the prior year
analysis, as restated for discontinued operations and prior year
adjustments.
Year ended 31 October 2015 Home Energy Generation Repair and Total
Restated Improvements and Savings Renewal Service
Agreements
GBP000's GBP000's GBP000's GBP000's
----------------------------------------- ------------- ----------------- ---------------- --------
Revenue 79,168 7,685 2,710 89,563
----------------------------------------- ------------- ----------------- ---------------- --------
Operating profit before exceptional
items 4,312 887 2,061 7,260
Exceptional items (518) - - (518)
----------------------------------------- ------------- ----------------- ---------------- --------
Operating (loss)/ profit 3,794 887 2,061 6,742
Finance income 4 - - 4
Finance costs (27) - - (27)
----------------------------------------- ------------- ----------------- ---------------- --------
(Loss)/profit before taxation-continuing
operations 3,771 887 2,061 6,719
----------------------------------------- ------------- ----------------- ---------------- --------
Loss for the year from discontinued
operations* 107 (3,139) - (3,032)
----------------------------------------- ------------- ----------------- ---------------- --------
*There was no tax charge or credit in respect of discontinued
operations in the year ended 31 October 2015.
There was no material inter-segment revenue in the year ended 31
October 2015.
5. Exceptional items
Year ended 31 October 2016 2015
GBP000's GBP000's
------------------------------------------------- -------- --------
Restructuring and commercial
Restructuring 1,930 -
Other commercial 547 -
Aborted acquisition costs - 235
--------------------------------------------------- -------- --------
2,477 235
------------------------------------------------- -------- --------
Other
Dilapidations provisions 244 -
Inventory write down and provisioning 482 -
Other balance sheet items not deemed recoverable 1,378 -
Property costs - 115
Directors' bonuses - 168
--------------------------------------------------- -------- --------
2,104 283
------------------------------------------------- -------- --------
Total continuing operations 4,581 518
--------------------------------------------------- -------- --------
Restructuring and commercial
Restructuring costs relate to the restructuring of the Group
announced as part of the Group's Interim Results for the six months
to April 2016, in July 2016. The costs include: redundancy /other
employee related costs arising from a reduction in headcount
(GBP781,000), provision for onerous lease obligations for exited
properties / estimated dilapidation costs (GBP979,000), and other
associated restructuring costs (GBP170,000). Other commercial costs
(GBP547,000) relates to provisions for various commercial matters
including associated legal and professional settlement costs.
Other
A detailed review of the Group's subsidiary balance sheets
identified GBP2,104,000 of further exceptional items relating to
balances that were not deemed recoverable (with GBP1,652,000
originating in 2015 and GBP452,000 originating in earlier years).
These adjustments included a large number of relatively small
items, principally prepayments and other receivables, which will
have no impact on the future cash flows of the Group.
Exceptional costs in the year ended 31 October 2015
Exceptional costs in the prior year relate to costs associated
with the acquisition of the Astley business in March 2015. Also
included were certain costs relating to planned acquisitions which
were subsequently aborted and certain other non- trading items.
Discontinued operations also include costs that are classified
as exceptional, which are further set out in note 10.
6. (Loss)/ profit for the year from continuing operations
Year ended 31 October 2016 2015
Restated
GBP000's GBP000's
----------------------------------------- ------ -------- ---------
(Loss)/profit for the year has been
arrived at after charging/ (crediting):
Depreciation of property, plant and
equipment (i) 237 349
Profit on disposal of property, plant
and equipment (note 27) (213) -
Cost of inventories purchased for resale (ii) 23,737 29,173
Costs of inventories written down 55 -
Employee costs (iii) 11,613 12,033
Operating lease costs 1,578 2,350
Auditors' remuneration (see below) 320 86
-------------------------------------------------- -------- ---------
(i) Additional depreciation charged relating to discontinued
operations is included within the total depreciation charge in note
14.
(ii) Cost of inventories written off excludes further write off
of inventories disclosed in exceptional items amounting to
GBP482,000 (2015: nil).
(iii) Employee costs relate to continuing operations only. Total
employee costs including discontinued operations are shown in note
7.
A more detailed analysis of auditors' remuneration is provided
below.
Year ended 31 October 2016 2015
GBP000's GBP000's
---------------------------------------------------------- -------- --------
Fees payable to the Company's auditors for the audit
of the Company's annual accounts
and consolidation 20 15
Fees payable to the Company's auditors and their
associates for other services to the Group:
The audit of the Company's subsidiaries 150 71
------------------------------------------------------------ -------- --------
Total audit fees 170 86
Fees payable to the Company's auditors and its associates
for other services:
Corporate finance services 150 -
------------------------------------------------------------ -------- --------
Total fees 320 86
------------------------------------------------------------ -------- --------
7. Directors and employees
Employee costs
Year ended 31 October 2016 2015
Number Number
--------------------------------------------- -------- --------
The average number of employees (including
Executive Directors) was as follows:
Depot staff 120 135
Administration, professional, supervisory
and other staff 240 301
----------------------------------------------- -------- --------
Total 360 436
----------------------------------------------- -------- --------
Year ended 31 October 2016 2015
GBP000's GBP000's
--------------------------------------------- -------- --------
The costs incurred in respect of the above
were as follows:
Wages and salaries 11,567 10,793
Social security costs 1,145 1,561
Share based payments (note 26) - 30
Pension costs (note 21) defined contribution
plans 385 290
----------------------------------------------- -------- --------
13,097 12,674
--------------------------------------------- -------- --------
Employee costs in the year include almost a full year of wages
and salaries for the Astley business, whereas this was only
included for six months in the prior year. The Astley business is
included within discontinued operations (note 10).
Directors' remuneration
Year ended 31 October 2016 2015
GBP000's GBP000's
----------------------------------------------- -------- --------
The costs incurred in respect of the Directors
and former Directors were as follows:
Short term employee benefits 820 635
Compensation for loss of office 45 -
Other pension costs 17 14
882 649
----------------------------------------------- -------- --------
Additional payments were made to a former Director, see note
27.
Emoluments by Director for all Directors who served during the
year ended 31 October 2016, including former Directors Darren
Cornwall and Andrew Corless, were as follows:
Year ended 31 October Salary Bonus Benefits Compensation Total emoluments
2016 for
for loss of
office
GBP000's GBP000's GBP000's GBP000's GBP000's
---------------------- -------- -------- -------- ------------ ----------------
Ian Blackhurst 220 - 15 - 235
Neill Skinner 122 - 23 - 145
Geoff Stevens 70 - 5 - 75
Lorraine Clinton 31 - - - 31
David Forbes 56 - - - 56
Darren Cornwall 74 - 5 - 79
Andrew Corless 148 55 13 45 261
---------------------- -------- -------- -------- ------------ ----------------
721 55 61 45 882
---------------------- -------- -------- -------- ------------ ----------------
Benefits include contributions to defined contribution pension
schemes of GBP17,000 in total for Neill Skinner, Ian Blackhurst and
former director Andrew Corless. Other benefits include car
allowances and healthcare insurance. Former Director Darren
Cornwall received payments for services provided post his
resignation date of 15 April 2016. See note 27 related party
transactions for details of these payments of GBP53,000 which were
made on an arm's length basis.
For the year ended 31 October 2016 the highest paid Director
received GBP261,000 of emoluments. In the prior year ended 31
October 2015, the highest paid Director received total remuneration
of GBP285,000 and pension contributions of GBP1,200.
Short term employment benefits include a bonus of GBP55,000. No
share options, shares or other benefits were awarded to Directors
in the year or upon commencement of employment. There are no
pension benefits accruing to Directors, the only pension payments
are made to defined contribution schemes. For further disclosures
regarding Directors' emoluments, see the Remuneration Report which
contains information relating to Directors in office as at 31
October 2016.
8. Finance income and costs
Year ended 31 October 2016 2015
GBP000's GBP000's
---------------------- -------- --------
Interest receivable - 4
Interest payable (219) (27)
------------------------ -------- --------
Net finance costs (219) (23)
------------------------ -------- --------
Interest payable includes bank loan and overdraft interest.
9. Taxation
Continuing operations taxation is shown separately on the income
statement whereas the taxation relating to discontinued operations
is shown within the loss on discontinued operations. See note 10
for analysis of discontinued operations.
Continuing operations
Year ended 31 October 2016 2015
Restated
GBP000's GBP000's
---------------------------------------------- -------- ---------
Current tax
UK corporation tax charge for the year - 925
Adjustments in respect of prior years (85) 24
------------------------------------------------ -------- ---------
Total current tax (credit)/ charge (85) 949
------------------------------------------------ -------- ---------
Deferred tax (note 19)
Origination and reversal of temporary timing
differences (41) 24
Losses expected to reverse in the foreseeable
future (386) -
------------------------------------------------ -------- ---------
Total deferred tax(credit)/ charge (427) 24
------------------------------------------------ -------- ---------
Total tax(credit)/ charge (512) 973
------------------------------------------------ -------- ---------
Discontinued operations
Year ended 31 October 2016 2015
GBP000's GBP000's
---------------------------------------------- -------- --------
Current tax
UK corporation tax credit for the year (343) -
------------------------------------------------ -------- --------
Total current tax credit (343) -
------------------------------------------------ -------- --------
Deferred tax
Losses expected to reverse in the foreseeable
future-continuing operations (52) -
------------------------------------------------ -------- --------
Total deferred tax credit (52) -
------------------------------------------------ -------- --------
Total tax credit discontinued operations (395) -
------------------------------------------------ -------- --------
Reconciliation of total taxation (credit)/charge
Year ended 31 October 2016 2015
Restated
GBP000's GBP000's
-------------------------------------------------- -------- ---------
(Loss)/profit before tax on continuing operations (2,333) 6,719
Loss before tax on discontinued operations
(note 10) (4,196) (3,032)
---------------------------------------------------- -------- ---------
(6,529) 3,687
Tax at the UK corporation tax rate of 20.0%
(2015: 20.4%) (1,306) 752
Tax effect of expenses that are not deductible 211 197
Tax effect of losses not expected to be
recoverable 257 -
Effect of tax rate changes 16 -
Adjustments in respect of prior periods (85) 24
Tax (credit)/ charge for the year (907) 973
---------------------------------------------------- -------- ---------
Reconciliation of total taxation:
Tax (credit) /charge for continuing operations (512) 973
Tax credit for discontinued operations (395) -
---------------------------------------------------- -------- ---------
Total tax (credit)/charge for the year (907) 973
---------------------------------------------------- -------- ---------
The year ended 31 October 2016 tax credit relating to
discontinued operations wholly arises from trading within
discontinued operations. None of the tax credit relates to the loss
on disposal of discontinued operations. The Group utilises group
relief as appropriate amongst trading subsidiaries.
Factors that may affect future tax charges
Changes to the UK corporation tax rates were substantively
enacted as part of the Finance Bill 2015 (on 26 October 2015) and
Finance Bill 2016 (on 7 September 2016). These include reductions
to the main rate to reduce the rate to 19% from 1 April 2017 and to
17% from 1 April 2020. Deferred taxes at the balance sheet date
have been measured using those estimated tax rates and reflected in
these Financial Statements (see note 19).
10. Discontinued Operations
During the year, the Group took the strategic decision to sell
the Astley Facades (UK) Limited business (Astley) as well as close
its loss making Europlas operations in the South East of England.
The Directors consider both businesses to be separate major lines
of business and as such the results of both businesses have been
presented in discontinued operations in the current year with the
prior year financial information being restated in accordance with
IFRS 5.
In the year ended 31 October 2015 the Group also took the
decision to close its Solar operations and the results were
presented as discontinued operations in that year and have been
treated consistently in the current financial year. The Norwood UK
kitchen interiors business was also discontinued in the year ended
31 October 2015.
The trading results and exceptional items relating to these
discontinued operations together with the loss on disposal of
Astley were as follows:
Year ended 31 October 2016 Astley Europlas Solar Total
GBP000's GBP000's GBP000's GBP000's
--------------------------- -------- -------- -------- --------
Revenue 15,452 2,954 - 18,406
Cost of sales (13,221) (2,113) (452) (15,786)
--------------------------- -------- -------- -------- --------
Gross profit/(loss) 2,231 841 (452) 2,620
Administrative expenses (1,192) (1,200) (211) (2,603)
--------------------------- -------- -------- -------- --------
Operating profit/ (loss)
before exceptional costs 1,039 (359) (663) 17
Exceptional costs - (1,253) (1,207) (2,460)
--------------------------- -------- -------- -------- --------
Operating profit/(loss) 1,039 (1,612) (1,870) (2,443)
Loss on disposal of Astley (1,740) - - (1,740)
Finance costs (2) (7) (4) (13)
--------------------------- -------- -------- -------- --------
Loss before tax (703) (1,619) (1,874) (4,196)
--------------------------- -------- -------- -------- --------
Taxation credit 395
--------------------------- -------- -------- -------- --------
Loss after taxation (3,801)
--------------------------- -------- -------- -------- --------
Year ended 31 October 2015 Astley Europlas Solar Norwood Total
Restated GBP000's GBP000's GBP000's GBP000's GBP000's
--------------------------- -------- -------- -------- -------- --------
Revenue 6,625 3,021 14,521 3,342 27,509
Cost of sales (5,305) (2,134) (12,181) (2,666) (22,286)
--------------------------- -------- -------- -------- -------- --------
Gross profit 1,320 887 2,340 676 5,223
Administrative expenses (726) (754) (5,179) (1,296) (7,955)
--------------------------- -------- -------- -------- -------- --------
Operating profit/ (loss)
before exceptional costs 594 133 (2,839) (620) (2,732)
Exceptional costs - - (300) - (300)
--------------------------- -------- -------- -------- -------- --------
Operating profit/(loss) 594 133 (3,139) (620) (3,032)
Finance costs - - - - -
--------------------------- -------- -------- -------- -------- --------
Profit/(loss) before tax 594 133 (3,139) (620) (3,032)
--------------------------- -------- -------- -------- -------- --------
Taxation -
--------------------------- -------- -------- -------- -------- --------
Loss after taxation (3,032)
--------------------------- -------- -------- -------- -------- --------
Analysis of discontinued exceptional items and loss on disposal
of discontinued operations
Year ended 31 October 2016 Astley Europlas Solar Total
GBP000's GBP000's GBP000's GBP000's
------------------------------ -------- -------- -------- --------
Restructuring costs - 474 417 891
Impairment of goodwill - 299 56 355
Other balance sheet items
no longer deemed recoverable - 480 734 1,214
------------------------------ -------- -------- -------- --------
Discontinued exceptional - 1,253 1,207 2,460
------------------------------ -------- -------- -------- --------
Loss on disposal of Astley (1,740) - - (1,740)
------------------------------ -------- -------- -------- --------
Year ended 31 October 2015
Discontinued exceptional costs of GBP300,000 in the prior year
related to restructuring in the Solar division.
Discontinued exceptional costs
Restructuring costs in relation to Europlas and Solar include
people, property, and other costs associated with the exit of the
business. The goodwill in relation to Europlas, GBP299,000, and KBC
Energy Limited goodwill, GBP56,000, have been impaired in the year.
KBC Energy Limited was the holding company with investments in a
large number of the Group's Solar subsidiaries. See note 13.
The detailed review of the Group's subsidiary balance identified
GBP1,214,000 of exceptional items relating to balances deemed no
longer recoverable, (with GBP725,000 originating in 2015 and
GBP114,000 originating in earlier years). These adjustments
included a large number of relatively small items, principally
prepayments and other receivables, which will have no impact on the
future cash flows of the Group.
Loss on disposal of Astley
Astley was sold by the business on 28 October 2016 to Duality
Group Ltd. The business was valued at GBP200,000. This price was
based on the financial position of Astley as at 31 August 2016,
(and future trading prospects and cost funding requirements), to be
adjusted for subsequent net working capital adjustments before
completion. These net working capital movements totalled an outflow
of GBP200,000 to Entu, resulting in a net nominal disposal price of
GBP1.
Year ended 31 October 2016
GBP000's
------------------------------------------------ --------
Purchase price 200
Working capital adjustment (200)
Cash inflow to the Group in respect of purchase -
price
Net assets disposed of, including impaired
intercompany balances (1,540)
Professional fees associated with the disposal (200)
-------------------------------------------------- --------
Loss on disposal of Astley (1,740)
-------------------------------------------------- --------
Statement of cash flows
Year ended 31 October 2016 2015
Restated
GBP000's GBP000's
--------------------------------------------------------- -------- ---------
The statement of cash flows includes the following
amounts relating to
discontinued operations:
Net cash operating outflows from discontinued operations
(all operating cash flows) (1,742) (5,606)
----------------------------------------------------------- -------- ---------
The above operating cash flows include the cash impacts of
restructuring activity in the year ended 31 October 2016 and the
prior year ended 31 October 2015. In terms of investing and
financing activities, the proceeds on sale of Astley, (excluding
professional fees) in the year ended 31 October 2016 were GBP1
after adjustment for working capital movements. Similarly, the
nominal purchase price for Astley in the year ended 31 October 2015
was GBP200,000, but after adjustments in respect of net assets, the
final purchase price was GBP1.
Prior year acquisition of Astley (now included within
discontinued operations)
Upon acquisition of Astley in the year ended 31 October 2015 the
net impact of the cash inflow was GBP1,040,000.
11. Dividends
Year ended 31 October 2016 2015
GBP000's GBP000's
---------------------- -------- --------
Dividends paid 2,079 2,736
------------------------ -------- --------
GBP000's Pence per
share
----------------- -------- ---------
2016 Dividends
Final dividend 1,750 2.67
Interim dividend 329 0.50
------------------- -------- ---------
2,079 3.17
----------------- -------- ---------
2015 Dividends
Special dividend 984 1.50
Interim dividend 1,752 2.67
------------------- -------- ---------
2,736 4.17
----------------- -------- ---------
In the light of the changes in the financial position of the
Group, the Directors have concluded that no final dividend will be
declared for the year.
The final dividend for the prior year ended 31 October 2015 of
GBP1,750,000 was not recognised as a liability in the prior year
Financial Statements but has been recognised in the movements for
the year ended 31 October 2016 in the Consolidated Statement of
Changes in Equity.
12. Earnings per share
Basic earnings per share and diluted earnings per share are
calculated by dividing the loss or profit for the period
attributable to equity holders by the weighted average number of
shares in issue.
Year ended 31 October 2016 2015
Number Number
------------------------- ---------- ----------
Basic weighted average 65,600,000 65,600,000
--------------------------- ---------- ----------
Diluted weighted average 65,600,000 65,663,777
--------------------------- ---------- ----------
The weighted average number of shares used to calculate earnings
per share is consistent with the number of ordinary shares in issue
as at the year end and this has been applied consistently for all
years reported within these Financial Statements. As a result of
the formation of the Group and the Company's capital structure the
application of the closing number of ordinary shares has been
deemed to give the most relevant and comparable calculation of
earnings per share in the financial years reported.
Deferred shares have been excluded from the basic and diluted
number of shares as deferred shares carry no voting right and no
rights to any distributions to be made by the Group.
Year ended 31 October 2016 2015
Restated
Pence Pence
------------------------------------ ------ ---------
Basic(loss)/ earnings per share (8.6) 4.2
Exceptional items 7.0 0.7
Discontinued operations 5.8 4.6
-------------------------------------- ------ ---------
Adjusted basic earnings per share 4.2 9.5
-------------------------------------- ------ ---------
Adjusted diluted earnings per share 4.2 9.5
-------------------------------------- ------ ---------
Adjustments to earnings per share
Adjusted basic and diluted earnings per share figures are
calculated by dividing adjusted profit after tax for the year by
the weighted average number of shares in issue (as above). The
adjusted profit after tax for the year is as follows:
Year ended 31 October 2016 2015
Restated
GBP000's GBP000's
---------------------------------------- -------- ---------
(Loss)/profit attributable to owners of
the Parent Company (5,622) 2,714
Exceptional items 4,581 518
Discontinued operations 3,801 3,032
------------------------------------------ -------- ---------
Adjusted profit after tax 2,760 6,264
------------------------------------------ -------- ---------
Year ended 31 October 2016 2015
Restated
Pence Pence
------------------------------------------- ----- ---------
Basic earnings per share:
Continuing operations (loss)/ earnings per
share (2.8) 8.8
Discontinued operations loss per share (5.8) (4.6)
--------------------------------------------- ----- ---------
Total basic(loss)/earnings per share (8.6) 4.2
--------------------------------------------- ----- ---------
Diluted earnings per share
Year ended 31 October 2016 2015
Restated
Pence Pence
------------------------ ----- ---------
Continuing operations (2.8) 8.8
-------------------------- ----- ---------
Discontinued operations (5.8) (4.6)
-------------------------- ----- ---------
There is no material difference between diluted earnings per
share and basic earnings per share for continuing and discontinued
operations.
13. Intangible assets
At 31 October Goodwill
GBP000's
----------------------------------------- --------
Cost
At 1 November 2014 1,749
Disposal of a subsidiary (180)
-------------------------------------------- --------
At 31 October 2015 and 31 October 2016 1,569
-------------------------------------------- --------
Accumulated impairment losses
At 1 November 2014 and 1 November 2015 (73)
Impairment charge during the year ended
31 October 2016 (355)
-------------------------------------------- --------
At 31 October 2016 (428)
-------------------------------------------- --------
Carrying value of goodwill at 31 October
2016 1,141
-------------------------------------------- --------
Carrying value of goodwill at 31 October
2015 1,496
-------------------------------------------- --------
Carrying value of goodwill at 31 October
2014 1,676
-------------------------------------------- --------
Goodwill has arisen as follows:
-- the purchase of 100% of the share capital of Weatherseal
Holdings Limited whose trade is now held within Weatherseal Home
Improvements Limited;
-- the acquisition of the trade and assets held within Zenith Staybrite Limited;
-- the acquisition of the trade and assets of a business which
now sits in Penicuik Home Improvements Limited;
-- the acquisition of 100% of the share capital of Soltrac
Limited, Energy Hypermarket Limited and The Essex Solar Company
Limited (this was reflected on a consolidated basis in KBC goodwill
which has been impaired during the year ended 31 October 2016);
and
-- the acquisition of the trade and assets of trade of Europlas,
a division of Specialist Building Products Limited, which has now
been impaired in the year ended 31 October 2016.
Impairment testing of goodwill
The allocation of the carrying value of goodwill after
impairment to Cash-Generating Units (CGU) is as follows:
At 31 October 2016 2015
GBP000's GBP000's
----------------------------------- -------- --------
Weatherseal Holdings Limited 876 876
Zenith Staybrite Limited 200 200
Penicuik Home Improvements Limited 65 65
KBC Energy Limited Group - 56
Europlas Limited - 299
------------------------------------- -------- --------
Total 1,141 1,496
------------------------------------- -------- --------
The recoverable amount of a CGU is determined based on
'value-in-use' calculations. These calculations use pre-tax cash
flow projections based on financial budgets, covering three years
that are approved by the Board. Income and costs within the budgets
are derived on a detailed, 'bottom up' basis. All income streams
and cost lines are considered and appropriate growth or decline,
rates are assumed for each based on historical experience, all of
which are then reviewed and challenged, firstly by senior
management and ultimately by the Board. Income and cost growth
forecasts are risk adjusted to reflect the specific risks facing
each CGU and take account of the markets in which they operate.
Cash flows beyond the budgeted period are extrapolated using the
estimated growth rate stated below. The growth rate does not exceed
the long-term average growth rate for the markets in which the CGUs
operate. Furthermore, it is assumed that there are no material
adverse changes in legislation that would affect the forecast cash
flows. The key assumptions used in the 'value-in-use' calculations
for each CGU are as follows:
Long term growth
rate 2.00%
Market risk premium 5.75%
The pre-tax discount rate used within the recoverable amount
calculations was 10.0% (2015: 10.0%) and is based upon the weighted
average cost of capital reflecting the specific principal risks and
uncertainties applicable to each CGU. The discount rate takes into
account, amongst other things, the risk-free rate of return, the
cost of equity and the market risk premium, which is used in
deriving the cost of equity. The same discount rate has been used
for each CGU as the principal risks and uncertainties associated
with the Group, as highlighted earlier in this report as being
those risks with the highest likelihood or impact, would also
impact each CGU in a similar manner. The Board acknowledge that
there are additional factors that could impact the risk profile of
each CGU given the difference in operations, customer base and
trading performance over recent years. These additional factors
were considered by way of a sensitivity analysis performed as part
of the annual impairment tests. A sensitivity analysis has been
performed around the base assumptions with the conclusion that no
reasonable possible changes in key assumptions would cause the
recoverable amount of the goodwill assets to be less than the
carrying value.
The Directors consider past experience and use forecasts when
assessing the likely future cash flows of the cash generating
units. Having completed the 2016 annual impairment review, the
Group has recognised an impairment charge of GBP299,000 in respect
of Europlas goodwill and GBP56,000 in respect of KBC goodwill.
These impairment charges were taken in the year, because the
goodwill originally arose on businesses which have now been
discontinued, (see note 10).
14. Property, plant and equipment
Freehold Plant Fixtures Motor Equipment Total
property and machinery and fittings vehicles
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
Cost
At 1 November
2014 294 170 969 382 710 2,525
Additions - 17 88 - 153 258
Acquisition - 17 - - - 17
Disposals - - (76) - (4) (80)
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
At 31 October
2015 294 204 981 382 859 2,720
Additions - - 104 - 85 189
Disposals (294) - - - - (294)
Disposals in
Astley business - (35) - - - (35)
Write downs - - (54) - - (54)
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
At 31 October
2016 - 169 1,031 382 944 2,526
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
Accumulated
depreciation
At 1 November
2014 31 153 667 73 553 1,477
Charge for the
year 13 13 160 64 102 352
Disposals - - (54) - (3) (57)
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
At 31 October
2015 44 166 773 137 652 1,772
Charge for the
year - 18 63 66 103 250
Disposals (44) - - - - (44)
Disposal of
Astley
business - (15) - - - (15)
Write downs - - 52 - 30 82
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
At 31 October
2016 - 169 888 203 785 2,045
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
Net book value:
At 31 October
2016 - - 143 179 159 481
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
At 31 October
2015 250 38 208 245 207 948
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
At 1 November
2014 263 17 302 309 157 1,048
----------------- ---------------------- --------------- -------------- ---------- ------------------- ---------
As at 31 October 2016, the Group had not entered into any
commitments for the acquisition of property, plant and equipment.
During the year, the freehold property was sold to a related party
at market value. See note 27 on related party transactions.
15. Inventories
At 31 October 2016 2015
GBP000's GBP000's
------------------------------------ -------- --------
Raw materials and consumables 932 789
Finished goods and goods for resale 335 1,050
-------------------------------------- -------- --------
1,267 1,839
------------------------------------ -------- --------
During the year GBP55,000 (2015: GBPnil) was charged to
operating profit and a further GBP482,000 (2015:GBPnil) within
exceptional items in the income statement for the write down of
inventories.The cost of inventories recognised as an expense and
included in cost of sales amounts to GBP23,737,000 (2015:
GBP29,173,000).
16. Trade and other receivables
At 31 October 2016 2015
Restated
GBP000's GBP000's
---------------------------------------------- -------- ---------
Trade receivables 5,498 5,361
Provision for impairment of trade receivables (1,424) (861)
------------------------------------------------ -------- ---------
Net trade receivables 4,074 4,500
Other receivables 675 4,724
Prepayments and accrued income 3,354 4,865
------------------------------------------------ -------- ---------
8,103 14,089
---------------------------------------------- -------- ---------
The fair value of trade and other receivables has been
considered to be consistent with the book value given their short
term nature.
Movements in the Group provision for impairment of trade
receivables are as follows:
2016 2015
GBP000's GBP000's
---------------------------------------- -------- --------
At 1 November (861) (725)
Provision for receivables (779) (708)
Receivables written off during the year 216 572
------------------------------------------ -------- --------
At 31 October (1,424) (861)
------------------------------------------ -------- --------
Provisions are estimated by management based on past default
experience and their assessment of the current economic
environment. The creation and release of provisions for receivables
is charged/(credited) to administrative expenses in the statement
of comprehensive income. The credit risk of customers is assessed
at a subsidiary and Group level, taking into account their
financial positions, past experiences and other relevant factors.
Individual customer credit limits are imposed based on these
factors.
No other receivables have been deemed to be impaired. The
following table shows trade receivables at the reporting date
including those that are overdue (over 31 days) and for which no
allowance for impairment has been recognised.
Debt over 31 days (after provisions)
At 31 October 2016 2015
GBP000's GBP000's
-------------- -------- --------
31- 60 days 840 421
61-90 days 671 168
91 + days 226 589
---------------- -------- --------
1,737 1,178
-------------- -------- --------
Provisioning is based on debt over 31 days, with the bulk of the
provision being applied to debt over 90 days.
17. Cash and cash equivalents
At 31 October 2016 2015
GBP000's GBP000's
-------------------------- -------- --------
Cash at bank and in hand 768 1,435
---------------------------- -------- --------
Cash and cash equivalents 768 1,435
---------------------------- -------- --------
The Group's banking facility is operated and managed as an
integrated facility both internally and externally. Although
individual bank accounts may have positive or negative cash
balances, the interest calculated is on the net position of the
banking balances within the Group facility. The cash at bank and in
hand position shown in the above table represent the net position
of the Group. Bank overdrafts have been offset against cash at bank
and in hand as the Group has an enforceable right to offset
positive and negative individual bank account positions and
receives or pays interest on the net cash position of the Group. As
at 31 October 2016 bank overdrafts offset against cash at bank and
in hand totalled GBP3,066,000, (2015: GBP904,000).
18. Trade and other payables
At 31 October 2016 2015
GBP000's GBP000's
------------------------------------- -------- --------
Trade payables 7,539 8,731
Payments on account 870 1,303
Other taxation and social security 1,875 1,781
Accruals 1,937 3,205
Deferred income and advance payments 6,244 2,457
--------------------------------------- -------- --------
18,465 17,477
------------------------------------- -------- --------
19. Deferred tax
Deferred tax liability
Accelerated Total
tax
depreciation
GBP000's GBP000's
------------------- ------------- --------
At 31 October 2015 (60) (60)
Credit to income 22 22
--------------------- ------------- --------
At 31 October 2016 (38) (38)
--------------------- ------------- --------
Deferred tax asset
Losses Provisions Total
GBP000's GBP000's GBP000's
--------------------- -------- ---------- --------
At 31 October 2015 - - -
Movement in the year 437 19 456
---------------------- -------- ---------- --------
At 31 October 2016 437 19 456
---------------------- -------- ---------- --------
For the year ended 31 October 2016, certain deferred tax assets
and liabilities have been offset in accordance with IAS 12 'Income
taxes'. The following is the analysis of the deferred tax balances
(after offset) for financial reporting purposes:
At 31 October 2016 2015
GBP000's GBP000's
------------------------------------ -------- --------
Deferred tax assets 456 -
Deferred tax liabilities (38) (60)
-------------------------------------- -------- --------
Net deferred tax asset /(liability) 418 (60)
-------------------------------------- -------- --------
There are no amounts on which a deferred tax asset is not
recognised.
The net deferred tax asset of GBP418,000 (31 October 2015:
GBPnil) is expected to be recovered within one year.
20. Provisions
The analysis between provisions included in liabilities within
one year, and provisions included in liabilities over one year is
provided below:
At 31 October 2016 2015
GBP000's GBP000's
----------------------------------------- -------- --------
Onerous lease and dilapidations 1,189 -
Legal and commercial (including relating
to discontinued operations) 570 -
Finance clawback 105 105
Warranty and contractual clauses 101 2,238
------------------------------------------- -------- --------
1,965 2,343
----------------------------------------- -------- --------
Current 1,562 1,025
Non-current 403 1,318
------------------------------------------- -------- --------
1,965 2,343
----------------------------------------- -------- --------
Onerous lease and dilapidations
Provision has been made for onerous lease obligations
(properties which the Group is planning to exit prior to the lease
expiry date) and has also provided for dilapidation costs where
appropriate on leased properties.
Legal and commercial
Provision has been made for certain legal and commercial matters
(including those relating to discontinued operations) where a
liability is considered to exist, but where the final amount and
the timing of any payment in this respect is uncertain.
Finance clawback
Subsidiaries of the Group offer a financing agreement to
customers on the purchase of products. Such financing is provided
by third parties from whom the Group receives a commission. In
certain circumstances this may be clawed back within the first six
months of the agreement, and therefore a provision is made based on
historic clawback trends.
Warranty and contractual clauses
The Home Installations business historically manufactured
products and as a result a suitable warranty provision was
maintained. In addition, Astley carried warranty provisions arising
from its various contractual issues. The Group has ceased to
manufacture its own products and Astley has been sold, resulting in
a significant reduction in the level of warranty provisions
required.
Onerous Legal and Finance Warranty Total
lease and commercial clawback and
dilapidations contractual
clauses
GBP000's GBP000's GBP000's GBP000's GBP000's
---------------------------------- -------------- ----------- --------- ------------ --------
Cost
At 1 November 2014 - - 107 1,810 1,917
Additional provisions - - 105 22 127
Acquisition - - - 1,270 1,270
Utilised in the year - - - (19) (19)
Released in the year - - (107) (845) (952)
---------------------------------- -------------- ----------- --------- ------------ --------
At 31 October 2015 - - 105 2,238 2,343
Additional provisions 1,189 570 105 - 1,864
Utilised in the year - - (105) - (105)
Released in the year continuing - - - (867) (867)
Released in the year discontinued - - - (500) (500)
Disposals - - - (770) (770)
---------------------------------- -------------- ----------- --------- ------------ --------
At 31 October 2016 1,189 570 105 101 1,965
---------------------------------- -------------- ----------- --------- ------------ --------
The discontinued Astley business released GBP500,000 after
closing out risks on a major project in the six months to 31
October 2016. The disposals adjustment of GBP770,000 in the
provisions movement disclosed above is also in respect of Astley,
which has now been sold.
21. Retirement benefits
The Group operates a defined contribution pension scheme. The
assets of the scheme are administered by trustees in funds
independent from those of the Company.
The total contributions paid in the year amounted to GBP385,000
(2015: GBP290,000) and at the balance sheet date pension
contributions of GBP26,000 (2015: GBPnil) were outstanding.
22. Share capital
At 31 October 2016 2016 2015 2015
Number (000's) GBP000's Number (000's) GBP000's
------------------------------ -------------- -------- -------------- --------
Authorised:
Ordinary shares of GBP0.0005
each 65,600 33 65,600 33
Deferred shares of GBP0.0005
each 34,400 17 34,400 17
------------------------------ -------------- -------- -------------- --------
100,000 50 100,000 50
------------------------------ -------------- -------- -------------- --------
Issued and fully paid:
Ordinary shares of GBP0.0005
each 65,600 33 65,600 33
Deferred shares of GBP0.0005
each 34,400 17 34,400 17
------------------------------ -------------- -------- -------------- --------
Total called up share capital 100,000 50 100,000 50
------------------------------ -------------- -------- -------------- --------
The Company was incorporated on 25 March 2014 at which time 100
ordinary shares of GBP0.01 were issued to the shareholders of the
Company which were settled in full in cash.
On 7 July 2014, the Company issued a further 10,020 GBP0.01
ordinary shares. Consideration for the issue of these shares was in
the form of the issued share capital of JWD Installations Limited,
HI Sales Limited and KBC Energy Limited, which were entities
controlled by common shareholders.
On 8 October 2014, a further 4,989,880 GBP0.01 ordinary shares
were issued by the Company which were settled in full in cash.
On 8 October 2014, the Company's issued share capital of
5,000,000 GBP0.01 ordinary shares were subdivided into 100,000,000
GBP0.0005 ordinary shares.
On 8 October 2014 30,000,000 GBP0.0005 ordinary shares issued by
the Company were converted into deferred shares in the Company.
On 8 October 2014 4,400,000 GBP0.0005 ordinary shares issued by
the Company were converted into deferred shares in the Company.
Ordinary shares give holders the right to vote and participate
in general meetings of the Group as well as the rights over
distributions and the assets of the Group. All ordinary
shareholders rank pari-passu.
Deferred share carry no voting rights and no rights to
distributions and the assets of the Group.
23. Accumulated losses
Accumulated losses reserves are analysed in the Consolidated
Statement of Changes in Equity and prior year reserves have been
restated. See note 2 for details of and the reasons for the
restatement.
24. Reconciliation of (loss)/profit before tax to cash generated
from operations
Year ended 31 October 2016 2015
Restated
GBP000's GBP000's
--------------------------------------------------- -------- ---------
(Loss)/profit before tax including discontinued
operations (6,529) 3,687
Finance income - (4)
Finance costs 232 27
Depreciation of property, plant and equipment 250 352
Profit on disposal of property (213) -
Goodwill impairment charge 355 -
Other non-cash movements including write
downs of fixed assets 28 -
Loss on disposal of Norwood kitchen operation - 156
Loss on disposal of Astley group of companies 1,740 -
Share based payment charge - 30
Increase/(decrease) in provisions 392 (844)
----------------------------------------------------- -------- ---------
Operating cash flows before movements in
working capital (3,745) 3,404
Movements in working capital:
Decrease/(increase) in inventories 469 (34)
Decrease/(increase) in trade and other receivables 1,767 (1,833)
Increase/(decrease) in trade and other payables 2,891 (357)
----------------------------------------------------- -------- ---------
Cash generated from operations 1,382 1,180
----------------------------------------------------- -------- ---------
The impact of the disposal of Astley Facades group of companies
is adjusted in the movements in working capital in the above
note.
The profit on sale of freehold property of GBP213,000 relates to
sales proceeds of GBP463,000 less net book value of GBP250,000
eliminated on disposal.
25. Operating lease commitments
Year ended 31 October 2016 2015
GBP000's GBP000's
------------------------------------------------- -------- --------
Lease payments under operating leases recognised
as an expense in the year 1,578 2,350
--------------------------------------------------- -------- --------
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
At 31 October 2016 2015
GBP000's GBP000's
--------------------------------------- -------- --------
Within one year 261 1,897
In the second to fifth years inclusive 2,661 4,198
Over five years 2,031 902
----------------------------------------- -------- --------
4,953 6,997
--------------------------------------- -------- --------
26. Share based payment incentive schemes
The Company offers a Long Term lncentive Plan ('LTIP') and a
Management Incentive Plan ('MIP') for a small senior management
cohort, a Company Share Option Plan ('CSOP') for a wider management
group and an all employee Save As You Earn scheme ('SAYE').
All schemes are subject to a three-year vesting period and are
designed to align employee interests with shareholder
interests.
At 31 October 2016 CSOP SAYE
Number of options granted 270,000 500,000
Share price at date of grant (per share) 100p - 110p 100p
Exercise price (per share) 100p 80p
Vesting period 3 years 3 years
Option life 10 years 3.5 years
Expected life 3 years 3 years
Volatility 33.88% 33.77%
Dividend yield 6% 5.6%
Risk free rate 1.04% 1.07%
Expected leaver rate 25% 25%
Fair value of options granted 14.76p-20.1p 26.1p
A reconciliation of option movements is set out in the table
below:
CSOP SAYE
Number Number
------------------------------- ----------- ----------
Outstanding at 1 November 2015 240,000 433,625
Granted - -
Forfeited / cancelled (60,000) (202,775)
Lapsed - (1,350)
Outstanding at 31 October 2016 180,000 229,500
--------------------------------- ----------- ----------
As at 31 October 2016 there were no CSOP or SAYE options that
were exercisable at the end of the year (2015: None).The Group has
recognised a charge of GBPnil (2015: GBP30,000) in respect of the
CSOP and SAYE schemes in the year.
LTIP and MIP schemes
The number of options issued under the LTIP and MIP schemes was
960,000 and 4,448,399 respectively. There is currently no
expectation that any options will vest under these schemes and no
charges has been recognised in these Financial Statements.
27. Related party transactions
Sale of freehold property
At the end of October 2016, a freehold property was sold to the
Chief Executive Officer. The sale price of GBP463,000, and the
future rental charge, were determined by independent valuers on an
arm's length basis and were approved by the Non-Executive Directors
in advance of the transaction. The Group generated a profit of
GBP213,000 as a result of this transaction.
There were no balances outstanding as at 31 October 2016 in
relation to this transaction. The purchase price was paid in full
prior to the year-end date.
Key management personnel
After resignation as a director, Darren Cornwall provided some
consultancy work for the Group. In addition to the emoluments of
GBP79,000 included within note 7, former Director, Darren Cornwall
received GBP53,000 in pay for the year ended 31 October 2016,
(2015: GBPnil), in the period post his resignation from the Board
of Directors on 15 April 2016, to 31 October 2016. The payments
made were on an arm's length basis.
There are no other personnel which the Group defines as key
management personnel, other than the Board of Directors.
28. Subsidiaries
Details of the Company's subsidiaries at 31 October 2016 are as
follows:
Company Operation Country of Parent Company's Proportion
incorporation interest of voting
interest
---------------------------------- -------------------------- --------------- ---------------- ----------
Entu (UK) Holdings Limited Holding Company United Kingdom *100% *100%
HI Sales Limited Holding Company United Kingdom *100% *100%
Weatherseal Home Improvements
Limited Retail United Kingdom 100% 100%
Penicuik Home Improvements
Limited Retail/Marketing United Kingdom 100% 100%
Zenith Staybrite Limited Manufacturing/Retail United Kingdom 100% 100%
Home Install Limited Retail/Marketing United Kingdom 100% 100%
Europlas Limited Retail United Kingdom 100% 100%
KBC Energy Limited Holding Company (Dormant) United Kingdom *100% *100%
Soltrac Limited Retail United Kingdom 100% 100%
Energy Hypermarket Limited Retail United Kingdom 100% 100%
Retail/Services to
Job Worth Doing Limited Group United Kingdom 100% 100%
Window Care Limited Retail United Kingdom 100% 100%
Zenith Windows Limited Dormant United Kingdom 100% 100%
Staybrite Windows Limited Dormant United Kingdom 100% 100%
Entu Home Energy Services Limited Retail/Holding Company United Kingdom 100% 100%
JWD Installations Limited Holding Company United Kingdom 100% 100%
Quotes Near Me Limited Dormant United Kingdom 100% 100%
St Andrews Home Improvements
Limited Retail United Kingdom 100% 100%
Entu Services Limited Dormant United Kingdom 100% 100%
* Shares held by the Company
Shares held by a subsidiary
All holdings represent ordinary share capital.
All subsidiary entities have a year end of 31 October except for
JWD Installations Limited and Quotes Near Me Limited, which are not
trading companies.
No subsidiaries of the Group other than dormant entities have
taken the exemption from audit under Section 479A of CA 2006.
29. Ultimate controlling party
The Directors consider there to be no ultimate controlling party
of the Group.
30. Events after the end of the reporting period.
During March 2017, the Group extended it facilities with
Barclays Bank plc, with the renewal of its GBP4m revolving credit
facility for 12 months alongside the Group's existing variable
overdraft facility. The Directors have no reason to believe that
the facilities will not be renewed upon expiry. The terms include a
renewal of the existing cross guarantee and debenture security
across the Entu (UK) plc group of companies.
31. Reconciliation of results to non-statutory measures
A reconciliation of reported profit to underlying profit:
Year ended Home Energy Generation Repair and Renewal Total
31 October 2016 Improvements and Savings Service Agreements
Gross EBITDA Gross EBITDA Gross EBITDA Gross EBITDA
profit profit profit profit
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------- -------- -------- --------- -------- ---------- --------- -------- --------
Reported profit 23,727 414 1,498 54 2,236 2,236 27,461 2,704
Recurring central
overheads charged
to discontinued
operations (i) - (350) - - - - - (350)
- -
------------------- -------- -------- --------- -------- ---------- --------- -------- --------
Underlying profit 23,727 64 1,498 54 2,236 2,236 27,461 2,354
------------------- -------- -------- --------- -------- ---------- --------- -------- --------
Year ended Home Energy Generation Repair and Renewal Total
31 October 2015 Improvements and Savings Service Agreements
Gross EBITDA Gross EBITDA Gross EBITDA Gross EBITDA
profit profit profit profit
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------- -------- -------- --------- -------- ---------- --------- -------- --------
Reported profit 26,238 4,612 1,619 936 2,061 2,061 29,918 7,609
Recurring central
overheads charged
to discontinued
operations (ii) - (2,904) - (676) - - - (3,580)
Exceptional
items
originating
in 2015 (iii) (1,217) (1,217) (435) (435) - - (1,652) (1,652)
- -
------------------- -------- -------- --------- -------- ---------- --------- -------- --------
Underlying profit 25,021 491 1,184 (175) 2,061 2,061 28,266 2,377
------------------- -------- -------- --------- -------- ---------- --------- -------- --------
(i) In the year ended 31 October 2016, the recurring central
overheads charged to discontinued operations related to Astley and
Europlas.
(ii) In the year ended 31 October 2015, the recurring central
overheads charged to discontinued operations related to Solar and
Norwood.
(iii) See note 5.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BUGDXCUDBGRI
(END) Dow Jones Newswires
March 29, 2017 02:00 ET (06:00 GMT)
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