TIDMGEN
RNS Number : 7393E
Genuit Group PLC
15 March 2022
15 March 2022
Genuit Group plc
Audited results for the year ended 31 December 2021
Record profit and strong demand, improving price leadership
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 audited
results for the year ended 31 December 2021.
Joe Vorih, Chief Executive Officer, said:
"I am delighted to have joined Genuit and pleased to report that
the Group has delivered another strong performance, toward the
higher end of expectations, despite cost inflation and some supply
chain constraints. While challenges remain, our team has taken
additional measures to improve price and margins as we enter 2022
and we remain in a strong demand environment. It is also positive
that, despite the operating environment, the team completed three
strategic acquisitions in the year to broaden the Group's market
offering, and that these are performing well, with Adey already
ahead of expectations.
In visiting our sites since I joined last month, I am impressed
by the knowledge of our team, the dedication we all share to
customer service and the experience and commitment within the
Genuit Group. I look forward to working together to unlock further
ways to accelerate growth, continue progress on the Genuit
strategy, and improve our operational excellence. From my early
reviews, I am confident the Group is well positioned to deliver
another strong financial performance this year and build on its
track record of shareholder value creation."
Financial Results
2021 2020 Change
Statutory measures
Revenue GBP594.3m GBP398.6m 49.1%
Operating profit GBP67.1m GBP30.4m 120.7%
Profit before tax GBP62.9m GBP23.8m 164.3%
Basic earnings per share 16.7p 8.5p 96.5%
Dividend per share 12.2p 4.8p 154.2%
Alternative performance measures
Underlying operating profit(1) GBP95.3m GBP42.2m 125.8%
Underlying cash generated from operations(2) GBP57.2m GBP39.3m 45.5%
Underlying operating margin(1) 16.0% 10.6% 540bps
Underlying profit before tax(1) GBP91.1m GBP35.7m 155.2%
Underlying basic earnings per share(1) 30.6p 13.5p 126.7%
Leverage(3) (times pro forma EBITDA(4) ) 1.2 0.3 0.9
Financial highlights
-- Revenue increase of 49.1% due to significant increase in
demand and robust price leadership in the market
-- Ongoing recovery in underlying operating profit margin
despite cost headwinds and supply chain constraints
-- Underlying basic earnings per share of 30.6p, an increase of 126.7%
-- Strong operational cash management and balance sheet, net debt 1.2 times pro forma EBITDA
-- Continued strategic investment in business, net capital expenditure of GBP34.1m
-- Proposed final 2021 dividend of 8.2p per share
-- The three acquisitions made in the year (Adey, Nu-Heat and
Plura) performed well with Adey exceeding expectations
-- A strongly supported GBP96.3m capital raise to help fund the Adey acquisition
-- Continuing to invest in market leading brands and growth
drivers underpinned by sustainability, resilience and
adaptation
ESG Highlights
-- The Group is making progress against its 2025 ESG targets and
senior management's incentive programmes are now aligned to
these
-- Continued focus on serving the needs created by four key sustainability drivers:
o Increasing need for resilient drainage;
o Need for green urbanisation;
o Increased focus on clean healthy indoor air and ventilation;
and
o A move towards a low, or zero carbon, built environment.
-- As well as serving the needs of our sustainability-based
growth drivers, we continue our progress on operating
sustainably:
o Material consumed from recycled inputs increased to 49.4%,
against a target of 62.0% by 2025;
o 44.0%(5) reduction in CO(2) intensity, signed up to Pledge to
Net Zero 1.5 Degree Scheme and we are in the process of gaining
SBTi verification;
o Increased sales of new products to a value of GBP120.0m (2019:
GBP77.1m) resulting in a Vitality Index of 20.2%, against our
target of 25.0% by 2025; and
o 3.2% of our workforce were in accredited work and learning
programmes and we were awarded Silver Status within The 5%
Club.
Board changes
-- On 28 February 2022, Joe Vorih was appointed Chief Executive
Officer and a member of the Board, and Martin Payne stepped down
from the Board and as Chief Executive Officer but he will remain an
employee of the Group and available to the Board in an advisory
capacity until 20 May 2022.
-- On 1 November 2021, Matt Pullen was appointed Chief Operating
Officer and a member of the Board and Glen Sabin retired as Chief
Operating Officer and a member of the Board.
Outlook
-- We have balanced exposure to UK construction markets with
robust growth drivers, and continue to execute our strategy
investing organically and by acquisition. Our recent acquisitions
are performing well.
-- The housebuilding sector has had an encouraging start to 2022
with a greater level of starts versus completions. Residential
repairs, maintenance and improvement ("RMI") remains strong with
improvement in the commercial and infrastructure markets.
-- The Group is offsetting input cost inflation with necessary
market leading price increases, and has already taken a number of
actions to address the lag impact of the price increases.
-- The Board is mindful of the global macro-economic uncertainty
from the ongoing tragic events in Ukraine. Whilst early in the
current financial year, the Group continues to have strong momentum
and is well positioned to make further progress in full year
2022.
(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 and amortisation 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.
(5) Carbon intensity defined as tonnes of carbon per tonne of
output using the market-based method.
Enquiries:
Genuit
Joe Vorih, Chief Executive
Officer
Paul James, Chief Financial
Officer +44 (0) 1138 315380
Brunswick
Nina Coad
Tom Pigott +44 (0) 20 7404 5959
A copy of this report will be available on our website
www.genuitgroup.com today from 0700hrs (GMT).
There will be a presentation for analysts and investors at
0830hrs (GMT) on Tuesday 15 March 2022 at Brunswick Group's
offices, 16 Lincoln's Inn Fields, London, WC2A 3ED. Please contact
Genuit@brunswickgroup.com to confirm your attendance.
The presentation will also be available to listen into via
webcast. Please register for access to the webcast via the
following link:
https://www.investis-live.com/genuit-group/6214bc79f1e36c0c006683c6/eabg
.
We recommend you register by 0815hrs (GMT).
The webcast will be recorded and a replay will be available
shortly after the webcast ends via the same link above.
The presentation is also available on the Reports, results and
presentation page on Genuit's website at
http://investors.genuit.com/
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 solutions in water-based
heating systems in the UK.
The Group operates from 29 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 and the
Netherlands, and sells 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
The Group experienced a strong performance in the year despite
the challenges associated with the continued Covid-19 pandemic,
increasing raw material and transport costs and some constraints in
the supply chain. Group revenue for the year ended 31 December 2021
was 49.1% higher than the prior year at GBP594.3m (2020: GBP398.6m)
and 32.8% above 2019 (GBP447.6m). On a like-for-like basis,
excluding the impact of acquisitions, revenue was 29.5% higher than
prior year and 12.8% above the same period in 2019. The Group
successfully implemented price increases in the year after the
extent of the raw material cost inflation became apparent which,
together with operating efficiencies, mitigated the effects of this
inflation. The Group continued to focus on its medium-term 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 in the
year (Adey, Nu-Heat and Plura) performed well, with Adey exceeding
expectations, and the integration of these businesses is now
complete.
Underlying operating profit of GBP95.3m was 125.8% higher than
the prior year (2020: GBP42.2m) and 22.0% higher than the same
period in 2019 (GBP78.1m). This represents an increased underlying
operating margin of 16.0%. This is a significant improvement on the
prior year level of 10.6% but 140 basis points lower than 2019, due
to the normal timing lag in effecting price increases to recover
inflation and Covid-19 related costs.
Underlying finance costs of GBP4.2m (2020: GBP6.5m) were broadly
in line with expectations due to the lower levels of debt. The
prior year included costs related to the full draw down of the
Group's Revolving Credit Facility (RCF), a GBP50m Covid-19 facility
and a GBP100m Covid Corporate Financing Facility, which was repaid
in full in September 2020. Interest cover was 31.3x for the year
(2020: 7.8x).
Net debt, pre IFRS 16, increased to GBP145.1m (2020: GBP14.8m)
to help fund the acquisitions. Including the impact of IFRS 16, net
debt was GBP165.7m (2020: GBP27.7m). Cash conversion for the year
was 60% (2020: 93%), leaving net debt to pro forma EBITDA at 1.2x
(2020: 0.3x).
Profit before tax was significantly higher than prior year at
GBP62.9m (2020: GBP23.8m), and 4.7% above the same period in 2019
(GBP60.1m).
Non-underlying items increased to GBP28.2m (2020: GBP 11.9 m)
primarily related to the acquisitions of Adey, Nu-Heat and Plura in
February 2021. These consist of non-cash amortisation charges of
GBP14.2m (2020: GBP7.8m) in respect of intangible assets arising
from acquisitions since 2015, GBP6.6m (2020: GBP3.0m) of costs
related to acquisitions and other M&A costs, a product
liability claim of GBP2.6m, and restructuring costs of GBP1.1m
(2020: GBP1.1m). There was also GBP3.7m of fair value adjustments
associated with the Adey acquisition.
The total tax charge for the year of GBP21.9m (2020: GBP5.3m)
represents an effective tax rate of 34.8% (2020: 22.3%). The
underlying effective tax rate of 17.6% (2020: 17.6%) was lower than
the standard UK rate of tax of 19.0% (2020: 19.0%) primarily due to
the benefit of patent box relief and super-deduction capital
allowances.
Underlying net profit for the year was 155.4% higher than the
prior year at GBP75.1m (2020: GBP29.4m), with underlying basic
earnings per share at 30.6 pence (2020: 13.5 pence).
Chairman and Chief Executive Officer Review
We are delighted to report that the Group has delivered a record
performance in the year with revenue 49.1% higher than prior year
at GBP594.3m (2020: GBP398.6m) and 32.8% above 2019 (GBP447.6m).
CPA statistics show the UK market was 3.6% below 2019 levels, and
so it is pleasing to see us outperforming the market with
like-for-like volume growth of 2.6% versus 2019. This is a
reflection of our businesses being focused on real growth drivers
and providing innovative solutions that our customers value. The
acquisitions we completed early in 2021 are all performing well,
with Adey ahead of expectations and all are well established within
the Group. We are now focusing on leveraging their performance
further. In common with the rest of the manufacturing sector, the
speed of recovery from 2020 placed stress upon our supply chains,
both with cost and availability of components. Our teams worked
incredibly hard to satisfy customer needs and, due to our brand
strengths and product offerings, we were able to take price
leadership positions across our key sectors.
We remain committed to market outperformance via organic and
inorganic growth, and our financial performance and strong
shareholder support enables us to pursue our M&A
objectives.
With strong fundamentals in our markets, the strength of our
talent and our focus on innovation, this is an exciting time for
the Genuit Group.
Environmental, Social and 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 then.
We reduced our like-for-like carbon intensity by 44.0% during
the year, which is excellent progress toward our 2025 goal of a
66.0% reduction and of course we have also signed up to the
ambitious 1.5 degree warming target as part of our Pledge to Net
Zero. Operating sustainably is now deeply embedded across our
businesses and within our culture.
We are engaged with Science Based Targets and are part of the
cohort that will have independently verified targets and measures
by Summer 2022. As part of our governance process of assessing
climate risk and impact, our 2021 Annual Report & Accounts will
include Taskforce on Climate-related Financial Disclosures
("TCFD").
Our commitment to employee development and social mobility is
reflected in our membership of The 5% Club with 3.2% of qualifying
colleagues participating in accredited training schemes thus
earning us Silver Status. Our use of recycled material in the year
increased to 49.4% of our total tonnage consumption. By 2025, r
ecycled materials should represent 62.0% of our total polymer
consumption; the maximum possible under current regulations across
our ranges. We have committed to expanding our ability to utilise
recycled materials in 2021 by initiating a GBP2.5m investment in a
new multi-layer extrusion line at our Aylesford site. We are also
seeking to broaden the potential for products containing recyclate,
by using our influence within various standards and approvals
bodies, so that they recognise the societal requirement for these
products, which offer equivalent performance levels but with the
lower carbon content our customers increasingly value. 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. Our sales of products launched in the last five years
totalled GBP120.0m in 2021, or 20.2% of net revenues. We will
continue to drive this toward our 2025 target of 25.0%.
Outlook
We have balanced exposure to UK construction markets with robust
growth drivers, and continue to execute our strategy investing
organically and by acquisition. Our recent acquisitions are
performing well. The housebuilding sector has had an encouraging
start to 2022 with a greater level of starts versus completions.
Residential repairs, maintenance and improvement ("RMI") remains
strong with improvement in the commercial and infrastructure
markets.
The Group is offsetting input cost inflation with necessary
market leading price increases, and has already taken a number of
actions to address the lag impact of the price increases.
The Board is mindful of the global macro-economic uncertainty
from the ongoing tragic events in Ukraine. Whilst early in the
current financial year, the Group continues to have strong momentum
and is well positioned to make further progress in full year
2022.
Ron Marsh Joe Vorih
Chairman Chief Executive Officer
Financial Review
REVENUE AND OPERATING MARGIN
2021 2020
Revenue and operating margin GBPm GBPm Change
---------------------------------- ------ ----- ------
Revenue 594.3 398.6 49.1%
Underlying operating profit 95.3 42.2 125.8%
Underlying operating margin 16.0% 10.6% 540bps
---------------------------------- ------ ----- ------
2021 2020
Revenue by geographic destination GBPm GBPm Change
---------------------------------- ------ ----- ------
UK 534.1 354.6 50.6%
Rest of Europe 38.3 27.6 38.8%
Rest of World 21.9 16.4 33.5%
---------------------------------- ------ ----- ------
Group 594.3 398.6 49.1%
---------------------------------- ------ ----- ------
Group revenue for the year ended 31 December 2021 was GBP594.3m
(2020: GBP398.6m), an increase of 49.1%. UK revenue increased by
50.6% following significant demand as the nation recovered from the
Covid-19 pandemic. On a like-for-like basis, Group revenue
increased by 29.5%. This was ahead of the overall UK construction
market where the Construction Products Association (CPA) Winter
Forecast suggested a year-on-year increase of 13.3%. Private
housing new build and repair, maintenance and improvements (RMI)
reached a historic high level of growth of 17.0%. Activity in the
RMI sector slowed during last Summer as supply constraints reached
a peak but sector demand returned to 'new normal' levels towards
the end of the year. Infrastructure activity was again less
affected by the pandemic than other sectors of the construction
industry with growth estimated at 23.5% (source: CPA Winter
Forecast/MHCLG).
Operating profit was GBP67.1m (2020: GBP30.4m), an increase of
120.7%. The Group underlying operating margin increased to 16.0%
(2020: 10.6%) as volumes recovered following the pandemic. This is
140 basis points below 2019 as the Group continued to bear ongoing
costs of managing the impact of the pandemic. Profit before tax was
GBP62.9m (2020: GBP23.8m), an increase of 164.3%.
The Group continued to invest in product development and
innovation throughout the pandemic. In 2021, underlying operating
profit benefited from GBP2.0m of HMRC approved Research &
Development Expenditure Credit, relating to the years ended 31
December 2020 and 2021.
BUSINESS REVIEW
LFL
2021 2020 Change Change
Revenue GBPm GBPm % %
-------------------------------------- ------ ----- ------ --------------
Residential Systems 372.9 223.9 66.5 34.5
Commercial and Infrastructure Systems 221.4 174.7 26.7 23.1
-------------------------------------- ------ ----- ------ --------------
594.3 398.6 49.1 29.5
-------------------------------------- ------ ----- ------ --------------
2021 ROS 2020 ROS Change
Underlying operating profit GBPm % GBPm % %
-------------------------------------- ------ ----- ------ ---- ------
Residential Systems 73.1 19.6 29.8 13.3 145.3
Commercial and Infrastructure Systems 22.2 10.0 12.4 7.1 79.0
-------------------------------------- ------ ----- ------ ---- ------
95.3 16.0 42.2 10.6 125.8
-------------------------------------- ------ ----- ------ ---- ------
Residential Systems
Revenue in our Residential Systems segment, which is almost
exclusively derived from the UK market, was 66.5% above the prior
year at GBP372.9m (2020: GBP223.9m) and 43.3% ahead of the same
period in 2019 (GBP260.3m). On a like-for like-basis, revenue was
34.5% ahead of prior year and 15.7% above 2019.
The residential sector 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 was highlighted by the first
quarter of 2021 seeing private starts and completions at 36.0% and
21.0% higher than prior year, respectively (source: CPA Summer
Forecast/MHCLG). These trends continued beyond the first quarter
with private starts and completions forecasted at 30.0% and 19.0%
higher respectively for full year 2021 (source: CPA Winter
Forecast/MHCLG). 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
constraints have driven cost inflation through the course of 2021,
which was offset by our ability to pass on cost increases.
In the RMI sector, demand remained high for home renovation
driven by the 'race for space' early in the year with activity
slowing towards the end of the year, most likely affected by
increases in the cost of living and constraints in supply of key
raw materials and labour. The sector was estimated to have grown by
17.0% in the year (source: CPA Winter Forecast/MHCLG).
Our acquisitions, Adey and Nu-Heat, performed strongly and
increased our mix toward RMI activity, which was generally less
volatile than new housing, and more profitable. The growth drivers
and regulatory framework around low carbon heating, which support
both of these businesses, continue to provide confidence in their
ability to deliver against their strategic plans.
Residential Systems delivered underlying operating profit of
GBP73.1m (2020: GBP29.8m), a significant improvement on prior year
and 36.9% ahead of the same period in 2019. Operating margin
increased to 19.6% (2020: 13.3%).
Commercial and Infrastructure Systems
Revenue in our Commercial and Infrastructure Systems segment was
26.7% higher than the prior year at GBP221.4m (2020: GBP174.7m),
18.2% ahead of 2019. On a like-for like-basis, revenue was 23.1%
ahead of prior year and 8.8% above 2019.
Sales of ventilation products were strong, benefiting from the
increased focus on the importance of fresh air in the workspace,
with suitability for retrofitting minimising the impact of the low
level of new build activity. We saw strong demand for our water
management systems with the expansion of larger housing development
sites, which was necessary due to the rapid build out rates and
completions which occurred in the second half of 2020. Plura
performed 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 have been developing as we emerge from the
pandemic, as the impact from wider structural constraints starts to
be seen.
The commercial sector was affected by the move toward home
working during the pandemic, as well as online shopping. This trend
was particularly evident in London, which accounted for over a
third of commercial new build activity (source: CPA). Latest
projections forecast growth in this sector of 5.4% in 2022 and 3.1%
in 2023.
Infrastructure was the strongest performing sector 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 estimate for 2021 remains 23.5% ahead of prior
year, and 19.0% ahead of 2019.
Commercial and Infrastructure Systems delivered an underlying
operating profit of GBP22.2m (2020: GBP12.4m).and operating margin
increased to 10.0% (2020: 7.1%).
ACQUISITIONS
On 2 February 2021, the Group acquired 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. On
5 February 2021, the Group acquired 51% of the voting rights and
shares of Plura Composites Limited (Plura) for an initial
consideration of GBP1.25m. Plura provides a range of products for
utility companies, road and rail operations, network builders and
designers in the construction and maintenance of their networks.
These acquisitions were both funded entirely from the Group's
Revolving Credit Facility. Acquisition costs have been charged to
non-underlying items.
On 10 February 2021, the Group acquired 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 constraints in water-based heating systems and improve
energy efficiency.
During February 2021, 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.
NON-UNDERLYING ITEMS
Non-underlying items before taxation increased to GBP28.2m
(2020: GBP 11.9 m) primarily relating to the acquisitions of Adey,
Nu-Heat and Plura in February 2021. These consist of non-cash
amortisation charges of GBP14.2m (2020: GBP7.8m) in respect of
intangible assets arising from acquisitions since 2015, GBP6.6m
(2020: GBP3.0m) of costs related to acquisitions and other M&A
costs, a product liability claim of GBP2.6m, and restructuring
costs of GBP1.1m (2020: GBP1.1m). There was also GBP3.7m of fair
value adjustments associated with the Adey acquisition.
Non-underlying items comprised:
2021 2020
GBPm GBPm
----------------------------------------- ----- -----
Amortisation of intangible assets 14.2 7.8
Acquisition costs 4.7 0.6
Fair value adjustments on acquisitions 3.7 -
Contingent consideration on acquisitions 1.9 2.4
Product liability claim 2.6 -
Restructuring costs 1.1 1.1
----------------------------------------- ----- -----
Non-underlying items before taxation 28.2 11.9
Tax effect on non-underlying items (3.4) (1.0)
Impact of change in statutory tax rate 9.3 -
----------------------------------------- ----- -----
Non-underlying items after taxation 34.1 10.9
----------------------------------------- ----- -----
EXCHANGE RATES
The Group trades predominantly in Sterling but has some revenue
and costs in other currencies, mainly the US Dollar and the Euro,
and takes appropriate forward cover on these cash flows using
forward currency derivative contracts in accordance with its
hedging policy.
FINANCE COSTS
Underlying finance costs decreased to GBP4.2m (2020: GBP6.5m)
due to lower interest rates and the prior year included costs
related to the full draw down of the Group's Revolving Credit
Facility (RCF), a GBP50m Covid-19 facility and a GBP100m Covid
Corporate Financing Facility, which was repaid in full in September
2020. Interest cover was 31.3x for the year (2020: 7.8x).
Interest was payable on the RCF at LIBOR plus an interest rate
margin ranging from 0.90% to 2.75%. The interest rate margin at 31
December 2021 was 1.40% (2020: 1.40%). With effect from 4 January
2022, LIBOR was replaced by the Standard Overnight Index Average
(SONIA).
Taxation
Underlying taxation:
The underlying tax charge in 2021 was GBP16.0m (2020: GBP6.3m)
representing an effective tax rate of 17.6% (2020: 17.6%). This was
below the UK standard tax rate of 19.0% (2020: 19.0%). Patent box
relief contributes to a lowering of the underlying effective tax
rate by some 1.8 percentage points.
Taxation on non-underlying items:
The non-underlying net taxation charge of GBP5.9m (2020: GBP1.0m
credit) represents an effective rate of 20.9% (2020: 8.4%). The
charge includes GBP9.3m in respect of the restatement of the
deferred income tax liability on intangible assets as a result of
the change in the main UK corporation tax rate.
EARNINGS PER SHARE
2021 2020
-------------------- ----- -----
Pence per share:
Basic 16.7 8.5
Underlying basic 30.6 13.5
Diluted 16.5 8.4
Underlying diluted 30.2 13.3
-------------------- ----- -----
The Directors consider that the underlying basic earnings per
share (EPS) 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.
Underlying basic EPS increased by 126.7% in 2021 due to a
significant increase in the underlying operating result after
taxation following the Group's strong recovery from the impact of
the Covid-19 pandemic.
Dividend
The final dividend of 8.2 pence (2020: 4.8 pence) per share is
being recommended for payment on 25 May 2022 to shareholders on the
register at the close of business on 22 April 2022. The ex-dividend
date will be 21 April 2022.
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.
Balance Sheet
The Group's balance sheet is summarised below:
2021 2020
GBPm GBPm
----------------------------------------------------------------------------------------- ------- ------
Property, plant and equipment 151.7 134.2
Right-of-use assets 20.6 12.9
Goodwill 467.7 345.4
Other intangible assets 175.1 48.4
Net working capital 22.0 2.0
Taxation (47.4) (10.2)
Other current and non-current assets and liabilities (6.3) (4.1)
Net debt (loans and borrowings, and lease liabilities, net of cash and cash equivalents) (165.7) (27.7)
Net assets 617.7 500.9
----------------------------------------------------------------------------------------- ------- ------
The net value of property, plant and equipment has increased by
GBP17.5m following the acquisitions in the year and the Group's
continued strategic investment in its businesses. The value of
right-of-use assets has increased by GBP7.7m.
The acquisitions in the year had an impact on both goodwill and
other intangible assets, with increases of GBP122.3m and GBP126.7m,
respectively. Net working capital increased by GBP20.0m. Net debt
is discussed below.
Pensions
The Group does not have any defined benefit pension schemes and
only has defined contribution pension arrangements in place.
Pension costs for the year amounted to GBP5.4m (2020: GBP4.2m)
reflecting the inclusion of the acquisitions made in the year and
an overall increase in the number of scheme participants.
Cash Flow and Net Debt
The Group's cash flow statement is summarised below:
2021 2020
GBPm GBPm
------------------------------------------------------------------------ ------- ------
Operating cash flows before movement in net working capital 111.4 60.0
Add back non-underlying cash items 6.9 2.3
------------------------------------------------------------------------ ------- ------
Underlying operating cash flows before movement in net working capital 118.3 62.3
Movement in net working capital (27.0) 1.5
Capital expenditure, net (34.1) (24.5)
Underlying cash generated from operations after net capital expenditure 57.2 39.3
Income tax paid (9.5) (8.2)
Interest paid (2.9) (5.4)
Non-underlying cash items (6.9) (2.3)
Settlement of deferred and contingent consideration - (1.8)
Acquisition of businesses (236.4) -
Issue of Euro-Commercial Paper - 99.4
Buyback of Euro-Commercial Paper - (99.7)
Net proceeds from issue of share capital 93.5 116.4
Debt issue costs - (0.4)
Dividends paid (21.7) -
Proceeds from exercise of share options net of purchase of own shares 2.1 2.1
Other (5.7) (4.2)
------------------------------------------------------------------------ ------- ------
Movement in net debt - excluding IFRS 16 (130.3) 135.2
Movement in IFRS 16 (7.7) 1.9
------------------------------------------------------------------------ ------- ------
Movement in net debt - including IFRS 16 (138.0) 137.1
------------------------------------------------------------------------ ------- ------
Delivery of good cash generation remains core to the Group's
strategy. Underlying cash generated from operations after net
capital expenditure at GBP57.2m (2020: GBP39.3m) represents a
conversion rate of 60.0% (2020: 93.1%). The prior year included the
benefit of GBP9.8m of HMRC approved VAT deferral from April and
July 2020, which was paid in February 2021.
Working capital movement in the year was driven by a rebuilding
of inventory to improve customer service performance following the
recovery in demand after the pandemic, as well as the effects of
cost inflation and the acquisitions.
Net capital expenditure investment increased to GBP34.1m (2020:
GBP24.5m) as the Group continued to focus on investing in key,
strategic and innovative projects. In 2022, we anticipate that
capital expenditure will be approximately GBP45.0m.
Net debt of GBP165.7m comprised:
2021 2020 Change
GBPm GBPm GBPm
-------------------------------------------------- ------- ------ -------
Bank loans (198.0) (60.0) (138.0)
Cash and cash equivalents 52.3 44.1 8.2
-------------------------------------------------- ------- ------ -------
Net debt (excluding unamortised debt issue costs) (145.7) (15.9) (129.8)
Unamortised debt issue costs 0.6 1.1 (0.5)
IFRS 16 (20.6) (12.9) (7.7)
-------------------------------------------------- ------- ------ -------
Net debt (165.7) (27.7) (138.0)
-------------------------------------------------- ------- ------ -------
FINANCING
The Group has an RCF committed through to November 2023 with two
further uncommitted annual renewals through to November 2025. The
facility limit is GBP300.0m with an uncommitted 'accordion'
facility of up to GBP50.0m on top. At 31 December 2021, GBP198.0m
of the RCF was drawn down.
The Group is subject to two financial covenants. At 31 December
2021, there was significant headroom and facility interest cover
and net debt to EBITDA covenants were comfortably achieved:
Position at
Covenant Covenant requirement 31 December 2021
--------------- --------------------- -----------------
Interest cover >4.0:1 31.3:1
Leverage <3.0:1 1.2:1
--------------- ---------------------- -----------------
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 with an uncommitted 'accordion' facility
of GBP50.0m. The extended committed Covid-19 facility of GBP50.0m
expired in May 2021. GBP102.0m of the RCF was undrawn at 31
December 2021. At 31 December 2021, liquidity headroom (cash and
undrawn committed banking facilities) was GBP154.3m (2020:
GBP284.1m). Our focus will continue to be on deleveraging, and our
net debt to EBITDA ratio stood at 1.2x times pro forma EBITDA at 31
December 2021 (2020: 0.3x), increasing to 1.4x (2020: 0.5x) 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 15 months. Accordingly,
they continue to adopt the going concern basis in preparing the
consolidated financial statements.
Principal Risks and Uncertainties
The Board continually assesses and monitors the key risks of the
Business and the Group 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 are those detailed in the Group's Annual
Report and Accounts. They have not changed significantly during the
year.
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' Responsibilities
Each of the Directors confirms that, to the best of their
knowledge, the consolidated financial statements, prepared in
accordance UK-Adopted International Accounting Standards, give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the Group and undertakings included in the
consolidation taken as a whole; and the Group Results, Chairman and
Chief Executive Officer Review and Financial Review includes a fair
review of the development and performance of the business and the
position of the Group and undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
Annual General Meeting
The Annual General Meeting is scheduled to be held on 19 May
2022.
By order of the Board.
Joe Vorih Paul James
Chief Executive Officer Chief Financial Officer
Group income statement
FOR THE YEARED 31 DECEMBER 2021
2021 2020
-------------------------------- --------------------------------
Non- Non-
Underlying underlying Total Underlying underlying Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Revenue 2 594.3 - 594.3 398.6 - 398.6
Cost of sales 3 (348.8) (6.5) (355.3) (242.5) - (242.5)
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Gross profit 245.5 (6.5) 239.0 156.1 - 156.1
Selling and distribution
costs (81.8) - (81.8) (65.0) - (65.0)
Administration expenses 4 (68.3) (7.5) (75.8) (48.9) (4.0) (52.9)
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Trading profit 95.4 (14.0) 81.4 42.2 (4.0) 38.2
Amortisation of intangible
assets 4 (0.1) (14.2) (14.3) - (7.8) (7.8)
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Operating profit 2, 3 95.3 (28.2) 67.1 42.2 (11.8) 30.4
Finance costs 4, 5 (4.2) - (4.2) (6.5) (0.1) (6.6)
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Profit before tax 2 91.1 (28.2) 62.9 35.7 (11.9) 23.8
Income tax 6 (16.0) (5.9) (21.9) (6.3) 1.0 (5.3)
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Profit for the year attributable
to the owners of the parent
company 75.1 (34.1) 41.0 29.4 (10.9) 18.5
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Basic earnings per share
(pence) 7 16.7 8.5
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Diluted earnings per share
(pence) 7 16.5 8.4
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Dividend per share (pence)
- interim 8 4.0 -
Dividend per share (pence)
- final 8 8.2 4.8
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
8 12.2 4.8
--------------------------------- ----- ---------- ----------- ------- ---------- ----------- -------
Group statement of comprehensive income
for the year ended 31 december 2021
2021 2020
GBPm GBPm
----------------------------------------------------------------------------------------- ----- -----
Profit for the year attributable to the owners of the parent company 41.0 18.5
----------------------------------------------------------------------------------------- ----- -----
Other comprehensive income:
Items which may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations (0.4) 0.3
Effective portion of changes in fair value of interest rate swaps - 0.5
Effective portion of changes in fair value of forward foreign currency derivatives (0.1) -
Tax relating to items which may be reclassified subsequently to the income statement - (0.1)
----------------------------------------------------------------------------------------- ----- -----
Other comprehensive income for the year net of tax (0.5) 0.7
----------------------------------------------------------------------------------------- ----- -----
Total comprehensive income for the year attributable to the owners of the parent company 40.5 19.2
----------------------------------------------------------------------------------------- ----- -----
Group balance sheet
at 31 december 2021
31 December 2021 31 December 2020
Notes GBPm GBPm
--------------------------------------- ----- ---------------- ----------------
Non-current assets
Property, plant and equipment 9 151.7 134.2
Right-of-use assets 10 20.6 12.9
Intangible assets 11 642.8 393.8
--------------------------------------- ----- ---------------- ----------------
Total non-current assets 815.1 540.9
--------------------------------------- ----- ---------------- ----------------
Current assets
Inventories 80.8 52.6
Trade and other receivables 76.7 61.6
Income tax receivable 1.1 0.6
Cash and cash equivalents 52.3 44.1
--------------------------------------- ----- ---------------- ----------------
Total current assets 210.9 158.9
--------------------------------------- ----- ---------------- ----------------
Total assets 1,026.0 699.8
--------------------------------------- ----- ---------------- ----------------
Current liabilities
Trade and other payables 13 (135.5) (112.2)
Lease liabilities 13 (4.5) (3.5)
Deferred and contingent consideration 13 (0.5) (3.4)
Derivative financial instruments 13 (0.1) -
Total current liabilities (140.6) (119.1)
--------------------------------------- ----- ---------------- ----------------
Non-current liabilities
Loans and borrowings 13 (197.4) (58.9)
Lease liabilities 13 (16.1) (9.4)
Deferred and contingent consideration 13 (4.3) -
Other liabilities 13 (1.4) (0.7)
Deferred income tax liabilities (48.5) (10.8)
--------------------------------------- ----- ---------------- ----------------
Total non-current liabilities (267.7) (79.8)
--------------------------------------- ----- ---------------- ----------------
Total liabilities (408.3) (198.9)
--------------------------------------- ----- ---------------- ----------------
Net assets 617.7 500.9
--------------------------------------- ----- ---------------- ----------------
Capital and reserves
Equity share capital 0.2 0.2
Share premium 93.6 -
Capital redemption reserve 1.1 1.1
Hedging reserve (0.1) -
Foreign currency retranslation reserve - 0.4
Other reserves 116.5 116.5
Retained earnings 406.4 382.7
--------------------------------------- ---------------- ----------------
Total equity 617.7 500.9
--------------------------------------- ----- ---------------- ----------------
Group statement of changes in equity
for the year ended 31 december 2021
Foreign
Equity Capital currency
share Share redemption Hedging retranslation Other Retained Total
capital premium reserve reserve reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- -------- --------- ----------- -------- -------------- ---------- --------- -------
At 31 December
2019 0.2 - 1.1 (0.4) 0.1 - 360.4 361.4
--------------------- -------- --------- ----------- -------- -------------- --------- -------
Profit for the
year - - - - - - 18.5 18.5
Other comprehensive
income - - - 0.4 0.3 - - 0.7
--------------------- -------- --------- ----------- -------- -------------- ---------- --------- -------
Total comprehensive
income for the
year - - - 0.4 0.3 - 18.5 19.2
--------------------- -------- --------- ----------- -------- -------------- ---------- --------- -------
Issue of share
capital - - - - - 120.0 - 120.0
Transaction costs
on issue of share
capital - - - - - (3.5) - (3.5)
Share-based payments
charge - - - - - - 1.4 1.4
Share-based payments
settled - - - - - - 2.1 2.1
Share-based payments
excess tax benefit - - - - - - 0.3 0.3
--------------------- -------- --------- ----------- -------- -------------- ---------- --------- -------
At 31 December
2020 0.2 - 1.1 - 0.4 116.5 382.7 500.9
--------------------- -------- --------- ----------- -------- -------------- ---------- --------- -------
Profit for the
year - - - - - - 41.0 41.0
Other comprehensive
income - - - (0.1) (0.4) - - (0.5)
--------------------- -------- --------- ----------- -------- -------------- ---------- --------- -------
Total comprehensive
income for the
year - - - (0.1) (0.4) - 41.0 40.5
-------- --------- ----------- -------- -------------- ---------- --------- -------
Dividends paid - - - - - - (21.7) (21.7)
Issue of share
capital - 96.3 - - - - - 96.3
Transaction costs
on issue of share
capital - (2.7) - - - - - (2.7)
Share-based payments
charge - - - - - - 2.2 2.2
Share-based payments
settled - - - - - - 2.1 2.1
Share-based payments
excess tax benefit - - - - - - 0.1 0.1
--------------------- -------- --------- ----------- -------- -------------- ---------- --------- -------
At 31 December
2021 0.2 93.6 1.1 (0.1) - 116.5 406.4 617.7
--------------------- -------- --------- ----------- -------- -------------- ---------- --------- -------
Group cash flow statement
for the year ended 31 december 2021
2021 2020
Notes GBPm GBPm
--------------------------------------------------------------------- ----- ------- -------
Operating activities
Profit before tax 62.9 23.8
Finance costs 5 4.2 6.6
--------------------------------------------------------------------- ----- ------- -------
Operating profit 67.1 30.4
Non-cash items:
Profit on disposal of property, plant and equipment (0.2) (0.2)
Transaction costs on issue of share capital 0.1 0.1
Research and development expenditure credit (2.0) (1.0)
Non-underlying items:
- amortisation of intangible assets arising on business combinations 4 14.2 7.8
- provision for acquisition costs 4 6.6 2.9
- unwind of inventory fair value adjustment 4 3.7 -
- provision for restructuring costs 4 1.1 1.1
- provision for product liability claim 4 2.6 -
Depreciation of property, plant and equipment 9 18.4 16.3
Depreciation of right-of-use assets 10 4.4 3.5
Amortisation of internally generated intangible assets 0.1 -
Share-based payments 2.2 1.4
Cash items:
- settlement of acquisition costs (6.9) (1.2)
- settlement of restructuring costs - (1.1)
--------------------------------------------------------------------- ----- ------- -------
Operating cash flows before movement in working capital 111.4 60.0
Movement in working capital:
Receivables (0.9) (21.3)
Payables (6.2) 15.6
Inventories (19.9) 7.2
--------------------------------------------------------------------- ----- ------- -------
Cash generated from operations 84.4 61.5
Income tax paid (9.5) (8.2)
--------------------------------------------------------------------- ----- ------- -------
Net cash flows from operating activities 74.9 53.3
--------------------------------------------------------------------- ----- ------- -------
Investing activities
Settlement of deferred and contingent consideration - (1.8)
Acquisition of businesses net of cash at acquisition (236.4) -
Proceeds from disposal of property, plant and equipment 0.5 0.6
Purchase of property, plant and equipment (33.1) (25.1)
Patent and development costs expenditure (1.5) -
-------
Net cash flows from investing activities (270.5) (26.3)
--------------------------------------------------------------------- ----- -------
Financing activities
Issue of share capital 96.3 120.0
Transaction costs on issue of share capital (2.8) (3.6)
Debt issue costs - (0.4)
Issue of Euro-Commercial Paper - 99.4
Buyback of Euro-Commercial Paper - (99.7)
Drawdown of bank loan 148.0 150.6
Repayment of bank loan (10.0) (289.6)
Interest paid (2.9) (5.4)
Dividends paid 8 (21.7) -
Proceeds from exercise of share options 2.1 2.1
Settlement of lease liabilities 10 (5.1) (4.0)
--------------------------------------------------------------------- ----- ------- -------
Net cash flows from financing activities 203.9 (30.6)
--------------------------------------------------------------------- ----- ------- -------
Net change in cash and cash equivalents 8.3 (3.6)
--------------------------------------------------------------------- ----- ------- -------
Cash and cash equivalents at 1 January 44.1 47.7
Net foreign exchange difference (0.1) -
--------------------------------------------------------------------- ----- ------- -------
Cash and cash equivalents at 31 December 52.3 44.1
--------------------------------------------------------------------- ----- ------- -------
1. Basis of preparation
The preliminary results for the year ended 31 December 2021 have
been prepared in accordance with UK-Adopted International
Accounting Standards (UK-Adopted IAS). Whilst the financial
information included in this preliminary announcement has been
computed in accordance with the recognition and measurement
requirements of IFRS, this announcement does not itself contain
sufficient information to comply with IFRS. The accounting policies
adopted have been consistently applied in all material aspects to
all the periods presented.
The financial information set out in this announcement does not
constitute the statutory accounts for the Group within the meaning
of Section 435 of the Companies Act 2006. The statutory accounts
for the year ended 31 December 2020 have been filed with the
Registrar of Companies. The statutory accounts for the year ended
31 December 2021 will be filed in due course. The auditor's report
on these accounts was not qualified or modified and did not contain
any statement under Sections 498(2) or (3) of the Companies Act
2006 or any preceding legislation.
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 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 range of scenarios, with the base forecast
being one in which, over the 18 months ending 30 June 2023, sales
volumes grow in line with or moderately above external construction
industry forecasts.
In addition, the Directors have considered several downside
scenarios, including adjustments to the base forecast, a period of
significantly lower like-for-like sales, profitability and cash
flows. Consistent with our Principal Risks and Uncertainties these
downside scenarios included, but were not limited to, loss of
production, loss of a major customer, product failure, recession,
increases in interest rates and increases in raw material prices.
Downside scenarios also included a combination of these risks, and
reverse stress testing. The Directors have considered the impact of
climate-related matters on the going concern assessment and it is
not expected to have a significant impact on the Group's going
concern.
At 31 December 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. The Directors are satisfied that the Group has sufficient
liquidity and covenant headroom to withstand reasonable variances
to the base forecast, as well as the downside scenarios. 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 15 months. Accordingly,
they continue to adopt the going concern basis in preparing the
consolidated financial statements.
There have been no related party transactions in the period to
31 December 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 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.
-- Pro forma EBITDA is defined as underlying operating profit
before depreciation and amortisation 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 .
-- 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 .
2. Segment information
IFRS 8, Operating Segments, requires operating segments to be
identified on the basis of the internal financial information
reported to the Chief Operating Decision Maker (CODM). The Group's
CODM is deemed to be the Board of Directors, who are primarily
responsible for the allocation of resources to segments and the
assessment of performance of the segments.
The Group has two reporting segments - Residential Systems and
Commercial and Infrastructure Systems. The reporting segments sell
products which are unique to that segment, and products which are
common to both segments. They are however organised and
distinguished as separate reporting segments 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. During the period two
acquired businesses were added to the Residential Systems segment
and one to the Commercial and Infrastructure Systems segment (see
Note 12).
2021 2020
Commercial & Commercial &
Infrastructure Infrastructure
Residential Systems Systems Total Residential Systems Systems Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------------------- ------------------ ------ ------------------- ------------------- ------
Segmental revenue 378.0 231.8 609.8 228.4 183.0 411.4
Inter-segment
revenue (5.1) (10.4) (15.5) (4.5) (8.3) (12.8)
------------------- ------------------- ------------------ ------ ------------------- ------------------- ------
Revenue 372.9 221.4 594.3 223.9 174.7 398.6
------------------- ------------------- ------------------ ------ ------------------- ------------------- ------
Underlying
operating profit * 73.1 22.2 95.3 29.8 12.4 42.2
Non-underlying
items - segmental (18.5) (8.8) (27.3) (4.4) (7.4) (11.8)
------------------- ------------------- ------------------ ------ ------------------- ------------------- ------
Segmental operating
profit 54.6 13.4 68.0 25.4 5.0 30.4
Non-underlying
items - Group (0.9) -
------------------- ------------------- ------------------ ------ ------------------- ------------------- ------
Operating profit 67.1 30.4
Non-underlying
items - finance
costs - (0.1)
Finance costs (4.2) (6.5)
------------------- ------------------- ------------------ ------ ------------------- ------------------- ------
Profit before tax 62.9 23.8
------------------- ------------------- ------------------ ------ ------------------- ------------------- ------
* 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 GBP28.2m
(2020: GBP11.9m) are set out below at Non-underlying items before
tax.
Geographical analysis
2021 2020
Revenue by destination GBPm GBPm
----------------------- ----- -----
UK 534.1 354.6
Rest of Europe 38.3 27.6
Rest of World 21.9 16.4
----------------------- ----- -----
Total - Group 594.3 398.6
----------------------- ----- -----
3. Operating profit
2021 2020
GBPm GBPm
------------------------------------------------------ ----- -----
Income statement charges
Depreciation of property, plant and equipment (owned) 18.4 16.3
Depreciation of right-of-use assets 4.4 3.5
Cost of inventories recognised as an expense 290.4 189.8
Research and development costs expensed 8.8 8.8
------------------------------------------------------ ----- -----
Income statement credits
Research and development expenditure credit 2.0 1.0
Profit on disposal of property, plant and equipment 0.2 0.2
------------------------------------------------------ ----- -----
4. Non-underlying items
Non-underlying items comprised:
2021 2020
Gross Tax Net Gross Tax Net
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------------------------------------- ----- ----- ----- ----- ----- -----
Cost of sales: Unwind of inventory fair value adjustment 3.7 - 3.7 - - -
Cost of sales:
Restructuring costs 0.2 - 0.2 - - -
Cost of sales:
Product liability claim 2.6 (0.5) 2.1 - - -
Administration expenses: Acquisition costs - acquisition and other M&A
activity 6.6 - 6.6 2.9 (0.4) 2.5
Administration expenses: Restructuring costs 0.9 (0.2) 0.7 1.1 (0.2) 0.9
Amortisation of intangible assets 14.2 6.6 20.8 7.8 (0.4) 7.4
Finance costs: Unwind of discount on contingent consideration - - - 0.1 - 0.1
----- ----- -----
Total non-underlying items 28.2 5.9 34.1 11.9 (1.0) 10.9
---------------------------------------------------------------------------- ----- ----- ----- ----- ----- -----
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.
Restructuring costs in 2021 relate to the rationalisation of the
number of operating business units.
The product liability claim is associated with a historic
acquisition.
Acquisition costs in 2021 relate to the acquisitions of Nu-Heat,
Plura and Adey as well as costs associated with other merger and
acquisition activity and contingent consideration treated as
remuneration in respect of the acquisition of Plura as detailed in
see Note 12.
The non-underlying tax charge includes GBP9.3m 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).
Acquisition costs in 2020 relate to the contingent consideration
treated as remuneration in respect of the acquisition of Permavoid,
as detailed in Note 12, and costs associated with the acquisitions
of Nu-Heat, Plura and Adey.
Restructuring costs in 2020 are in relation to actions taken to
mitigate the impact of Covid-19, including 104 redundancies.
5. Finance costs
2021 2020
GBPm GBPm
----------------------------------------------- ----- -----
Interest on bank loan 2.5 4.2
Debt issue cost amortisation 0.5 0.6
Unwind of discount on lease liabilities 0.7 0.5
Other finance costs 0.5 1.2
Unwind of discount on contingent consideration - 0.1
----------------------------------------------- ----- -----
4.2 6.6
----------------------------------------------- ----- -----
6. Income tax
(a) Tax expense reported in the income statement
2021 2020
GBPm GBPm
--------------------------------------------------- ----- -----
Current income tax:
UK income tax 9.5 5.0
Overseas income tax 0.5 0.1
--------------------------------------------------- ----- -----
Current income tax 10.0 5.1
Adjustment in respect of prior years 0.4 (0.3)
--------------------------------------------------- ----- -----
Total current income tax 10.4 4.8
--------------------------------------------------- ----- -----
Deferred income tax:
Origination and reversal of temporary differences (1.3) (1.1)
Effects of changes in income tax rates 11.7 1.4
--------------------------------------------------- ----- -----
Deferred income tax 10.4 0.3
Adjustment in respect of prior years 1.1 0.2
--------------------------------------------------- ----- -----
Total deferred income tax 11.5 0.5
--------------------------------------------------- ----- -----
Total tax expense reported in the income statement 21.9 5.3
--------------------------------------------------- ----- -----
Details of the non-underlying tax charge of GBP5.9m (2020:
GBP1.0m credit) are set out in Note 4.
(b) Reconciliation of the total tax expense
A reconciliation between the tax expense and the product of
accounting profit multiplied by the UK standard rate of income tax
for the years ended 31 December 2021 and 2020 is as follows:
2021 2020
GBPm GBPm
-------------------------------------------------------------------------------------------- ----- -----
Accounting profit before tax 62.9 23.8
-------------------------------------------------------------------------------------------- ----- -----
Accounting profit multiplied by the UK standard rate of income tax of 19.0% ( 2020 : 19.0%) 12.0 4.5
Expenses not deductible for income tax 1.8 0.2
Non-taxable income (1.0) (0.2)
Adjustment in respect of prior years 1.5 (0.1)
Effects of patent box (1.6) (0.4)
Effects of changes in income tax rates 11.4 1.2
Effects of tax losses (1.1) -
Effects of super deduction (0.6) -
Effects of other tax rates/credits (0.5) 0.1
-------------------------------------------------------------------------------------------- ----- -----
Total tax expense reported in the income statement 21.9 5.3
-------------------------------------------------------------------------------------------- ----- -----
The effective rate for the full year was 34.8% (2020: 22.3%). If
the impact of non-underlying items is excluded, the underlying
income tax rate would be 17.6% (2020: 17.6%).
(c) Deferred income tax
The deferred income tax included in the Group balance sheet is
as follows :
31 December 2021 31 December 2020
GBPm GBPm
--------------------------------------------- ---------------- ----------------
Deferred income tax liabilities/(assets)
Short-term timing differences 41.3 8.8
Capital allowances in excess of depreciation 11.1 4.3
Share-based payments (2.3) (1.8)
Tax losses (1.6) (0.5)
--------------------------------------------- ---------------- ----------------
48.5 10.8
--------------------------------------------- ---------------- ----------------
The Group offsets tax assets and liabilities if, and only if, it
has a legally enforceable right to offset current income tax assets
and current income tax liabilities and the deferred income tax
assets and deferred income tax liabilities relate to income taxes
levied by the same tax authority.
The deferred income tax liability on short-term timing
differences has increased by GBP32.2m as a result of the intangible
assets arising on the acquisitions of Nu-Heat, Plura and Adey.
A reconciliation of deferred income taxes for the years ended 31
December 2021 and 2020 is as follows:
2021 2020
GBPm GBPm
----------------------------------------------------------- ----- -----
Deferred income tax reported in the income statement 11.5 0.5
Deferred income tax reported in other comprehensive income - 0.1
Share-based payments excess tax benefit (0.1) (0.3)
Deferred income tax acquired 26.3 -
37.7 0.3
----------------------------------------------------------- ----- -----
(d) Change in corporation tax rate
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 31 December 2020 was therefore measured at
19%.
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 31
December 2021 was therefore measured at 19% or 25% depending on
when the deferred income tax asset or liability is expected to
reverse.
(e) Unrecognised tax losses
No deferred income tax has been recognised on non-trading losses
and other timing differences of GBP1.4m (2020: GBP0.7m) as the
Directors do not consider that they will be utilised in the
foreseeable future.
7. Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the year attributable to the owners of the parent
company by the weighted average number of ordinary shares
outstanding during the year. The diluted earnings per share amounts
are calculated by dividing profit for the year attributable to the
owners of the parent company by the weighted average number of
ordinary shares outstanding during the year 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:
2021 2020
----------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for the purpose of basic earnings per share 245,097,578 218,122,445
Effect of dilutive potential ordinary shares 3,168,838 2,545,315
----------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for the purpose of diluted earnings per share 248,266,416 220,667,760
----------------------------------------------------------------------------------------- ----------- -----------
Underlying earnings per share is based on the result for the
year after tax excluding the impact of non-underlying items of
GBP34.1m (2020: GBP10.9m). 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:
2021 2020
--------------------------------------------------------------------------------------- ---- ----
Underlying profit for the year attributable to the owners of the parent company (GBPm) 75.1 29.4
--------------------------------------------------------------------------------------- ---- ----
Underlying basic earnings per share (pence) 30.6 13.5
--------------------------------------------------------------------------------------- ---- ----
Underlying diluted earnings per share (pence) 30.2 13.3
--------------------------------------------------------------------------------------- ---- ----
8. Dividend per share
2021 2020
GBPm GBPm
------------------------------------------------------------------------------------------- ----- -----
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 December 2020 of 4.8p per share (2019: nil) 11.8 -
Interim dividend for the year ended 31 December 2021 of 4.0p per share (2020: nil) 9.9 -
------------------------------------------------------------------------------------------- ----- -----
21.7 -
------------------------------------------------------------------------------------------- ----- -----
Proposed final dividend for the year ended 31 December 2021 of 8.2p per share (2020: 4.8p) 20.3 11.8
------------------------------------------------------------------------------------------- ----- -----
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these consolidated financial
statements.
9. Property, plant and equipment
Freehold Plant
land and and other
buildings equipment Total
GBPm GBPm GBPm
----------------------------------- ---------- ---------- --------
Cost
At 1 January 2020 52.1 189.0 241.1
Additions 3. 4 21. 4 24.8
Disposals ( 1.2 ) (50.5) (51. 7 )
Acquisition of businesses - 0.2 0.2
Exchange adjustment - 0.3 0.3
----------------------------------- ---------- ---------- --------
At 31 December 2020 54.3 160.4 214.7
Additions 3.9 28.9 32.8
Disposals (1.0) (7.7) (8.7)
Transfer to intangible assets - (0.8) (0.8)
Acquisition of businesses 1.2 3.0 4.2
Exchange adjustment - (0.3) (0.3)
----------------------------------- ---------- ---------- --------
At 31 December 2021 58.4 183.5 241.9
----------------------------------- ---------- ---------- --------
Depreciation and impairment losses
At 1 January 2020 7.7 107.6 115.3
Provided during the year 2.0 14.3 16.3
Disposals (1.2) (50.1) (51.3)
Exchange adjustment - 0.2 0.2
----------------------------------- ---------- ---------- --------
At 31 December 2020 8.5 72.0 80.5
Provided during the year 1.6 16.8 18.4
Disposals (1.0) (7.4) (8.4)
Transfer to intangible assets - (0.1) (0.1)
Exchange adjustment - (0.2) (0.2)
----------------------------------- ---------- ---------- --------
At 31 December 2021 9.1 81.1 90.2
----------------------------------- ---------- ---------- --------
Net book value
At 31 December 2021 49.3 102.4 151.7
----------------------------------- ---------- ---------- --------
At 31 December 2020 45.8 88.4 134.2
----------------------------------- ---------- ---------- --------
Included in freehold land and buildings is non-depreciable land
of GBP17.7m (2020: GBP17.4m).
During 2020, the Group carried out a review of its plant and
other equipment register and removed assets with a gross cost of
GBP48.8m and associated accumulated depreciation of GBP48.7m. These
assets were no longer in use and/or fully depreciated.
10. Right-of-use assets and lease liabilities
Freehold land and Plant and other
buildings equipment Motor vehicles Total Lease liabilities
GBPm GBPm GBPm GBPm GBPm
----------------------- ---------------------- ---------------------- --------------- ------ ------------------
At 1 January 2020 7.1 7.5 0.2 14.8 (14.8)
Additions 0.2 1.3 - 1.5 (1.5)
Depreciation (1.5) (1.9) (0.1) (3.5) -
Unwind of discount - - - - (0.5)
Settlements - - - - 4.0
Exchange adjustment 0.1 - - 0.1 (0.1)
----------------------- ---------------------- ---------------------- --------------- ------ ------------------
At 31 December 2020 5.9 6.9 0.1 12.9 (12.9)
Additions 2.9 2.5 - 5.4 (5.4)
Acquisition of
businesses 6.0 0.8 - 6.8 (6.8)
Depreciation (2.1) (2.3) - (4.4) -
Unwind of discount - - - - (0.7)
Settlements - - - - 5.1
Exchange adjustment - (0.1) - (0.1) 0.1
----------------------- ---------------------- ---------------------- --------------- ------ ------------------
At 31 December 2021 12.7 7.8 0.1 20.6 (20.6)
----------------------- ---------------------- ---------------------- --------------- ------ ------------------
11. Intangible assets
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 2020 345.6 34.4 30.3 17.4 0.8 - - 428.5
Acquisition of businesses (0.2) - - - - - - (0.2)
-------------------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
At 31 December 2020 345.4 34.4 30.3 17.4 0.8 - - 428.3
Additions - 0.3 - - - - 1.2 1.5
Transfer from tangible assets - - - - - - 0.8 0.8
Acquisition of businesses 122.3 4.8 36.2 96.9 - 0.9 - 261.1
-------------------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
At 31 December 2021 467.7 39.5 66.5 114.3 0.8 0.9 2.0 691.7
-------------------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
Amortisation and impairment
losses
At 1 January 2020 - 9.1 11.5 6.0 0.1 - - 26.7
Charge for the year - 3.0 2.8 1.9 0.1 - - 7.8
-------------------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
At 31 December 2020 - 12.1 14.3 7.9 0.2 - - 34.5
Charge for the year - 3.3 4.9 5.5 0.1 0.4 0.1 14.3
Transfer from tangible assets - - - - - - 0.1 0.1
-------------------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
At 31 December 2021 - 15.4 19.2 13.4 0.3 0.4 0.2 48.9
-------------------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
Net book value
At 31 December 2021 467.7 24.1 47.3 100.9 0.5 0.5 1.8 642.8
-------------------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
At 31 December 2020 345.4 22.3 16.0 9.5 0.6 - - 393.8
-------------------------------- -------- ------- ------ -------------- -------- ----------- ----------- -----
Goodwill arising on the acquisition of businesses was increased
by GBP122.3m following the acquisition of Nu-Heat (Holdings)
Limited, Plura Composites Limited, London Topco Limited (Adey) and
Tree Ground Solutions BV as detailed in Note 12.
During 2020 goodwill arising on the acquisition of businesses
was reduced by GBP0.2m following finalisation of the calculation of
the fair value of assets and liabilities acquired in October 2019
in respect of the Alderburgh group of companies.
Impairment testing of goodwill
Goodwill is not amortised but is subject to annual impairment
testing. 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. The carrying amount of
goodwill allocated to each of the CGUs is as follows:
31 December 2021 31 December 2020
CGU GBPm GBPm
---------------------------------------- ---------------- ----------------
Building Services & International 33.6 33.6
Infrastructure & Landscape 40.7 40.5
Residential Systems 169.6 169.6
Ventilation & Climate 93.7 93.7
Adey 104.8 -
Nu-Heat 17.3 -
Others (comprising Surestop and Ulster) 8.0 8.0
---------------------------------------- ---------------- ----------------
467.7 345.4
---------------------------------------- ---------------- ----------------
Impairment tests on the carrying amounts of goodwill are
performed by analysing the carrying amount allocated to each CGU
against its value-in-use. Value-in-use is 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
2.74% to 2.80% thereafter (2020: 2.68% to 2.80%).
A pre-tax discount rate of 10.4% (2020: 10.0%) has been applied
in determining the recoverable amounts of CGUs. The pre-tax
discount rate is estimated based on the Group's risk adjusted cost
of capital.
The Group has 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.
12. Acquisitions
Acquisition-related deferred and contingent consideration
comprised:
31 December 31 December
2021 2020
GBPm GBPm
----------------------------------------------------------- ----------- -----------
Deferred and contingent consideration on Plura acquisition 4.3 -
Contingent consideration on Permavoid acquisition 0.5 3.4
----------------------------------------------------------- ----------- -----------
4.8 3.4
----------------------------------------------------------- ----------- -----------
Acquisition-related cash flows comprised:
2021 2020
GBPm GBPm
------------------------------------------------------- ----- -----
Operating cash flows - settlement of acquisition costs
Nu-Heat 0.6 -
Plura 0.7 -
Adey 3.1 -
Permavoid 2.5 -
Other - aborted acquisition costs - 1.2
------------------------------------------------------- ----- -----
6.9 1.2
------------------------------------------------------- ----- -----
2021 2020
GBPm GBPm
--------------------------------------- ------------------ ------------------
Investing cash flows - settlement of deferred and contingent consideration
Alderburgh - 0.3
Permavoid - 1.5
--------------------------------------- ------------------ ------------------
- 1.8
--------------------------------------- ------------------ ------------------
2021 2020
GBPm GBPm
---------------------------------------------------- ------------ ------------
Investing cash flows - acquisition of businesses net of cash at acquisition
Nu-Heat 25.8 -
Plura 1.8 -
Adey 208.6 -
Tree Ground Solutions 0.2 -
---------------------------------------------------- ------------ ------------
236.4 -
---------------------------------------------------- ------------ ------------
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 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 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. 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 GBP0.7m. The
gross amount of trade and other receivables was GBP0.8m and it is
expected that the full contractual amounts can be collected.
Post-acquisition, Nu-Heat contributed GBP15.5m revenue and
GBP2.4m 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 twelve months ended 31 December
2021 would have shown revenue of GBP595.5m and underlying operating
profit of GBP95.2m.
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 year, 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
option to acquire 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. Under the contractual arrangements, the Group's approval is
required for all major operational decisions. Based on this, the
Group has concluded that Plura Composites Ltd is a wholly owned
subsidiary, and the Group controls it with no non-controlling
interests.
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 fair value adjustments,
were as follows:
Fair
value
GBPm
----------------------------------------- ------
Property, plant and equipment 0.7
Right-of-use assets 1.7
Intangible assets 3.2
Inventories 0.9
Trade and other receivables 1.8
Cash and cash equivalents 0.2
Trade and other payables (2.4)
Loans and borrowings (0.7)
Lease liabilities (1.7)
Deferred income tax liabilities (0.5)
------------------------------------------- ------
Net identifiable assets 3.2
Less: estimated contingent consideration (1.9)
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. The goodwill arising on the acquisition is
immaterial.
The fair value of trade and other receivables was GBP1.8m. The
gross amount of trade and other receivables was GBP1.8m and it is
expected that the full contractual amounts can be collected.
Post-acquisition, Plura contributed GBP5.9m revenue and GBP0.1m
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 twelve months ended 31 December 2021 would
have shown revenue of GBP594.7m and underlying operating profit of
GBP95.2m.
Acquisition costs of GBP0.4m were expensed and are included in
non-underlying items in administration expenses. Acquisition costs
of GBP0.7m were fully cash settled in the year, including GBP0.3m
that was included in trade and other payables at 31 December
2020.
Contingent consideration of GBP4.3m has been recognised at 31
December 2021. Of this, GBP1.9m is contingent on EBITDA performance
in the third year of trading following acquisition and has been
included in the purchase consideration. The balance of GBP2.4m has
been included in non-underlying items in administration expenses
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.
Contingent consideration was determined using the Directors'
assessment of the likelihood that financial targets will be
achieved. There is no material difference between the estimated
cash consideration and the fair value. 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
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 constraints 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
GBP7.3m 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 GBP1.4m.
Details of the acquisition, including fair value adjustments,
were as follows:
Fair
value
GBPm
--------------------------------- -------
Property, plant and equipment 3.0
Right-of-use assets 4.8
Intangible assets 123.9
Inventories 10.0
Trade and other receivables 11.5
Cash and cash equivalents 7.3
Trade and other payables (19.1)
Loans and borrowings (129.3)
Lease liabilities (4.8)
Derivative financial instruments (0.8)
Other liabilities (0.7)
Income tax payable (0.5)
Deferred income tax liabilities (23.5)
----------------------------------- -------
Net identifiable liabilities (18.2)
Goodwill on acquisition 104.8
Total cash consideration 86.6
----------------------------------- -------
Customer relationships (GBP90.5m), the 'Adey' brand (GBP28.6m)
and patents (GBP4.8m) have been recognised as specific intangible
assets as a result of this acquisition. The customer relationships
have been recognised with useful economic lives of between 10 to 20
years due to the strength of Adey's relationships with key
customers. Fair value adjustments principally relate to the
recognition of intangible assets and deferred income tax arising on
these adjustments. 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 GBP11.5m. The
gross amount of trade and other receivables was GBP11.8m and it is
expected that the full contractual amounts can be collected.
Post-acquisition Adey contributed GBP56.1m revenue and GBP18.1m
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 twelve months ended 31 December 2021 would
have shown revenue of GBP605.7m and underlying operating profit of
GBP97.2m.
Acquisition costs of GBP2.9m were expensed and are included in
non-underlying items in administration expenses. Of the GBP2.9m
acquisition costs, GBP2.7m were fully cash settled in the year 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 31 December 2021.
Tree Ground Solutions
On 3 May 2021, the Group acquired the remaining 50% of the share
capital of Tree Ground Solutions BV (TGS), 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.
Post-acquisition TGS contributed GBP1.1m revenue and GBP0.1m of
underlying operating profit which were included in the Group income
statement. If TGS had been acquired on 1 January 2021, the Group's
results for the twelve months ended 31 December 2021 would have
shown revenue of GBP594.9m and underlying operating profit of
GBP95.3m.
Acquisition costs were negligible and have been expensed and
included in non-underlying items in administration expenses.
Permavoid
On 31 August 2018, the Group acquired 100% of the share capital
of Permavoid Limited (Permavoid), a specialist designer and
supplier of surface water management solutions in commercial,
residential, and sports pitch applications, for an initial cash
consideration of GBP4.3m on a cash and debt-free, normalised
working capital basis, and further contingent consideration
depending on the EBITDA performance of Permavoid in the two years
to 30 September 2020.
During the year a payment of GBP2.5m was made that was
contingent on EBITDA performance in the second year of trading
following acquisition and the continued employment of key
personnel. Contingent consideration at fair value of GBP3.4m was
held on the balance sheet at 31 December 2020 and was accrued over
the two-year period. A balance of GBP0.5m contingent consideration
is held on the balance sheet at 31 December 2021 with GBP0.4m
having been released non-underlying items in administration
expenses in the income statement. A further agreement has been made
whereby up to GBP0.5m is payable contingent on EBIT performance for
the year ending 31 December 2021. Accordingly, the aggregate
consideration is expected to be approximately GBP8.8m.
13. Financial liabilities
31 December 31 December
2021 2020
GBPm GBPm
------------------------------------------ ----------- -----------
Non-current loans and borrowings:
Bank loan - principal 198.0 60 .0
- unamortised debt issue costs (0.6) (1.1)
------------------------------------------ ----------- -----------
Total non-current loans and borrowings 197.4 58 .9
Cash at bank and in hand (52.3) (44.1)
------------------------------------------ ----------- -----------
Net debt excluding lease liabilities 145.1 14.8
------------------------------------------ ----------- -----------
31 December 31 December
2021 2020
GBPm GBPm
-------------------------------------- ----------- -----------
Other financial liabilities:
Trade and other payables 135.5 112.2
Lease liabilities 20.6 12.9
Other liabilities 1.4 0.7
Deferred and contingent consideration 4.8 3.4
Derivative financial instruments 0.1 -
-------------------------------------- ----------- -----------
162.4 129.2
-------------------------------------- ----------- -----------
Bank loan
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 was 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 31 December 2021 was 1.40% (2020:
1.40%). With effect from 4 January 2022, LIBOR was replaced by the
Standard Overnight Index Average (SONIA). Pro forma EBITDA for the
year was GBP117.9m (2020: GBP59.6m), and is defined as pre-IFRS 16
underlying operating profit before depreciation, amortisation and
share-based payment charges, 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.
2021 2020
GBPm GBPm
--------------------------------------------------------- ------ ------
Pro forma EBITDA (12 months preceding the balance sheet)
Underlying operating profit 95.3 42.2
Depreciation of property, plant and equipment 18.4 16.3
Amortisation of internally generated intangible assets 0.1 -
Unwind of discount on lease liabilities (0.7) (0.5)
Share-based payments charge 2.5 1.6
--------------------------------------------------------- ------ ------
115.6 59.6
EBITDA from acquisitions 2.3 -
--------------------------------------------------------- ------ ------
117.9 59.6
--------------------------------------------------------- ------ ------
At 31 December 2021, the Group had available, subject to
covenant headroom, GBP102.0m (2020: GBP240.0m) of undrawn committed
borrowing facilities in respect of which all conditions precedent
had been met.
The Group is subject to a number of covenants in relation to its
bank loan which, if breached, would result in the bank loan
becoming immediately repayable. These covenants specify certain
maximum limits in terms of net debt, excluding lease liabilities,
as a multiple of pro forma EBITDA and interest cover. At 31
December 2021, the Group was not in breach of any bank covenants.
The covenant position was as follows:
Position at
Covenant 31 December
Covenant requirement 2021
----------------------------------------------------------------------------------------- ------------- ------------
Interest cover (Underlying operating profit: Finance costs excluding debt issue cost
amortisation) >4.0:1 31.3:1
Leverage (Net debt excluding lease liabilities: pro forma EBITDA) <3.0:1 1.2:1
----------------------------------------------------------------------------------------- ------------- ------------
The interest cover and leverage covenants remain at 4.0:1 and
3.0:1, respectively, throughout the remaining term of the revolving
credit facility to November 2023, though there exists the option to
apply to extend the leverage covenant to 3.5:1 for a limited period
of time if the Group makes an acquisition.
The interest rate on the Group's GBP300m revolving credit
facility is variable, being payable at LIBOR plus a margin. In
order to reduce the Group's exposure to potential future increases
in interest rates, the Group previously entered into interest rate
swaps which expired in August 2020, with interest payable at a
fixed rate return of 1.735% (excluding margin).
On 11 February 2021, the Group conducted a non-pre-emptive
placing of 18,704,085 new ordinary shares at GBP5.15 per share
generating gross proceeds of GBP96.3m with issue costs of GBP2.7m.
Net proceeds in excess of the nominal value of GBP93.6m have been
credited to the share premium account. A further GBP0.1m of listing
fees have been incurred and charged to the income statement in
2021.
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.
On 7 May 2020, the Group conducted a non-pre-emptive placing of
26,966,300 new ordinary shares at GBP4.45 per share generating
gross proceeds of GBP120.0m. The placing was undertaken using a
cashbox structure. As a result, the Group was able to take relief
under Section 612 of the Companies Act 2006 from crediting share
premium and instead transfer the net proceeds in excess of the
nominal value to other reserves. Advisors' fees of GBP3.5m were
netted off against the gross proceeds. A further GBP0.1m of listing
fees were incurred and charged to the income statement in 2020.
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END
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March 15, 2022 03:00 ET (07:00 GMT)
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