TIDMGEN

RNS Number : 0902W

Genuit Group PLC

16 August 2022

 
 Genuit Group plc 
  Interim condensed set of consolidated financial 
  statements for the six months ended 30 June 2022 
 

Genuit Group plc

Interim results for the six months ended 30 June 2022

On track to meet full year expectations

Genuit Group plc ("Genuit", the "Company" or the "Group"), a leading provider of sustainable water, climate and ventilation products for the built environment , today announces its unaudited interim results for the six months ended 30 June 2022.

Joe Vorih, Chief Executive Officer, said

"Genuit has performed well in the first half. Agile pricing leadership offset inflationary pressures, and the effect of selective business decisions helped to increase our margins. These, with more focus on operational efficiency, overcame some limited headwinds while delivering revenue growth over the prior year and improving profitability throughout the second quarter.

We continue to invest in the business, achieving increased sales from new and innovative products, and positioning us to deliver our sustainability plans which now include our Science-Based Targets. Our structural tailwinds are driven by regulation and the resulting investment needed to mitigate and adapt to effects of climate change. We remain focused on unlocking ways to accelerate growth and expand operating margin. While mindful of the macroeconomic pressures, we have good momentum as we enter the second half, and the Group anticipates meeting full year expectations."

Financial Results

 
                                     H1 2022     H1 2021     Change 
 Statutory measures 
 Revenue                           GBP318.0m   GBP295.6m       7.6% 
 Operating profit                   GBP35.7m    GBP36.3m     (1.7)% 
 Profit before tax                  GBP32.9m    GBP33.8m     (2.7)% 
 Earnings per share (basic)            10.1p        7.9p      27.8% 
 Cash generated from operations     GBP18.4m    GBP23.6m    (22.0)% 
 Dividend per share                     4.1p        4.0p       2.5% 
 Alternative performance 
  measures 
 Underlying operating 
  profit (1)                        GBP47.4m    GBP48.6m     (2.5)% 
 Underlying cash generated 
  from operations(2)                GBP15.2m    GBP15.0m       1.3% 
 Underlying operating 
  margin (1)                           14.9%       16.4%   (150)bps 
 Underlying profit before 
  tax (1)                           GBP44.6m    GBP46.5m     (4.1)% 
 Underlying earnings per 
  share (basic) (1)                    14.0p       15.8p    (11.4)% 
 Leverage(3) (times pro 
  forma EBITDA(4) )                      1.5         1.5          - 
 

Financial highlights

-- Revenue increase of 7.6% against strong prior year comparatives, 5.7% higher on a like-for-like basis

-- Price leadership offset specific headwind events, a planned prioritisation of higher margin business and a minor decline in market-driven volume

-- Isolated cyber incident (fully mitigated) and Adey volumes held back by nationwide boiler shortages - both impacted operating profit

   --      Pricing lag resolved with month-on-month improvement in Q2 EBIT margin 

-- Further investment in delivering our sustainability goals, Science-Based Targets finalised for validation

   --      Net debt(3) of 1.5 times pro forma EBITDA(4) in line with expectations 

-- RCF of GBP350m renewed as a Sustainability Linked Loan ("SLL") until 2026 with a GBP25m private placement until 2029

   --      The Group intends to pay an interim dividend of 4.1pence, an increase of 2.5% 

ESG highlights

   --      The Group remains focused on delivering its 2025 ESG targets 
   --      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 at 47.1%, against a target of 62% by 2025, with new multi-layer extrusion tooling due to come on stream in the second half;

o Our carbon intensity is broadly in line with the last year end;

o Increased sales of new products to a value of GBP161.0m (FY2021: GBP120.0m) resulting in a Vitality Index of 26.2%, ahead of our target of 25% by 2025; and

o 3.0% of our workforce were in accredited work and learning programmes - broadly in line with reporting at the full year results.

Additionally, the Group's Science-Based Targets ("SBTs") have been finalised for validation by the Science-Based Targets initiative ("SBTi"). SBTs are clearly defined pathways for companies to reduce greenhouse gas ("GHG") emissions, which have been validated by the SBTi.

Outlook

   --      The Group has a balanced exposure underpinned by structural growth drivers 

-- Despite the short term headwinds in the residential sector (including ongoing boiler supply constraints), the long term fundamentals in this market continue to be strong, driven by new housebuilding and increased interest in energy efficiency

-- Robust price leadership actions and a greater focus on operational efficiency and cost base structure are expected to offset slightly weaker demand

-- Whilst mindful of the uncertain macroeconomic and geopolitical environment, our order books remain strong and the Board anticipates the Group will meet full year expectations.

(1) Underlying profit and earnings measures exclude certain non-underlying items and, where relevant, the tax effect of these items. The Directors consider that these measures provide a better and more consistent indication of the Group's underlying financial performance and more meaningful comparison with prior and future periods to assess trends in our financial performance.

(2) Underlying cash generated from operations is defined as cash generated from operations, adjusted for non-underlying cash items, after movement in net working capital and capital expenditure net of proceeds from disposals of property, plant and equipment.

(3) Leverage is defined as net debt divided by pro forma EBITDA. Net debt within the leverage calculation is defined as loans and borrowings net of unamortised issue costs less cash and cash equivalents, excluding the effects of IFRS 16.

(4) Pro forma EBITDA is defined as underlying operating profit before depreciation, 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.

(5) Carbon intensity is defined as tonnes of carbon per tonne of output using the market-based method.

Capital Markets Event

We plan to hold a capital markets event in the Autumn. Further information will be published in due course.

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 (BST).

There will be a presentation for analysts and investors at 0830hrs (BST) on Tuesday 16 August 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/62ea7a4ab973541f0011b16c/dfghjk

We recommend you register by 0815hrs (BST).

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 Presentations page on Genuit's website at https://www.genuitgroup.com/investors/

Notes to Editors:

Genuit Group plc ("Genuit", the "Company" or the "Group"), a leading provider of sustainable water and climate management solutions for the built environment, is the largest manufacturer in the UK, and among the ten largest manufacturers in Europe, of piping systems for the residential, commercial, civils and infrastructure sectors by revenue. It is also a leading designer and manufacturer of energy efficient solutions in water-based heating systems in the UK.

The Group operates from 30 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

Revenue for the six months ended 30 June 2022 was 7.6% higher than the prior year at GBP318.0m (2021: GBP295.6m). On a like-for-like basis, excluding the impact of acquisitions, revenue was 5.7% higher than prior year. The Group successfully implemented further price increases in the period and delivered additional operating efficiencies to mitigate the extent of the raw material cost inflation. The Group remained focused on its medium-term drivers - a structural UK housing shortage, the regulatory and environmental drivers around water and climate management, and indoor air quality.

Underlying operating profit was GBP47.4m (2021: GBP48.6m), a reduction of 2.5% on the prior year, driven by the timing of the price increase at the start of Q2 compensating for inflation experienced in Q1 as well as management decisions in respect of certain volume to drive the quality of the business. This represented an underlying operating margin of 14.9% in the period, a decline of 150 basis points on the prior year. The H1 performance was impacted by the effects of an isolated cyber incident at one of our businesses in Q2 which had a negative impact of some GBP4.4m during the period. In addition, supply constraints, most noticeably in respect of semiconductors and printed circuit boards in our Adey business meant that we were unable to satisfy customer demand and which had an impact of some GBP2.6m during the period. Without these two issues, the Group would have reported underlying operating profit of GBP54.4m and a margin of 16.5%. Sequential month-on-month improvement in margins in the second quarter are expected to come through more fully in the second half of the year.

Underlying finance costs of GBP2.8m (2021: GBP2.1m) were broadly in line with expectations driven by larger levels of drawdown of the Revolving Credit Facility compared to prior year.

Non-underlying operating costs of GBP11.7m (2021: GBP12.3m) consist of acquisition costs, some severance costs, the costs associated with resolving a cyber incident and amortisation of intangible assets arising from acquisitions.

The total tax charge for the period was GBP7.9m (2021: GBP14.7m). The underlying tax charge of GBP9.8m (2021: GBP8.2m) represents an effective underlying tax rate of 22.0% (2021: 17.6%).

Underlying profit after tax was lower than the prior year at GBP34.8m (2021: GBP38.3m). Underlying basic earnings per share decreased to 14.0 pence (2021: 15.8 pence).

Including non-underlying items, profit after tax increased to GBP25.0m (2021: GBP19.1m). Basic earnings per share increased to 10.1 pence (2021: 7.9 pence).

The Board recognises the importance of dividends to shareholders and has declared an interim dividend of 4.1 pence per share. This dividend will be paid on 28 September 2022 to shareholders on the register at the close of business on 2 September 2022.

Business Review

 
 Revenue                           2022    2021   Change       LFL 
                                                            Change 
------------------------------- 
                                   GBPm    GBPm        %         % 
-------------------------------  ------  ------  -------  -------- 
 Residential Systems              198.9   183.8      8.2       6.1 
 Commercial and Infrastructure 
  Systems                         119.1   111.8      6.5       5.2 
-------------------------------  ------  ------  -------  -------- 
                                  318.0   295.6      7.6       5.7 
-------------------------------  ------  ------  -------  -------- 
 
 
 Underlying operating             2022    ROS   2021    ROS   Change 
  profit 
------------------------------- 
                                  GBPm      %   GBPm      %        % 
-------------------------------  -----  -----  -----  -----  ------- 
 Residential Systems              37.3   18.8   35.8   19.5      4.2 
 Commercial and Infrastructure 
  Systems                         10.1    8.5   12.8   11.4   (21.1) 
                                  47.4   14.9   48.6   16.4    (2.5) 
-------------------------------  -----  -----  -----  -----  ------- 
 

The Group led the industry in robust pricing moves and reduced implementation time lags to mitigate the effects of input cost inflation. Management has increased its commercial focus, walking away from low margin sales and increasing the quality of the Group's business. Inflation has been a considerable challenge as well as supply constraints, most noticeably semiconductors and printed circuit boards but there are signs that raw materials inflation at least is starting to ease.

During the period we experienced an isolated cyber incident on our Climate & Ventilation division that was ultimately unsuccessful but resulted in temporary disruption to manufacturing and sales in April and May. We implemented new, stronger protection across the Group in the first half. Our order books remain strong, and we anticipate that most of the lost volume will be made up in the second half of the year.

The combined impacts on EBIT for both the cyber incident and constraints on upstream boiler manufacturing was some GBP7m in the period and we expect the portion attributable for the cyber incident at least to be fully recoverable in the second half and for there to be some mitigation of the effects of the shortfalls in boiler manufacturing also in H2.

The acquisition of Keytec Geomembranes for GBP2.6m was made during the period and has exceeded expectations, and its integration into the Group is progressing well. This business strengthens our water management systems installation capabilities.

Revenue for the six months ended 30 June 2022 was 7.6% higher than the prior year at GBP318.0m (2021: GBP295.6m). On a like-for-like basis, excluding the impact of acquisitions, revenue was 5.7% higher than prior year.

Revenue in Residential Systems was 8.2% ahead of prior year and 6.1% on a like-for-like basis. In Commercial and Infrastructure Systems, revenue was 6.5% ahead of prior year and 5.2% on a like-for-like basis. New product innovation remains strong. In Residential Systems, we launched several new ranges in the first half of the year, including Nuaire's DX Cooling modules designed to work in conjunction with existing MVHR ventilation units to tackle the challenges of overheating in apartments. Adey launched a number of new products to expand their range of performance enhancing heating system additives, including the new MCXS leak sealant additive. In Commercial and Infrastructure Systems, our Civils and Green Urbanisation business launched SciClone X, a new stormwater treatment device for removing pollutants from surface water runoff.

Residential Systems

Trading in the Residential Systems segment performed strongly, with revenue of GBP198.9m (2021: GBP183.8m) 8.2% above prior year, and 6.1% ahead on a like-for-like basis, driven by robust price leadership in the market. The residential sector remains strong, driven by the continued structural housing shortage and pent-up demand with house prices remaining buoyant. Confidence remains in the sector over the short to medium term. Overall, the CPA is forecasting that 2022 housing activity will be 1% up on 2021.

Margin recovery continued through the first half of the year reaching 18.8% for the half with robust sequential margin improvement throughout the second quarter. Excluding the impacts of upstream supply chain issues affecting Adey and the cyber incident, divisional EBIT margin would have been some 19.7% for the period.

Commercial and Infrastructure Systems

Revenue of GBP119.1m (2021: GBP111.8m) in Commercial and Infrastructure Systems improved by 6.5% vs 2021 (5.2% on a like-for-like basis). Sales in our ventilation business is driven by increased focus on the importance of air quality in the workplace when it was temporarily impacted by a cyber incident in the second half of April that curtailed manufacturing and sales for six weeks. The order book remains strong, and management anticipates recovering most of this lost volume in the second half of the year.

The division reported an underlying operating margin of 8.5% during the period, which excluding the impact of the cyber incident, would have been some 11.5% for the period. Our Water Management solutions have performed well with the ongoing requirement for new housing and our most recent acquisition in Keytec has strengthened our ability to supply and install our attenuation systems, which is also helping to bridge the onsite skills shortage gap.

Environmental, Social & Governance

We remain committed to be carbon neutral by 2050, as we continue our improvement trajectory beyond the targets we have set out for 2025. 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 commitment to employee development and social mobility is reflected in our membership of The 5% Club, our proportion of qualifying colleagues at 3.0%. Our use of recycled material in the first half was 47.1% of our total tonnage. By 2025, r ecycled materials should represent 62% of our total polymer consumption and we expect a new multi-layer extrusion tooling due to come on stream in the second half. During the period, the Group began its migration of its company car fleet to electric vehicles and plug-in hybrid electric vehicles.

Financial Review

Finance Costs

Net underlying finance costs for the six months ended 30 June 2022 increased to GBP2.8m (2021: GBP2.1m) due to increased interest rates on a higher level of borrowing through the first half of the year. With effect from 4 January 2022, interest was payable on the Group's RCF at the Standard Overnight Index Average (SONIA) plus an interest rate margin ranging from 0.90% to 2.75% depending on leverage. The interest rate margin at 30 June 2022 was 1.40% (30 June 2021: 1.65%).

Taxation

The Group's tax charge for the six months ended 30 June 2022 decreased to GBP7.9m (2021: GBP14.7m) as the prior year included an adjustment in respect of changes in the income tax rate. The underlying tax rate (underlying tax: underlying profit) has been provided at the estimated full year rate of 22.0% (2021 full year: 17.6%), driven by a prior year adjustment in respect of a corporate interest restriction in one of our group companies.

Dividend

Our dividend policy is normally to pay a minimum of 40% of the Group's annual underlying profit after tax. The Directors intend that the Group will pay the total annual dividend in two tranches, an interim dividend and a final dividend, to be announced at the time of announcement of the interim and preliminary results respectively with the interim dividend being approximately one half of the prior year's final dividend.

Cash Flow and Net Debt

Cash generated from operations during the period amounted to an inflow of GBP18.4m (2021: GBP23.6m inflow). This result includes a working capital outflow of GBP37.4m (2021: GBP31.1m). A first half working capital outflow is a normal feature of the Group's annual working capital cycle and arose due to rebate settlements and the impact of raw material inflation on inventory valuation.

Capital expenditure decreased to GBP9.4m (2021: GBP15.1m) with larger projects forecasted to be completed in the second half of the year. The full year 2022 capital expenditure is expected to be in the region of GBP40m, with a primary focus on key commercial and innovation lead projects.

Net debt (including unamortised debt issue costs but excluding the effects of IFRS 16 capitalisation) decreased to GBP167.9m at 30 June 2022 (2021: GBP169.6m). Leverage was in line with prior year and expectations at 1.5 times pro forma EBITDA.

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 were subsequently renewed on 10 August 2022 and consist of a GBP350.0m RCF and a seven year committed GBP25.0m private placement. At 30 June 2022, the Group's RCF was GBP300m of which GBP82.0m was undrawn (2021: GBP102.0m) and the Group's liquidity headroom (cash and undrawn committed banking facilities) was GBP131.7m (2021: GBP129.6m). Our focus will continue to be on deleveraging and our net debt to EBITDA ratio stood at 1.5 times pro forma EBITDA at 30 June 2022 (2021: 1.5 times pro forma EBITDA), increasing to 1.6 times pro forma EBITDA including the effects of IFRS 16. This headroom means the Group is well-positioned with a strong balance sheet .

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 condensed set of consolidated financial statements.

Principal Risks and Uncertainties

The Board continually assesses and monitors the key risks of the business and Genuit has developed a risk management framework to identify, report, and manage its principal risks and uncertainties . The principal risks and uncertainties that could have a material impact on the Group's performance and prospects, and the mitigating activities which are aimed at reducing the impact or likelihood of a major risk materialising , have not changed from those which are set out in detail in the principal risks and uncertainties section of our 2021 Annual Report and Accounts.

These principal risks and uncertainties include macro-economic and political conditions; climate change; raw materials supply and pricing; information systems disruption; reliance on key customers and recruitment and retention of key personnel.

The Board is mindful of the global macro-economic uncertainty from the ongoing tragic events in Ukraine. The impact of this situation on the Group in the first half of the year has been minimal and the Group is well positioned to mitigate any further risk for the full year 2022.

A copy of the 2021 Annual Report and Accounts is available on the Company's website www.genuitgroup.com .

Forward-Looking Statements

This report contains various forward-looking statements that reflect management's current views with respect to future events and financial and operational performance. These forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other factors, which may be beyond the Group's control and which may cause actual results or performance to differ materially from those expressed or implied from such forward-looking statements. All statements (including forward-looking statements) contained herein are made and reflect knowledge and information available as of the date of preparation of this report and the Group disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein. Nothing in this report should be construed as a profit forecast .

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

-- The condensed set of consolidated financial statements has been prepared in accordance with UK adopted International Accounting Standard (IAS) 34, Interim Financial Reporting; and

   --      The Interim Management Report includes a fair review of the information required by: 

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report and Accounts that could do so.

This report was approved by the Board of Directors on 15 August 2022 and is available on the Company's website www.genuitgroup.com .

The Directors of the Company are:

   Ron Marsh                     Chairman 
   Joe Vorih                        Chief Executive Officer 
   Paul James                    Chief Financial Officer 
   Matt Pullen                     Chief Operating Officer 
   Mark Hammond              Non-executive Director and Senior Independent Director 
   Louise Hardy                   Non-executive Director 
   Lisa Scenna                    Non-executive Director 
   Louise Brooke-Smith      Non-executive Director 
   Kevin Boyd                     Non-executive Director 

By order of the Board:

   J M Vorih                                                    P A James 
   Chief Executive Officer                            Chief Financial Officer 

INTERIM GROUP INCOME STATEMENT

for the six months ended 30 June 2022 (unaudited)

 
                     Notes            Six months ended 30                     Six months ended 30 
                                           June 2022                               June 2021 
------------------  ------  --------------------------------------  -------------------------------------- 
                             Underlying   Non-Underlying     Total   Underlying   Non-Underlying     Total 
                                   GBPm             GBPm      GBPm         GBPm             GBPm      GBPm 
 Revenue               3          318.0                -     318.0        295.6                -     295.6 
 Cost of sales                  (194.4)                -   (194.4)      (173.6)            (1.7)   (175.3) 
------------------  ------  -----------  ---------------  --------  -----------  ---------------  -------- 
 Gross profit                     123.6                -     123.6        122.0            (1.7)     120.3 
 Selling and 
  distribution 
  costs                          (42.7)                -    (42.7)       (40.0)                -    (40.0) 
 Administration 
  expenses                       (33.5)            (4.2)    (37.7)       (33.4)            (4.0)    (37.4) 
------------------  ------  -----------  ---------------  --------  -----------  ---------------  -------- 
 Trading 
  profit                           47.4            (4.2)      43.2         48.6            (5.7)      42.9 
 Amortisation 
  of intangible 
  assets                              -            (7.5)     (7.5)            -            (6.6)     (6.6) 
------------------  ------  -----------  ---------------  --------  -----------  ---------------  -------- 
 Operating 
  profit               3           47.4           (11.7)      35.7         48.6           (12.3)      36.3 
                      3, 
 Finance costs         5          (2.8)                -     (2.8)        (2.1)            (0.4)     (2.5) 
------------------  ------  -----------  ---------------  --------  -----------  ---------------  -------- 
 Profit before 
  tax                              44.6           (11.7)      32.9         46.5           (12.7)      33.8 
 Income tax            6          (9.8)              1.9     (7.9)        (8.2)            (6.5)    (14.7) 
 Profit for 
  the period 
  attributable 
  to the owners 
  of the parent 
  company                          34.8            (9.8)      25.0         38.3           (19.2)      19.1 
------------------  ------  -----------  ---------------  --------  -----------  ---------------  -------- 
 
 Basic earnings 
  per share 
  (pence)              7                                      10.1                                     7.9 
------------------  ------  -----------  ---------------  --------  -----------  ---------------  -------- 
 Diluted earnings 
  per share 
  (pence)              7                                      10.0                                     7.8 
------------------  ------  -----------  ---------------  --------  -----------  ---------------  -------- 
 
 Dividend 
  per share 
  (pence) - 
  interim              8                                       4.1                                     4.0 
------------------  ------  -----------  ---------------  --------  -----------  ---------------  -------- 
 

Non-underlying items are presented separately and are detailed in Note 4.

INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2022 (unaudited)

 
                                                   Six months   Six months 
                                                     ended 30     ended 30 
                                                    June 2022    June 2021 
                                                         GBPm         GBPm 
------------------------------------------------  -----------  ----------- 
 Profit for the period attributable to the 
  owners of the parent company                           25.0         19.1 
------------------------------------------------  -----------  ----------- 
 Other comprehensive income: 
 Items which may be reclassified subsequently 
  to the income statement: 
 Exchange differences on translation of foreign 
  operations                                              0.6            - 
 Effective portion of changes in fair value 
  of forward foreign currency derivatives                 0.3            - 
 Other comprehensive income for the period 
  net of tax                                              0.9            - 
------------------------------------------------  -----------  ----------- 
 Total comprehensive income for the period 
  attributable to the owners of the parent 
  company                                                25.9         19.1 
------------------------------------------------  -----------  ----------- 
 

INTERIM GROUP BALANCE SHEET

at 30 June 2022 (unaudited)

 
                                              30 June    30 June   31 December 
                                                 2022       2021          2021 
                                     Notes       GBPm       GBPm          GBPm 
--------------------------------  --------  ---------  ---------  ------------ 
 
              Non-current assets 
             Property, plant and 
                       equipment                152.2      145.1         151.7 
             Right-of-use assets                 21.1       21.7          20.6 
               Intangible assets      9         639.0      644.4         642.8 
--------------------------------  --------  ---------  ---------  ------------ 
        Total non-current assets                812.3      811.2         815.1 
--------------------------------  --------  ---------  ---------  ------------ 
 
                  Current assets 
                     Inventories                 97.4       64.4          80.8 
     Trade and other receivables                 94.8       99.4          76.7 
           Income tax receivable                  2.5        1.2           1.1 
       Cash and cash equivalents     10          49.7       27.6          52.3 
            Derivative financial 
                     instruments     11           0.2          -             - 
--------------------------------  --------  ---------  ---------  ------------ 
            Total current assets                244.6      192.6         210.9 
--------------------------------  --------  ---------  ---------  ------------ 
                    Total assets              1,056.9    1,003.8       1,026.0 
--------------------------------  --------  ---------  ---------  ------------ 
 
             Current liabilities 
        Trade and other payables              (132.4)    (129.0)       (135.5) 
               Lease liabilities    10,11       (5.4)      (4.3)         (4.5) 
         Deferred and contingent 
                   consideration    9,11            -      (0.9)         (0.5) 
            Derivative financial 
                     instruments     11             -      (0.8)         (0.1) 
       Total current liabilities              (137.8)    (135.0)       (140.6) 
--------------------------------  --------  ---------  ---------  ------------ 
 
         Non-current liabilities 
            Loans and borrowings    10,11     (217.6)    (197.2)       (197.4) 
               Lease liabilities    10,11      (16.5)     (17.5)        (16.1) 
         Deferred and contingent 
                   consideration    9,11        (6.2)      (2.6)         (4.3) 
               Other liabilities                (1.4)      (1.4)         (1.4) 
             Deferred income tax 
                     liabilities               (53.2)     (46.9)        (48.5) 
--------------------------------  --------  ---------  ---------  ------------ 
   Total non-current liabilities              (294.9)    (265.6)       (267.7) 
--------------------------------  --------  ---------  ---------  ------------ 
               Total liabilities              (432.7)    (400.6)       (408.3) 
--------------------------------  --------  ---------  ---------  ------------ 
                      Net assets                624.2      603.2         617.7 
--------------------------------  --------  ---------  ---------  ------------ 
 
            Capital and reserves 
            Equity share capital                  0.2        0.2           0.2 
                   Share premium                 93.6       93.6          93.6 
      Capital redemption reserve                  1.1        1.1           1.1 
                 Hedging reserve                  0.2          -         (0.1) 
  Foreign currency retranslation 
                         reserve                  0.6        0.4             - 
                  Other reserves                116.5      116.5         116.5 
               Retained earnings                412.0      391.4         406.4 
--------------------------------  --------  ---------  ---------  ------------ 
                    Total equity                624.2      603.2         617.7 
--------------------------------  --------  ---------  ---------  ------------ 
 

INTERIM GROUP STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2022 (unaudited)

 
 
                                                                           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 
---------------  ----------  ----------  ------------  ----------  ---------------  ----------  -----------  --------- 
 Six months 
 ended 
 30 June 2022 
 Opening 
  balance               0.2        93.6           1.1       (0.1)                -       116.5        406.4      617.7 
---------------  ----------  ----------  ------------  ----------  ---------------  ----------  -----------  --------- 
 Profit for the 
  period                  -           -             -           -                -           -         25.0       25.0 
 Other 
  comprehensive 
  income                  -           -             -         0.3              0.6           -            -        0.9 
---------------  ----------  ----------  ------------  ----------  ---------------  ----------  -----------  --------- 
 Total 
  comprehensive 
  income for 
  the period              -           -             -         0.3              0.6           -         25.0       25.9 
 Dividends paid           -           -             -           -                -           -       (20.3)     (20.3) 
 Share-based 
  payments 
  charge                  -           -             -           -                -           -          1.6        1.6 
 Share-based 
  payments 
  settled                 -           -             -           -                -           -          0.4        0.4 
 Share-based 
  payments 
  excess tax 
  benefit                 -           -             -           -                -           -        (1.1)      (1.1) 
---------------  ----------  ----------  ------------  ----------  ---------------  ----------  -----------  --------- 
 Closing 
  balance               0.2        93.6           1.1         0.2              0.6       116.5        412.0      624.2 
---------------  ----------  ----------  ------------  ----------  ---------------  ----------  -----------  --------- 
 
 Six months 
 ended 
 30 June 2021 
 Opening 
  balance               0.2           -           1.1           -              0.4       116.5        382.7      500.9 
---------------  ----------  ----------  ------------  ----------  ---------------  ----------  -----------  --------- 
 Profit for the 
  period                  -           -             -           -                -           -         19.1       19.1 
 Total 
  comprehensive 
  income for 
  the period              -           -             -           -                -           -         19.1       19.1 
 Dividends paid           -           -             -           -                -           -       (11.9)     (11.9) 
 Issue of share 
  capital                 -        96.3             -           -                -           -            -       96.3 
 Transaction 
  costs 
  on issue of 
  share 
  capital                 -       (2.7)             -           -                -           -            -      (2.7) 
 Share-based 
  payments 
  charge                  -           -             -           -                -           -          1.0        1.0 
 Share-based 
  payments 
  settled                 -           -             -           -                -           -          0.4        0.4 
 Share-based 
  payments 
  excess tax 
  benefit                 -           -             -           -                -           -          0.1        0.1 
---------------  ----------  ----------  ------------  ----------  ---------------  ----------  -----------  --------- 
 Closing 
  balance               0.2        93.6           1.1           -              0.4       116.5        391.4      603.2 
---------------  ----------  ----------  ------------  ----------  ---------------  ----------  -----------  --------- 
 

INTERIM GROUP CASH FLOW STATEMENT

for the six months ended 30 June 2022

 
                                                                   Six months   Six months     Year ended 
                                                                     ended 30     ended 30    31 December 
                                                                    June 2022    June 2021           2021 
                                                           Notes         GBPm         GBPm           GBPm 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Operating activities 
 Profit before tax                                                       32.9         33.8           62.9 
 Finance costs                                               5            2.8          2.5            4.2 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Operating profit                                                        35.7         36.3           67.1 
 Non-cash items: 
 Profit on disposal of property, 
  plant and equipment                                                   (0.6)            -          (0.2) 
 Transaction costs on issue of share 
  capital                                                                   -          0.1            0.1 
 Research and development expenditure 
  credit                                                                (0.6)            -          (2.0) 
 Non-underlying items: 
 - amortisation of intangible assets 
  arising on business combinations                          4,9           7.5          6.6           14.2 
 - provision for acquisition costs                           4            1.3          4.0            6.6 
 - unwind of inventory fair value 
  adjustment                                                 4              -          1.7            3.7 
 - provision for restructuring costs                         4            1.2            -            1.1 
 - provision for product liability 
  claim                                                                     -            -            2.6 
 - provision for cyber incident related 
  costs                                                      4            1.2            -              - 
 - provision for intellectual property 
  infringement legal costs                                   4            0.5            -              - 
 Depreciation of property, plant 
  and equipment                                                           9.4          9.3           18.4 
 Depreciation of right-of-use assets                                      2.7          2.1            4.4 
                   Amortisation of internally generated 
                    intangible assets                        9            0.1            -            0.1 
 Share-based payments                                                     1.6          1.0            2.2 
 Cash items: 
 - settlement of acquisition costs                           9          (0.7)        (6.4)          (6.9) 
 - settlement of restructuring costs                                    (1.8)            -              - 
 - settlement of cyber incident related                                                  -              - 
  costs                                                                 (1.2) 
 - settlement of intellectual property                                                   -              - 
  infringement legal costs                                              (0.5) 
 Operating cash flows before movement 
  in working capital                                                     55.8         54.7          111.4 
 Receivables                                                           (17.2)       (22.3)          (0.9) 
 Payables                                                               (3.9)        (8.5)          (6.2) 
 Inventories                                                           (16.3)        (0.3)         (19.9) 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Cash generated from operations                                          18.4         23.6           84.4 
 Income tax paid                                                        (5.2)        (5.3)          (9.5) 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Net cash flows from operating activities                                13.2         18.3           74.9 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Investing activities 
 Settlement of deferred and contingent 
  consideration                                              9          (0.5)            -              - 
 Acquisition of businesses net of 
  cash at acquisition                                        9          (2.6)      (236.2)        (236.4) 
 Proceeds from disposal of property, 
  plant and equipment                                                     1.5          0.1            0.5 
 Purchase of property, plant and 
  equipment                                                             (9.4)       (15.1)         (33.1) 
 Patent and development costs expenditure                               (0.9)            -          (1.5) 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Net cash flows from investing activities                              (11.9)      (251.2)        (270.5) 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Financing activities 
 Issue of share capital                                                     -         96.3           96.3 
 Transaction costs on issue of share 
  capital                                                                   -        (2.8)          (2.8) 
 Drawdown of bank loan                                                   30.0        148.0          148.0 
 Repayment of bank loan                                                (10.0)       (10.0)         (10.0) 
 Interest paid                                                          (2.2)        (1.2)          (2.9) 
 Proceeds from sale and leaseback 
  of property, plant and equipment                                        1.4            -              - 
 Dividends paid                                                        (20.3)       (11.9)         (21.7) 
 Proceeds from exercise of share 
  options                                                                 0.4          0.6            2.1 
 Settlement of lease liabilities                                        (3.3)        (2.5)          (5.1) 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Net cash flows from financing activities                               (4.0)        216.5          203.9 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Net change in cash and cash equivalents                                (2.7)       (16.4)            8.3 
 Cash and cash equivalents - opening 
  balance                                                                52.3         44.1           44.1 
 Net foreign exchange difference                                          0.1        (0.1)          (0.1) 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 Cash and cash equivalents - closing 
  balance                                                                49.7         27.6           52.3 
--------------------------------------------------------  ------  -----------  -----------  ------------- 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   1.      Basis of preparation 

Genuit Group plc (previously known as Polypipe Group plc) is incorporated in the UK. The condensed set of consolidated financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and UK adopted IAS 34, Interim Financial Reporting.

The annual financial statements will be prepared under UK-adopted IAS (UK-adopted IFRSs).

As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of consolidated financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2021. These statements do not include all the information required for full annual consolidated financial statements and should be read in conjunction with the full Annual Report and Accounts for the year ended 31 December 2021.

The comparative figures for the financial year ended 31 December 2021, where reported, are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

There were no accounting standards or interpretations that have become effective in the current reporting period which had an impact on disclosures, financial position or performance.

The condensed set of consolidated financial statements are prepared on a going concern basis. The Directors have made enquiries into the adequacy of the Group's financial resources, through a review of the Group's budget and medium-term financial plan, including cash flow forecasts. The Group has modelled a range of scenarios with the base forecast being one in which, over the 15 months ending 30 September 2023, sales volumes grow in line with 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 30 June 2022, the Group had available GBP82.0m of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. The Group's borrowing facilities were subsequently renewed on 10 August 2022 and included an increase in the RCF facility to GBP350.0m available until at least August 2026, subject to covenant headroom, and a seven-year private placement loan note of GBP25.0m repayable August 2029. 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 condensed set of consolidated financial statements.

There have been no related party transactions in the period to 30 June 2022.

Four non-statutory measures have been used in preparing the condensed set of consolidated financial statements:

-- Underlying profit and earnings measures exclude certain non-underlying items (which are detailed in Note 4) and, where relevant, the tax effect of these items. The Directors consider that these measures provide a better and more consistent indication of the Group's underlying financial performance and more meaningful comparison with prior and future periods to assess trends in our financial performance.

-- Underlying cash generated from operations is defined as cash generated from operations, adjusted for non-underlying cash items, after movement in net working capital and capital expenditure net of proceeds from disposals of property, plant and equipment.

-- Leverage is defined as net debt divided by pro forma EBITDA (both are reconciled in note 10). Net debt within the leverage calculation is defined as loans and borrowings net of unamortised issue costs less cash and cash equivalents, excluding the effects of IFRS 16.

-- Pro forma EBITDA is defined as 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.

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   2.      Financial risks, estimates, assumptions and judgements 

The preparation of the condensed set of consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from estimates.

In preparing the condensed set of consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2021.

   3.      Segment information 

The Group has two reporting segments - Residential Systems and Commercial and Infrastructure Systems. The reporting segments are organised based on the nature of the end markets served. There are no significant judgements in aggregating operating segments to arrive at the reporting segments. Inter-segment sales are on an arm's length basis in a manner similar to transactions with third parties.

 
                              Six months ended 30 June            Six months ended 30 June 
                                        2022                                2021 
                       --------------------------------------  ------------------------------  ------ 
                                           Commercial                              Commercial 
                       Residential   & Infrastructure          Residential   & Infrastructure 
                           Systems            Systems   Total      Systems            Systems   Total 
                              GBPm               GBPm    GBPm         GBPm               GBPm    GBPm 
---------------------  -----------  -----------------  ------  -----------  -----------------  ------ 
 
Segmental revenue            202.5              124.9   327.4        186.7              116.4   303.1 
Inter-segment 
 revenue                     (3.6)              (5.8)   (9.4)        (2.9)              (4.6)   (7.5) 
---------------------  -----------  -----------------  ------  -----------  -----------------  ------ 
Revenue                      198.9              119.1   318.0        183.8              111.8   295.6 
---------------------  -----------  -----------------  ------  -----------  -----------------  ------ 
Underlying operating 
 profit *                     37.3               10.1    47.4         35.8               12.8    48.6 
Non-underlying 
 items - segmental           (7.0)              (4.7)  (11.7)        (9.7)              (2.6)  (12.3) 
---------------------  -----------  -----------------  ------  -----------  -----------------  ------ 
Segmental operating 
 profit                       30.3                5.4    35.7         26.1               10.2    36.3 
Non-underlying 
 items - finance 
 costs                                                      -                                   (0.4) 
Finance costs                                           (2.8)                                   (2.1) 
---------------------  -----------  -----------------  ------  -----------  -----------------  ------ 
Profit before 
 tax                                                     32.9                                    33.8 
---------------------  -----------  -----------------  ------  -----------  -----------------  ------ 
 
 

* 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 segmental profit used by the Group's CODM. Details of the non-underlying items of GBP11.7m (2021: GBP12.7m) are detailed in Note 4 .

Geographical analysis

 
                         Six months  Six months 
                           ended 30    ended 30 
                          June 2022   June 2021 
Revenue by destination         GBPm        GBPm 
-----------------------  ----------  ---------- 
UK                            284.8       266.3 
Rest of Europe                 18.5        18.4 
Rest of World                  14.7        10.9 
-----------------------  ----------  ---------- 
Total - Group                 318.0       295.6 
-----------------------  ----------  ---------- 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   4.         Non-underlying items 

Non-underlying items comprised:

 
                                 Six months ended 30      Six months ended 30 June 
                                           June 2022                          2021 
                             -----------------------  ---------------------------- 
                               Gross     Tax     Net     Gross       Tax       Net 
                                GBPm    GBPm    GBPm      GBPm      GBPm      GBPm 
---------------------------  -------  ------  ------  --------  --------  -------- 
Cost of sales: 
 Unwind of inventory 
 fair value adjustment             -       -       -       1.7     (0.3)       1.4 
Administration expenses: 
 Acquisition costs 
 - acquisition and 
 other M&A activity              1.3       -     1.3       4.0     (0.2)       3.8 
Administration expenses: 
 Isolated cyber incident 
 costs                           1.2   (0.2)     1.0         -         -         - 
Administration expenses: 
 Intellectual property 
 infringement legal 
 costs                           0.5   (0.1)     0.4         -         -         - 
Administration expenses: 
 Restructuring costs             1.2   (0.2)     1.0         -         -         - 
Amortisation of 
 intangible assets               7.5   (1.4)     6.1       6.6       7.1      13.7 
Finance costs: Unwind 
 of discount on contingent 
 consideration                     -       -       -       0.4     (0.1)       0.3 
---------------------------  -------  ------  ------  --------  --------  -------- 
Total non-underlying 
 items                          11.7   (1.9)     9.8      12.7       6.5      19.2 
---------------------------  -------  ------  ------  --------  --------  -------- 
 
 

In the six months ended 30 June 2022 non-underlying items included GBP1.3m of acquisition costs in respect of an accrual, for the element of the earn out accounted for as remuneration, associated with the Plura acquisition. Other non-underlying items in the six months ended 30 June 2022 comprised of costs associated with an isolated cyber incident at one of the Group's businesses, legal costs relating to an intellectual property infringement claim which was successfully defended and restructuring costs incurred following a strategic review of the Group.

In the prior year, 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 and costs relating to the acquisitions of Adey, Nu-Heat and Plura which includes an accrual for the earn out associated with the Plura acquisition. The non-underlying tax charge in the six months ended 30 June 2021 includes GBP8.5m in respect of restating the deferred income tax liability on intangible assets as a result of the change in the main UK corporation tax rate.

   5.         Finance costs 
 
                                                 Six months  Six months 
                                                   ended 30    ended 30 
                                                  June 2022   June 2021 
                                                       GBPm        GBPm 
-----------------------------------------------  ----------  ---------- 
Interest on bank loan                                   2.0         1.2 
Debt issue cost amortisation                            0.2         0.3 
Unwind of discount on lease liabilities                 0.4         0.3 
Other finance costs                                     0.2         0.3 
Unwind of discount on contingent consideration            -         0.4 
-----------------------------------------------  ----------  ---------- 
                                                        2.8         2.5 
-----------------------------------------------  ----------  ---------- 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   6.         Income tax 

Tax has been provided on the profit before tax at the estimated effective rate for the full year of 24.0% (2021 full year: 34.8%). Tax on underlying profit before tax was 22.0% (2021 full year: 17.6%).

 
                                                 Six months  Six months 
                                                   ended 30    ended 30 
                                                  June 2022   June 2021 
                                                       GBPm        GBPm 
-----------------------------------------------  ----------  ---------- 
Current income tax: 
UK income tax                                           3.5         5.1 
Overseas income tax                                     0.2         0.1 
-----------------------------------------------  ----------  ---------- 
Current income tax                                      3.7         5.2 
Adjustment in respect of prior years                    0.6           - 
-----------------------------------------------  ----------  ---------- 
Total current income tax                                4.3         5.2 
-----------------------------------------------  ----------  ---------- 
Deferred income tax: 
Origination and reversal of timing differences          0.2       (1.2) 
Adjustment in respect of changes in income 
 tax rate                                               2.4        10.7 
-----------------------------------------------  ----------  ---------- 
Deferred income tax                                     2.6         9.5 
Adjustment in respect of prior years                    1.0           - 
-----------------------------------------------  ----------  ---------- 
Total deferred income tax                               3.6         9.5 
-----------------------------------------------  ----------  ---------- 
Total tax expense reported in the income 
 statement                                              7.9        14.7 
-----------------------------------------------  ----------  ---------- 
 
   7.         Earnings per share 

Basic earnings per share amounts are calculated by dividing profit for the period attributable to the owners of the parent company by the weighted average number of ordinary shares outstanding during the period. The diluted earnings per share amounts are calculated by dividing profit for the period attributable to the owners of the parent company by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of potential ordinary shares that would be issued on the conversion of all the dilutive share options into ordinary shares.

The calculation of basic and diluted earnings per share is based on the following:

 
                                                  Six months   Six months 
                                                    ended 30     ended 30 
                                                   June 2022    June 2021 
-----------------------------------------------  -----------  ----------- 
Weighted average number of ordinary shares 
 for the purpose of basic earnings per share     247,928,506  242,745,684 
Effect of dilutive potential ordinary shares       3,101,184    3,311,655 
-----------------------------------------------  -----------  ----------- 
Weighted average number of ordinary shares 
 for the purpose of diluted earnings per share   251,029,690  246,057,339 
-----------------------------------------------  -----------  ----------- 
 

Underlying earnings per share is based on the result for the period after tax excluding the impact of non-underlying items of GBP9.8m (2021: GBP19.2m). The Directors consider that this measure provides a better and more consistent indication of the Group's underlying financial performance and more meaningful comparison with prior and future periods to assess trends in our financial performance. The underlying earnings per share is calculated as follows:

 
                                                Six months  Six months 
                                                  ended 30    ended 30 
                                                 June 2022   June 2021 
----------------------------------------------  ----------  ---------- 
Underlying profit for the period attributable 
 to the owners of the parent company (GBPm)           34.8        38.3 
----------------------------------------------  ----------  ---------- 
Underlying basic earnings per share (pence)           14.0        15.8 
----------------------------------------------  ----------  ---------- 
Underlying diluted earnings per share (pence)         13.9        15.6 
----------------------------------------------  ----------  ---------- 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   8.         Dividends 

The Directors have proposed an interim dividend for the current year of GBP10.2m which equates to 4.1 pence per share.

   9.         Acquisitions 

Acquisition-related deferred and contingent consideration comprised:

 
                                               30 June  30 June  31 December 
                                                  2022     2021         2021 
                                                  GBPm     GBPm         GBPm 
---------------------------------------------  -------  -------  ----------- 
Deferred consideration on Keytec acquisition       0.6        -            - 
Contingent consideration on Plura 
 acquisition                                       5.6      2.6          4.3 
Deferred and contingent consideration 
 on Permavoid acquisition                            -      0.9          0.5 
---------------------------------------------  -------  -------  ----------- 
                                                   6.2      3.5          4.8 
---------------------------------------------  -------  -------  ----------- 
 

Deferred and 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 and Keytec.

Acquisition-related cash flows comprised:

 
                                    Six months  Six months    Year ended 
                                      ended 30    ended 30   31 December 
                                     June 2022   June 2021          2021 
                                          GBPm        GBPm          GBPm 
----------------------------------  ----------  ----------  ------------ 
Operating cash flows - settlement 
 of acquisition costs 
Nu-Heat                                      -         0.6           0.6 
Plura                                        -         0.3           0.7 
Adey                                       0.2         3.0           3.1 
Permavoid                                    -         2.5           2.5 
Other - aborted acquisition costs          0.5           -             - 
----------------------------------  ----------  ----------  ------------ 
                                           0.7         6.4           6.9 
----------------------------------  ----------  ----------  ------------ 
 
 
               Six months    Six months      Year ended 
                 ended 30      ended 30     31 December 
                June 2022     June 2021            2021 
                     GBPm          GBPm            GBPm 
-----------  ------------  ------------  -------------- 
Investing cash flows - settlement of deferred and 
 contingent consideration 
------------------------------------------------------- 
Permavoid             0.5             -               - 
-----------  ------------  ------------  -------------- 
 
 
                                   Six months     Six months  Year ended 
                                     ended 30       ended 30    December 
                                    June 2022      June 2021     31 2021 
                                         GBPm           GBPm        GBPm 
------------------------------  -------------  -------------  ---------- 
Investing cash flows - acquisition of businesses net of 
 cash at acquisition 
Keytec                                    2.6              -           - 
Nu-Heat                                     -           25.8        25.8 
Plura                                       -            1.8         1.8 
Adey                                        -          208.4       208.6 
Tree Ground Solutions                       -            0.2         0.2 
------------------------------  -------------  -------------  ---------- 
                                          2.6          236.2       236.4 
------------------------------  -------------  -------------  ---------- 
 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   9.         Acquisitions (continued) 

Keytec

On 31 March 2022, the Group acquired 100% of the voting rights and shares of Keytec Geomembranes Holding Company Limited (Keytec), for an initial cash consideration of GBP2.5m on a cash free and debt free basis plus a deferred consideration of GBP0.6m due no later than 12 months from completion. The total cash consideration of GBP2.9m included a payment for net cash and working capital commitments on completion of GBP0.4m. Keytec is a supplier and installer of stormwater attenuation products, geomembranes and gas protection products.

Details of the acquisition, including fair value adjustments, were as follows:

 
                                    Fair 
                                   value 
                                    GBPm 
------------------------------    ------ 
Property, plant and equipment        0.1 
Inventories                          0.1 
Trade and other receivables          0.7 
Cash and cash equivalents            0.3 
Trade and other payables           (0.5) 
Income tax payable                 (0.1) 
Net identifiable assets              0.6 
Goodwill on acquisition              2.9 
--------------------------------  ------ 
Total cash consideration             3.5 
Less: deferred consideration       (0.6) 
--------------------------------  ------ 
Initial cash consideration           2.9 
--------------------------------  ------ 
 

No material intangible assets have been identified. The goodwill arising on the acquisition primarily represented the technical expertise of the Keytec staff, synergies of companies offering both supply and install services and market share. The goodwill is allocated entirely to the Commercial and Infrastructure Systems segment.

The fair value of trade and other receivables was GBP0.7m. The gross amount of trade and other receivables was GBP0.7m and it is expected that the full contractual amounts will be collected.

Post-acquisition, Keytec contributed GBP1.3m revenue and GBP0.2m underlying operating profit which were included in the Group income statement. If Keytec had been acquired on 1 January 2022, the Group's results for the six months ended 30 June 2022 would have shown revenue of GBP319.1m and underlying operating profit of GBP47.6m.

Immaterial acquisition costs were incurred and are included in non-underlying items in administration expenses.

Following the Keytec acquisition, the carrying amount of goodwill and other intangible assets is as follows:

 
                                        Brand        Customer               Customer  Development 
                    Goodwill  Patents   names   relationships  Licences   order book        costs  Total 
                        GBPm     GBPm    GBPm            GBPm      GBPm         GBPm         GBPm   GBPm 
------------------  --------  -------  ------  --------------  --------  -----------  -----------  ----- 
Cost 
At 1 January 2022      467.7     39.5    66.5           114.3       0.8          0.9          2.0  691.7 
Additions                  -      0.3       -               -         -            -          0.6    0.9 
Acquisition of 
 businesses              2.9        -       -               -         -            -            -    2.9 
At 30 June 2022        470.6     39.8    66.5           114.3       0.8          0.9          2.6  695.5 
------------------  --------  -------  ------  --------------  --------  -----------  -----------  ----- 
Amortisation 
 and impairment 
 losses 
At 1 January 2021          -     15.4    19.2            13.4       0.3          0.4          0.2   48.9 
Charge for the 
 period                    -      1.6     2.6             3.1         -          0.2          0.1    7.6 
------------------  --------  -------  ------  --------------  --------  -----------  -----------  ----- 
At 30 June 2022            -     17.0    21.8            16.5       0.3          0.6          0.3   56.5 
------------------  --------  -------  ------  --------------  --------  -----------  -----------  ----- 
Net book value 
At 30 June 2022        470.6     22.8    44.7            97.8       0.5          0.3          2.3  639.0 
------------------  --------  -------  ------  --------------  --------  -----------  -----------  ----- 
At 31 December 
 2021                  467.7     24.1    47.3           100.9       0.5          0.5          1.8  642.8 
------------------  --------  -------  ------  --------------  --------  -----------  -----------  ----- 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   9.         Acquisitions (continued) 

Impairment testing of goodwill

Goodwill is not amortised but is subject to annual impairment testing (at 31 December). Goodwill has been allocated for impairment testing purposes to a number of cash-generating units (CGUs) which represent the lowest level in the Group at which goodwill is monitored for internal management purposes.

At 30 June 2022 an assessment was made to identify any indicators of impairment of goodwill as a result of the impacts of upstream supply chain issues in certain end markets and the cyber incident. Where required, impairment tests of the carrying amounts of goodwill were performed by analysing the carrying amount allocated to each CGU against its value-in-use. Value-in-use of a CGU is calculated as the net present value of that CGU's discounted future pre-tax cash flows. These pre-tax cash flows are based on forecast cash flow information for a period of one year, construction industry forecasts of growth for the following year and growth of between 2.60% to 2.80% (2021: 2.68% to 2.80%) thereafter. A pre-tax discount rate of 11.4% (2021: 10.0%) was applied in determining the recoverable amounts of CGUs. The pre-tax discount rate was estimated based on the Group's risk adjusted cost of capital. The Group applied sensitivities to assess whether any reasonably possible changes in assumptions could cause an impairment that would be material to these consolidated financial statements. The application of these sensitivities did not indicate any impairment of goodwill was reasonably possible at 30 June 2022.

   10.       Analysis of net debt 
 
                                                30 June  30 June  31 December 
                                                   2022     2021         2021 
                                                   GBPm     GBPm         GBPm 
----------------------------------------------  -------  -------  ----------- 
 
Cash and cash equivalents                          49.7     27.6         52.3 
----------------------------------------------  -------  -------  ----------- 
 
Current loans and borrowings 
Lease liabilities                                   5.4      4.3          4.5 
----------------------------------------------  -------  -------  ----------- 
 
Non-current loans and borrowings 
Bank loan - principal                             218.0    198.0        198.0 
               - unamortised debt issue costs     (0.4)    (0.8)        (0.6) 
Lease liabilities                                  16.5     17.5         16.1 
----------------------------------------------  -------  -------  ----------- 
                                                  234.1    214.7        213.5 
----------------------------------------------  -------  -------  ----------- 
 
Net debt                                          189.8    191.4        165.7 
----------------------------------------------  -------  -------  ----------- 
 

On 19 November 2018, the Group entered into an Amendment and Restatement Agreement with various lenders in respect of the Group's previous revolving credit facility agreement dated 4 August 2015. The bank loan, which comprised a GBP300.0m revolving credit facility and GBP50.0m uncommitted accordion facility, was secured and would have matured in November 2023 (with two further uncommitted annual renewals through to November 2025 possible). The Group incurred GBP1.7m of debt issue costs in respect of entering into the Amendment and Restatement Agreement dated 19 November 2018 which were capitalised and are being amortised to the income statement over the term of the facility to November 2023.

Subsequently on 10th August 2022 the Group renewed its banking facilities and entered into a Sustainability Linked Loan revolving credit facility agreement for GBP350.0m with a GBP50.0m uncommitted accordion facility expiring in August 2026 and a separate agreement for private placement loan notes of GBP25.0m with an uncommitted GBP125.0m shelf facility repayable August 2029. Any debt issue costs in respect of entering into both agreements will be capitalised and amortised to the income statement over the whole term of each facility, respectively.

With effect from 4 January 2022, LIBOR was replaced by the Standard Overnight Index Average (SONIA).

Interest was payable on the bank loan at SONIA plus an interest margin ranging from 0.90% to 2.75% which is dependent on the Group's leverage (net debt excluding lease liabilities as a multiple of pro forma EBITDA) and reduces as the Group's leverage reduces. The interest margin at 30 June 2022 was 1.40% (2021: 1.65%). The Group's net debt for the leverage calculation at 30 June 2022 was GBP167.9m (2021: GBP169.6m) and is defined as loans and borrowings net of unamortised issue costs less cash and cash equivalents, excluding the effects of IFRS 16. Pro forma EBITDA at 30 June 2022 was GBP115.7m (2021: GBP116.2m) and is defined as pre-IFRS 16 underlying operating profit before depreciation, amortisation and share-based payment charges, for the 12 months preceding

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   10.       Analysis of net debt (continued) 

the balance sheet date, adjusted where relevant, to include a full year of EBITDA from acquisitions made during those 12 months.

 
                                          30 June  30 June  30 December 
                                             2022     2021         2021 
                                             GBPm     GBPm         GBPm 
----------------------------------------  -------  -------  ----------- 
Pro forma EBITDA (12 months preceding 
 the balance sheet) 
Underlying operating profit                  94.1     80.3         95.3 
Depreciation of property, plant 
 and equipment                               18.5     17.7         18.4 
Amortisation of internally generated 
 intangible assets                            0.2        -          0.1 
Unwind of discount on lease liabilities     (0.8)    (0.6)        (0.7) 
Share-based payments charge                   3.2      2.2          2.5 
                                          -------  -------  ----------- 
                                            115.2     99.6        115.6 
EBITDA from acquisitions                      0.5     16.6          2.3 
----------------------------------------  -------  -------  ----------- 
                                            115.7    116.2        117.9 
----------------------------------------  -------  -------  ----------- 
 

At 30 June 2022, the Group had available, subject to covenant headroom, GBP82.0m (2021: GBP102.0m) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.

   11.       Other financial assets and liabilities 

Fair values of financial assets and financial liabilities

The book value of trade and other receivables, trade and other payables, cash balances, bank loan and other liabilities equates to fair value.

 
                                          Carrying   Fair value 
                                             value         GBPm 
                                              GBPm 
---------------------------------------  ---------  ----------- 
 Forward foreign currency derivatives        (0.2)        (0.2) 
 Interest-bearing loans and borrowings 
  due after more than one year               217.6        217.6 
 Deferred and contingent consideration         6.2          6.2 
 Lease liabilities                            21.9         21.9 
---------------------------------------  ---------  ----------- 
 Total at 30 June 2022                       245.5        245.5 
---------------------------------------  ---------  ----------- 
 
 Forward foreign currency derivatives          0.8          0.8 
 Interest-bearing loans and borrowings 
  due after more than one year               197.2        197.2 
 Deferred and contingent consideration         3.5          3.5 
 Lease liabilities                            21.8         21.8 
---------------------------------------  ---------  ----------- 
 Total at 30 June 2021                       223.3        223.3 
---------------------------------------  ---------  ----------- 
 
 Forward foreign currency derivatives          0.1          0.1 
 Interest-bearing loans and borrowings 
  due after more than one year               197.4        197.4 
 Deferred and contingent consideration         4.8          4.8 
 Lease liabilities                            20.6         20.6 
---------------------------------------  ---------  ----------- 
 Total at 31 December 2021                   222.9        222.9 
---------------------------------------  ---------  ----------- 
 

NOTES TO THE INTERIM FINANCIAL STATEMENTS

for the six months ended 30 June 2022

   11.       Other financial assets and liabilities (continued) 

The fair values were determined as follows by reference to:

   --      Forward foreign currency derivatives: quoted exchange rates. 

-- Deferred and contingent consideration: Directors' assessment of the likelihood that financial targets will be achieved (see Note 9).

   --      Lease liabilities: present value of lease payments to be made over the lease terms. 

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

The fair values disclosed above, with the exception of deferred and contingent consideration, which is categorised as Level 3, all relate to items categorised as Level 2.

There have been no transfers in any direction between Levels 1, 2 or 3 in the period.

INDEPENT REVIEW REPORT TO GENUIT GROUP PLC

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2022 which comprises the Interim Group Income Statement, the Interim Group Statement of Comprehensive Income, the Interim Group Balance Sheet, the Interim Group Statement of Changes in Equity, the Interim Group Cash Flow Statement and the related Notes 1 to 11. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2022 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern .

Responsibilities of the Directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the Review of the Financial Information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report

Use of our Report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

Leeds

15 August 2022

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