The Alumasc Group plc
Report and Accounts 2018
ALUMASC EVERYWHERE
ARCHITECTURAL
SCREENING, SOLAR
SHADING & BALCONIES
see page 8
Our business
segments
ROOFING & WALLING
see page 10
WATER MANAGEMENT
see page 12
HOUSEBUILDING &
ANCILLARY PRODUCTS
see page 14
The Alumasc Group
provides premium
building products,
systems and solutions
for specialist markets.
The latest online...
Certain information and topics may be covered
in greater detail online. The arrow below
indicates where further detail may be found.
Other information is outside the scope of
this report, but may be found on or accessed
through the Alumasc website.
www.alumasc.co.uk
The Alumasc Group plc Report and Accounts 2018Strategic Report 01
WELCOME
Financial Highlights
Group Revenues
(£m)
£98.4m
(2017: £104.8m)
Underlying Earnings per Share*
(pence)
14.4p
(2017: 20.1p)
Dividend per Share
(pence)
7.35p
(2017: 7.15p)
2018
2017
98.4
104.8
2018
2017
14.4
20.1
2018
2017
7.35
7.15
* A reconciliation of underlying earnings per share to basic earnings per share is provided in note 11 to the group financial statements.
Who We Are
Alumasc is a specialist supplier of premium
building products.
What We Do
We provide high quality systems and
solutions, the majority of which manage
the scarce resources of water and energy
in the built environment.
Read more on pages 6 to 15
Our Values
We behave with integrity.
We build strong relationships and trust.
We have an entrepreneurial approach.
We deliver what we say we will.
Read more on pages 4 and 5
Our Vision
To exceed customer expectations.
To provide a safe and stimulating
place for our employees to work.
To generate superior shareholder returns
over the medium to longer term.
Read more on pages 4 and 5 and pages 31 to 33
Inside your Report & Accounts
Strategic Report
Governance
Financial Statements & Company Information
02 Chairman’s Statement
04 Our Strategy and Business Model
06 Strategic Evolution
08 Our Business Segments
16 Chief Executive’s Review
24 Financial KPIs
25 Financial Review
28 Principal Risks and Uncertainties
30 Viability Statement
31 Corporate and Social Responsibility
34 Board of Directors
36 Corporate Governance Statement
40 Audit Committee Report
– Statement from the Chairman
41 Audit Committee Report
44 Directors’ Remuneration Report
– Statement from the Chairman
46 Directors’ Remuneration Report
53 Directors’ Report
56 Statement of Directors’ Responsibilities
Independent Auditor’s Report
57
63 Financial Statements
110 Financial Summary
111 Additional Shareholder Information
112 Notice of Annual General Meeting
119 List of Subsidiaries
120 Businesses and Operating Locations
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
02
CHAIRMAN’S STATEMENT
“The Board's firm belief in the
strength of Alumasc's strategic
position has led to a string of
decisions for action which we
believe will underpin and
accelerate further progress.”
John McCall
Chairman
Our Strategy
In recent years, Alumasc has been repositioned
to become a dedicated supplier of premium
building products to the UK construction
industry and to seek opportunities to expand
internationally.
From this tightly defined base, Alumasc
is focused on driving growth through a
combination of market share gains, innovation,
market development, and complementary
acquisitions such as Wade International
purchased in January 2018. These strands in
turn rely upon the quality of our products and
marketing, the development of new products
and services which genuinely complement the
portfolio and the patient nurturing of a small
number of overseas markets where we have
identified that our products have potential.
In conjunction with this market-led approach,
we recognise that opportunities exist for
operational efficiencies as the shape and scope
of our business changes.
This strategy will enable our group to
outperform against the industry benchmark.
The Year Under Review
Following six years of uninterrupted growth,
progress towards these strategic goals was
partially disrupted in the year under review by
the reversal in the group’s financial performance.
However, we continued to make the planned
investment which underpins the group’s longer
term development.
The reasons which lay behind the financial
reversal included the exceptionally hard and
disruptive winter season, unusually bringing
many building activities to a halt; the bankruptcy
of a major player in the construction industry,
which sent shockwaves across most sectors; and
the more illusive hesitancy that accompanies the
economic and political uncertainties in the UK
associated with Brexit. As anticipated a year
ago, we also experienced lower export sales
reflecting project timing after last year's record.
This should now begin to recover as the project
pipeline grows.
While severely impacting profit for the year
under review, none of these factors is viewed
as undermining the group’s underlying strategy.
Moreover, where possible, lessons have been
learnt and actions taken to diminish their impact
in the future.
The Alumasc Group plc Report and Accounts 2018Strategic Report
03
Meanwhile investment in support of the
group’s longer term development has continued,
including rehousing Timloc, the group’s
successful housebuilding products business,
in new, bespoke manufacturing premises;
and the acquisition of Wade International,
a synergistic and significant addition to our
water management division. We also continued
to invest in people to support our growth plans.
Development
Furthermore, the Board’s firm belief in the
strength of Alumasc’s strategic position has
led to a string of decisions for action which
we believe will underpin and accelerate further
progress. These include:
Outlook
As set out above, we believe that many of the
factors which held back the group’s financial
performance in the year under review were
external and do not undermine our strategy.
Indeed, we continue to invest for the longer
term and to take actions designed to underpin
and accelerate the group’s progress. While
some of the economic factors which impacted
the last year remain, the group’s strong
performance in the final quarter of that year,
coupled with the action plan outlined above,
gives your Board confidence that Alumasc has
a resilient business model and a strategy to
generate growth this year and beyond.
• relocation of a second principal group
operation into new manufacturing facilities,
freeing it to achieve its planned potential;
John McCall
Chairman
• a more streamline and cost-effective
operational structure;
• the proposed merger of the group’s two
pension schemes, thereby reducing costs and
enabling simplification of the group’s presently
complex legal structures;
• consideration of moving the group’s listing to
AIM to assist the pursuit of the strategy; and
• a review of the group Board to ensure that
the skills and experience are in place to
oversee and progress the group’s strategy.
Board Succession
Philip Gwyn, a Director of The Alumasc Group
since its flotation in 1986, retired from the
Board at the end of June this year. Philip’s
contribution to the direction and development
of Alumasc has been immense and I would like
to express my personal thanks to him for his
wisdom and enthusiasm over many years.
We have appointed a recruitment firm to
identify a new Non-Executive Director with
appropriate skills and experience and the
process is well advanced.
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 04
Strategic Report
OUR STRATEGY AND BUSINESS MODEL
The Alumasc Group plc Report and Accounts 2018
Our Strategic Objectives
1
Grow revenues faster
than the UK construction
market on average
2
Augment UK revenue growth
through the development of
selected export markets
4
Generate superior
shareholder returns over
the medium to longer term
3
Grow profit at a faster rate
than revenue by improving
operating margins
The Alumasc Group plc Report and Accounts 2018
05
Our Business Model
Build specialised positions in growth markets
Strategic focus on one or more of the following long-term
growth drivers in each group business:
Energy Management
Water Management
Bespoke Architectural Solutions
Ease of Construction
Manage these to optimise opportunities
Empower talented people
Leverage strong brands
Continuous innovation & development
Maximise the commercial opportunity
Invest in strategic priorities
Success
Satisfied customers
Motivated employees
Sustainable growth
Superior financial returns
Long term value creation
Read more about our business
segments on pages 6 to 15
Read more on how Alumasc
maximises its opportunities from
our CEO on pages 16 to 23
Read more on our success
through our KPIs on page 24
Strategic ReportGovernanceFinancial Statements 06
06
Strategic Report
STRATEGIC EVOLUTION
The Alumasc Group plc Report and Accounts 2018
Strategic Development and Operational Highlights
Levolux’s new business
streams gain momentum
Building Envelope Offering
Timloc expansion
Alumasc differentiates itself within the
marketplace by providing a single source
solution for the full envelope of buildings,
by combining the products and expertise
across the group’s portfolio. Key benefits
include unparalleled, single point technical
assistance, extensive warranties and
ongoing post-project support.
Rea Street, Birmingham City
Council – Full building envelope
refurbishment from Alumasc
Timloc’s purpose built
factory, Howden, Yorkshire
Since moving into its new, purpose-built
factory, Timloc Building Products has
continued to go from strength to strength.
The relocation was completed in December
2017, three months ahead of schedule.
The new factory, warehouse and office space
totals 88,000 sq ft and is based in Howden,
East Yorkshire. It is just one mile away
from the M62 and is close to all major road
networks. This is key to the business, as it
facilitates industry leading next day delivery
service.
The relocation has allowed Timloc to improve
capacity and efficiency significantly, enabling
it to expand manufacturing operations and
plan for future growth. Timloc continues
to out-perform the UK construction and
housebuilding market by developing new
products and increasing market share.
Westmount development, Jersey
Balcony Projects
Levolux has increased production capacity
at its Balcony Assembly Unit in Gloucester,
by streamlining its processes and investing
in state of the art lifting and handling
equipment. This, coupled with a proven
track record gained from working on
high-profile projects across the UK, has
helped Levolux to secure several million
pound plus balcony and balustrading
projects, most notably in Jersey, London,
Birmingham, Leeds and Manchester.
North America
Levolux continues to expand its presence
across North America by fostering
relationships with key architects, specifiers
and contractors. Levolux solar shading
and screening solutions are increasingly
specified on large, prestigious projects,
including corporate headquarters, leading
universities and shopping malls. A
dedicated sales team and export manager
combine effectively with our design,
procurement and production management
teams, ensuring even the most challenging
project requirements are satisfied.
The Alumasc Group plc Report and Accounts 2018Strategic Report The Alumasc Group plc Report and Accounts 2018
07
Non-Financial KPIs
Acquisition of
Wade International
The group has introduced non-financial KPIs
in its Annual Report for the first time this year:
Wade International’s
factory, Halstead, Essex
Alumasc was delighted to announce
the acquisition of Wade International
on 31 January 2018, a leading manufacturer
and supplier of quality drainage products
and with over 50 years' experience in
the industry.
Wade strengthens the unique “Rain
to Drain” position of Alumasc’s Water
Management division, being a market
leading brand within the Building
Drainage market.
Wade owns a 52,000 sq ft modern freehold
facility which has spare capacity to facilitate
future growth.
Wade’s brand recognition and specification
sales approach further strengthens our
product offering to international markets.
Wade has an established, highly skilled
and knowledgeable workforce.
Non-Financial Highlights
Health & Safety
Performance rate index
(PRI)
4.3
(2017: 5.7)
New Product Introductions
(% of revenues)
14.5%
Definition:
The PRI is a measure of days lost to safety incidents
as a proportion of total hours worked.
Comment:
The ratio improved (reduced) year on year in line
with continuous improvement actions.
Definition:
Revenues generated in the year from products
introduced in the last three years as a percentage
of total revenues in the year.
Investment in people to grow the business
(£)
Carbon emissions
(Tonnes CO2 per £million of revenue)
£300,000
(2017: £1,300,000)
34.4
(2017: 42.5)
Definition:
The incremental amount spent on sales, marketing
and operational support resources in the year.
Definition:
Carbon emissions from Alumasc group businesses
in tonnes per million pounds of revenue.
Comment:
Alumasc has continued to invest in future growth
potential but in 2017/18 at a lower rate given the
reduction in profit in that year.
Comment:
Carbon emissions reduced in absolute terms and
as a proportion of group revenue during the year
as a result of continuous improvement initiatives.
Quotation to sales order conversion
(%)
On time in full
(%)
43.5%
Definition:
Order intake for the year as a proportion
of quotations for new work in the year.
96.4%
Definition:
The percentage of occasions where the group met
expectations with regard to delivery of goods on
time in full in accordance with the customer’s order.
Note: As this is the first year that non-financial KPIs have been introduced, comparative information
for 2016/17 is not available for some measures.
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 08
Strategic Report
ARCHITECTURAL SCREENING,
SOLAR SHADING & BALCONIES
Brands
Nature of business
• Design and supply of bespoke solar shading, architectural screening and balcony
& balustrading systems.
• Installation of systems in the UK only.
Growth drivers
Routes to market
• Architectural specification.
• Direct to main building contractors
• Customer demand for bespoke solutions.
in the UK.
• Building regulations.
Opportunities and potential
• Development of embryonic UK balconies
& balustrading business.
• Development of North American
export business.
• Growth in operating margins through
operational efficiencies and gearing.
Stage of construction cycle
• Mid to late cycle.
• Via general contractors and installing
sub-contractors in North America.
Market position
• UK no. 1 in solar shading and screening.
• Recent entry to North American architectural
screening/shading market and UK balconies
and balustrading market with significant
potential for development in both.
Operations and supply chain
• UK factory operation providing fabrication,
assembly and finishing operations.
• Diversified specialist supply chain of mainly
UK and European based suppliers.
The Alumasc Group plc Report and Accounts 2018
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Architectural Screening,
Solar Shading & Balconies
Architectural Screening, Ikea Car Park
Key Features
Simple and effective
Levolux designed and installed replacement faux
timber fins to create an effective, curved screen that
encloses two car park ramp structures. The vertical
fins soften the visual impact of the ramp structures.
Levolux also refurbished the supporting steelwork to
restore the structural integrity of the façade, which
was originally erected in 2009.
Innovative, highly durable finish
The new aluminium fins feature an innovative,
‘wood-effect’ powder coating that closely matches
the appearance and texture of real wood. Unlike
a real timber equivalent, a specially treated aluminium
fin will not change colour or be prone to movement
due to weathering. By harnessing new powder
coating techniques, Levolux can offer a multitude
of finishes that accurately mimic timber, terracotta
or even concrete.
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Strategic Report
ROOFING & WALLING
Brands
Nature of business
• Premium waterproofing solutions for flat roofs – including green roofs, blu-roofs and roofing
support services.
• Exterior wall insulation ("EWI") systems.
Growth drivers
Routes to market
• Architectural specification.
• Improving insulation standards
in hard to heat homes.
• Building regulations.
Opportunities and potential
• Outperformance of the UK construction
market through continued market share gain
and introduction of new products and systems.
• Specification-led cross-selling of a “building
envelope“ of Alumasc exterior building product
solutions including water management, facade
systems and balconies & balustrades.
• Recovery in demand for high quality specified
EWI and facade systems.
Stage of construction cycle
• Mid-cycle.
• Architectural specification, sales to main
contractors via a network of registered
installing sub-contractors.
Market position
• Roofing specification
– UK no. 2.
• Walling
– UK no. 3.
Operations and supply chain
• Mainly outsourced to suppliers in Europe
and North America and other Alumasc
group companies.
• In-house manufacture of renders for the
walling business.
The Alumasc Group plc Report and Accounts 2018
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Green Roof and
Waterproofing
Elephant and Castle, London – Green
Roof System and Waterproofing
Key Features
Blackdown Green Roof
Blackdown supplied green and brown roofing to help
local ecosystems and provide a natural finish with the
surrounding area.
Hydrotech Structural Waterproofing
With zero product failures in over 50 years worldwide,
Hydrotech was installed beneath the green roof
to provide a seamless hot melt waterproofing
membrane solution.
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Strategic Report
ALUMASC WATER
MANAGEMENT SOLUTIONS
Brands
Nature of business
• Solutions that manage and attenuate water originating inside and outside buildings.
• Integrated “Rain to Drain” solutions for the built environment.
Growth drivers
Routes to market
• Legislation aimed at conservation,
attenuation and control of water.
• Majority of sales are specification/
contract led.
• Architectural and structural engineering
• Most are sold via building distributors.
specifications.
• Building regulations.
• Some are sold direct via civil drainage
contractors.
Opportunities and potential
Market position
• Development of further “Rain to Drain”
synergies following the acquisition of Wade.
• Alumasc Rainwater:
– No. 1 in UK aluminium.
• Increase divisional export sales with focus
– No. 2 in cast iron.
on systems using Gatic, Harmer and
Wade products.
• Grow operating margins through new
product introductions, operational efficiency
and gearing.
Stage of construction cycle
• Mid-cycle.
• Harmer & Wade building drainage:
– No. 1 in metal building drainage systems.
• Gatic
– No. 1 in UK engineered access covers.
– No. 1 in UK high capacity drainage.
Operations and supply chain
• Majority UK in-house manufacture.
The Alumasc Group plc Report and Accounts 2018
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Wade stainless steel
drainage channels
Victoria & Albert Museum, London
Stainless steel hidden channels, which are suited for
draining large areas, are finished with block paving
to provide an aesthetic solution. Can be designed and
manufactured in house to accommodate a range of
paving thicknesses, flow rates and any bespoke design
detail requirements.
On this project Wade worked closely with the architect
to provide a solution for a large area of block paving
which needed to be drained effectively following
critical water entrapment, due to this product being
installed over the exhibition area of the museum.
Several design challenges were overcome as the paved
area had random shapes, so bespoke access cover
shapes were required and a curved channel to follow
the curve of the glass in the café windows.
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Strategic Report
HOUSEBUILDING &
ANCILLARY PRODUCTS
Brands
Roofline
and above
Loft doors
Air leakage
solutions
Nature of business
Cavity trays
• Premium housebuilding products and ancillary items.
Growth drivers
Stage of construction cycle
• Shortage of new houses in the UK.
• Early-mid cycle.
• Legislation and building regulations.
Routes to market
Opportunities and potential
• Merchants and distributors.
• Outperformance relative to the UK
• House builder specification.
construction market through continued
range development and market
share growth.
• Leveraging strong sales channels
through product portfolio and excellent
customer service.
• Margin improvement through operational
efficiency, utilising the new factory
commissioned in early 2018.
Market position
• Unique product and service proposition.
Operations and supply chain
• Mostly in-house manufacture.
Access
panels
Cavity
closures
Underfloor
and through
ventilation
The Alumasc Group plc Report and Accounts 2018
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Housebuilding & Ancillary Products
Timloc products on a new house
Timloc Building Products is one of the UK’s leading manufacturers
of plastic injection moulded building products. Timloc designs,
manufactures and supplies new build and refurbishment building
product solutions mainly for housebuilding applications from ground
level to the roof ridge.
Timloc is extremely proud of its British heritage and has been
tried, tested and trusted by its customers for over 40 years. Timloc
understands the demands of today’s construction and merchant
markets and has established a reputation for consistently delivering
exceptional levels of service.
Trust Timloc to deliver – with unrivalled free next working day delivery
service to branch or site on low order values.
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Strategic ReportGovernanceFinancial Statements
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Strategic Report
CHIEF EXECUTIVE’S REVIEW
“Alumasc remains well positioned to
outperform the UK construction market,
given its robust business model, strong
market positions and focus on key
strategic growth drivers.”
Paul Hooper
Chief Executive
Our Performance:
Revenue
£98.4m
Underlying Operating Profit
£6.7m
Underlying Profit Before Tax
£6.5m
Profit Before Tax
£5.4m
The Alumasc Group plc Report and Accounts 2018Strategic Report
17
Overview of Underlying and Statutory Profit
£m
Revenue
Operating profit1
Profit before tax2
2017/18
Non-
Underlying underlying
Statutory Underlying
Non-
underlying
98.4
6.7
6.5
–
(0.6)
(1.1)
98.4
6.1
5.4
104.8
9.1
9.0
–
(0.3)
(0.9)
2016/17
Statutory
104.8
8.9
8.1
1 Non-underlying costs included in operating profit comprise brand amortisation of £0.2 million (2016/17: £0.3 million), loss on disposal of SCP of £0.2 million, profit on disposal
of Amorim trade investment of £0.4 million, Timloc relocation costs of £0.3 million and Wade acquisition costs of £0.2 million (see note 5 to the financial statements).
2 Non-underlying costs included in profit before tax include the costs charged to operating profit (see note 1 above) and IAS 19 pension scheme finance costs of £0.5 million
(2016/17: £0.6 million) (see note 5 to the financial statements).
Overview
The 2017/18 financial year was an important
one for Alumasc in terms of strategic
development. However, as reported in May,
largely due to external circumstances beyond
our control, trading during the year was more
challenging than expected.
In the financial year to 30 June 2018, Alumasc
reported underlying earnings per share of
14.4 pence (2016/17: 20.1 pence) and basic
earnings per share of 12.0 pence (2016/17:
18.3 pence) from revenues of £98.4 million
(2016/17: £104.8 million).
Most of the shortfall in financial performance
relative to the prior financial year occurred
during the third quarter when trading
momentum was disrupted by severe weather
and a cautious approach from building
contractor customers in committing to new
work against an uncertain economic and
political background, both in the UK and in
export markets, leading to project delays.
This was exacerbated by the fall-out from the
insolvency of Carillion in late January, which
further impacted confidence and the availability
of credit across much of the UK construction
sector in the following months. Pleasingly
though, the financial year ended strongly, with
a record trading performance delivered by our
specialist building products businesses in the
final quarter, including the benefit of some
larger construction projects delayed from earlier
in the year.
Strategic development
2017/18 was a significant year for Alumasc’s
strategic development as we:
1. Continued to invest in capacity for growth.
Examples of this were:
• the successful commissioning of a new 88,000
square foot manufacturing and warehousing
facility at Timloc, our housebuilding products
business, in January 2018; and
• the investment of £0.3 million in additional
commercial resources to drive and support
growth, with particular focus on Levolux,
our bespoke solar shading, screening and
balconies business, where significant long
term opportunities are available in the North
American and balconies markets.
3. Leveraged further synergy between
group businesses.
The acquisition of Wade was highly
complementary to Alumasc’s existing water
management activities. This division will now
account for almost 40% of group revenues.
When combined with Alumasc Roofing, some
60% of the group now participates in the group’s
“Rain to Drain” strategy which enables water
to be managed, controlled and attenuated as it
flows through and around buildings.
In addition, our specification sales teams are
now in a position to offer a broader building
envelope of exterior building product solutions
to customers, comprising roofing, walling,
balconies, and water management systems.
2. Improved the quality of the group’s
earnings through the proactive
management of our portfolio
of businesses.
Examples of this were:
• the acquisition of Wade International,
a high-quality specialist drainage business
for £8.0 million on 31 January 2018. In its
full financial year to 30 June 2018, Wade
generated operating profits of £1.3 million
from revenues of £5.3 million at operating
margins of above 20%; and
• the disposal of the scaffolding products
business, SCP, in July 2017 for net sale
proceeds of £0.9 million. In 2016/17 SCP
traded at a break-even level from revenues
of £4.2 million.
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
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CHIEF EXECUTIVE’S REVIEW continued
Alumasc’s model of value creation
through strategic portfolio management
"Fast flowing streams"
Key Strategic
Criteria
Water
Management
Energy
Management
Bespoke
Architectural
Solutions
Ease of
Construction
Key Financial
Targets
Operating
Margin
>10%
Return on
Investment
(post tax)
>15%
Operating Cash Conversion >75%
Working Capital % Sales <15%
Portfolio
Diversification
End Use
Construction
Markets
Stage of
Construction
Cycle
Routes
to Market
Export Market
Development
Management
Drivers
Entrepreneurial
Leadership
Strong
Management
& Skills Mix
New Product
Development
Continuous
Improvement
Board Decisions
Can't Meet
Criteria
Meet
Criteria
Exceed
Criteria
Divest
Hold, Develop,
Improve
Invest,
Grow, Acquire
The Alumasc Group plc Report and Accounts 2018Strategic Report The Alumasc Group plc Report and Accounts 2018
19
4. Continued to implement a simpler and
more cost-efficient operating structure
across the group.
The combination of:
• the commissioning of the 88,000 square foot
Timloc factory last January, described above;
• the acquisition of Wade with a modern 52,000
square foot freehold factory; and
End-Use Market Analysis – 2017/18
7 %
2
4
%
12 %
• the intention for Alumasc Water Management
Solutions to relocate to new manufacturing
facilities in the next two years
%
2
1
will provide the group with a more modern,
larger and flexible footprint which will enable us
to consolidate our operations on to fewer sites,
thereby enabling us to improve manufacturing
and supply chain efficiency and reduce
duplication of overheads.
Further, the initiatives outlined in the
Chairman’s Statement comprising:
• the continued refreshing and renewal of the
group Board;
• the proposed merger of the group’s two legacy
defined benefit pension schemes and the
consequential rationalisation of the group’s
legal structure, together unlocking significant
administrative cost saving potential; and
• considering whether to re-list the group’s
shares on the Alternative Investment
Market (AIM)
are also consistent with the broader themes
of simplification and cost efficiency that we
believe will help us build a future for Alumasc
as a more focused, dynamic and entrepreneurial
group.
7
%
9%
2%
1%
4%
22%
Performance overview
Group revenues were £98.4 million compared
with £104.8 million in the prior financial year.
The shortfall mostly related to the poor third
quarter trading performance described above
which was attributable largely to external events.
In addition, and as foreseen in our outlook
statement last September, the 2017/18 financial
year did not benefit from as strong a contribution
from larger construction projects (with revenues
of £500,000 or more), including export projects,
when compared with the prior financial year.
These projects make a significant marginal profit
contribution to overheads and therefore can have
a material impact on the group’s overall operating
profits and margins. At the time of writing, early
signs are that the current 2018/19 financial
year should see a greater revenue and profit
contribution from larger projects than was the
case in 2017/18.
UK sales were similar to those in the prior year,
but export sales were 27% lower. This illustrates
the impact of larger contracts on the group’s
overall financial performance for the year, with
no contract in the year under review coming close
to the scale of the £3.1 million revenue North
American power station screening project which
had benefited Levolux in the prior year.
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Private Housing
Private Commercial
Infrastructure
Private Industrial
Public Housing
Public Non-Residential
Public Housing Repair,
Maintenance & Improvement
Public Non-Residential Repair,
Maintenance & Improvement
Private Housing Repair,
Maintenance & Improvement
Private Non-Residential Repair,
Maintenance & Improvement
Despite some inflationary input cost pressure
in the first half of the financial year, profit
contribution margins after variable costs
recovered to levels similar to those in the prior
year, but gross margins after variable costs and
operational fixed costs reduced from 31.3% to
30.6% reflecting an adverse operational gearing
impact from lower sales (including the large
project impact described above); investment in
operational support resources at Levolux ahead
of growth anticipated to flow from the significant
increase in project quotation levels during the
current year; and additional property costs mainly
relating to the new Timloc factory commissioned
at the half year stage.
Selling, general and administrative costs were
well controlled with further investment in sales
resources to drive continued growth in the
business over the medium term largely offset
by savings elsewhere.
The resulting underlying profit before tax was
£6.5 million compared with £9.0 million in
the prior financial year at underlying operating
margins of 6.8% (2016/17: 8.7%).
Non-underlying items, analysed in the financial
review, together amounted to a net cost of
£1.1 million during the year (2016/17: £0.9
million), and therefore statutory profit before tax
was £5.4 million (2016/17: £8.1 million).
Whilst the financial performance for the year
was below our initial expectations, we believe
the reasons for the shortfall relate to specific
circumstances during the year and that the group’s
strategy and business model remain robust.
20
CHIEF EXECUTIVE’S REVIEW continued
Operational review
Architectural Screening,
Solar Shading & Balconies
2017/18 performance highlights
• Revenue: £22.0 million
(2016/17: £24.4 million)
• Underlying operating profit*:
£0.8 million (2016/17: £2.0 million)
• Underlying operating margin*:
3.6% (2016/17: 8.2%)
• Operating profit: £0.6 million
(2016/17: £1.8 million)
* Prior to brand amortisation charges of £0.2 million
in both years.
Levolux’s financial performance in the year
reflected a significantly lower level of sales from
larger projects with greater than £500,000
revenue. In part, this was anticipated after
a strong prior year performance, but it also
reflected project delays attributed to broader
economic and political uncertainties which in
turn prolonged the decision-making process of
property developers and building contractors,
exacerbated by the credit issues experienced
across the UK construction industry following
the failure of Carillion in January.
Alumasc has nonetheless continued to invest
to unlock Levolux’s significant future growth
potential: both in its embryonic UK balconies
and balustrading business and in its North
American business, also at a relatively early
stage of development. The investment in
people resources, including sales, estimators,
designers and project managers absorbed
in the income statement amounted to some
£0.2 million in the year.
This investment enabled quotations for new
work in the balconies and balustrading business
to increase by five-fold compared with the
prior year to over £60.0 million, and to more
than double to £40.0 million in the North
American business. These quotation figures
validate our belief in the medium to longer
term opportunity in these markets and reflect
Levolux’s growing brand presence. Our focus
now is to strengthen the existing commercial
infrastructure in place to increase order
conversion rates.
The outlook for larger project revenues in the
2018/19 financial year currently looks stronger
than it did a year ago, including in the UK core
solar shading and screening business.
Levolux Shading – Remington
office and labs
Levolux Architectural Screening, Eastleigh College – Hampshire
The Alumasc Group plc Report and Accounts 2018Strategic Report 21
Roofing & Walling
2017/18 performance highlights
• Revenue: £31.2 million
(2016/17: £34.0 million)
• Operating profit: £1.8 million
(2016/17: £2.8 million)
• Operating margin: 5.8%
(2016/17: 8.2%)
Alumasc Roofing experienced a challenging year
with weaker than expected demand in the UK
new build construction market, exacerbated
by some of our contractor customers taking a
cautious approach before committing to new
developments in view of the broader economic
uncertainties, and a number also experiencing
credit issues either directly or indirectly in the
months following the failure of Carillion.
Nonetheless, Alumasc Roofing has adapted well
both in winning refurbishment work, particularly
in the Academies sector, and in developing new
products such as surfacing systems to exploit
available market opportunities.
Alumasc has continued to invest in talented
sales resources both to increase revenues in
regions of the UK where we are currently
under-represented and to develop increased
specification system selling of a broader building
envelope of Alumasc exterior building products,
including water management systems, walling
systems and balconies.
Alumasc Roofing – Atlantic College, Roofing and Green Roof
Following the £0.3 million overhead cost saving
initiative of August 2017, Alumasc Facades
posted a robust financial performance for the
year despite reduced public funding for exterior
wall insulation (EWI) systems in England and
Wales and delays to projects in Scotland under
the HEEPs and SEEP funding regimes due to
adverse weather conditions in the third quarter
of the year and with installing contractors
challenging some awards of work by local
authorities, causing further delay.
Demand was subdued for high rise projects
following the Grenfell Tower tragedy a year ago,
but there are now promising signs of increasing
demand from specifiers for high quality EWI
systems, including those that have always been
supplied by Alumasc, particularly now those that
utilise a combination of fire retardant render and
mineral wool solutions.
Blackdown green roof, The Bunker, Monmouthshire
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 22
CHIEF EXECUTIVE’S REVIEW continued
Water Management
2017/18 performance highlights
• Revenue: £34.5 million
(2016/17: £32.6 million)
• Underlying operating profit*:
£3.6 million (2016/17: £4.1 million)
• Underlying operating margin*:
10.3% (2016/17: 12.6%)
• Operating profit: £3.3 million
(2016/17: £4.0 million)
* Prior to Wade acquisition costs of £0.2 million in
2017/18 and brand amortisation charges of £0.1 million
in both years.
This was an important year for the strategic
development of this division.
The acquisition of Wade International for £8.0
million on 31 January 2018 added a high quality,
market leading range of surface water drainage
solutions backed by a highly respected brand
to complement our existing range of water
management solutions. In addition to Alumasc
Roofing, these comprise Alumasc Rainwater
systems; Skyline soffit and coping systems;
Harmer roof and through building drainage
systems; and Gatic drainage systems for areas
outside the building. Wade has performed well,
in line with expectations, since acquisition and
we now believe that the export potential for
this business, especially when combined with
Gatic’s existing strong presence in the Middle
and Far East, is greater than anticipated prior
to acquisition.
With the acquisition of Wade, Alumasc has
significantly enhanced its ability to provide full
“Rain to Drain” solutions to manage the flow,
control and attenuation of water through and
around buildings.
Within the division, Alumasc Water Management
Solutions (AWMS) had a resilient year despite
some under recovery of input cost inflation in the
first-half, with demand from building merchant
customers remaining robust for solutions serving
the new housebuilding and refurbishment sectors.
Rainclear, which has proven to be an excellent
acquisition since joining Alumasc in 2012,
continues to go from strength to strength,
providing a specialist route to market for
specialist installers in need of advice and strong
customer service in the supply and use of high
quality metal Rainwater systems.
Gatic, which sells mostly into large infrastructure
projects, experienced some project delays and
competitive margin pressure in its civil drainage
business, but benefited from more solid demand
for engineered access covers. After a record
prior year for export sales, the year under
review was more difficult and this impacted
both revenues, marginal profit contribution and
therefore operating margins. However, at the
time of writing, the outlook for larger projects,
including exports, in the 2018/19 financial year
looks more positive.
Alumasc Water Management Solutions – Skyline, Convent Lane, Hampshire
The Alumasc Group plc Report and Accounts 2018Strategic Report 23
Housebuilding
& Ancillary Products
2017/18 performance highlights
• Revenue: £10.5 million
(2016/17: £9.6 million)
• Underlying operating profit*:
£1.7 million (2016/17: £1.6 million)
• Underlying operating margin*:
15.8% (2016/17: 16.5%)
• Operating profit: £1.4 million
(2016/17: £1.6 million)
* Prior to factory move costs of £0.3 million in 2017/18.
2017/18 was a key year for the development
of Timloc as the business relocated from two
capacity constrained sites to a new single,
purpose built, 88,000 square foot leased facility
in Howden, East Yorkshire, close to the M62
motorway. The relocation process was seamless,
and a great credit to the management team and
all the workforce.
Timloc continues to benefit from a positive
UK new build housing market. Revenue
growth of 9.6% exceeded market growth
again as Timloc’s customer service driven
model of supplying its building distribution
customers with excellent next day delivery
at attractive carriage paid prices being a great
success, resulting in the business expanding
its product portfolio to existing customers.
Alumasc continues to invest in Timloc enabling
the business to introduce new products,
such as expanding the relatively new Above
the Roofline range, which is gaining further
traction, and to increase automation and
manufacturing efficiency.
Timloc expects to recover increased property
costs of circa £0.5 million within its first year
of operating the new factory and to continue
its trajectory of profitable growth from that
point onwards.
Timloc – eaves vent pack
Outlook
For the most part, Alumasc continues to operate
in an uncertain UK economic and political
environment, with the UK construction industry
forecast to contract by one to two percent
in 2018 and grow only by low single digit
percentages in each of the following two years.
Against this background Alumasc remains well
positioned to outperform the UK construction
market over the medium term, given its robust
business model, strong market positions and
focus on the key strategic growth drivers of:
• managing the scarce resources of water
and energy in the built environment,
including developing international markets
for these solutions;
• providing bespoke solutions tailored to
customer needs supported by excellent
customer service;
• developing high quality products and
solutions and new business streams such
as balconies and other new products that
ease the construction process and lower the
installed and life cycle costs of buildings;
together with
• the acquisition of high-quality complementary
businesses such as Wade.
Paul Hooper
Chief Executive
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 24
FINANCIAL KPIS
The group’s financial KPIs are summarised below:
Year-end Group Order Book
(£m)
£22.4m
(2017: £28.6m)
Average Trade Working Capital
(as a percentage of sales)
13.6%(2017: 11.3%)
2018
2017
22.4
28.6
Comment/explanation
Reflects a lower, but recovering,
Levolux order book at year-end.
2018
2017
13.6
11.3
Comment/explanation
The increase reflects lower revenues and
the impact of project delays during the
year on working capital management.
Group Revenues
(£m)
£98.4m
(2017: £104.8m)
Net (Debt)/Cash
(£m)
2018
2017
98.4
104.8
Comment/explanation
Lower third quarter 2017/18 revenues,
due largely to external factors.
2018
(4.8)
2017
(£4.8m)
(2017: £6.1m net cash)
Comment/explanation
The net cash/debt movement reflects the
acquisition of Wade for £8m and investments
in capital projects and working capital.
6.1
Underlying Operating Margin
(%)
6.8%(2017: 8.7%)
Pension Deficit (IAS 19)
(£m)
2018
2017
6.8
8.7
Comment/explanation
Reduced revenues gave rise to lower
overhead recovery and reduced
operating margins in the year.
2018
2017
15.1
20.6
Underlying Profit Before Tax
(£m)
£6.5m(2017: £9.0m)
Year-end Shareholders’ Funds
(£m)
£15.1m
(2017: £20.6m)
Comment/explanation
The pension deficit improved due to
company cash contributions during
the year and more favourable market
valuation assumptions at 30 June 2018.
£24.4m
(2017: £20.4m)
2018
2017
6.5
9.0
Comment/explanation
Lower revenues at reduced operating
margins led to lower profit.
2018
2017
24.4
20.4
Comment/explanation
Increase due to retained profit during the
year and pension scheme valuation gains.
Underlying Earnings per Share
(pence)
14.4p
(2017: 20.1p)
Return on Investment (post-tax)
(%)
14.5%
(2017: 25.0%)
2018
2017
14.4
20.1
Comment/explanation
Reduced underlying earnings per
share reflects lower underlying profit
before tax in the year.
2018
2017
14.5
25.0
Comment/explanation
ROI reduced due to the lower profit for
the year on a higher average capital base.
The Alumasc Group plc Report and Accounts 2018Strategic Report 25
FINANCIAL REVIEW
“The group invested £10 million to grow
the business, including the acquisition
of Wade International and the fit-out
of the new Timloc factory.”
Andrew Magson
Group Finance Director
Our Performance:
EBITDA
£8.2m
Shareholders’ Funds
£24.4m
Post-tax ROI
14.5%
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 26
FINANCIAL REVIEW continued
Reconciliation of Underlying Profit Before Tax
to Profit Before Tax
Underlying profit before tax
Brand amortisation
IAS 19 net pension scheme finance costs
Loss on disposal of the SCP business
Profit on disposal of available-for-sale assets
Timloc relocation costs
Wade acquisition costs
Statutory profit before tax
2017/18
£m
2016/17
£m
6.5
(0.2)
(0.5)
(0.2)
0.4
(0.3)
(0.2)
5.4
9.0
(0.3)
(0.6)
–
–
–
–
8.1
Taxation
The group’s underlying effective tax rate was
20.2% (2016/17: 20.6%), slightly above the
weighted average UK statutory rate of tax
applicable to the group’s financial year of 19%
due to certain costs that are disallowable for
tax purposes.
The group’s effective tax rate on statutory profit
before tax was 19.7% (2016/17: 19.5%), also
above the weighted average UK statutory rate
of tax applicable to the group’s financial year,
as a number of the non-underlying costs set
out in the table above are not allowable for
tax purposes.
We expect the group’s underlying tax rate to
be circa 20% in the 2018/19 financial year.
Earnings per share
Underlying earnings per share for the year
was 14.4 pence (2016/17: 20.1 pence).
The reduction was broadly consistent with
the lower underlying profit before tax for the
year for the reasons described in the Chief
Executive’s review.
Basic earnings per share of 12.0 pence
(2016/17: 18.3 pence) reflected the reduction
in statutory profit before tax for the year for
the reasons described in the Chief Executive's
review; together with the year on year change
in the items shown in the reconciliation of
underlying to statutory profit before tax, above;
and changes in the group’s overall tax rate for
the year also described above.
Dividends
The Board has decided to recommend to
shareholders an increased final dividend of 4.4
pence per share (2016/17: 4.3 pence), applicable
to members on the share register on 5 October
and to be paid on 31 October.
This takes the total dividend for the year to
7.35 pence (2016/17: 7.15 pence), an increase
of 2.8%.
Alumasc’s distributable reserves, available for
the payment of dividends to shareholders, are
disclosed in note 15 to the parent company
financial statements. These amount to £9.4
million, without pension trustee consent,
increasing to a maximum of £23.4 million with
pension trustee consent. The approximate cash
cost of the proposed final dividend for the
2017/18 financial year, which under accounting
conventions is not yet deducted from these
distributable reserves, is £1.6 million.
Alumasc does not have any dividend blocks
in its active trading subsidiaries and therefore
would expect to replenish parent company
distributable reserves annually with dividends
paid from the future profits generated by those
subsidiary companies.
Alumasc has a progressive dividend policy that
seeks to grow the dividend broadly in line with
underlying earnings growth, having regard to the
extent to which dividend payments are covered
by underlying earnings after taking into account
pension scheme funding commitments.
Reconciliation of underlying to statutory
profit before tax
Underlying profit before tax of £6.5 million
exceeded statutory profit before tax of £5.4
million as reconciled in the table opposite:
The reconciling items were:
• Amortisation of acquired brands £0.2 million
(2016/17: £0.3 million). This is a non-cash
charge determined by management judgment
in applying accounting standards. It does
not affect the economic value of the group.
The reduction in the charge compared to
the prior year relates to the Rainclear brand
becoming fully amortised in the earlier part
of the year. This more than offsets the initial
post-acquisition charge relating to the Wade
brand acquired in January 2018. The full year
amortisation charge relating to the Wade
brand in 2018/19 and thereafter is expected
to be £0.1 million pa. Details of the valuation
of the Wade brand and other fair value
adjustments made to the balance sheet of
Wade at acquisition are set out in note 13 to
the financial statements.
• IAS 19 net pension scheme finance costs of
£0.5 million (2016/17: £0.6 million). This is a
non-cash charge determined by a pensions
actuary. It represents a year’s unwind of the
discount to present values of the group’s
pension deficit using AA-rated corporate
bond yields as the discount rate. This charge
is outside management’s control. The year
on year reduction in the charge relates to
a lower corporate bond yield applicable at
the beginning of the 2017/18 financial year.
• The loss on disposal of £0.2 million from
the sale of the Scaffold and Construction
Products business in July 2017 related to
a non-transferable lease commitment that
became onerous when the business was sold,
and the legal costs of selling the business.
These costs were excluded from underlying
earnings as they were non-recurring costs.
• The profit of £0.4 million on disposal of
an available for sale asset relates to the
disposal of the group’s long standing 20%
trade investment in Amorim Isolamentos, a
Portuguese cork producer. The gain on sale
was excluded from underlying earnings as it
was a non-recurring item.
• The £0.3 million cost of relocating the Timloc
factory, described in more detail in the
Chief Executive’s review, was excluded from
underlying earnings as it was a one-off cost.
• The £0.2 million cost, relating mainly to legal
fees and stamp duty, associated with the
acquisition of Wade International in January
2018 was also excluded from underlying
earnings as it was a one-off cost.
The Alumasc Group plc Report and Accounts 2018Strategic Report
27
2017/18
£m
2016/17
£m
8.2
(2.7)
0.7
6.2
(1.3)
(0.2)
(0.7)
(3.2)
(2.6)
(1.8)
(2.0)
(8.0)
0.9
(10.9)
10.5
(3.7)
(1.7)
5.1
(0.9)
(0.1)
(0.8)
(3.3)
(2.4)
(2.4)
(0.2)
–
0.1
(2.5)
Summarised Cash Flow Statement
EBITDA*
Underlying change in working capital
Short term changes in working capital on large construction contracts
Operating cash flow
Replacement capital expenditure
Interest
Tax
Pension deficit funding
Dividend payments
Sub total
Expansion capital expenditure
Wade acquisition consideration
SCP and Amorim disposal proceeds & others
Net cash flow
Net (debt)/cash at year end
(4.8)
6.1
* EBITDA: Underlying earnings before interest, tax, depreciation and amortisation.
Pensions
The valuation of Alumasc’s pension deficit for
accounting purposes at 30 June 2018 using IAS
19 valuation conventions was £15.1 million. This
was an improvement on the previous financial year
end valuation of £20.6 million, largely reflecting
the benefit of pension deficit recovery payments
made by the group during the year of £2.7 million,
together with actuarial gains arising from the
slightly higher AA corporate bond discount
rates and slightly lower long term inflation rates
prevailing at 30 June 2018; together with more
favourable current mortality assumptions, as set
out in note 21 to the financial statements.
The group is taking an increasingly pro-active
approach in managing its legacy defined pension
obligations. Initiatives include:
• A proposal to merge the group’s two legacy
defined benefit pension schemes to reduce
ongoing administration costs and improve
efficiency. The merger is planned to take
place in time to be reflected in the next
formal triennial valuation of the schemes
as at 31 March 2019.
• Taking opportunities to reduce gross scheme
liabilities should scheme members, with
independent advice as appropriate, choose to
leave including the greater pension freedoms
now available to them.
• Improving the efficiency of returns on scheme
assets by switching approximately half of the
return seeking portfolio, or approximately 15%
of total assets invested, from actively managed
to passive global equity index tracker schemes at
significantly lower ongoing management costs.
• Reducing the volatility of scheme valuations
through the use of derivatives and insurance
products to hedge pension liabilities.
Banking facilities
Alumasc’s banking facilities comprise:
• An unsecured committed five-year revolving
credit facility of £12.5 million, expiring in
August 2020
• Overdraft facilities, repayable on demand,
of £3.5 million.
Going concern and viability
After due enquiry and based on the information
available at the date of this report, the Board
believes that Alumasc will remain a going
concern and financially viable on the basis of
the assumptions and relevant time horizons set
out in the going concern assessment on page
67 and the viability statement on page 30.
Andrew Magson
Group Finance Director
11 September 2018
Investment in growth, cash flow and net debt
The group’s overall net cash outflow for
the year was £10.9 million. This included
an investment of £10.0 million to grow
the business, including £8.0 million for the
acquisition of Wade International and £2.0
million relating to capital investment in excess
of the depreciation charge for the year,
including the fit-out cost of the new Timloc
leased factory.
At 30 June 2018 the group had a modest level
of net debt of £4.8 million (30 June 2017: net
cash of £6.1 million).
The group invested a net £2.0 million in working
capital during the year, mainly relating to:
• the strong final quarter trading performance
where cash from sales made in the weeks
prior to the year end was not collected until
after 30 June; and
• the earlier phasing of inventory purchases to
mitigate cost inflationary pressure during the
year, which resulted in a lower than usual
level of trade creditors at 30 June 2018.
Our rolling average working capital as a percentage
of sales ratio increased to 13.6% in 2017/18 from
11.3% in the prior year reflecting the impact of
numerous construction project delays beyond
the group’s control during the year which made
working capital management more challenging
than usual, and the earlier phasing of inventory
purchases during the year already described.
Balance sheet and return on investment
The group’s net assets and shareholders’ funds
increased from £20.4 million at the beginning
of the financial year to £24.4 million at 30
June 2018, mainly reflecting the net actuarial
gain on the pension deficit described below,
together with retained profit after tax and
dividend payments for the year.
The group defines its capital invested as the
sum of shareholders’ funds, together with the
pension deficit (net of tax) and net debt. On
this basis, capital invested increased from £31.5
million at the beginning of the financial year to
£41.8 million at 30 June 2018, largely reflecting
the acquisition of Wade International during the
year for £8.0 million and investments in working
capital and in property, plant and equipment to
grow the business, all as described above.
The combination of the lower profit in the
year and higher average capital invested led
to a reduction in underlying post-tax return
on investment from 25.0% in the prior year
to 14.5% in 2017/18, still well ahead of our
estimated weighted average cost of capital.
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
28
PRINCIPAL RISKS AND UNCERTAINTIES
Risks and uncertainties
Mitigating actions taken
Change
Economic, construction market
and Brexit risks
Comment
Alumasc is a UK-based group of businesses.
The majority of group sales are made to the
construction sector in the UK. This market
can be cyclical in nature.
There is relatively high economic and
political uncertainty at the current time,
including surrounding the outcome of
the Brexit negotiations.
• Strategic positioning in markets/sectors anticipated to grow faster than the UK
construction market.
• Selected development of export sales opportunities, especially for Levolux
(particularly in North America) and Alumasc Water Management (particularly
in Europe, the Middle East and Far East).
• Revenues are derived from a variety of end use construction markets (see page 19).
• Development of added value systems and solutions that are either required by
legislation, building regulation and/or specified by architects and engineers.
• Continuous development and introduction of innovative products, systems, solutions
and services that are market leading and differentiated against the competition.
• The group has exposure to currency risk, particularly the Euro and US Dollar.
These exposures are for the most part hedged.
• Brexit developments being monitored closely. Strong relationships monitored
and regular dialogue with key European suppliers. Contingency planning for
key residual risk areas.
Loss of key employees
Comment
Generally turnover of key employees is low.
• Market competitive remuneration/incentive arrangements.
• Employee numbers and changes monitored in monthly subsidiary Board meetings.
• Key, high performing and high potential employees identified and monitored.
• Training and development programmes.
Product/service differentiation
relative to competition not developed
or maintained
Comment
Innovation and an entrepreneurial spirit is
encouraged in all group companies. Almost
15% of group revenues relate to products
launched in the last three years.
• A devolved operating model with both group and local management responsible
for developing a deep knowledge of our specialist markets and identifying
opportunities and emerging market trends.
• Innovation best practice days held annually at group level and more regularly
in each business.
• Annual group strategy meetings encourage innovation and ”blue sky” thinking.
• New product introduction/development KPI used to monitor progress.
• Monitoring the market for potentially new and/or disruptive technologies.
Loss of key customers
Comment
Generally the group has a good track record
of customer retention and has a diversified
customer base.
• Develop and maintain strong customer relationships.
• Product, system and service differentiation.
• Project tracking and enquiry/quote conversion rate KPI.
• Increasing use of, and investment in, customer relationship management
(CRM) software.
• Organisational and cultural flexibility to adapt to changing and emerging
customer needs.
Legacy defined benefit
pension obligations
Comment
Alumasc’s pension obligations are material
relative to its market capitalisation and
shareholders' funds.
• Continue to grow the business so the relative affordability of pension deficit
contributions is improved over time.
• Maintain constructive relationship with Pension Trustees.
• Meet agreed pension funding commitments.
• Regular review at group Board level.
• Use of specialist advisors.
• Investment performance and risk/return balance overseen by an Investment
Committee.
• Monitor and seek opportunities to reduce gross pension liabilities. Use of
derivatives to partly hedge inflation and interest rate risk.
Supply chain risks
• Annual strategic reviews, including supplier concentration, quality, reliability
Comment
Whilst the group does not have undue
concentration on any single or small group
of suppliers, certain Alumasc businesses do
have key strategic suppliers, some of whom
are located in the Far East.
International supply chain risks are increasing
through increased tariffs/duties, Brexit risks in
Europe and potential closure of foundries in
China for environmental reasons.
and sustainability.
• Regular key supplier visits, good relationships maintained including quality
control reviews and training.
• Regular supplier quality, value for money and risk reviews.
• Avoidance of strategic dependence on single sources of supply.
• Contingency plans to manage Brexit and China sourcing risks.
The Alumasc Group plc Report and Accounts 2018Strategic Report 29
Key for change since last year
Increase
Decrease No change
Risks and uncertainties
Mitigating actions taken
Change
Business continuity risks
Comment
The group has not previously experienced
any significant loss of operational capability
causing business continuity issues.
Cyber security risks are increasing globally.
• Business continuity plans prepared at each business.
• IT disaster recovery plans are in place, with close to real time back
up arrangements.
• Awareness training and management briefings held on cyber security risks
and actions taken on preventative measures.
• Regular reviews of cyber security, including external penetration testing.
• Energy supply and contingency arrangements reviewed periodically.
• Critical plant and equipment is identified, with associated breakdown/recovery
plans, including assessment of engineering spares held on site.
• Business interruption insurance to cover residual risks.
Strategic development risks
and change projects
• Key strategic change projects are governed by Operating Unit Boards, supported
by independent specialist consultants where necessary, for example IT and property.
Comment
There are execution risks around a number
of current strategic change projects,
including export development, business
simplification projects, forthcoming factory
moves and various ERP and CRM system
implementations.
• Project risk reviews and plans updated regularly.
• Use of proven, reliable software solutions and avoidance of bespoking
wherever possible.
• Careful documentation and challenge of legacy business processes prior to
implementation of new systems.
• Pre-implementation system testing, training and communication, with go-live
delayed if implementation risk is judged to be too high.
Product warranty/recall risks
Comment
The group does not have a history
of significant claims.
• Robust internal quality systems; compliance with relevant legislation, building
regulations and industry standards (e.g. ISO, BBA etc), and product testing,
as appropriate.
• Group insurance programme to cover larger potential risks.
• Back to back warranties obtained from suppliers where possible.
• Specific local risk management procedures in group brands that also install
(as well as supply) building products (i.e. Levolux and Blackdown).
Health and safety risks
• Health and safety is the number one priority of management and the first Board
Comment
The group has a strong overall track record
of health and safety performance, with the
number of lost time accidents significantly
reduced over recent years.
agenda item.
• Risk assessments are carried out and safe systems of work documented
and communicated.
• All safety incidents and significant near misses reported at Board level monthly.
Appropriate remedial action taken.
• Group health and safety best practice days are held twice a year, chaired
by the Chief Executive.
• Annual audits of health and safety in all group businesses by independent
consultants.
• Specific focus on improving safety of higher risk operations.
Credit risk
Comment
The group has good recent record in
managing credit risks.
• Most credit risks are insured.
• Large export contracts are backed by letters of credit, performance bonds,
guarantees or similar.
• Any risks taken above insured limits are subject to strict delegated
authority limits.
• Credit checks when accepting new customers/new work.
• The group employs experienced credit controllers and aged debt reports
are reviewed in monthly Board meetings.
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 30
VIABILITY STATEMENT
In accordance with provision C.2.2 of the 2016 revision
of the UK Corporate Governance Code, the Directors
have assessed the viability of the group over a three
year period, consistent with Alumasc’s formal financial
planning horizon.
The three-year financial plan comprises the
group’s expected income statement and cash
flow performance; its maximum expected and
period end net cash/debt positions relative
to committed financing facilities; its forecast
financial position; and other key financial ratios.
The Board has performed a robust assessment
including sensitivity analyses on the base
case plan by flexing a number of the main
assumptions including those set out below,
both individually and in combination, to
illustrate the impact of potential downside risks
that could affect the financial viability of the
group. The more significant sensitivities include:
• The group’s ability to adapt to changes in
revenue expectations caused by cyclical or
adverse changes in the macroeconomic and
construction market environments in which
it operates; and
• A material erosion of operating margins.
In making this statement, the Directors have
also given specific consideration to the principal
risks faced by the group as described on pages
28 to 29.
Whilst this review does not consider all of the
risks that the group may face and it is recognised
that the level of uncertainty with regard to a
three year planning horizon increases over time,
the Directors consider that their assessment of
the group’s prospects is reasonable in current
circumstances, having regard to the level of
inherent uncertainty involved.
Based on the analysis performed for the
three-year review period, the group’s net debt
position of £4.8 million at 30 June 2018 and
the group’s committed financing facilities of
£12.5 million, which the Board would currently
expect to be able to re-finance on expiry in
2020, the Directors confirm that they have
a reasonable expectation that the group will
be able to continue in operation and be able
to meet its liabilities as they fall due over the
period to 30 June 2021.
Levolux Shading, Windsor City Hall – Ontario
The Alumasc Group plc Report and Accounts 2018Strategic Report 31
CORPORATE AND SOCIAL RESPONSIBILITY
Environmental and sustainability matters
Alumasc is cognisant of the impact its business
operations may have on the environment, and
where practicable we seek ways of working
to improve our environmental footprint. Our
strategy of focusing on building products
activities and divesting our engineering and
industrial products businesses over recent years
has significantly reduced the impact of the
group’s operations on the environment.
Many of our building products businesses
are strongly focused on providing effective
solutions to enhance sustainability in the
built environment. The group has established
leading positions in water management,
through brands such as Alumasc Water
Management Solutions, Wade, Gatic, Alumasc
Roofing and Timloc; and energy management
through Levolux.
The Board supports continuous improvements
in environmental standards throughout the
group. This is achieved through a variety
of methods, including product process
development, promoting use of recycled
materials, waste minimisation, energy efficiency
and reducing the emissions from all our
operations.
Our programme of environmental audits,
carried out and certified by external
consultants, has continued through the year.
These audits are designed not only to highlight
areas in which we can improve, but also to
form a basis for our achieving ISO14001:2015
Environmental Management accreditation in a
number of our businesses.
Health & Safety
The Alumasc Group plc places the highest
priority on health and safety matters. There is
a clear group policy to this effect and it remains
the first agenda item for all subsidiary and
group Board meetings. Achieving an embedded
health and safety culture and the reduction
of accident risk is the responsibility of
management and employees alike.
The group continues to hold regular health
and safety best practice days. Each operating
business or site has local health and safety
committees that meet regularly and is
subject to an annual health and safety audit,
carried out by external consultants, with
consequential action plans being monitored
in Board meetings. All of our businesses/sites
continue to improve on their excellent audit
results with an embedded focus on seeking
best practice.
The reporting of near misses has improved,
with identified instances of near misses
increasing by nearly 80% over the last
year, largely due to a refreshed initiative
to encourage employees to be more aware
of health and safety issues whilst working.
This has also resulted in a significant reduction
in the number of accidents resulting in lost
days, down 60% in 2017/18 compared with
2016/17. Our principal health and safety KPI,
the performance rate index (a relative measure
capturing the total number of lost time and
other safety incidents, relating the result to the
overall number of hours worked), improved
to 4.3 from 5.7 in the previous year. The
improvement in health and safety performance
over the last year is consistent with the longer
term trend, resulting from prioritisation,
focus and continuous improvement actions
taken by both management and employees
over many years. Following prior initiatives of
strengthening risk assessments, safe systems
of work and training in those areas of our
businesses judged to be those capable of
causing the most serious incidents, work
continues to ensure that improvements are
continually made.
Employee matters
Role
Male Female
Total
Non-Executive
Director
Executive Director
Senior managers
Employees
5
2
42
366
415
–
–
7
114
121
5
2
49
480
536
As a group, we are committed to promoting
diversity and providing equal opportunity to
all areas of the business from recruitment,
employment and career progression to learning
and development. We recognise the benefit of
calling on the widest range of knowledge, skills
and experience and we use a broad spectrum
of recruitment advertising and methods of
attraction (for example, press advertising,
internet job sites, Jobcentre Plus, agencies) to
try and reach all relevant potential applicants
within the members of society and local
community. The group is an equal opportunities
employer and its policies for recruitment,
training, career development and promotion
are based on the aptitude and abilities of the
individual regardless of religion, gender and
sexual orientation. Those who are disabled are
given equal treatment with the able-bodied.
Should employees become disabled after
joining the company, every effort is made
to ensure that employment continues and
appropriate training is given. A formal Equality
and Diversity Policy has been approved by the
group Board and applies to all our businesses.
Employees are kept informed of changes in the
business and general financial and economic
factors influencing the group, this is done
through briefing sessions and presentations.
The group values the views of its employees
and consults with them on a regular basis
about matters that may affect them. Some
of our businesses issue quarterly internal
newsletters with a mix of company updates
and employee related news such as charitable
events that employees have participated in.
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements 32
CORPORATE AND SOCIAL RESPONSIBILITY continued
CO2 emissions (Tonnes)
Emissions from all operations
Annual turnover (£'000)
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2
O
C
s
e
n
n
o
T
)
0
0
0
'
£
(
r
e
v
o
n
r
u
T
l
a
u
n
n
A
110,000
105,000
100,000
95,000
90,000
85,000
80,000
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018*
* 2017/18 emission figure includes Wade from date of purchase
Carbon Management & Greenhouse gas
(“GHG”) emissions
The group continues to work with Carbon
Footprint Limited, the carbon and sustainability
management specialists, to improve our
environmental and sustainability credentials.
We continue to reduce carbon emissions
including:
• Moving our old, energy inefficient Timloc
factories to a single new purpose built
energy efficient building that has reduced
its electricity usage by around 19%; and
• Acquisition of typically low capital intensity,
specialist building product businesses, such
as Wade International, whose factory has
roof-top solar panels, generating power
for its manufacturing operations, with the
surplus sold back to the national grid.
All operational sites segregate their process
waste to allow direct recovery and recycling.
Our obligations to recover and recycle
packaging waste are discharged by membership
of an independent compliance scheme
operated by Valpak.
The wider group is well positioned to benefit
from environmentally-driven changes in policy
and regulation. In particular, the growing
awareness of sustainability and life-cycle cost
amongst building and construction specifiers
should benefit those group businesses that
assist their customers to manage energy and
water use in the built environment.
The group’s strategy of becoming a focussed
supplier of premium building products has
enabled the group to reduce its overall CO2
emissions by just under 74% over the last five
years to 4,054 tonnes in 2017/18 from 15,245
tonnes in 2013/14, see the graph above, whilst
growing revenues over that period.
Whilst the majority of our reduction in CO2
emissions have resulted from the sale of our
engineering businesses, our businesses also
saw a reduction in electricity usage in 2017/18
of 22% when measured against 2016/17
across the group. This demonstrates the effect
of continuing process efficiencies on group
emissions as a whole. The full statutory report
on greenhouse gas emissions can be found in
the Directors’ Report on page 54.
Community
In addition to the wider community benefits
arising from our environmental programme,
the group is committed to supporting local
community initiatives and a number of charitable
donations have been made throughout the year
by our subsidiaries including to football and
rugby clubs and European Rally in aid of The
Teenage Cancer Trust and The Rainy Day Trust.
Group donations in the year amounted
to £1,949 (2016/17: £1,237).
Human Rights and Modern Slavery Act 2015
Alumasc has long had a culture of seeking to
treat people fairly and of being honest and
straightforward in its business relationships.
As Alumasc comprises a number of relatively
small businesses operating from the UK and
exporting to mainly developed countries, the
Board does not consider it necessary to have a
formal human rights policy.
Following the enactment of the Modern Slavery
Act 2015, Alumasc has introduced a new
Modern Slavery and Human Trafficking Policy.
The Alumasc Group plc has a zero tolerance
approach to modern slavery and is committed
to act ethically and comply with all laws and
regulations, which are relevant to the group's
businesses and in all countries where the group
operates. The group expects its suppliers to
hold their own suppliers to the same high
standards. The latest statement is available at
www.alumasc.co.uk.
The group does have policies on the related
topics of equal employment rights policies and
communication with employees as highlighted
earlier in this report. It also has the following
policies in place:
• Business Ethics policy;
• Anti-Bribery and Corruption policy;
• Equality and Diversity policy; and
• Whistleblowing policy.
The Alumasc Group plc Report and Accounts 2018Strategic Report
33
Pavestone Rally
Alumasc Water Management Solutions
(”AWMS”) took up the challenge to enter the
Pavestone Rally in aid of The Rainy Day Trust
and The Teenage Cancer Trust. The 2017 Rally
event raised over £100,000 with AWMS raising
over £1,000 with the help from its customers
and suppliers.
Over 30 cars took part, crossing through ten
countries between 7 and 10 September 2017.
The AWMS team of four were tasked to “buy
a banger” costing under £500 and create
something that will grab people’s attention
and then drove from Dover to Monte Carlo –
passing through Belgium, Germany, Switzerland
and Italy en-route, crossing their fingers they
didn’t break down!
The 2017 rally event raised
>£100k
Alumasc raised
>£1,000
How many cars took part
>30
“Driving from Dover to Monte Carlo for charity –
passing through Belgium, Germany, Switzerland
and Italy en-route crossing their fingers they didn’t
break down!”
The Alumasc Group plc Report and Accounts 2018Strategic ReportGovernanceFinancial Statements
34
BOARD OF DIRECTORS AND COMPANY ADVISORS
Chairman and Deputy Chairman
John McCall MA (Cantab)
Chairman
Jon Pither MA (Cantab)
Deputy Chairman
Appointed: 1984
Experience: John McCall was appointed Chairman and
Chief Executive on the foundation of the company in 1984.
He was called to the Bar in 1968. His previous employment was
with the mining finance house Consolidated Gold Fields plc with
whom he gained extensive international experience in the fields
of mining and construction materials.
N
Appointed: 1992
Experience: Jon Pither holds directorships in numerous companies
and is a past council member of the CBI and a past President
of The Aluminium Federation. He is the Senior Independent
Non-Executive Director on the Alumasc Board.
R A N
Executive Directors
Paul Hooper BSc, MBA, DipM
Chief Executive
Andrew Magson BSc, FCA
Group Finance Director
Appointed: 2003
Experience: Paul Hooper joined Alumasc as Group Managing Director
in April 2001. His earlier career included a first Managing Director role
with BTR plc in 1992. He subsequently joined Williams Holdings plc
in Special Operations, implementing acquisitions in Europe and North
America, prior to joining Rexam PLC as a Divisional Managing Director
with responsibility for operations in Europe and South East Asia.
Appointed: 2006
Experience: Andrew Magson spent his earlier career in the business
assurance and corporate finance practices of PwC, where he qualified
as a chartered accountant. He subsequently held a number of senior
finance roles, including Group Financial Controller at BPB plc and
divisional financial controller at Saint Gobain.
GovernanceThe Alumasc Group plc Report and Accounts 2018 35
Non-Executive Directors
Richard Saville BSc
Non-Executive Director
David Armfield LLB
Non-Executive Director
Philip Gwyn MA (Cantab)
Non-Executive Director
Appointed: 2002
Experience: Richard Saville’s early career
was in the City, where he became a partner
of Phillips & Drew in 1980 and a Director of
Morgan Grenfell Securities in 1987. He joined
George Wimpey plc in 1988 becoming Group
Finance Director at the beginning of 1994, a
position he held until May 2001. After 2001
he served for a time as Director of Finance of
Halfords plc and at Craegmoor Limited. He is
currently a director of a number of companies.
Appointed: 2014
Experience: David Armfield began his career
as a solicitor at Wilde Sapte, moved to Lehman
Brothers in its Investment Banking group in
1987 and later became a partner at PwC,
where he led their industrial corporate finance
team. David became a founding partner of
Kinetix Corporate Finance LLP in 2010, which
provides corporate finance advice to the clean
technology and environmental sustainability
sectors.
Appointed: 1984
Experience: Philip Gwyn, who has served as
a Non-Executive Director of the group since its
foundation in 1984, retired on 30 June 2018.
A R N
Kirstan Boynton ACIS, MSc
Company Secretary
A R N
A R
Committees:
Audit Committee
A
Remuneration Committee
R
Nomination Committee
N
Chairman of Committee
Registered Office
The Alumasc Group plc
Burton Latimer
Kettering
Northamptonshire NN15 5JP
Tel: +44(0) 1536 383844
Fax: +44(0) 1536 725069
www.alumasc.co.uk
info@alumasc.co.uk
Registered No: 1767387
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Auditors
KPMG LLP
Altius House
One North Fourth Street
Milton Keynes MK9 1NE
Investment Bankers
DC Advisory Partners
5 King William Street
London EC4N 7DA
Bankers
Barclays Bank PLC
Ashton House
497 Silbury Boulevard
Milton Keynes MK9 2LD
HSBC Bank plc
4th Floor
120 Edmund Street
Birmingham B3 2QZ
Solicitors
Freeths LLP
6 Bennetts Hill
Birmingham B2 5ST
Pinsent Masons LLP
3 Colmore Circus
Birmingham B4 6BH
Brokers
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 36
Governance
CORPORATE GOVERNANCE STATEMENT
How we govern the group
There is a commitment to high standards of corporate governance
throughout the group. The Board endorses the general principles
set out in The UK Corporate Governance Code 2016 (the ‘Code’)
(which is available on www.frc.org.uk) and is accountable to the
group’s shareholders for good governance.
This report, together with the information contained in the Audit Committee Report on pages
40 to 43 and the Directors’ Remuneration Report on pages 44 to 52, explains how the
Directors seek to apply the requirements of the Code to procedures within the group. The Board is
responsible for the overall governance of the group. Its responsibilities include setting the strategic
direction of the group, providing leadership to put the strategy into action and to supervise the
management of the business.
Board of Directors
Audit
Committee
Remuneration
Committee
Nomination
Committee
The Audit Committee is responsible for
monitoring and reviewing the integrity of
the financial reporting process, including
the appropriateness of any judgments and
estimates taken in preparing the financial
statements; internal and external audit
functions; and internal financial control.
The Remuneration Committee is responsible
for determining the remuneration policy
and the application of the policy in relation
to the Chairman’s and Executive Directors’
remuneration. The remuneration of the
Non-Executive Directors is determined by the
Chairman and the Executive Directors.
The Nomination Committee is responsible for
reviewing the size, structure and composition
of the Board, including consideration of
the skills, knowledge and experience of the
Board members. It also manages succession
planning and selects potential new Board
candidates when appropriate.
Richard Saville
Non-Executive Director
Jon Pither
Deputy Chairman
John McCall
Chairman
Read more on pages 40 to 43
Read more on pages 44 to 52
GovernanceThe Alumasc Group plc Report and Accounts 2018 37
Statement of compliance
During the year ended 30 June 2018 the group has complied with the requirements of the Code save for the following:
Three of the Board’s Non-Executive Directors, Jon Pither, Philip Gwyn and Richard Saville, have been members of the Board for more than the
recommended nine years. Mr Gwyn retired from the Board at the end of the financial year and a replacement is being sought who is expected to
meet the independence requirements of the code. The Board has reviewed the role of each of the Non-Executive Directors who are continuing to
serve and concluded that each is independent in character and free from any relationship that could affect exercise of their independent judgment.
It is felt that their knowledge and understanding are fundamental to the Board’s deliberations and each Director has other significant external
commercial interests. The group currently has one independent (as defined by provision B.1.1. of the Code) Non-Executive Director, David Armfield,
therefore, is not compliant with the Code provisions B.1.2., B.2.1., C.3.1. and D.2.1..
Directors
The Board consists of a Chairman, Chief Executive, Group Finance Director and three Non-Executive Directors. Jon Pither is the Senior Independent
Director. Philip Gwyn retired as a Non-Executive Director with effect from 30 June 2018.
In accordance with the articles of association, any Director appointed during the year is required to retire and seek election by shareholders at the
next Annual General Meeting (“AGM”) following their appointment. Additionally, one-third of the Directors retire by rotation each year and seek re-
election at the AGM. The Directors required to retire are those in office longest since their previous re-election. Accordingly, Andrew Magson retires
by rotation at the forthcoming AGM and, being eligible, offers himself for re-election. In addition, Jon Pither and Richard Saville, having served on
the Board for more than nine years, also retire and offer themselves for re-election.
No individual or group of individuals dominate the Board’s decision-making.
Profiles of the Board members appear on pages 34 and 35 of this report. These indicate the high level and range of business experience which
enables the group to be managed effectively.
The Board meets at least seven times a year and more frequently where business needs require. Two of these meetings are focused upon strategic
matters. The Board has a Schedule of Matters reserved for its decision which includes appointments to the Board, material capital commitments,
commencing or settling major litigation, business acquisitions and disposals and monitoring the effectiveness of the group’s risk management
processes. This was updated during the year to reflect the Code and current practice. The full Schedule of Matters can be found on the group’s
website www.alumasc.co.uk. Directors are given appropriate information for each Board meeting, including reports on the current financial and
trading position.
All Directors have access to independent professional advice if required and at the company’s expense. This is in addition to the access that every
Director has to the Company Secretary. The Company Secretary is charged by the Board with ensuring that Board procedures are followed.
Chairman and Chief Executive
There is a clear division of responsibilities between the roles of the Chairman and of the Chief Executive.
The role of the Chairman is to conduct Board meetings and to ensure that all Directors are properly briefed in order to take a full and constructive
part in Board discussions. He is responsible for evaluating the performance of the Board and of the executive management team and of the other
Non-Executive Directors and has active involvement in all key strategic decisions taken by the group.
The role of the Chief Executive is to oversee the day to day running of the group’s business including the development of business strategies
and processes to enable the group to meet shareholder requirements. The role involves leading the executive management team and evaluating
their performance. Together with the Group Finance Director, he is also responsible for dealing with investor and public relations, external
communications and corporate governance.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 38
CORPORATE GOVERNANCE STATEMENT continued
Board evaluation
In line with the Code, an evaluation of the performance and effectiveness of the Board, its Committees and individual Directors was carried out
during the year. One-to-one discussions were held between each of the Directors and the Chairman and, in the case of the Chairman, between
the Chairman and the Senior Independent Director. Issues arising from this process were discussed with the Board with recommendations for actions
where appropriate. The Senior Independent Director in conjunction with the Non-Executive Directors is responsible for evaluating the performance
of the Chairman.
Board committees
The Board has delegated authority to the following Committees and there are written terms of reference for each Committee outlining its authority
and duties. All terms of reference comply with the Code and are available on the company’s website www.alumasc.co.uk.
(i) Audit Committee
Details of the composition of the Audit Committee and its activities during the year are given in the Audit Committee Report on page 40.
(ii) Remuneration Committee
Details of the composition of the Remuneration Committee and its activities during the year are given in the Directors’ Remuneration Report
on page 44.
(iii) Nomination Committee
The Nomination Committee members throughout the year were John McCall (Chairman), Jon Pither, Philip Gwyn and Richard Saville. The Committee
meets when appropriate to consider appointments to the Board of both Executive and Non-Executive Directors. Following the retirement of
Mr Gwyn, the Committee has started the process to recruit a new Non-Executive Director, appointing an external recruitment agency, with no
connection to the company, to assist in the identification of suitable candidates. Where necessary, external search consultants are used to ensure
that a wide range of candidates is considered. An induction to the group’s business and training is available for all Directors on appointment.
Attendance at Board and Committee meetings
Directors
J S McCall
J P Pither
P H R Gwyn*
R C C Saville
D Armfield
G P Hooper
A Magson
† By invitation as an attendee.
* Retired 30 June 2018.
Position
Chairman
Deputy Chairman
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Chief Executive
Group Finance
Director
Board
(8 meetings)
Audit Committee
(3 meetings)
Remuneration
Committee
(2 meetings)
Nomination
Committee
(2 meetings)
8
8
4
8
8
8
8
2†
3
2
3
3
3†
3†
2†
2
1
2
2
N/A
N/A
2
2
1
2
2†
N/A
N/A
GovernanceThe Alumasc Group plc Report and Accounts 2018
39
Shareholder relations
The group is committed to maintaining good communications with its shareholders. Shareholders have direct access to the group via its website
where material of interest to shareholders is displayed. Additionally, the group responds to individual enquiries from shareholders on a wide range
of issues.
There is regular dialogue with individual institutional shareholders, as well as general presentations after the announcement of results. The Board
receives regular updates on all the meetings and communications with major shareholders, who are offered the opportunity to meet with the
Non-Executive Directors from time to time. The Senior Independent Director is available to shareholders if they have concerns that cannot be
addressed through regular channels such as The Chairman, Chief Executive or Group Finance Director.
All shareholders have the opportunity to raise questions at the AGM when the group also highlights the latest key business developments.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 40
AUDIT COMMITTEE REPORT
Statement by the Chairman
“The Committee considered, together
with management and the external
auditor, the significant areas of estimation,
judgment and possible error in the
financial statements.”
Richard Saville
Chairman of the Audit Committee
Dear Shareholders
I am pleased to present the Audit Committee’s
report for the year ended 30 June 2018.
The members of the Committee are set out
below. The Group Chairman, Chief Executive,
Group Finance Director and Group Financial
Controller usually attend the meetings of
the Committee. In addition, the external
auditors attended two meetings during the
year and the members of the Committee met
with the external auditors on one occasion
without members of the management team
being present. The Committee met three
times in the year and a record of the meeting
attendance by Committee members is set out
on page 38.
Richard Saville
Chairman of the Audit Committee
Audit Committee membership
The Audit Committee members who served
during the year were:
• Richard Saville (Chairman)
• John Pither
• Philip Gwyn
• David Armfield
The Board considers that Richard Saville has
relevant, recent financial experience.
The Committee’s main duties are as follows:
• monitoring and reviewing the integrity of financial reporting process and reviewing the
financial statements, including the appropriateness of judgments and estimates taken
in preparing the financial statements and preparations for the introduction of new
accounting standards;
• monitoring and reviewing the effectiveness of the group’s internal financial controls
including approval of the scope and review of the results of internal audit activities;
• monitoring and reviewing the effectiveness of the company’s part-time internal audit
function;
• monitoring and reviewing the external auditor’s independence and objectivity and the
effectiveness of the audit process, taking into consideration relevant UK professional and
regulatory requirements;
• making recommendations to the Board, for it to put to the shareholders for their
approval in general meeting, in relation to the appointment, re-appointment and removal
of the external auditor and to approve the remuneration and terms of engagement of
the external auditor;
• to review any proposal for the external auditor to supply non-audit services, in view of
group policy and relevant ethical guidance regarding the provision of non-audit services
by the external audit firm; and
• to report to the Board, identifying any matters in respect of which it considers that action
or improvement is needed and making recommendations as to the steps to be taken.
GovernanceThe Alumasc Group plc Report and Accounts 2018 41
Activities of the Committee in the 2017/18 financial year
The main activities of the Committee during the year were:
• reviewing the interim and full year results announcements and financial statements, with particular focus on the key estimates and judgments
taken by management in the preparation of those statements and the external auditor’s comments in those areas;
• review and approval of the audit plan of the external auditor, including the scope of the work, the key areas of focus in terms of audit risk and
judgment, and the basis on which the auditor assesses materiality;
• considering the effectiveness of the external audit and the independence of the auditors, and planning the approach to the forthcoming audit
tender process;
• review and approval of the plan and scope of internal audit work, including consideration of internal audit reports issued during the year and
discussion of the key matters and improvement points arising from those audits with management; and
• review of management’s preparations for the introduction of IFRS 15, “Revenue Recognition”, in particular its likely application to accounting
for construction contracts; IFRS 9, “Financial Instruments”; and IFRS 16, “Leases”. IFRS 9 and IFRS 15 will apply to the group’s financial
statements for the 2018/19 financial year onwards, and IFRS 16 for the group’s 2019/20 financial year onwards.
Significant issues considered in relation to the financial statements
The Committee considered, in conjunction with management and the external auditor, the significant areas of estimation, judgment and possible
error in preparing the financial statements and disclosures, discussed how these were addressed and approved the conclusions of this work. The
principal areas of focus in this regard were:
(i) Revenue and profit recognition on construction contracts
Revenue and profit recognition on construction contracts that span more than one accounting period is an inherently judgmental area, involving
estimation of the percentage of contract completion and estimates of costs to complete the work, as described in the accounting policy note on
page 67. Having reviewed the contract accounting judgments taken at the year end with management and the external auditors, the Committee
was satisfied with the level of revenue and profit recognised on construction contracts for the financial year.
(ii) Defined benefit pension schemes’ valuation
As described in the risk review on pages 28 and 29, Alumasc has relatively significant legacy defined benefit pension obligations in the context
of the overall size of the group. Therefore, relatively small changes to market assumptions (particularly the discount rate and inflation rate) and
actuarial assumptions used to value defined benefit pension obligations under IAS 19 can have a material impact on the group’s Consolidated
Statement of Financial Position and Consolidated Statement of Comprehensive Income. Further details are given in note 21 to the consolidated
financial statements. Having reviewed the valuation assumptions adopted by management, in conjunction with actuarial advice received and the
review of those assumptions by the external auditors, the Committee was satisfied that the group balance sheet reflects an appropriate valuation
of the group’s pension obligations using IAS 19’s valuation methodology.
(iii) Valuation of acquired assets and liabilities of Wade International Limited
The Committee reviewed the acquisition accounting for Wade International, including the judgments taken in fair valuing the tangible and
intangible assets of the business at acquisition. These judgments were taken based on the advice of independent valuation experts.
(iv) Accuracy and valuation of inventory
All of the group’s businesses carry material levels of inventory, whether manufactured in-house or bought-in. The accuracy of the records of
physical inventory on hand and the valuation of that inventory, including judgments as the value of manufacturing cost to be absorbed into
the inventory valuation and the net realisable value particularly of old and slow-moving inventory, can affect both the group’s Consolidated
Statement of Financial Position and its Consolidated Statement of Comprehensive Income. Inventory records, including an analysis of trends and
the evolution of management judgments on valuation are reviewed by the Executive Directors in monthly meetings with operating company
management and in associated Board reports. Internal audit has a particular focus on checking the accuracy of the inventory records through
attendance at stock counts and reviewing the application of judgments taken by local management surrounding valuation. Physical stock counts
are held at the financial year end and half year end, and more regularly when needed. The Committee reviews regular reports from executive
management, internal audit and the results of the external audit to satisfy itself that inventory values across the group are materially accurate.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 42
AUDIT COMMITTEE REPORT continued
Assessment of the effectiveness of external audit
The Committee assesses the performance of KPMG both through formal Committee meetings, KPMG’s reports to the Committee and more
informal interaction throughout the year. The Committee also receives structured feedback from senior group level and operational management
on the robustness, value added and efficiency of the external audit.
Having considered this information, the Committee concluded that the external audit continues to operate effectively and that KPMG continue
to be effective in their role.
Assessment of the independence of the external auditor
The group’s policy on the independence of auditors is consistent with ethical standards published by the Financial Reporting Council.
The group last changed its external auditors nine years ago, and the Committee assesses the effectiveness and independence of the external
auditor every year.
Any non-audit services proposed to be carried out by the external auditor are discussed and approved in advance by the Committee. During
the financial year under review KPMG carried out non-audit advisory services relating to Alumasc’s forthcoming adoption of IFRS 15, “Revenue
Recognition”. The fee for this work was £8k and was approved by the committee on the basis it was not significant in the context of the overall
audit fee. No non-audit services were provided by KPMG in the prior financial year.
In accordance with best practice and professional standards, KPMG rotated the audit partner responsible for the audit four years ago, when the
original audit partner had served for five years. The current audit partner had not previously been involved in providing any audit or non-audit
services to Alumasc.
KPMG have confirmed to the Committee that they consider themselves to be independent within the meaning of regulatory and professional
requirements.
In view of all the above, the Committee remains satisfied with the independence of the external auditor.
Re-appointment of the external auditor
The audit for Alumasc’s financial year ended 30 June 2018 was KPMG’s tenth. Therefore under current regulations the external audit will be put
out to tender before the 2018/19 audit process commences. KPMG will be invited to re-tender for the work.
Effective internal control and risk management
The Alumasc Board as a whole acknowledges that it is ultimately responsible for the group’s system of internal control and for reviewing its
effectiveness. The system is designed to be robust in its management of the risk of failure to achieve business objectives. This risk, however, cannot
be wholly eliminated and therefore the system can only provide reasonable and not absolute assurance against the risk of material misstatement,
fraud or loss.
The group has an ongoing process for identifying, evaluating and managing the significant risks faced by the business. The process was in place
during the year and remained in place on the date that the Annual Report and financial statements were approved by the Board. The main
elements of the group’s internal control process are as follows:
(i) Risk management
Risk management is a continuing activity throughout the year, dealt with through the Board meetings of operating companies. In addition, a
formal business risk review exercise is conducted every year at each operating company and for the group as a whole. This identifies the most
important risks, their likelihood of occurrence and possible business and financial implications and the effectiveness of mitigating controls. A group
level summary of these risk reviews is provided on pages 28 and 29. Each operating company has implemented procedures for controlling the
relevant risks of their business.
Based on their attendance at the Board meetings of each operating company, the Executive Directors report periodically to the Board on the risk
management processes that have been in place during the year and the effectiveness of the level of control in managing the identified risks. The
Board is able to confirm that these procedures are ongoing.
GovernanceThe Alumasc Group plc Report and Accounts 2018 43
(ii) Financial reporting and monitoring
The Board receives regular financial reports, including monthly management accounts, rolling re-forecasts, annual budgets and three-year plans.
These procedures are intended to ensure that the Board maintains full and effective control over all financial issues. An Executive Committee,
comprising the group’s Executive Directors and the Divisional Managing Directors of the group’s operating segments, reviews trading activities and
addresses matters of common interest with regard to safety, strategic development, performance, risk and other matters of mutual group interest.
Day to day management of the group companies is delegated to operational management with a clearly defined system of control, including:
• An organisational structure with an appropriate delegation of authority within each company;
• The identification and appraisal of business and financial risks both formally, within the annual process of preparing business plans and
budgets, and informally, through close monitoring of operations;
• A comprehensive financial reporting system within which actual results are compared with approved budgets, re-forecasts and the previous
year’s figures on a monthly basis and reviewed at both local and group level; and
• An investment evaluation procedure to ensure an appropriate level of scrutiny and approval for all significant items of capital expenditure.
(iii) Internal Controls Assurance
The Audit Committee on behalf of the Board has reviewed during the year the effectiveness of the system of internal financial control from
information provided by management, the group’s external auditors and the results from internal audits. The Board as a whole assessed internal
control more generally, including the key risks affecting the group in the delivery of its long-term strategies, as summarised on pages 28 and 29.
No material weaknesses in internal control were identified in the year.
(iv) Internal Audit
The Committee’s view is that the size and complexity of the group and the close involvement of the Executive Directors make it unnecessary for
Alumasc to have a dedicated internal audit function, although part of the Group Financial Controller’s role, and that of her team, is to carry out
internal audits in each of the group’s principal operating locations each year. This position is kept under annual review by the Committee.
The principal focus of this internal audit work is to check the existence and effective operation of key internal financial controls.
The Committee reviews and approves the proposed scope of internal audit activities each year, and ensures that key risk areas are covered, and
that agreed recommendations arising from previous internal and external audits are re-reviewed to assess whether they have been implemented.
Whistleblowing policy
The group has a Whistleblowing policy, which provides a formal mechanism whereby every group employee can, on a confidential basis, raise
concerns over potential malpractice or impropriety within the group.
Bribery and Corruption policy
The group has in place a policy with regards to compliance with the Bribery Act 2010. The group’s Bribery and Corruption policy and guidelines
reflect the Directors’ zero tolerance approach to bribery and corruption of all kinds.
This policy has been cascaded down into the operating companies with relevant training provided. Any matters of particular concern, whether
arising from due diligence or otherwise with regard to related parties as defined in the Bribery Act 2010, are raised and discussed at monthly
operating company Board meetings.
Code of Conduct
The group has in place a Code of Conduct, setting out the standards of business practice that the group expects from its executives and
employees. This policy is subject to periodic review to ensure it reflects the operation of the group and the business environment in which
it operates.
Copies of this policy, the Whistleblowing policy and the Bribery and Corruption policy can be found on the group’s website www.alumasc.co.uk.
Going concern and longer-term viability
The Committee is satisfied that the group has adequate resources to continue for the foreseeable future for the reasons given on page 67 and
recommends to the Board the adoption of the going concern basis of accounting. This view is further supported by the viability statement on
page 30.
Richard Saville
Chairman of the Audit Committee
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 44
DIRECTORS’ REMUNERATION REPORT
Statement by the Chairman
“We are focused on ensuring the group’s
Remuneration Policy is aligned with
shareholders’ interests and the company’s
strategic goals.”
Jon Pither
Chairman of the Remuneration Committee
Dear Shareholder
I am pleased to present the Directors’
Remuneration Report for the year ending
30 June 2018. The overall approach of the
Remuneration Committee (the “Committee”
in this report) remains unchanged from
prior years. We are focused on ensuring the
group’s Remuneration Policy is aligned with
shareholders’ interests and the company’s
strategic goals, whilst also enabling us to
attract, retain and motivate high quality
executive management.
In making remuneration decisions, the
Committee considers the group’s overall
performance against its long-term goals.
As described in the Strategic Report, the
2017/18 financial year was a strategically
important one for Alumasc but more
challenging than expected from a trading
perspective.
The Committee met twice during the year.
The topics under discussion included:
• Preparation of the new Long Term
Incentive Plan (2018 LTIP) to be put to
shareholders at the 2018 Annual General
Meeting (“AGM”);
• A review of the base salaries of the
Executive Directors and group employees
more generally;
• A review and establishment of the
achievement of the bonus criteria for the
Executive Directors;
• Decisions on the performance criteria
to be applied to the current long term
incentive plan (“LTIP”) and executive share
option scheme (“ESOS”) awards to be
made in October 2018; and
• Decisions on the achievement of the
performance criteria in relation to the
ESOS and LTIP awards maturing in
November 2018 and December 2018
respectively.
Summary of any discretion applied
in the year
There was no discretion applied during
the year to any part of the Directors’
remuneration.
2018 LTIP
A summary of the proposed rules for the
2018 LTIP is contained in the Annual General
Meeting notice. The full rules of the LTIP will
be available for inspection at the office of
Deloitte LLP as detailed in the AGM notice
and will be put to a binding shareholder
vote at the AGM in October this year. It will
become effective following that meeting
should the members vote in favour of it.
Jon Pither
Chairman of the Remuneration Committee
Remuneration Committee
membership
The Remuneration Committee members
who served during the year were:
• Jon Pither (Chairman)
• Philip Gwyn
• Richard Saville
• David Armfield
GovernanceThe Alumasc Group plc Report and Accounts 2018 45
Remuneration Dashboard
Mix of Remuneration
Executive Directors 2017/18
Mix of Remuneration
Chief Executive 2017/18
95% Fixed Base & Pensions
5% Benefits in Kind
95% Fixed Base & Pensions
5% Benefits in Kind
Bonus Levels as a Percentage of Salary
Historical Vesting of LTIPs
G P Hooper
Magson
100%
A Magson
Hooper
80%
Vested
Vested
60%
40%
20%
0%
2013/14
2014/15
2015/16
2016/17
2017/18
For
Against
For
Against
This report is on the activities of the Remuneration Committee
for the period to 30 June 2018.
It has been prepared by the Remuneration Committee, in
accordance with Schedule 8 of The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008
as amended in August 2013. It will be subject to a shareholders’
advisory vote at the forthcoming Annual General Meeting on
25 October 2018.
2013/14
2014/15
2015/16
2016/17
2017/18
AGM Votes on Directors’ Remuneration
Policy and Report
2017
Policy
2013
Report
2014
Report
2015
Report
2016
Report
2017
Report
100%
80%
60%
40%
20%
0%
100%
99%
98%
97%
96%
95%
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 46
DIRECTORS’ REMUNERATION REPORT continued
Annual Report on Remuneration
The following sections show how the remuneration policy approved in 2017 was applied in the year ending 30 June 2018 and, where appropriate,
will be applied in the following year. The information provided on pages 44 to 49 of the Directors’ Remuneration Report is subject to audit.
Single total figure of remuneration
The remuneration of the Non-Executive Directors for the years 2017/18 and 2016/17 is made up as follows:
Director
John McCall
Jon Pither
Philip Gwyn*
Richard Saville
David Armfield
Total
* Retired 30 June 2018.
Base salaries/fees
Benefits in kind
Single figures of total remuneration
2017/18
£000
2016/17
£000
2017/18
£000
2016/17
£000
2017/18
£000
2016/17
£000
100
40
35
40
35
250
100
40
35
40
35
250
4
–
–
–
–
4
4
–
–
–
–
4
104
40
35
40
35
254
104
40
35
40
35
254
The Non-Executive Director fees were reviewed in 2018. No further increases are proposed for the 2018/19 year.
The remuneration of the Executive Directors for the years 2017/18 and 2016/17 is made up as follows:
Base salaries/fees
Bonuses
Benefits in kind
Pension
contributions
Long-term
incentives with
or payments in performance period
ending during
lieu of pension
the year
contributions
Single figure
of total
remuneration
Director
Paul Hooper
Andrew Magson
Total
2017/18 2016/17 2017/18 2016/17 2017/18 2016/17 2017/18 2016/17 2017/18 2016/17^ 2017/18 2016/17
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
265
186
451
257
181
438
–
–
–
56
39
95
16
13
29
17
12
29
51
27
78
51
27
78
–
–
–
129
60
189
332
226
558
510
319
829
^ Re-stated values based on the vesting of the 2015 LTIP award at a price of 128 pence on 13 March 2018.
For the year to 30 June 2018 the minimum level at which the annual bonus would become payable was set at underlying profit before tax (“PBT”)
of £8.3 million. On the basis of actual underlying PBT from all operations of £6.5 million, the target for the profit linked bonus was not met and
therefore no annual bonus was awarded to Mr Hooper or Mr Magson.
The group operates a policy whereby Executive Directors are provided with health insurance, disability insurance and life cover, and are given a cash
alternative to a company car and associated expenses.
The performance metrics used for the 2015 LTIP award, which has a performance period for the three financial years ending 30 June 2018, were
set to incentivise significant further growth in the group’s underlying EPS compared with the 2014/15 financial year. These metrics comprised an
earnings target based on Basic EPS and a total shareholder return (“TSR”) target.
In order for any part of the award to vest a threshold level of basic earnings per share of 15.8 pence had to be achieved in 2017/18, at which
25% of the award would be payable. Two thirds of the remaining 75% of the award was payable on a straight line basis if the group’s basic EPS
was between 15.8 and 19.4 pence per share, with the remaining 25% payable on a straight line basis if the TSR fell within the median and upper
quartile. The group’s basic EPS for the 2017/18 year was 12.0 pence per share, therefore the award lapsed and no shares have vested.
GovernanceThe Alumasc Group plc Report and Accounts 2018
47
Mix of remuneration
Paul Hooper 2017/18
Mix of remuneration
Andrew Magson 2017/18
95% Fixed Base & Pensions
94% Fixed Base & Pensions
5% Benefits in Kind
6% Benefits in Kind
Total pension entitlements
The group’s defined benefit pension schemes are closed to future accrual and neither Mr Hooper nor Mr Magson have benefits provided under
these schemes. The group makes provision to pay 20% of Mr Hooper’s base salary and 15% of Mr Magson’s base salary into a defined contribution
pension scheme of each executive’s choosing or as a cash alternative.
Payments to past directors
There were no payments to past directors during the year (2016/17: £nil).
Payments for loss of office
There were no payments in relation to loss of office during the year (2016/17: £nil).
Scheme interests awarded during the year
LTIP awards were granted in October 2017 as detailed in the table below.
Paul Hooper
Andrew Magson
Scheme
2008 LTIP
2008 LTIP
Basis of
award granted
No. of
shares awarded
75% of base salary
50% of base salary
115,425
54,194
Face value
of award†
£200,262
£94,027
% vesting for
threshold
performance
Vesting and
performance
period
25%
25%
3 years
3 years
† Based on share price of 173.5 pence on the day of grant.
The performance measures for these awards over the three-year period will be benchmarked against the 2016/17 basic EPS from continuing
operations in that year of 18.3 pence per share.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
48
DIRECTORS’ REMUNERATION REPORT continued
Threshold basic EPS growth (25% of award) is:
At least growth in RPI plus 2.5% per annum over the performance period
Below growth in RPI plus 2.5% per annum over the performance period
Vesting level
100%
0%
If above threshold performance is achieved, then the following tables explain how vesting levels above the threshold level will relate to performance achieved:
If basic EPS growth (50% of award) is:
Vesting level
Equal to or greater than the growth in retail prices index (“RPI”) plus 10% per annum over the performance period
Between RPI growth plus 2.5% and RPI growth plus 10% per annum over the performance period
100%
Straight line between 0%-100%
If Total Shareholder Return (25% of award) is:
Top quartile performance relative to FTSE All Share Index.
Between median and top quartile
Below median
Statement of Directors’ shareholdings and share interests
Directors’ shareholdings
John McCall
Jon Pither
Philip Gwyn*
Paul Hooper
Andrew Magson
Richard Saville
David Armfield
* Retired 30 June 2018.
Vesting level
100%
Straight line between 0%-100%
0%
At
30 June
2018
4,359,668
298,986
3,057,605
460,478
133,926
83,000
69,400
At
30 June
2017
4,359,668
280,736
3,057,605
330,237
100,103
53,000
35,000
The Directors’ shareholdings are beneficial with the exception of 434,000 shares (2017: 434,000) in which Mr McCall has a non-beneficial holding.
There is no requirement of Directors to hold a specific number of shares in the company.
At the year end the Employee Trust, established to hold shares in relation to the ESOS and the LTIP, held 161,411 ordinary shares. The market value
of the shares held in trust as at 30 June 2018 was £217,905.
GovernanceThe Alumasc Group plc Report and Accounts 2018
49
Long Term Incentive Plans
The table below reconciles movements in LTIP awards during the year.
Date
of award
Market
price at
award date*
Earliest
exercise
date
Interest
as at
1 July
2017
vested
in year
exercised
in year
were
granted
in year
of which
lapsed
in year
Interest
as at
30 June
2018
Mar 2015
Dec 2015
Sept 2016
Oct 2017
155.5p Mar 2018
Dec 2018
177.5p
Sept 2019
157.5p
Oct 2020
173.5p
140,154
99,734
122,510
–
100,898
–
–
–
100,898
–
–
–
–
–
–
115,425
39,256
–
–
–
–
99,734
122,510
115,425
362,398
100,898
100,898
115,425
39,256
337,669
Paul Hooper
Total 2008 Plan
Andrew Magson
Mar 2015
Dec 2015
Sept 2016
Oct 2017
155.5p Mar 2018
Dec 2018
177.5p
Sept 2019
157.5p
Oct 2020
173.5p
64,865
46,808
57,521
–
46,696
–
–
–
46,696
–
–
–
–
–
–
54,194
18,169
–
–
–
46,808
57,521
54,194
Total 2008 Plan
169,194
46,696
46,696
54,194
18,169
158,523
* The market price at the award date is based on the price on the day the Employee Trust or the company granted the award. This price can differ from the market value at the date the Remuneration
Committee recommended the award to the Trust or company.
Performance graph and Chief Executive remuneration table
The information included in this part of the Directors’ Remuneration report is not subject to audit.
Historical total shareholder return performance
£300
£250
£200
£150
£100
£50
£0
30 June
2010
31 Dec
2010
30 June
2011
31 Dec
2011
30 June
2012
31 Dec
2012
30 June
2013
31 Dec
2013
30 June
2014
31 Dec
2014
30 June
2015
31 Dec
2015
30 June
2016
31 Dec
2016
30 June
2017
31 Dec
2017
30 June
2018
Alumasc
FTSE All Share
The graph shows the total shareholder return on a hypothetical holding of shares in the company compared with the FTSE All Share Index. This index
has been selected as, in the opinion of the Directors, it provides a sounder comparison than any subset of the market.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
50
DIRECTORS’ REMUNERATION REPORT continued
The following table sets out the total remuneration and the amount vesting under short-term and long-term incentives (as a percentage of the
maximum that could have been achieved) in each of the past five years for the Chief Executive.
Year
2017/18
2016/17*
2015/16
2014/15
2013/14
Chief Executive single figure
of total remuneration
£000
Annual bonus payout against
maximum opportunity
%†
Long-term incentive vesting
rates against maximum opportunity
%
332
510
493
633
323
0%
22%
20%
71%
13%
0%
72%*
50%
50%
0%
* Adjusted to reflect actual figures following the vesting of the 2015 LTIP award in March 2018.
† For the purposes of this table, percentages relate to the remuneration policy maximum bonus of 100% rather than the current practice maximum of 50% of salary.
Percentage change in Chief Executive’s remuneration
The table below shows the percentage change in remuneration between the years ended 30 June 2017 and 30 June 2018 for the CEO and all
group employees. Remuneration is defined for these purposes as wages and salaries (including variable remuneration) and pension costs. Whilst all
employees in general received a 2 to 3% cost of living pay rise in 2017, changes in the mix of employees across the group have impacted the overall
reported increase in salary per employee.
Salary
Benefits
Bonus
Total
Relative importance of spend on pay
2016/17
2017/18
CEO
Employees
3.1%
-3.5%
-100.0%
-14.7%
0.4%
–
-38.9%
-2.6%
Total employee pay
£000
Dividends
£000
21,574
21,747
2,368
2,594
Relative importance of spend on pay
Chief Executive’s remuneration 2013/14 – 2017/18
30,000
25,000
20,000
15,000
0
0
0
’
£
10,000
5,000
0
21,574
21,747
2016/17
2017/18
Total Employee Pay
Dividends
2,368
2,594
700
600
2017/18
500
2016/17
0
0
0
’
£
400
300
200
100
0
2013/14
2014/15
2015/16
2016/17
2017/18
Long Term
long term
Short Term
Short term
Pension
Pension
benefits
Benefits
Salary
Salary
GovernanceThe Alumasc Group plc Report and Accounts 2018
51
Statement of implementation of Remuneration Policy in 2018/19
The following sections show how the Remuneration Policy will be applied in 2018/19.
Base salary
Neither the Chief Executive nor the Group Finance Director base salaries have been raised for the 2018/19 financial year. This will be reviewed later
in the year.
Non-Executive Directors
The remuneration of the Non-Executive Directors is set by the Chairman and the Executive Directors. The policy of the Board is that the
remuneration of the Non-Executive Directors should be consistent with the levels of remuneration paid by companies of a similar size and
complexity. Non-Executive Directors receive an annual fee and are reimbursed expenses incurred in performing their duties. They do not receive
any performance related remuneration or pension contributions. The non-executive fees were not increased during the year and there are no
plans to make any increases in the 2018/19 financial year.
The Chairman and Non-Executive Directors do not have contracts of service but their terms are set out in letters of appointment.
Bonus
For 2018/19 the annual bonus for Executive Directors will be determined by growth in group underlying profit before tax relative to demanding
targets set at the beginning of the financial year. The Board considers that these targets are commercially sensitive and therefore full details will
not be disclosed until the 2018/19 report.
Long Term Incentive Plan
It is intended that awards under the 2008 LTIP will be made in October 2018 for the Chief Executive, to the extent of 75% of base salary,
and to the Group Finance Director, to the extent of 50% of base salary.
The performance criteria for these awards over a three year period will be the growth in basic EPS above the 18.3 pence per share base level
achieved in the 2016/17 financial year, in view of the reduction in earnings per share in 2017/18.
Threshold basic EPS growth (25% of award) is:
At least growth in RPI plus 2.5% per annum over the performance period
Below growth in RPI plus 2.5% per annum over the performance period
If threshold performance above achieved then:
Basic EPS growth (50% of award) is:
Vesting level
100%
0%
Vesting level
Equal to or greater than the growth in retail prices index (“RPI”) plus 10% per annum over the performance period
Between RPI growth plus 2.5% and RPI growth plus 10% per annum over the performance period
100%
Straight line between 0%-100%
Total Shareholder Return (25% of award) is:
Top quartile performance relative to FTSE All Share Index.
Between median and top quartile
Below median quartile
Vesting level
100%
Straight line between 0%-100%
0%
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
52
DIRECTORS’ REMUNERATION REPORT continued
Consideration by the Directors of matters relating to directors remuneration
During the year the Committee considered the remuneration of the Chairman and the Executive Directors.
Details of the Committee members who served during the year can be found on page 44. The Committee met twice during the year and a record
of the meeting attendance by Committee members is set out on page 38. The Group Chairman generally attends meetings of the Committee but
takes no part in deliberations relating to his own position. The Chief Executive and Group Finance Director can attend meetings of the Committee
as requested but take no part in deliberations relating to their own position.
The increases in base salary for the Executive Directors in July 2017 were awarded within the range of salary increases granted to employees across
the group. No external advice was taken on these matters.
Neither of the Executive Directors has any external paid directorships. Executive Directors may be permitted to accept external Board or committee
appointments provided they do not interfere with their obligations to the company. The Board will decide at the time of appointment whether the
Executive Director may retain the fees for such appointments.
Statement of voting at general meeting
At last year’s AGM (2017) the Directors’ Remuneration Report received the following votes from shareholders:
For
Against
Total votes cast (for and against)
Votes withheld*
Total votes cast (including withheld votes)
Total number of votes cast
% of votes cast
20,729,189
13,979
20,743,168
249,000
20,992,168
99.9
0.1
100
n/a
n/a
* A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast ‘For’ or ‘Against’ a resolution.
Approval
This report was approved by the Board of Directors on 11 September 2018 and signed on its behalf by:
Jon Pither
Chairman
Remuneration Committee
GovernanceThe Alumasc Group plc Report and Accounts 2018
53
DIRECTORS’ REPORT
The Directors present their Annual Report and the consolidated financial statements for The Alumasc Group plc for the financial year ended
30 June 2018.
Strategic report
The Companies Act 2006 (“CA2006”) requires this Annual Report to present a fair, balanced and understandable view of Alumasc’s business
during the year ended 30 June 2018 and of the position of the group at the end of the financial period, together with a description of the principal
risks and uncertainties facing the business. The company has taken advantage of section 414C(11) of the CA 2006 to include disclosures in the
Strategic report on these items and the further items listed in the ‘Other information’ section on page 55. The Strategic report can be found on
pages 2 to 33.
Corporate governance statement
The Disclosure and Transparency Rules (“DTR”) require certain information to be included in a corporate governance statement in the Directors’
report. Information that fulfils these requirements can be found in the Corporate Governance Statement on pages 36 to 39 and is incorporated
into the Directors’ report by reference.
Management report
For the purposes of compliance with DTR 4.1.5R(2) and DTR 4.1.8R the required content of the management report can be found in the
Strategic report and this Directors’ report, including the sections of the Annual Report incorporated by reference.
Directors
The Directors who served during the financial year were John McCall, Jon Pither, Paul Hooper, Andrew Magson, Philip Gwyn, David Armfield
and Richard Saville. Their biographies can be found on pages 34 to 35.
Results and dividends
The group reported underlying profit before tax of £6.5 million (2016/17: £9.0 million) and the profit before tax for the year of £5.4 million
(2016/17: £8.1 million). The Directors recommend a final dividend of 4.4 pence (2016/17: 4.3 pence) per ordinary share payable on 31 October 2018
to members on the register at the close of business on 5 October 2018 which, together with the interim dividend, makes a total of 7.35 pence for
the year (2016/17: 7.15 pence).
The company operates a dividend re-investment plan, details of which are available from Equiniti Registrars.
The right to receive any dividend has been waived by the Trustee of the Company’s Employee Benefit Trust over any shares that the Trustees
may hold from time to time. Details of the Employee Trust’s current holding can be found in the Directors Remuneration Report on page 48.
Employee matters
The group is an equal opportunities employer and its policies for recruitment, training, career development and promotion are based on the
aptitude and abilities of the individual regardless of religion, gender and sexual orientation, educational or professional backgrounds. An analysis
of our employees by gender at 30 June 2018 can be found on page 31.
Those who are disabled are given equal treatment with the able-bodied. Should employees become disabled after joining the group, every effort
is made to ensure that employment continues and appropriate training is given.
Employees are kept informed of changes in the business and general financial and economic factors influencing the group, this is done through
briefing sessions and presentations. The group values the views of its employees and consults with them on a regular basis about matters that
may affect them.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 54
DIRECTORS’ REPORT continued
Global green house gas emissions data
The table below shows the emissions data for the current year. The 2016/17 data has been recalculated to exclude the SCP business, which was
sold on 31 July 2017, and both years also include Wade International for a full year, although it was acquired by the group on 31 January 2018
as required under the mandatory disclosure rules. The group continues to improve its emissions both in absolute terms and relative to the size
of the business.
Total Group Emissions
Scope 1
Scope 2
Scope 3
Total (scopes 1 & 2 only)
Total (scopes 1, 2 & 3)
Scope 1 & 2 emissions normalised to per employee (tCO2e)
Scope 1 & 2 emissions normalised to per £million revenue (tCO2e)
Tonnes of CO2e
2016/17
2017/18
1,914
1,875
481
3,789
4,270
8.4
42.5
1,828
1,652
574
3,480
4,054
6.2
34.4
Footnote:
We report in the tables above on all of the emission sources required under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. We do not have responsibility for any other
material emission sources. We have used the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (revised edition), ISO 14064 Part 1 2006 and emission factors from UK Government’s
Conversion Factors for Company Reporting 2016.
Political donations
No political donations were made during the year (2016/17: £0).
Research and development
The group continues to devote effort and resources to the research and development of new products and solutions. Research and development
expenditure during the year totalled £0.2 million (2016/17: £0.2 million).
Disclosure of information to the auditor
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit
information of which the company’s auditor is unaware; and each Director has taken all the steps that he ought to have taken as a Director to make
himself aware of any relevant audit information and to establish that the company’s auditor is aware of that information.
Auditor
The auditor, KPMG LLP, has indicated its willingness to continue in office, and a resolution that KPMG LLP be re-appointed will be proposed at the
next AGM. This will be KPMG’s 10th year in office and therefore, in accordance with legislation, an audit tendering process will be conducted during
the year, and KPMG will be part of that process.
Annual General Meeting
The notice convening the AGM, to be held on 25 October 2018, is included within this document together with an explanation of the business to be
conducted at the meeting and a form of proxy.
The Directors believe that the proposals set out for approval at the AGM will promote the success of the company. Accordingly, they recommend
unanimously that members vote in favour of each resolution. Members who are in any doubt as to what action to take are advised to consult
appropriate independent advisors.
GovernanceThe Alumasc Group plc Report and Accounts 2018
55
Other information
Other information relevant to the Directors’ report can be found in the following sections of the Annual Report:
Information
Page/s Location in Annual Report
Amendment of Articles of Association
Directors’ interests
Long term incentive plans
Financial risk management
Future developments
Health and safety and employee related policies
Major shareholdings
Movements in share capital
Purchase of own shares
Share capital – structure, voting, restrictions and other rights
111
48
49
84
2-33
31
111
90
111
111
Additional information for shareholders
Directors’ Remuneration Report
Directors’ Remuneration Report
Note 20 and the significant accounting policies sections, Financial Statements
Strategic report1
Strategic report: Corporate & Social Responsibility Report1
Additional information for shareholders
Note 23, Financial statements
Additional information for shareholders
Additional information for shareholders
1 The Board has taken advantage of section 414C(11) of the Companies Act 2006 to include disclosures in the Strategic report on these items.
The Directors’ Report of the company for the year ended 30 June 2018 comprises these pages, the sections of the Annual Report referred to under
the Corporate Governance statement and other information above which are incorporated into the Directors’ Report by reference.
Fair, balanced and understandable
The Board has concluded that the 2018 Annual Report is fair, balanced and understandable and provides the necessary information for shareholders
and other readers of the Report and Accounts to assess the group’s position and performance, business model and strategy.
The Directors’ Report was approved by the Board on 11 September 2018.
On behalf of the Board
Paul Hooper
Chief Executive
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 56
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the group and parent company financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare group and parent company financial statements for each financial year. Under that law they are
required to prepare the group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union
(IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent company financial statements on the same basis.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state
of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable, relevant and reliable;
• for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
• for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the parent company financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and
disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements
comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets
of the group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility Statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the group and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary
for shareholders to assess the group’s position and performance, business model and strategy.
On behalf of the Board
Paul Hooper
Chief Executive
Andrew Magson
Group Finance Director
GovernanceThe Alumasc Group plc Report and Accounts 2018
57
INDEPENDENT AUDITOR’S REPORT
To the members of the Alumasc Group plc
Overview
Materiality:
group financial statements as a whole
£320,000 (2017: £370,000)
4.7% (2017: 4.6%) of normalised group profit before tax from continuing operations
Coverage
96% (2017: 99%) of group profit before tax from continuing operations
Risks of material misstatement
vs 2017
Recurring risks
Post retirement benefits
Event driven
Accounting for acquisition of Wade International Limited
Accounting for long term contracts
Recoverability of parent company’s investment in subsidiaries
tu
tu
tu
New
1 Our opinion is unmodified
We have audited the financial statements of The Alumasc Group plc (“the company”) for the year ended 30 June 2018 which comprise the
Consolidated Statement of Comprehensive Income, Consolidated and Company Statements of Financial Position, Consolidated and Company
Statements of Cash Flows, Consolidated and Company Statements of Changes in Equity, and the related notes, including the accounting policies
in note 2.
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2018 and of the
group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU);
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in
accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial
statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the audit committee.
We were appointed as auditor by the shareholders on 29 October 2009. The period of total uninterrupted engagement is for the 10 financial years
ended 30 June 2018. We have fulfilled our ethical responsibilities under, and we remain independent of the group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard
were provided.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include
the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest
effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below
the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to
address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results
are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in
forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 58
INDEPENDENT AUDITOR’S REPORT
To the members of the Alumasc Group plc
2 Key audit matters: our assessment of risks of material misstatement (continued)
Valuation of defined benefit
obligation
Gross liability £113.9 million
(2017 gross liability: £119.7 million)
Refer to page 41 (Audit Committee
Report), page 70 (accounting policy)
and page 87 (financial disclosures).
The risk
Subjective valuation: Significant estimates are
made in valuing the defined benefit pension
obligation. Small changes in the key assumptions,
being the discount rate, inflation and mortality
rates, can have a significant effect on the group’s
results and financial position.
Accounting for
long term contracts
Revenue for Architectural
Screening, Solar Shading &
Balconies £22.0 million (2017
revenue: £24.4 million)
Refer to page 41 (Audit Committee
Report), page 71 (accounting policy)
and page 83 (financial disclosures).
The group adopts long term contract accounting
in respect of the Architectural Screening, Solar
Shading & Balconies segment.
Subjective estimate: Where the outcome of a
long-term contract can be estimated reliably the
recognition of revenue and profit is based on the
stage of completion of work performed. In most
cases this is assessed by reference to surveys of
work performed at the balance sheet date.
Surveys of work performed pose a significant risk
for our audit due to the high degree of estimation
involved. Incorrect estimation of the stage of
completion using surveys could result in a material
error in the level of revenue recognised by
the group.
Accounting treatment
To determine whether the outcome can be
estimated reliably, consideration needs to be
given as to whether the contract revenue can
be measured reliably and it is probable that the
economic benefits associated with the contract
will flow to the entity. This process involves
significant judgments, in particular where there
are contract variations and claims. The inclusion
of these amounts in the contract forecast where
the above conditions are not met could result
in a material error in the level of profit or loss
recognised by the group.
Our response
Our procedures included:
• Our pension expertise: challenging the key
assumptions used in the group’s valuation of
the defined benefit pension obligation, with the
support of our own actuarial specialists. This
included critically assessing the key assumptions
against those used by other comparable
companies and comparing those assumptions
with externally derived market data; and
• Assessing transparency: considering the
adequacy of the group’s disclosures of the
assumptions and the sensitivities of the defined
benefit pension obligation to changes in these
assumptions.
Our results
• We found the resulting estimate of the gross
pension liability to be acceptable (2017:
acceptable).
Our procedures included:
• Control design: testing the design and
implementation of the group’s controls over
the forecasting process for long term contract
revenue;
• Tests of detail: assessing whether the amounts
recognised in the financial statements for a
sample of contracts were in line with the stage
of completion assessment. This included, where
relevant, analysing post year end certification
and correspondence with customers;
• Tests of detail: assessing the appropriateness
of claims and variations accounted for during
the period by analysing correspondence with
customers regarding contract variations and
claims and obtaining post year end agreements
where available for a sample of contracts;
• Historical comparisons: assessing the
reasonableness of the group’s forecasts by
comparing the historical financial performance
of completed contracts with the original budgets
and forecast margins for those contracts; and
• Assessing transparency: considering the
adequacy of the group’s disclosures about the
degree of judgment and estimates involved in
arriving at contract revenues.
Our results
• We found revenue from long term contracts
to be acceptable (2017: acceptable).
Financial StatementsThe Alumasc Group plc Report and Accounts 2018 59
2 Key audit matters: our assessment of risks of material misstatement (continued)
Valuation of brand intangible
identified on acquisition of
Wade International Limited
Brand acquired on acquisition
£1.6 million;
Refer to page 41 (Audit Committee
Report), page 68 (accounting
policy) and page 80 (financial
disclosures).
The risk
Subjective valuation: The acquisition of
Wade International Limited is material for the
group. Acquisition accounting, in particular
the identification and valuation of acquired
intangibles, can be complex and involves
subjective judgments and estimates which require
special audit consideration due to the likelihood
and potential magnitude of misstatements of
intangible assets recognised.
Recoverability of parent
company’s investment in
subsidiaries
Investments £72.5 million; (2017:
£64.7 million)
Refer to page 98 (accounting
policy) and page 101 (financial
disclosures).
Forecast-based valuation
The carrying amount of the parent company’s
investment in other group companies represents
98% of the company’s total assets.
Their recoverability is not at a high risk of
significant misstatement or subject to significant
judgment. However, due to their materiality
in the context of the parent company financial
statements, this is considered to be the area that
had the greatest effect on our overall parent
company audit.
Our response
Our procedures included:
• Our valuations expertise: involving valuation
specialists to challenge the methodology applied
to the valuation exercise used to determine the
nature and value of intangible assets recognised,
and assess the key assumptions underlying
the valuation, being royalty rate and discount
rate, by comparison to comparable external
benchmarks and market-derived data; and
• Assessing transparency: considering the
adequacy of the group’s disclosures of the
acquisition in the Annual Report.
Our results
• We found the resulting valuation of the brand
intangible recognised on acquisition of Wade
International Limited to be acceptable.
Our procedures included:
• Benchmarking assumptions: challenging
the assumptions used in the cash flows included
in the budgets based on our knowledge of
the group and the markets in which the
subsidiaries operate; and
• Historical comparisons: assessing the
reasonableness of the budgets by considering
the historical accuracy of the previous forecasts.
Our results
• We found the group’s assessment of the
recoverable amount of the parent company’s
investment in subsidiaries to be acceptable
(2017: acceptable).
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 60
INDEPENDENT AUDITOR’S REPORT
To the members of the Alumasc Group plc
3 Our application of materiality and an overview of the scope of our audit
The materiality for the group financial statements as a whole was set at £320,000 (2017: £370,000), determined with reference to a benchmark of
group profit before tax normalised to exclude acquisition costs and any gains or losses on disposal of subsidiaries as disclosed in note 4, averaged
over the last three years due to fluctuations in the construction market, of £6.8 million, (2017: group profit before tax), of which it represents 4.7%
(2017: 4.6%).
Materiality for the parent company financial statements as a whole was set at £272,000 (2017: £315,000), determined with reference to a
benchmark of company total assets, of which it represents 0.4% (2017: 0.5%).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £16,000 (2017: £18,500), in addition
to other identified misstatements that warranted reporting on qualitative grounds.
Of the group’s nine (2017: nine) reporting components we subjected seven (2017: eight) to full scope audits for group purposes and two (2017:
one) to specified risk-focused procedures over revenue and trade receivables, all conducted by the group team. The latter were not individually
financially significant enough to require a full scope audit for group purposes, but did present specific individual risks that needed to be addressed.
The components within the scope of our work accounted for the percentages illustrated below.
The group team used component materiality ranging from £145,000 to £272,000 (2017: £191,000 to £315,000), having regard to the mix of size
and risk profile of the group across the components.
Group Materiality £320,000
(2017: £370,000)
Normalised profit before tax
from continuing operations
£6.8m
(2017: £8.1m)
Normalised profit before tax
from continuing operations
Group materiality
£320,000
Whole financial
statements materiality
(2017: £370,000)
£272,000
Range of materiality
at seven components
(£145,000 - £272,000)
(2017: £191,000 - £315,000)
£16,000
Misstatements reported
to the audit committee
(2017: £18,500)
Group total assets
Group revenue
Normalised group profit
before tax
8
1
92%
(2017: 99%)
99
92
4
1
96%
(2017: 99%)
99
96
4
1
96%
(2017: 99%)
99
96
Full scope for group audit
purposes 2018
Specified risk-focused audit
procedures 2018
Full scope for group audit
purposes 2017
Specified risk-focused audit
procedures 2017
Financial StatementsThe Alumasc Group plc Report and Accounts 2018 61
4 We have nothing to report on going concern
We are required to report to you if:
• we have anything material to add or draw attention to in relation to the Directors’ statement in note 1 to the financial statements on the use
of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the group and company’s use
of that basis for a period of at least twelve months from the date of approval of the financial statements; or
• the related statement under the Listing Rules set out on page 67 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
5 We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on
the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information
therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic Report and Directors’ Report
Based solely on our work on the other information:
• we have not identified material misstatements in the Strategic Report and the Directors’ Report;
• in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:
• the Directors’ confirmation within the Viability Statement that they have carried out a robust assessment of the principal risks facing the group,
including those that would threaten its business model, future performance, solvency and liquidity;
• the Principal Risks and Uncertainties disclosures describing these risks and explaining how they are being managed and mitigated; and
• the Directors’ explanation in the Viability Statement of how they have assessed the prospects of the group, over what period they have done
so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the group
will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Under the Listing Rules we are required to review the Viability Statement. We have nothing to report in this respect.
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the Directors’
statement that they consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the group’s position and performance, business model and strategy; or
• the section of the Annual Report describing the work of the Audit Committee does not appropriately address matters communicated by us
to the Audit Committee.
We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the eleven provisions of
the UK Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in these respects.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 62
INDEPENDENT AUDITOR’S REPORT
To the members of the Alumasc Group plc
6 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 56, the Directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error; assessing the group and parent 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 they either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector
experience, through discussion with the Directors and other management (as required by auditing standards), and from inspection of the group’s
regulatory and legal correspondence.
We had regard to laws and regulations in areas that directly affect the financial statements including financial reporting (including related company
legislation) and taxation legislation. We considered the extent of compliance with those laws and regulations as part of our procedures on the related
financial statement items.
In addition we considered the impact of laws and regulations in the specific area of health and safety recognising the nature of the group’s activities.
With the exception of any known or possible non-compliance, and as required by auditing standards, our work in respect of these was limited to
enquiry of the Directors and other management and inspection of regulatory and legal correspondence.
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.
As with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.
8 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company
and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Mark Matthewman (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 North Fourth Street
Milton Keynes
MK9 1NE
United Kingdom
11 September 2018
Financial StatementsThe Alumasc Group plc Report and Accounts 2018 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2018
63
Revenue
Cost of sales
Gross profit
Selling, general & administrative expenses
Operating profit
Finance expenses
Profit before taxation
Tax expense
Profit for the period
Other comprehensive income
Items that will not be recycled to profit or loss:
Actuarial gain/(loss) on defined benefit pensions, net of tax
Items that are or may be recycled subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges, net of tax
Exchange differences on retranslation of foreign operations
Other comprehensive gain/(loss) for the period, net of tax
Total comprehensive profit for the period, net of tax
Earnings per share:
Basic earnings per share
Diluted earnings per share
Alternative performance measures:
Underlying profit before tax (£’000)
Underlying earnings per share (pence)
Notes
3, 4
4, 5
8
5
9
2017/18
£000
98,407
(68,304)
30,103
(24,023)
6,080
(706)
5,374
(1,057)
4,317
2016/17
£000
104,761
(72,022)
32,739
(23,864)
8,875
(752)
8,123
(1,583)
6,540
21, 9
2,280
(792)
20, 9
11
11
5
11
(220)
2
(218)
2,062
6,379
Pence
12.0
11.9
170
34
204
(588)
5,952
Pence
18.3
18.0
6,456
14.4
9,011
20.1
Reconciliations of underlying to statutory profit and earnings per share are provided in notes 5 and 11 respectively.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
64
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2018
Notes
2018
£000
2018
£000
2017
£000
2017
£000
12
13
14
9
15
16
26
19, 26
21
22
9
17
22
20
23
24
24
24
24
10,661
18,705
3,913
–
2,574
10,440
23,755
4,656
(9,468)
(15,140)
(1,525)
(905)
(22,413)
(100)
(405)
(327)
4,517
445
(241)
(271)
86
19,885
35,853
38,851
74,704
5,315
16,488
2,364
17
3,501
10,508
22,459
9,014
(2,938)
(20,596)
(890)
(595)
27,685
41,981
69,666
(27,038)
(25,019)
(23,245)
(50,283)
24,421
(24,210)
(49,229)
20,437
(23,497)
(157)
(494)
(62)
4,517
445
(541)
(51)
84
15,983
24,421
20,437
Assets
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Available-for-sale assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Interest bearing loans and borrowings
Employee benefits payable
Provisions
Deferred tax liabilities
Current liabilities
Trade and other payables
Provisions
Corporation tax payable
Derivative financial liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Capital reserve – own shares
Hedging reserve
Foreign currency reserve
Profit and loss account reserve
Total equity
Paul Hooper
Director
Andrew Magson
Director
11 September 2018
Company number 1767387
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2018
65
Operating activities
Operating profit
Adjustments for:
Depreciation
Amortisation
Gain on disposal of property, plant and equipment
Loss on disposal of business
Gain on disposal of available-for-sale assets
Decrease/(increase) in inventories
Increase in receivables
Decrease in trade and other payables
Increase/(decrease) in provisions
Cash contributions to retirement benefit schemes
Share based payments
Cash generated by operating activities
Tax paid
Net cash inflow from operating activities
Investing activities
Purchase of property, plant and equipment
Payments to acquire intangible fixed assets
Proceeds from sales of plant and equipment
Acquisition of subsidiary undertaking, prior to payment for cash acquired
Net proceeds from sale of business activity
Proceeds from sale of available-for-sale assets
Net cash outflow from investing activities
Financing activities
Interest paid
Equity dividends paid
Draw down of revolving credit facility
Exercise of share based incentives
Net cash inflow/(outflow) from financing activities
Net decrease in cash and cash equivalents
Net cash and cash equivalents brought forward
Net decrease in cash and cash equivalents
Effect of foreign exchange rate changes
Net cash and cash equivalents carried forward
Notes
2017/18
£000
2016/17
£000
6,080
8,875
6, 12
6, 14
21
26
26
26
1,204
434
(18)
218
(426)
528
(1,618)
(1,200)
242
(3,203)
160
2,401
(679)
1,722
(3,042)
(229)
26
(7,807)
767
443
(9,842)
(185)
(2,594)
6,500
39
3,760
(4,360)
9,014
(4,360)
2
4,656
958
425
(2)
–
–
(270)
(2,700)
(1,994)
(585)
(3,200)
157
1,664
(800)
864
(909)
(147)
4
–
–
–
(1,052)
(120)
(2,368)
1,000
116
(1,372)
(1,560)
10,540
(1,560)
34
9,014
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
66
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2018
At 1 July 2016
Profit for the period
Exchange differences on retranslation
of foreign operations
Net gain on cash flow hedges
Tax on derivative financial liability
Actuarial loss on defined benefit pensions,
net of tax
Dividends
Share based payments
Own shares used to satisfy exercise
of share awards
Exercise of share based incentives
Notes
Share
capital
£000
4,517
–
–
–
–
–
–
–
–
–
10
25
Share
Capital
reserve –
premium own shares
£000
£000
Hedging
reserve
£000
Foreign
currency
reserve
£000
445
–
(931)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
390
–
(221)
–
–
207
(37)
–
–
–
–
–
50
–
34
–
–
–
–
–
–
–
Profit
and loss
account
reserve
£000
12,720
6,540
–
–
–
(792)
(2,368)
157
–
(274)
Total
equity
£000
16,580
6,540
34
207
(37)
(792)
(2,368)
157
390
(274)
At 1 July 2017
4,517
445
(541)
(51)
84
15,983
20,437
Profit for the period
Exchange differences on retranslation
of foreign operations
Net loss on cash flow hedges
Tax on derivative financial liability
Actuarial gain on defined benefit pensions,
net of tax
Dividends
Share based payments
Own shares used to satisfy exercise
of share awards
Exercise of share based incentives
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300
–
–
–
(265)
45
–
–
–
–
–
–
2
–
–
–
–
–
–
–
4,317
4,317
–
–
–
2
(265)
45
2,280
(2,594)
160
2,280
(2,594)
160
–
(261)
300
(261)
10
25
At 30 June 2018
4,517
445
(241)
(271)
86
19,885
24,421
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
67
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
1 Basis of preparation
The Alumasc Group plc is incorporated and domiciled in England and Wales. The company’s ordinary shares are traded on the
London Stock Exchange.
The group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by
the European Union as they apply to the financial statements of the group for the year ended 30 June 2018, and the Companies Act 2006.
Going concern
The group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in
the Strategic Report on pages 1 to 33. The financial position of the group, its cash flows and liquidity position are set out in these financial
statements. Details of the group’s borrowing facilities are described within note 19.
The group has committed borrowing facilities of £12.5 million which expire in August 2020. In addition, the group has recently renewed
overdraft facilities totalling £3.5 million for another year. At 30 June 2018 the group’s net debt was £4.8 million (2017: £6.1 million net cash).
On the basis of the group’s financing facilities and current operating and financial plans and sensitivity analyses, the Board is satisfied that the
group has adequate resources to continue in operational existence for the foreseeable future and accordingly continues to adopt the going
concern basis in preparing the financial statements. Further information is set out in the viability statement on page 30.
2 Summary of significant accounting policies
Changes in accounting policy
The accounting policies adopted are consistent with those of the previous financial year.
The following new standards, amendments and interpretations are effective for the period beginning on or after 1 July 2017 and have been
adopted for the group financial statements where appropriate with no material impact on the disclosures made by the group:
Amendments to IAS 7: Disclosure Initiative.
Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses.
Basis of consolidation
The group financial statements consolidate the financial statements of the company and each of its subsidiaries for the year to 30 June
each year.
Subsidiaries are consolidated from the date of their acquisition, being the date on which the group obtains control, and continue to be
consolidated until the date that such control ceases. Control in this context means the power to govern the financial and operating policies
of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights. The financial
statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All inter-
company balances and transactions, including unrealised profits arising from them, are eliminated.
Judgments and estimates
The main source of estimation uncertainty that could have a significant risk of causing material adjustment to the carrying amounts of assets
and liabilities at 30 June 2018 within the next financial year are the valuation of defined benefit pension obligations and the recognition
of revenues and profit on construction contracts.
Measurement of defined benefit pension obligations requires estimation of future changes in inflation, mortality rates and the selection
of a suitable discount rate (see note 21).
Revenue recognised on construction contracts is determined by the assessment of the stage of completion of each contract. Contract revenue
includes an assessment of contract variations, claims and incentive payments when their recovery is considered probable and the amount
can be estimated reliably. Judgment is therefore required in the application of the group’s policy regarding revenue and profit recognition
relating to:
(i) the inclusion of potential contract variations, claims and incentive payments prior to these being fully is agreed; and/or
(ii) differences arising, timing or otherwise, between the assessment of internal quantity surveyors and those of our customers
as to the level of work performed.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 68
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
2 Summary of significant accounting policies (continued)
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures.
As part of its transition to IFRS, the group elected to re-state only those business combinations that occurred on or after 1 July 2004.
In respect of acquisitions prior to 1 July 2004, goodwill represents the amount recognised under the group’s previous accounting framework,
UK GAAP. For acquisitions on or after 1 July 2004, goodwill represents the excess of the cost of the acquisition over the group’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is
recognised immediately in the income statement.
After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for
impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value may be impaired. The carrying
amount of goodwill allocated to a cash-generating unit is taken into account when determining the gain or loss on disposal of the unit, or of
an operation within it.
Other intangible assets
Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses.
Intangible assets acquired separately from a business are carried initially at cost. An intangible asset acquired as part of a business combination
is recognised separately from goodwill if the asset is separable or arises from contractual or other legal rights and its fair value can be measured
reliably. Expenditure on internally developed intangible assets, excluding development costs, is taken to the income statement in the year in
which it is incurred.
Development expenditure is recognised as an intangible asset only after all the following criteria are met:
• the project’s technical feasibility and commercial viability can be demonstrated;
• the availability of adequate technical and financial resources and an intention to complete the project have been confirmed; and
• the correlation between development costs and future revenues has been established.
Intangible assets with a finite life are amortised on a straight line basis over their expected useful lives, as follows:
Computer software
Development expenditure
Brands
–
–
–
2 to 5 years
up to 10 years
3 to 20 years
The carrying value of intangible assets is reviewed for impairment whenever events or changes in circumstances indicate the carrying value
may not be recoverable. In addition, the carrying value of capitalised development expenditure is reviewed for impairment annually and before
being brought into use.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Cost comprises the
aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to
making the asset capable of operating as intended. Under IFRS transitional provisions, the group elected to bring in previous valuations of
freehold and long leasehold land and buildings at a valuation frozen under FRS 15, and these amounts are carried forward at deemed cost.
Freehold land is not depreciated.
The cost of other property, plant and equipment is written off by equal monthly instalments over their estimated useful lives as follows:
Freehold buildings
Long leasehold property
Short leasehold improvements
Plant and equipment
Motor vehicles
–
–
–
–
–
25 to 50 years
over the period of the lease to a maximum of 50 years
over the period of the lease
3 to 15 years
4 to 5 years
Where parts of an item of property, plant and equipment have different useful lives, each part is accounted for as a separate item.
Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018 69
2 Summary of significant accounting policies (continued)
Impairment of fixed assets
The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when
annual impairment testing for an asset is required, the group makes an estimate of the asset’s recoverable amount. An asset’s recoverable
amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use. It is determined for each individual
asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. For the
purpose of impairment testing, goodwill is allocated to the related cash-generating units monitored by management, usually at business
segment level or business level as the case may be.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations
are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.
Leased assets
Assets held under leasing arrangements that transfer substantially all the risks and rewards of ownership to the group are classified as finance
leases and are capitalised with a corresponding liability being recognised for the lower of the fair value of the leased asset and the present
value of the minimum lease payments. The interest element of the rental obligation is charged to the statement of comprehensive income in
proportion to the reducing capital element outstanding.
Assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are classified as operating leases and rentals
payable are charged in the statement of comprehensive income on a straight line basis over the life of the lease.
Financial assets
When financial assets are recognised initially under IAS 39, they are measured at fair value, being the transaction price plus directly attributable
transaction costs.
Inventories
Inventories are valued at the lower of cost and net realisable value on a first in first out basis after making due allowance for any obsolete
or slow moving items. In the case of finished goods and work in progress, cost comprises direct materials, direct labour and an appropriate
proportion of manufacturing overheads. The allocation of manufacturing overheads has regard to normal production.
The group holds certain raw materials from suppliers on an inventory held on consignment basis, which are accounted for as consumed.
This inventory remains the property of the supplier until used.
Biological assets
Biological assets relate to the value of horticultural inventories at Blackdown greenroofs, which form part of the green roof systems supplied.
The assets are measured at fair value, being discounted market value less estimated point-of-sale costs, with any change therein recognised
in the statement of comprehensive income. Point-of-sale costs include all costs that would be necessary to sell the assets.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 70
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
2 Summary of significant accounting policies (continued)
Pension costs
The group operates both defined benefit and defined contribution pension schemes as follows:
(i) Defined benefit pensions
The group operates two principal defined benefit schemes which require deficit reduction contributions to be made to separately administered
funds. One of the schemes was closed to future benefit accrual in 2009, the other in 2010, with neither closure resulting in a curtailment gain
or loss. Prior to this, benefits were accrued under the Career Average Revalued Earnings (CARE) basis.
Prior to the closure of these schemes to future benefit accrual, the cost of providing benefits under the defined benefit plans was determined
separately for each plan using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine
current service cost) and is based on actuarial advice.
The group determines finance income/expense for the period relating to defined benefit pension schemes by applying the discount rate used
for valuing the schemes’ liabilities to the value of the net pension liability at the beginning of the year.
The net pension scheme finance costs are charged to finance costs within the statement of comprehensive income.
Actuarial gains and losses are recognised in full in the consolidated statement of comprehensive income. These comprise, for scheme assets,
the difference between the expected and actual return on assets, and, for scheme liabilities, the difference between the actuarial assumptions
and actual experience, and the effect of changes in actuarial assumptions.
The defined benefit pension asset or liability in the statement of financial position comprises the total for each plan of the present value of
the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which
the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published
bid price. The value of a net pension benefit asset is restricted to the sum of any unrecognised past service costs and the present value of any
amount the group expects to recover by way of refunds from the plan or reductions in the future contributions.
(ii) Defined contribution pensions
The pension cost charge to the statement of comprehensive income of the group’s defined contribution schemes represents the contributions
payable by the group to the funds. The assets of the schemes are held separately from those of the group in independently administered funds.
Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax
rates and laws that are enacted or substantively enacted by the statement of financial position date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts
in the financial statements, with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
• in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related
asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is
recognised in the consolidated statement of comprehensive income.
Foreign currencies
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions.
Exchange differences resulting from the settlement of such transactions and from the translation at exchange rates ruling at the year end date
of monetary assets and liabilities denominated in currencies other than the functional currency are recognised in the consolidated statement of
comprehensive income.
Own shares
The Alumasc Group plc shares held by the group are classified in shareholders’ equity as ‘own shares’ and are recognised at cost. Consideration
received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being
taken to reserves. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation of equity shares.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018 71
2 Summary of significant accounting policies (continued)
Equity settled share based payment transactions
The fair value of long term incentive awards and share options granted to employees is recognised as an employee expense from the date
of grant, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The
amount recognised as an expense is adjusted to reflect the actual number of shares for which the related service and non-market vesting
conditions are met.
Derivative financial instruments and hedging
The group uses derivative financial instruments to hedge its exposure to interest rate and foreign exchange risk.
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the statement of
comprehensive income. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the
nature of the item being hedged.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar
maturity profiles.
For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception.
This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how
effectiveness will be measured throughout its duration. Such items are expected at inception to be highly effective.
For the purpose of hedge accounting, the hedges used by the group are classified as cash flow hedges, as they hedge exposure to variability in
cash flows that are attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction.
Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the consolidated
statement of comprehensive income.
The portion of the gain or loss on a cash flow hedge that is determined to be an effective hedge is initially recognised directly in equity, while
the ineffective portion is recognised in the statement of comprehensive income.
Amounts taken to equity are transferred to the income statement at the time when the underlying transaction being hedged affects profit or
loss, such as when the forecast sale or purchase of the hedged item occurs. Where the hedged item is the cost of a non-financial asset
or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the statement of
comprehensive income.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked,
amounts previously recognised in equity remain in equity until the forecast transaction being hedged occurs and are transferred to the income
statement or to the initial carrying amount of a non-financial asset or liability as above. If the related transaction is not expected to occur, the
amount is taken to the statement of comprehensive income.
Information regarding both the qualitative and quantitative characteristics of the group’s treasury activities is presented to enable the improved
evaluation of the group’s exposure to risks arising from financial instruments.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received, and is stated net of rebates, and before VAT and other sales
taxes or duty. The following criteria must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer,
usually on despatch of the goods.
Construction contracts
Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the
extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can
be estimated reliably, contract revenue and expenses are recognised in the consolidated statement of comprehensive income in proportion to
the stage of completion of the contract.
The stage of completion, in most cases, is assessed by reference to surveys of work performed. When the outcome of a contract cannot be
estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. An expected loss
on a contract is recognised immediately in the statement of comprehensive income.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 72
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
2 Summary of significant accounting policies (continued)
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Provision is made when there
is objective evidence that the group will not be able to recover balances in full.
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand and short-term deposits with an original
maturity of three months or less.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
method. Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance
revenue and finance costs. Borrowing costs are recognised as an expense over the period to the maturity of the underlying instrument.
Provisions
A provision is recognised when the group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of
economic benefits will be required to settle the obligation. Where the group expects some or all of a provision to be reimbursed, for example
under an insurance policy, the reimbursement is recognised as a separate asset but only when recovery is virtually certain. The expense relating
to any provision is presented in the statement of comprehensive income net of any reimbursement.
New standards and interpretations not applied
The group is currently assessing the impact that IFRS 9 ‘Financial Instruments’, IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 16
‘Leases’ will have on the group’s revenue recognition, assets and liabilities. IFRS 9 and IFRS 15 are applicable to Alumasc’s accounting period
commencing 1 July 2018, and IFRS 16 to the accounting period commencing 1 July 2019.
Under IFRS 9, the group will elect to recognise the full amount of credit losses that would be expected to be incurred over the full recovery
period of trade receivables and contract assets recorded under IFRS 15. From the assessments performed to date the group does not expect
this to have a material impact on the group’s recorded assets.
IFRS 15 will impact revenue recognition throughout the group, but is likely to have a more significant impact on the Architectural Screening,
Solar Shading & Balconies operating segment as this business supplies bespoke products and performance obligations are satisfied over a period
of time. An input cost methodology is therefore deemed a more appropriate measure of revenue recognition rather than the current stage of
completion method. The extent of the impact is yet to be fully quantified and audited and will in any case depend on the type and terms of the
specific construction contracts undertaken in each financial year and the stage of completion of these contracts at the period end date.
The group has started a detailed assessment to quantify the impact on its reported assets and liabilities of adoption of IFRS 16. So far, the
most significant impact identified is that the group will recognise new assets and liabilities for its operating leases in respect of manufacturing,
warehouse and office premises and company cars. In addition, the nature of expenses related to those leases will change as the straight-
line operating lease expense will be replaced with a depreciation charge for right-of-use assets and interest expense on lease liabilities. The
quantitative effect will depend on the transition method chosen, the extent to which the group uses the practical expedients and recognition
exemptions, and any additional leases that the group enters into. Once the detailed assessment has been completed in 2018/19 the group will
confirm its transition date, approach and related quantitative information.
3 Revenue
Revenue, as disclosed in the statement of comprehensive income and total income, is analysed as follows:
Revenue arising from:
Sales of goods
Recognised on construction contracts
Revenue (per statement of comprehensive income)
Rental income
Total income
2017/18
£000
2016/17
£000
75,069
23,338
98,407
79,451
25,310
104,761
32
32
98,439
104,793
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
73
4 Segmental analysis
In accordance with IFRS 8 “Operating Segments”, the segmental analysis below follows the group’s internal management reporting structure.
The Chief Executive reviews internal management reports on a monthly basis, with performance being measured based on segmental operating
result as disclosed below. Performance is measured on this basis as management believes this information is the most relevant when evaluating
the impact of strategic decisions because of similarities between the nature of products and services, routes to market and supply chains in
each segment.
Inter-segment transactions are entered into applying normal commercial terms that would be available to third parties. Segment results, assets
and liabilities include those items directly attributable to a segment. Unallocated assets comprise cash and cash equivalents, deferred tax assets,
income tax recoverable and corporate assets that cannot be allocated on a reasonable basis to a reportable segment. Unallocated liabilities
comprise borrowings, employee benefit obligations, deferred tax liabilities, income tax payable and corporate liabilities that cannot be allocated
on a reasonable basis to a reportable segment.
Since the publication of Alumasc’s 2017 Report and Accounts there has been a change to internal management reporting and responsibilities
to the Chief Operating Decision Maker in respect of the Rainclear business, and therefore this business is now reported under the Water
Management segment, previously it was reported in the Roofing & Walling segment. The segmental analysis of comparative data has been
re-presented to reflect this change.
The group sold the SCP business on 31 July 2017 and as such revenues from this business of £288,000 (30 June 2017: £4,223,000),
and 30 June 2017 assets and liabilities of £1,381,000 and £528,000 respectively have been excluded from the segmental analysis
below in both 2017/18 and 2016/17 financial years. The business operated at break-even levels in the year prior to its sale. This business was
previously reported as part of the Roofing & Walling segment.
Analysis by reportable segment 2017/18
Architectural Screening, Solar Shading & Balconies
Roofing & Walling
Water Management
Housebuilding & Ancillary Products
Sub-total
Inter-segment elimination/unallocated costs
Total*
* Total excludes the SCP business sold on 31 July 2017 as described above.
Segmental operating result
Brand amortisation
Loss on disposal of the SCP business
Profit on disposal of available-for-sale assets
Timloc relocation costs
Wade acquisition costs
Total operating profit
External
£000
21,957
31,225
34,454
10,483
98,119
–
98,119
Inter-
segment
£000
–
–
21
–
21
(21)
–
Revenue
Total
£000
21,957
31,225
34,475
10,483
98,140
(21)
98,119
Segmental
operating
result
£000
786
1,812
3,567
1,660
7,825
(1,157)
6,668
£000
6,668
(239)
(218)
426
(322)
(235)
6,080
Segment
assets
£000
Segment
liabilities
£000
Capital expenditure
Property,
plant &
equipment
£000
Other
intangible
assets
£000
Depreciation
£000
Amortisation
£000
Architectural Screening, Solar Shading & Balconies 19,647
14,475
Roofing & Walling
22,908
Water Management
9,426
Housebuilding & Ancillary Products
Sub-total
Unallocated
Total
66,456
8,248
74,704
(5,317)
(6,998)
(7,431)
(3,612)
(23,358)
(26,925)
(50,283)
100
120
491
2,187
2,898
182
3,080
21
2
157
57
237
–
237
63
203
610
305
1,181
23
1,204
258
–
132
43
433
1
434
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
74
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
4 Segmental analysis (continued)
Analysis by reportable segment 2016/17
Architectural Screening, Solar Shading & Balconies
Roofing & Walling
Water Management
Housebuilding & Ancillary Products
Sub-total
Inter-segment elimination/unallocated costs
Total*
* Total excludes the SCP business sold on 31 July 2017, as described above.
Segmental operating result
Brand amortisation
Total operating profit from continuing operations
Segment
assets
£000
Architectural Screening, Solar Shading & Balconies 19,839
14,591
Roofing & Walling
13,582
Water Management
7,315
Housebuilding & Ancillary Products
Sub-total
Unallocated & Discontinued
Total
55,327
14,339
69,666
Analysis by geographical segment 2017/18
External
£000
24,399
34,008
32,573
9,558
100,538
–
100,538
Inter-
segment
£000
–
10
–
4
14
(14)
–
Revenue
Total
£000
24,399
34,018
32,573
9,562
100,552
(14)
100,538
Segmental
operating
result
£000
1,989
2,775
4,112
1,573
10,449
(1,306)
9,143
£000
9,143
(268)
8,875
Capital expenditure
Property,
plant &
equipment
£000
Other
intangible
assets
£000
18
211
336
447
1,012
13
1,025
46
–
76
17
139
8
147
Segment
liabilities
£000
(5,261)
(9,426)
(6,101)
(2,409)
(23,197)
(26,032)
(49,229)
Depreciation
£000
Amortisation
£000
73
141
428
283
925
33
958
251
2
125
47
425
–
425
Sales to external customers
Segment non-current assets
Analysis by geographical segment 2016/17
Sales to external customers
Segment non-current assets
United
Kingdom
£000
Europe
£000
North
America
£000
Middle
East
£000
Far
East
£000
Rest of
World
£000
Total
£000
85,550
3,035
5,552
839
2,849
294
98,119
33,279
–
–
–
–
–
33,279
United
Kingdom
£000
Europe
£000
North
America
£000
Middle
East
£000
Far
East
£000
Rest of
World
£000
Total
£000
83,387
3,747
7,953
630
2,359
2,462
100,538
24,176
–
–
–
–
–
24,176
Segment revenue by geographical segment represents revenue from external customers based upon the geographical location of the customer.
The analyses of segment non-current assets are based upon location of the assets.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
75
5
Underlying to statutory profit reconciliation
Underlying profit
Brand amortisation
IAS 19 net pension scheme finance costs (note 7)
Loss on disposal of the SCP business
Profit on disposal of available-for-sale assets
Timloc relocation costs
Wade acquisition costs
Statutory profit
Operating
profit
£000
2017/18
Profit
before tax
£000
Operating
profit
£000
2016/17
Profit
before tax
£000
6,668
(239)
–
(218)
426
(322)
(235)
6,080
6,456
(239)
(494)
(218)
426
(322)
(235)
5,374
9,143
(268)
–
–
–
–
–
8,875
9,011
(268)
(620)
–
–
–
–
8,123
In the presentation of underlying profits, management treats the amortisation of acquired brands and IAS 19 pension costs as non-underlying
items because they are material non-cash and non-trading items that typically would be excluded in assessing the value of the business.
In addition, in 2017/18 management is presenting the following four items as non-underlying as they are non-recurring items that are judged
by management to be significant enough to distort the understanding of the year-on-year evolution of the underlying trading performance
of the business:
• the loss on disposal of the Scaffold and Construction Products (“SCP”) business, which was sold on 31 July 2017;
• the profit on disposal of the group’s share of Amorim Isolamentos S.A, previously an available-for-sale asset, on 21 November 2017;
• costs of relocating the Timloc business to new purpose built leased premises; and
• acquisition costs relating to the purchase of Wade International Limited on 31 January 2018.
6 Expenses by nature
The following items have been charged/(credited) in arriving at operating profit:
Raw materials and consumables
Depreciation of property, plant and equipment
Intangible assets amortisation
Brand amortisation
Gain on disposal of property, plant and equipment
Unsettled foreign exchange losses/(gains)
Employee benefit expense
Operating lease payments
Income from property operating leases
Research and development
Auditor’s remuneration:
Audit of these financial statements
Audit of financial statements of subsidiaries pursuant to legislation
Non-audit services
Other operating charges
2017/18
£000
49,920
1,204
195
239
(18)
45
23,989
1,779
(32)
224
66
76
8
14,632
92,327
2016/17
£000
53,599
958
157
268
(3)
(22)
23,754
1,480
(32)
176
64
66
–
15,421
95,886
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
76
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
7 Employee costs and numbers
Employee benefit expense from continuing operations:
Wages and salaries
Social security
Defined contribution pension costs (note 21)
Sub-total
IAS 19 net defined benefit pension scheme finance costs
Total
Average number of employees
8 Net finance costs
Finance costs – Bank overdrafts
– Revolving credit facility
– IAS 19 net pension scheme finance costs
9 Tax expense
(a) Tax on profit on ordinary activities
Tax charged in the statement of comprehensive income
Current tax:
UK corporation tax
Overseas tax
Amounts over provided in previous years
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Amounts under provided in previous years
Rate change adjustment
Total deferred tax
Total tax expense
Tax recognised in other comprehensive income
Deferred tax:
Actuarial gains on pension schemes
Cash flow hedge
Tax charged to other comprehensive income
Total tax charge in the statement of comprehensive income
2017/18
£000
2016/17
£000
21,141
2,242
606
23,989
20,977
2,180
597
23,754
494
620
24,483
24,374
2017/18
Number
531
2016/17
Number
511
2017/18
£000
2016/17
£000
33
179
212
494
706
39
93
132
620
752
2017/18
£000
2016/17
£000
559
33
(2)
590
491
5
(29)
467
1,117
11
(22)
1,106
478
78
(79)
477
1,057
1,583
467
(45)
422
152
37
189
1,479
1,772
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
77
9 Tax expense (continued)
(b) Reconciliation of the total tax charge
The total tax rate applicable to the tax expense shown in the statement of total comprehensive income of 19.7% is higher than (2016/17:
19.5% was lower than) the standard rate of corporation tax in the UK of 19.0% (2016/17: 19.75%). The differences are reconciled below:
Accounting profit before tax
Current tax at the UK standard rate of 19.0% (2016/17: 19.75%)
Expenses not deductible for tax purposes
Rate change adjustment
Tax over provided in previous years – current tax
Tax under provided in previous years – deferred tax
2017/18
£000
5,374
1,021
62
(29)
(2)
5
1,057
2016/17
£000
8,123
1,604
2
(79)
(22)
78
1,583
(c) Unrecognised tax losses
The group has agreed tax capital losses in the UK amounting to £20 million (2017: £20 million) that relate to prior years. Under current
legislation these losses are available for offset against future chargeable gains. The capital losses are able to be carried forward indefinitely.
Revaluation gains on land and buildings amount to £1 million (2017: £1 million). These have been offset against the capital losses detailed
above. A deferred tax asset has not been recognised in respect of the net capital losses carried forward of £19 million (2017: £19 million)
as they do not meet the criteria for recognition.
(d) Deferred tax
A reconciliation of the movement in deferred tax during the year is as follows:
Accelerated
capital
allowances
£000
Short term
temporary
differences
£000
Brands
£000
Hedging
£000
Total
deferred
tax liability
£000
At 1 July 2016
Charged/(credited) to the statement of
comprehensive income – current year
Charged to the statement of
comprehensive income – prior year
Charged to equity
At 30 June 2017
Charged/(credited) to the statement of
comprehensive income – current year
(Credited)/charged to the statement of
comprehensive income – prior year
(Credited)/charged to equity
Acquisition of subsidiary
At 30 June 2018
233
33
73
–
339
58
(12)
–
50
435
(41)
4
5
–
(32)
(15)
17
–
–
(30)
364
(65)
–
–
299
(41)
–
–
298
556
(48)
–
–
37
(11)
–
–
(45)
–
(56)
508
(28)
78
37
595
2
5
(45)
348
905
Pension
deferred
tax asset
£000
(4,080)
427
–
152
(3,501)
460
–
467
–
(2,574)
Deferred tax assets and liabilities are presented as non-current in the consolidated statement of financial position.
Deferred tax assets have been recognised where it is probable that they will be recovered. Deferred tax assets of £3.2 million
(2017: £3.2 million) have not been recognised in respect of net capital losses of £19 million (2017: £19 million), see note 9 (c).
(e) Factors affecting the tax charge in future periods
In the Budget on 16 March 2016, the UK Government announced its intention to further reduce the main rate of UK corporation tax to
17% with effect from 1 April 2020. Existing temporary differences on which deferred tax has been provided may therefore unwind in future
periods at this reduced rate. This rate change was substantively enacted at the balance sheet date. Deferred tax assets and liabilities have been
calculated based on the rate of 17% substantively enacted at both the 30 June 2017 and 30 June 2018 balance sheet dates.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
78
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
10 Dividends
Interim dividend for 2018 of 2.95p paid on 6 April 2018
Final dividend for 2017 of 4.3p paid on 31 October 2017
Interim dividend for 2017 of 2.85p paid on 7 April 2017
Final dividend for 2016 of 3.8p paid on 1 November 2016
2017/18
£000
2016/17
£000
1,056
1,538
–
–
2,594
–
–
1,018
1,350
2,368
A final dividend of 4.4 pence per equity share, at a cash cost of £1,583,000, has been proposed for the year ended 30 June 2018,
payable on 31 October 2018. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated
financial statements.
11 Earnings per share
Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary equity shareholders of the parent by
the weighted average number of ordinary shares in issue during the period. Diluted earnings per share is calculated by dividing the net profit
attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the period, after
allowing for the exercise of outstanding share options. The following sets out the income and share data used in the basic and diluted earnings
per share calculations:
Net profit attributable to equity holders of the parent
Weighted average number of shares
Dilutive potential ordinary shares – employee share options
Calculation of underlying earnings per share:
Reported profit before taxation
Brand amortisation
IAS 19 net pension scheme finance costs
Loss on disposal of the SCP business
Profit on disposal of available-for-sale assets
Timloc relocation costs
Wade acquisition costs
Underlying profit before taxation
Tax at underlying group tax rate of 20.2% (2016/17: 20.6%)
Underlying earnings
Weighted average number of shares
Underlying earnings per share
2017/18
£000
4,317
000s
35,830
361
36,191
2016/17
£000
6,540
000s
35,663
556
36,219
2017/18
£000
2016/17
£000
5,374
239
494
218
(426)
322
235
6,456
(1,304)
5,152
35,830
14.4p
8,123
268
620
–
–
–
–
9,011
(1,856)
7,155
35,663
20.1p
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
12 Property, plant and equipment
Cost
At 1 July 2016
Additions
Disposals
At 1 July 2017
Additions
Acquisition through business combination
Reclassification
Disposals
At 30 June 2018
Accumulated depreciation and impairment losses
At 1 July 2016
Depreciation charge for year
On disposals
At 1 July 2017
Depreciation charge for year
Reclassification
On disposals
At 30 June 2018
Net book value at 30 June 2018
Net book value at 30 June 2017
Net book value at 1 July 2016
Freehold
land and
buildings
£000
Long
leasehold
property
£000
Short
leasehold
improvements
£000
Plant &
equipment
£000
3,128
49
–
3,177
16
2,651
–
–
5,844
802
91
–
893
148
–
–
1,041
4,803
2,284
2,326
235
–
–
235
841
–
138
–
1,214
220
15
–
235
20
2
–
257
957
–
15
273
178
(5)
446
66
–
(81)
(58)
373
250
9
(5)
254
16
(2)
(57)
211
162
192
23
11,209
798
(420)
11,587
2,157
827
(57)
(575)
13,939
8,323
843
(418)
8,748
1,020
–
(568)
9,200
4,739
2,839
2,886
79
Total
£000
14,845
1,025
(425)
15,445
3,080
3,478
–
(633)
21,370
9,595
958
(423)
10,130
1,204
–
(625)
10,709
10,661
5,315
5,250
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
80
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
13 Goodwill
Cost:
At 1 July
Acquisition of Wade
At 30 June
Impairment:
At 1 July and 30 June
Net book value at 30 June
2018
£000
17,211
2,217
19,428
2017
£000
17,211
–
17,211
723
723
18,705
16,488
Goodwill acquired through acquisitions has been allocated to cash generating units for impairment testing as set out below:
Alumasc Roofing
Timloc
Levolux
Rainclear
Wade
At 30 June
2018
£000
3,820
2,264
10,179
225
2,217
18,705
2017
£000
3,820
2,264
10,179
225
–
16,488
Impairment testing of acquired goodwill
The group considers each of the operating businesses that have goodwill allocated to them, which are those units for which a separate cash
flow is computed, to be a cash generating unit (CGU). Each CGU is reviewed annually for indicators of impairment. In assessing whether an
asset has been impaired, the carrying amount of the CGU is compared to its recoverable amount. The recoverable amount is the higher of its
fair value less costs to sell and its value in use. In the absence of any information about the fair value of a CGU, the recoverable amount is
deemed to be its value in use. Each of the CGUs are either operating segments as shown in note 4, or sub-sets of those operating segments.
For the purpose of impairment testing, the recoverable amount of CGUs is based on value in use calculations. The value in use is derived from
discounted management cash flow forecasts for the businesses, based on budgets and strategic plans covering a five year period.
The growth rate used to extrapolate the cash flows beyond this period was 1% (2017: 1%) for each CGU.
Key assumptions included in the recoverable amount calculation include:
(i) Revenues
(ii) Gross margins
(iii) Overhead costs
Each assumption has been considered in conjunction with the local management of the relevant operating businesses who have used their
past experience and expectations of future market and business developments in arriving at the figures used.
The range of pre-tax rates used to discount the cash flows of these cash generating units with on-balance sheet goodwill was between
11% and 12% (2017: between 10% and 11%). These rates were based on the group’s estimated weighted average cost of capital (W.A.C.C.),
which was risk-adjusted for each CGU taking into account both external and internal risks. The group’s W.A.C.C. in 2018 was similar to the
rate used in 2017.
The surplus headroom above the carrying value of goodwill at 30 June 2018 was significant in the case of all businesses subject to goodwill
impairment testing, with no impairment arising from either a 2% increase in the discount rate; a growth rate of -1% used to extrapolate the
cash flows; or a reduction of 25% in the cash flow generated in the terminal year for any CGU.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
81
13 Goodwill (continued)
Business combinations
On 31 January 2018 the group acquired 100% of the share capital of Wade International Limited (“Wade”), a leading manufacturer
and supplier of high quality metal drainage products and access covers with a well-established premium brand, for an enterprise value
of £8,000,000.
An analysis of the provisional fair value of the Wade net assets acquired and the fair value of the consideration paid is set out below:
Book value
£000
Fair value
adjustments
£000
Fair value
to group
£000
Net assets at date of acquisition:
Property, plant and equipment
Inventories
Trade and other receivables
Cash
Trade and other payables
Provisions
Deferred tax liabilities
Net assets
Goodwill
Brand acquired on acquisition
Software acquired on acquisition
Satisfied by:
Enterprise value
Working capital completion adjustment
Cash consideration prior to payment for cash acquired
Payment for cash acquired
Total purchase consideration
2,651
770
619
482
(492)
(200)
(50)
3,780
827
99
(40)
–
–
(50)
(298)
538
3,478
869
579
482
(492)
(250)
(348)
4,318
2,217
1,554
200
8,289
8,000
(193)
7,807
482
8,289
In addition to the cash consideration above, the group incurred £235,000 of acquisition costs relating to stamp duty and legal fees.
From the date of acquisition to 30 June 2018 Wade reported revenue of £2,242,000 and profit of £592,000 which, after the post-acquisition
reversal of the acquisition accounting adjustment to revalue inventories to fair value less costs to sell of £99,000, shown in the table above,
resulted in a net profit to the group in the 2017/18 financial year of £493,000.
If the combination had taken place at the beginning of the year, 1 July 2017, the revenue for the group for the 2017/18 financial year would
have been £101,482,000 and the profit before taxation would have been £6,203,000.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
82
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
14 Other intangible assets
Cost:
At 1 July 2016
Additions
At 1 July 2017
Additions
Acquisition of subsidiaries
Disposals
At 30 June 2018
Accumulated amortisation:
At 1 July 2016
Amortisation for the year
At 1 July 2017
Amortisation for the year
On disposals
At 30 June 2018
Net book value at 30 June 2018
Net book value at 30 June 2017
Net book value at 1 July 2016
Brands
£000
Computer
software
£000
4,289
–
4,289
–
1,554
–
5,843
2,265
268
2,533
239
–
2,772
3,071
1,756
2,024
2,158
147
2,305
237
200
(387)
2,355
1,540
157
1,697
195
(379)
1,513
842
608
618
Total
£000
6,447
147
6,594
237
1,754
(387)
8,198
3,805
425
4,230
434
(379)
4,285
3,913
2,364
2,642
The Levolux brand is being amortised over a life of 20 years from May 2007.
The Rainclear brand was being amortised over a life of 5 years from December 2012 and is now fully amortised.
The Wade brand is being amortised over a life of 25 years from February 2018.
15 Inventories
Raw materials
Work in progress
Finished goods
2018
£000
3,373
370
6,697
2017
£000
2,747
748
7,013
10,440
10,508
During the year the group’s inventory provision reduced by £25,000 (2017: increased by £199,000). At 30 June 2018 the group’s inventory
provision was £1,110,000 (2017: £1,135,000). Included within raw materials were biological assets of £48,000 (2017: £76,000).
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
16 Trade and other receivables
Trade receivables
Construction contracts
Other receivables
Prepayments and accrued income
83
2018
£000
15,202
6,615
432
1,506
23,755
2017
£000
14,626
6,266
384
1,183
22,459
Trade receivables are non-interest bearing, are generally on terms of 30-90 days and are shown net of provisions for impairment. As at
30 June 2018, trade receivables at nominal value of £297,000 (2017: £204,000) were impaired and provided for. Movements in the provision
for impairment of receivables were as follows:
At 1 July
Charge for the year
Amounts written off
At 30 June
2018
£000
204
221
(128)
297
Included within the total provision for impairment is £77,000 (2017: £69,000) in relation to provisions against construction contracts.
17 Trade and other payables
Trade payables
Other taxation and social security
Other payables
Construction deposits received on account
Accruals
Deferred income
2018
£000
16,776
2,064
974
578
1,756
265
22,413
2017
£000
249
8
(53)
204
2017
£000
17,043
1,820
783
893
2,231
727
23,497
18 Construction contracts
Details of amounts due from and to customers for contract work as at 30 June are included in notes 16 and 17. For contracts in progress
at 30 June 2018, the amount of contract costs incurred plus recognised profits less recognised losses to date, (i.e. contract revenue recognised),
was £13,420,000 (2017: £8,129,000). These contracts were on average 47% complete at 30 June 2018 (2017: 29%).
19 Borrowings
Non-current liabilities:
Non-current instalments due on bank loan
2018
£000
2017
£000
9,468
2,938
The group has a £12.5 million committed revolving credit facility which expires in August 2020. The group has the option to cancel and
repay elements of the committed facility at short notice should it wish to do so. The following financial covenants applied to the facility:
group interest cover, based on underlying EBITDA (i.e. from continuing operations and before non-recurring items), to be at least four times;
and net debt as a multiple of underlying EBITDA (i.e. from continuing operations and before non-recurring items) to be below three times.
At 30 June 2018 the group also had £2 million (2017: £2 million) of bank overdraft facilities repayable on demand.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
84
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
20 Financial instruments
Financial risk management
The group’s treasury activities are carried out in accordance with policies set by the Board and are managed on a centralised basis across
the group. The purpose of treasury activities is to ensure that adequate, cost effective funding is available to the group at all times and that
exposure to interest rate, foreign exchange and counterparty risks are managed within acceptable levels. The group uses derivative financial
instruments as economic hedges to manage foreign exchange and, where necessary, interest rate risks. It is the group’s policy that no trading
in financial instruments is undertaken. Hedge accounting treatment has been applied to all of these hedging activities. All derivative financial
instruments are measured at fair value at each balance sheet date.
Financial assets and liabilities
Set out below is a comparison by category of carrying amounts and fair values of all the group’s financial assets and liabilities:
Financial assets:
Cash and cash equivalents
Trade receivables
Construction contracts
Other receivables
Financial liabilities:
Bank loans
Trade and other payables
Derivative financial liabilities
30 June 2018
30 June 2017
Carrying
amount
£000
4,656
15,202
6,615
432
26,905
9,468
19,771
327
29,566
Fair
value
£000
4,656
15,202
6,615
432
26,905
9,468
19,771
327
29,566
Carrying
amount
£000
9,014
14,626
6,266
384
30,290
2,938
20,784
62
23,784
Fair
value
£000
9,014
14,626
6,266
384
30,290
2,938
20,784
62
23,784
Trade and other payables balances do not include other taxation and social security costs or construction deposits received on account, as these
balances do not meet the definition of financial liabilities in IAS 39.
The table below summarises the maturity profile of the group’s financial liabilities at 30 June 2018 and 2017 based on contractual
undiscounted payments. The total interest bearing loans and borrowings value in the table below includes future unaccrued interest,
whilst the bank overdraft and loans balance in the table above shows only the carrying amount at the year end date.
At 30 June 2018
Interest bearing loans and borrowings
Trade and other payables
At 30 June 2017
Interest bearing loans and borrowings
Trade and other payables
On
demand
£000
Less than
3 months
£000
–
5,463
5,463
–
5,747
5,747
46
12,653
12,699
16
13,925
13,941
3 to 12
months
£000
138
1,310
1,448
33
881
914
1 to 5
years
£000
9,711
345
10,056
3,125
231
3,356
Total
£000
9,895
19,771
29,666
3,174
20,784
23,958
Liquidity risk management
The group manages liquidity risk by monitoring its net cash/debt position regularly and ensuring that committed and uncommitted banking
facilities are in place to provide adequate headroom for anticipated future cash flows. Details of the facilities are given above. The group’s net
debt position at 30 June 2018 was £4.8 million (2017: net cash of £6.1 million).
Details of the group’s approach to capital structure are given within the Financial Review on page 27.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
20 Financial instruments (continued)
Liquidity risk management (continued)
The maturity profile of the group’s interest bearing financial liabilities is as follows:
Floating rate interest bearing financial liabilities:
In two to five years
85
2018
£000
9,468
9,468
2017
£000
2,938
2,938
Interest rate risk
The group’s marginal pre-tax cost of debt finance at interest rates in place at 30 June 2018 under the banking facilities in existence at that
time was approximately 1.2% (2017: 1.0%).
The floating rate financial liabilities comprise the drawn down element of the revolving credit facility in existence at the balance sheet date
that bears interest based on LIBOR.
The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant,
of the group’s profit before tax (through the impact of floating rate borrowings):
Increase
Decrease
Basis points
Effect on profit
before tax
+50
-50
(38)
38
Credit risk
The risk of financial loss due to a counterparty’s failure to honour its obligations arises principally in relation to transactions where the group
provides goods and services on deferred terms. There are no concentrations of credit risk which amount to more than 10% of group revenues.
The maximum credit risk exposure relating to financial assets is represented by its carrying value less amounts recoverable from credit insurance
contracts as at the balance sheet date. In addition the group may from time to time have credit exposures relating to bespoke inventories. The
group’s cash deposits and derivative transactions are only lodged with approved institutions that have strong credit ratings.
Group policies are aimed at minimising credit losses, and require that deferred terms are granted only to customers who demonstrate an
appropriate payment history and satisfy creditworthiness procedures. Individual exposures are monitored with customers subject to credit
terms to ensure that the group’s exposure to bad debts is minimised. Goods may be sold on a payment with order basis to mitigate credit risk.
Most group businesses purchase credit insurance and the group has increased its overall levels of credit insurance in recent years.
At 30 June, the analysis of trade and other receivables that were past due but not impaired is as follows:
At 30 June 2018
Trade receivables
Construction contracts
Other receivables
At 30 June 2017
Trade receivables
Construction contracts
Other receivables
Total
£000
Not past due
£000
< 30 days
£000
30-60 days
£000
60-90 days
£000
> 90 days
£000
Past due but not impaired
15,202
6,615
432
22,249
14,626
6,266
384
21,276
12,632
6,523
424
19,579
11,782
3,969
371
16,122
1,973
47
–
2,020
2,079
2,152
–
4,231
246
9
8
263
256
22
13
291
50
–
–
50
126
8
–
134
301
36
–
337
383
115
–
498
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
86
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
20 Financial instruments (continued)
Foreign currency risk
The group has transactional currency exposures. Such exposures arise from sales or purchases by operating companies in currencies other than
the companies’ operating currency (mainly Pounds Sterling). Transactional currency risks are managed by offsetting as far as possible purchases
and sales by group companies in the same currency. A proportion of the residual risk is managed, where appropriate, through the use of
forward currency contracts.
None of the derivative financial instruments held at 30 June 2018 or 30 June 2017 related to derivative trading activity. Where cash flow
hedge accounting is applied, gains or losses on the financial instrument hedges are held in equity and only recognised in the consolidated
statement of comprehensive income when the losses or gains on the hedged transactions are recognised in the consolidated statement
of comprehensive income.
The following shows the amounts of foreign currency denominated receivables, payables and cash balances at 30 June stated in local currency:
Euros
US Dollars
Hong Kong Dollars
2018
Receivable
000
Payable
000
Cash
000
Net total
000
Receivable
000
426
1,267
3,979
(844)
(1,837)
(81)
221
450
1,462
(197)
(120)
5,360
928
2,592
1,112
Payable
000
(2,248)
(1,129)
(33)
2017
Cash
000
Net total
000
372
1,583
3,462
(948)
3,046
4,541
The following table demonstrates the impact on the group’s profit after tax and equity when the fair value of unhedged monetary assets and
liabilities at 30 June are retranslated at exchange rates either 10% above or below the year end exchange rate:
Effect on profit after tax and equity in Sterling
2018
2017
Increase
Decrease
Increase
Decrease
Exchange
rate change
+10%
-10%
+10%
-10%
US
Dollar
£000
(39)
47
145
(178)
Euro
£000
18
(22)
(75)
92
Hedging activities
The net fair values of the group’s derivative financial instruments at 30 June designated as hedging instruments are set out below:
Forward foreign exchange contracts
2018
£000
(327)
Hong Kong
Dollar
£000
47
(58)
41
(50)
2017
£000
(62)
At 30 June 2018 the group had forward foreign exchange contracts with principal amounts equivalent to £11,646,000 (2017: £13,048,000).
The forward foreign exchange contracts hedge foreign currency cost and price risks of various currency purchases and sales across the group.
The cash flows associated with the forward foreign exchange hedges are generally expected to occur within the next 18 months.
The derivative financial instruments carried at fair value have been valued using directly observable market inputs and therefore they are all
considered to have been valued at Level 2, as described in the amendments to IFRS 7.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
87
21 Retirement benefit obligations
The group operates a number of defined contribution and defined benefit pension schemes, funded by the payment of contributions into
separately administered funds. The defined benefit schemes, which have been closed to future accrual since 2010, provide defined benefits
based on a career average revalued earnings (CARE) basis.
Defined contribution schemes
Of the amount charged to operating profit in the statement of comprehensive income for pension contributions, £606,000 (2017: £597,000)
was in respect of defined contribution schemes. At 30 June 2018 there was an accrual of £93,000 payable in respect of defined contribution
schemes (2017: £67,000).
Defined benefit schemes
The two principal defined benefit schemes are The Alumasc Group Pension Scheme and The Benjamin Priest Group Pension Scheme. The rate
of contributions to fund the deficits in the schemes is assessed by the schemes’ actuary on a triennial basis.
The level of company cash contributions agreed with the Pension Trustees is £3.2 million per annum, to include deficit reduction contributions
and scheme running expenses, over a 10-11 year period from April 2016. These contribution levels are reviewed every three years with the next
review due in 2019.
Disclosures in accordance with IAS 19 are set out below in respect of the defined benefit schemes.
Pension charges are determined with the advice of an independent qualified actuary on the basis of annual valuations using the projected unit
credit method.
The principal assumptions used for the purpose of the IAS 19 valuations are set out below:
Discount rate
Expected rate of deferred pension increases
Future pension increases
Retail Price Index inflation rate
Consumer Price Index inflation rate
Post retirement mortality
Current pensioners at 65 – male
Current pensioners at 65 – female
Future pensioners at 65 in 2038 – male
Future pensioners at 65 in 2038 – female
The Alumasc
Group
Scheme
2018
%
The Benjamin
Priest Group
Scheme
2018
%
The Alumasc
Group
Scheme
2017
%
The Benjamin
Priest Group
Scheme
2017
%
2.75
2.10
1.80-3.60
3.10
2.10
2.75
2.10
1.80-3.60
3.10
2.10
2.60
2.15
1.85-3.65
3.15
2.15
2.60
2.15
1.85-3.65
3.15
2.15
Years
Years
Years
Years
21.7
23.1
23.5
24.8
20.9
22.2
22.6
23.8
21.9
23.6
23.3
24.9
21.0
22.8
22.5
24.1
A discount rate of 2.75% has been used in calculating the present value of liabilities of the pension schemes at 30 June 2018. A 0.1% change
to this rate would have changed the present value of the pension fund liabilities at that date by approximately £1,760,000 before tax.
A Retail Price Index inflation rate of 3.1% and a Consumer Price Index inflation rate of 2.1% have been used in calculating the present value of
liabilities of the pension schemes at 30 June 2018. A 0.1% change to these rates would have changed the present value of the pension fund
liabilities at that date by approximately £640,000 before tax.
In valuing the liabilities of the pension schemes at 30 June 2018, mortality assumptions have been assumed as indicated above. If life
expectancy had been changed to assume that all members of the schemes live for one year longer on average, the value of the reported
liabilities at 30 June 2018 would have increased by approximately £5,639,000 before tax.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
88
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
21 Retirement benefit obligations (continued)
Defined benefit schemes (continued)
The combined assets and liabilities of the schemes at 30 June are:
Scheme assets at fair value:
Equities
Government bonds
Corporate bonds and insured annuities
Multi-asset fund
Property
Cash
Present value of scheme liabilities
Defined benefit pension deficit
2018
£000
40,966
13,681
12,041
23,853
6,783
1,387
2017
£000
40,190
13,459
12,539
24,676
7,896
362
2016
£000
34,342
10,953
11,974
25,710
8,075
1,764
2015
£000
42,378
9,016
10,820
19,836
7,213
902
2014
£000
40,949
8,224
10,302
21,557
4,762
779
98,711
(113,851)
99,122
(119,718)
92,818
(115,486)
90,165
(111,100)
86,573
(104,495)
(15,140)
(20,596)
(22,668)
(20,935)
(17,922)
Of the above assets, all have a quoted market price with the exception of £1,943,000 of insured annuities (2017: £2,510,000) and £800,000
of property (2017: £800,000).
The whole of the defined benefit pension deficit is shown as a non-current liability.
Amounts recognised in the statement of comprehensive income in respect of the defined benefit plans, before taxation, are as follows:
Included in net finance cost:
Net pension scheme finance costs
Included in other comprehensive income:
Actuarial (loss)/gain on plan assets
Actuarial gain/(loss) on retirement benefit obligations
Total recognised in the statement of comprehensive income
The actual return on plan assets for 2017/18 was a gain of £2,011,000 (2016/17: gain of £9,101,000).
Changes in the present value of the defined benefit obligation before taxation are as follows:
At 1 July
Interest cost
Benefits paid
Actuarial gain/(loss)
At 30 June
2017/18
£000
2016/17
£000
(494)
(620)
(535)
3,282
2,747
2,253
6,404
(7,044)
(640)
(1,260)
2018
£000
(119,718)
(3,040)
5,625
3,282
2017
£000
(115,486)
(3,317)
6,129
(7,044)
(113,851)
(119,718)
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
21 Retirement benefit obligations (continued)
Defined benefit schemes (continued)
Changes in the fair value of plan assets before taxation are as follows:
At 1 July
Expected return on plan assets
Actuarial (loss)/gain
Contributions by employer
Benefits paid
At 30 June
89
2018
£000
99,122
2,546
(535)
3,203
(5,625)
98,711
2017
£000
92,818
2,697
6,404
3,332
(6,129)
99,122
The cumulative amount of actuarial losses recognised since 1 July 2004 in the group statement of comprehensive income is £15,896,000
(2016/17: losses of £18,643,000).
22 Provisions
At 1 July 2016
Credit for the year
Utilised
At 1 July 2017
Charge for the year
Acquisition of subsidiary
Utilised
At 30 June 2018
At 30 June 2018
Current liabilities
Non-current liabilities
At 30 June 2017
Current liabilities
Non-current liabilities
Dilapidations
£000
Note (i)
Warranty
£000
Note (ii)
999
(246)
–
753
392
200
(35)
1,310
–
1,310
1,310
75
678
753
543
(38)
(211)
294
19
50
(48)
315
100
215
315
82
212
294
Total
£000
1,542
(284)
(211)
1,047
411
250
(83)
1,625
100
1,525
1,625
157
890
1,047
(i) Dilapidations
The provision is in respect of a number of the group’s properties where the group has obligations to make good dilapidations and required
restoration. The non-current liabilities are estimated to be payable over periods from one to fifteen years.
(ii) Warranty
Warranty provisions are generally utilised within five years.
Provisions are not discounted to present values since the impact of reflecting the time value of money on these balances is not considered
to be material.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
90
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
23 Called up share capital
Allotted, called up and fully paid:
36,133,558 (2017: 36,133,558) ordinary shares of 12.5p each
24 Movements in equity
2018
£000
2017
£000
4,517
4,517
Share capital and share premium
The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue
of the company’s equity share capital net of issue costs.
Capital reserve – own shares
The capital reserve – own shares relates to 161,411 (2017: 361,789) ordinary own shares held by the company. The market value of shares at
30 June 2018 was £217,905 (2017: £672,928). These are held to help satisfy the exercise of awards under the company’s Long Term Incentive
Plans. During the year 200,378 shares with a cost of £300,000 were used to satisfy the exercise of awards. A Trust holds the shares in its name
and shares are awarded to employees on request by the company. The company bears the expenses of the Trust.
Hedging reserve
This reserve records the post-tax portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an
effective hedge.
Foreign currency reserve
This foreign currency reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
25 Share based payments
The company operates two types of share based payment schemes, the main features of each scheme as detailed in the Directors’
Remuneration Report on pages 44 to 52.
Weighted
average
exercise
price
(pence)
As at
1 July
2017
Weighted
average
exercise
price
(pence)
Granted
Weighted
average
exercise
price
(pence)
Exercised
Weighted
average
exercise
price
(pence)
Lapsed
Weighted
average
exercise
price
(pence)
As at
30 June
2018
LTIP(i)
ESOS(ii)
690,205
440,000
n/a
1.58
282,629
210,000
n/a
1.74
(170,378)
(40,000)
n/a
1.30
(61,973)
(70,000)
n/a
1.73
740,483
540,000
n/a
1.64
Weighted
average
exercise
price
(pence)
As at
1 July
2016
Weighted
average
exercise
price
(pence)
Granted
Weighted
average
exercise
price
(pence)
Exercised
Weighted
average
exercise
price
(pence)
Lapsed
Weighted
average
exercise
price
(pence)
As at
30 June
2017
LTIP(i)
ESOS(ii)
742,678
460,000
n/a
1.51
256,299
120,000
n/a
1.58
(170,740)
(90,000)
n/a
1.29
(138,032)
(50,000)
n/a
1.47
690,205
440,000
n/a
1.58
(i) Long term incentive plan
(ii) Executive share option scheme
ESOS
For the share options outstanding at 30 June 2018 the weighted average remaining contractual life is 7.9 years (30 June 2017: 8.1 years).
The exercise price of the options outstanding ranges between 103 pence and 188 pence. 110,000 share options are exercisable at 30 June 2018
(30 June 2017: 70,000).
LTIP
None of the November 2015 LTIP awards will vest in November 2018.
Fair value of awards
The fair values of awards granted in the year, together with the other inputs into the option pricing model are shown below.
The Black-Scholes option pricing model has been used to calculate the fair value of the options and the amount to be expensed
in the statement of comprehensive income.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
91
25 Share based payments (continued)
Share price at grant date
Exercise price
Expected volatility
Expected life (years)
Risk free rate
Dividend yield at date of grant
Fair value per option
ESOS
LTIP
Black Scholes
2018
Black Scholes
2017
Black Scholes
2018
Black Scholes
2017
174p
174p
25%
3
1.0%
4.1%
21p
158p
158p
25%
3
1.0%
4.1%
19p
174p
nil
25%
3
1.0%
4.1%
153p
158p
nil
25%
3
1.0%
4.1%
139p
The expected volatility is based on historical volatility over the last three years. The risk free rate of return is based on the yield on government
bonds due to mature on the expected maturity of the award.
The net charge recognised for share based payments in respect of employee services rendered during the year to 30 June 2018 was £160,000
(2016/17: £200,000). Of this, £89,000 (2016/17: £146,000) is in respect of key management personnel, which are the Directors of The
Alumasc Group plc.
26 Movement in cash net of borrowings
At 1 July 2016
Cash flow movements
Non-cash movements
Effect of foreign exchange rates
At 1 July 2017
Cash flow movements
Non-cash movements
Effect of foreign exchange rates
At 30 June 2018
27 Financial commitments
Cash and
cash
equivalents
£000
10,540
(1,560)
–
34
9,014
(4,360)
–
2
4,656
Bank
loans
£000
(1,908)
(1,000)
(30)
–
(2,938)
(6,500)
(30)
–
(9,468)
Net
cash/(debt)
£000
8,632
(2,560)
(30)
34
6,076
(10,860)
(30)
2
(4,812)
(i) Capital commitments
At 30 June 2018, £395,000 (2017: £665,000) of capital expenditure had been authorised and £nil (2017: £144,000) of capital expenditure
had been authorised and contracted but not provided for by the group.
(ii) Operating lease commitments
The group has entered into commercial leases on certain properties, motor vehicles and items of plant and equipment. The leases have varying
terms and renewal rights.
Future minimum rentals payable under non-cancellable operating leases are as follows:
Less than one year
Between one and five years
After five years
Property
2018
£000
1,289
3,224
4,771
9,284
Plant and
vehicles
2018
£000
427
507
–
934
Property
2017
£000
1,469
4,622
4,994
Plant and
vehicles
2017
£000
594
731
–
11,085
1,325
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
92
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2018
27 Financial commitments (continued)
(ii) Operating lease commitments (continued)
The total future minimum sub-lease receipts under non-cancellable operating leases where the group acts as a lessor are as follows:
Less than one year
28 Related party disclosure
The group’s principal subsidiaries are listed below:
Principal subsidiaries
Alumasc Exterior Building Products Limited
Alumasc Limited
Levolux Limited
Wade International Limited
Principal activity
Building products
Building products
Building products
Building products
A full list of the group’s subsidiaries is shown on page 119.
Country of
incorporation
England
England
England
England
Property
2018
£000
32
Property
2017
£000
32
% of equity interest
and votes held
2018
100
100
100
100
2017
100
100
100
–
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made at arms-length market prices. Outstanding balances at the year end are unsecured and
settlement occurs in cash. There have been no guarantees provided or received for any related party receivables.
Transactions with other related parties
Key management personnel are determined as the Directors of The Alumasc Group plc. Details of transactions with the Directors and their
compensation are detailed in the Directors’ Remuneration Report on pages 44 to 52.
29 Contingent liabilities
At the balance sheet date there existed contingent liabilities amounting to £300,000 (2017: £300,000) in relation to outstanding Guarantees
and £55,000 (2017: £184,000) in relation to outstanding Performance Bonds.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
COMPANY STATEMENT OF FINANCIAL POSITION
At 30 June 2018
93
Assets
Non-current assets
Property, plant & equipment
Investments in group companies
Deferred tax assets
Current assets
Trade and other receivables
Total assets
Liabilities
Non-current liabilities
Interest bearing loans and borrowings
Amounts due to subsidiary undertakings
Provisions
Deferred tax liabilities
Employee benefits payable
Current liabilities
Bank overdraft
Trade and other payables
Derivative financial liabilities
Total liabilities
Net assets
Capital and reserves
Called up share capital
Share premium
Revaluation reserve
Merger reserve
Capital reserve – own shares
Hedging reserve
Profit and loss account reserve
Shareholders’ funds
Paul Hooper
Director
Andrew Magson
Director
11 September 2018
Company number 1767387
Notes
2018
£000
2017
£000
5
6
9
7
10, 18
19
13
9
12
18
8
11
14
15
15
15
15
643
72,494
217
73,354
758
74,112
(9,468)
(14,808)
(110)
(124)
(843)
485
64,687
219
65,391
3,474
68,865
(2,938)
(6,800)
(59)
(67)
(1,052)
(25,353)
(10,916)
(6,273)
(1,435)
(361)
(8,069)
(33,422)
(9,688)
(1,811)
(72)
(11,571)
(22,487)
40,690
46,378
4,517
445
2,265
10,606
(241)
(300)
23,398
40,690
4,517
445
2,265
10,606
(541)
(60)
29,146
46,378
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
94
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 June 2018
Operating activities
Operating (loss)/profit
Adjustments for:
Depreciation
Decrease in receivables
Increase/(decrease) in trade and other payables
Movement in provisions
Cash contributions to retirement benefit schemes
Share based payments
Tax received
Net cash inflow from operating activities
Investing activities
Purchase of property, plant and equipment
Acquisition of subsidiary undertaking, prior to the payment for cash acquired
Net cash outflow from investing activities
Financing activities
Interest paid
Equity dividends paid
Draw down of amounts borrowed
Exercise of share based incentives
Net cash inflow/(outflow) from financing activities
Notes
2017/18
£000
2016/17
£000
(2,634)
5,321
5
12
4
18
23
2,716
7,636
51
(144)
160
7,808
57
7,865
(181)
(7,807)
(7,988)
(407)
(2,594)
6,500
39
3,538
33
1,680
(466)
–
(141)
157
6,584
76
6,660
(14)
–
(14)
(348)
(2,368)
1,000
116
(1,600)
Net increase in cash and cash equivalents
18
3,415
5,046
Net cash and cash equivalents brought forward
Net increase in cash and cash equivalents
Net cash and cash equivalents carried forward
(9,688)
3,415
(6,273)
(14,734)
5,046
(9,688)
18
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
95
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2018
At 1 July 2016
Profit for the period
Net gain on cash flow hedges
Tax on derivative financial liability
Actuarial loss on defined benefit pensions,
net of tax
Dividends
Share based payments
Acquisition of own shares
Exercise of share based incentives
Share
capital
£000
Share Revaluation
reserve
£000
premium
£000
Capital
Merger
reserve –
reserve own shares
£000
£000
Hedging
reserve
£000
4,517
–
–
–
–
–
–
–
–
445
–
–
–
–
–
–
–
–
2,265
–
–
–
10,606
–
–
–
–
–
–
–
–
–
–
–
–
–
(931)
–
–
–
–
–
–
390
–
(224)
–
201
(37)
–
–
–
–
–
Profit
and loss
account
reserve
£000
26,665
4,984
–
–
(18)
(2,368)
157
–
(274)
Total
equity
£000
43,343
4,984
201
(37)
(18)
(2,368)
157
390
(274)
At 1 July 2017
4,517
445
2,265
10,606
(541)
(60)
29,146
46,378
Loss for the period
Net loss on cash flow hedges
Tax on derivative financial liability
Actuarial gain on defined benefit pensions,
net of tax
Dividends
Share based payments
Issue of own shares
Exercise of share based incentives
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300
–
–
(289)
49
–
–
–
–
–
(3,129)
–
–
76
(2,594)
160
–
(261)
(3,129)
(289)
49
76
(2,594)
160
300
(261)
At 30 June 2018
4,517
445
2,265
10,606
(241)
(300)
23,398
40,690
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
96
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2018
1 Basis of preparation
The Alumasc Group plc is incorporated and domiciled in England and Wales. The company’s ordinary shares are traded on the London
Stock Exchange.
The company financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting
Standards as adopted by the EU (“Adopted IFRSs”), and the Companies Act 2006.
The financial statements are prepared on the historical cost basis except for derivative financial instruments and equity settled share based
payments which are stated at their fair value.
The financial statements are prepared on a consistent basis with The Alumasc Group plc consolidated financial statements. As permitted by
Section 408 of the Companies Act 2006, the company profit and loss account is not presented. The loss for the year after tax was £3,129,000
(2017: profit of £4,984,000).
Going concern
The company participates in the Alumasc group’s overall borrowing facilities and treasury operations are managed on a centralised basis
throughout the group. The company’s borrowings are subject to cross-guarantees and offset arrangements with positive cash balances
elsewhere in the group.
The group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in
the Strategic Report on pages 1 to 33. The financial position of the group, its cash flows and liquidity position are set out in these financial
statements. Details of the group’s borrowing facilities are described within note 10.
The group has committed borrowing facilities of £12.5 million which expire in August 2020. In addition, the group has recently renewed overdraft
facilities totalling £3.5 million for another year. At 30 June 2018 the group’s net debt was £4.8 million (2017: net cash of £6.1 million).
On the basis of the group’s financing facilities and current operating and financial plans and sensitivity analyses, the Board is satisfied that the
group has adequate resources to continue in operational existence for the foreseeable future and accordingly continues to adopt the going
concern basis in preparing the financial statements. Further information is set out in the viability statement on page 30.
2 Summary of significant accounting policies
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial
statements.
The following new standards, amendments and interpretations are effective for the period beginning on or after 1 July 2017 and have been
adopted for the company financial statements where appropriate with no material impact on the disclosures made by the company:
Amendments to IAS 7: Disclosure Initiative.
Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses.
Judgments and estimates
The key source of estimation uncertainty that has a significant risk of causing material adjustment to the carrying amounts of assets and
liabilities within the next financial year is the measurement and valuation of defined benefit pension obligations. Measurement of defined
benefit pension obligations requires estimation of future changes in inflation, mortality rates and the selection of a suitable discount rate
(see note 12).
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Cost comprises the
aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to
making the asset capable of operating as intended.
Under IFRS transitional provisions, the company elected to bring in previous valuations of freehold and long leasehold land and buildings
at a valuation frozen under FRS 15, and these amounts are carried forward at deemed cost.
Freehold land is not depreciated.
The cost of other property, plant and equipment is written off by equal monthly instalments over their estimated useful lives as follows:
Freehold buildings
Long leasehold property
Plant and equipment
–
–
–
25 to 50 years
over the period of the lease to a maximum of 50 years
3 to 15 years
Where parts of an item of property, plant and equipment have different useful lives, each part is accounted for as a separate item. Useful lives
and residual values are reviewed annually and where adjustments are required these are made prospectively.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018 97
2 Summary of significant accounting policies (continued)
Impairment of fixed assets
The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists,
or when annual impairment testing for an asset is required, the company makes an estimate of the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use. It is determined for each
individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations
are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.
Leased assets
Assets held under leasing arrangements that transfer substantially all the risks and rewards of ownership to the company are classified as
finance leases and are capitalised with a corresponding liability being recognised for the lower of the fair value of the leased asset and the
present value of the minimum lease payments. The interest element of the rental obligation is charged to the statement of comprehensive
income in proportion to the reducing capital element outstanding.
Assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are classified as operating leases and rentals
payable are charged in the statement of comprehensive income on a straight line basis over the life of the lease.
Financial assets
When financial assets are recognised initially under IAS 39, they are measured at fair value, being the transaction price plus directly attributable
transaction costs.
Pension costs
The company operates a defined benefit pension scheme, which is constituted as a separately administered fund and which is closed to future
accrual. Deficit reduction contributions are agreed with the pension trustees on the basis of actuarial advice to fund this scheme. The company
also operates defined contribution schemes where agreed contractual contributions are paid into separately administered funds.
(i) Defined benefit pensions
Prior to the closure of the defined benefit scheme to future benefit accrual, the cost of providing benefits under the defined benefit plan was
determined using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service
cost) and is based on actuarial advice.
The company determines finance income/expense for the period relating to the defined benefit pension scheme by applying the discount rate
used for valuing the scheme’s liabilities to the value of the net pension liability at the beginning of the year.
The net pension scheme finance costs are charged to finance costs within the statement of comprehensive income.
Actuarial gains and losses are recognised in full in the statement of comprehensive income. These comprise, for scheme assets, the difference
between the expected and actual return on assets, and, for scheme liabilities, the difference between the actuarial assumptions and actual
experience, and the effect of changes in actuarial assumptions.
The defined benefit pension asset or liability in the statement of financial position comprises the total of the present value of the defined
benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations
are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price. The
value of a net pension benefit asset is restricted to the sum of any unrecognised past service costs and the present value of any amount the
company expects to recover by way of refunds from the plan or reductions in the future contributions.
(ii) Defined contribution pensions
The pension cost charge to the statement of comprehensive income of the company’s defined contribution schemes represents the
contributions payable by the company to the funds. The assets of the schemes are held separately from those of the company in independently
administered funds.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 98
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2018
2 Summary of significant accounting policies (continued)
Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax
rates and laws that are enacted or substantively enacted by the statement of financial position date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts
in the financial statements, with the following exceptions:
• where the temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss;
• in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related
asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is
recognised in the statement of comprehensive income.
Foreign currencies
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions.
Exchange differences resulting from the settlement of such transactions and from the translation at exchange rates ruling at the year end date
of monetary assets and liabilities denominated in currencies other than the functional currency are recognised in the income statement.
Own shares
The Alumasc Group plc shares held by the company are classified in shareholders’ equity as ‘own shares’ and are recognised at cost.
Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the
original cost being taken to reserves. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation
of equity shares.
Equity settled share based payment transactions
The fair value of long term incentive awards and share options granted to employees is recognised as an employee expense from the date
of grant, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards.
The amount recognised as an expense is adjusted to reflect the actual number of shares for which the related service and non-market
vesting conditions are met.
Investment in subsidiaries
Investments in subsidiaries are stated at cost, or revalued amount, less provisions for impairment where appropriate.
Derivative financial instruments and hedging
The company uses derivative financial instruments to hedge its, and the group’s exposure to interest rate and foreign exchange risk.
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the statement of
comprehensive income. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the
nature of the item being hedged.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar
maturity profiles.
For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception.
This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how
effectiveness will be measured throughout its duration. Such items are expected at inception to be highly effective.
For the purpose of hedge accounting, the hedges used by the company are classified as cash flow hedges, as they hedge exposure to variability
in cash flows that are attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction.
Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the statement
of comprehensive income.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018 99
2 Summary of significant accounting policies (continued)
Derivative financial instruments and hedging (continued)
The portion of the gain or loss on a cash flow hedge that is determined to be an effective hedge is initially recognised directly in equity,
while the ineffective portion is recognised in the statement of comprehensive income.
Amounts taken to equity are transferred to the income statement at the time when the underlying transaction being hedged affects profit or
loss, such as when the forecast sale or purchase of the hedged item occurs. Where the hedged item is the cost of a non-financial asset
or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the statement of
comprehensive income.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked,
amounts previously recognised in equity remain in equity until the forecast transaction being hedged occurs and are transferred to the income
statement or to the initial carrying amount of a non-financial asset or liability as above. If the related transaction is not expected to occur, the
amount is taken to the statement of comprehensive income.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Provision is made when
there is objective evidence that the company will not be able to recover balances in full.
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand and short-term deposits with an original
maturity of three months or less.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
method. Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance
revenue and finance costs. Borrowing costs are recognised as an expense over the period to the maturity of the underlying instrument.
Provisions
A provision is recognised when the company has a legal or constructive obligation as a result of a past event and it is probable that an
outflow of economic benefits will be required to settle the obligation. Where the company expects some or all of a provision to be reimbursed,
for example under an insurance policy, the reimbursement is recognised as a separate asset but only when recovery is virtually certain.
The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.
New standards and interpretations not applied
The company is currently assessing the impact that IFRS 9 ‘Financial Instruments’ and IFRS 16 ‘Leases’ will have on the company’s assets
and liabilities. The standards are applicable for Alumasc’s accounting periods commencing 1 July 2018 and 1 July 2019 respectively.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 100
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2018
3 Expenses by nature
The following item has been charged in arriving at operating profit:
Auditors’ remuneration – audit of the financial statements of the company
4 Dividends
Interim dividend for 2018 of 2.95p paid on 6 April 2018
Final dividend for 2017 of 4.3p paid on 31 October 2017
Interim dividend for 2017 of 2.85p paid on 7 April 2017
Final dividend for 2016 of 3.8p paid on 1 November 2016
A final dividend of 4.4 pence per equity share, at a cash cost of £1,583,000, has been proposed for the year ended 30 June 2018,
payable on 31 October 2018. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated
financial statements.
5 Property, plant & equipment
Cost:
At 1 July 2016
Additions
At 1 July 2017
Additions
At 30 June 2018
Depreciation:
At 1 July 2016
Charge for the year
At 1 July 2017
Charge for the year
At 30 June 2018
Net book value:
At 30 June 2018
At 30 June 2017
At 1 July 2016
Freehold
land and
buildings
£000
Long
leasehold
property
£000
Plant and
equipment
£000
749
–
749
–
749
275
11
286
12
298
451
463
474
235
–
235
–
235
220
15
235
–
235
–
–
15
318
14
332
181
513
303
7
310
11
321
192
22
15
Included within freehold land and buildings is land of £336,000 (2017: £336,000) which is not depreciated.
2017/18
£000
17
2016/17
£000
17
2017/18
£000
2016/17
£000
1,056
1,538
–
–
2,594
–
–
1,018
1,350
2,368
Total
£000
1,302
14
1,316
181
1,497
798
33
831
23
854
643
485
504
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
6
Investments in group companies
Cost:
At 1 July 2016 and 30 June 2017
Acquisitions in year
At 30 June 2018
Provisions:
At 1 July 2016 and 30 June 2017
Provided in year
At 30 June 2018
Net book value:
At 30 June 2018
At 1 July 2016 and 30 June 2017
101
£000
75,622
14,289
89,911
10,935
6,482
17,417
72,494
64,687
On 31 January 2018 the company acquired the entire share capital of Wade International Limited for net consideration of £7,807,000.
At 30 June 2018 the principal subsidiary undertakings and related classes of business are as follows: Alumasc Exterior Building Products Limited
(building products), Alumasc Limited (building products), Levolux Limited (building products) and Wade International Limited (building products).
All subsidiary companies are wholly owned and owned directly or indirectly by The Alumasc Group plc and have a registered office of Burton
Latimer, Kettering, Northamptonshire, NN15 5JP.
7 Trade and other receivables
Other receivables
Prepayments and accrued income
Receivables due from subsidiary undertakings
8 Trade and other payables
Other payables
Accruals
2018
£000
120
638
–
758
2018
£000
803
632
2017
£000
94
740
2,640
3,474
2017
£000
963
848
1,435
1,811
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
102
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2018
9 Deferred tax
A reconciliation of the movement in deferred tax during the year is as follows:
Pension
deferred
tax asset
£000
Short term
temporary
differences
£000
Hedging
£000
Total
deferred
tax asset
£000
Deferred tax
liabilities
£000
At 1 July 2016
(Charged)/credited to the statement of comprehensive income
Charged to equity
At 30 June 2017
Charged to the statement of comprehensive income
(Charged)/credited to equity
At 30 June 2018
211
(21)
(11)
179
(22)
(15)
142
35
(7)
–
28
(14)
–
14
49
–
(37)
12
–
49
61
295
(28)
(48)
219
(36)
34
217
(74)
7
–
(67)
(57)
–
(124)
Deferred tax assets and liabilities are presented as non-current in the statement of financial position.
Deferred tax assets have been recognised where it is probable that they will be recovered.
Deferred tax liabilities relate to accelerated capital allowances.
10 Borrowings
Non-current liabilities:
Non-current instalments due on bank loan
2018
£000
2017
£000
9,468
2,938
In August 2015 the group entered into a £12.5 million committed revolving credit facility which expires in August 2020. The group has
the option to cancel and repay elements of the committed facility at short notice should it wish to do so. The following financial covenants
applied to the facility: group interest cover, based on underlying EBITDA (i.e. from continuing operations and before non-recurring items),
to be at least four times; and net debt as a multiple of underlying EBITDA (i.e. from continuing operations and before non-recurring items)
to be below three times.
At 30 June 2018 the group also had £2 million (2017: £2 million) of bank overdraft facilities repayable on demand.
11 Financial instruments
Financial risk management
The company’s financial risk management is consistent with that of the group as outlined in the notes to the consolidated financial statements.
Financial assets and liabilities
Set out below is a comparison by category of carrying amounts and fair values of all the company’s financial assets and liabilities:
Financial assets:
Trade and other receivables
Financial liabilities:
Bank overdraft
Bank loans
Trade and other payables
Derivative financial liabilities
30 June 2018
30 June 2017
Carrying
amount
£000
Fair
value
£000
Carrying
amount
£000
Fair
value
£000
120
120
2,734
2,734
6,273
9,468
16,243
361
32,345
6,273
9,468
16,243
361
32,345
9,688
2,938
8,611
72
9,688
2,938
8,611
72
21,309
21,309
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
103
11 Financial instruments (continued)
Financial assets and liabilities (continued)
Trade and other receivables exclude prepayments and accrued income, which do not meet the definition of a financial asset. Market values
have been used to determine the fair value of bank borrowings. The fair value of forward foreign exchange contracts has been determined by
marking those contracts to market against prevailing forward foreign exchange rates.
The table below summarises the maturity profile of the company’s financial liabilities at 30 June 2018 and 2017 based on contractual
undiscounted payments. The total interest bearing loans and borrowings value in the table below includes future unaccrued interest, whilst
the bank overdraft and loans balance in the table above shows only the carrying amount at the year end date.
At 30 June 2018
Interest bearing loans and borrowings
Trade and other payables
At 30 June 2017
Interest bearing loans and borrowings
Trade and other payables
On
demand
£000
Less than
3 months
£000
3 to 12
months
£000
–
20
20
–
122
122
46
1,141
1,187
16
1,238
1,254
6,411
73
6,484
9,721
148
9,869
1 to 5
years
£000
9,711
15,009
24,720
3,125
7,103
10,228
Total
£000
16,168
16,243
32,411
12,862
8,611
21,473
Liquidity risk management
The company’s liquidity risk management is consistent with that of the group as outlined in the notes to the consolidated financial statements.
The company’s net debt position at 30 June 2018 was £15.7 million (2017: £12.6 million).
The company’s overdraft and revolving credit banking facilities are part of the group’s overall credit facilities and are subject to cross guarantees
from other group companies. The group as a whole had net debt at 30 June 2018 of £4.8 million (2017: net cash resources of £6.1 million).
The maturity profile of the company’s interest bearing financial liabilities is as follows:
Floating rate interest bearing financial liabilities:
In less than one year
In two to five years
2018
£000
6,273
9,468
15,741
2017
£000
9,688
2,938
12,626
Interest rate risk management
The company’s interest rate risk management is consistent with that of the group as outlined in the notes to the consolidated
financial statements.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
104
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2018
11 Financial instruments (continued)
Credit risk
The company’s credit risk management is consistent with that of the group as outlined in the notes to the consolidated financial statements.
At 30 June, the analysis of trade and other receivables that were past due but not impaired is as follows:
At 30 June 2018
Other receivables
At 30 June 2017
Other receivables
Receivables due from subsidiary undertakings
Total
£000
Not past due
£000
< 30 days
£000
30-60 days
£000
60-90 days
£000
Past due but not impaired
120
120
94
2,640
2,734
112
112
81
2,640
2,721
8
8
–
–
–
–
–
13
–
13
–
–
–
–
–
Foreign currency risk
The group has transactional currency exposures as disclosed within the notes to the consolidated financial statements. The company manages
this risk, in part, through the use of forward currency contracts. None of the derivative financial instruments held at 30 June 2018 or 30 June
2017 related to derivative trading activity. Where cash flow hedge accounting is applied, gains or losses on the financial instrument hedges are
held in equity and only recognised in the income statement when the losses or gains on the hedged transactions are recognised in the income
statement.
Hedging activities
The net fair values of the company’s derivative financial instruments at 30 June designated as hedging instruments are set out below:
Forward foreign exchange contracts
2018
£000
(361)
2017
£000
(72)
At 30 June 2018 the company had forward foreign exchange contracts with principal amounts equivalent to £6,421,000 (2017: £4,668,000).
The forward foreign exchange contracts hedge foreign currency price risks of sales across the group. The cash flows associated with the
forward foreign exchange hedges are generally expected to occur within the next 18 months.
The derivative financial instruments carried at fair value have been valued using directly observable market inputs and therefore they are all
considered to have been valued at Level 2, as described in the amendments to IFRS 7.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
105
12 Retirement benefit obligations
Defined contribution schemes
£89,000 (2017: £85,000) was charged to operating profit in the statement of comprehensive income for defined contribution pension scheme
contributions. At 30 June 2018 there was an accrual of £85,000 payable in respect of defined contribution schemes (2017: £67,000).
Defined benefit scheme
The company participates in a defined benefit scheme, The Alumasc Group Pension Scheme, which has been closed to future accrual
since 2010.
The defined benefit scheme maintained by the company is a part of a plan that shares risks between various group entities under common
control. In determining the allocation of net defined benefit cost and contributions between the various sponsoring employers, the Directors
have used as a basis the sponsoring employer at the date the scheme was closed to future accrual.
Following the conclusion of the 2016 triennial actuarial review in the 2016/17 financial year, deficit reduction contributions increased from
£110,000 to £141,000 per year, with effect from 1 July 2016.
The principal assumptions used by the actuary in valuing the assets and liabilities of the Scheme for IAS 19 purposes were:
Discount rate
Expected rate of deferred pension increases
Future pension increases
Retail Price Index inflation rate
Consumer Price Index inflation rate
Post retirement mortality:
Current pensioners at 65 – male
Current pensioners at 65 – female
Future pensioners at 65 in 2038 – male
Future pensioners at 65 in 2038 – female
2018
%
2.75
2.10
1.80-3.60
3.10
2.10
2017
%
2.60
2.15
1.85-3.65
3.15
2.15
Years
Years
21.7
23.1
23.5
24.8
21.9
23.6
23.3
24.9
A discount rate of 2.75% has been used in calculating the present value of liabilities of the pension scheme at 30 June 2018. A 0.1% change
to this rate would have changed the present value of the pension fund liabilities at that date by approximately £72,000 before tax.
A Retail Price Index inflation rate of 3.1% and a Consumer Price Index inflation rate of 2.1% have been used in calculating the present value
of liabilities of the pension scheme at 30 June 2018. A 0.1% change to these rates would have changed the present value of the pension fund
liabilities at that date by approximately £26,000 before tax.
In valuing the liabilities of the pension scheme at 30 June 2018, mortality assumptions have been assumed as indicated above. If life expectancy
had been changed to assume that all members of the scheme live for one year longer on average, the value of the reported liabilities at 30
June 2018 would have increased by approximately £246,000 before tax.
The following information relates to the company’s element of the assets and liabilities of the scheme.
The combined assets and liabilities of the scheme at 30 June are:
Equities
Gilts
Bonds and insured annuities
Multi-asset fund
Property and cash
Total market value of assets
Actuarial value of liability
Defined benefit pension deficit
2018
£000
1,730
620
503
1,024
332
4,209
(5,052)
(843)
2017
£000
1,701
609
513
1,048
345
4,216
(5,268)
(1,052)
2016
£000
1,412
470
392
1,253
391
3,918
(5,087)
(1,169)
2015
£000
1,731
376
376
903
377
3,763
(4,739)
(976)
2014
£000
1,707
343
429
899
231
3,609
(4,438)
(829)
Of the above assets, all have a quoted market price with the exception of £86,000 of insured annuities (2016/17: £98,000) and £33,000 of
property (2016/17: £33,000).
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
106
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2018
12 Retirement benefit obligations (continued)
The whole of the defined benefit pension deficit is shown as a non-current liability.
Amounts recognised in the statement of comprehensive income in respect of the defined benefit pension plan, before taxation, are as follows:
Included in net finance cost:
Net pension scheme finance costs
Included in other comprehensive income:
Actuarial (loss)/gain on plan assets
Actuarial gain/(loss) on retirement benefit obligations
Total recognised in the statement of comprehensive income
The actual return on plan assets for 2017/18 was a gain of £85,000 (2016/17: gain of £391,000).
Changes in the present value of the defined benefit obligation before taxation are as follows:
At 1 July
Interest cost
Benefits paid
Actuarial gain/(loss)
At 30 June
Changes in the fair value of plan assets before taxation are as follows:
At 1 July
Expected return on plan assets
Actuarial (loss)/gain
Contributions by employer
Benefits paid
At 30 June
2017/18
£000
2016/17
£000
(26)
(32)
(23)
114
91
65
2018
£000
(5,268)
(134)
236
114
(5,052)
2018
£000
4,216
108
(23)
144
(236)
4,209
277
(284)
(7)
(39)
2017
£000
(5,087)
(146)
249
(284)
(5,268)
2017
£000
3,918
114
277
156
(249)
4,216
The cumulative amount of net actuarial losses recognised since 1 July 2014 in the statement of comprehensive income is £401,000 (2016/17:
losses of £492,000).
13 Provisions
At 1 July 2016 and 30 June 2017
Charge for the year
At 30 June 2018
£000
59
51
110
The company has provided £110,000 (2017: £59,000) in relation to the anticipated cost of dilapidations required under the terms of the lease
of business premises.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
107
2018
£000
2017
£000
4,517
4,517
14 Called up share capital
Allotted, called up and fully paid:
36,133,558 (2017: 36,133,558) ordinary shares of 12.5p each
15 Movements in equity
Share capital and share premium
The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue
of the company’s equity share capital net of issue costs.
Capital reserve – own shares
The capital reserve – own shares relates to 161,411 (2017: 361,789) ordinary own shares held by the company. The market value of shares at
30 June 2018 was £217,905 (2017: £672,928). These are held to help satisfy the exercise of awards under the company’s Long Term Incentive
Plans. During the year 210,378 shares with a cost of £300,000 were used to satisfy the exercise of awards. A Trust holds the shares in its name
and shares are awarded to employees on request by the company. The company bears the expenses of the Trust.
Hedging reserve
This reserve records the post-tax portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an
effective hedge.
Distributable reserves
The company’s profit and loss account reserve shown on the balance sheet is £23,398,000 (2017: £29,146,000). In connection with the capital
reorganisation in 2007, the company reached agreement with the Pension Trustees that £14 million of the profit and loss account reserve
would be retained as a non-distributable reserve until the group’s pension deficits reduced below £14 million (as determined by full actuarial
valuations). Therefore the Directors consider that £9,398,000 of the company profit and loss account reserve is distributable.
Cumulative actuarial losses relating to defined benefit pension schemes of £989,000 (2017: losses of £1,080,000) have been deducted in
calculating the distributable reserves figure above.
16 Share based payments
The company operates two types of share based payment schemes, the main features of each scheme as detailed in the Directors’
Remuneration Report on pages 44 to 52.
Weighted
average
exercise
price
(pence)
As at
1 July
2017
Weighted
average
exercise
price
(pence)
Granted
Weighted
average
exercise
price
(pence)
Exercised
Weighted
average
exercise
price
(pence)
Lapsed
Weighted
average
exercise
price
(pence)
As at
30 June
2018
LTIP(i)
ESOS(ii)
531,592
60,000
n/a
1.54
169,619
10,000
n/a
1.74
(147,594)
(10,000)
n/a
1.30
(57,425)
(10,000)
n/a
1.88
496,192
50,000
n/a
1.55
Weighted
average
exercise
price
(pence)
As at
1 July
2016
Weighted
average
exercise
price
(pence)
Granted
Weighted
average
exercise
price
(pence)
Exercised
Weighted
average
exercise
price
(pence)
Lapsed
Weighted
average
exercise
price
(pence)
As at
30 June
2017
LTIP(i)
ESOS(ii)
548,059
60,000
n/a
1.49
180,031
10,000
n/a
1.58
(122,673)
(10,000)
n/a
1.29
(73,825)
–
n/a
–
531,592
60,000
n/a
1.54
(i) Long term incentive plan
(ii) Executive share option scheme
ESOS
For the share options outstanding at 30 June 2018 the weighted average remaining contractual life is 7.4 years (30 June 2017: 7.9 years).
The exercise price of the options outstanding ranges between 129 pence and 188 pence. 20,000 share options are exercisable at 30 June 2018
(30 June 2017: 10,000).
LTIP
None of the November 2015 awards will vest in November 2018.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
108
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June 2018
16 Share based payments (continued)
Fair value of awards
The fair values of awards granted in the year, together with the other inputs into the option pricing model are shown below. The Black-Scholes
option pricing model has been used to calculate the fair value of the options and the amount to be expensed in the income statement.
Share price at grant date
Exercise price
Expected volatility
Expected life (years)
Risk free rate
Dividend yield at date of grant
Fair value per option
ESOS
LTIP
Black Scholes
2018
Black Scholes
2017
Black Scholes
2018
Black Scholes
2017
174p
174p
25%
3
1.0%
4.1%
21p
158p
158p
25%
3
1.0%
4.1%
19p
174p
nil
25%
3
1.0%
4.1%
153p
158p
nil
25%
3
1.0%
4.1%
139p
The expected volatility is based on historical volatility over the last three years. The risk free rate of return is based on the yield on government
bonds due to mature on the expected maturity date of the award.
The net charge recognised for share based payments in respect of employee services rendered during the year to 30 June 2018 is £160,000
(2016/17: £200,000).
17 Financial commitments
(i) Capital commitments
The company had no capital commitments at the year end (2017: £nil).
(ii) Operating lease commitments
The company has entered into commercial leases on certain properties and items of plant and equipment. The leases have varying terms and
renewal rights.
Future minimum rentals payable under non-cancellable operating leases are as follows:
Less than one year
Between one and five years
After five years
Property
2018
£000
20
80
1,027
1,127
Plant
2018
£000
1
4
–
5
Property
2017
£000
20
80
1,047
1,147
Plant
2017
£000
1
1
–
2
The total future minimum sub-lease receipts under non-cancellable operating leases where the company acts as a lessor are as follows:
Less than one year
Property
2018
£000
32
Property
2017
£000
32
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
109
Bank
overdrafts
£000
14,734
(5,046)
–
9,688
(3,415)
–
6,273
Bank
loans
£000
1,908
1,000
30
2,938
6,500
30
9,468
Net
borrowings
£000
16,642
(4,046)
30
12,626
3,085
30
15,741
18 Movement in net borrowings
At 1 July 2016
Cash flow movements
Non-cash movements
At 1 July 2017
Cash flow movements
Non-cash movements
At 30 June 2018
The company is part of a group offset banking arrangement, together with its subsidiary undertakings.
19 Related party disclosure
Terms and conditions of transactions with related parties
A full list of the company’s subsidiaries is shown on page 119.
The total non-current position with regards to amounts owed to subsidiary undertakings at 30 June 2018 was a £14,808,000 liability
(2017: £6,800,000 liability).
The increase in the non-current intercompany position at 30 June 2018 is due to a write off of an intercompany receivable from two of the
company’s dormant subsidiaries, Alumasc Precision Limited and Benjamin Priest Limited.
Transactions with other related parties
Key management personnel are determined as the Directors of The Alumasc Group plc. Details of transactions with the Directors and their
compensation are detailed in the Directors’ Remuneration Report on pages 44 to 52.
20 Contingent liabilities
The company is party to, together with subsidiary undertakings, cross guarantee banking arrangements in favour of the group’s relationship
banks. At the year end, subsidiary undertakings had utilised none (2017: none) of the overdraft facilities guaranteed by the company.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
110
FINANCIAL SUMMARY
2011/12
£000
2012/13
£000
2013/14
£000
2014/15
£000
2015/16
£000
2016/17
£000
2017/18
£000
Income Statement Summary
Revenue
71,094
85,291
80,301
90,295
92,233
104,761
98,407
Underlying operating profit
Underlying operating margin
3,234
4.5%
7,133
8.4%
6,645
8.3%
8,314
9.2%
8,476
9.2%
9,143
8.7%
6,668
6.8%
Net interest cost on borrowings
(706)
(767)
(521)
(592)
(215)
(132)
(212)
Underlying profit before tax
2,528
6,366
6,124
7,722
8,261
9,011
6,456
Non-underlying items*
Profit before taxation
Taxation
(889)
(2,984)
(1,168)
(1,434)
(1,502)
(888)
(1,082)
1,639
3,382
4,956
6,288
6,759
8,123
5,374
(372)
(1,025)
(1,016)
(1,483)
(1,581)
(1,583)
(1,057)
Profit for the year from continuing operations
1,267
2,357
3,940
4,805
5,178
6,540
4,317
Discontinued operations – (loss)/profit after tax
(854)
(471)
101
(429)
1,306
–
–
Profit for the year
413
1,886
4,041
4,376
6,484
6,540
4,317
Underlying earnings per share (pence)
4.9
13.3
13.0
16.9
18.4
20.1
Basic earnings per share – continuing operations (pence)
3.6
Basic earnings per share (pence)
Dividends per share (pence)
Balance Sheet Summary at 30 June
1.2
2.0
6.6
5.3
4.5
11.1
13.5
14.5
18.3
11.3
12.3
18.2
18.3
5.0
6.0
6.5
7.15
14.4
12.0
12.0
7.35
Shareholders’ funds
Net debt/(cash)
Pension deficit (net of associated deferred tax asset)
Discontinued operations
18,928
13,229
11,050
(13,219)
22,443
7,687
7,748
(12,169)
17,042
7,666
14,338
(11,037)
15,929
(914)
16,748
(2,969)
16,580
(8,632)
18,588
–
20,437
(6,076)
17,095
–
24,421
4,812
12,566
–
Capital invested – continuing operations
29,988
25,709
28,009
28,794
26,536
31,456
41,799
Underlying return on capital invested (post-tax)**
7.4%
19.0%
18.8%
22.8%
24.3%
25.0%
14.5%
Underlying tax rate
31.6%
25.7%
24.2%
22.0%
20.8%
20.6%
20.2%
Notes
* Non-underlying costs comprise brand amortisation and IAS 19 pension costs in all years an impairment charge in 2012/13 and restructuring costs in 2011/12. In 2017/18 non-underlying items also includes
profit on sale of available-for-sale investments, loss on sale of SCP, Wade acquisition costs and Timloc relocation costs.
** Underlying operating profit after tax from continuing operations calculated using the underlying tax rate, as a percentage of average capital invested.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
111
ADDITIONAL SHAREHOLDER INFORMATION
Purchase of own shares by the company
At last year’s Annual General Meeting, authority was granted to the Directors to purchase, in the market, the company’s own shares, up to the limit
of 14.9% of the issued share capital. The authority is expressed to expire on the 25 October 2018 or the company’s next Annual General Meeting
whichever is earlier. No purchases pursuant to this authority have been made during the year. Renewal of this authority will be proposed at the
forthcoming Annual General Meeting. The Directors do not propose to exercise the authority unless satisfied that a purchase would be in the best
interest of shareholders and could be expected to result in an increase in earnings per share.
Share capital
The details of the company’s share capital structure are given in note 23 to the group financial statements.
With the exception of ordinary shares held in the employee trust being subject to a waiver of the right to a dividend, as detailed in the Directors’
Report on page 53, all shares carry equal rights and no restrictions other than those imposed from time to time by laws and regulations and pursuant
to the Listing Rules of the Financial Conduct Authority. The full rights are set out in the articles of association (the ‘Articles’), the latest
copy of which can be obtained on request at the company’s registered office.
Articles of association
Any amendment to the Articles may be made in accordance with the provisions of applicable English law concerning companies, specifically the
Companies Act 2006 (as amended from time to time), by way of special resolution at a general meeting of the shareholders.
Major shareholders
In addition to those shareholdings of John McCall and Philip Gwyn detailed on page 48, the analysis of the company’s share register showed the
following interests in 3% or more of the company’s issued ordinary shares as at 30 June 2018:
AXA Investment Management
Hargreaves Lansdown Asset Management
Unicorn Asset Management
NN Investment Partners
Fortezza Finanz
Mrs E L O’Loughlin
Chelverton Asset Management
Interactive Investor
Acorn Income Fund
The Directors are not aware of any other notifiable interest in the share capital of the company.
Ordinary shareholders on the register at 30 June 2018:
Shareholding range:
1 – 999
1,000 – 9,999
10,000 – 99,999
100,000 – 999,999
1,000,000 and over
Ordinary shares
% of issued
share capital
3,300,000
2,254,239
1,800,000
1,625,000
1,595,000
1,550,962
1,426,000
1,161,666
1,100,000
9.13
6.24
4.98
4.50
4.41
4.29
3.95
3.21
3.04
Number of
shareholders
Number of
ordinary shares
370
481
126
42
8
173,946
1,215,280
3,634,244
15,003,174
16,106,914
1,027
36,133,558
Change of control
The group’s committed financing facility includes a change of control provision. Under this provision, a change in ownership/control of the company
would result in withdrawal of these facilities.
Other than the change of control provisions in the company’s long term incentive plan and annual bonus as detailed in the Directors’ Remuneration
Policy on page 52 of the 2017 Annual Report and Accounts, there are no other material agreements which take effect, alter or terminate upon a
change of control of the company following a takeover bid.
Compensation for loss of office
There are no additional agreements between the company and its Directors or employees providing for compensation for loss of office or
employment that occurs because of a takeover bid.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
112
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 2018 Annual General Meeting (“AGM”) of The Alumasc Group plc (the “company”) will be held at The Alumasc
Group plc, Station Road, Burton Latimer, Northamptonshire, NN15 5JP at 11am on Thursday 25 October 2018 for the following purposes:
Ordinary business
To consider, and if thought fit, to pass the following Resolutions as Ordinary Resolutions:
1 To receive the reports of the Directors and auditor and the accounts for the year ended 30 June 2018
2 To receive the report of the Remuneration Committee for the year ended 30 June 2018
3 To declare a final dividend of 4.4 pence per share
4 To re-elect Andrew Magson as a Director
5 To re-elect Jon Pither as a Director12
6 To re-elect Richard Saville as a Director123
7 To re-appoint KPMG LLP as auditor of the company to hold office from the conclusion of this meeting until the conclusion
of the next AGM at which accounts are laid before the shareholders and to authorise the Directors to determine the
auditor’s remuneration
1 Member of Nomination Committee
2 Member of Remuneration Committee
3 Member of Audit Committee
Special business
To consider, and if thought fit, to pass the following Resolutions. Resolutions 8 and 9 shall be proposed as Ordinary Resolutions and Resolutions 10,
11 and 12 shall be proposed as Special Resolutions.
8 Adoption of the Alumasc Long Term Incentive Plan 2018
That:
(a) the rules of the Alumasc Long Term Incentive Plan 2018 in the form produced to the meeting and initialled by the Chairman of the meeting
for purposes of identification (the “LTIP”), the principal terms of which are summarised in the Appendix to this Notice of Annual General
Meeting, be and they are hereby approved, and the Directors be and they are hereby generally authorised to adopt the LTIP and do all acts
and things that they consider necessary or expedient to give effect to the LTIP ; and
(b) the Directors be and are hereby authorised to adopt further schemes based on the LTIP but modified to take account of local tax, exchange
control or securities laws in overseas territories, provided that any shares made available under such further schemes are treated as counting
against any limits on individual or overall participation in the LTIP.
9 Renewal of Directors’ authorities to allot shares
That the Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies Act 2006 to
exercise all the powers of the company to allot shares in the company or to grant rights to subscribe for or to convert any security into shares in
the company up to an aggregate nominal amount of £1,505,564 provided that this authority shall expire at the conclusion of the next annual
general meeting of the company, save that the Directors shall be entitled to make offers or agreements before the expiry of this authority which
would or might require shares to be allotted or rights to be granted pursuant to any such offers or agreements after this authority had expired;
and all unexercised authorities previously granted to the Directors are hereby revoked.
10 Disapplication of statutory pre-emption rights: general
That the Board be authorised to allot equity securities (as defined in the Companies Act 2006) for cash under the authority given by resolution 9
and/or to sell ordinary shares held by the company as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any
such allotment or sale, such authority to be limited:
(i) allotments for rights issues and other pre-emptive issues; and
(ii) to the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (i) above) up to a nominal amount of
£225,834. This amount to be not more than five per cent of the issued ordinary share capital (excluding treasury shares) of the company
as at the latest practicable date prior to publication of the notice of meeting.
Such authority to expire at the end of the next AGM of the company (or, if earlier, at the close of business on 24 October 2019).
Financial StatementsThe Alumasc Group plc Report and Accounts 2018
113
11 Disapplication of statutory pre-emption rights: acquisition or capital investment
That if resolution 9 granting authority to allot shares is passed, the Board be authorised in addition to any authority granted under the first
disapplication resolution to allot equity securities (as defined in the Companies Act 2006) for cash under the authority given by that resolution
and/or to sell ordinary shares held by the company as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any
such allotment or sale, such authority to be:
(i)
limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £225,834. This amount to be not more
than five per cent of the issued ordinary share capital (excluding treasury shares) of the company as at the latest practicable date prior to
publication of the notice of meeting; and
(ii) used only for the purposes of financing (or refinancing, if the authority is to be used within six months after the original transaction) a
transaction which the Board of the company determines to be an acquisition or other capital investment of a kind contemplated by the
Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this notice.
12 Company’s authority to purchase its own shares
That the company be generally and unconditionally authorised to make market purchases (within the meaning of Section 693(4) of the
Companies Act 2006) of ordinary shares of 12.5p each in the company provided that:
(i) the maximum number of ordinary shares hereby authorised to be acquired is 5,383,900 which represents 14.9% of the issued share capital
of the company on 31 August 2018;
(ii) the minimum price (exclusive of taxes and expenses) which may be paid for such ordinary shares is 12.5p per share;
(iii) the maximum price (exclusive of taxes and expenses) which may be paid for such ordinary shares is an amount equal to 105% of the
average of the middle market quotations for ordinary shares (derived from the Daily Official List of the London Stock Exchange Plc) for the
five dealing days immediately preceding the day on which such ordinary shares are contracted to be purchased;
(iv) the authority hereby conferred shall expire on 24 October 2019, or, if earlier, on the date of the next annual general meeting of the company
except that the expiry of such authority shall not exclude any purchase of ordinary shares made pursuant to a contract concluded before
the authority expired and which would or might be executed wholly or partly after its expiration;
(v) This authority supersedes the company’s authority to make market purchases granted by Special Resolution passed on 26 October 2017.
By order of the Board
Kirstan Boynton
Company Secretary
11 September 2018
Registered Office
Burton Latimer
Kettering
Northamptonshire
NN15 5JP
Registered No
1767387
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
114
NOTICE OF ANNUAL GENERAL MEETING continued
Explanatory notes to the Resolutions 4, 5, 6, 7, 8, 9, 10, 11 and 12 to be proposed at the 2018 AGM
Resolution 4 - Re-election of Andrew Magson
Your Board recommends that Andrew Magson be re-elected as a Director.
Resolutions 5 and 6 – Re-election of Jon Pither and Richard Saville
Your Board recommends that Jon Pither and Richard Saville be re-elected as Directors. As they have served on the Board for longer than nine years,
and in order to comply with the best practice provisions of The Code, they offer themselves for re-election.
The Board has concluded that the three Directors standing for re-election are effective, committed to their role, and subject to
shareholder approval, should continue in office. The biographical details of each Director is set out on pages 34 and 35 of the
2018 Annual Report.
Resolution 7 – Re-appointment of KPMG as Auditors of the company
Resolution 7 proposes the reappointment of KPMG LLP as the auditor of the company. Resolution 7 authorises the Audit Committee to agree the
remuneration of the company’s auditor.
During the 2018/19 financial year, the Board will undertake a tender process for the provision of the external auditor. KPMG LLP will participate
in the tender. Further information may be found on page 42 of the 2018 Annual Report.
Resolution 8 – New Long Term Incentive Scheme
Please see the appendix to the AGM notice for details of the new scheme to be approved by shareholders at the AGM.
The rules of the LTIP will be available for inspection at the office of Deloitte LLP (Company Secretarial Department), Athene Place, 66 Shoe Lane,
London EC4A 3BQ during normal business hours on any weekday (Saturdays, Sundays and public holidays excluded) until the close of the AGM, and
will also be available at the place of the AGM for at least 15 minutes before and during the meeting.
Resolution 9 – Renewal of Directors’ authority to allot shares
By virtue of Section 551 of the Companies Act 2006 the Directors require the authority of shareholders of the company to allot shares or other
relevant securities of the company, Resolution 10 authorises the Directors to make allotments of up to an additional 12,044,519 shares (being
approximately one third of the issued share capital of the company as at 31 August 2018). This authority will lapse at the conclusion of the next
AGM, unless renewed earlier. The Directors have no present intention to exercise the authority proposed to be conferred by Resolution 10.
Resolutions 10 and 11 – Disapplication of statutory pre-emption rights
Special resolutions 10 and 11 will allow the Directors to allot equity securities for cash pursuant to the authority under ordinary resolution 9, or by
way of a sale of treasury shares, without in the first instance offering them to existing shareholders in proportion to their holdings.
The authority sought will authorise the Directors to issue shares in connection with: (a) a rights issue or other pre-emptive offer and otherwise to
issue shares for cash up to a nominal value of £225,834 which includes the sale on a non pre-emptive basis of any shares the company holds in
treasury for cash. This amount represents just under 5% of the total ordinary share capital in issue at 31 August 2018 (being the latest practicable
date prior to publication of this Notice); and in addition, (b) the financing (or re-financing, if the authority is to be used within 6 months after the
original transaction) for an acquisition or other capital investment which the Board determines to be as contemplated by the Pre-Emption Group’s
Statement of Principles, to issue shares for cash up to a nominal value of £225,834 which includes the sale on a non pre-emptive basis of any shares
the company holds in treasury for cash. This amount also represents just under 5% of the total ordinary share capital in issue at 31 August 2018.
This disapplication authority is in line with guidance with the Pre-Emption Group’s Statement of Principles. The authority will expire at the conclusion
of the 2019 AGM of the company or, if earlier, on 24 October 2019.
The authority sought under this resolution provides the company with greater flexibility in pursuing its strategy of building a focussed premium
building products company which should generate long-term growth for shareholders. It is the current intention to renew this authority annually.
The Directors have no present intention of exercising their authority under resolutions 10 and 11.
Resolution 12 – Company’s authority to purchase its own shares
The Directors consider it desirable that the company should have the authority to make market purchases of its own shares. The purpose of
Resolution 12 is to authorise the Directors generally to purchase up to 5,383,900 ordinary shares in the market (being 14.9% of the issued share
capital of the company as at 31 August 2018). The Directors will only exercise the authority granted by Resolution 12 (if passed) if to do so would
result in an increase in earnings per share and is in the best interests of shareholders generally. This authority will lapse on 24 October 2019, unless
renewed earlier.
Financial StatementsThe Alumasc Group plc Report and Accounts 2018 115
Notes to the Notice of Annual General Meeting
1) A member may appoint a proxy to exercise all or any of his/her rights to attend and to speak and vote on his/her behalf at the meeting.
A member may appoint more than one proxy in relation to the AGM provided that each proxy is appointed to exercise the rights attached to
a different share or shares held by that member. A proxy need not be a member of the company but must attend the AGM to represent you.
A proxy could be the Chairman, another Director of the company or another person who has agreed to represent you.
2) To be valid, any proxy form or other instrument appointing a proxy and power of attorney or other authority, if any, under which it is signed
or a notarial certified or office copy of such power or authority must be received by post or (during normal business hours only) by hand by
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA not later than 48 hours before the time fixed for the meeting or any
adjournment thereof. Completion and return of the form of proxy will not prevent a member from attending and voting at the meeting instead
of the proxy if they so wish. Amended instructions must also be received by Equiniti by the deadline for receipt of proxy forms. A member must
inform Equiniti in writing of any termination of the authority of a proxy.
3) As an alternative to completing and returning the printed form of proxy, a member may submit your proxy appointment electronically by
accessing www.sharevote.co.uk where full details of the procedure are given. For security purposes, members will need their voting ID, task ID
and shareholder reference number as printed on the form of proxy in order to validate the submission of their proxy appointment on-line. Any
such proxy appointment must be received not later than 48 hours before the time fixed for the meeting or any adjournment thereof. To appoint
more than one proxy electronically, please contact Equiniti on 0371 384 2030 (from overseas +44 121 415 7047. Lines are open 8.30am to
5.30pm, Monday to Friday (excluding public holidays in England and Wales)).
4)
If a member has more than one holding registered in his/ her name he/she should receive no more than one copy of the Annual Report and one
form of proxy which will be valid in respect of all his/her shareholdings. A form of proxy is enclosed. To request a form of proxy please contact
Equiniti on 0371 384 2030 (from overseas +44 121 415 7047. Lines are open 8.30am to 5.30pm, Monday to Friday (excluding public holidays in
England and Wales)).
5) Any person to whom this Notice is sent who is a person nominated under Section 146 of the Companies Act 2006 (‘CA2006’) to enjoy
information rights (a ‘Nominated Person’) may, under an agreement between him/her and the shareholder by whom he/she was nominated,
have the right to be appointed (or to have someone else appointed) as a proxy for the AGM. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as
to the exercise of voting rights.
6) The statement of rights of shareholders in relation to the appointment of proxies in notes 1, 2 and 3 above to this Notice of Annual General
Meeting does not apply to Nominated Persons. The rights described in these sections can only be exercised by the shareholders of the company.
Nominated Persons are reminded that they should contact the registered holder of their shares (and not the company) on matters relating to
their investments in the company.
7) The company specifies that only those shareholders registered in the register of members of the company as at 6.30pm on 23 October 2018 (or,
in the event of any adjournment, at 6.30pm on the date which is two days before the time of the adjourned meeting) shall be entitled to attend
(in person or by proxy) or vote at the meeting or any adjourned meeting in respect of the number of shares registered in their name at that time.
Changes to entries on the register of members made after the relevant deadline shall be disregarded in determining the rights of any person to
attend or vote at the meeting.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
116
Financial Statements
NOTICE OF ANNUAL GENERAL MEETING continued
Notes to the Notice of Annual General Meeting continued
8) CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM to
be held on 25 October 2018 and any adjournment(s) thereof by using the procedure described in the CREST manual. CREST personal members
or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland’s specifications and must contain the information
required for such instructions as described in the CREST manual (available at www.euroclear.com). The message, regardless of whether it
constitutes the appointment of a proxy or relates to an amendment to the instruction given to a previously appointed proxy must, in order to be
valid, be transmitted so as to be received by the issuer’s agent (ID RA19) by the latest time(s) for receipt for proxy appointments specified in the
Notice of Annual General Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied
to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee
through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland does not
make available special procedures in CREST for any particular messages. Normal system timings and limitations will apply in relation to the
input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take, (or, if the CREST member is a CREST personal
member or sponsored member or has appointed a voting service provider(s), to procure that his/her CREST sponsor or voting service provider(s)
take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their CREST sponsor(s) or voting service provider(s) are referred, in particular, to those
sections of the CREST manual concerning practical limitations of the CREST system and timings. The company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended).
9) Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of the same powers as
the corporation could exercise if it were an individual member provided that they do not do so in relation to the same shares.
10) As at 31 August 2018 (being the last practicable business day prior to the publication of this Notice) the company’s issued share capital consists
of 36,133,558 ordinary shares, carrying one vote each.
11) Copies of the service contracts of Executive Directors, letters of appointment for Non-Executive Directors, Directors’ deeds of indemnity and a
copy of the company’s articles of association are available for inspection at the company’s registered office on each business day during normal
business hours and will also be available at the place of the AGM from at least 15 minutes prior to the meeting and until the conclusion of the
meeting.
12) It is possible that, pursuant to requests made by members of the company under Section 527 of the CA2006, the company may be required to
publish on its website a statement setting out any matter relating to: (a) the audit of the company’s accounts (including the auditor’s report and
the conduct of the audit) that are to be laid before the AGM; or (b) any circumstance connected with an auditor of the company ceasing to hold
office since the previous meeting at which annual accounts and reports were laid. The company may not require the shareholders requesting any
such website publication to pay its expenses in complying with Sections 527 or 528 of the CA 2006.
Where the company is requested to place a statement on a website under Section 527 of the CA 2006 it must forward the statement to the
company’s auditor not later than the time when it makes the statement available on the website.
The business which may be dealt with at the AGM includes any statement that the company has been required under Section 527 of the CA
2006 to publish on its website.
13) A member attending the meeting has the right to ask questions relating to the business being dealt with at the meeting in accordance with
Section 319A of the CA 2006. The company must cause to be answered any such question but no such answer need be given if: (a) to do so
would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information; (b) the answer has already
been given on a website in the form of an answer to a question; or (c) it is undesirable in the interests of the company or the good order of the
meeting that the question be answered.
14) A copy of this Notice of Annual General Meeting and other information required by Section 311A of the CA 2006 can be found at
www.alumasc.co.uk.
15) Members who have general queries about the meeting should address such questions, in the first instance, to the company’s Registrars, Equiniti
0371 384 2030 (from overseas +44 121 415 7047. Lines are open 8.30am to 5.30pm, Monday to Friday (excluding public holidays in England
and Wales)). Members may not use any electronic address provided in this Notice of Annual General Meeting or any related documents to
communicate with the company for any purposes other than those expressly stated.
16) Voting at the meeting on all resolutions will be conducted by way of a show of hands. As soon as practicable following the meeting, the results
of the voting at the meeting and the number of proxy votes cast for and against and the number of votes actively withheld in respect of each of
the resolutions proposed at the meeting will be announced via a Regulatory Information Service and also placed on the company’s website.
The Alumasc Group plc Report and Accounts 2018
117
Appendix
THE ALUMASC LONG TERM
INCENTIVE PLAN 2018
The Alumasc Long Term Incentive Plan 2018 (the “LTIP”) is a discretionary share plan which will be administered by the Board of Directors or a
committee appointed by the Board, and references in this summary to the Board should be read accordingly. Decisions in relation to the participation
in the LTIP by Executive Directors of the company will be taken by the Remuneration Committee of the Board of Directors. The LTIP is proposed as a
replacement for the company’s previous long term incentive plan which expires for the purposes of new awards on 23 October 2018.
A summary of the principal terms of the LTIP is set out below.
1 Eligibility
Any employee (including an Executive Director) of the company or any of its subsidiaries will be eligible to participate in the LTIP at the discretion
of the Board.
2 Form of awards
An award under the LTIP may be in the form of:
a) an option to acquire ordinary shares in the company for an exercise price of nil (a “Nil-Cost Option”); or
b) a conditional right to acquire ordinary shares in the company at no cost (a “Conditional Award”).
In this summary, Nil-Cost Options and Conditional Awards are together referred to as “Awards”.
3 Grant of Awards
Awards may be granted within the six week period following approval of the LTIP by shareholders, the announcement of the company’s results
for any period, the day on which a Directors’ remuneration policy is approved by shareholders of the company, or on any day on which the Board
determines that exceptional circumstances exist. However, if the company is restricted from granting Awards during any such period, Awards
may be granted in the period of six weeks following the relevant restriction being lifted.
4
Individual limit
A participant shall not be granted an Award (other than an Award granted to facilitate the recruitment of the participant) in respect of any
financial year of the company over shares with a market value (as determined by the Board) in excess of 100% of his annual base salary.
5 Overall limits
Awards may be granted over newly issued shares, treasury shares or shares purchased in the market.
In any ten year period, the number of shares which may be issued under the LTIP and under any other employees’ share plan adopted by the
company may not exceed 10% of the issued ordinary share capital of the company from time to time.
In any ten year period, the number of new shares which may be issued under the LTIP and under any other discretionary employees’ share plan
adopted by the company may not exceed 5% of the issued ordinary share capital of the company from time to time.
Treasury shares will be treated as newly issued for the purpose of this limit until such time as guidelines published by institutional investor
representative bodies determine otherwise.
6 Performance conditions
Awards will ordinarily be subject to the satisfaction of a performance condition which will determine the proportion (if any) of the Award which
will vest at the end of a performance period. The Board will have discretion to grant Awards which are not subject to performance conditions,
although Awards granted to Executive Directors (other than awards granted to facilitate the recruitment of an executive director) must be subject
to performance conditions. A performance period will usually be three years long.
A performance condition may be amended or substituted if an event occurs which causes the Board to consider such action to be appropriate.
Any amended or substituted performance condition would not be materially less difficult to satisfy.
7 Vesting, release and exercise
Awards subject to a performance condition will normally vest as soon as practicable following the end of the performance period to the extent
that the performance condition has been satisfied. Awards not subject to a performance condition will usually vest on the third anniversary of
the grant date (or on such other date or dates as the Board determines).
Awards may be subject to a “holding period” of up to two years following vesting, as determined by the Board. An Award which is subject to
a holding period will be released (so that the participant is entitled to acquire the shares) following the end of the holding period. Alternatively,
Awards may be granted on the basis that the participant is entitled to acquire shares following vesting but that (other than as regards sales to
cover tax liabilities) the Award is not released (so that the participant is able to dispose of shares) until the end of the holding period. Awards
which are not subject to a holding period will ordinarily be released at vesting.
Options will normally be exercisable until the tenth anniversary of the grant date, or such earlier date as the Board determines.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018
118
Appendix
THE ALUMASC LONG TERM
INCENTIVE PLAN 2018 continued
8 Settlement of Awards
Before shares have been delivered, the Board may decide to pay a cash amount equal to the value of some or all of the shares the participant
would otherwise have received.
9 Malus and clawback
At any time prior to the vesting of an Award, the Board may cancel the Award or impose further conditions on it. These malus provisions may
be applied in the event of a material error or misstatement of the company’s results, or information coming to light which, had it been known,
would have affected the award or vesting decision or caused reputational damage to the group.
For up to two years after the vesting of an Award, the Board may cancel the relevant Award or impose further conditions on it (if shares have not
been delivered in respect of it) or may require the participant to make a payment to the company in respect of some or all of the shares acquired.
These clawback provisions may be applied in the event of material misstatement of the company’s results, information coming to light which,
had it been known, would have affected the vesting decision, or gross misconduct by the participant.
10 Cessation of employment
If a participant ceases employment by reason of death, redundancy, retirement, injury, disability, or for any other reason at the discretion of the
Board (except where a participant is summarily dismissed), any unvested Award the participant holds (or any vested but unreleased Award) will
usually continue and be released at the normal release vesting date unless the Board determines that the Award will be released as soon as
reasonably practicable following the date on which the participant ceases to be employed by the group (or at some other time, such as following
the vesting date in the case of an Award which would otherwise be subject to a holding period).
The Board will decide the extent to which an unvested Award vests in these circumstances, taking into account the extent to which any
performance condition is satisfied at the end of the performance period or, as appropriate, the date on which the participant ceases to be
employed by the group and, unless the Board determines otherwise, the proportion of the performance period (or vesting period in the case of
an Award not subject to a performance condition) that has elapsed at cessation.
If a participant ceases to be employed with the group in any other circumstances, any Award he holds, whether vested or unvested, shall lapse
on the date on which the participant ceases employment.
11 Corporate events
In the event of a change of control of the company unvested Awards will ordinarily vest and be released (and vested but unreleased Awards will
be released) as soon as reasonably practicable. The Board will determine the extent to which Awards will vest taking into account the extent to
which any performance condition has been satisfied, and, unless the Board determines otherwise, the proportion of the performance period (or
vesting period in the case of an Award not subject to a performance condition) that has elapsed at the date of the relevant event. Alternatively,
the Board may permit, or in the case of an internal reorganisation, require Awards to be exchanged for equivalent Awards which relate to shares
in another company.
If other events occur such as a winding-up of the company, demerger, delisting, special dividend or other event which, in the opinion of the
Board, may affect the current or future value of shares, the Board may determine that Awards will vest and be released on the same basis as in
the event of a change of control.
12 Adjustments
In the event of a variation of the company’s share capital or a demerger, delisting, special dividend, rights issue or other event, which may, in
the Board’s opinion, affect the current or future value of shares, the number of shares subject to an Award and/or any performance condition
attached to Awards, may be adjusted.
13 Amendment, termination and further terms of the LTIP
The Board may amend the LTIP at any time, provided that the approval of the company’s shareholders in a general meeting will be required for
any amendments to the advantage of participants relating to eligibility, limits, the basis for determining a participant’s entitlement to, and the
terms of, the shares or cash comprised in an Award and the impact of any variation of capital.
However, any minor amendment to benefit administration, to take into account legislative changes, or to obtain or maintain favourable tax
treatment, exchange control or regulatory treatment may be made by the Board without shareholder approval.
The LTIP will usually terminate on the tenth anniversary of its approval by shareholders but the rights of existing participants will not be affected
by any termination.
Awards are not transferable (other than on death). No payment will be required for the grant of an Award. Awards will not form part of
pensionable earnings.
The Alumasc Group plc Report and Accounts 2018
119
LIST OF SUBSIDIARIES
The group’s subsidiary undertakings as at 30 June 2018 are shown below. Unless otherwise disclosed all subsidiary undertakings are incorporated
in the UK. All subsidiaries are 100% owned and with a share class of ordinary shares. The registered offices are located at The Alumasc Group plc
registered address.
Subsidiary
Alumasc Exterior Building Products Limited
Alumasc Limited
Levolux Limited
Wade International Limited
Alumasc Precision Limited
A.G. Standard Company Limited
Access Floor Systems Limited
AIBP 2 Limited
ALK Limited
Alumasc Building Products Limited
Alumasc Construction Products Limited
Alumasc D Developments Limited
Alumasc DD Limited
Alumasc Holdings Limited
Alumasc Interior Building Products Limited
Alumasc Precision Hong Kong Limited
Alumasc-Grundy Limited
Apex Gutter & Drainage Limited
Benion Limited
Benjamin Priest Group Limited
Benjamin Priest Limited
Blackdown Horticultural Consultants Limited
BLK Limited
BLL Limited
C. C. Realisations Limited
Cleomack (One) Limited
Cleomack (Three) Limited
Cleomack Limited
Condyle Limited
Copal Casting Limited
D.E. Limited
Doranda Limited
Drew Street Limited
Elkington China Limited
Elkington Gatic Limited
Engird Limited
Euroroof Limited
Gatic Inc
Green Roof Solutions Limited
Harmer Holdings Limited
Harvey Reed Top Table Limited
Justcredit Limited
Kett Limited
Levolux A.T. Limited
MR Limited
Powke Limited
Rainclear Systems Ltd
Roof-Pro Limited
Sillavan Anodes Limited
Sillavan Industries Limited
Sorrel 009 Limited
Sure-foot Supports Limited
Technical Building Products Limited
The Green Building Products Company Limited
The Paint Factory Limited
Thermex AFC Limited
Thermex Industries Limited
Timloc Building Products Limited
Wade International (UK) Limited
Wade Drainage Products Limited
Wergs Limited
Yenots Limited
Principal activity
Country of incorporation
Hong Kong
Hong Kong
USA
Building Products
Building Products
Building Products
Building Products
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2018 120
Company Information
THE ALUMASC GROUP –
BUSINESSES AND OPERATING LOCATIONS
Housebuilding & Ancillary Products
Ventilation products, access panels/
doors cavity closers/dry roof verge
products
Timloc Building Products
Timloc House
Ozone Park
Howden
East Riding of Yorkshire DN14 7SD
Tel: +44 (0) 1405 765567
Fax: +44 (0) 1405 720479
Email: sales@timloc.co.uk
Web: www.timloc.co.uk
Architectural Screening, Solar Shading
& Balconies
Levolux
Forward Drive
Harrow
Middlesex HA3 8NT
Tel: +44 (0) 20 8863 9111
Fax: +44 (0) 20 8863 8760
Email: info@levolux.com
Web: www.levolux.com
Roofing & Walling
Waterproofing systems
Alumasc Waterproofing
White House Works
Bold Road
Sutton
St Helens
Merseyside WA9 4JG
Tel: +44 (0) 1744 648400
Fax: +44 (0) 1744 648401
Email: info@alumasc-exteriors.co.uk
Web: www.alumascroofing.co.uk
Green roofing
Blackdown Horticultural Consultants
Street Ash Nursery
Combe St. Nicholas
Chard
Somerset TA20 3HZ
Tel: +44 (0) 1460 234582
Fax: +44 (0) 845 0760267
Email: enquiries@blackdown.co.uk
Web: www.blackdown.co.uk
Roofing services support systems
Roof-Pro Systems
Polwell Lane
Burton Latimer
Northamptonshire NN15 5PS
Tel: +44 (0) 1536 383865
Fax: +44 (0) 1536 726859
Email: info@roof-pro.co.uk
Web: www.roof-pro.co.uk
Insulated render systems
Alumasc Facades
White House Works
Bold Road
Sutton
St Helens
Merseyside WA9 4JG
Tel: +44 (0) 1744 648400
Fax: +44 (0) 1744 648401
Email: info@alumasc-exteriors.co.uk
Web: www.alumascfacades.co.uk
Water Management
Metal rainwater, roof, shower
and floor drainage systems
Alumasc Water Management Solutions
Station Road
Burton Latimer
Kettering
Northamptonshire NN15 5JP
Tel: +44 (0) 1536 383810
Fax: +44 (0) 1744 648401
Email: info@alumascwms.co.uk
Web: www.alumascwms.co.uk
Rainclear Systems
Unit 34 A
Techno Trading Estate
Ganton Way
Swindon SN2 8ES
Tel: +44 (0) 844 4142266
Fax: +44 (0) 844 4142277
Email: sales@rainclear.co.uk
Web: www.rainclear.co.uk
Metal drainage & access covers
Wade International
Third Avenue
Halstead
Essex CO9 2SX
Tel: +44 (0) 1787 475151
Fax: +44 (0) 1787 475579
Email: sales@wadeint.co.uk
Web: www.wade.eu
Civil drainage systems
Elkington Gatic
Hammond House
Holmestone Road
Poulton Close
Dover
Kent CT17 0UF
Tel: +44 (0) 1304 203545
Fax: +44 (0) 1304 215001
Email: info@gatic.com
Web: www.gatic.com
Engineered access covers
Elkington Gatic
Hammond House
Holmestone Road
Poulton Close
Dover
Kent CT17 0UF
Tel: +44 (0) 1304 203545
Fax: +44 (0) 1304 215001
Email: info@gatic.com
Web: www.gatic.com
The Alumasc Group plc Report and Accounts 2018 Design and Production
www.carrkamasa.co.uk
The Alumasc Group plc
Burton Latimer, Kettering
Northamptonshire NN15 5JP
Tel: +44(0) 1536 383844
Fax: +44(0) 1536 725069
info@alumasc.co.uk
www.alumasc.co.uk