TIDMGEN
RNS Number : 8140I
Genuit Group PLC
17 August 2021
Genuit Group plc
Interim condensed set of consolidated financial
statements for the six months ended 30 June 2021
17 August 2021
Genuit Group plc
Interim results for the six months ended 30 June 2021
"H1 performance above 2019 - upgrade to full year
expectations"
Genuit Group plc ("Genuit", the "Company" or the "Group"), a
leading provider of sustainable water and climate management
solutions for the built environment , today announces its unaudited
interim results for the six months ended 30 June 2021.
Martin Payne, Chief Executive Officer, said
"I am delighted with the Group's performance in the first half
with strong revenue and profit growth in recovering markets,
despite cost headwinds. This reflects good organic trading as well
as the contribution from our three recent acquisitions, which are
performing well. I would like to thank all our people for their
continued hard work in the face of ongoing challenges from the
pandemic as well as significant increases in demand. The alignment
of our Group strategy around sustainability and environmental
drivers as well as strong market demand has seen momentum continue
into the second half and the Board expects full year performance to
be ahead of previous management expectations."
Financial Results
H1 2021 H1 2020 H1 2019 Change
Statutory measures vs H1 2019
Revenue GBP295.6m GBP173.6m GBP223.3m 32.4%
Operating profit GBP36.3m GBP6.2m GBP35.2m 3.1%
Profit before tax GBP33.8m GBP2.3m GBP31.4m 7.6%
Earnings per share (basic) 7.9p 0.7p 12.9p (38.8%)
Cash generated from operations GBP23.6m GBP(15.7)m GBP21.7m 8.8%
Dividend per share 4.0p - 4.0p -
Alternative performance
measures
Underlying operating
profit (1) GBP48.6m GBP10.5m GBP39.3m 23.7%
Underlying cash generated
from operations(2) GBP15.0m GBP(22.7)m GBP13.5m 11.1%
Underlying operating
margin (1) 16.4% 6.0% 17.6% (120)bps
Underlying profit before
tax (1) GBP46.5m GBP6.6m GBP35.6m 30.6%
Underlying earnings per
share (basic) (1) 15.8p 2.6p 14.7p 7.5%
Leverage(3) (times pro
forma EBITDA(4) ) 1.5 1.1 1.8 0.3
Summary
-- We continue to prioritise the health, safety and wellbeing of
our colleagues as circumstances around the pandemic evolve.
-- Financial performance has been achieved by driving higher
volumes despite some supply constraints and considerable cost
inflation, particularly in relation to raw materials. Management
expects full year operating margins to be broadly in line with the
first half.
-- Revenue 32.4% higher than H1 2019, reflecting continued
strong trading and the benefit of acquisitions. On a like-for-like
basis, revenue 13.8% higher than H1 2019.
-- Strong cashflow generation with net debt(3) of 1.5 times pro
forma EBITDA(4) in line with expectations. Net debt leverage for
the year end is forecast to be lower than this.
-- The three acquisitions made during the period (Adey, Nu-Heat
and Plura) have performed well to date with Adey exceeding
expectations and integration of these businesses into the Group is
proceeding well.
-- Statutory financial measures have a number of non-underlying
adjustments including recognition of a deferred tax liability as a
result of tax rate changes and enhanced amortisation of intangible
assets as a result of the acquisitions.
-- Continued investment in new products in both Residential
Systems and Commercial and Infrastructure Systems in line with our
strategic growth drivers.
-- The Group is making progress against its 2025 ESG targets and
senior management's incentive programmes are now aligned to
these.
-- The Group intends to pay an interim dividend of 4.0 pence per share (2019: 4.0 pence).
Outlook
-- UK market outlook for the second half is generally
encouraging, with strong demand levels in most parts of the UK
construction market, particularly in residential.
-- Fundamentals in Residential Systems continue to be strong,
driven by the new housebuild sector and private RMI, which
performed relatively well throughout the pandemic.
-- Despite buoyant demand, structural labour supply constraints
and cost inflation primarily affecting raw materials and transport
costs, will provide some risk to financial performance for the
remainder of the year, although the Group is taking action to help
mitigate this.
-- Trading has started well in the second half, and the Board
now expects that underlying operating profit for the full year will
be ahead of previous management expectations.
(1) Underlying profit and earnings measures exclude certain
non-underlying items and, where relevant, the tax effect of these
items. The Directors consider that these measures provide a better
and more consistent indication of the Group's underlying financial
performance and more meaningful comparison with prior and future
periods to assess trends in our financial performance.
(2) Underlying cash generated from operations is defined as cash
generated from operations, adjusted for non-underlying cash items,
after movement in net working capital and capital expenditure net
of proceeds from disposals of property, plant and equipment.
(3) Leverage is defined as net debt divided by pro forma EBITDA.
Net debt within the leverage calculation is defined as loans and
borrowings net of unamortised issue costs less cash and cash
equivalents, excluding the effects of IFRS 16.
(4) Pro forma EBITDA is defined as underlying operating profit
before depreciation for the 12 months preceding the balance sheet
date, adjusted, where relevant, to include a full year of EBITDA
from acquisitions made during those 12 months.
Enquiries:
Genuit
Martin Payne, Chief Executive
Officer
Paul James, Chief Financial
Officer +44 (0) 1709 772 204
Brunswick
Nina Coad
Sophia Lazarus +44 (0) 20 7404 5959
A copy of this report will be available on our website
www.genuitgroup.com today from 0700hrs (BST).
There will be webcast presentation for analysts and investors at
0830hrs (BST) on Tuesday 17 August 2021 via web-conference. Please
access the presentation on the following link; :
https://www.investis-live.com/genuit-group/60ed96532527a9160049e54a/ir2021
We recommend you register by 0815hrs (BST). Details of the
conference call dial-in numbers for questions and answers will be
given at the end of the webcast presentation.
The presentation is also available on the Reports, Results and
Presentations page on our website at
https://www.genuitgroup.com/investors/
Notes to Editors:
Genuit Group plc ("Genuit", the "Company" or the "Group"), a
leading provider of sustainable water and climate management
solutions for the built environment, is the largest manufacturer in
the UK, and among the ten largest manufacturers in Europe, of
piping systems for the residential, commercial, civils and
infrastructure sectors by revenue. It is also a leading designer
and manufacturer of energy efficient ventilation systems,
sustainable underfloor heating solutions and energy efficiency
solutions in water-based heating systems in the UK.
The Group operates from 28 facilities in total and manufactures
the UK's widest range of solutions for heating, plumbing, drainage
and ventilation. The Group primarily targets the UK and European
building and construction markets with a presence in Italy, the
Netherlands, Ireland and the Middle East and sales to specific
niches in the rest of the world.
Genuit Group plc changed its name from Polypipe Group plc on 6
April 2021. The Group was established in 1980 and has been listed
on the premium segment of the London Stock Exchange since 2014.
Group Results
Revenue for the six months ended 30 June 2021 was 70.3% higher
than the prior year at GBP295.6m (2020: GBP173.6m) and 32.4% above
2019 (GBP223.3m). On a like-for-like basis, excluding the impact of
acquisitions, revenue was 50.0% higher than prior year and 13.8%
above the same period in 2019. The Group successfully implemented
price increases in the period after the extent of the raw material
cost inflation became apparent which, together with operational
efficiencies, is mitigating this inflation. The Group continued to
focus on its medium-term demand drivers - a structural UK housing
shortage, the regulatory and environmental drivers around water and
climate management, and increasingly indoor air quality. The three
acquisitions made during the period (Adey, Nu-Heat and Plura) have
performed well to date, with Adey exceeding expectations, and the
integration of these businesses into the Group is progressing
well.
Underlying operating profit was 362.9% higher than the prior
year at GBP48.6m (2020: GBP10.5m) and 23.7% higher than the same
period in 2019 (GBP39.3m). This represents an underlying operating
margin of 16.4%, a significant improvement on the prior year level
of 6.0% but 120 basis points lower than 2019 due to the normal lag
in effecting price increases to recover inflation and Covid-19
related costs.
Underlying finance costs of GBP2.1m (2020: GBP3.9m) were broadly
in line with expectations due to the lower levels of debt. The
prior year included a cost related to the full draw down of the
Group's GBP300.0m Revolving Credit Facility (RCF), a GBP50.0m
Covid-19 facility and a GBP100.0m Covid Corporate Financing
Facility, which was repaid in full in September 2020.
Non-underlying operating costs of GBP12.3m (2020: GBP4.3m, 2019:
GBP4.1m) are driven by acquisition costs, amortisation of
intangible assets arising from acquisitions and the unwind of
inventory fair value adjustment.
The total tax charge for the period was GBP14.7m (2020: GBP0.9m,
2019: GBP5.7m). The underlying tax charge of GBP8.2m (2020:
GBP1.1m, 2019: GBP6.3m) represents an effective underlying tax rate
of 17.6% (2020: 16.7%). The effective underlying tax rate for the
same period in 2019 was 17.7%.
Underlying profit after tax was significantly higher than prior
year at GBP38.3m (2020: GBP5.5m) and 30.7% above the same period in
2019 (2019 GBP29.3m). Underlying basic earnings per share increased
to 15.8 pence (2020: 2.6 pence), 7.5% higher than the same period
in 2019 (14.7 pence).
Including non-underlying items, profit after tax increased to
GBP19.1m (2020: GBP1.4m), 25.7% lower than the same period in 2019
(GBP25.7m). Basic earnings per share increased to 7.9 pence (2020:
0.7 pence).
The Board recognises the importance of dividends to shareholders
and has declared an interim dividend of 4.0 pence per share. This
dividend will be paid on 24 September 2021 to shareholders on the
register at the close of business on 3 September 2021.
Business Review
Revenue 2021 2020 Change LFL Change 2019 Change LFL Change
GBPm GBPm % % GBPm % %
------------------------------- ------ ------ ------- ----------- ------ ------- -----------
Residential Systems 183.8 92.8 98.1 63.7 129.0 42.5 17.8
Commercial and Infrastructure
Systems 111.8 80.8 38.4 34.2 94.3 18.6 8.3
------------------------------- ------ ------ ------- ----------- ------ ------- -----------
295.6 173.6 70.3 50.0 223.3 32.4 13.8
------------------------------- ------ ------ ------- ----------- ------ ------- -----------
Underlying operating 2021 ROS 2020 ROS Change 2019 ROS Change
profit GBPm % GBPm % % GBPm % %
------------------------------- ------ ----- ------ ---- ------- ------ ----- -------
Residential Systems 35.8 19.5 7.4 8.0 383.8 26.6 20.6 34.6
Commercial and Infrastructure
Systems 12.8 11.4 3.1 3.8 312.9 12.7 13.5 0.8
------------------------------- ------ ----- ------ ---- ------- ------ ----- -------
48.6 16.4 10.5 6.0 362.9 39.3 17.6 23.7
------------------------------- ------ ----- ------ ---- ------- ------ ----- -------
The Group has experienced a strong performance in the first half
of the year despite the challenges associated with the continued
Covid-19 pandemic, the cost and supply of raw materials and
increasing transport costs. We were able to maintain manufacturing
output due to the scale and flexibility of our operations.
During the period we focused on integrating our newly acquired
businesses of Adey, the UK's leading provider of magnetic filters,
chemicals and related products, which protect against magnetite and
other performance issues in water-based heating systems and improve
energy efficiency; Nu-Heat, the leading supplier of sustainable
underfloor heating solutions, air and ground source heat pumps, and
other renewable heating systems; and Plura, a manufacturer of a
range of products for utility companies, road and rail operators,
network builders and designers in the construction and maintenance
of their networks. All businesses are performing well, with Adey
continuing to exceed expectations.
We are pleased to report that revenue for the six months ended
30 June 2021 was 70.3% higher than the prior year at GBP295.6m
(2020: GBP173.6m) and 32.4% above 2019 (2019: GBP223.3m). On a
like-for-like basis, excluding the impact of acquisitions, revenue
was 50.0% higher than prior year and 13.8% above the same period in
2019.
On a like-for-like basis, revenue in Residential Systems was
63.7% ahead of prior year and 17.8% above 2019 levels. In
Commercial and Infrastructure Systems, revenue was 34.2% ahead of
prior year and 8.3% above 2019 levels. Despite the challenges of
the pandemic, we retain a strong pipeline of new products. We have
launched several new ranges in the first half of the year,
including the Squrbo 2 extractor range from Nuaire, and newly
acquired Adey launched the Magnaclean CMX filter, and a new range
of cleaning chemicals specifically targeting growth in the
commercial sector. Our Civils & Green Urbanisation business su
ccessfully launched Permatreat, a new range of low maintenance
linear surface water collection and treatment systems.
RESIDENTIAL SYSTEMS
Trading in the Residential Systems segment performed strongly,
with revenue of GBP183.8m 42.5% ahead 2019, and 17.8% ahead on a
like-for-like basis. The residential sector has continued its
fast-paced recovery, due to a combination of pent-up demand, and
government stimulus. The second quarter of 2020 was the most
impacted by Covid-19, however, the strength of the housing recovery
is highlighted by the first quarter of 2021 seeing private starts
and completions at 36% and 21% higher than prior year respectively
(source: CPA Summer Forecast/MHCLG). Revenue in the Residential
Systems segment was ahead of 2019 by 42.5%, (17.8% on a
like-for-like basis). The CPA full year 2021 estimation is that
total housing output will be slightly below 2019, as the gradient
of recovery begins to shallow out, partly reflecting possible
constraining factors on the supply side, including some key
construction materials as well as labour. These supply side issues
have had an impact on input inflation in the first half, which was
offset by our ability to pass on cost increases.
Our acquisitions, Adey and Nu-Heat have performed strongly, and
increased our mix toward RMI activity, which has generally been
less volatile than new housing in recent months. The growth drivers
around low carbon heating, which support both of these businesses,
continue to provide confidence in their ability to deliver against
their plans.
Margin recovery continued through the first half of the year
reaching 19.5%, close to levels achieved in the same period in
2019, despite the cost headwinds experienced.
COMMERCIAL AND INFRASTRUCTURE SYSTEMS
Revenue of GBP111.8m in Commercial and Infrastructure Systems
improved by 18.6% vs 2019 (8.3% on a like-for-like basis). Sales of
ventilation products have benefitted from the increased focus on
the importance of fresh air in the workspace, and suitability for
retrofitting has minimised the impact of the low level of new build
activity. We have also seen strong demand for our water management
systems with the expansion of larger housing development sites,
which has been necessary due to the rapid build out rates and
completions which occurred in the second half of 2020. Plura
continues to perform in line with expectations and is well
positioned to benefit from the near-term growth in infrastructure
activity highlighted above.
Commercial and Infrastructure Systems showed some resilience
during the pandemic, with the larger sites and open spaces making
continued operation easier than the housing sector. However,
differing trends are developing as we emerge from the pandemic, as
the impact from wider structural issues starts to be seen.
The commercial sector remains subdued, with moves toward home
working, and online shopping, dampening new projects in particular.
This has been particularly evident in London, which has accounted
for over a third of commercial new build activity (source: CPA).
Even with projected growth in 2021 of 5.8%, 3.5% in 2022, and 2.7%
in 2023, the new build construction segment would still be 10%
below 2019.
Infrastructure, in contrast, continues to be the strongest
performing segment with continued growth in the regulated sectors
such as roads. Although some project delays have caused a slight
movement of work from 2021 to 2022, the CPA outlook for 2021
remains 23.4% ahead of prior year, and 17.3% ahead of 2019.
The margin continued to improve through the first half of the
year reaching 11.4% (2019: 13.5%), despite the cost headwinds.
ENVIRONMENTAL, SOCIAL & GOVERNANCE
At our Capital Markets Event in November 2020, we explained how
our focus on addressing growth drivers relating to the
sustainability agenda, would be matched by our commitment to
operating sustainably. We have continued to make strong progress
against the various ESG targets we announced in November 2020. Our
like-for-like carbon intensity has reduced by some 53% in the first
half of the year, with a significant contribution from our move to
renewable energy sources. We have also signed the Pledge to Net
Zero initiative, committing to be carbon neutral by 2050, giving us
a long-term goal, which will continue our improvement trajectory
beyond 2025.
Our commitment to employee development and social mobility is
reflected in our membership of The 5% Club, and we have grown our
proportion of qualifying colleagues to 3.5%, earning us "silver"
status. Our use of recycled material in the first half was 47.6% of
our total tonnage. Although it has been challenging in a market
with strong housing starts and a resulting product mix biased
toward those governed by standards limiting use of recyclate, it is
pleasing to report that our Q2 performance was marginally above 50%
of our consumption derived from recyclate. By 2025, r ecycled
materials should represent 62% of our total polymer consumption. We
continue to place innovation at the heart of our business, ensuring
we have the solutions for the emerging challenges faced by the
construction sector.
OUTLOOK
The robust start to the year continued into May and June with
revenues for the half year up 13.8% compared to the first half of
2019, on a like-for-like basis. Within this, there was strong
like-for-like volume growth at circa 6%, ahead of 2019 and the
overall performance of a recovering construction market, with good
drop through on this volume. Profitability has been impacted during
the period by the normal lag in price increases compensating for
considerable levels of cost inflation in the period as well as some
costs associated with Covid-19. The three acquisitions completed in
February 2021 are all performing well, with Adey continuing to
exceed expectations. As for the year ahead, we are monitoring how
the recovering market develops with supply constraints in some
areas as well as labour shortages affecting the overall market
performance. The ongoing pandemic continues to provide challenges,
but the Group is well-placed to address them.
We believe the Group has a balanced exposure to the different
elements of the UK construction market, which provides resilience,
and a clear strategy underpinned by strong medium-term growth
drivers. The Board now expects that underlying operating profit for
the full year will be ahead of previous management expectations
.
Financial Review
Finance Costs
Net underlying finance costs for the six months ended 30 June
2021 decreased to GBP2.1m (2020: GBP3.9m, 2019: GBP3.7m) due to the
lower interest rates on a lower level of borrowing through the
first half of the year. Interest is payable on the Group's RCF at
LIBOR plus an interest rate margin ranging from 0.90% to 2.75%
depending on leverage. The interest rate margin at 30 June 2021 was
1.65% (2020: 1.65%, 2019: 1.65%).
Taxation
The Group's tax charge for the six months ended 30 June 2021
increased to GBP14.7m (2020: GBP0.9m, 2019: GBP5.7m) due to the
much stronger profitability. The underlying tax rate (underlying
tax: underlying profit) has been provided at the estimated full
year rate of 17.6% (2020 full year: 17.6%, 2019 full year
16.8%).
Dividend
Our dividend policy is normally to pay a minimum of 40% of the
Group's annual underlying profit after tax. The Directors intend
that the Group will pay the total annual dividend in two tranches,
an interim dividend and a final dividend, to be announced at the
time of announcement of the interim and preliminary results
respectively with the interim dividend being approximately one half
of the prior year's final dividend.
Cash Flow and Net Debt
Cash generated from operations during the period amounted to an
inflow of GBP23.6m (2020: GBP15.7m outflow, 2019: GBP21.7m inflow).
This result includes a working capital outflow of GBP31.1m (2020:
GBP35.2m, 2019: GBP27.8m). A first half working capital outflow is
a normal feature of the Group's annual working capital cycle and
arises primarily from rebate settlements.
Capital expenditure increased to GBP15.1m (2020: GBP8.5m, 2019:
GBP9.0m) as expenditure in the prior year was severely curtailed
following the Covid-19 outbreak. The full year 2021 expected spend
is some GBP35.0m with a primary focus on key commercial and
innovation lead projects.
During February the Group successfully raised GBP96.3m through
an equity placing of its shares, funds which were used along with a
drawdown on its Revolving Credit Facility to acquire Adey for a
cash consideration of GBP210.0m on a cash-free, debt-free
basis.
Following the acquisitions in February 2021, net debt (including
unamortised debt issue costs but excluding the effects of IFRS 16
capitalisation) increased to GBP169.6m at 30 June 2021 (2020:
GBP71.2m, 2019: GBP178.5m). Leverage was 1.5 times pro forma EBITDA
compared to 1.1 times pro forma EBITDA at 30 June 2020, 0.3 times
pro forma EBITDA at 31 December 2020 and 1.8 times pro forma EBITDA
at 30 June 2019.
Going Concern
The Group continues to meet its day-to-day working capital and
other funding requirements through a combination of long-term
funding and cash deposits. The Group's bank financing facilities
consist of a GBP300.0m RCF. The extended committed Covid-19
facility of GBP50.0m expired in May 2021. GBP102.0m of the RCF was
undrawn at 30 June 2021. At 30 June 2021, liquidity headroom (cash
and undrawn committed banking facilities) was GBP129.6m (2020:
GBP376.9m, 2019: GBP120.0m). Our focus is to continue to be on
deleveraging and our net debt to EBITDA ratio stood at 1.5 times
pro forma EBITDA at 30 June 2021 (2020: 1.1 times pro forma
EBITDA), increasing to 1.6 times pro forma EBITDA including the
effects of IFRS 16. This headroom means the Group is
well-positioned with a strong balance sheet.
As a result, the Directors have satisfied themselves that the
Group has adequate financial resources to continue in operational
existence for a period of at least the next 17 months. Accordingly,
they continue to adopt the going concern basis in preparing the
condensed set of consolidated financial statements.
Principal Risks and Uncertainties
The Board continually assesses and monitors the key risks of the
business and Genuit has developed a risk management framework to
identify, report, and manage its principal risks and uncertainties
. The principal risks and uncertainties that could have a material
impact on the Group's performance and prospects, and the mitigating
activities which are aimed at reducing the impact or likelihood of
a major risk materialising , have not changed from those which are
set out in detail in the principal risks and uncertainties section
of our 2020 Annual Report and Accounts.
These principal risks and uncertainties include macro-economic
and political conditions; the weather; raw materials supply and
pricing; information systems disruption; reliance on key customers
and recruitment and retention of key personnel.
A copy of the 2020 Annual Report and Accounts is available on
the Company's website www.genuitgroup.com .
Forward-Looking Statements
This report contains various forward-looking statements that
reflect management's current views with respect to future events
and financial and operational performance. These forward-looking
statements involve known and unknown risks, uncertainties,
assumptions, estimates and other factors, which may be beyond the
Group's control and which may cause actual results or performance
to differ materially from those expressed or implied from such
forward-looking statements. All statements (including
forward-looking statements) contained herein are made and reflect
knowledge and information available as of the date of preparation
of this report and the Group disclaims any obligation to update any
forward-looking statements, whether as a result of new information,
future events or results or otherwise. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements due to the
inherent uncertainty therein. Nothing in this report should be
construed as a profit forecast .
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- The condensed set of consolidated financial statements has
been prepared in accordance with UK adopted International
Accounting Standard (IAS) 34, Interim Financial Reporting; and
-- The Interim Management Report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of consolidated financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last Annual Report and Accounts that
could do so.
This report was approved by the Board of Directors on 17 August
2021 and is available on the Company's website www.genuitgroup.com
.
The Directors of the Company are:
Ron Marsh Chairman
Martin Payne Chief Executive Officer
Paul James Chief Financial Officer
Glen Sabin Chief Operating Officer
Mark Hammond Non-executive Director and Senior Independent Director
Louise Hardy Non-executive Director
Lisa Scenna Non-executive Director
Louise Brooke-Smith Non-executive Director
Kevin Boyd Non-executive Director
By order of the Board:
M K Payne P A James
Chief Executive Officer Chief Financial Officer
INTERIM GROUP INCOME STATEMENT
for the six months ended 30 June 2021 (unaudited)
Notes Six months ended 30 Six months ended 30
June 2021 June 2020
------------------ ------ -------------------------------------- --------------------------------------
Underlying Non-Underlying Total Underlying Non-Underlying Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 3 295.6 - 295.6 173.6 - 173.6
Cost of sales (173.6) (1.7) (175.3) (110.3) - (110.3)
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Gross profit 122.0 (1.7) 120.3 63.3 - 63.3
Selling and
distribution
costs (40.0) - (40.0) (31.0) - (31.0)
Administration
expenses (33.4) (4.0) (37.4) (21.8) (0.3) (22.1)
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Trading profit 48.6 (5.7) 42.9 10.5 (0.3) 10.2
Amortisation
of intangible
assets - (6.6) (6.6) - (4.0) (4.0)
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Operating
profit 3 48.6 (12.3) 36.3 10.5 (4.3) 6.2
3,
Finance costs 5 (2.1) (0.4) (2.5) (3.9) - (3.9)
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Profit before
tax 46.5 (12.7) 33.8 6.6 (4.3) 2.3
Income tax 6 (8.2) (6.5) (14.7) (1.1) 0.2 (0.9)
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Profit for
the period
attributable
to the owners
of the parent
company 38.3 (19.2) 19.1 5.5 (4.1) 1.4
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Basic earnings
per share
(pence) 7 7.9 0.7
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Diluted earnings
per share
(pence) 7 7.8 0.7
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Dividend
per share
(pence) -
interim 8 4.0 -
------------------ ------ ----------- --------------- -------- ----------- --------------- --------
Non-underlying items are presented separately and are detailed
in Note 4.
INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2021 (unaudited)
Six months Six months
ended 30 ended 30
June 2021 June 2020
GBPm GBPm
------------------------------------------------- ----------- -----------
Profit for the period attributable to the
owners of the parent company 19.1 1.4
------------------------------------------------- ----------- -----------
Other comprehensive income:
Items which may be reclassified subsequently
to the income statement:
Exchange differences on translation of foreign
operations - 0.5
Effective portion of changes in fair value
of interest rate swaps - 0.4
Tax relating to items which may be reclassified
subsequently to the income statement - (0.1)
------------------------------------------------- ----------- -----------
Other comprehensive income for the period
net of tax - 0.8
------------------------------------------------- ----------- -----------
Total comprehensive income for the period
attributable to the owners of the parent
company 19.1 2.2
------------------------------------------------- ----------- -----------
INTERIM GROUP BALANCE SHEET
at 30 June 2021 (unaudited)
30 June 2021 30 June 2020 31 December
Notes 2020
GBPm GBPm GBPm
-------------------------------- -------- -------------- -------------- ------------
Non-current assets
Property, plant and
equipment 145.1 126.9 134.2
Right-of-use assets 21.7 13.5 12.9
Intangible assets 9 644.4 397.8 393.8
-------------------------------- -------- -------------- -------------- ------------
Total non-current assets 811.2 538.2 540.9
-------------------------------- -------- -------------- -------------- ------------
Current assets
Inventories 64.4 55.8 52.6
Trade and other receivables 99.4 60.2 61.6
Income tax receivable 1.2 2.5 0.6
Cash and cash equivalents 10 27.6 201.7 44.1
-------------------------------- -------- -------------- -------------- ------------
Total current assets 192.6 320.2 158.9
-------------------------------- -------- -------------- -------------- ------------
Total assets 1,003.8 858.4 699.8
-------------------------------- -------- -------------- -------------- ------------
Current liabilities
Trade and other payables (129.0) (78.1) (112.2)
Loans and borrowings 10 - (99.5) -
Lease liabilities 10 (4.3) (3.3) (3.5)
Deferred and contingent
consideration 11 (0.9) (1.5) (3.4)
Derivative financial
instruments (0.8) (0.1) -
Total current liabilities (135.0) (182.5) (119.1)
-------------------------------- -------- -------------- -------------- ------------
Non-current liabilities
Loans and borrowings 10 (197.2) (173.4) (58.9)
Lease liabilities 10 (17.5) (10.2) (9.4)
Deferred and contingent
consideration 11 (2.6) - -
Other liabilities (1.4) (0.9) (0.7)
Deferred income tax
liabilities (46.9) (11.0) (10.8)
-------------------------------- -------- -------------- -------------- ------------
Total non-current liabilities (265.6) (195.5) (79.8)
-------------------------------- -------- -------------- -------------- ------------
Total liabilities (400.6) (378.0) (198.9)
-------------------------------- -------- -------------- -------------- ------------
Net assets 603.2 480.4 500.9
-------------------------------- -------- -------------- -------------- ------------
Capital and reserves
Equity share capital 0.2 0.2 0.2
Share premium 93.6 - -
Capital redemption reserve 1.1 1.1 1.1
Hedging reserve - (0.1) -
Foreign currency retranslation
reserve 0.4 0.6 0.4
Other reserves 116.5 116.5 116.5
Retained earnings 391.4 362.1 382.7
-------------------------------- -------- -------------- -------------- ------------
Total equity 603.2 480.4 500.9
-------------------------------- -------- -------------- -------------- ------------
INTERIM GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2021 (unaudited)
Equity Capital Foreign
share Share redemption Hedging currency Other Retained Total
capital premium reserve reserve retranslation reserves earnings equity
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- --------- ------------ --------- --------------- ---------- ---------- --------
Six months
ended
30 June 2021
Opening
balance 0.2 - 1.1 - 0.4 116.5 382.7 500.9
--------------- --------- --------- ------------ --------- --------------- ---------- ---------- --------
Profit for the
period - - - - - - 19.1 19.1
Total
comprehensive
income for
the period - - - - - - 19.1 19.1
Dividends paid - - - - - - (11.9) (11.9)
Issue of share
capital - 96.3 - - - - - 96.3
Transaction
costs
on issue of
share
capital - (2.7) - - - - - (2.7)
Share-based
payments
charge - - - - - - 1.0 1.0
Share-based
payments
settled - - - - - - 0.4 0.4
Share-based
payments
excess tax
benefit - - - - - - 0.1 0.1
--------------- --------- --------- ------------ --------- --------------- ---------- ---------- --------
Closing
balance 0.2 93.6 1.1 - 0.4 116.5 391.4 603.2
--------------- --------- --------- ------------ --------- --------------- ---------- ---------- --------
Six months
ended
30 June 2020
Opening
balance 0.2 - 1.1 (0.4) 0.1 - 360.4 361.4
--------------- --------- --------- ------------ --------- --------------- ---------- ---------- --------
Profit for the
period - - - - - - 1.4 1.4
Other
comprehensive
income - - - 0.3 0.5 - - 0.8
--------------- --------- --------- ------------ --------- --------------- ---------- ---------- --------
Total
comprehensive
income for
the period - - - 0.3 0.5 - 1.4 2.2
Issue of share
capital - - - - - 120.0 - 120.0
Transaction
costs
on issue of
share
capital - - - - - (3.5) - (3.5)
Share-based
payments
charge - - - - - - 0.6 0.6
Share-based
payments
settled - - - - - - 0.1 0.1
Share-based
payments
excess tax
benefit - - - - - - (0.4) (0.4)
--------------- --------- --------- ------------ --------- --------------- ---------- ---------- --------
Closing
balance 0.2 - 1.1 (0.1) 0.6 116.5 362.1 480.4
--------------- --------- --------- ------------ --------- --------------- ---------- ---------- --------
INTERIM GROUP CASH FLOW STATEMENT
for the six months ended 30 June 2021
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- -------------
Operating activities
Profit before tax 33.8 2.3 23.8
Finance costs 2.5 3.9 6.6
-------------------------------------- ----------- ----------- -------------
Operating profit 36.3 6.2 30.4
Non-cash items:
Profit on disposal of property,
plant and equipment - (0.1) (0.2)
Transaction costs on issue
of share capital 0.1 0.1 0.1
Research and development expenditure
credit - - (1.0)
Non-underlying items:
- amortisation of intangible
assets 6.6 4.0 7.8
- provision for acquisition
costs 4.0 0.3 2.9
-unwind of inventory fair value 1.7 - -
adjustment
- provision for restructuring
costs - - 1.1
Depreciation of property, plant
and equipment 9.3 7.9 16.3
Depreciation of right-of-use
assets 2.1 1.8 3.5
Share-based payments 1.0 0.6 1.4
Cash items:
- settlement of acquisition
costs (6.4) (1.3) (1.2)
- settlement of restructuring
costs - - (1.1)
-------------------------------------- ----------- ----------- -------------
Operating cash flows before
movement in working capital 54.7 19.5 60.0
Movement in working capital:
Receivables (22.3) (19.2) (21.3)
Payables (8.5) (20.1) 15.6
Inventories (0.3) 4.1 7.2
-------------------------------------- ----------- ----------- -------------
Cash generated from operations 23.6 (15.7) 61.5
Income tax paid (5.3) (7.3) (8.2)
-------------------------------------- ----------- ----------- -------------
Net cash flows from operating
activities 18.3 (23.0) 53.3
-------------------------------------- ----------- ----------- -------------
Investing activities
Settlement of deferred and
contingent consideration - (1.8) (1.8)
Acquisition of businesses net
of cash at acquisition (236.2) - -
Proceeds from disposal of property,
plant and equipment 0.1 0.2 0.6
Purchase of property, plant
and equipment (15.1) (8.5) (25.1)
-------------------------------------- ----------- ----------- -------------
Net cash flows from investing
activities (251.2) (10.1) (26.3)
-------------------------------------- ----------- ----------- -------------
Financing activities
Issue of share capital 96.3 120.0 120.0
Transaction costs on issue
of share capital (2.8) (3.6) (3.6)
Debt issue costs - (0.3) (0.4)
Issue of Euro-Commercial Paper - 99.4 99.4
Buyback of Euro-Commercial
Paper - - (99.7)
Net drawdown / (repayment)
of bank loan 138.0 (24.2) (139.0)
Interest paid (1.2) (2.6) (5.4)
Dividends paid (11.9) - -
Proceeds from exercise of share
options 0.6 0.1 2.1
Settlement of lease liabilities (2.5) (1.9) (4.0)
-------------------------------------- ----------- ----------- -------------
Net cash flows from financing
activities 216.5 186.9 (30.6)
-------------------------------------- ----------- ----------- -------------
Net change in cash and cash
equivalents (16.4) 153.8 (3.6)
Cash and cash equivalents -
opening balance 44.1 47.7 47.7
Net foreign exchange difference (0.1) 0.2 -
-------------------------------------- ----------- ----------- -------------
Cash and cash equivalents -
closing balance 27.6 201.7 44.1
-------------------------------------- ----------- ----------- -------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
1. Basis of preparation
Genuit Group plc (previously known as Polypipe Group plc) is
incorporated in the UK. The condensed set of consolidated financial
statements have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority
and UK adopted IAS 34, Interim Financial Reporting.
The annual financial statements will be prepared under
UK-adopted IAS (UK-adopted IFRSs).
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of consolidated
financial statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of
the Group's published consolidated financial statements for the
year ended 31 December 2020, except for the definition of
non-underlying items that now includes the unwind of inventory fair
value adjustment as a result of the Adey acquisition. These
statements do not include all the information required for full
annual consolidated financial statements and should be read in
conjunction with the full Annual Report and Accounts for the year
ended 31 December 2020.
The comparative figures for the financial year ended 31 December
2020, where reported, are not the Group's statutory accounts for
that financial year. Those accounts have been reported on by the
Group's auditors and delivered to the Registrar of Companies. The
report of the auditors was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006.
There were no accounting standards or interpretations that have
become effective in the current reporting period which had an
impact on disclosures, financial position or performance.
The condensed set of consolidated financial statements are
prepared on a going concern basis. The Directors have made
enquiries into the adequacy of the Group's financial resources,
through a review of the Group's budget and medium-term financial
plan, including cash flow forecasts. The Group has modelled a
scenario with the base forecast being one in which, over the 17
months ending 31 December 2022, sales volumes continue to recover
to pre-Covid-19 pandemic levels and then grow in line with external
construction industry forecasts. In addition, reverse stress
testing has been performed to identify the necessary reduction in
profitability or growth in net debt required to result in a breach
of the Group's banking covenants. The reverse stress test showed
significant headroom existed throughout the assessment period.
At 30 June 2021, the Group had available GBP102.0m of undrawn
committed borrowing facilities in respect of which all conditions
precedent had been met. These borrowing facilities are available
until at least November 2023, subject to covenant headroom. In
addition, on 11 February 2021, the Company conducted a
non-pre-emptive placing of new ordinary shares generating gross
proceeds of GBP96.3m and drew down GBP120.0m net from the RCF as
part of the post year end acquisition funding. The Directors are
satisfied that the Group has sufficient liquidity and covenant
headroom to withstand reasonable variances to the base forecast. In
addition, the Directors have noted the range of possible additional
liquidity options available to the Group, should they be
required.
As a result, the Directors have satisfied themselves that the
Group has adequate financial resources to continue in operational
existence for a period of at least the next 17 months. Accordingly,
they continue to adopt the going concern basis in preparing the
condensed set of consolidated financial statements.
There have been no related party transactions in the period to
30 June 2021.
Four non-statutory measures have been used in preparing the
condensed set of consolidated financial statements:
-- Underlying profit and earnings measures exclude certain
non-underlying items (which are detailed in Note 4) and, where
relevant, the tax effect of these items. The Directors consider
that these measures provide a better and more consistent indication
of the Group's underlying financial performance and more meaningful
comparison with prior and future periods to assess trends in our
financial performance.
-- Underlying cash generated from operations is defined as cash
generated from operations, adjusted for non-underlying cash items,
after movement in net working capital and capital expenditure net
of proceeds from disposals of property, plant and equipment.
-- Leverage is defined as net debt divided by pro forma EBITDA.
Net debt within the leverage calculation is defined as loans and
borrowings net of unamortised issue costs less cash and cash
equivalents, excluding the effects of IFRS 16.
-- Pro forma EBITDA is defined as underlying operating profit
before depreciation, for the 12 months preceding the balance sheet
date, adjusted where relevant, to include a full year of EBITDA
from acquisitions made during those 12 months.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
2. Financial risks, estimates, assumptions and judgements
The preparation of the condensed set of consolidated financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. Actual results may differ from estimates.
In preparing the condensed set of consolidated financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 31
December 2020.
3. Segment information
The Group has two reporting segments - Residential Systems and
Commercial and Infrastructure Systems. The reporting segments are
organised based on the nature of the end markets served. There are
no significant judgements in aggregating operating segments to
arrive at the reporting segments. Inter-segment sales are on an
arm's length basis in a manner similar to transactions with third
parties.
Six months ended 30 June Six months ended 30 June
2021 2020
-------------------------------------- -------------------------------------
Commercial Commercial
Residential & Infrastructure Residential & Infrastructure
Systems Systems Total Systems Systems Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ----------- ----------------- ------ ----------- ----------------- -----
Segmental revenue 186.7 116.4 303.1 95.1 84.4 179.5
Inter-segment revenue (2.9) (4.6) (7.5) (2.3) (3.6) (5.9)
---------------------- ----------- ----------------- ------ ----------- ----------------- -----
Revenue 183.8 111.8 295.6 92.8 80.8 173.6
---------------------- ----------- ----------------- ------ ----------- ----------------- -----
Underlying operating
profit * 35.8 12.8 48.6 7.4 3.1 10.5
Non-underlying
items - segmental (9.7) (2.6) (12.3) (1.9) (2.4) (4.3)
---------------------- ----------- ----------------- ------ ----------- ----------------- -----
Segmental operating
profit 26.1 10.2 36.3 5.5 0.7 6.2
Non-underlying
items - finance
costs (0.4) -
Finance costs (2.1) (3.9)
---------------------- ----------- ----------------- ------ ----------- ----------------- -----
Profit before tax 33.8 2.3
---------------------- ----------- ----------------- ------ ----------- ----------------- -----
* Underlying operating profit is stated before non-underlying
items as defined in the Group Accounting Policies in the Annual
Report and Accounts and is the measure of segment profit used by
the Group's CODM. Details of the non-underlying items of GBP12.7m
(2020: GBP4.3m) are detailed in Note 4 .
Geographical analysis
Six months Six months
ended 30 ended 30
June 2021 June 2020
Revenue by destination GBPm GBPm
----------------------- ---------- ----------
UK 266.3 151.7
Rest of Europe 18.4 12.5
Rest of World 10.9 9.4
----------------------- ---------- ----------
Total - Group 295.6 173.6
----------------------- ---------- ----------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
4. Non-underlying items
Non-underlying items comprised:
Six months ended 30 June Six months ended 30 June
2021 2020
---------------------------- ----------------------------
Gross Tax Net Gross Tax Net
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------- -------- -------- -------- -------- --------
Cost of sales:
Unwind of inventory
fair value adjustment 1.7 (0.3) 1.4 - - -
Administration expenses:
Acquisition costs
- acquisition and
other M&A activity 4.0 (0.2) 3.8 0.3 - 0.3
Amortisation of intangible
assets 6.6 7.1 13.7 4.0 (0.2) 3.8
Finance costs: Unwind
of discount on contingent
consideration 0.4 (0.1) 0.3 - - -
Total non-underlying
items 12.7 6.5 19.2 4.3 (0.2) 4.1
--------------------------- -------- -------- -------- -------- -------- --------
The unwind of the inventory fair value adjustment relates to the
fair value uplift of the inventory acquired as part of the Adey
acquisition that has subsequently been sold. Acquisition costs in
2021 relate to the acquisitions of Adey, Nu-Heat and Plura and also
include an accrual for the earn out associated with the Plura
acquisition (see Note 9). The non-underlying tax charge includes
GBP8.5m in respect of restating the deferred income tax liability
on intangible assets as a result of the change in the main UK
corporation tax rate (see Note 6).
5. Finance costs
Six months Six months
ended 30 ended 30
June 2021 June 2020
GBPm GBPm
----------------------------------------------- ---------- ----------
Interest on bank loan 1.2 3.1
Interest on Euro-Commercial Paper - 0.1
Debt issue cost amortisation 0.3 0.2
Unwind of discount on lease liabilities 0.3 0.2
Other finance costs 0.3 0.3
Unwind of discount on contingent consideration 0.4 -
----------------------------------------------- ---------- ----------
2.5 3.9
----------------------------------------------- ---------- ----------
6. Income tax
Tax has been provided on the profit before tax at the estimated
effective rate for the full year of 31.7% (2020 full year: 22.3%).
Tax on underlying profit before tax was 17.6% (2020 full year:
17.6%).
Six months Six months
ended 30 ended 30
June 2021 June 2020
GBPm GBPm
--------------------------------------------------- ---------- ----------
Current income tax:
UK income tax 5.1 0.9
Overseas income tax 0.1 0.1
--------------------------------------------------- ---------- ----------
Total current income tax 5.2 1.0
Deferred income tax:
Origination and reversal of timing differences (1.2) (0.8)
Adjustment in respect of changes in income
tax rate 10.7 0.7
--------------------------------------------------- ---------- ----------
Total deferred income tax 9.5 (0.1)
--------------------------------------------------- ---------- ----------
Total tax expense reported in the income statement 14.7 0.9
--------------------------------------------------- ---------- ----------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
6. Income tax (continued)
The Finance (No.2) Act 2015 reduced the main UK corporation tax
rate to 19%, effective from 1 April 2017. A further reduction in
the main UK corporation tax rate to 17% was expected to come into
effect from 1 April 2020 (as enacted by the Finance Act 2016 on 15
September 2016). However, legislation introduced in the Finance Act
2020 (enacted on 22 July 2020) repealed the reduction of the rate,
thereby maintaining the current rate of 19%. Deferred income tax on
the balance sheet at 30 June 2020 was therefore measured at 19%
(2019: 17%).
The Finance Act 2021 (enacted on 10 June 2021) included an
increase to the main UK corporation tax rate to 25% effective from
1 April 2023. Deferred income tax on the balance sheet at 30 June
2021 was therefore measured at 19% or 25% (2020: 19%) depending on
when the deferred income tax asset or liability is expected to
reverse.
7. Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the period attributable to the owners of the parent
company by the weighted average number of ordinary shares
outstanding during the period. The diluted earnings per share
amounts are calculated by dividing profit for the period
attributable to the owners of the parent company by the weighted
average number of ordinary shares outstanding during the period
plus the weighted average number of potential ordinary shares that
would be issued on the conversion of all the dilutive share options
into ordinary shares.
The calculation of basic and diluted earnings per share is based
on the following:
Six months Six months
ended 30 ended 30
June 2021 June 2020
----------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purpose of basic earnings per share 242,745,684 208,398,693
Effect of dilutive potential ordinary shares 3,311,655 2,648,081
----------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purpose of diluted earnings per share 246,057,339 211,046,774
----------------------------------------------- ----------- -----------
Underlying earnings per share is based on the result for the
period after tax excluding the impact of non-underlying items of
GBP7.1m (2020: GBP4.1m). The Directors consider that this measure
provides a better and more consistent indication of the Group's
underlying financial performance and more meaningful comparison
with prior and future periods to assess trends in our financial
performance. The underlying earnings per share is calculated as
follows:
Six months Six months
ended 30 ended 30
June 2021 June 2020
---------------------------------------------- ---------- ----------
Underlying profit for the period attributable
to the owners of the parent company (GBPm) 38.3 5.5
---------------------------------------------- ---------- ----------
Underlying basic earnings per share (pence) 15.8 2.6
---------------------------------------------- ---------- ----------
Underlying diluted earnings per share (pence) 15.6 2.6
---------------------------------------------- ---------- ----------
8. Dividends
The Directors have proposed an interim dividend for the current
year of GBP9.9m which equates to 4.0 pence per share.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
9. Acquisitions
Acquisition-related deferred and contingent consideration
comprised:
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------- ------- ------- -----------
Deferred and contingent consideration
on Permavoid acquisition 0.9 1.5 3.4
Deferred and contingent consideration
on Plura acquisition 2.6 - -
-------------------------------------- ------- ------- -----------
3.5 1.5 3.4
-------------------------------------- ------- ------- -----------
Acquisition-related cash flows comprised:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBPm GBPm GBPm
---------------------------------- ---------- ---------- ------------
Operating cash flows - settlement
of acquisition costs
Permavoid 2.5 - -
Nu-Heat 0.6 - -
Plura 0.3 - -
Adey 3.0 - -
Other - aborted acquisition costs - 1.3 1.2
---------------------------------- ---------- ---------- ------------
6.4 1.3 1.2
---------------------------------- ---------- ---------- ------------
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBPm GBPm GBPm
------------- ------------ ----------- --------------
Investing cash flows - settlement of deferred and
contingent consideration
Permavoid - 1.5 1.5
Alderburgh - 0.3 0.3
- 1.8 1.8
------------- ------------ ----------- --------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
9. Acquisitions (continued)
Six months Six months Year ended
ended 30 ended 30 December
June 2021 June 2020 31 2020
GBPm GBPm GBPm
------------------------------ ------------- ------------- ----------
Investing cash flows - acquisition of businesses net of
cash at acquisition
Nu-Heat 25.8 - -
Plura 1.8 - -
Adey 208.4 - -
Tree Ground Solutions 0.2 - -
------------------------------ ------------- ------------- ----------
236.2 - -
------------------------------ ------------- ------------- ----------
Nu-Heat
On 2 February 2021, the Group acquired 100% of the voting rights
and shares of Nu-Heat (Holdings) Limited (Nu-Heat), the leading
supplier of sustainable underfloor heating solutions, air and
ground source heat pumps, and other renewable heating systems, for
a cash consideration of GBP27.0m on a cash-free, debt-free basis.
The total cash consideration of GBP24.8m included a payment of
GBP5.7m for net cash on completion and was net of loans and
borrowings at acquisition of GBP6.7m. Additional debt and debt like
items amounted to GBP1.2m.
Details of the acquisition, including provisional fair value
adjustments, were as follows:
Fair
value
GBPm
-------------------------------- ------
Property, plant and equipment 0.5
Right-of-use assets 0.3
Intangible assets 11.7
Inventories 1.4
Trade and other receivables 0.7
Cash and cash equivalents 5.7
Trade and other payables (3.3)
Loans and borrowings (6.7)
Lease liabilities (0.3)
Income tax payable (0.2)
Deferred income tax liabilities (2.3)
Net identifiable assets 7.5
Goodwill on acquisition 17.3
Total cash consideration 24.8
---------------------------------- ------
The 'Nu-Heat' brand, order book and customer relationships have
been recognised as specific intangible assets as a result of this
acquisition. Fair value adjustments principally relate to the
recognition of intangible assets and deferred income tax arising on
these adjustments and are provisional. The goodwill arising on the
acquisition primarily represented the assembled workforce,
technical expertise and market share. The goodwill is allocated
entirely to the Residential Systems segment.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
9. Acquisitions (continued)
The fair value of trade and other receivables was GBP0.7m. The
gross amount of trade and other receivables was GBP0.7m and it is
expected that the full contractual amounts will be collected.
Post-acquisition Nu-Heat contributed GBP6.6m revenue and GBP1.0m
underlying operating profit which were included in the Group income
statement. If Nu-Heat had been acquired on 1 January 2021, the
Group's results for the six months ended 30 June 2021 would have
shown revenue of GBP296.8m and underlying operating profit of
GBP48.5m.
Acquisition costs of GBP0.4m were expensed and are included in
non-underlying items in administration expenses. Acquisition costs
of GBP0.6m were fully cash settled in the period, including GBP0.2m
that was included in trade and other payables at 31 December
2020.
Plura
On 5 February 2021, the Group acquired 51% of the voting rights
and shares of Plura Composites Ltd (Plura) for an initial cash
consideration of GBP1.25m, and a further payment in respect of the
remaining 49% of between GBP6.0m and GBP16.4m depending on the
EBITDA performance of Plura in the 12 month period ending no
earlier than 5 February 2024 and no later than 31 July 2024. Plura
provides a range of products for utility companies, road and rail
operators, network builders and designers in the construction and
maintenance of their networks. Plura's manufacturing expertise lies
in pultrusion, compression moulding, injection moulding and
fabrications.
Details of the acquisition, including provisional fair value
adjustments, were as follows:
Fair
value
GBPm
----------------------------------------- ------
Property, plant and equipment 0.7
Right-of-use assets 1.7
Intangible assets 2.5
Inventories 0.9
Trade and other receivables 1.7
Cash and cash equivalents 0.2
Trade and other payables (2.2)
Loans and borrowings (0.7)
Lease liabilities (1.7)
Income tax receivable 0.1
Deferred income tax liabilities (0.4)
------------------------------------------- ------
Net identifiable assets 2.8
Goodwill on acquisition -
Less: estimated contingent consideration (1.5)
Initial cash consideration 1.3
------------------------------------------- ------
Customer relationships is the only material intangible asset
that has been recognised as a result of this acquisition. Fair
value adjustments principally relate to the recognition of
intangible assets and deferred income tax arising on these
adjustments and are provisional. The goodwill arising on the
acquisition is immaterial.
The fair value of trade and other receivables was GBP1.7m. The
gross amount of trade and other receivables was GBP1.7m and it is
expected that the full contractual amounts will be collected.
Post-acquisition Plura contributed GBP3.2m revenue and GBP0.2m
underlying operating profit which were included in the Group income
statement. If Plura had been acquired on 1 January 2021, the
Group's results for the six months ended 30 June 2021 would have
shown revenue of GBP296.0m and underlying operating profit of
GBP48.5m.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
9. Acquisitions (continued)
Acquisition costs of GBP0.3m were included in trade and other
payables at 31 December 2020 and have been fully cash settled in
the period. No further acquisition costs have been charged to the
income statement in the period.
Contingent consideration at fair value of GBP2.6m has been
recognised at 30 June 2021. Of this, GBP1.5m is contingent on
EBITDA performance in the third year of trading following
acquisition and has been included in the purchase consideration.
The balance of GBP1.1m has been included in non-underlying items
and is contingent on EBITDA performance in the third year of
trading following acquisition as well as the continued employment
of key personnel. This second payment is being accrued over the
three-year period. Of the GBP1.1m, GBP0.8m was included in
administration expenses and GBP0.3m included in finance costs.
Contingent consideration was determined using the Directors'
assessment of the likelihood that financial targets will be
achieved. The fair value of the consideration has been derived by
discounting the estimated cash consideration at 10.0% (being the
Group's estimated risk adjusted cost of capital). The estimated
cash consideration is derived from the budgets and forecasts for
Plura.
Adey
On 10 February 2021, the Group acquired 100% of the voting
rights and shares of London Topco Limited (Adey) for a cash
consideration of GBP210.0m on a cash-free, debt-free basis. Adey is
the UK's leading provider of magnetic filters, chemicals and
related products, which protect against magnetite and other
performance issues in water-based heating systems and improve
energy efficiency, operating in predominantly residential end
markets. The cash consideration of GBP86.6m included a payment of
GBP7.5m for net cash on completion and was net of loans and
borrowings at acquisition of GBP129.3m. Additional debt and debt
like items amounted to GBP1.6m.
Details of the acquisition, including provisional fair value
adjustments, were as follows:
Fair
value
GBPm
--------------------------------- -------
Property, plant and equipment 3.4
Right-of-use assets 4.9
Intangible assets 124.0
Inventories 10.9
Trade and other receivables 12.8
Cash and cash equivalents 7.5
Trade and other payables (20.0)
Loans and borrowings (129.3)
Lease liabilities (4.9)
Derivative financial instruments (0.8)
Income tax payable 0.8
Deferred income tax liabilities (24.0)
----------------------------------- -------
Net identifiable liabilities (14.7)
Goodwill on acquisition 101.3
Total cash consideration 86.6
----------------------------------- -------
Customer relationships, the 'Adey' brand and patents have been
recognised as specific intangible assets as a result of this
acquisition. Fair value adjustments principally relate to the
recognition of intangible assets and deferred income tax arising on
these adjustments and are provisional. The goodwill arising on the
acquisition primarily represented the assembled workforce,
technical expertise and market share. The goodwill is allocated
entirely to the Residential Systems segment.
The fair value of trade and other receivables was GBP12.8m. The
gross amount of trade and other receivables was GBP13.1m and it is
expected that the full contractual amounts will be collected.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
9. Acquisitions (continued)
Post-acquisition Adey contributed GBP25.3m revenue and GBP8.0m
underlying operating profit which were included in the Group income
statement. If Adey had been acquired on 1 January 2021, the Group's
results for the six months ended 30 June 2021 would have shown
revenue of GBP307.0m and underlying operating profit of
GBP50.5m.
Acquisition costs of GBP2.8m were expensed and are included in
non-underlying items in administration expenses. Of the GBP2.8m
acquisition costs, GBP2.6m were fully cash settled in the period in
addition to GBP0.4m that were included in trade and other payables
at 31 December 2020. A further GBP0.2m is included in trade and
other payables at 30 June 2021.
Tree Ground Solutions
On 3 May 2021, the Group acquired the remaining 50% of the share
capital of Tree Ground Solutions BV, taking the total shareholding
to 100%, for a cash consideration of GBP0.2m (EUR0.25m). The cash
consideration of GBP0.2m included an immaterial payment for net
cash on completion.
Details of the acquisition were as follows:
Fair
value
GBPm
---------------------------- -------
Inventories 0.1
Trade and other receivables 0.4
Trade and other payables (0.4)
------------------------------ -------
Net identifiable assets 0.1
Less: initial investment (0.1)
Goodwill on acquisition 0.2
Total cash consideration 0.2
------------------------------ -------
There have been no fair value adjustments following the
acquisition. The goodwill arising on the acquisition primarily
represented the assembled workforce, technical expertise and market
share. The goodwill is allocated entirely to the Commercial and
Infrastructure Systems segment.
The fair value of trade and other receivables was GBP0.4m. The
gross amount of trade and other receivables was GBP0.4m and it is
expected that the full contractual amounts will be collected.
Due to the timing of the acquisition, TGS contributed an
immaterial amount to the revenue and underlying operating profit of
the Group.
Acquisition costs were negligible and have been expensed and
included in non-underlying items in administration expenses.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
9. Acquisitions (continued)
Following these acquisitions, the carrying amount of goodwill
and other intangible assets is as follows:
Brand Customer Customer Development
Goodwill Patents names relationships Licences order book costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
Cost
At 1 January 2021 345.4 34.4 30.3 17.4 0.8 - - 428.3
Additions - - - - - - 0.2 0.2
Acquisition of
businesses 118.8 4.9 36.2 96.2 - 0.9 - 257.0
------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
At 30 June 2021 464.2 39.3 66.5 113.6 0.8 0.9 0.2 685.5
------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
Amortisation and
impairment losses
At 1 January 2021 - 12.1 14.3 7.9 0.2 - - 34.5
Charge for the
period - 1.6 2.3 2.4 0.1 0.2 - 6.6
------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
At 30 June 2021 - 13.7 16.6 10.3 0.3 0.2 - 41.1
------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
Net book value
At 30 June 2021 464.2 25.6 49.9 103.3 0.5 0.7 0.2 644.4
------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
At 31 December
2020 345.4 22.3 16.0 9.5 0.6 - - 393.8
------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
Impairment testing of goodwill
Goodwill is not amortised but is subject to annual impairment
testing (at 31 December). Goodwill has been allocated for
impairment testing purposes to a number of cash-generating units
(CGUs) which represent the lowest level in the Group at which
goodwill is monitored for internal management purposes.
Impairment tests on the carrying amounts of goodwill were
performed by analysing the carrying amount allocated to each CGU
against its value-in-use. Value-in-use was calculated for each CGU
as the net present value of that CGU's discounted future pre-tax
cash flows. These pre-tax cash flows are based on budgeted cash
flows information for a period of one year, construction industry
forecasts of growth for the following year and growth of between
2.68% to 2.80% thereafter. A pre-tax discount rate of 10.0% was
applied in determining the recoverable amounts of CGUs. The pre-tax
discount rate was estimated based on the Group's risk adjusted cost
of capital. The Group applied sensitivities to assess whether any
reasonably possible changes in assumptions could cause an
impairment that would be material to these consolidated financial
statements. The application of these sensitivities did not cause an
impairment of goodwill.
However, the headroom resulting from the value-in-use
calculations at 31 December 2020 indicated that the Alderburgh CGU
was sensitive to changes in the key assumptions. Accordingly,
whilst not identifying any further specific indicators of
impairment at 30 June 2021, management reperformed these
calculations at 30 June 2021. Management considers that a
reasonably possible change in any single assumption could give rise
to an impairment of the corresponding carrying amount of goodwill
and other intangible assets of GBP2.5m (2020: GBP2.5m) and GBP4.1m
(2020: GBP4.3m), respectively. The achievement, or otherwise, of
the key assumptions is dependent on maintaining the continued
recovery in Alderburgh's chosen markets. The detailed sensitivity
analysis indicates that the following changes in each of these key
assumptions would result in the headroom being eliminated and thus
an impairment recognised:
-- Operating margins declining to 7.9% (2020: 7.7%) per annum
from that used in the value-in-use calculations of 10.2% (2020:
10.3%) per annum.
-- The pre-tax discount rate increasing to 12.1% (2020: 12.5%)
from that used in the value-in-use calculations of 10.0% (2020:
10.0%).
-- A reduction of 22% (2020: 25%) in the overall forecast
operating cash flows used in the value-in-use calculations.
It should be noted that a deterioration in a combination of
these key assumptions could result in a larger reduction in
assessed headroom.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
10. Analysis of net debt
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
---------------------------------------------- ------- ------- -----------
Cash and cash equivalents 27.6 201.7 44.1
---------------------------------------------- ------- ------- -----------
Current loans and borrowings
Euro-Commercial Paper - 99.5 -
Lease liabilities 4.3 3.3 3.5
---------------------------------------------- ------- ------- -----------
4.3 102.8 3.5
---------------------------------------------- ------- ------- -----------
Non-current loans and borrowings
Bank loan - principal 198.0 174.8 60.0
- unamortised debt issue costs (0.8) (1.4) (1.1)
Lease liabilities 17.5 10.2 9.4
---------------------------------------------- ------- ------- -----------
214.7 183.6 68.3
---------------------------------------------- ------- ------- -----------
Net debt 191.4 84.7 27.7
---------------------------------------------- ------- ------- -----------
On 19 November 2018, the Group entered into an Amendment and
Restatement Agreement with various lenders in respect of the
Group's previous revolving credit facility agreement dated 4 August
2015. The bank loan, which comprised a GBP300.0m revolving credit
facility and GBP50.0m uncommitted accordion facility, was secured
and would have matured in November 2023 (with two further
uncommitted annual renewals through to November 2025 possible). The
Group incurred GBP1.7m of debt issue costs in respect of entering
into the Amendment and Restatement Agreement dated 19 November 2018
which were capitalised and are being amortised to the income
statement over the term of the facility to November 2023.
On 4 May 2020, the Group entered into a revised Amendment and
Restatement Agreement with its banking group to provide the
additional GBP50.0m Covid-19 facility for a period of 12 months,
leaving the Group with GBP350.0m of total revolving credit
facilities for the next 12 months. The Group also secured agreement
from its banking group to temporarily waive certain requirements
within the Group's revolving credit facility and suspend the June
2020 quarterly leverage covenant test. The Group incurred GBP0.3m
of debt issue costs in respect of entering into the revised
Amendment and Restatement Agreement which were capitalised and
amortised to the income statement over the 12-month term of the
facility. The facility expired in May 2021.
Interest is payable on the bank loan at LIBOR plus an interest
margin ranging from 0.90% to 2.75% which is dependent on the
Group's leverage (net debt excluding lease liabilities as a
multiple of pro forma EBITDA) and reduces as the Group's leverage
reduces. The interest margin at 30 June 2021 was 1.65% (2020:
1.65%). Pro forma EBITDA at 30 June 2021 was GBP116.2m (2020:
GBP66.7m) and is defined as pre-IFRS 16 underlying operating profit
before depreciation for the 12 months preceding the balance sheet
date, adjusted where relevant, to include a full year of EBITDA
from acquisitions made during those 12 months.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
10. Analysis of net debt (continued)
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
---------------------------------------- ------- ------- -----------
Pro forma EBITDA (12 months preceding
the balance sheet)
Underlying operating profit 80.3 49.3 42.2
Depreciation of property, plant
and equipment 17.7 16.1 16.3
Unwind of discount on lease liabilities (0.6) (0.5) (0.5)
Share-based payments charge 2.2 1.4 1.6
------- ------- -----------
99.6 66.3 59.6
-----------
EBITDA from acquisitions 16.6 0.4
---------------------------------------- ------- -------
116.2 66.7
---------------------------------------- ------- -------
At 30 June 2021, the Group had available, subject to covenant
headroom, GBP102.0m (2020: GBP125.2m, excluding the GBP50.0m
Covid-19 facility) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met.
Euro-Commercial Paper
On 1 May 2020, the Group entered into a GBP100.0m
Euro-Commercial Paper Programme with Citibank N.A. (acting as
Issuing and Paying Agent) under the UK Government's joint HM
Treasury and Bank of England Covid Corporate Financing Facility
(CCFF). On 14 May 2020, the Company drew down GBP99.463m under the
CCFF and issued GBP100.0m of Euro-Commercial Paper to the Bank of
England at a coupon rate of 0.65% per annum maturing on 12 March
2021. On 8 September 2020, the Euro-Commercial Paper was bought
back for GBP99.710m inclusive of accrued coupon. The Company
incurred minimal costs in respect of entering into the CCFF, which
have been charged to the income statement in 2020.
11. Other financial assets and liabilities
Fair values of financial assets and financial liabilities
The book value of trade and other receivables, trade and other
payables, cash balances, bank loan and other liabilities equates to
fair value.
Carrying Fair value
value GBPm
GBPm
--------------------------------------- --------- -----------
Forward foreign currency derivatives 0.8 0.8
Interest-bearing loans and borrowings
due after more than one year 197.2 197.2
Deferred and contingent consideration 3.5 3.5
Lease liabilities 21.7 21.7
--------------------------------------- --------- -----------
Total at 30 June 2021 223.2 223.2
--------------------------------------- --------- -----------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2021
11. Other financial assets and liabilities (continued)
Carrying Fair value
value GBPm
GBPm
Euro-Commercial Paper 99.5 99.5
Interest rate swaps 0.1 0.1
Interest-bearing loans and borrowings
due after more than one year 173.4 173.4
Deferred and contingent consideration 1.5 1.5
Lease liabilities 13.5 13.5
--------------------------------------- --------- -----------
Total at 30 June 2020 288.0 288.0
--------------------------------------- --------- -----------
Interest-bearing loans and borrowings
due after more than one year 58.9 58.9
Deferred and contingent consideration 3.4 3.4
Lease liabilities 12.9 12.9
--------------------------------------- --------- -----------
Total at 31 December 2020 75.2 75.2
--------------------------------------- --------- -----------
The fair values were determined as follows by reference to:
-- Forward foreign currency derivatives: quoted exchange rates.
-- Interest rate swaps: market values.
-- Deferred and contingent consideration: Directors' assessment
of the likelihood that financial targets will be achieved (see Note
9).
-- Lease liabilities: present value of lease payments to be made over the lease terms.
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
The fair values disclosed above, with the exception of deferred
and contingent consideration, which is categorised as Level 3, all
relate to items categorised as Level 2.
There have been no transfers in any direction between Levels 1,
2 or 3 in the period.
INDEPENT REVIEW REPORT TO GENUIT GROUP PLC
Conclusion
We have been engaged by the Company to review the condensed set
of consolidated financial statements in the interim financial
report for the six months ended 30 June 2021 which comprises the
Interim Group Income Statement, the Interim Group Statement of
Comprehensive Income, the Interim Group Balance Sheet, the Interim
Group Statement of Changes in Equity, the Interim Group Cash Flow
Statement and the related Notes 1 to 11. We have read the other
information contained in the interim financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of consolidated financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the interim financial report for the six
months ended 30 June 2021 is not prepared, in all material
respects, in accordance with UK adopted IAS 34 and the Disclosure
Guidance and Transparency Rules of the UK's Financial Conduct
Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity, issued by the Auditing Practices Board. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in Note 1, the annual consolidated financial
statements of the Group will be prepared in accordance with UK
adopted IFRSs. The condensed set of consolidated financial
statements included in this interim financial report has been
prepared in accordance with UK adopted IAS 34, Interim Financial
Reporting.
Responsibilities of the Directors
The Directors are responsible for preparing the interim
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the UK's Financial Conduct Authority.
Auditor's Responsibilities for the Review of the Financial
Information
In reviewing the interim financial report, we are responsible
for expressing to the Company a conclusion on the condensed set of
consolidated financial statements in the interim financial report.
Our conclusion, is based on procedures that are less extensive than
audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our Report
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity, issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Leeds
17 August 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR DKABDOBKDOFD
(END) Dow Jones Newswires
August 17, 2021 02:00 ET (06:00 GMT)
Genuit (LSE:GEN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Genuit (LSE:GEN)
Historical Stock Chart
From Apr 2023 to Apr 2024
