The Alumasc Group plc
Report and Accounts 2019
Premium building products,
systems and solutions.
Welcome
WE ARE ALUMASC
We provide high quality systems and solutions,
the majority of which manage the scarce resources
of water and energy in the built environment.
We behave with integrity, building strong
relationships and trust with our customers.
We have an entrepreneurial approach,
and deliver on our promises.
Group Revenues*
(£m)
£90.1m
(2018: £87.0m)
Underlying Earnings per Share*
(pence)
12.4p
(2018: 13.4p)
Dividends per Share
(pence)
7.35p
(2018: 7.35p)
2019
2018
2017
2016
2015
90.1
87.0
88.4
2019
2018
2017
2016
2015
73.0
70.0
12.4
13.4
15.1
12.6
19.1
2019
2018
2017
2016
2015
7.35
7.35
7.15
6.5
6.0
* From continuing operations. A reconciliation of underlying to statutory profit before tax is provided in note 5 to the Group financial statements.
The world we live in
Alumasc contributes to the world we live
in by providing high quality products and
systems, many of which manage the scarce
resources of water and energy in the built
environment, where possible using
recyclable materials.
Where we operate
Alumasc is a UK based business and 90%
of our sales are in the UK. We are developing
selective export markets in North America
and in the Middle/Far East, although Alumasc
products are already sold globally.
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.
The Alumasc Group plc Report and Accounts 2019 OUR OPERATING DIVISIONS
01
Architectural Screening,
Solar Shading & Balconies
Pages 06 and 07
Roofing & Water
Management
Pages 04 and 05
Housebuilding
Products
Pages 08 and 09
Inside your Annual Report & Accounts
02
28
Strategic Report
02 Our Strategy &
Business Model
04 Our Business Segments
10 Chairman’s Statement
12 Chief Executive’s Review
18 Key Performance Indicators
19 Financial Review
22 Principal Risks &
Uncertainties
24 Corporate Social
Responsibility
Governance
28 Board of Directors
30 Corporate Governance
Statement
38 Audit Committee Report
42 Directors’ Remuneration
Report
52
Financial Statements
& Company Information
52 Independent Auditor’s
Report
56 Financial Statements
103 Financial Summary
104 Additional Shareholder
48 Nomination Committee
Information
Report
49 Directors’ Report
51 Statement of Directors’
Responsibilities
106 Notice of Annual General
Meeting
111 List of Subsidiaries
112 Businesses & Operating
Locations
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 2019Strategic ReportGovernanceFinancial Statements 02
Our Strategy & Business Model
OUR STRATEGIC OBJECTIVES
1
Grow revenues at a faster
rate on average than the overall
UK construction market
2
Augment UK organic revenue
growth through the development
of selected export markets
and acquisitions
4
Generate superior financial
returns to shareholders over
the medium/longer term
3
Grow profit at a faster rate
than revenue by improving
operating margins
1
We have a track record
of outperforming UK
construction market
growth by circa 2% p.a.
2
3
We are investing to grow
export revenues in North
America for Architectural
Screening and Solar Shading
Systems and in the Middle/ Far
East for Water Management
products and systems
Operating margin
improvement is being
underpinned by better
overhead recovery as
revenues grow and
through cost savings
and efficiency initiatives
4
Superior financial returns:
• Revenue growth
• Operating margin growth
• Strong returns on
investment
The Alumasc Group plc Report and Accounts 2019 03
OUR BUSINESS MODEL
Build specialised brands in growth markets
Specified products
International market
development
Structural growth
Almost 80% of Group
revenues are driven by
specification & regulation
Export revenues are around
10% of Group sales
Over 80% of Group revenues relate to long
term structural growth drivers
Manage these to optimise opportunities
Long-term structural growth drivers
Empower talented people
Leverage strong brands
Continuous innovation & development
Strong customer service
Invest in strategic priorities
Drive intra-group revenue and cost synergies
Success
Satisfied customers
Motivated employees
Sustainable growth
Superior financial returns
Long term value creation
1: Water
management
2: Energy
management
3: Bespoke architectural
solutions
4: Ease of
construction
See pages 04 to 09
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements
04
Strategic Report
Our Business Segments
ROOFING & WATER
MANAGEMENT
• Innovative, high performance flat roof systems,
waterproofing and green roof systems
• Products that manage and attenuate water originating
inside and outside buildings including integrated
“Rain to Drain” solutions for the built environment
Our brands
Growth drivers
Roofing:
• Architectural specification
• Building regulations
Water Management:
• Legislation aimed at conservation,
attenuation and control of water
• Structural engineering specifications
• Building regulations
Operations and supply chain
• Partial UK in-house manufacture
• Partial external supply chain including
suppliers in Europe and North America
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
products including solar shading/screening
systems, balconies & balustrades and water
management solutions
• Development of further synergies in our
“Rain to Drain”strategy following last year's
acquisition of Wade
• Increase divisional export sales with focus
on systems using Gatic and Wade products
• Grow operating margins through new
product introductions, improving customer
service and operational efficiency
Routes to market
• Roofing – mainly via preferred installers
• Water management – via merchants and
distributors; some via preferred installers
For more information on these brands through links on our segment page:
www.alumasc.co.uk/operations/water-management
Stage of construction cycle
Mid
The Alumasc Group plc Report and Accounts 2019 05
05
Alumasc Water
Management Solutions
Tottenham Hotspur’s new state
of the art stadium
AWMS played an integral part in
Tottenham Hotspur’s new state of the
art £1 billion stadium.
This was an exciting project for the AWMS team that
featured a comprehensive ‘Rain to Drain’ offer with
the specification of various brands. Gatic special
Stainless Steel CastSlot and PaveSlot drainage
channels were installed around the stadium to provide
discreet high capacity linear drainage, as well as the
installation of Gatic engineered Access Covers and
Assist Lift Covers. In addition, Harmer SML Below
Ground cast iron drainage systems were installed
in combination with Wade cast iron floor gullies.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements 06
Strategic Report
Our Business Segments continued
ARCHITECTURAL SCREENING,
SOLAR SHADING & BALCONIES
• Design and supply of solar shading, architectural
screening and balcony & balustrading systems
• Installation of certain systems in the UK only
Our brand
LEVOLUX
Growth drivers
• Architectural specification
• Building regulations relating
to energy management
Operations and supply chain
• Partial UK manufacture providing
fabrication, assembly and finishing
operations
• Diversified specialist supply chain of mainly
UK and European based suppliers
Opportunities and potential
• Business development opportunities arising
from the new Alumasc Building Envelope
specification sales approach together with
Alumasc Roofing
• Development of embryonic UK
balconies & balustrading business
• Development of North American
export business
• Growth in operating margins through
operational efficiencies and increasing
the proportion of design and supply
only; versus design, supply and install
project work
Routes to market
• Direct to main building contractors
in the UK
• Via general contractors and installing
sub-contractors in North America
For more information on these brands through links on our segment page:
www.alumasc.co.uk/operations/architectural-screening-solar-shading-balconies
Stage of construction cycle
Mid
Late
The Alumasc Group plc Report and Accounts 2019 07
07
LEVOLUX
Architectural Screening,
Solar Shading & Balconies
San Antonio multi-storey car park –
external screening solution
The Village at San Antonio Center in
California replaces a 50-year-old shopping
centre with a new mixed-use development,
including a large multi-storey car park
which benefits from a distinctive Levolux
External Screening Solution.
A bespoke screening structure was required to soften
the visual impact of the building by concealing
unsightly structures under a veil of curved or twisted
fins. The client selected their preferred design as one
that resembles fabric draped across the building.
The custom screening solution supplied by Levolux
comprises more than 1,800 vertical fins, each formed
from 15mm thick, extruded aluminium plate. The
fins, which have a maximum width of 600mm and a
length of up to 3.1 metres, are individually water jet
cut along their length to create the required curved
profile. Working to very small tolerances, Levolux
ensured all vertical fins were aligned perfectly, set at
510mm centres.
To enhance the overall aesthetic, Levolux supplied all
vertical fins for the project in a highly durable and
attractive silver-grey powder coating.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements 08
Strategic Report
Our Business Segments continued
HOUSEBUILDING PRODUCTS
• Premium housebuilding products
Our brand
Growth drivers
• Growth in UK house building demand and
Opportunities and potential
• Outperformance relative to the UK
current under supply of houses
• Legislation and building regulations
Operations and supply chain
• Nearly all in-house manufacture
construction market with continued
market share growth through product
range development and best in class
customer service
• Leveraging strong sales channels through
product portfolio development and
excellent customer service
• Margin improvement through operational
efficiency and additional operational
flexibility, utilising the new factory
commissioned in early 2018 and
significant investment in new machines
and automation in 2019
Routes to market
• Merchants and distributors
• House builder specification
For more information on these brands through links on our segment page:
www.alumasc.co.uk/operations/housebuilding-products
Stage of construction cycle
Early
Mid
The Alumasc Group plc Report and Accounts 2019 09
09
Housebuilding
Products
Product innovation and service
from Timloc: InvisiWeep
Timloc Building Products is one of the
UK’s leading manufacturers of plastic
injection moulded building products.
To ensure continued growth ahead
of the UK construction market, Timloc
continuously innovates, improves,
and invests in people and in plant
and equipment.
Timloc’s recent move to a state-of-the-art 88,000 sq
ft manufacturing and distribution facility in Howden,
East Yorkshire has significantly benefited product
development, with several new or improved products
launched within the last 12 months.
A key example of Timloc’s continued innovation
is the development of InvisiWeep (pictured) – the
almost invisible wall weep. InvisiWeep can be used
in a situation where water must be discharged from
an external cavity wall and InvisiWeep provides a
much smaller opening on the face of the wall for
an improved aesthetic appearance. Many National
Housebuilders have already specified the product in
their latest designs.
Timloc continues to be extremely proud of its British
heritage and has been tried, tested and trusted by
its customers for over 50 years. Timloc understands
the demands of today’s construction and merchant
markets and has established a reputation for
consistently delivering exceptional levels of customer
service.
Trust Timloc to deliver – with unrivalled free next
working day delivery service to branch or site on
low carriage paid order values.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements 10
Chairman’s Statement
“We believe Alumasc will
be in a strong position
to exploit future market
recovery.”
John McCall
Chairman
Summary
In the year under review, our Roofing,
Water Management and Housebuilding
products businesses, representing 80% of
Group revenues, performed well, growing
revenues and profits, and delivered their
strategic objective of outperforming the
industry benchmark.
This was against the backdrop of growing
political and economic uncertainty, which had
a negative impact on business generally, and
commercial construction in particular. Our
business most exposed to this sector – Levolux
– experienced numerous project delays as a
consequence, and incurred losses as a result.
Swift action has been taken to mitigate
these and a plan to restructure the business
was announced in June 2019. Levolux
continues to offer great potential in the
UK and international markets and is one
of Alumasc’s strongest brands.
In light of the resilient performance by
the majority of our business, our plans for
development in the short and longer term
and the strength of our balance sheet, the
Board is recommending an unchanged final
dividend of 4.4p per share which, if approved,
gives an unchanged total dividend of 7.35p
per share for the full year.
The year under review
In the full year, Group revenues increased by
4% to £90.1 million, while underlying profit
before tax fell by 7% to £5.6 million.
Alumasc again achieved its strategic
objective of growing revenues faster than
the UK construction market, with our
Roofing & Water Management and
Housebuilding products divisions, together
representing 80% of the Group, significantly
outperforming. This growth did not translate
into increased overall profit for the year due
to the operating losses incurred at Levolux,
reflecting the decline in UK commercial
construction activity and project delays during
the period. A significant strategic refocusing
and restructuring of Levolux was announced
in June, aimed at returning the business to
sustainable profit as soon as possible.
Details are in the Chief Executive’s review.
The Alumasc Group plc Report and Accounts 2019 11
Corporate actions
During the year, the Board decided to
relist Alumasc's shares on the AIM market,
providing a more suitable base for the
development of the business and a broader
spectrum of investor interest. This was
achieved on 25 June 2019.
Earlier in the year, the Company’s two legacy
pension schemes were merged, saving
duplication and cost, and enabling the
desirable restructuring of operations to
take place.
In addition to the physical rearrangements
referred to above, a simplification of the
Group’s corporate structure is under way,
reducing administration and aligning legal
structure with our commercial organisation.
Prospects
Given the mixed forecasts for UK construction
while economic and political uncertainty
prevails, the Board has taken mitigating steps
both in the shorter term and to ensure that
Alumasc will be in a strong position to exploit
future market recovery.
In these circumstances, we stay close and
listen to our customers and, where we have
identified opportunities to add greater value,
we are revising our product ranges and
investing to reinforce excellent service as
our key differentiator.
John McCall
Chairman
Other operational highlights of the year
included:
• The Wade drainage business acquired
in January 2018 was strongly earnings
enhancing in its first full year in the Group,
with surplus space at its freehold property
utilised to enable us to save property rental
costs elsewhere.
• Capital investment of £2.4 million was
made during the year, some £0.7 million in
excess of the depreciation charge, reflecting
our confidence in the growth potential
of Timloc, our housebuilding products
business, and our Water Management
business in particular. These investments
meet our key investment criteria of
increasing manufacturing capacity while
improving efficiency and reducing cost.
• We continued to benefit from our
innovation and new product development
programmes. New product launches
included Timloc’s InvisiWeep, a virtually
invisible wall weep, and the Adapt-Air
system, which provides an integrated
wall ventilation solution; and Gatic’s
launch of new generation access cover
and slotdrain products.
• The factors which underlie Timloc’s
reputation for excellent customer
service are being implemented
elsewhere in the Group.
The Group had modest net debt of
£5.1 million at 30 June 2019, with
committed banking facilities of £20 million.
The Group’s legacy pension liabilities had
reduced to £13.0 million at 30 June 2019,
the lowest for some time.
Our previously announced plans to continue
to drive efficiency and reduce fixed costs
across the Group, planned to benefit the
2019/20 financial year by £2 million,
are on track to be delivered.
Strategic developments
Following the acquisition of Wade, a business
complementary to our Water Management
Division, during the previous financial year,
the Board took the decision to sell our
Facades business in October 2018 to a
purchaser providing a stronger strategic fit.
The freehold manufacturing and warehousing
facilities at St Helens were retained and are
central to our plans for site rationalisation.
This move streamlined Alumasc’s portfolio
into three new operating divisions effective
from 1 July 2019: Building Envelope, Water
Management and Housebuilding Products.
This in turn enables the operational team
to focus on the significant cross selling
opportunities that exist across Alumasc’s
strong client base while exploiting
operational efficiencies.
Timloc’s activities were successfully
consolidated for the first full year onto its
new site at Howden, East Yorkshire and, as
highlighted above, significant investment was
made in manufacturing facilities in support of
its service-led housebuilding product range.
Following the acquisition of Wade, related
manufacturing activities have been transferred
to its freehold site from leasehold properties
elsewhere, accompanied by service enhancing
investment.
In addition to the commercial gains being
targeted from the more integrated selling
approach, the rationalisation of property
usage is a significant contributor to the
Group’s previously announced plans to
reduce total fixed costs by £2 million in the
new financial year, without compromising
capacity or service.
By the end of 2019/20, we will have
achieved our objective of reducing the
number of operational sites from ten
to six, saving some £0.6 million of leased
property costs in the process.
Board succession
Richard Saville, who served as a Director of
The Alumasc Group for 17 years, many as
Chairman of The Audit Committee, retired
during the year. My colleagues and I wish to
express our sincere thanks to Richard for his
support and wisdom.
Two Non-executive appointments were
made during the year: Stephen Beechey,
an executive director of The Wates Group,
and Vijay Thakrar, whose career included
partnerships at Deloitte and Ernst & Young,
will bring valuable new perspectives to our
Board and I welcome them on your behalf.
I am delighted to announce that Gilbert
Jackson and Michael Leaf, Divisional
Managing Directors of our Roofing and
Housebuilding Products divisions respectively,
have today accepted the invitation of the
Board to become Directors of the Alumasc
Group. We believe that these appointments
will help to accelerate the delivery of the
exciting plans that exist for their businesses
and will benefit our deliberations on further
Group developments.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements 12
Chief Executive’s Review
Strategic Report
“Alumasc again achieved
its strategic objective of
growing Group revenues
faster than the UK
construction market.”
Paul Hooper
Chief Executive
Despite this, Alumasc achieved its strategic
objective of growing Group revenues faster
than the UK construction market. Revenue
growth was 4%. Adjusting for selling price
inflation, sales volume growth was circa 2%,
representing an outperformance of circa 2%
against a broadly flat UK construction market.
This revenue growth did not translate into an
overall improvement in profit due to operating
losses incurred in our Architectural Screening,
Solar Shading & Balconies division, Levolux.
This division, which represents approximately
20% of Group revenues, impacted the Group's
underlying profit before tax negatively by 32%
and is the sole reason why the Group's overall
underlying profit before tax was 7% lower
than in the prior year.
Following a strategic review, a significant
restructuring of this business was announced
in June 2019. Further detail is set out in the
Strategic Development section opposite.
Financial highlights
Group performance:
Revenue (£m)*
Underlying profit before tax (£m)*
Statutory profit before tax (£m)
Underlying earnings per share (pence)
Basic earnings per share (pence)
Dividends per share (pence)
Note:
Roofing & Water Management and
Housebuilding Products segments:
Revenue (£m)
Underlying operating profit (£m)
2018/19
2017/18
% change
90.1
5.6
3.9
12.4
10.1
7.35
71.3
7.7
87.0
6.0
5.4
13.4
12.0
7.35
+4%
-7%
-27%
-7%
-16%
–
65.1
6.6
+10%
+16%
* Revenue and profit from continuing operations, excluding the revenues and profits of Alumasc Facades prior to its disposal
on 31 October 2018 and its classification as a discontinued operation. A reconciliation of underlying to statutory profit
before tax is provided in note 5 to the Group financial statements.
Overview
In recent years, the Alumasc management
team’s strategy has been to re-position
the Group to become a dedicated supplier
of premium building products to the UK
construction industry and to seek opportunities
to grow internationally.
Review of Financial Performance:
Alumasc’s performance for the year was
resilient against the background of a flat overall
UK construction market which was impacted
by the uncertain economic and political
environment. The impact of this environment
was reflected in a 7% reduction in activity in
the UK commercial new build construction
sector, which is an important end use market
for the Group (see the chart opposite).
The Alumasc Group plc Report and Accounts 2019 13
End use analysis – 2018/19
Private Commercial (29%)
Private Industrial (1%)
Private Housing (23%)
Public Non-Residential
(9%)
Infrastructure (5%)
Public Housing (2%)
Public Non-Residential RMI
(13%)
Private Housing RMI (8%)
Private Non-Residential
RMI (7%)
Public Housing RMI (3%)
Significant progress was made in the Group’s
core Roofing & Water Management and
Housebuilding Products divisions, which
represent circa 80% of Group revenues.
In these divisions revenue growth of 10%
was considerably ahead of the UK construction
market, with underlying operating profit
growth of 16% exceeding revenue growth
mainly due to the effect of operational gearing.
Excluding the full year benefit of the successful
acquisition of Wade International in January
2018, like-for-like revenues in these divisions
were ahead by 5% with underlying profits
up 7%.
Strategy and performance
against strategic objectives
Alumasc’s strategy is to:
1. Grow revenues on average faster
than UK construction market growth
by building specialised positions in
growth markets
In 2018/19 the Group continued its track
record over recent years of growing
revenues ahead of the UK construction
market on average.
2. Augment UK revenue growth
through the development of selected
export markets
Due to the timing of larger projects
and project delays, export revenues,
which were circa 10% of overall Group
revenues, reduced by 25% against the
prior year. However, market intelligence
supports our view that there is meaningful
growth potential in Levolux’s North
American markets and for Alumasc Water
Management in the Middle and Far East.
Prudent investment therefore continues
to be made in local and export sales
resources to realise this sales potential.
3. Grow profit at a faster rate than
revenue by improving operating
margins
Overall the Group’s underlying operating
margins reduced from 7.2% to 6.5% in the
year reflecting the operating losses incurred
at Levolux. In the remaining 80% of the
Group operating margins improved from
10.1% to 10.7%. The Group has, in recent
months, announced cost saving plans of
approximately £2 million which should,
other things equal, benefit operating
margins in 2019/20 by around 2
percentage points.
Accelerating strategic development
Management has increased the pace at
which it is executing its priorities for strategic
development. These are as follows:
1. Levolux business improvement plan
The overriding strategic priority that
emerged in the second half year was the
necessity to return Levolux to sustainable
profit as soon as possible. Following a
change of management and a strategic
review, the Board announced in June 2019
that the revised strategy involves a re-focus
of the business to those areas where it can
clearly differentiate and add most value
to customers and shareholders, including
developing the more profitable areas of the
business, simplifying operational delivery
and reducing risk. The key elements are to:
• incorporate Levolux solar shading,
screening and balconies as major
constituents in a new “Alumasc Building
Envelope” division, providing integrated
solutions for developers and specifiers
seeking high quality roofing and walling
systems. A new, collaborative divisional
sales approach will increase Levolux’s
existing market reach and leverage
existing strong customer relationships.
• focus on design and supply activities, as is
the case in the rest of the Alumasc Group.
In-house installation will only be offered
where this service is particularly valuable
to customers and Levolux. The expectation
over time is that this will improve margin
mix and enhance profit margins.
• invest in local technical sales resources to
accelerate growth in the profitable Levolux
business in North America. Current
revenues in this market are circa
£3 million pa.
• undertake a significant restructuring of the
existing Levolux operational and overhead
cost base, with fixed cost savings of £1
million expected in the Group’s 2019/20
financial year, and further significant
annualised savings in 2020/21. This will
include the relocation of the business from
Levolux’s current two leasehold sites to
Alumasc’s freehold facility in St Helens.
One-off restructuring costs of £2.5 million
were booked in the 2018/19 financial year
in connection with the above.
Alumasc continues to believe that Levolux
is a business with great future potential
and is one of the Group’s strongest brands.
2. Develop further opportunities for
specification cross selling, including
the development of a “building
envelope” division
In light of the strategic review of Levolux
described above, we believe there is a
further beneficial significant opportunity for
the Group to increase sales by offering an
integrated “Building Envelope” of exterior
building products facilitating the integration
of walling, roofing, balconies, solar shading
and integrated aluminium detailing which
not only provides a full external envelope
solution but also mitigates both client’s
and contractor’s risks by ensuring that
the horizontal and vertical planes
are detailed to remove tolerance and
interfacing detail issues.
The wider well known Alumasc system
brands will be brought together to provide
a single source solution whilst working
with clients, their agents and installers to
design out construction risk along with a
combined strength to provide cost savings
through the avoidance of post construct
legacy issues and providing certainty
through build cost engineering to
planned models.
The Group’s management structure and
specification sales teams have been re-
aligned to approach the market in this
way. The Group’s divisional structure
and segmentation of results will change
in 2019/20 reports to reflect this and
Alumasc’s three operating divisions in future
will comprise Building Envelope; Water
Management; and Housebuilding Products.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements 14
Chief Executive’s Review continued
3. Implementation of a more cost-efficient
operating structure
Following the restructuring of Gatic
described in our interim report and in the
operational review section below, and the
restructuring of Levolux described above,
by the end of the 2019/20 financial year
we will have achieved our previously
announced objective of reducing the
number of operational sites in the Group
from ten to six. In doing so we will have
saved circa £0.6 million per year in leased
property costs through better utilisation
of the Group’s freehold properties.
Further, the Group has simplified both its
internal legal and pensions structure. The
Group’s two legacy defined benefit pension
schemes were merged in March 2019,
which reduced the Group's pension deficit
by £0.3 million and will save over £100k pa
in pension scheme running costs. The
pension scheme merger, in turn, enabled
the combination of three of the Group’s
four active trading subsidiaries into one
in June 2019.
The benefit of this investment is evident in
the continued strong performance of these
businesses, both in terms of revenue growth
and margin improvement, and we continue
to assess further projects with attractive
payback characteristics.
Revenue investment in new people is
focused on expanding our sales reach both
in the newly formed Building Envelope
division in the UK and in growing Levolux
and Water Management divisional
export sales.
5. Improving the Group’s quality of
earnings and operating margins
through the proactive management
of our portfolio of businesses
Although the Group did not make any
further acquisitions in the year under
review, in the last two years through
the acquisition of the Wade drainage
business and divestment of the Scaffolding
Products and Alumasc Facades businesses,
the Group has acquired net incremental
operating profits of £0.7 million for a net
purchase consideration of £2.5 million. This
represents a pro forma pre-tax return on
investment of 28%. Whilst we continue to
seek to grow the Group through bolt-on
acquisitions we have no plans to make
further divestments.
Performance overview
(a) Continuing Operations
Revenue analysis
An analysis of the Group's year on year revenue growth from continuing operations
is set out below:
% change 2018/19 versus 2017/18:
Finally, as previously announced, the Group
successfully completed the re-listing of its
shares on the Alternative Investment Market
“AIM” in June 2019.
Roofing & Water Management
Housebuilding Products
Sub-total
4. Prioritising and focusing investment
Architectural Screening, Solar Shading & Balconies
to drive profitable growth
Alumasc continues to invest to exploit
the significant growth potential of our
businesses.
Capital investment is focused on those of
our businesses with greatest manufacturing
activity: Timloc, our Housebuilding Products
business, and our Water Management
business. Over the last two years capital
investment has exceeded depreciation by
£2.7 million reflecting the Board’s confidence
in future growth potential, and the plan is
to invest in excess of depreciation again in
the 2019/20 financial year. Of the Group’s
2018/19 capital spend of £2.4 million,
some £2.1 million was focused on these
businesses, with £1 million spent at Timloc on
new machinery and automation to improve
efficiency and reduce cost; and £0.6 million in
new Gatic Slotdrain manufacturing plant and
machinery following the successful relocation
of manufacturing to Wade’s freehold
premises. Investment of over £1 million has
been committed in the Water Management
division to renew tooling held at strategic
suppliers in the Far East to enable reduced
manufacturing cost, improved efficiency,
better product quality and to assist our supply
partners in reducing carbon emissions.
Total Group (headline)
Note:
Roofing & Water Management like-for-like*
Group like-for-like*
* Like-for-like information is adjusted for full year impact in 2018/19 of the acquisition of Wade in January 2018.
UK like-for-like revenues excluding Wade grew by 4%.
Revenue
The table above illustrates that across
the Group, except for the Architectural
Screening, Shading and Balconies division
(Levolux), Alumasc achieved revenue growth
rates in excess of the UK construction
market despite the downturn in new build
commercial construction activity.
contracting sector in the UK. Levolux is the
only business in Alumasc that installs
its own products and therefore has this
degree of exposure to building contracting.
This model is now being changed, following
the recent strategic review of the business,
to retain Levolux's differentiated design
offering whilst reducing margin risk.
This outperformance can be attributed to the
Group’s strategy of investing in businesses
with strong market positions in specialised
growth markets, including products and
systems that manage the scarce resources of
water and energy in the built environment.
The revenue reduction at Levolux reflects its
strong alignment with the commercial new
build market sector where UK output reduced
by 7% over the period, exacerbated by project
delays. These were associated with ongoing
economic and political uncertainties and
restricted credit availability across the building
Gross margins
Gross margins reduced from 30.9% in
2017/18 to 29.8% in 2018/19 due to lower
margin realisation at Levolux, reflecting lower
recovery of fixed costs due to lower than
expected revenues in part due to project
delays; a higher proportion of lower margin
balcony and balustrading work in the period;
lower margins in the Gatic brand in the first
half year; and higher annualised property
costs at Timloc following its relocation to
a larger factory in December 2017. Gatic’s
margins recovered in the second half
following successful selling price increases.
Total
+10%
+9%
+10%
-15%
+4%
+5%
–
The Alumasc Group plc Report and Accounts 2019
15
Net operating expenses
Net operating expenses were well controlled
during the year and amounted to 23.3% of
revenues compared with 23.8% in the prior
year. As the cost saving actions described in
this report bear fruit, we expect this ratio to
decrease further in the 2019/20
financial year.
Underlying operating profit
Underlying operating profit was £5.9 million
compared with £6.2 million in the previous
year. The reduction was entirely attributable to
Levolux, where the operating losses incurred
more than offset profitable growth in the rest
of the Group.
Bank interest
Bank interest costs of £0.3 million were
a little higher than in the previous year
(£0.2 million) due to modestly higher levels
of average net debt during the year following
the debt-funded acquisition of Wade for £8.0
million in January 2018, which was not fully
offset by the disposal of Alumasc Facades for
£4.5 million in October 2018.
Underlying profit before tax
Underlying profit before tax was £5.6 million
(2017/18: £6.0 million), reflecting the reduced
underlying operating profit and higher bank
interest charge.
Non-underlying, non-recurring items
Non-underlying and non-recurring items
(relating to continuing operations) amounted
to a £4.6 million net cost in the period
compared with a £0.9 million net cost in the
prior year. In 2018/19, the larger items in this
category were restructuring and relocation
costs of £3.0 million, mainly associated with
the cost reduction programmes at Levolux and
Gatic; net one off pension scheme charges
of £0.8 million largely relating to the UK
High Court decision in October in respect of
guaranteed minimum pensions equalisation;
and £0.2 million in connection with the
re-listing of Alumasc’s shares on the AIM
market. Further details are given in the
Financial Review.
(b) Discontinued Operations and
profit (after tax) for the year
The net after tax gain from discontinued
operations, reflecting the trading profit of
the Alumasc Facades business prior to its
disposal in October 2018 and the gain
realised on the disposal transaction itself,
was £2.9 million. The post-tax operating
profit generated by Alumasc Facades in
the prior year was £0.4 million.
The Group’s resulting overall statutory profit
(after tax) for the year was £3.6 million
(2017/18: £4.3 million).
Operational review
(a) Roofing & Water Management
Performance in this division benefited
from the full year effect of the successful
Wade acquisition in January 2018; growth
in revenues in the Gatic brand driven by
a number of larger projects in the UK
infrastructure sector during the year; and
the successful launch in the latter part of the
prior year of new generation Access Cover
and Slotdrain products. Wade was strongly
earnings enhancing in its first full year in
the Group.
The margin pressures in the Gatic brand
experienced in the first half year were
addressed by selling price increases in
November 2018, which led to a full recovery
of margin in the second half year.
Production of Gatic Slotdrain transferred
successfully from leased premises in Dover
to Wade’s freehold premises in Halstead, Essex
in June 2019. This is expected to yield circa
£0.6 million of cost savings in 2019/20.
Elsewhere in the division, both Alumasc
Roofing and Alumasc Water Management
Solutions contributed solid performances,
each matching prior year revenues. Alumasc
Roofing worked hard to successfully evolve its
mix of revenues towards refurbishment work
from new build where commercial demand
was lower in the 2018/19 financial year,
reflecting market conditions.
Roofing & Water
Management
2018/19 performance
highlights
• Revenue: £59.9 million
(2017/18: £54.6 million)
• Underlying operating
profit*: £5.9 million
(2017/18: £4.9 million)
• Underlying operating
margin*: 9.9%
(2017/18: 9.0%)
• Operating profit:
£5.3 million
(2017/18: £4.6 million)
* Prior to restructuring costs
of £0.5 million in 2018/19,
brand amortisation charges
of £0.1 million in both years
and Wade acquisition costs
of £0.2 million in 2017/18.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements 16
Chief Executive’s Review continued
As stated at the interim stage, a review of
capacity at Alumasc Water Management
Solutions concluded that with relatively
modest capital spend at existing facilities
there is no immediate need to relocate
to a new site, saving significant capital
cost relative to earlier plans.
During the year divisional sales teams were
consolidated to promote more effectively
our “Rain to Drain” strategy, where Alumasc
offers solutions to manage and control the
flow of water through buildings from the roof
to the ground thereby alleviating pressure on
public drainage systems and reducing risks
of flash flooding from increasingly intense
rainfall events. Action is also being taken to
simplify product ranges across the division to
reduce complexity and increase focus on the
most profitable lines whilst exiting areas not
making an adequate contribution.
The one-off costs of moving to a simplified
divisional structure from the relocation of
Slotdrain production and moving to a shared
overhead structure at Wade and Gatic is
the principal reason why divisional statutory
operating profit was lower than underlying
operating profit for the year.
(b) Architectural Screening,
Solar Shading & Balconies
Following the reduction in revenues and the
significant operating losses incurred in the
Levolux business during the year, a major
restructuring programme was announced
in June 2019 to recover profitability in
this business as described in the strategic
development section above.
Levolux’s challenging year stemmed
from a combination of:
• lower commercial new build demand
impacting UK architectural screening
and solar shading project revenues;
• project delays, both prior to and after receipt
of sales orders, that we believe reflects
the impact of the uncertain economic
and political environment on customer
investment decisions, exacerbated by the
ongoing lack of credit in the UK building
contracting industry;
• increasing competition for architectural
screening and solar shading in the UK; and
• margin realisation issues in our embryonic
balconies business that impacted the first
half year in particular.
Architectural Screening,
Solar Shading & Balconies
2018/19 performance highlights
• Revenue: £18.8 million
(2017/18: £22.0 million)
• Underlying operating margin*:
(5.9)% (2017/18: 3.6%)
• Operating (loss)/profit: £(3.7) million
(2017/18: £0.6 million)
• Underlying operating (loss)/profit*:
£(1.1) million (2017/18: £0.8 million)
* Prior to restructuring costs of £2.5 million
in 2018/19 and brand amortisation charges
of £0.2 million in both years.
In future, Levolux will focus increasingly
on design and supply work and only install
where the customer recognises the value
that we add from this activity and our risks
can be better managed. We see significant
opportunity for growth in architectural
screening and solar shading in the USA,
particularly California, and we intend to invest
further in local sales resources to help realise
this potential. We also see significant growth
potential in balconies and balustrading, driven
by increasing demand for apartments in the
private rented sector. However, we need to
do further work to prove we can execute
this work at acceptable profit margins and
a number of options are under evaluation
to resolve this.
We believe that future demand for Levolux
products more generally and conversion rates
from customer enquiries to orders will both
be enhanced by the business becoming part
of the Building Envelope division benefiting
from the integrated specification sales
strategy described above and the larger
combined technical sales team.
One-off restructuring costs are the main
reason why the statutory operating loss for
this division was higher than the underlying
operating loss.
The Alumasc Group plc Report and Accounts 2019 17
Housebuilding Products
2018/19 performance highlights
• Revenue: £11.4 million
(2017/18: £10.5 million)
• Operating profit:
£1.7 million
(2017/18: £1.7 million)
• Operating margin:15.2%
(2017/18: 15.8%)
(c) Housebuilding Products
Timloc continues to go from strength to
strength and delivered operating profit of
£1.7 million, similar to the prior year, despite
absorbing £0.3 million of incremental
annualised property costs following the
successful re-location to its new purpose
built, higher capacity factory in December
2017. The payback from investment in the
new factory is running ahead of
initial expectations.
Once again, Timloc’s revenue growth
rate of 9% comfortably exceeded UK
housebuilding market growth as management
expanded the product range and grew
market share.
Timloc’s strong service ethos of guaranteed
next working day delivery and low carriage
paid order values again proved to be highly
attractive to merchant and distributor
customers, and this was effectively
communicated by the “Trust Timloc to
deliver next working day” marketing and
social media campaign.
New product development, which has always
been an important element of Timloc’s
success, included the launch of InvisiWeep,
a virtually invisible wall weep, and the
Adapt-Air system which provides an
integrated solution for through wall
ventilation. Further new product launches
are planned in 2019/20 and some currently
bought-in products will be manufactured
in-house to further enhance margins.
Alumasc invested over £1 million in new
injection moulding machines and automation
during the year and the successful execution of
these capital projects by Timloc’s management
team will yield cost savings in the 2019/20
financial year.
Outlook
In light of the current economic and
construction sector backdrop (including Brexit
uncertainties), the Board is taking a cautious
view of revenue development in the 2019/20
financial year.
Notwithstanding the challenging market
conditions, the actions taken to restructure
those parts of the Group (particularly Levolux)
that did not perform to expectation in the
year under review should yield cost savings of
circa £2 million in the 2019/20 financial year.
The Board believes Alumasc’s strong strategic
and market positions, which underpin our
established track record over many years of
outperforming the UK construction market,
together with:
• the formation of the Building Envelope
division to drive specification cross-selling;
• the major restructuring of the Levolux
business;
• focused investments in new products and
manufacturing capability;
• selective investments in sales resources
to grow the business both in the UK and
internationally; and
• lower fixed costs and actions taken to
deliver a more cost-effective operating
structure across the Group
makes Alumasc well positioned to make
progress in the current financial year
and beyond.
Paul Hooper
Chief Executive
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements
18
Key Performance Indicators
Health & Safety Performance Rate Index
(PRI)
New Product Introductions
(% of revenues)
2.7(2018: 4.3)
2019
2018
16.6%
(2018: 14.5%)
On Time in Full
(%)
97.4%
(2018: 96.4%)
2.7
2019
2018
4.3
16.6
2019
2018
14.5
97.4
96.4
Comment/explanation
Comment/explanation
Comment/explanation
The ratio improved/(reduced) year on year in line
with continuous improvement actions.
Definition
The PRI is a measure of days lost and other safety
incidents as a proportion of total hours worked.
Acceleration of new product development activities.
Management focus on service improvement initiatives.
Definition
Definition
Revenues generated in the year from products
introduced in the last three years as a percentage
of total revenues in the year.
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.
Year-end Group Order Book
(£m)
£20.6m
(2018: £21.0m)
Group Revenues
(£m)
£90.1m
(2018: £87.0m)
Underlying *Operating Margin
(%)
6.5%(2018: 7.2%)
2019
2018
20.6
21.0
2019
2018
90.1
87.0
2019
2018
6.5%
7.2%
Comment/explanation
Comment/explanation
Comment/explanation
Reflects a lower Levolux order book as we refocus
the business on its most profitable lines of business.
Revenue grew circa 2% ahead of the UK
construction market, consistent with our strategy.
Overall Group operating margins impacted by
Levolux operating losses, with good progress
made elsewhere.
Underlying* Profit Before Tax
(£m)
Underlying* Earnings per Share
(pence)
Average Trade Working Capital
(as a percentage of sales)
£5.6m(2018: £6.0m)
2019
2018
12.4p
(2018: 13.4p)
14.1%
(2018: 14.6%)
5.6
6.0
2019
2018
12.4
13.4
2019
2018
14.1
14.6
Comment/explanation
Comment/explanation
Comment/explanation
Operating losses at Levolux offset profitable
growth in 80% of the Group during the year.
Reduced underlying earnings per share reflects the
lower underlying profit before tax in the year.
The reduction (i.e. greater working capital efficiency)
reflects continuous improvement initiatives during
the year.
Net Debt
(£m)
£5.1m(2018: £4.8m)
2019
2018
Pension Deficit (IAS 19)
(£m)
£13.0m
(2018: £15.1m)
Return on Investment (post-tax)
(%)
11.4%
(2018: 14.5%)
5.1
4.8
2019
2018
13.0
2019
2018
15.1
11.4
14.5
Comment/explanation
Comment/explanation
Comment/explanation
A broadly balanced cash flow performance for
the year.
The pension deficit improved due to Company cash
contributions during the year, more favourable
mortality assumptions at 30 June 2019 and the
benefit of the merger of Alumasc's pension schemes
during the year.
ROI reduced due to the lower profit for the year
on a similar average capital base.
* A reconciliation of underlying to statutory profit is provided opposite and in note 5 to the financial statements.
The Alumasc Group plc Report and Accounts 2019 Financial Review
19
“Capital investment of
£2.4 million will support
future growth and enable
margin improvement.”
Andrew Magson
Group Finance Director
Reconciliation of underlying to statutory profit before tax
Underlying profit before tax
Brand amortisation
Net IAS 19 defined benefit pension scheme costs
Restructuring & relocation costs
AIM listing/prior year acquisition costs
Net gain from business disposals (pre-tax)
Gain on disposal of available-for-sale assets
Statutory profit before tax
2018/19
£m
2017/18
£m
5.6
(0.2)
(1.2)
(3.0)
(0.2)
2.9
–
3.9
6.0
(0.2)
(0.5)
(0.3)
(0.2)
0.2
0.4
5.4
Underlying profit before tax for the 2018/19
financial year of £5.6 million exceeded
statutory profit before tax of £3.9 million
for the reasons shown in the table above.
The reconciling items were:
• Amortisation of acquired brands of
£0.2 million (2017/18: £0.2 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.
• Net IAS 19 defined benefit of pension
scheme costs of £1.2 million (2017/18:
£0.5 million) are also non-cash charges.
These relate to the Group’s legacy defined
benefit pension scheme, which has been
closed to future accrual for almost ten
years. The value of the charge is determined
by actuarial assessment. In the 2018/19
financial year, the charge to the income
statement was higher than usual, due to
a one-off £1.1 million increase in liabilities
following a UK High Court decision in
October 2018 applicable to UK defined
benefit pension schemes generally and
relating to guaranteed minimum pension
equalisation between men and women.
This was partly offset by a one-off actuarial
gain of £0.3 million arising from the merger
of the Group’s pension schemes during the
year. The balance of the 2018/19 charge,
and all the prior year’s charge, represents
the non-cash notional financing cost of
the Group’s pension deficit due to the time
value of money.
• One-off restructuring and relocation costs
of £3.0 million incurred in 2018/19 will
enable Alumasc to reduce fixed costs
by circa £2 million p.a. in the current
2019/20 financial year, as described in the
Chief Executive’s review. These savings
will accrue mainly in the Gatic brand
within the Roofing & Water Management
division and at Levolux which forms our
Architectural Screening, Solar Shading
& Balconies division. The costs comprise
redundancy costs; the costs of relocating
Gatic Slotdrain production from Dover to
Wade’s freehold factory in Essex; the costs
of relocating certain Levolux functions and
operations from two leased sites to our
freehold factory and offices at St. Helens;
and associated write downs in the value of
certain plant and machinery in the premises
being vacated. The cost in the prior year
related to the relocation of Timloc, our
Housebuilding Products business, to a new,
purpose built, leased site in East Yorkshire.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements
20
Financial Review continued
• AIM listing costs of £0.2 million in 2018/19
Dividends
represent one-off professional fees
incurred in connection with the re-listing of
Alumasc’s shares from the Main Market of
the UK Stock Exchange to the Alternative
Investment Market (“AIM”) in June 2019.
The acquisition costs of £0.2 million in
the prior year related to professional fees
incurred in connection with the acquisition
of the Wade specialist drainage business.
• The net gain from business disposals
comprises the gain on sale of the Alumasc
Facades business on 31 October 2018,
together with its operating profit from
the beginning of the 2018/19 financial
year to the date of disposal. The prior year
comparator represents its operating profit
for that financial year and the loss on sale
of the Scaffolding Products business in
July 2017.
• The one-off gain of £0.4 million on
realisation of an available-for-sale asset in
the prior year related to the disposal of the
Group’s legacy 20% trade investment in
Amorim Isolamentos, a Portuguese cork
producer.
Taxation
The Group’s underlying effective tax rate was
20.4% (2017/18: 20.2%), slightly above the
UK statutory rate of tax of 19% applicable to
the Group’s financial year due to certain costs
that are disallowable for tax purposes. We
expect the Group’s underlying tax rate to be
circa 20% in the 2019/20 financial year.
The Group’s effective tax rate on statutory
profit before tax was 7.4% (2017/18: 19.7%).
Reconciliations from the actual to statutory
rates of tax are provided in note 10 to the
financial statements. The reconciling items
chiefly relate to the tax treatment of the one-
off items in the Group’s income statement
described above.
Earnings per share
Underlying earnings per share for the year
was 12.4 pence (2017/18: 13.4 pence).
This reduction is 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 10.1 pence
(2017/18: 12.0 pence) reflected the reduction
in underlying profit before tax for the year
and the higher level of net one-off costs in
2018/19 relative to 2017/18 described above.
The Board has decided to recommend to
shareholders an unchanged final dividend
of 4.4 pence per share (2017/18: 4.4 pence),
applicable to members on the share register
on 27 September and to be paid on
31 October.
This takes the total dividend for the year
to 7.35 pence, again unchanged on the
prior year.
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.
Investment in growth,
cash flow and net debt
The Group recorded a small net cash
outflow for the year of £0.3 million. This
included capital investment of £2.4 million
which was some £0.7 million in excess of
the depreciation charge for the year. This
investment was made principally in the
Group’s Housebuilding Products and Water
Management businesses to enable future
growth and support margin improvement
through greater automation and efficiency.
At 30 June 2019 the Group continued to have
a modest level of net debt of £5.1 million
(30 June 2018: £4.8 million).
Our twelve month rolling average ratio of
trade working capital as a percentage of
revenue from continuing operations improved
from 14.6% in 2017/18 to 14.1% in 2018/19
due to continuous improvement initiatives.
Summarised Cash Flow Statement
EBITDA*
Change in working capital
Operating cash flow
Capital expenditure
Interest
Tax
Pension deficit funding
Dividend payments
Sub total
Wade acquisition consideration
Facades / SCP business disposal proceeds/other
Net cash flow
Net debt at the year end
The increase of £1.2 million in working
capital balances relating to continuing
operations at 30 June 2019 compared
with a year earlier reflected an increase in
contract assets at Levolux following the
implementation of IFRS 15; and the higher
levels of inventories put in place to manage
potential Brexit risks. The latter in turn also
led to a lower level of payables at the 2019
financial year end compared with a year ago.
Statement of financial position
and return on investment
The Group’s net assets and shareholders’
funds increased from £24.4 million at the
beginning of the financial year to £25.4
million at 30 June 2019, 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 was broadly
unchanged at £41.3 million at 30 June 2019
compared with £41.8 million at the beginning
of the financial year. This is explained by a
modest increase in the value of property, plant
and equipment reflecting the investments
made in the business during the year
described above, offset by lower combined
trade and other working capital requirements
at the year end, including provisions for
committed restructuring costs at Levolux.
Average levels of capital invested were higher
in 2018/19 than in the prior year due to the
relative value and timing of the acquisition
of Wade in the prior year and the divestment
of Alumasc Facades in 2018/19.
2018/19
£m
2017/18
£m
7.4
(1.2)
6.2
(2.4)
(0.2)
(0.6)
(3.2)
(2.6)
(2.8)
–
2.5
(0.3)
5.1
7.6
(1.6)
6.0
(3.3)
(0.2)
(0.7)
(3.2)
(2.6)
(4.0)
(8.0)
1.1
(10.9)
4.8
* EBITDA: Underlying operating profit from continuing operations before interest, tax, depreciation and amortisation.
The Alumasc Group plc Report and Accounts 2019
21
The Group will implement IFRS 16, Leases,
with effect from 1 July 2019. Disclosure
of the expected impact is in note 2 to the
financial statements. In essence, the Group
will bring onto its statement of consolidated
financial position leased property assets
valued at £5 million, with a corresponding
liability to pay future lease rentals. The
Group’s pro forma EBITDA will increase by
circa £0.6 million, operating profit will
increase by £0.1 million and profit before tax
will reduce by circa £0.1 million, other things
equal, for the 2019/20 financial year. This is
because notional financing costs calculated
under the accounting standard will be higher
than currently reported as the Group’s more
material leases are closer to inception
than expiry.
Andrew Magson
Group Finance Director
Banking facilities
Alumasc’s banking facilities were renewed
as a matter of routine during the year and
comprise:
• An unsecured committed three-year
revolving credit facility of £20 million,
expiring in March 2022
• Overdraft facilities, repayable on
demand, of £4 million.
Going concern
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 on the basis
of the assumptions and relevant time
horizons set out in the going concern
assessment on page 60.
Introduction of new accounting
standards
The Group implemented IFRSs 9 and 15
during the financial year and details of their
impact are provided in notes 2 and 30.
In summary:
• IFRS 9, Financial Instruments, did not have
a material impact to the Group’s financial
statements
• IFRS 15, Revenue Recognition, led to an on
average earlier recognition of revenue and
profit over time on construction contracts,
as explained and disclosed in note 30.
The combination of the lower underlying
profit in the year and higher average levels
of capital invested led to a reduction in
underlying post-tax return on investment
from 14.5% in the prior year to 11.4%
in 2018/19. This is still well ahead of our
estimated weighted average cost of capital.
Pensions
In March 2019 the Group merged its two
former defined benefit pension schemes.
This will simplify and reduce the ongoing
costs of scheme administration by over
£100k p.a. It also enabled a simplification
of the Group’s legal structure and a reduction
in the number of the Group’s active trading
subsidiaries, yielding further administrative
savings.
The valuation of Alumasc’s defined benefit
pension scheme deficit for accounting
purposes at 30 June 2019 using IAS 19
valuation conventions was £13.0 million
(30 June 2018: £15.1 million).
The year on year improvement reflected the
benefit of pension deficit recovery payments
made by the Group during the year of
£2.7 million together with more favourable
mortality assumptions and benefits from the
merger of the Group’s two pension schemes
during the year. These benefits were partly
offset by less favourable market valuation
assumptions, including the rate at which
future liabilities are discounted to present
values using bond yields and the long term
inflation rate; together with the £1.1 million
increase in liabilities described above relating
to the UK High Court decision on guaranteed
minimum pension equalisation.
The formal triennial actuarial valuation of the
merged Alumasc Group Pension Scheme at
31 March 2019 and its related deficit funding
plan is currently being negotiated with the
Pension Trustees. This valuation uses more
prudent assumptions than those required
by accounting standards in calculating the
deficit recognised in the Group’s statement
of consolidated financial position. Early
indications are that the triennial value of
the scheme’s deficit has reduced from circa
£33 million in 2016 to the low/mid £20
million range in 2019. This suggests, other
things equal, the Group is on track to repay
the deficit during the remaining eight years
of the existing funding plan.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements 22
Principal Risks and Uncertainties
RISK MANAGEMENT EMBEDDED IN STRATEGY
AND DAY-TO-DAY BUSINESS DECISION MAKING
Risks and uncertainties
Mitigating actions taken
Change
Economic, construction market
and Brexit risks
Comment
Alumasc is a UK-based Group of
businesses. 90% 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 13).
• Development of added value systems and solutions that are either required by legislation,
building regulation and/or specified by architects and engineers (currently almost 80%
of Group revenues).
• 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, with hedging percentages increased in 2019
to manage potential FX volatility including that associated with Brexit.
• Brexit developments being monitored closely. Regular dialogue and strong relationships
maintained with European customers and suppliers. Contingency planning for key residual
risk areas, including increased inventory holdings of materials/products imported from the EU.
Strategic people risks
• Market competitive remuneration/incentive arrangements.
Comment
Including recruitment, retention, succession,
people development. Risk of loss of ability
to innovate and improve without attracting
and retaining the right people. The current
UK recruitment market is tight with some
skills shortages.
Product/service differentiation
relative to competition not
developed or maintained
Comment
Innovation and an entrepreneurial spirit
is encouraged in all Group companies.
Over 16% of Group revenues relate to
products launched in the last three years.
Strategic development and change
projects – execution risks
Comment
There are execution risks around a
number of current strategic change
projects, including the Levolux and
Gatic restructuring programmes; export
development, business simplification
projects, forthcoming factory moves
and various ERP and CRM system
implementations.
• Employee numbers and changes monitored in monthly subsidiary Board meetings.
• Key, high performing and high potential employees identified, monitored, coached
and developed.
• Training and development programmes.
• Increasing focus of Board and Executive Committee in managing this area, supported
by Human Resource professionals.
• Alumasc operates a devolved operating model with local management primarily 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 (see page 18).
• Regular monitoring of the market for potentially new and/or disruptive technologies.
• Close Group Board involvement in the Levolux and Gatic restructuring and export
development strategy.
• Key strategic change projects are managed by Operating Unit Boards and Steering
committees, supported by independent specialist consultants where necessary,
for example IT and property.
• Key milestone plans, project risk reviews and detailed project plans updated
and maintained regularly.
• Use of proven, reliable software solutions and avoidance of bespoking wherever possible,
with 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.
Loss of key customers
• Develop and maintain strong customer relationships.
Comment
Generally the Group has a good track
record of customer retention and has
a diversified customer base.
• 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.
The Alumasc Group plc Report and Accounts 2019 23
Key for change since last year
Increase
Decrease No change
Risks and uncertainties
Mitigating actions taken
Change
Legacy defined benefit
pension obligations – valuation
and funding risks
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. The pension deficit reduced during 2018/19.
• 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
Comment
• Annual strategic reviews, including supplier concentration, quality, reliability and
sustainability.
• Regular key supplier visits, good relationships maintained including quality control reviews
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.
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.
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.
• Tooling investment programme to support supply chain efficiency, including management
of environmental risks.
• Business continuity plans in place at each business, or being evolved, where we are relocating
operations. Work is ongoing to refine these plans and, where possible, test them.
• 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.
Product warranty/recall risks
Comment
The Group does not have a history
of significant warranty claims or
product recall.
• 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 agenda item.
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.
• Heath and safety KPIs measured, reported and reviewed monthly, including the Performance
Rate Index (see page 18).
• 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, with external consultancy support
as needed.
Credit risk
Comment
The Group has good recent record
in managing credit risks.
• Most credit risks are insured, including all contracting credit risk.
• 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 2019Strategic ReportGovernanceFinancial Statements 24
Corporate Social Responsibility
Health & Safety
Health & Safety is Alumasc’s number one
priority, and this is reflected in how we run
and manage our business. There is a clear
Group policy on Health & Safety, and it
remains the first agenda item for Group
and divisional Board meetings. Achieving
an embedded health and safety culture
and zero-harm approach is a focus for every
employee; both management and staff.
The Group holds regular health and safety
best practice days and other types of training
including courses for supervisors. Operating
businesses and sites have Health & Safety
Committees. External consultants conduct
regular Health & Safety audits. Action plans
from Health & Safety audits are monitored
by management and progress reviewed at
Board meetings. All Alumasc Group locations
improved upon already high scoring audit
results in 2018/19 and we have a focus on
following best practices.
Near miss reporting has remained at the same
high level of the prior year. In addition, the
number of days lost in the workplace relating
to accidents reduced by 37%.
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 2.7 (2018: 4.3). The
improvement in Health & Safety performance
over the last year is consistent with the long-
term trend, due to focus and continuous
improvement by both management and
employees. Health & Safety initiatives
include robust risk assessments and we work
continuously to ensure that improvements
are implemented.
Fundraising for charities
Money raised
As part of a fundraiser for
CLIC Sargent Alumasc Water
Management Solutions held
a raffle and raised £500.
£500
Supporting our community
We support our local community, by
providing use of our car park for a day
nursery and on other occasions by Burton
Park Wanderers FC and for Kettering
Town FC.
The Alumasc Group plc Report and Accounts 2019 Diversity
Alumasc 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, ethnicity, gender and
sexual orientation. Employees with disabilities
are afforded equality of opportunity in respect
of entering and continuing employment
with us. The Group aims to provide training
opportunities that are identical, as far as
possible, for disabled and non-disabled
employees. 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. We recognise the
benefits of encouraging diversity throughout
the business and believe that this will
contribute to our continued success.
Role
Male Female Total
Non-executive Director
5
Executive Director
Senior Managers
Employees
2
39
339
385
0
0
7
120
127
5
2
46
459
512
We are committed to promoting diversity
and equal opportunities from recruitment,
employment and career progression to
learning and development. We recognise the
benefit of calling on the widest range
of experience knowledge and skills.
Employee helpline
We do have a confidential employee
assistance helpline that is available free
to all staff. We publicise the telephone
number on our notice boards and make staff
aware of this service. The helpline has been
obtained from a supplier that operates 24/7.
Counselling and wellbeing services can be
accessed via an app.
25
Employees are informed of changes in
the business and general financial and
economic factors influencing the Group,
through briefing sessions and presentations.
We are always looking at ways to improve
communications to motivate employees.
Alumasc values the views of its employees
and consults with them about matters that
affect them and the business. Some sites issue
quarterly internal newsletters with Company
updates, community/charitable events and
employee related news.
Helping our employees
We have helped our non-UK employees
at Timloc where 25% of employees are
EU nationals, with their applications to
settle in the UK by explaining how to use
the app. Tutorials and hand-outs were
provided in Timloc to help EU employees
register when they have “settled”, or non-
UK“pre-settled”, status. The aim being
that all employees at Timloc will have
settled or pre-settled status by
31 October 2019.
Environmental and
sustainability matters
Alumasc recognises its responsibility to
protect the environment. As a business we
are focused on using materials that can be
re-used, especially metals. The Group seeks to
improve its environmental footprint by looking
at new more energy efficient technologies
and by reducing emissions. Our strategy of
focusing on building products activities and
divesting our former Engineering and Industrial
Products businesses over recent years has
significantly reduced the Group’s impact on the
environment, (see the CO2 emissions chart on
page 27). During the year we have approved
investments with some of our overseas
suppliers to move to more environmentally-
friendly methods of casting to help protect
the environment.
Most of Alumasc’s businesses are focused
on providing effective solutions to enhance
sustainability in the built environment. Alumasc
has established leading positions in water
management, through brands such as Alumasc
Water Management Solutions, Wade, Gatic,
Alumasc Roofing and Rainclear; and energy
management through Levolux.
Supporting our community
As part of our programme of supporting
our Community, Wade were part of
“Halstead in Bloom” and were sponsors
of the programme.
Supporting our community
Alumasc supports local community initiatives
and a number of charitable donations have
been made throughout the year by the
Group, following fundraising activities. We
also help our local football and rugby clubs
in Burton Latimer. In particular, we support
our local community, football clubs and a
day nursery by allowing them use of our car
park for key events. Alumasc also supports
the British Legion Poppy Appeal. In addition,
Rainclear held a Cup Cake Bake-off for the
Alzheimer’s Society and raised £60.
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements
26
Corporate Social Responsibility continued
Packaging and recycling
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. Alumasc used the services
of Valpack to help the business comply
with the requirements of the packaging
waste regulations and to ensure that our
submissions are as accurate as possible.
During the year Alumasc reduced its obligated
tonnage due to the sale of the Facades
business and better business processes
including increased accuracy of reporting.
Our environmental audits are certified by
external consultants. These audits are part
of our internal programme to maintain our
ISO14001:2015 Environmental Management
accreditation in several of our businesses.
Greenhouse gas (“GHG”)
emissions data
Carbon Footprint Limited work with the
Alumasc Group to help us monitor and report
our GHG emissions and to help us improve our
energy efficiency. The Group aims to reduce
carbon emissions year-on-year. Reductions in
our emissions have resulted from:
• The Group invested over £1 million in new
factory machinery at Timloc and as a result
had significantly reduced energy
consumption as detailed in the chart
opposite marked (a);
• The Group has a particularly low energy
usage at Wade International. The factory at
Wade has roof-top solar panels generating
power for its manufacturing operations and
any surplus electricity generated being sold
back to the national grid.
The table opposite marked (b) demonstrates
the Group’s reduced emissions.
The graph opposite marked (c) demonstrates
the Group’s continuing reduction in emissions.
Group companies are continually reviewing
energy consumption and considering new
technologies to deliver on-going reductions
in emissions.
Human Rights and Modern Slavery
Act 2015
Alumasc treats people fairly and we are
honest and straightforward in all our business
relationships. We have established long-term
relationships built on trust and reliability.
Following the enactment of the Modern
Slavery Act 2015, Alumasc introduced a
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. The Group expects its suppliers
and those in the supply chain, where possible,
to confirm that all suppliers have the same
policies. The latest Modern Slavery Statement
and previous disclosures are available at
www.alumasc.co.uk.
The Group has policies on equal
employment rights, Business Ethics, Anti-
Bribery and Corruption, Equality and
Diversity, and Whistleblowing. Additionally,
the Group has other policies, including
Health & Safety and Share Dealing. Key
policies can be found on our website at
www.alumasc.co.uk.
Fundraising for charities
Events at Rainclear included a Cup Cake
Bake-off for the Alzheimer’s Society, that
raised £60 and they also took part in the
#GreatSconeBake for the National Trust
(even though there was a stocktake)!
Money raised
£60
The Alumasc Group plc Report and Accounts 2019 27
(a)
(b)
(c)
Timloc average daily energy usage kW hrs
7,500
7,000
6,500
6,000
5,500
5,000
Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19
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 turnover (kgCO2e)
Tonnes of CO2e
2017/18 2018/19
1,827
1,652
574
3,480
4,054
1,615
1,282
586
2,897
3,484
6.2
5.6
34.4
32.0
Total tCO2e
3,484
Total tCO2e/employee
5.6
Total kgCO2e/turnover (£m)
32.0
CO2 Emissions
(Tonnes)
2
O
C
s
e
n
n
o
T
16,000.00
14,000.00
12,000.00
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
0.00
2014/15
2015/16
2016/17
2017/18
2018/19
Emissions from all operations
The Alumasc Group plc Report and Accounts 2019Strategic ReportGovernanceFinancial Statements
28
Board of Directors
COMMITTED AND EXPERIENCED LEADERSHIP
Chairman and Deputy Chairman
Executive Directors
John McCall
MA (Cantab)
Chairman
Jon Pither
MA (Cantab)
Deputy Chairman
Paul Hooper
BSc, MBA, DipM
Chief Executive
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.
A R N
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: 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.
Andrew Magson
BSc, FCA
Group Finance Director
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.
Registered Office Company Advisors
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
BDO LLP
Two Snowhill
Birmingham B4 6GA
Investment Bankers
DC Advisory Partners
5 King William Street
London EC4N 7DA
Brokers
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
NOMAD
finnCap
60 New Broad Street
London
EC2M 1JJ
Bankers
HSBC Bank plc
4th Floor
120 Edmund Street
Birmingham B3 2QZ
Barclays Bank PLC
Ashton House
497 Silbury Boulevard
Milton Keynes MK9 2LD
Solicitors
Freeths LLP
The Colmore Building
20 Colmore Circus Queensway
Birmingham B4 6AT
Pinsent Masons LLP
3 Colmore Circus
Birmingham B4 6BH
The Alumasc Group plc Report and Accounts 2019 29
Non-executive Directors
David Armfield
LLB
Non-executive Director
Vijay Thakrar
BSc, FCA
Non-executive Director
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. David became a founding
partner of Kinetix Critchleys
Corporate Finance LLP in 2010,
which provides corporate finance
advice to the clean technology
and environmental sustainability
sectors. David is also chairman
of Xeros Technology Group plc.
A R N
Appointed: 2019
Experience: Vijay is a qualified
accountant who was a partner
at Ernst & Young and Deloitte. In
2012, he became a non-executive
director of the Quoted Companies
Alliance (QCA). He stepped down
from the QCA Board in 2018,
having completed two terms of
three years. He is also a non-
executive director and Audit
Committee Chair of Quorn Foods,
Walker Greenbank PLC, and the
MK Dons Football Club Sports &
Education Trust. He is a member
of the Audit and Remuneration
Committees.
Stephen Beechey
BSc, MA, MRICS, MCIOB, MAPM
Non-executive Director
Appointed: 2019
Experience: Stephen has worked
in the construction industry for
over 30 years and he has a broad
understanding of all aspects of the
business. He is also an executive
director of the Wates Group, one
of the largest privately-owned
construction, development and
property services companies in the
UK, where he sits on the Group
Executive Committee and the
Construction Group Board.
A R
A R
Helen Ashton BA, FCIS
Group Company Secretary
The Board
Board tenure
At Alumasc we have a strong
and experienced Board, bringing
a wealth of skills and knowledge
to the Company.
Committees:
Audit Committee
A
Remuneration Committee
R
Nomination Committee
N
Chair of Committee
>15 Years: 3
5-15 Years: 2
<5 Years: 2
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 30
Corporate Governance Statement
Corporate Governance Statement
“The Directors of
The Alumasc Group plc are
committed to maintaining
and developing high
standards of corporate
governance.”
John McCall
Chairman
On the relisting on the Alternative Investment
Market (AIM) the Board adopted the QCA
Corporate Governance Code 2018 (the QCA
Code) with immediate effect on 25 June 2019.
Given this has been a transitional year the
Company complied with the UK Corporate
Governance Code (the Code) that can be
found at www.frc.org.uk until re-listing.
The Company has therefore had a high level
of Corporate Governance and will provide
updates on Compliance with the QCA
Code in this and future annual reports.
Further information on our Corporate
Governance can also be found on our
website: www.alumasc.co.uk.
Director Induction
On appointment to the Board,
Mr Stephen Beechey and Mr Vijay Thakrar
were provided with:
• A background briefing on key issues
by the Chairman
• Access to induction materials
and information
• Contacts and meetings arranged
to visit Alumasc’s sites
• Access to the Group Company Secretary
• A tailored induction appropriate
to their position
The Alumasc Group plc Board of Directors
(Biographical details can be found on pages 28 and 29)
Audit
Committee
Membership as at
30 June 2019
Vijay Thakrar (Chairman)
David Armfield
Stephen Beechey
Jon Pither
See pages 38 to 41
Remuneration
Committee
Membership as at
30 June 2019
Jon Pither (Chairman)
David Armfield
Stephen Beechey
Vijay Thakrar
See pages 42 to 47
Nomination
Committee
Membership as at
30 June 2019
John McCall (Chairman)
David Armfield
Jon Pither
See page 48
Executive Committee
The Alumasc Group plc Report and Accounts 2019 31
Deliver growth
Principle 1:
Establish a strategy and
business model which
promotes long-term
value for shareholders
Within certain parameters, the Executive Committee led by the Chief Executive Officer and the Group Finance Director is
responsible for recommending the strategy of the Group to the Board. The strategic focus of the Group also reflects and
takes into account views of key stakeholders; its shareholders, employees, members of its pensions schemes, customers,
suppliers and bankers. The Board reviews and discusses the recommendations and ideas of management and must
approve the strategy before it can be implemented. The Executive Committee and the management teams of the Group’s
divisions are then responsible for the implementation of the strategic plans and the management of the business on an
operational and day-to-day basis.
Our business model is to build specialised positions in growth markets and manage these positions to optimise
opportunities to achieve success in the form of satisfied customers, motivated employees, sustainable growth, superior
financial returns and long-term value creation. We aim as a business to extract the maximum value from our product
sales, through efficient manufacture where this is managed in house or through our outsourced suppliers. We also look
to protect our designs and products through patents and trademarks. Our products are then sold in the UK market place
via a range of distribution channels.
Our business model and strategy can be found in this Annual Report on pages 2 to 27.
Principle 2:
Seek to understand
and meet Shareholder
needs and expectations
Alumasc has regular dialogue with existing and potential investors. Meetings are organised at least twice a year providing
management with a forum to explain the business and our opportunities to investors. It is also useful to receive feedback
from investors and analysts on our business as a way to gather information and ideas to help drive the business forward.
Dialogue with
shareholders
There are regular dialogues 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 have the opportunity
to meet with the Non-executive Directors from time to time.
Shareholders have direct access to the Group via its website where material of interest
is displayed. Additionally, the Group responds to individual enquiries from shareholders
on a wide range of issues.
Use of General
Meetings
The Annual General Meeting (AGM) also provides an opportunity for shareholders to meet with
the Chairman and Committee Chairs and Directors and to ask questions. The Board is available
at the AGM to answer questions. In addition, comments or questions from proxy voting services
are considered and reviewed. At our AGM there is an opportunity for shareholders to attend or
to appoint a proxy on their behalf.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 32
Corporate Governance Statement continued
Corporate Governance Statement continued
Deliver growth continued
Principle 3:
Take into account
wider stakeholder and
social responsibilities
and their implications
for long-term success
Alumasc engages with employees through works forums and written updates to understand employee matters and
points of view and this in turns helps us to make more informed business decisions. Alumasc takes its corporate and
social responsibilities seriously. The strategy of a large part of the business includes focusing on managing the scarce
resources of water and energy in the built environment. We also seek effective relationships with customers, suppliers
and employees. Being in touch and having engagement with our stakeholders helps us drive change and reflect and act
on these requirements. For example, at Wade the manufacturing process for a component was changed to remove plastic
waste and we have worked with customers to provide bespoke drainage solutions that enhance architectural designs.
Health & Safety
People
Diversity
Alumasc places the highest priority on Health & Safety matters. There is a Group policy to
this effect, and it remains the first agenda item for all subsidiary and plc Board meetings. It is
considered that embedding a health and safety culture is the responsibility of both management
and all employees.
Our key responsibility is to keep all people we interact with safe from harm. Alumasc and its
subsidiaries comply with Health & Safety legislation, and we have active involvement of all staff
with continuous improvement.
Further information about Health & Safety can be found on pages 18, 23 and 24.
Communication with employees can be through various methods from Company meetings
and conferences to other forms of written and electronic communication; this also includes
site visits from senior management and Directors.
In addition to Health & Safety, technical and compliance training we have courses for
Supervisors and Managers.
As a Group, we are committed to promoting diversity and providing equal opportunity
to all areas including (but not limited to) recruitment, employment and career progression.
The Group is an equal opportunities employer.
The environment
The majority of our products help to manage scarce resources of energy and water in the built
environment. We primarily sell manufacturing products made of metal and other materials that
can be re-used.
Culture
Customers
Suppliers
This year we have invested in plant, equipment tooling and new technology, both internally
and externally. Many of the materials used in our products can be recycled.
Our culture of trust is promoted, and all our employees are expected to operate in an honest
and ethical manner. We look to have relationships of trust with our customers and with our
programme of cross-selling products for the building envelope.
We are very customer focused and aim to work with customers to ensure we provide market
leading products and services to meet their requirements. Alumasc seeks to innovate where
possible to provide solutions for customers. We do seek to provide excellent service and we
appreciate loyalty as good relationships are part of our long-term success. We also aim to
provide outstanding customer service.
Alumasc’s suppliers are critical to help deliver long-term success. We have long-term
relationships with our suppliers as we need to have assurance about the timeliness, quality
and the reliable delivery of materials and products. As part of our supply chain our suppliers
need to have aligned values, and in example support our statement on Modern Slavery and
our Anti-Bribery Policy. In addition, we work with our suppliers to ensure that we respect the
environment, and this year have made significant commitments to ensure that the methods
of manufacture used reduce particulates and are environmentally friendly.
Communities
We seek to be close to the Communities where we operate and to be supportive neighbours.
Operating divisions are connected with events in their local area and we seek to support local
good causes. For example, we have supported charity fundraising events and we support
community sports teams.
Further information on the support we provide is in the Corporate Social Responsibility
Report on pages 24 to 27.
The Alumasc Group plc Report and Accounts 2019 33
Deliver growth continued
Principle 4:
Embed effective
risk management
considering both
opportunities and
threats throughout
the organisation
Our Group objective is to maximise long-term shareholder value. As part of this, the Directors recognise that creating
value is the reward for taking business risks. The Board’s policy on risk management encompasses all significant business
risks to the Group, including; strategic, commercial, financial, operational and Health & Safety risks, which could
undermine the achievement of business objectives. The Board sees the discussion of principal risks as critical for our
business.
Monitoring risks
Role of the Board
Controls
Regular monitoring of risk and control processes, across headline risk areas and other
business-specific risk areas, provides the basis for regular and exception reporting to
management and the Board. In addition, we also run regular Health & Safety assessments
and reviews. Our risk assessment and reporting criteria are designed to provide the Board
with a consistent, Group-wide perspective of the key risks. Regular reports to the Board include
an assessment of the likelihood and impact of risks materialising, as well as risk mitigation
initiatives and their effectiveness.
The Board has overall responsibility for the Group’s approach to risk management. It has
delegated some responsibility in respect of financial controls to the Audit Committee.
Any new and material risks identified by management are communicated promptly to the
Chairman and the Board.
The Board is responsible for, and ensures that, the Company’s business activities comply with key
standards policies such as the Data Protection, Anti-Bribery, Whistleblower and Share Dealing
Policies and other policies. Key messages are delivered by staff training. There is a delegated
authorities matrix in place for approval levels across the business and each trading division is
aware of matters and powers that are reserved for Board approval.
A summary of the principal risks and uncertainties facing Alumasc, together with mitigating
actions, are set out on pages 22 to 23.
Maintain a dynamic management framework
Principle 5:
Board composition
Maintain the Board
as a well-functioning,
balanced team lead by
the Chair
The Board consists of a Chairman, Chief Executive, Group Finance Director and four
Non-executive Directors, three of which are independent. The Non-executive Directors
who are not considered independent are Mr John McCall and Mr Jon Pither however,
their depth of knowledge and experience of Alumasc is of exceptional value to the Board.
During the year Stephen Beechey was appointed on 1 January 2019 and Mr Vijay Thakrar
was appointed on 15 January 2019.
There is a clear separation of roles between the Chairman and the Chief Executive Officer.
The Chairman takes responsibility for the running of the Board; no individual or group
dominates the Board’s decision-making and the Chairman ensures that the Non-executive
Directors are properly briefed on matters. The Chairman has overall responsibility for corporate
governance matters and also chairs the Nomination Committee.
The Chairman approves the Board agenda, in addition, the Directors are provided with regular,
timely information on the financial performance of the divisions within the Group, and on the
business. The Chairman facilitates the meetings and ensures there is time for each Director
to contribute and that no one individual dominates a meeting. Directors contribute their
independent judgement and experience to challenge and explore all matters, whether strategic
or operational. In addition, the Board is provided with Health & Safety reports, management
reports and data and analysis.
The Chief Executive Officer has responsibility for implementing the strategy of the Board and for
managing the day-to-day business activities. The Company Secretary is responsible for ensuring
that Board procedures are followed together with all applicable rules and regulations.
All Non-executive Directors have confirmed and demonstrated that they have adequate time
available to meet the requirements of the role.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 34
Corporate Governance Statement continued
Corporate Governance Statement continued
Maintain a dynamic management framework continued
Principle 5 continued:
Board Committees
The Board has delegated authority to the Audit, Remuneration and Nomination Committees
to support the work of the Board in the performance of its duties. Terms of reference for each
Committee are available on our website www.alumasc.co.uk. The Board believes that the members
of those Committees have the appropriate skills and knowledge to carry out their functions.
a) Audit Committee
Information about the composition of the Audit Committee and its activities during
the year is given in the Audit Committee Report on pages 38 to 41.
b) Remuneration Committee
The composition of the Remuneration Committee and its activities during the year
is provided in the Directors’ Remuneration Report on pages 42 to 47.
c) Nominations Committee
The composition of the Nomination Committee and its activities during the year is provided
on page 48.
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 Non-executive Directors who were appointed during the year,
Mr Stephen Beechey and Mr Vijay Thakrar are required to offer themselves for election at the
forthcoming AGM. The Directors required to retire are those who have served 3 years since
their previous re-election or where appointed during the year. Accordingly Mr Stephen Beechey
and Mr Vijay Thakrar are standing for election and Mr Paul Hooper, Mr Jon Pither and Mr John
McCall are standing for re-election.
Profiles of the Board members appear on pages 28 and 29 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 decisions, including 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. The full Schedule of Matters Reserved
for the Board is on the Group’s website www.alumasc.co.uk.
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.
The Alumasc Group plc Report and Accounts 2019 35
Maintain a dynamic management framework continued
Principle 5
continued:
Board Committees
continued
Scheduled Board and Committee meeting attendance
Directors
Position
J S McCall
Chairman
J P Pither
Deputy Chairman
D Armfield
Non-executive Director
S Beechey
Non-executive Director
V Thakrar
Non-executive Director
R Saville
Non-executive Director
G P Hooper Chief Executive
A Magson
Group Finance Director
Board
(Attended/
eligible to
attend)
Audit
Committee
(Attended/
eligible to
attend)
Remuneration
Committee
(Attended/
eligible to
attend)
Nomination
Committee
(Attended/
eligible to
attend)
7/7
7/7
6/71
4/42
2/43
2/34
7/7
7/7
2 †
3/3
3/3
2/2
2/2
1/1
3†
3†
N/A
2/2
2/2
1/1
1/1
1/1
N/A
N/A
2/2
2/2
2/2
1†
1†
1/14
N/A
N/A
1 D Armfield was unable to attend one meeting due to an unexpected clash of meetings.
2 S Beechey was appointed to the Board on 1 January 2019.
3 V Thakrar was appointed to the Board on 15 January 2019 and was unable to attend two meetings due to prior
commitments made before his appointment to the Board.
4 R Saville retired from the Board on 15 January 2019.
† Attended as invitees of the Committee meetings.
On the 25 April 2019 Mr S Beechey and Mr V Thakrar were appointed to the Remuneration
Committee. In addition Mr Beechey was appointed to the Audit Committee on the same day.
Mr V Thakrar was appointed as Chairman of the Audit Committee on 15 January 2012.
For those Directors unable to attend a meeting, they were able to feedback any comments
they had on the papers to the Chair.
Principle 6:
Ensure that between
them the directors
have the necessary
up-to-date experience,
skills and capabilities
The Chairman, with the Nomination Committee and the Company Secretary, reviews the knowledge and experience on
the Board to ensure that the Board has the right balance to support Alumasc’s strategy.
When considering appointing new Non-executive Directors to the Board the Nomination Committee considers relevant
matters including the experience and skills needed together with the diversity of its composition. During the year, Alumasc
has refreshed its Board with the appointment of two new Non-executive Directors and it keeps its membership under
regular review.
The Board considers that the Directors bring a senior and significant level of judgement and experience that are important
for the evaluation of the operations, (including key appointments) and standards of conduct. All Directors are given access
to the Group’s operations and personnel as and when required.
The Board ensures that the Directors’ knowledge of Alumasc and its business is kept up-to-date and refreshed. Site visits
are also arranged for Non-executive Directors as needed.
The Directors received briefings from the NOMAD and from other advisors as needed to enable them to fulfil their duties
(for example, the auditors). The Company Secretary is available to discuss corporate governance matters.
Directors may seek advice from the Company Secretary as required about their duties, or from the Company’s legal
advisors if needed.
The Director’s biographies are available in this report on pages 28 to 29 and on our website (https://www.alumasc.
co.uk/investors/board-directors). These indicate the high level and range of professional and business experience which
enables the Group to be managed effectively.
Role of the Chairman
The main role of the Chairman is to oversee the Board and the Company’s Governance
Structures. He is also responsible for ensuring that the Company maintains an appropriate
level of dialogue with its shareholders.
Chief Executive Officer
The role of the Chief Executive Officer is to oversee the day-to-day running of the business
and the operational management of the Group’s businesses.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 36
Corporate Governance Statement continued
Corporate Governance Statement continued
Maintain a dynamic management framework continued
Principle 7:
Evaluate Board
performance
based on clear and
relevant objectives
seeking continuous
improvement
An evaluation of the performance and effectiveness of the Board, its Committees and individual Directors was carried
out during the year. The outline for the evaluation complied with the QCA Code. The Company conducts an annual
performance review of the Board using one-to-one interviews with Board members in line with the QCA Code: the results
of the interviews are then discussed with the Board.
Overall Board composition is reviewed annually by the Chairman and the Nominations Committee to determine whether
any changes should be recommended. Two new independent Non-executive Directors have been appointed since
1 January 2019 with one Non-executive Director retiring during the same period. A new Company Secretary was
appointed in November 2018.
Principle 8:
Promote corporate
culture that is based
on ethical values and
behaviours
Principle 9:
Maintain Governance
structures and
processes that are
fit for purpose and
support good decision-
making by the Board
The areas discussed related to strategy, succession planning, risk and employee management and development.
The review concluded that the Alumasc Board was effective and it comprised experienced individuals. Recommendations
made were considered and acted on, including considering the appointment of additional Directors.
Our Chairman Chief Executive Officer and Group Finance Director lead on corporate culture and encourage the values of
trust, honesty and integrity. The Board understands that employee engagement underpins our business and helps us drive
for success. We also seek to ensure we have the best levels of Health & Safety standards in order to protect employees.
Employees are required to deal ethically with customers and suppliers. A number of our businesses have employee forums
for matters to be raised.
Alumasc Group employees are asked to maintain appropriate behaviours and to have a strong compliance with
Health & Safety regulations. The Group has policies that govern its activities in respect of Modern Slavery, Anti-Bribery,
Whistleblowing, Data Protection and reviews compliance with these policies. Alumasc has a series of requirements for its
suppliers and these are reviewed from time to time by internal procurement professionals.
Any matters of concern can also be raised to the Chairman or to the Chair of our Audit Committee, as appropriate.
The Board meets seven times per year in accordance with its calendar of scheduled meetings. Before each Board
meeting an agenda is prepared and circulated with appropriate information received by the Directors in advance.
The Board is responsible for the long-term success of the Company; there is a formal schedule of matters reserved for
the Board and this includes discussions on strategy. In addition, the Board considers budgets, annual and interim results,
dividend policies, contract approval, large Capital Expenditure requests, acquisitions and senior appointments.
The Chairman and Board of Directors support good corporate governance to ensure that they build a successful and
sustainable business that is beneficial and successful for all our stakeholders.
The Chief Executive Officer and Group Finance Director have responsibility for the operational day-to-day management
of Alumasc’s business and activity. The Non-executive Directors bring outside experience and independent judgement
to decision-making at the Board. The Chairman has responsibility for the Board and for corporate governance matters.
The Company Secretary is responsible for ensuring that Board procedures are followed together with all applicable rules
and regulations.
The Board is responsible for the overall governance of the Company. Its responsibilities include setting the strategic
direction of the Company, providing leadership to put the strategy into action and to supervise the management
of the business.
The Board is supported by the Audit, Remuneration and Nomination Committees. The reports for these Committees
can be found on pages 38 to 48. The terms of reference for the Committees are on our website www.alumasc.co.uk.
The Alumasc Group plc Report and Accounts 2019 37
Maintain a dynamic management framework continued
Principle 10:
Communicate how the
Company is governed
and is performing by
maintaining a dialogue
with shareholders
and other relevant
stakeholders
The business sets a high priority on maintaining good communications with its stakeholders to ensure that the Alumasc
Group’s processes and procedures are clear and understood. On our website (www.alumasc.co.uk) the “Investors” section
is regularly updated. We communicate with our shareholders through; the Annual Report, the half-year announcements,
the AGM, roadshows/meetings with Investors and at analysts’ briefings. The Chairs of Committees attend our AGM and
are available for questions at the meeting.
The Board also pays attention to the voting recommendations provided by third party proxy voting services, as well
as the voting outcomes of specific resolutions with a view to determining whether any further action is required.
The Company maintains a dedicated email address for use by current or potential investors, alumasc@camarco.co.uk.
After the AGM the Company announces the results of the voting including details of the proxy votes cast or received.
In addition, information is available on the investor section of our website.
The Board also receives information on the views of shareholders from its Brokers and NOMAD. Feedback from analysts,
other advisors and investors are also reviewed, and discussions held to enable alignment between the way in which the
Group is led and shareholder views.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 38
Audit Committee Report
Audit Committee Report
STATEMENT FROM THE CHAIRMAN
OF THE AUDIT COMMITTEE
“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.”
Vijay Thakrar
Chairman of the Audit Committee
Audit Committee membership
The members of the Committee
are as follows:
• Vijay Thakrar (Chairman)
• Jon Pither
• David Armfield
• Stephen Beechey
The Group Chairman, Chief Executive,
Group Finance Director, Group Financial
Controller and the external auditors usually
attend the meetings of the Committee.
The Committee met three times in the
year, all of which were attended by
the external auditors, and a record of
the meeting attendance by Committee
members is set out in the table to the right.
After each Audit Committee meeting that
the auditors attend, the Committee meets
the external auditors without members
of the management team being present.
Dear Shareholders,
I am pleased to present the Audit Committee’s
report for the year ended 30 June 2019. This is
my first report since succeeding Richard Saville
as Chairman of the Committee in January 2019.
I would like, on behalf of the Committee, to
place on record our gratitude for Richard’s
contribution to the leadership of this Committee
over many years and for the wise counsel he
provided to the Board.
Meeting Attendance
Members
Attended/
eligible to attend
Vijay Thakrar2 (Chairman)
David Armfield
Stephen Beechey2
Jon Pither
Richard Saville1
2/2
3/3
2/2
3/3
1/1
1 Richard Saville retired on 15 January 2019.
2 Vijay Thakrar and Stephen Beechey were appointed
15 January 2019.
Governance The Alumasc Group plc Report and Accounts 2019
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
judgements 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 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.
Activities of the Committee
in the 2018/19 Financial Year
The main activities of the Committee
during the year were:
• overseeing the tender process for the Group’s
external audit, and making recommendations
to the Board with regard to the choice of the
Group’s external auditors, described further
below;
• reviewing the interim and full year results
announcements and financial statements,
with particular focus on the key estimates
and judgements 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 judgement, and the basis on which
the auditor assesses materiality;
• considering the effectiveness of the external
audit and the independence of the auditors;
• review of the methodology, impact and
disclosures in the financial statements relating
to the introduction of IFRS 15, Revenue
Recognition and IFRS 9, Financial Instruments,
during the 2018/19 financial year; and
preparations and the transitional disclosures in
this year’s financial statements relating to the
introduction of IFRS 16, Leases, which became
effective on 1 July 2019 and will apply to the
Group’s 2019/20 financial year; and
• 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.
39
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, judgement
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 recognition
Revenue recognition received particular focus
this financial year in view of the introduction
of the new accounting standard governing
this, IFRS 15. The most complex area of the
application of IFRS 15 to the Group related to
construction projects carried out in the Solar
Shading, Architectural Screening and Balconies
division, which has bespoke construction
projects with performance obligations that
can span more than one accounting period.
This leads to the application of judgement
in the recognition of revenue and profit over
time, including estimation of the percentage
of contract completion and estimates of
costs to complete the work, as described
in the accounting policy note on page 65.
Having reviewed these judgements taken
at the year end with management and the
external auditors, the Committee was satisfied
with management's judgements for the
level of revenue and profit recognised on
construction projects for the financial year.
(ii) Defined benefit pension
schemes’ valuation
As described in the risk review on pages 22
and 23, 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
(such as estimating the impact of the UK High
Court decision during the year on guaranteed
minimum pensions equalisation) 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 estimated valuation
of the Group’s pension obligations that is
consistent with IAS 19’s valuation methodology.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 40
Audit Committee Report continued
Audit Committee Report continued
(iii) Accuracy and valuation of inventory
All of the Group’s businesses carry significant
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 judgements
as to 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 judgements on valuation
are reviewed by the Executive Directors in
monthly meetings with operating company
management and in associated Board reports.
Internal audit has particular focus on checking
the accuracy of the inventory records through
attendance at stock counts and reviewing
the application of judgements 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.
(iv) Classification of non-underlying/
discontinued
Given the importance of understanding
the underlying performance of the Group's
ongoing activities, the Committee scrutinised
management's classification of items regarded
as non-underlying/discontinued in the
year. These items were also discussed with
the external auditors who have confirmed
that management's classification are
appropriate and in line with market practice.
Accordingly, the Committee is satisfied that
the classifications adopted in these financial
statements are reasonable in providing a view
of the performance of the Group's underlying
operations.
Appointment of BDO LLP (“BDO”)
as the Group’s external auditors
In November 2018, following completion of
ten years of service by KPMG LLP (“KPMG”)
as the Group’s external auditors, and in
accordance with current regulations and
best practice, the Committee led a tender
process for the future appointment of the
Group’s external auditors. KPMG and three
other firms were invited to participate in
this process. The principal criteria by which
the tendering firms were assessed were:
• the quality and robustness of the proposed
audit process and approach, as evidenced
by presentations to the Committee and
information gathered as part of the tender
process, together with independent
information in the public domain on the
track record of the tendering firms with
regard to audit quality;
• the degree of alignment between the
tendering audit firms and Alumasc with
regard to understanding of the business,
past experience of auditing building products,
construction and manufacturing companies,
the identification of key audit risks and the
proposed approach to auditing those risks;
• the quality of leadership of the audit team
and key audit team members and the degree
of challenge to management that the audit
team would bring;
• the perceived ability for the auditors to add
value to Alumasc as part of the audit through
their observations of the business and making
recommendations for improvement; and
• the efficiency and value for money of the
audit relative to the scope of work required.
The conclusion of the audit tender process was
a recommendation from the Committee to the
Board to appoint BDO as the Group’s auditors for
the 2018/19 financial year onwards. The Board
debated and accepted this recommendation. The
Committee would like to thank KPMG for their
ten years of service as the Group’s auditors and
the professionalism with which they approached
the tender process and handover to BDO.
Assessment of the effectiveness
of external audit
The Committee assessed the performance of
BDO both through formal Committee meetings,
BDO’s reports to the Committee and more
informal interaction throughout the year. The
Committee also received 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 BDO’s first external
audit of Alumasc was robust and effective.
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.
As described above, the Group changed
its external auditors during the year from
KPMG to BDO. 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 and
following their appointment as auditors BDO
did not carry out any non-audit work. Prior
to their appointment as auditors to Alumasc,
BDO had acted as the auditors to the Group’s
defined benefit pension schemes. BDO
resigned as auditors to the Group’s defined
benefit pension schemes on their appointment
as the Group’s auditors in January 2019.
BDO 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
is satisfied with the independence
of the external auditor.
Appointment and re-appointment
of the external auditor
As described above, the audit for Alumasc’s
financial year ended 30 June 2019 was BDO’s
first following their appointment in January
2019. As this appointment was made by the
Board after the Group’s AGM in October 2018,
resolutions are being put to the AGM to be
held in October 2019 both to confirm BDO’s
initial appointment and to recommend their
re-appointment for the 2019/20 financial year.
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:
The Alumasc Group plc Report and Accounts 2019 41
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 Anti-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 60 and recommends to the Board the
adoption of the going concern basis
of accounting.
Vijay Thakrar
Chairman of the Audit Committee
(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 22 and 23. 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.
(ii) Financial reporting and monitoring
The Board receives regular financial reports,
including monthly management accounts,
quarterly 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 22 and 23. 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. The Committee
has requested future work to be focused
on high risk areas that could have a
material business or financial impact.
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 Anti-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.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 42
Directors’ Remuneration Report
Directors' Remuneration Report
STATEMENT FROM THE CHAIRMAN
OF THE REMUNERATION COMMITTEE
“The Group needs to
ensure that its pay and
reward arrangements are
competitive, but also reflect
its performance.”
Jon Pither
Chairman of The Remuneration Committee
Dear Shareholder,
I am pleased to present the Report of the
Remuneration Committee for the year ended
30 June 2019. The business has adopted a
similar approach to last year to ensure that
shareholder interests and the corporate strategy
are aligned with the approach to reward. We aim
to attract and retain talented individuals who will
drive the business forward.
As an AIM listed entity, the Company is not
required to apply the full Listing Rules of the
Financial Conduct Authority or the requirements
under SI 2008/410 schedule 8 and hence is not
required to present a report on remuneration
in accordance with those rules. However, the
Board considers it appropriate for the Company
to provide shareholders with information in
respect of executive remuneration that follow
the "spirit" of the Regulations given previous
disclosures before the Company joined AIM.
The Remuneration Committee (the Committee)
considered the overall performance of the
Group and has sought to align reward with
performance in a challenging pre-Brexit
environment, where business has been cautious.
The Group needs to ensure that its pay and
reward arrangements are competitive, but also
reflect its circumstances and performance.
Performance for the year ending
30 June 2019
The financial and operating performance for
the Group in 2019 is set out on pages 56 to
87. The Group’s performance achieved an
underlying profit before tax of £5.6 million and
an underlying earnings per share of 12.4 pence.
Key decisions
During the year there were two meetings
of the Committee and the following topics
were discussed:
• review of base salaries of the Group
Executive Directors, members of the
Executive Committee and Group
employees more generally;
• a review and discussion about the objectives
set for Executive Directors and performance
against bonus objectives;
• the performance criteria for the current
“long-term” incentive plans (“LTIP”) and
the executive share option scheme “ESOS”
for the current year;
• decision on the award of 2019 LTIPs
Meeting Attendance
Members
Jon Pither (Chairman)
David Armfield
Richard Saville1
Stephen Beechey2
Vijay Thakrar2
Attended/
eligible to attend
2/2
2/2
1/1
1/1
1/1
1 Richard Saville retired on 15 January 2019.
2 Stephen Beechey and Vijay Thakrar were appointed
as members of the Remuneration Committee on
25 April 2019.
I would like to welcome Stephen Beechey
and Vijay Thakrar who both joined the
Committee on 25 April 2019. During the
year Richard Saville resigned as a Director
and member of the Committee and I would
like to thank him for support and help over
the years.
No significant changes are proposed to our
executive remuneration arrangements. The
Directors’ salaries were increased by 2.5% at the
end of June 2019 and this was in line with the
general increase awarded to the wider workforce.
Governance The Alumasc Group plc Report and Accounts 2019
43
Annual Report on Remuneration
The following sections show how the remuneration policy approved in 2017 was applied in the year ending 30 June 2019 and will be applied in the next
financial year. Information provided on pages 42 to 47 of the Directors’ Remuneration Report is subject to audit.
Single total figure of remuneration
The remuneration of the Non-executive Directors for the years 2018/19 and 2017/18 was as follows:
Director
John McCall
Jon Pither
Richard Saville1
Philip Gwyn3
David Armfield
Stephen Beechey4
Vijay Thakrar5
Total
Base salaries/fees
2018/19
£000
2017/18
£000
100
40
30
0
35
18
18
241
100
40
40
35
35
–
–
250
Benefits in kind Single figure of total remuneration
2017/18
£000
2017/18
£000
2018/19
£000
2018/19
£000
4
–
–
–
–
–
–
4
4
–
–
–
–
–
–
4
104
40
302
0
35
18
18
245
104
40
40
35
35
–
–
254
1 Richard Saville retired on 15 January 2019.
2 The sum of £10,000 was paid to Richard Saville in respect of fees for the handover and this was included in the fees paid.
3 Philip Gwyn retired 30 June 2018.
4 Stephen Beechey was appointed on 1 January 2019.
5 Vijay Thakrar was appointed on 15 January 2019.
The Non-executive Directors’ fees were not reviewed in 2018/19 financial year and no changes were proposed.
Information on Directors’ service contracts can be found on our website: www.alumasc.co.uk
The remuneration of the Executive Directors for the years 2018/19 and 2017/18 is 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
2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18 2018/19 2017/18
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
265
186
451
265
186
451
10
10
20
–
–
–
17
14
31
16
13
29
51
27
78
51
27
78
–
–
–
–
–
–
343
237
580
332
226
558
For the financial year ending 30 June 2019 the minimum level at which the annual bonus would become payable was set at underlying profit
before tax (“PBT”) of £8.4 million. See page 47: £10,000 bonus paid in respect of Facades Sale.
Benefits
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.
2016 LTIP
The 2016 LTIPs have a vesting date of 22 September 2019.
The performance metrics used for the 2016 LTIP award, with a performance period for the three financial years ending 30 June 2019, which was set to
incentivise significant further growth in the Group’s underlying EPS compared with the 2015/16 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 14.5 pence from continuing operations of at least the growth
in RPI plus 2.5% pa over a three-year performance period needed to be achieved. Below this threshold level no LTIP award will vest. Above the threshold
level two thirds of the remaining 75% of the award will vest based on EPS growth above the threshold level and one third based on the realised TSR
performance. The Group’s basic EPS for the 2018/19 year was 12.0 pence per share, therefore the award lapsed and no shares have vested.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
44
Directors’ Remuneration Report continued
Directors' Remuneration Report continued
Pensions
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. The amounts paid were set at the 2016 level.
Payments in compensation to past directors, for loss of office
A payment was made to Richard Saville of £10,000 in recognition of handover work (2017/18:£nil). No payments in relation to loss of office were
made during the year (2018: £nil).
Scheme interests awarded during the year
LTIP awards were granted in on 26 October 2018 as detailed in the table below.
Paul Hooper
Andrew Magson
Scheme
2008 LTIP
2008 LTIP
No. of
award granted shares awarded
Basis of
Face value
of award†
% vesting for
threshold
performance
Vesting and
performance
period
75% of base salary
50% of base salary
149,081
69,997
£194,551
£90,996
25%
25%
3 years
3 years
† Based on share price of 130.5 pence on the day of grant.
The performance measures for these awards over the three-year period will be benchmarked against the 2017/18 basic EPS from continuing operations
in that year of 14.4 pence per share.
Threshold basic EPS growth (25% of award) is:
At least growth in the retail prices index (“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 the above threshold performance is achieved, then the following tables explain how vesting levels above the threshold level will relate to performance:
If basic EPS growth (50% of award) is:
Equal to or greater than the growth in 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
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
Paul Hooper
Andrew Magson
Richard Saville1
David Armfield
Stephen Beechey2
Vijay Thakrar3
Vesting level
100%
Straight line between 0%-100%
Vesting level
100%
Straight line between 0%-100%
0%
At
30 June
2019
4,359,668
318,986
519,534
133,379
N/A
69,400
–
10,000
At
30 June
2018
4,359,668
298,986
460,478
133,926
83,000
69,400
–
–
1 Richard Saville retired on 15 January 2019.
2 Stephen Beechey was appointed on 1 January 2019.
3 Vijay Thakrar was appointed on 15 January 2019.
* The Directors’ shareholdings are beneficial with the exception of 434,000 shares (2018: 434,000) in which Mr. McCall has a non-beneficial holding.
At the year end the Employee Benefit Trust, established to hold shares in relation to the ESOS and the LTIP, held 369,245 ordinary shares.
The market value of the shares held in trust as at 30 June 2019 was £348,936.525 (94.5 pence per share).
The Alumasc Group plc Report and Accounts 2019
45
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
Dec 2015
Sept 2016 1
Oct 2017
Oct 2018
177.5p
157.5p
173.5p
130.5p
Dec 2018
Sept 2019
Oct 2020
Oct 2021
Dec 2015
Sept 2016 1
Oct 2017
Oct 2018
177.5p
157.5p
173.5p
130.5p
Dec 2018
Sept 2019
Oct 2020
Oct 2020
Interest
as at
1 July
2018
99,734
122,510
115,425
–
337,669
46,808
57,521
54,194
–
158,523
vested
in year
exercised
in year
were
granted
in year
of which
lapsed
in year
Interest
as at
30 June
2019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
149,081
99,734
122,510
–
–
–
–
115,425
149,081
149,081
222,244
264,506
–
–
69,997
69,997
46,808
57,521
–
–
–
–
54,194
69,997
104,329
124,191
Paul Hooper
Total 2008 Plan
Andrew Magson
Total 2008 Plan
1 Lapsed due to failure to meet performance criteria.
* 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
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
31 Dec
2009
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
31 Dec
2018
30 June
2019
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.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
46
Directors’ Remuneration Report continued
Chief Executive Remuneration
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
2018/19
2017/18
2016/17
2015/16
2014/15
Chief Executive single figure
of total remuneration
£000
Annual Bonus pay-out against
maximum opportunity
%†
Long-term incentive vesting
against maximum opportunity
%
343
332
510
493
633
3.8%
0%
22%
20%
71%
0%
0%
72%*
50%
50%
* 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 2018 and 30 June 2019 for the CEO and all Group employees.
CEO
Employees
0.0%
68.75%
4.0%
0.6%
-12.2%
-0.4%
Total employee pay
£000
21,747
21,581
Dividends
£000
2,594
2,628
Salary
Benefits and bonus
Total
Relative importance of spend on pay
2017/18
2018/19
Relative importance of spend on pay
30000
25000
20000
15000
10000
5000
0
0
0
0
’
£
21,747
21,581
2017/18
2018/19
2017/18
2016/17
Total Employee Pay
Dividends
2,594
2,628
The Alumasc Group plc Report and Accounts 2019
47
Statement of implementation of Remuneration Policy in 2019/20
The following sections show how the Remuneration Policy will be applied in 2019/20.
Base salary
The Chief Executive and the Group Finance Director base salaries have been increased by 2.5% in line with the general workforce for the 2019/20
financial 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.
The Chairman and Non-executive Directors have letters of appointment and details of their terms can be seen in the Appendix to Schedule 1
published on our website.
Bonus
For 2019/20 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. A bonus on the sale of the Facades business will be £10,000 (already paid) plus an amount based upon
the delivery of the earn-out. The Board considers that these targets are commercially sensitive and therefore full details will not be disclosed until the
2019/2020 report.
Long Term Incentive Plan
It is intended that awards under the 2018 LTIP will be made in October 2019 in the same quantum as the prior year as outlined on page 45.
The performance metrics in the 2019 LTIP are stretching to incentivise an increase in profitability.
The minimum Underlying Profit Before Tax (UPBT) of £7 million (being an underlying EPS of 14.4p) was set as base level of performance for 2018/2019
(25% of the award).
If the threshold performance above is achieved, then the remaining 75% of the award is met by:
Basic EPS growth (65% 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%
Total Shareholder Return (10% of award) is:
Top quartile performance relative to FTSE All Share Index.
Between median and top quartile
Below median
Vesting level
100%
Straight line between 0%-100%
0%
Statement of voting at general meeting
At the 2018 AGM 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
15,723,445
35,854
15,759,299
17,636
15,776,935
99.8
0.2
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 on 5 September 2019.
Jon Pither
Chairman of the Remuneration Committee
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
48
Nomination Committee Report
Nomination Committee Report
STATEMENT FROM THE CHAIRMAN
OF THE NOMINATION COMMITTEE
“The Nomination Committee
has considered the
composition of the Board
and succession plans for
senior management.”
John McCall
Chairman of the Nomination Committee
I am pleased to present the Report of the
Nomination Committee (the Committee).
The Committee held two scheduled meetings
during the year to consider the search process
for new independent Non-executive Directors.
The Committee also recommended the
appointments of Mr Stephen Beechey and then
Mr Vijay Thakrar to the Board and as Chairman
of the Audit Committee. Both bring additional
skills and experience to the Board.
In addition, the Nomination Committee
has considered the composition of the Board
and succession plans for senior management.
In accordance with the Committee’s terms of
reference it will continue to keep under review
succession planning for senior management.
The Committee continually reviews the
leadership of the Group and ensures that it
is structured to meet the changing business
environment.
The Committee is continuing its succession
planning, reviewing Board composition
and the development of senior management
and will, if appropriate, make recommendations
to the Board.
Meeting Attendance
Members
Mr J McCall
Mr J Pither
Mr Richard Saville1
Mr David Armfield2
Attended/
eligible to attend
2/2
2/2
1/1
2/2
1 Mr Richard Saville resigned from the Board on
15 January 2019.
2 Mr David Armfield was appointed to the Committee
on 25 April 2019
In addition, Mr Stephen Beechey and Mr
Vijay Thakrar were invited as attendees to
the Committee Meeting in June 2019.
Key Responsibilities of the
Committee
• Review the size and composition
(including knowledge and experience)
required for the Board.
• To consider succession planning for
Directors and other senior executives.
• Identify and review candidates to fill
Board vacancies.
• Review the time required from the
Non-executive Directors.
A copy of the terms of reference
of the Nomination Committee is available
on our website at www.alumasc.co.uk/
investors/corporate-governance/
The Alumasc Group plc Report and Accounts 2019
Directors’ Report
Directors’ Report
49
The Directors present their Annual Report and the consolidated financial statements for The Alumasc Group plc for the financial year ended 30 June 2019.
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 2019 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 pages 104 and 105. The Strategic report can be found on pages 2 to 27.
Corporate governance statement
Certain information needs 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 30 to 37 and is incorporated into the Directors’ report by reference.
Management report
For the purposes of compliance with Accounts regulations Schedule 7 para 1A, 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, David Armfield, Richard Saville,
Vijay Thakrar and Stephen Beechey. During the year Stephen Beechey was appointed on 1 January 2019 and Vijay Thakrar was appointed on
15 January 2019. Richard Saville resigned on 15 January 2019.
The biographies of the Directors can be found on pages 28 to 29.
Summaries of the Directors’ service agreements can be found on our website at www.alumasc.co.uk.
Directors’ & Officers’ Insurance
The Company maintains a Directors’ & Officers’ Insurance Policy for the Directors and the Company Secretary.
Dividend
The Directors are recommending a final dividend of 4.4 pence per ordinary share (2017/18: 4.4 pence) which will, if approved at the AGM,
be paid on 31 October 2019 to shareholders on the register at the close of business on 27 September 2019, that, together with the interim
dividend, makes a total of 7.35 pence for the year (2017/18: 7.35 pence).
The Company operates a dividend re-investment plan; details 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 Additional Shareholder Information section on page 104.
Companies Act s.172
The Directors are aware of the requirements of s.172 of the Companies Act 2006 and take these into account when fulfilling their duties to promote the
long-term success of the Group. For example, the Company has recently committed to investment in its supply chain for tooling China. The Board also
considered both the long-term supply chain requirements and the impact of the Company’s operations on the community, whilst supporting our suppliers
to modernise manufacturing techniques and helping to protect the environment.
The interests of the Company’s employees are considered as part of decision-making on matters such as Health & Safety, communications and succession
discussions.
The impact of decisions made by the Board has due regard to the interests of the employees and effort is made to ensure that employee’s interests
as a whole are protected.
In addition, as new products are introduced the business considers relationships with both customers and suppliers.
Alumasc’s focus on Health & Safety is an example of the Company’s high standards and its protection of these and its reputation. The Board considers this
as the first items of business at every Board meeting in the year. The standards of business conduct were reviewed at the annual review of the Modern
Slavery Statement together with the application of Alumasc policies in the supply chain (s.172 (e) CA 2006).
Further information about how the Company considers its obligations under s.172 of the Companies Act are discussed in the Corporate Social
Responsibility Report on page 24.
Re-listing on AIM
A General Meeting was held on 25 April 2019, where the Company’s shareholders passed a special resolution to de-list from the Stock Exchange
main market and to re-list on AIM of the London Stock Exchange. Following approval of the resolution, the Company de-listed from
the main market and re-listed its shares on AIM at 8.00am on 25 June 2019.
Employees
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 2019 can be found on page 25.
Employees are kept informed of changes in the business and general financial and economic factors influencing the Group, 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 2019 50
Directors’ Report continued
Directors’ Report continued
In the Corporate Governance and CSR report there are disclosures on how the Company provides information to employees, and how their views
are taken into account in decision-making. It also provides information about the sharing of strategic aims (see page 25).
Group Greenhouse Gas emissions
Information about the Group’s Greenhouse Gas emissions is provided in the Corporate Social Responsibility Report on pages 26 and 27.
Political donations
No political donations were made during the year by the Company and its subsidiaries to any EU or non-EU political party, political organisation
or EU independent election candidate (2017/18: £nil).
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 (2017/18: £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.
Other information
Other information relevant to the Directors’ report can be found in the following sections of the Annual Report:
Information
Articles of Association
Directors’ interests
Long term incentive plans
Financial risk management
Future developments
Health & Safety and employee related policies
Major shareholdings
Movements in share capital
Purchase of own shares
Share capital – structure, voting, restrictions and other rights
Page/s
108
42 to 47
45 and 47
80
2 to 27
24
109
84
108
104
Location in Annual Report
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 24 to the Financial statements
Additional information for shareholders
Additional information for shareholders and in Note 23 to the
Financial statements
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.
Auditor
Following an audit tender process, details of which are given in the Audit Committee’s report, BDO LLP was appointed as auditor by the Directors during
the year. A formal resolution, that BDO LLP be re-appointed as auditor, together with a resolution that the Directors be authorised to approve their fees
will be proposed at the forthcoming Annual General Meeting.
Annual General Meeting (AGM)
The notice convening the AGM, to be held on 24 October 2019 at 10.00am at Station Road, Burton Latimer, Kettering, Northamptonshire NN15 5JP is
included within this document on pages 108 to 112 together with an explanation of the business to be conducted at the meeting.
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.
The Directors’ Report was approved by the Board on 5 September 2019.
On behalf of the Board
Helen Ashton
Group Company Secretary
Governance The Alumasc Group plc Report and Accounts 2019 Statement of Directors’ Responsibilities
Statement of Directors’ Responsibilities
51
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the
Group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European
Union. 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 Company and of the profit or loss of the Group and parent company for that period. The Directors are also
required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed
and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and 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
the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets
of the parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements
are published on the Group's website in accordance with legislation in the United Kingdom governing the preparation and dissemination
of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group's website is the
responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
On behalf of the Board
Paul Hooper
Chief Executive
Andrew Magson
Group Finance Director
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
52
Independent Auditor’s Report
Independent Auditor’s Report
TO THE MEMBERS OF THE ALUMASC GROUP PLC
Opinion
We have audited the financial statements of The Alumasc Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
30 June 2019 which comprise Consolidated statement of comprehensive income, Consolidated and Parent Company statement of financial position,
Consolidated and Parent Company statement of cash flows and Consolidated and Parent Company statement of changes in equity and notes to the
financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
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 2019 and of the Group’s
profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent
of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s
or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date
when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, 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.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
The Alumasc Group plc Report and Accounts 2019 53
Key audit matter
How we addressed the Key audit matter in the audit
Recognition of revenue and attributable
profit (or losses) on contracts
Refer to the accounting policies and significant
judgments and estimates (note 2) and notes 3,17
and 30.
During the year ended 30 June 2019 the Group
adopted IFRS 15 Revenue from Contracts with
Customers for the first time using the cumulative
effect method as set out in note 2 and note 30. The
adoption of the new standard introduced the concept
of recognising revenue over time based on an input
methodology in the Levolux component for the first
time for its long term contracts.
The interpretation and application of this new
standard involved a significant level of management
judgment which gave rise to a significant risk
of material misstatement. The adoption of the
input methodology within this standard required
management to accurately record both the costs to
date on a project as well as the total forecast costs
and overall project margin to determine the revenue
to be recognised.
The potential outcomes for contracts can have an
individual or collectively material impact on the
financial statements, whether through error or
management bias.
We obtained a breakdown of Levolux contracts making up revenue in the year.
From the breakdown we selected contracts for testing based on criteria that we
considered increased the risk of material misstatement in the revenue recognised
on the contract.
This included contracts that were significant to the Group or that had unusually
high or low margins.
For each contract selected we obtained a copy of the contract documentation and
via the audit testing listed below, critically assessed and challenged the recognition
of revenue from a review of whether performance obligations were fulfilled as follows:
• We reconciled the revenue recognised in the year to the contracts.
• We tested a sample of incurred cost to date to third party evidence and confirmed
completeness of costs through substantiating a sample of supplier balances at the
year end to supplier statements.
• We met with contract managers and enquired on current progress on open contracts
and final account negotiations on completed contracts substantiating explanations
to supporting correspondence.
• We confirmed the expected entries in the financial statements in respect of revenue,
cost of sales and contract assets/liabilities was accurate.
We assessed the ability of management to accurately forecast contract cost outcomes
by reviewing contract outturns against costs forecast historically.
We also audited the judgments surrounding the implementation of IFRS 15 including
the following:
• Reviewed management’s impact assessment of IFRS 15 in light of our knowledge of the
business, from a review of a selection of contracts in the previous year to understand the
terms and checked that the Group policies have been appropriately updated to comply
with the standard.
• Recalculated the IFRS 15 transition adjustment in relation to the change to an input
cost basis for revenue recognition for a sample of contracts at 1 July 2018 to check
that revenue was recognised appropriately and the transition adjustment was accurate.
Nothing has come to our attention through our audit testing to suggest that revenue
is materially misstated.
Valuation of defined benefit obligation
Refer to the accounting policies and significant
judgments and estimates (note 2) and notes 12, 21.
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. Due
to significant estimates management appointed an
independent actuary to assist.
We benchmarked the key assumptions used by management in the Group’s valuation
of the defined benefit pension obligation through engagement with an independent
auditor expert actuary. This included assessing the key assumptions against those used
in other comparable schemes and comparing those assumptions with externally derived
market data.
We substantiated the valuation of the pension scheme assets to third party
documentation and membership information to supporting evidence.
We considered adequacy of the Group’s disclosures of the assumptions and the
sensitivities of the defined benefit pension obligation to changes in these assumptions.
Nothing has come to our attention through our audit testing to suggest that pension
liabilities are materially misstated.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 54
Independent Auditor’s Report continued
Our application of materiality
Materiality
The magnitude of an omission or misstatement that, individually or in aggregate, could reasonably be expected to influence the economic decisions of the
users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality
for the Group to be £300,000 determined with reference to a benchmark of group profit before tax normalised to exclude any gains or losses on disposal
of subsidiaries, restructuring costs, AIM re-listing costs and non-underlying pension costs as disclosed in note 5, averaged over the last three years due to
fluctuations in the construction market, of £6.1 million, of which it represents 4.9%.
Performance materiality is the application of materiality to the individual accounts or balances and is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. Performance
materiality was set at £225,000 for the Group and £169,000 for the Parent Company which represents 75% of the above materiality levels.
We determined materiality in respect of the audit of the parent company to be £225,000 using a benchmark of 2% of total assets, restricted to 75% of
Group materiality. The Group team used component materiality ranging from £39,000 to £225,000 having regard to the mix of size and risk profile of the
Group across the components.
Reporting threshold
An amount below which identified misstatements are not reported.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £15,000, which was set at 5% of
materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluated all uncorrected
misstatements against both quantitative measures of materiality discussed above and in light of other relevant qualitative considerations when forming
our opinion.
An overview of the scope of our audit
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking
into account the geographical areas which the Group operates, the accounting processes, systems and controls and the industry in which the Group
operates. Of the Group’s nine reporting components our planned audit approach was to subject seven to full scope audits for Group purposes and two to
specific risk-focussed procedures over revenue, trade receivables and stock or analytical review procedures all conducted by the Group engagement 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 in accordance with the Group audit approach.
The work over these full scope components above gave us coverage of 95% of revenue, 82% of the profit for the year and 91% of total assets and we
performed analytical review procedures over the remaining trading entities to ensure we had the evidence needed to form our opinion on the financial
statements as a whole.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Financial Statements,
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent
with the financial statements; and
• the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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 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.
The Alumasc Group plc Report and Accounts 2019 55
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the 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 the Directors 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 for the audit of the financial statements
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 error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and
the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Gareth Singleton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Birmingham
5 September 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 56
Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2019
Year to 30 June 2019
Year to 30 June 2018 (restated)*
Notes
Underlying
£000
Non-
underlying
£000
Total
£000
Underlying
£000
Non-
underlying
£000
Total
£000
Continuing operations:
Revenue
Cost of sales
Gross profit
Net operating expenses
Net operating expenses before non-underlying items
IAS 19 past service pension cost & settlement gain
Other non-underlying items
Net operating expenses
3, 4
5
5
90,104
(63,255)
26,849
(20,984)
–
–
(20,984)
–
–
–
90,104
(63,255)
26,849
87,048
(60,101)
26,947
–
(787)
(3,439)
(4,226)
(20,984)
(787)
(3,439)
(25,210)
(20,723)
–
–
(20,723)
–
–
–
–
–
(588)
(588)
87,048
(60,101)
26,947
(20,723)
–
(588)
(21,311)
Operating profit
4, 5
5,865
(4,226)
1,639
6,224
(588)
5,636
Finance expenses
Profit before taxation
Tax expense
Profit for the period from continuing operations
Discontinued operations:
Profit after taxation for the period
from discontinued operations
Profit for the period
Other comprehensive income:
9
10
6
(281)
5,584
(1,139)
4,445
(373)
(4,599)
883
(3,716)
(654)
985
(256)
729
(212)
6,012
(1,214)
4,798
(494)
(1,082)
247
(835)
(706)
4,930
(967)
3,963
–
4,445
2,912
(804)
2,912
3,641
–
4,798
354
(481)
354
4,317
Items that will not be recycled to profit or loss:
Actuarial gain 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 for the period, net of tax
Total comprehensive profit for the period, net of tax
Earnings per share
Basic earnings per share
– Continuing operations
– Discontinued operations
Diluted earnings per share
– Continuing operations
– Discontinued operations
Alternative performance measures
Underlying earnings per share (pence)
12
12
123
263
4
267
390
4,031
Pence
2.0
8.1
10.1
2.0
8.1
10.1
12.4
* The results for the year to 30 June 2018 have been re-presented to show the Facades business as a discontinued operation. See note 6 for details.
Reconciliations of underlying to statutory profit and earnings per share are provided in notes 5 and 12 respectively.
2,280
(220)
2
(218)
2,062
6,379
Pence
11.0
1.0
12.0
10.9
1.0
11.9
13.4
The Alumasc Group plc Report and Accounts 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2019
57
Notes
2019
£000
2019
£000
2018
£000
2018
£000
13
14
15
10
16
17
26
19, 26
21
22
10
18
22
20
23
24
24
24
24
11,693
18,705
3,416
2,202
10,488
21,384
283
2,762
(7,857)
(12,951)
(1,272)
(954)
(20,111)
(2,333)
–
(10)
4,517
445
(416)
(8)
90
20,817
36,016
34,917
70,933
(23,034)
(22,454)
(45,488)
25,445
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
(27,038)
(23,245)
(50,283)
24,421
25,445
24,421
Assets
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Corporation tax receivable
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
5 September 2019
Company number 1767387
Andrew Magson
Director
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
58
Financial Statements continued
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2019
Operating activities
Operating profit
Adjustments for:
Depreciation
Amortisation
Gain on disposal of property, plant and equipment
Loss on disposal of business assets
Gain on disposal of available-for-sale assets
IAS 19 past service pension cost
IAS 19 settlement gain on merger of pension schemes
(Increase)/decrease in inventories
Increase in receivables
Increase/(decrease) in trade and other payables
Movement in provisions
Cash contributions to retirement benefit schemes
Share based payments
Cash generated by operating activities of continuing operations
Operating profit from discontinued operation
Depreciation and amortisation
Movement in working capital from discontinued operation
Cash generated by operating activities of discontinued operation
Tax paid
Net cash inflow from operating activities
Investing activities
Purchase of property, plant and equipment – continuing operations
Purchase of property, plant and equipment – discontinued operations
Payments to acquire intangible fixed assets
Proceeds from sales of property, 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 inflow/(outflow) from investing activities
Financing activities
Interest paid
Equity dividends paid
(Repayment)/draw down of amounts borrowed
Refinancing costs
Purchase of own shares
Exercise of share based incentives
Net cash (outflow)/inflow 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
Year to
30 June
2019
£000
Year to
30 June
2018
£000
1,639
5,636
1,335
514
(17)
–
–
1,111
(324)
(1,722)
(48)
1,229
1,637
(3,202)
(65)
2,087
163
60
(396)
(173)
(634)
1,280
(2,296)
(15)
(115)
116
–
3,886
–
1,576
(232)
(2,628)
(1,500)
(156)
(238)
–
(4,754)
(1,898)
4,656
(1,898)
4
2,762
1,081
434
(18)
218
(426)
–
–
580
(1,110)
(1,444)
242
(3,203)
160
2,150
444
123
(316)
251
(679)
1,722
(2,967)
(75)
(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
Notes
7, 13
7, 15
5
5
21
6
6
6
26
26
26
The Alumasc Group plc Report and Accounts 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2019
At 1 July 2017
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
At 1 July 2018, as previously reported
Impact of change in accounting policy – IFRS 15
(see note 1)
Adjusted balance at 1 July 2018
Profit for the period
Exchange differences on retranslation
of foreign operations
Net gain 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
Acquisition of own shares
Exercise of share based incentives
Notes
11
25
11
25
Share
capital
£000
4,517
–
–
–
–
–
–
–
–
–
4,517
–
4,517
–
–
–
–
–
–
–
–
–
–
Share
Capital
reserve –
premium own shares
£000
£000
Hedging
reserve
£000
Foreign
currency
reserve
£000
445
–
(541)
–
(51)
–
–
(265)
45
–
–
–
–
–
–
–
317
(54)
–
–
–
–
–
–
(241)
(271)
–
–
(241)
(271)
–
–
–
–
–
–
–
–
445
–
445
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300
–
–
–
–
–
–
–
–
63
(238)
–
(416)
59
Profit
and loss
account
reserve
£000
15,983
4,317
–
–
–
2,280
(2,594)
160
–
(261)
Total
equity
£000
20,437
4,317
2
(265)
45
2,280
(2,594)
160
300
(261)
19,885
24,421
(76)
(76)
19,809
24,345
3,641
3,641
–
–
–
123
(2,628)
(65)
–
–
(63)
4
317
(54)
123
(2,628)
(65)
63
(238)
(63)
84
–
2
–
–
–
–
–
–
–
86
–
86
–
4
–
–
–
–
–
–
–
–
At 30 June 2019
4,517
445
(8)
90
20,817
25,445
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
60
Financial Statements continued
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2019
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 Alternative Investment
Market (“AIM”).
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 2019, 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 2 to 27. 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 a committed £20 million revolving credit facility which has an initial expiry date of April 2022 and two single year extension periods.
The Group has the option to cancel and repay elements of the committed facility at short notice should it wish to do so. The extension periods are
subject to request by the Group and acceptance by the lender. In addition, the Group has overdraft facilities totalling £4.0 million. At 30 June 2019
the Group’s net debt was £5.1 million (2018: £4.8 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.
2 Summary of significant accounting policies
Changes in accounting policy
The following new standards, amendments and interpretations are effective for the period beginning on or after 1 July 2018 and have been adopted
for the Group financial statements:
IFRS 9: Financial Instruments; and
IFRS 15: Revenue from Contracts with Customers.
Except as described below, the accounting policies adopted are consistent with those of the previous financial year.
IFRS 15 Revenue from Contracts with Customers
The Directors have completed their assessment of the impact of IFRS 15 “Revenue from Contracts with Customers” and the Group has adopted
the new standard for the financial year ending 30 June 2019 using the cumulative effect method, as the net impact of adopting the new standard
is not significant. As a result of adopting the input method of revenue recognition under the new standard as opposed to the output method in
the old standard, the Group has re-stated its opening equity position as at 1 July 2018 by reducing its profit and loss reserve by £76,000 to reflect the
impact of transitioning to IFRS 15, see note 30. The comparative information for the 12 month period to 30 June 2018 has not been re-stated and
continues to be reported under IAS 18 Revenue and IAS 11 Construction contracts, the accounting policies stated in the Annual Report for the year
ended 30 June 2018.
IFRS 15 has impacted the Group in the following ways:
Architectural Screening, Solar Shading & Balconies:
All revenue within the Architectural Screening, Solar Shading & Balconies division, for which revenue was previously recognised over time measured
by reference to the stage of completion of the contract on an output cost method based on Quantity Surveyor assessments, will now be recognised
on an input cost method over time.
Revenue and associated margin are therefore recognised progressively as costs are incurred, having regard to latest estimates of cost to complete and
expected project margins. The Group has determined that this method more fairly reflects progress in satisfying customer performance obligations.
Within trade and other receivables in the consolidated statement of financial position:
• Previously, under IAS 11, amounts recoverable on construction contracts reflected amounts invoiced for payment of work performed based
on quantity surveyor assessments
• Under IFRS 15, invoices for payment are presented as trade receivables with revenue recognised at the balance sheet date not yet invoiced
presented as a contract asset.
Within trade and other payables in the consolidated statement of financial position:
• Previously, under IAS 11, payments in advance of revenue recognised were presented as construction deposits received on account within
trade and other payables
• Under IFRS 15, payments in advance of revenue recognised are presented as contract liabilities.
The Alumasc Group plc Report and Accounts 2019
61
2 Summary of significant accounting policies continued
Changes in accounting policy continued
IFRS 15 Revenue from Contracts with Customers continued
Other revenue streams:
The Group has concluded that the impact of adopting IFRS 15 in our Roofing & Water Management and Housebuilding Products divisions at
30 June 2018 is immaterial because the point at which performance obligations to customers were satisfied under IFRS 15 at that date was similar
to the point at which risks and rewards were transferred under IAS 18. It is possible that, should the value of bespoke contract work in the
Roofing & Water Management division become material in the future, IFRS 15 could result in earlier recognition of revenue and profit over time.
Revenue relating to supply and install contracts at Blackdown Greenroofs in the Roofing & Water Management division was recognised over time
using an output method during the 2018/19 financial year but will move to an input method going forwards.
Changes in accounting policy:
The details of the new significant accounting policies and the nature of the changes to previous accounting policies in relation to the Group’s
adoption of IFRS 15 are set out below:
Revenue represents the total amounts receivable by the Group for goods supplied and services provided, excluding VAT and rebates.
Architectural Screening, Solar Shading & Balconies:
The performance obligations and transaction price are defined within signed contracts between the customer and Levolux. These contracts contain
one performance obligation as the scope of work and pricing of the contract is to deliver an interrelated service. Effect of change in accounting
policy: The contracts with customers as defined under IFRS 15 correspond in almost all circumstances to construction contracts as previously defined
under IAS 11. The revenue for the performance obligation is recognised on an input cost method over time, measured by reference to the stage of
completion of the contract. Revenue and associated profit are therefore recognised progressively as costs are incurred and having regard to latest
estimates of cost to complete and expected project margins. Effect of change in accounting policy: Revenue was previously recognised on an output
cost method based on Quantity Surveyor assessments. The Group has determined that an input method more fairly reflects progress in satisfying
customer performance obligations over time and, depending on stage of completion of each contract at the reporting date, will generally result
in earlier recognition of revenue and profit.
Due to the nature of the services provided, instructed variations to contracts are usually accounted for as if it was part of the existing contract,
as the variations do not result in a distinct good or service being delivered. Where the variation to the original contract is for additional goods or
services which are distinct from the original performance obligations under the contract, this is accounted for as a separate contract. Claims for
additional revenue for variations or extra work over and above the original contract are only recognised when management determines the revenue
to be highly probable. Effect of change in accounting policy: The move from “probable” under IAS 37 to “highly probable” under IFRS 15 did not
result in a material change in the timing of revenue recognition for the Group at the transition date or during the year ended 30 June 2019.
Within trade and other receivables in the consolidated statement of financial position:
• Trade receivables represent invoiced rights to payment. Contract assets represent revenue recognised at the balance sheet date not yet invoiced.
Within trade and other payables in the consolidated statement of financial position:
• Contract liabilities represent payments received in advance of revenue recognised.
Other revenue streams:
The revenue for each performance obligation is generally recognised at a point in time upon despatch of goods, or receipt of goods by the customer,
depending on the terms of trade of each operating entity. Revenue of £1.1 million relating to supply and install contracts at Blackdown Greenroofs in
the Roofing & Water Management division was recognised over time using an output method during the 2018/19 financial year but will move to an
input method going forwards.
Effect of change in accounting policy: The satisfaction of performance obligations to customers under IFRS 15 matches the point at which risks and
rewards were transferred under IAS 18.
However, should the value of bespoke contract work in the Roofing & Water Management division become material, IFRS 15 could result in earlier
recognition of revenue and profit over time.
The impact of the adoption of IFRS 15, both at the transition date and on the 12 month accounting period ended 30 June 2019, is set out
in note 30.
IFRS 9 Financial Instruments
The Group has adopted IFRS 9 “Financial Instruments” from 1 July 2018. IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and
Measurement” and specifies how an entity should classify and measure financial assets and liabilities.
The most significant area of change which could potentially impact the Group’s reported results is the introduction of an “expected loss” model for
impairment provisioning of receivables, which now also includes contract assets recognised under the adoption of IFRS 15 “Revenue from Contracts
with Customers”.
Based on an assessment of historic credit losses and the likelihood of the occurrence of future credit losses on existing financial assets, and the
existence of credit insurance for the majority of Group receivables, the Directors consider that there are no further material impairment losses
to be recognised against the Group’s financial assets as a result of the transition to IFRS 9.
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62
Financial Statements continued
2 Summary of significant accounting policies continued
Changes in accounting policy continued
IFRS 9 Financial Instruments continued
Changes in accounting policy:
The details of the new significant accounting policies and the nature of the changes to previous accounting policies in relation to the Group’s adoption
of IFRS 9 are set out below:
The Group’s principal financial instruments comprise cash and cash equivalents, trade receivables, contract assets, trade payables, contract liabilities
and interest-bearing borrowings. Based on the way these financial instruments are managed and their contractual cash flow characteristics, all the
Group’s financial assets and liabilities are measured at amortised cost, which in most cases in the Group is materially the same as their original invoiced
or recognition value, due to the relatively short credit periods involved.
Effect of change in accounting policy: Cash and cash equivalents and trade receivables were previously treated as financial assets under IAS 39 and
were measured at amortised cost. Trade payables and interest-bearing borrowings were previously treated as financial liabilities under IAS 39 and
were measured at amortised cost. Contract assets and contract liabilities under IFRS 15, previously classified as amounts recoverable on construction
contracts and construction deposits received on account under IAS 11, continue to be measured at amortised cost. The adoption of IFRS 9 has
therefore not had any impact on the measurement of the Group’s financial assets and liabilities.
Impairment losses against financial assets carried at amortised cost are recognised by reference to any expected credit losses against those assets.
Effect of change in accounting policy: IFRS 9 replaces the incurred loss model in IAS 39 with the expected credit loss model, which requires that future
events are considered when calculating impairments to financial assets. Based on an assessment of historic credit losses on the Group’s financial assets
and the likelihood of the occurrence of future credit losses on existing financial assets, the Directors consider that no material change was needed to
impairment provisions recognised against the Group’s financial assets on transition to IFRS 9.
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 2019 within the next financial year are the valuation of defined benefit pension obligations, the valuation of the Group’s acquired
goodwill and the recognition of revenues and profit on contracts with customers where revenue is recognised over time.
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).
Goodwill is tested at least annually for impairment, with appropriate assumptions and estimates built into the value in use calculations to determine
if an impairment of the carrying value is required. See note 14 for further disclosure of the assumptions and estimates applied.
Revenue and associated margin recognised over time on contracts with customers is recognised using the input method under the new standard and
therefore progressively as costs are incurred, having regard to latest estimates of cost to complete and expected project margins. Contract revenue
includes an assessment of contract variations when their recovery is considered highly probable. Judgment is therefore required in the application
of the Group’s policy regarding revenue and profit recognition relating to estimates of costs to complete contracts, the final profit margin on those
contracts and the inclusion of potential contract variations prior to these being fully agreed.
Goodwill
Goodwill arises on the acquisition of subsidiaries.
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.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
63
2 Summary of significant accounting policies continued
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 25 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.
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.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
64
Financial Statements continued
2 Summary of significant accounting policies continued
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.
Pension costs
The Group operates both defined benefit and defined contribution pension schemes as follows:
(i) Defined benefit pensions
The Group operated two principal defined benefit schemes which require deficit reduction contributions to be made to separately administered funds.
During the year ending 30 June 2019 a bulk transfer of members from the Benjamin Priest Group Pension Scheme (“BPGPS”) to The Alumasc Group
Pension Scheme (“AGPS”) took place on 5 March 2019 and the intention is for the BPGPS to be wound up.
The scheme was closed to future benefit accrual in 2010, which did not result 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 the 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 Group determines finance income/expense for the period relating to defined benefit pension scheme 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.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
65
2 Summary of significant accounting policies continued
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.
A Trust holds the shares in its name and shares are awarded to employees on request by the Group. The Group controls and bears the expenses
of the Trust.
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.
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.
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.
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 represents the total amounts receivable by the Group for goods supplied and services provided, excluding VAT and rebates.
Architectural Screening, Solar Shading & Balconies:
The performance obligations and transaction price are defined within signed contracts between the customer and Levolux. These contracts contain
one performance obligation as the scope of work and pricing of the contract is to deliver an interrelated service. The revenue for the performance
obligation is recognised on an input cost method over time, measured by reference to the stage of completion of the contract. Revenue and
associated profit are therefore recognised progressively as costs are incurred and having regard to latest estimates of cost to complete and expected
project margins.
Due to the nature of the services provided, instructed variations to contracts are usually accounted for as if it was part of the existing contract, as the
variations do not result in a distinct good or service being delivered. Where the variation to the original contract is for extra goods or services which
are distinct from the original performance obligations under the contract, this is accounted for as a separate contract. Claims for extra revenue for
variations or extra work over and above the original contract are only recognised when management determines the revenue to be highly probable.
Other revenue streams:
The revenue for each performance obligation is generally recognised at a point in time upon despatch of goods, or receipt of goods by the customer,
depending on the terms of trade of each operating entity. Revenue of £1.1 million relating to supply and install contracts at Blackdown Greenroofs in
the Roofing & Water Management division was recognised over time using an output method during the 2018/19 financial year but will move to an
input method going forwards.
See note 22 for disclosure of the Group’s warranty provision held at the balance sheet date.
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66
Financial Statements continued
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. Impairment losses against financial
assets carried at amortised cost are recognised by reference to any expected credit losses against those assets.
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
IFRS 16 applies to Alumasc’s accounting period beginning on 1 July 2019 and requires lessees to recognise all leases in the Consolidated Statement
of Financial Position with limited exemptions for short-term leases and low value leases. This will result in the recognition of a right-to-use asset and
corresponding liability on the Group’s balance sheet for its operating leases in respect of manufacturing, warehouse and office premises, with the
associated depreciation and interest expense being recorded in the income statement over the lease period.
The Group has completed its impact assessment of this standard and the expected impact of applying IFRS 16 in its first full year of application
is detailed below:
• The total annual charge to the income statement is expected to increase by £0.1 million, reducing profit before tax by this figure in the first year
of application.
• EBITDA is expected to increase by around £0.6 million as the former lease expense is re-classified as a depreciation charge and interest cost.
• A right-of-use asset and corresponding lease liability of £5.0 million will be recognised for the first time on 1 July 2019 with no impact on net assets
at the transition date.
The Group plans to apply IFRS 16 initially on 1 July 2019, using a modified retrospective approach. The cumulative effect of adopting IFRS 16 at that
date is expected to be £nil with no restatement of comparatives.
3 Revenue
Revenue, as disclosed in the statement of comprehensive income and total income is analysed as follows:
Revenue arising from:
Goods transferred to customers, recognised at a point in time
Contracts recognised over time
Revenue (per statement of comprehensive income)
Rental income
Total income
2018/19
£000
70,205
19,899
90,104
40
90,144
2017/18
£000
63,710
23,338
87,048
32
87,080
The vast majority of the Group’s contracts where revenue is recognised over time are for the design, delivery and installation of goods for which those
contracts can span over more than one accounting period. At the reporting date several of these contracts had commenced but the performance
obligation was not yet fully satisfied. The amount of revenue that will be recognised on these contracts when the remainder of the performance
obligation is satisfied is £9,755,000 and this will be satisfied mostly in 2019/20 and the rest in 2020/21.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
67
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 the 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.
The Group sold the Alumasc Facades business on 31 October 2018. This has been treated as a discontinued operation (see note 6). Revenues and
operating results from this business have been excluded from the segmental analysis below. This business was formerly part of the Group’s Roofing
& Walling operating segment in prior years. Due to changes to internal management reporting responsibilities to the Chief Operating Decision Maker in
respect of the Roofing business following the sale of Alumasc Facades, this business is now included within the Roofing & Water Management segment.
Full year to 30 June 2019
Roofing & Water Management
Architectural Screening, Solar Shading & Balconies
Housebuilding Products
Sub-total
Unallocated costs
Total from continuing operations
Segmental operating result
Brand amortisation
Past service cost in respect of GMP equalisation (see note 5)
Settlement gain on merger of pension schemes (see note 5)
Restructuring & relocation costs (see note 5)
AIM re-listing costs (see note 5)
Total operating profit from continuing operations
Revenue
£000
59,917
18,789
11,398
90,104
90,104
Segmental
operating
result
£000
5,918
(1,107)
1,732
6,543
(678)
5,865
£000
5,865
(238)
(1,111)
324
(3,021)
(180)
1,639
Roofing & Water Management
Architectural Screening,
Solar Shading & Balconies
Housebuilding Products
Sub-total
Unallocated/discontinued
Total
Segment
assets
£000
36,211
18,089
10,003
64,303
6,630
70,933
Segment
liabilities
£000
(14,027)
(5,997)
(3,191)
(23,215)
(22,273)
(45,488)
Capital expenditure
Other
intangible
assets
£000
Property,
plant &
equipment
£000
Depreciation
£000
Amortisation
£000
1,341
149
1,041
2,531
78
2,609
49
55
11
115
–
115
810
61
399
1,270
125
1,395
188
290
36
514
–
514
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
68
Financial Statements continued
4 Segmental analysis continued
Full year to 30 June 2018
Roofing & Water Management
Architectural Screening, Solar Shading & Balconies
Housebuilding Products
Sub-total
Unallocated costs
Total from continuing operations
Segmental operating result
Brand amortisation
Loss on disposal of SCP assets
Profit on disposal of available-for-sale assets
Restructuring & relocation costs
Wade acquisition costs
Total operating profit from continuing operations
Roofing & Water Management
Architectural Screening,
Solar Shading & Balconies
Housebuilding Products
Sub-total
Unallocated & discontinued
Total
Segment
assets
£000
33,795
19,647
9,426
62,868
11,836
74,704
Segment
liabilities
£000
(11,555)
(5,317)
(3,612)
(20,484)
(29,799)
(50,283)
Revenue
£000
54,608
21,957
10,483
87,048
87,048
Segmental
operating
result
£000
4,935
786
1,660
7,381
(1,157)
6,224
£000
6,224
(239)
(218)
426
(322)
(235)
5,636
Capital expenditure
Other
intangible
assets
£000
Property,
plant &
equipment
£000
Depreciation
£000
Amortisation
£000
536
100
2,187
2,823
257
3,080
158
21
57
236
1
237
689
63
305
1,057
147
1,204
132
258
43
433
1
434
Total
£000
90,104
33,814
Total
£000
87,048
32,671
Analysis by geographical segment 2018/19
Sales to external customers
Segment non-current assets
Analysis by geographical segment 2017/18
Sales to external customers
Segment non-current assets
United
Kingdom
£000
80,677
33,814
United
Kingdom
£000
74,508
32,671
Europe
£000
North
America
£000
2,695
3,149
–
–
Europe
£000
3,006
–
North
America
£000
5,552
–
Middle
East
£000
972
–
Middle
East
£000
839
–
Far
East
£000
2,392
–
Far
East
£000
2,849
–
Rest of
World
£000
219
–
Rest of
World
£000
294
–
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 and exclude discontinued operations.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
69
5 Underlying to statutory profit before tax reconciliation
Underlying operating profit/profit before tax
Brand amortisation
IAS 19 net pension scheme finance costs (note 9)
IAS 19 Past service cost in respect of GMP equalisation
IAS 19 Settlement gain on merger of pension schemes
Restructuring & relocation costs
AIM re-listing costs
Loss on disposal of the SCP business
Profit on disposal of available-for-sale assets
Wade acquisition costs
Operating profit of Alumasc Facades*
Gain on disposal of Alumasc Facades*
Statutory operating profit/profit before tax
Statutory profit analysed by continuing and discontinued operations:
Continuing
Discontinued (note 6)
Statutory operating profit/profit before tax
Operating
profit
£000
2018/19
Profit
before tax
£000
2017/18 (restated)
Operating
profit
£000
Profit
before tax
£000
5,865
(238)
–
(1,111)
324
(3,021)
(180)
–
–
–
163
–
1,802
1,639
163
1,802
5,584
(238)
(373)
(1,111)
324
(3,021)
(180)
–
–
–
163
2,782
3,930
985
2,945
3,930
6,224
(239)
–
–
–
(322)
–
(218)
426
(235)
444
–
6,080
5,636
444
6,080
6,012
(239)
(494)
–
–
(322)
–
(218)
426
(235)
444
–
5,374
4,930
444
5,374
* Alumasc Facades meets the definition of a discontinued operation under international accounting standards. See note 6. The gain on sale of this operation is therefore excluded from underlying
operating profit and underlying profit before tax from continuing operations.
In the presentation of underlying profits, management treats the amortisation of acquired brands and IAS 19 pension costs consistently 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, management has presented the following specific items that arose in 2018/19 and 2017/18 financial years as non-underlying as they
are non-recurring items that are judged to be significant enough to affect the understanding of the year-on-year evolution of the underlying trading
performance of the business:
• The one off IAS 19 past service pension cost relating to Guaranteed Minimum Pension (“GMP”) equalisation between men and women,
following a High Court decision on 26 October 2018;
• The one off settlement gain arising from the merger of the Group’s pension schemes on 5 March 2019;
• One-off costs of material restructuring and relocation of separate businesses within the Group in 2018/19 and 2017/18;
• The one-off professional fees incurred in connection with the re-listing of Alumasc’s shares from the main market to the Alternative Investment
Market (“AIM”) on 25 June 2019;
• 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, on 21 November 2017, a previously available-for-sale asset; and
• Acquisition costs relating to the purchase of Wade International Limited on 31 January 2018.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
70
Financial Statements continued
6 Discontinued operations
Discontinued operations relate to the Alumasc Facades business which was divested by the Group on 31 October 2018.
The results of Alumasc Facades included in the consolidated statement of comprehensive income are as follows:
Revenue
Operating profit
Net gain on disposal of discontinued operation
Profit before taxation
Tax charge
Profit after taxation
Gross sales proceeds
Transaction costs of disposal
Cash cost of consequential restructuring/decommissioning
Net sales proceeds at 30 June 2019
Provisions for restructuring and plant decommissioning costs
Sales proceeds after restructuring and plant decommissioning
Net assets disposed of:
Plant & equipment
Working capital at completion
Net gain on disposal
The net cash flows attributable to discontinued operations are as follows:
Operating cash flows
Movement in working capital
Investing cash flows – proceeds from sale of business
Investing cash flows – purchase of property, plant and equipment
Net cash inflow
Year to
30 June
2019
£000
3,763
163
2,782
2,945
(33)
2,912
Year to
30 June
2018
£000
11,359
444
–
444
(90)
354
£000
4,500
(100)
(514)
3,886
(343)
3,543
(84)
(677)
2,782
223
(396)
3,886
(15)
3,698
The business sale agreement included a clause that deferred consideration could become payable to Alumasc based on the sales revenue of the
business in its first twelve month period under new ownership of up to £1.5 million. This period ends on 31 October 2019. The extent of, if any,
deferred consideration will be calculated based on actual sales achieved relative to pre-agreed target levels set out in the agreement. On the basis of
the limited data that the Buyer is required to provide at the time and the degree of remaining uncertainty as to the level of sales likely to be achieved
in the period to 31 October, no accrual for potential deferred consideration has been made in these financial statements.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
7 Expenses by nature
The following items have been charged/(credited) in arriving at operating profit from continuing operations:
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
Restructuring & relocation costs
IAS 19 past service cost in respect of GMP equalisation
IAS 19 settlement gain on merger of pension schemes
AIM re-listing costs
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
8 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 excluding restructuring
Restructuring costs
Total
Average number of employees
Operational
Administrative, support and management
9 Net finance costs
Finance costs – Bank overdrafts
– Revolving credit facility
– IAS 19 net pension scheme finance costs
71
2017/18
£000
43,621
1,080
195
239
(18)
45
21,793
322
–
–
–
1,726
(32)
224
66
76
8
12,067
81,412
2017/18
£000
19,228
2,038
527
21,793
494
22,287
–
22,287
2017/18
Number
244
235
479
2018/19
£000
46,794
1,395
276
238
(17)
10
22,951
3,021
1,111
(324)
180
1,773
(40)
111
61
69
–
10,856
88,465
2018/19
£000
20,058
2,204
689
22,951
373
23,324
1,461
24,785
2018/19
Number
260
247
507
2018/19
£000
2017/18
£000
38
243
281
373
654
33
179
212
494
706
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
72
Financial Statements continued
10 Tax expense
(a) Tax on profit on ordinary activities
Tax charged in the statement of comprehensive income
Current tax:
UK corporation tax – continuing operations
– discontinued operations
Overseas tax
Amounts over provided in previous years
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Amounts (over)/under provided in previous years
Rate change adjustment
Total deferred tax
Total tax expense
Tax charge on continuing operations
Tax charge on discontinued operations
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
2018/19
£000
2017/18
£000
(69)
33
3
(21)
(54)
406
(20)
(43)
343
289
256
33
289
24
54
78
469
90
33
(2)
590
491
5
(29)
467
1,057
967
90
1,057
467
(45)
422
Total tax charge in the statement of comprehensive income
367
1,479
(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 7.4% is lower than (2017/18: 19.7% was
higher than) the standard rate of corporation tax in the UK of 19.0% (2017/18: 19.0%).
The differences are reconciled below:
Profit before tax from continuing operations
Profit before tax from discontinued operations
Accounting profit before tax
Current tax at the UK standard rate of 19.0% (2017/18: 19.0%)
Expenses not deductible for tax purposes
Use of capital losses
Rate change adjustment
Tax over provided in previous years – current tax
Tax (over)/under provided in previous years – deferred tax
2018/19
£000
985
2,945
3,930
747
265
(639)
(43)
(21)
(20)
289
2017/18
£000
4,930
444
5,374
1,021
62
–
(29)
(2)
5
1,057
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
73
10 Tax expense continued
(c) Unrecognised tax losses
The Group has agreed tax capital losses in the UK amounting to £16.6 million (2018: £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 (2018: £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 £16 million (2018: £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
At 1 July 2017
Charged/(credited) to the statement of
comprehensive income – current year
(Credited)/charged to the statement of
comprehensive income – prior year
Charged to equity
Acquisition of subsidiary
At 30 June 2018
Charged/(credited) to the statement of
comprehensive income – current year
Credited to the statement of
comprehensive income – prior year
Charged to equity
At 30 June 2019
339
58
(12)
–
50
435
125
(20)
–
540
(32)
(15)
17
–
–
(30)
(36)
–
–
(66)
Brands
£000
299
(41)
–
–
298
556
(74)
–
–
482
Hedging
£000
Total
deferred
tax liability
£000
(11)
–
–
(45)
–
(56)
–
–
54
(2)
595
2
5
(45)
348
905
15
(20)
54
954
Pension
deferred
tax asset
£000
(3,501)
460
–
467
–
(2,574)
348
–
24
(2,202)
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 £2.7 million (2018: £3.2 million) have
not been recognised in respect of net capital losses of £16 million (2018: £19 million), see note 10 (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 30 June 2018 balance sheet date. Deferred tax assets and liabilities have therefore
been calculated based on the rate of 17% substantively enacted at both the 30 June 2018 and 30 June 2019 balance sheet dates.
11 Dividends
Interim dividend for 2019 of 2.95p paid on 8 April 2019
Final dividend for 2018 of 4.4p paid on 31 October 2018
Interim dividend for 2018 of 2.95p paid on 6 April 2018
Final dividend for 2017 of 4.3p paid on 31 October 2017
2018/19
£000
1,045
1,583
–
–
2,628
2017/18
£000
–
–
1,056
1,538
2,594
A final dividend of 4.4 pence per equity share, at a cash cost of £1,574,000, has been proposed for the year ended 30 June 2019, payable on
31 October 2019. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
74
Financial Statements continued
12 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 – continuing operations
Net profit attributable to equity holders of the parent – discontinued operations
Weighted average number of shares
Dilutive potential ordinary shares – employee share options
Basic earnings per share:
Continuing operations
Discontinued operations
Diluted earnings per share:
Continuing operations
Discontinued operations
Calculation of underlying earnings per share:
Reported profit before taxation from continuing operations
Brand amortisation
IAS 19 net pension scheme finance costs
Pension GMP equalisation
Winding up lump sums
Restructuring & relocation costs
AIM re-listing costs
Loss on disposal of the SCP assets
Profit on disposal of available-for-sale assets
Wade acquisition costs
Underlying profit before taxation from continuing operations
Tax at underlying Group tax rate of 20.4% (2017/18: 20.3%)
Underlying earnings from continuing operations
Weighted average number of shares
Underlying earnings per share from continuing operations
2018/19
£000
729
2,912
3,641
000s
35,956
153
36,109
2018/19
Pence
2.0
8.1
10.1
2018/19
Pence
2.0
8.1
10.1
2017/18
£000
3,963
354
4,317
000s
35,830
361
36,191
2017/18
Pence
11.0
1.0
12.0
2017/18
Pence
10.9
1.0
11.9
2018/19
£000
2017/18
£000
985
238
373
1,111
(324)
3,021
180
–
–
–
5,584
(1,139)
4,445
35,956
12.4p
4,930
239
494
–
–
322
–
218
(426)
235
6,012
(1,220)
4,792
35,830
13.4p
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
75
Total
£000
15,445
3,080
3,478
–
(633)
21,370
2,609
(1,573)
(121)
22,285
10,130
1,204
–
(625)
10,709
1,395
(1,475)
(37)
10,592
11,693
10,661
5,315
2018
£000
17,211
2,217
19,428
Freehold
land and
buildings
£000
Long
leasehold
property
£000
Short
leasehold
improvements
£000
Plant &
equipment
£000
3,177
16
2,651
–
–
5,844
73
(13)
–
5,904
893
148
–
–
1,041
154
(10)
–
1,185
4,719
4,803
2,284
235
841
–
138
–
1,214
13
–
–
1,227
235
20
2
–
257
66
–
–
323
904
957
–
428
66
–
(81)
(58)
355
22
–
(73)
304
272
16
(2)
(57)
229
17
–
(18)
228
76
126
156
11,605
2,157
827
(57)
(575)
13,957
2,501
(1,560)
(48)
14,850
8,730
1,020
–
(568)
9,182
1,158
(1,465)
(19)
8,856
5,994
4,775
2,875
2019
£000
19,428
–
19,428
13 Property, plant and equipment
Cost
At 1 July 2017
Additions
Acquisition through business combination
Reclassification
Disposals
At 1 July 2018
Additions
Disposals
Disposal of business activity
At 30 June 2019
Accumulated depreciation and impairment losses
At 1 July 2017
Depreciation charge for year
Reclassification
On disposals
At 1 July 2018
Depreciation charge for year
On disposals
On disposal of business activity
At 30 June 2019
Net book value at 30 June 2019
Net book value at 30 June 2018
Net book value at 1 July 2017
14 Goodwill
Cost:
At 1 July
Acquisition of Wade
At 30 June
Impairment:
At 1 July and 30 June
Net book value at 30 June
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
723
723
18,705
18,705
2019
£000
3,820
2,264
10,179
225
2,217
18,705
2018
£000
3,820
2,264
10,179
225
2,217
18,705
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
76
Financial Statements continued
14 Goodwill continued
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 cashflow
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 plans covering a five year period. The growth rate used
to extrapolate the cash flows beyond this period was 1% (2018: 1%) for each CGU.
Key assumptions included in the recoverable amount calculation are the discount rate applied and the cash flows generated by:
Revenues
(i)
Gross margins
(ii)
(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% (2018: between 11% and 12%). 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 2019 was similar to the rate used in 2018.
The surplus headroom above the carrying value of goodwill at 30 June 2019 was significant in the case of Timloc, Rainclear, Wade and Alumasc
Roofing, 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.
The surplus headroom above the carrying value of goodwill at 30 June 2019 for Levolux was not significant and the following change to each
of the key assumptions would lead to an impairment:
• a 2% increase in the discount rate;
• a growth rate of -1% used to extrapolate the cash flows;
• a 21% reduction in the cash flow generated in the terminal year.
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. See Report
and Accounts 2018 for full disclosure.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
15 Other intangible assets
Cost:
At 1 July 2017
Additions
Acquisition of subsidiaries
Disposals
At 1 July 2018
Additions
Disposals
At 30 June 2019
Accumulated amortisation:
At 1 July 2017
Amortisation for the year
On disposals
At 1 July 2018
Amortisation for the year
On disposals
At 30 June 2019
Net book value at 30 June 2019
Net book value at 30 June 2018
Net book value at 1 July 2017
The Levolux brand is being amortised over a life of 20 years from May 2007.
The Wade brand is being amortised over a life of 25 years from February 2018.
16 Inventories
Raw materials
Work in progress
Finished goods
77
Total
£000
6,594
237
1,754
(387)
8,198
115
(235)
8,078
4,230
434
(379)
4,285
514
(137)
4,662
3,416
3,913
2,364
2018
£000
3,373
370
6,697
Brands
£000
Computer
software
£000
4,289
–
1,554
–
5,843
–
–
5,843
2,533
239
–
2,772
238
–
3,010
2,833
3,071
1,756
2,305
237
200
(387)
2,355
115
(235)
2,235
1,697
195
(379)
1,513
276
(137)
1,652
583
842
608
2019
£000
2,990
193
7,305
During the year the Group’s inventory provision increased by £217,000 (2018: reduced by £25,000). At 30 June 2019 the Group’s inventory provision
was £1,327,000 (2018: £1,110,000).
10,488
10,440
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
78
Financial Statements continued
17 Trade and other receivables
Trade receivables
Contract assets
Construction contracts
Other receivables
Prepayments
2019
£000
16,155
3,002
–
744
1,483
21,384
2018
£000
15,202
–
6,615
432
1,506
23,755
Contracts assets arise from the Group’s Architectural Screening, Solar Shading & Balconies division where revenue is recognised at the balance sheet
date prior to the physical invoice being raised to the customer.
Trade receivables and contract assets are non-interest bearing, are generally on terms of 30-90 days and are shown net of provisions for lifetime
expected credit losses.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade
receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based
on similar credit risk and ageing.
The Group calculates the rate of provision for each customer based on the risk score assigned by reputable credit management agencies. The risk
score assigned is input into the Group’s expected credit loss matrix with a higher risk customer attracting a higher level of provision. The Group’s
matrix is designed such that the level of provision increases as the receivable balance ages as overdue receivables are of inherently higher risk.
As at 30 June 2019, trade receivables at nominal value of £411,000 (2018: £297,000) 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
2019
£000
297
141
(27)
411
2018
£000
204
221
(128)
297
The table below sets out the ageing of the gross trade receivable and contract asset balances against terms and the level of provision held against
each ageing category:
Current
Less than 30 days past due
Less than 60 days past due
Less than 90 days past due
Greater than 90 days past due
18 Trade and other payables
Trade payables
Other taxation and social security
Other payables
Construction deposits received on account
Contract liabilities
Accruals
Deferred income
Gross
receivable
£000
16,490
2,375
498
56
149
19,568
2019
Loss
provision
£000
335
23
19
3
31
411
Gross
receivable
£000
19,339
2,055
290
51
379
22,114
2019
£000
15,482
1,435
1,077
–
295
1,822
–
20,111
2018
Loss
provision
£000
184
35
35
1
42
297
2018
£000
16,776
2,064
974
578
–
1,756
265
22,413
Contracts liabilities arise from the Group’s Architectural Screening, Solar Shading & Balconies division and represents payments in advance of revenue
recognised under IFRS 15. Revenue recognised in the 2018/19 year that would have been included within contract liabilities at the beginning of the
period had the comparator been restated was £578,000.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
19 Borrowings
Non-current liabilities:
Non-current instalments due on bank loan
79
2019
£000
2018
£000
7,857
9,468
The Group has a committed £20 million revolving credit facility which has an initial expiry date of April 2022 and two single year extension periods.
The Group has the option to cancel and repay elements of the committed facility at short notice should it wish to do so. The extension periods are
subject to request by the Group and acceptance by the lender. The following financial covenants apply 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 two and a half times.
At 30 June 2019 the Group also had £4 million (2018: £2 million) of bank overdraft facilities repayable on demand. The Group has an offset
arrangement in place against uncommitted overdraft facilities.
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
Contract assets
Other receivables
Financial liabilities:
Bank loans
Trade and other payables
Derivative financial liabilities
Carrying
amount
£000
2,762
16,155
–
3,002
744
22,663
7,857
18,381
10
26,248
30 June 2019
Fair
value
£000
2,762
16,155
–
3,002
744
22,663
7,857
18,381
10
26,248
Carrying
amount
£000
4,656
15,202
6,615
–
432
26,905
9,468
19,771
327
29,566
30 June 2018
Fair
value
£000
4,656
15,202
6,615
–
432
26,905
9,468
19,771
327
29,566
Trade and other payables balances do not include other taxation and social security costs or contract liabilities, as these balances do not meet the
definition of financial liabilities in IAS 39.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
80
Financial Statements continued
20 Financial instruments continued
Financial assets and liabilities continued
The table below summarises the maturity profile of the Group’s financial liabilities at 30 June 2019 and 2018 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 2019
Interest bearing loans and borrowings
Trade and other payables
At 30 June 2018
Interest bearing loans and borrowings
Trade and other payables
On
demand
£000
Less than
3 months
£000
3 to 12
months
£000
–
6,489
6,489
–
5,463
5,463
52
10,672
10,724
46
12,653
12,699
157
1,220
1,377
138
1,655
1,793
1 to 5
years
£000
8,431
–
8,431
9,711
–
9,711
Total
£000
8,640
18,381
27,021
9,895
19,771
29,666
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 2019 was £5.1 million (2018: £4.8 million).
Details of the Group’s approach to capital structure are given within the Financial Review on page 20.
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
2019
£000
7,857
7,857
2018
£000
9,468
9,468
Interest rate risk
The Group’s marginal pre-tax cost of debt finance at interest rates in place at 30 June 2019 under the banking facilities in existence at that time was
approximately 1.4% (2018: 1.2%).
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
(37)
37
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
81
20 Financial instruments continued
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.
The ageing of gross trade receivables and contract assets is set out in note 17.
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 2019 or 30 June 2018 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
Receivable
000
Payable
000
475
1,760
212
(1,418)
(1,885)
–
Cash
000
144
680
1,887
2019
Net total
000
Receivable
000
(799)
555
2,099
426
1,267
3,979
Payable
000
(844)
(1,837)
(81)
Cash
000
221
450
1,462
2018
Net total
000
(197)
(120)
5,360
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:
2019
2018
Increase
Decrease
Increase
Decrease
Hedging activities
Exchange
rate change
+10%
-10%
+10%
-10%
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
2019
£000
(10)
At 30 June 2019 the Group had forward foreign exchange contracts with principal amounts equivalent to £11,046,000 (2018: £11,646,000). 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.
Effect on profit after tax and equity in Sterling
Hong Kong $
£000
Euro
£000
US $
£000
33
(40)
(39)
47
43
(52)
18
(22)
19
(24)
47
(58)
2018
£000
(327)
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
82
Financial Statements continued
21 Retirement benefit obligations
The Group operates a number of defined contribution schemes and a defined benefit pension scheme, funded by the payment of contributions into
separately administered funds. The defined benefit scheme, which has been closed to future accrual since 2010, provides 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, £689,000 (2018: £527,000) was
in respect of defined contribution schemes. At 30 June 2019 there was an accrual of £100,000 payable in respect of defined contribution schemes
(2018: £93,000).
Defined benefit schemes
On 5 March 2019 the Group merged its two former defined benefit pension schemes and a bulk transfer of members from the Benjamin Priest Group
Pension Scheme (“BPGPS”) was made to the Alumasc Group Pension Scheme (“AGPS”).
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 the second half of 2019.
Disclosures in accordance with IAS 19 are set out below in respect of the defined benefit scheme. 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 2039 – male
Future pensioners at 65 in 2039 – female
The Alumasc
Group
Scheme
2019
%
2.25
2.25
1.90-3.70
3.25
2.25
The Alumasc
Group
Scheme
2018
%
2.75
2.10
1.80-3.60
3.10
2.10
The Benjamin
Priest Group
Scheme
2018
%
2.75
2.10
1.80-3.60
3.10
2.10
Years
Years
20.9
22.6
22.2
23.8
21.7
23.1
23.5
24.8
Years
20.9
22.2
22.6
23.8
A discount rate of 2.25% has been used in calculating the present value of liabilities of the pension scheme at 30 June 2019. A 0.1% change to this
rate would have changed the present value of the pension fund liabilities at that date by approximately £1,640,000 before tax.
A Retail Price Index inflation rate of 3.25% and a Consumer Price Index inflation rate of 2.25% have been used in calculating the present value of
liabilities of the pension scheme at 30 June 2019. 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 scheme at 30 June 2019, 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 2019
would have increased by approximately £5,600,000 before tax.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
83
21 Retirement benefit obligations continued
Defined benefit schemes continued
The combined assets and liabilities of the scheme at 30 June are:
Scheme assets at fair value:
Equities
Liability Driven Investment Funds
Government bonds
Corporate bonds and insured annuities
Multi-asset fund
Property
Cash
Present value of scheme liabilities
Defined benefit pension deficit
2019
£000
43,758
16,194
–
12,483
19,692
6,123
2,217
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
100,467
(113,418)
(12,951)
98,711
(113,851)
(15,140)
99,122
(119,718)
(20,596)
92,818
(115,486)
(22,668)
90,165
(111,100)
(20,935)
Of the above assets, all have a quoted market price with the exception of £1,761,000 of insured annuities (2018: £1,943,000) and £800,000
of property (2018: £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 plan, before taxation, are as follows:
Included in net operating expenses:
Past service pension cost – Guaranteed minimum pension equalisation
Settlement gain on merger of pension schemes
Included in net finance cost:
Net pension scheme finance costs
Included in other comprehensive income:
Actuarial gain/(loss) on plan assets
Actuarial (loss)/gain on retirement benefit obligations
Net actuarial gain (pre-tax)
Total recognised in the statement of comprehensive income (pre-tax)
The actual return on plan assets for 2018/19 was a gain of £6,015,000 (2017/18: gain of £2,011,000).
Changes in the present value of the defined benefit obligation before taxation are as follows:
At 1 July
Interest cost
Settlement on merger of pension schemes
Past service cost – GMP equalisation
Benefits paid
Actuarial (loss)/gain
At 30 June
Changes in the fair value of plan assets before taxation are as follows:
At 1 July
Expected return on plan assets
Settlement on merger of pension schemes
Actuarial gain/(loss)
Contributions by employer
Benefits paid
At 30 June
2018/19
£000
2017/18
£000
(1,111)
324
(787)
–
–
–
(373)
(494)
3,343
(3,196)
147
(1,013)
(535)
3,282
2,747
2,253
2019
£000
(113,851)
(3,045)
1,496
(1,111)
6,289
(3,196)
(113,418)
2019
£000
98,711
2,672
(1,172)
3,343
3,202
(6,289)
100,467
2018
£000
(119,718)
(3,040)
–
–
5,625
3,282
(113,851)
2018
£000
99,122
2,546
–
(535)
3,203
(5,625)
98,711
The cumulative amount of actuarial losses recognised since 1 July 2004 in the Group statement of comprehensive income is £15,749,000 (2017/18:
losses of £15,896,000).
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
84
Financial Statements continued
22 Provisions
At 1 July 2017
Charge for the year
Acquisition of subsidiary
Utilised
At 1 July 2018
Charge for the year
Utilised
At 30 June 2019
At 30 June 2019
Current liabilities
Non-current liabilities
At 30 June 2018
Current liabilities
Non-current liabilities
Dilapidations
£000
Note (i)
Warranty
£000
Note (ii)
Restructuring
£000
Note (iii)
753
392
200
(35)
1,310
75
(292)
1,093
–
1,093
1,093
–
1,310
1,310
294
19
50
(48)
315
21
(57)
279
100
179
279
100
215
315
–
–
–
–
–
2,560
(327)
2,233
2,233
–
2,233
–
–
–
Total
£000
1,047
411
250
(83)
1,625
2,656
(676)
3,605
2,333
1,272
3,605
100
1,525
1,625
(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.
(iii) Restructuring
Restructuring provisions are held in respect of the restructuring of the Levolux business and in the Roofing and Water Management division,
particularly the Gatic brand, and are expected to be utilised within 12 months.
23 Called up share capital
Allotted, called up and fully paid:
36,133,558 (2018: 36,133,558) ordinary shares of 12.5p each
2019
£000
2018
£000
4,517
4,517
24 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 369,245 (2018: 161,411) ordinary own shares held by the Company. The market value of shares at
30 June 2019 was £348,936 (2018: £217,905). These are held to help satisfy the exercise of awards under the Company’s Long Term Incentive Plans.
During the year 42,166 shares with a cost of £63,000 were used to satisfy the exercise of awards and 250,000 shares with a cost of £238,000 were
purchased by the Trust. A Trust holds the shares in its name and shares are awarded to employees on request by the Group. The Group 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.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
85
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 42 to 47.
Weighted
average
exercise
price
(pence)
As at
1 July
2018
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
2019
LTIP(i)
ESOS(ii)
740,483
540,000
n/a
1.64
373,267
90,000
n/a
1.27
(42,166)
–
n/a
–
(222,464)
(230,000)
n/a
1.74
849,120
400,000
n/a
1.50
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
(i) Long term incentive plan.
(ii) Executive share option scheme.
ESOS
For the share options outstanding at 30 June 2019 the weighted average remaining contractual life is 7.6 years (30 June 2018: 7.9 years).
The exercise price of the options outstanding ranges between 103 pence and 188 pence. 80,000 share options are exercisable at 30 June 2019
(30 June 2018: 110,000).
LTIP
None of the November 2016 LTIP awards will vest in November 2019.
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.
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
Black Scholes
2019
Black Scholes
2018
Black Scholes
2019
ESOS
LTIP
Black Scholes
2018
127p
127p
25%
3
1.0%
5.3%
13p
174p
174p
25%
3
1.0%
4.1%
21p
131p
nil
25%
3
1.0%
5.3%
111p
174p
nil
25%
3
1.0%
4.1%
153p
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 credit recognised for share based payments in respect of employee services rendered during the year to 30 June 2019 was £65,000
(2017/18: charge of £160,000). Of this, £40,000 (2017/18: £89,000) is in respect of key management personnel, which are the Directors of
The Alumasc Group plc.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
86
Financial Statements continued
26 Movement in cash net of borrowings
At 1 July 2017
Cash flow movements
Non-cash movements
Effect of foreign exchange rates
At 1 July 2018
Cash flow movements
Non-cash movements
Effect of foreign exchange rates
At 30 June 2019
Cash and
cash
equivalents
£000
9,014
(4,360)
–
2
4,656
(1,898)
–
4
2,762
Bank
loans
£000
(2,938)
(6,500)
(30)
–
(9,468)
1,500
111
–
(7,857)
Net
cash/(debt)
£000
6,076
(10,860)
(30)
2
(4,812)
(398)
111
4
(5,095)
27 Financial commitments
(i) Capital commitments
At 30 June 2019, £325,000 (2018: £395,000) of capital expenditure had been authorised and no capital expenditure had been authorised and
contracted but not provided for by the Group (2018: £nil).
(ii) Operating lease commitments
The Group has entered into commercial leases which predominantly relate to certain properties within the Group. The Group also leases a small
number of 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
2019
£000
1,163
2,713
4,352
8,228
Plant and
vehicles
2019
£000
358
469
–
827
Property
2018
£000
1,289
3,224
4,771
9,284
The total future minimum sub-lease receipts under non-cancellable operating leases where the Group acts as a lessor are as follows:
Plant and
vehicles
2018
£000
427
507
–
934
Property
2018
£000
32
Property
2019
£000
40
Less than one year
28 Related party disclosure
The Group’s principal actively trading subsidiaries at 30 June 2019 are listed below:
Principal subsidiaries
Alumasc Building Products Limited
Levolux Limited
Principal activity
Building products
Building products
A full list of the Group’s subsidiaries is shown on page 111.
Country of
incorporation
England
England
% of equity interest
and votes held
2018
2019
100
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 42 to 47. In addition to the amounts disclosed in the Directors’
Remuneration Report, there is a charge of £73,000 (2018: £112,000) relating to employer’s national insurance and a credit of £51,000
(2018: charge of £89,000) relating to share based payments during the year.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued
87
29 Contingent liabilities
At the balance sheet date there existed contingent liabilities amounting to £530,000 (2018: £300,000) in relation to outstanding Guarantees
and £361,000 (2018: £55,000) in relation to outstanding Performance Bonds.
30 IFRS 15 impact of transition
Transition
The Group has taken advantage of the relief in IFRS 15 to reflect the aggregate effect of all modifications that occurred before the transition date
of 1 July 2018 as an adjustment to the Group’s profit and loss account reserve at 1 July 2018. This is because the net impact of adopting the new
standard, being a reduction in the profit and loss account reserve and therefore net assets at that date of £76,000 is not significant.
Impact on year to 30 June 2019
Had the Group continued to report in accordance with IAS 18 “Revenue” for the 12 months ended 30 June 2019, it would have reported
the following amounts in these financial statements:
Income statement extract (continuing operations):
Revenue
Underlying profit before tax
Statutory profit before tax
Tax expense
Statutory profit after tax
Statement of financial position extract:
Contract assets/Accrued income
(included in Trade & other receivables)
Contract liabilities/Deferred income
(included in Trade & other payables)
Inventory – Work in progress
The main reasons for the differences are:
As would have
been reported
£000
88,254
4,801
202
(96)
106
2,668
(1,578)
834
Effect
£000
1,850
783
783
(160)
623
As reported
under IFRS 15
£000
90,104
5,584
985
(256)
729
334
3,002
1,283
(834)
(295)
–
• Recognition of revenue and profit on an input cost method over time, measured by reference to the stage of completion of the contract, rather than
on an output cost method over time based on Quantity Surveyor assessments;
• Resultant changes in the tax expense arising from the above adjustment.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
88
Financial Statements continued
Company Statement of Financial Position
COMPANY STATEMENT OF FINANCIAL POSITION
At 30 June 2019
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
Notes
2019
£000
2018
£000
5
6
9
7
655
69,994
157
70,806
1,270
643
72,494
217
73,354
758
72,076
74,112
10, 18
19
13
9
12
18
8
11
14
15
15
15
15
(7,857)
(19,424)
(100)
(123)
(707)
(28,211)
(5,237)
(1,569)
(127)
(6,933)
(9,468)
(14,808)
(110)
(124)
(843)
(25,353)
(6,273)
(1,435)
(361)
(8,069)
(35,144)
(33,422)
36,932
40,690
4,517
445
2,265
10,606
(416)
(105)
19,620
36,932
4,517
445
2,265
10,606
(241)
(300)
23,398
40,690
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
£1,045,000 (2018: £3,129,000).
Paul Hooper
Director
5 September 2019
Company number 1767387
Andrew Magson
Director
The Alumasc Group plc Report and Accounts 2019
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 June 2019
Operating activities
Operating profit/(loss)
Adjustments for:
Depreciation
(Increase)/decrease in receivables
Increase in trade and other payables
Movement in provisions
Cash contributions to retirement benefit schemes
Share based payments
Tax (paid)/received
Net cash inflow from operating activities
Investing activities
Purchase of property, plant and equipment
Acquisition of subsidiary undertaking, prior to payment for cash acquired
Net cash outflow from investing activities
Financing activities
Interest paid
Equity dividends paid
(Repayment)/draw down of amounts borrowed
Refinancing costs
Purchase of own shares
Exercise of share based incentives
Net cash (outflow)/inflow from financing activities
Net increase in cash and cash equivalents
Net cash and cash equivalents brought forward
Net increase in cash and cash equivalents
Net cash and cash equivalents carried forward
89
Notes
2018/19
£000
2017/18
£000
2,090
(2,634)
5
12
4
18
18
18
66
(512)
4,747
(10)
(182)
(65)
6,134
(47)
6,087
(78)
–
(78)
(451)
(2,628)
(1,500)
(156)
(238)
–
(4,973)
1,036
(6,273)
1,036
(5,237)
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
3,415
(9,688)
3,415
(6,273)
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
90
Financial Statements continued
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2019
Share
capital
£000
Share Revaluation
reserve
£000
premium
£000
Capital
Merger
reserve –
reserve own shares
£000
£000
Hedging
reserve
£000
At 1 July 2017
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
At 1 July 2018
Loss for the period
Net gain 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 shares
Acquisition of own shares
Exercise of share based incentives
4,517
–
–
–
–
–
–
–
–
4,517
–
–
–
–
–
–
–
–
–
445
–
–
–
–
–
–
–
–
445
–
–
–
–
–
–
–
–
–
2,265
–
–
–
–
–
–
–
–
2,265
–
–
–
–
–
–
–
–
–
10,606
–
–
–
–
–
–
–
–
10,606
–
–
–
–
–
–
–
–
–
At 30 June 2019
4,517
445
2,265
10,606
(541)
–
–
–
–
–
–
300
–
(241)
–
–
–
–
–
–
63
(238)
–
(416)
Profit
and loss
account
reserve
£000
29,146
(3,129)
–
–
76
(2,594)
160
–
(261)
Total
equity
£000
46,378
(3,129)
(289)
49
76
(2,594)
160
300
(261)
23,398
40,690
(1,045)
–
–
23
(2,628)
(65)
–
–
(63)
(1,045)
234
(39)
23
(2,628)
(65)
63
(238)
(63)
(60)
–
(289)
49
–
–
–
–
–
(300)
–
234
(39)
–
–
–
–
–
–
(105)
19,620
36,932
The Alumasc Group plc Report and Accounts 2019
91
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 Alternative Investment
Market (“AIM”).
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.
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 2 to 27. 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 a £20 million revolving credit facility which has an initial expiry date of April 2022 and two single year extension periods. The Group
has the option to cancel and repay elements of the committed facility at short notice should it wish to do so. The extension periods are subject to
request by the Group and acceptance by the lender. In addition, the Group has overdraft facilities totalling £4.0 million. At 30 June 2019 the Group’s
net debt was £5.1 million (2018: £4.8 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.
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 2018 and have been adopted
for the Company financial statements where appropriate with no material impact on the disclosures made by the Company:
IFRS 9: Financial Instruments; and
IFRS 15: Revenue from Contracts with Customers.
Judgments and estimates
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities
within the next financial year are the measurement and valuation of defined benefit pension obligations and the valuation of the Company’s
investments in subsidiaries.
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).
The valuation of the Company’s investments is reviewed at least annually with key assumptions and estimates being applied by management in
assessing whether any impairment is required. See note 6 for further details.
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.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
92
Financial Statements continued
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.
The Alumasc Group plc Report and Accounts 2019
93
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.
A Trust holds the shares in its name and shares are awarded to employees on request by the Company. The Company controls and bears the expenses
of the Trust.
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, 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.
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.
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.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
94
Financial Statements continued
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. Impairment losses against financial
assets carried at amortised cost are recognised by reference to any expected credit losses against those assets.
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
IFRS 16 applies to Alumasc’s accounting period beginning on 1 July 2019 and requires lessees to recognise all leases on balance sheet with limited
exemptions for short-term leases and low value leases. This will result in the recognition of a right-to-use asset and corresponding liability on the
Company’s balance sheet for its operating leases in respect of office premises, with the associated depreciation and interest expense being recorded
in the income statement over the lease period. The expected impact of applying IFRS 16 in its first full year of application is detailed below:
• The income statement is not expected to be materially affected.
• Recognition of a right-of-use asset and lease liability of £0.5 million on 1 July 2019 with no impact on net assets at that time.
The Company plans to apply IFRS 16 initially on 1 July 2019, using a modified retrospective approach. The cumulative effect of adopting IFRS 16
is expected to be £nil with no restatement of comparatives.
3 Expenses by nature
The following item has been charged in arriving at operating profit:
Auditor’s remuneration – audit of the financial statements of the Company
4 Dividends
Interim dividend for 2019 of 2.95p paid on 8 April 2019
Final dividend for 2018 of 4.4p paid on 31 October 2018
Interim dividend for 2018 of 2.95p paid on 6 April 2018
Final dividend for 2017 of 4.3p paid on 31 October 2017
2018/19
£000
16
2018/19
£000
1,045
1,583
–
–
2,628
2017/18
£000
17
2017/18
£000
–
–
1,056
1,538
2,594
A final dividend of 4.4 pence per equity share, at a cash cost of £1,574,000, has been proposed for the year ended 30 June 2019, payable
on 31 October 2019. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.
The Alumasc Group plc Report and Accounts 2019
5 Property, plant & equipment
Cost:
At 1 July 2017
Additions
At 30 June 2018
Additions
At 30 June 2019
Depreciation:
At 1 July 2017
Charge for the year
At 30 June 2018
Charge for the year
At 30 June 2019
Net book value:
At 30 June 2019
At 30 June 2018
At 1 July 2017
Freehold
land and
buildings
£000
Long
leasehold
property
£000
Plant and
equipment
£000
749
–
749
–
749
286
12
298
12
310
439
451
463
235
–
235
–
235
235
–
235
–
235
–
–
–
332
181
513
78
591
310
11
321
54
375
216
192
22
Included within freehold land and buildings is land of £336,000 (2018: £336,000) which is not depreciated.
6
Investments in Group companies
Cost:
At 1 July 2017
Acquisitions in year
At 30 June 2018 and 30 June 2019
Provisions:
At 1 July 2017
Provided in year
At 30 June 2018
Provided in year
At 30 June 2019
Net book value:
At 30 June 2019
At 30 June 2018
At 1 July 2017
95
Total
£000
1,316
181
1,497
78
1,575
831
23
854
66
920
655
643
485
£000
75,622
14,289
89,911
10,935
6,482
17,417
2,500
19,917
69,994
72,494
64,687
During the year £2,500,000 was provided against the investment in Levolux Limited following annual impairment testing.
At close of business on 30 June 2019 the principal actively trading subsidiary undertakings and related classes of business are as follows:
Alumasc Building Products Limited (building products) and Levolux Limited (building products).
Following the merger of the Group’s two legacy defined benefit pension schemes in March 2019, the trade and net assets of Alumasc Limited
and Wade International Limited were hived across into Alumasc Building Products Limited on 30 June 2019.
On 31 January 2018 the Company acquired the entire share capital of Wade International Limited for net consideration of £7,807,000.
The trade of this company was hived across to Alumasc Building Products Limited effective 30 June 2019.
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.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
96
Financial Statements continued
7 Trade and other receivables
Other receivables
Prepayments
None of the Company’s receivables were passed due or impaired at the balance sheet date (2018: none).
8 Trade and other payables
Other payables
Accruals
2019
£000
473
797
1,270
2019
£000
1,032
537
1,569
2018
£000
120
638
758
2018
£000
803
632
1,435
9 Deferred tax
A reconciliation of the movement in deferred tax during the year is as follows:
At 1 July 2017
Charged to the statement of comprehensive income
(Charged)/credited to equity
At 30 June 2018
(Charged)/credited to the statement of comprehensive income
Charged to equity
At 30 June 2019
Pension
deferred
tax asset
£000
Short term
temporary
differences
£000
Hedging
£000
Total
deferred
tax asset
£000
Deferred tax
liabilities
£000
179
(22)
(15)
142
(18)
(4)
120
28
(14)
–
14
1
–
15
12
–
49
61
–
(39)
22
219
(36)
34
217
(17)
(43)
157
(67)
(57)
–
(124)
1
–
(123)
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
2019
£000
2018
£000
7,857
9,468
The Company and Group has a committed £20 million revolving credit facility which has an initial expiry date of April 2022 and two single year
extension periods. The Group has the option to cancel and repay elements of the committed facility at short notice should it wish to do so. The
extension periods are subject to request by the Group and acceptance by the lender. The following financial covenants apply 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 two and a half times.
At 30 June 2019 the Company and Group also had £4 million (2018: £2 million) of bank overdraft facilities repayable on demand. The Group has
an offset arrangement in place against uncommitted overdraft facilities.
The Alumasc Group plc Report and Accounts 2019
97
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, intercompany and other payables
Derivative financial liabilities
Carrying
amount
£000
473
5,237
7,857
20,993
127
34,214
30 June 2019
Fair
value
£000
473
5,237
7,857
20,993
127
34,214
Carrying
amount
£000
30 June 2018
Fair
value
£000
120
120
6,273
9,468
16,243
361
32,345
6,273
9,468
16,243
361
32,345
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 2019 and 2018 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 2019
Interest bearing loans and borrowings
Trade, intercompany and other payables
At 30 June 2018
Interest bearing loans and borrowings
Trade, intercompany and other payables
On
demand
£000
Less than
3 months
£000
3 to 12
months
£000
–
23
23
–
20
20
52
1,349
1,401
46
1,141
1,187
5,394
151
5,545
6,411
73
6,484
1 to 5
years
£000
8,431
19,470
27,901
9,711
15,009
24,720
Total
£000
13,877
20,993
34,870
16,168
16,243
32,411
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 2019 was £13.1 million (2018: £15.7 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 2019 of £5.1 million (2018: £4.8 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
2019
£000
5,237
7,857
13,094
2018
£000
6,273
9,468
15,741
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.
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.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
98
Financial Statements continued
11 Financial instruments continued
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 2019 or 30 June 2018 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
2019
£000
(127)
2018
£000
(361)
At 30 June 2019 the Company had forward foreign exchange contracts with principal amounts equivalent to £4,282,000 (2018: £6,421,000).
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.
12 Retirement benefit obligations
Defined contribution schemes
£92,000 (2018: £89,000) was charged to operating profit in the statement of comprehensive income for defined contribution pension scheme
contributions. At 30 June 2019 there was an accrual of £92,000 payable in respect of defined contribution schemes (2018: £85,000).
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 2039 – male
Future pensioners at 65 in 2039 – female
2019
%
2.25
2.25
1.90-3.70
3.25
2.25
Years
20.9
22.6
22.2
23.8
2018
%
2.75
2.10
1.80-3.60
3.10
2.10
Years
21.7
23.1
23.5
24.8
A discount rate of 2.25% has been used in calculating the present value of liabilities of the pension scheme at 30 June 2019. A 0.1% change
to this rate would have changed the present value of the pension fund liabilities at that date by approximately £76,000 before tax.
A Retail Price Index inflation rate of 3.25% and a Consumer Price Index inflation rate of 2.25% have been used in calculating the present value of
liabilities of the pension scheme at 30 June 2019. A 0.1% change to these rates would have changed the present value of the pension fund liabilities
at that date by approximately £30,000 before tax.
In valuing the liabilities of the pension scheme at 30 June 2019, 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 2019
would have increased by approximately £259,000 before tax.
The following information relates to the Company’s element of the assets and liabilities of the scheme.
The Alumasc Group plc Report and Accounts 2019
12 Retirement benefit obligations continued
Defined benefit scheme continued
The combined assets and liabilities of the scheme at 30 June are:
Equities
Gilts
Liability Driven Investment Funds
Bonds and insured annuities
Multi-asset fund
Property and cash
Total market value of assets
Actuarial value of liability
Defined benefit pension deficit
2019
£000
1,982
–
731
564
889
376
4,542
(5,249)
(707)
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)
99
2015
£000
1,731
376
–
376
903
377
3,763
(4,739)
(976)
Of the above assets, all have a quoted market price with the exception of £80,000 of insured annuities (2017/18: £86,000) and £33,000 of property
(2017/18: £33,000).
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 pension plan, before taxation, are as follows:
2018/19
£000
2017/18
£000
Included in net operating expenses:
Past service pension cost – Guaranteed minimum pension equalisation
Included in net finance cost:
Net pension scheme finance costs
Included in other comprehensive income:
Actuarial gain/(loss) on plan assets
Actuarial (loss)/gain on retirement benefit obligations
Total recognised in the statement of comprehensive income
The actual return on plan assets for 2018/19 was a gain of £409,000 (2017/18: gain of £85,000).
Changes in the present value of the defined benefit obligation before taxation are as follows:
At 1 July
Interest cost
Past service pension cost – Guaranteed minimum pension equalisation
Benefits paid
Actuarial (loss)/gain
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 gain/(loss)
Contributions by employer
Benefits paid
At 30 June
(48)
(25)
259
(232)
27
(46)
2019
£000
(5,052)
(175)
(48)
258
(232)
(5,249)
2019
£000
4,209
150
259
182
(258)
4,542
–
(26)
(23)
114
91
65
2018
£000
(5,268)
(134)
–
236
114
(5,052)
2018
£000
4,216
108
(23)
144
(236)
4,209
The cumulative amount of net actuarial losses recognised in the statement of comprehensive income is £962,000 (2017/18: losses of £989,000).
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
100
Financial Statements continued
13 Provisions
At 1 July 2017
Charge for the year
At 30 June 2018
Utilised
At 30 June 2019
£000
59
51
110
(10)
100
The Company has provided £100,000 (2018: £110,000) in relation to the anticipated cost of dilapidations required under the terms of the lease
of business premises.
14 Called up share capital
Allotted, called up and fully paid:
36,133,558 (2018: 36,133,558) ordinary shares of 12.5p each
2019
£000
2018
£000
4,517
4,517
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 369,245 (2018: 161,411) ordinary own shares held by the Company. The market value of shares at 30
June 2019 was £348,936 (2018: £217,905). These are held to help satisfy the exercise of awards under the Company’s Long Term Incentive Plans.
During the year 42,166 shares with a cost of £63,000 were used to satisfy the exercise of awards and 250,000 shares with a cost of £238,000 were
purchased by the Trust. 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 £19,620,000 (2018: £23,398,000).
In connection with the capital reorganisation in 2007, the Company reached agreement with the Pension Trustees that £14.0 million of the profit and
loss account reserve would be retained as a non-distributable reserve until the Group’s pension deficits reduced below £14.0 million (as determined by
full actuarial valuations). Therefore the Directors consider that £5,620,000 of the Company profit and loss account reserve is distributable.
Cumulative actuarial losses relating to defined benefit pension schemes of £962,000 (2018: losses of £989,000) have been deducted in calculating
the distributable reserves figure above.
The Alumasc Group plc Report and Accounts 2019Notes to the Company Financial Statements continued
101
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 42 to 47.
Weighted
average
exercise
price
(pence)
As at
1 July
2018
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
2019
LTIP(i)
ESOS(ii)
496,192
50,000
n/a
1.55
219,078
10,000
n/a
1.27
–
–
–
–
(146,542)
(10,000)
n/a
1.88
568,728
50,000
n/a
1.43
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
1.55
496,192
50,000
n/a
1.55
(i) Long term incentive plan.
(ii) Executive share option scheme.
ESOS
For the share options outstanding at 30 June 2019 the weighted average remaining contractual life is 7.0 years (30 June 2018: 7.4 years).
The exercise price of the options outstanding ranges between 129 pence and 188 pence. 20,000 share options are exercisable at 30 June 2019
(30 June 2018: 20,000).
LTIP
None of the September 2016 LTIP awards will vest in September 2019.
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
Black Scholes
2019
Black Scholes
2018
Black Scholes
2019
ESOS
LTIP
Black Scholes
2018
127p
127p
25%
3
1.0%
5.3%
13p
174p
174p
25%
3
1.0%
4.1%
21p
131p
nil
25%
3
1.0%
5.3%
111p
174p
nil
25%
3
1.0%
4.1%
153p
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 credit recognised for share based payments in respect of employee services rendered during the year to 30 June 2019 is £65,000
(2017/18: charge of £160,000).
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
102
Financial Statements continued
Notes to the Company Financial Statements continued
17 Financial commitments
(i) Capital commitments
The Company had no capital commitments at the year end (2018: £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
2019
£000
20
80
1,007
1,107
Plant
2019
£000
1
3
–
4
Property
2018
£000
20
80
1,027
1,127
Plant
2018
£000
1
4
–
5
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
18 Movement in net borrowings
At 1 July 2017
Cash flow movements
Non-cash movements
At 1 July 2018
Cash flow movements
Non-cash movements
At 30 June 2019
Property
2019
£000
40
Property
2018
£000
32
Bank
loans
£000
2,938
6,500
30
9,468
(1,500)
(111)
7,857
Net
borrowings
£000
12,626
3,085
30
15,741
(2,536)
(111)
13,094
Bank
overdrafts
£000
9,688
(3,415)
–
6,273
(1,036)
–
5,237
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 111.
The total non-current position with regards to amounts owed to subsidiary undertakings at 30 June 2019 was a £19,424,000 liability
(2018: £14,808,000 liability). Included in Other receivables is £369,000 (2018: £54,000) due from a subsidiary company.
Amounts owed to subsidiary undertakings have no fixed repayment date and accrue interest at a rate equivalent to the Alumasc Group’s effective
rate of interest. The Directors believe that in substance these amounts are non-current.
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 42 to 47.
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 (2018: none) of the overdraft facilities guaranteed by the Company.
The Alumasc Group plc Report and Accounts 2019
Financial Summary
Financial Summary
103
Income Statement Summary
Continuing operations
Revenue
2011/12
£000
2012/13
£000
2013/14
£000
2014/15
£000
2015/16
£000
2016/17
£000
2017/18
£000
2018/19
£000
58,259
66,842
63,028
69,950
73,005
88,368
87,048
90,104
Underlying operating profit
Underlying operating margin
2,667
4.6%
5,345
8.0%
5,099
8.1%
6,341
9.1%
7,010
9.6%
8,703
9.8%
6,224
7.2%
5,865
6.5%
Net interest cost on borrowings
(706)
(767)
(521)
(592)
(215)
(132)
(212)
(281)
Underlying profit before tax
1,961
4,578
4,578
5,749
6,795
8,571
6,012
5,584
Non-underlying items*
Profit before taxation
(889)
(2,984)
(1,168)
(1,434)
(1,502)
(888)
(1,082)
(4,599)
1,072
1,594
3,410
4,315
5,293
7,683
4,930
985
Taxation
(236)
(598)
(706)
(1,120)
(1,319)
(1,492)
(967)
(256)
Profit for the year from continuing
operations
836
996
2,704
3,195
3,974
6,191
3,963
729
Discontinued operations – (loss)/profit after tax
Profit for the year
(423)
413
890
1,886
1,337
4,041
1,181
4,376
2,510
6,484
349
6,540
354
4,317
2,912
3,641
Underlying earnings per share from
continuing operations (pence)
Basic earnings per share (pence)
Dividends per share (pence)
Balance Sheet Summary at 30 June
Shareholders’ funds
Net debt/(cash)
Pension deficit (net of tax)
Discontinued operations
3.8
1.2
2.0
9.5
5.3
4.5
9.7
11.3
5.0
12.6
12.3
6.0
15.1
18.2
6.5
19.1
18.3
7.15
13.4
12.0
7.35
12.4
10.1
7.35
18,928
13,229
11,050
(13,943)
22,443
7,687
7,748
(12,897)
17,042
7,666
14,338
(11,769)
15,929
(914)
16,748
(3,708)
16,580
(8,632)
18,588
(479)
20,437
(6,076)
17,095
(334)
24,421
4,812
12,566
(714)
25,445
5,095
10,749
359
Capital invested – continuing operations
29,264
24,981
27,277
28,055
26,057
31,122
41,085
41,648
Underlying return on capital invested (post tax)**
6.3%
14.4%
14.8%
17.9%
20.5%
24.2%
13.8%
11.3%
Underlying tax rate
31.6%
25.7%
24.2%
22.0%
20.8%
20.6%
20.2%
20.4%
Notes
* Non-underlying items comprise brand amortisation and IAS 19 pension costs in all years. 2012/13 also includes an impairment charge and restructuring costs. Further details of the 2017/18 and 2018/19
non underlying items can be found in note 5 of the Report and Accounts 2019.
** Underlying operating profit after tax from continuing operations calculated using the underlying tax rate, as a percentage of average capital invested from continuing operations.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
104
Additional Shareholder Information
Additional Shareholder Information
Additional shareholder information
In accordance with the requirements of the Companies Act 2006 (‘Act’) the following section describes the matters that are required for inclusion
in the Directors’ report. Further details of matters required to be included in the Directors’ report that are incorporated by reference into this report
are set out below.
Directors
The names of the members of the Board as at the date of this report and their biographical details are set out on pages 28 to 29.
Share capital
The issued share capital of the Company and the details of the movements in the Company’s share capital during the year are shown in note 23 to the
financial statements.
The holders of ordinary shares are entitled to receive dividends when declared, to receive the Company’s Annual Report and Accounts, to attend and
speak at general meetings of the Company, to appoint proxies and exercise voting rights.
Articles of association
The Articles of Association set out the internal regulation of the Company and cover such matters as the rights of shareholders, the appointment or
removal of Directors and the conduct of the Board and general meetings. Copies are available on the Company’s website www.alumasc.co.uk.
Further powers are granted by members in general meeting and those currently in place are set out in detail in the appropriate section of this report.
Directors’ interests
Other than the Directors’ service agreements or letters of appointment, none of the Directors of the Company had a personal interest in any business
transactions of the Company or its subsidiaries. The terms of the Directors’ service agreements or letters of appointment and the Directors’ interests in
shares and share awards of the Company, in respect of which transactions are notifiable to the Company and the FCA under Article 19 of the Market
Abuse Regulation, are disclosed in the Remuneration Report on pages 42 to 47.
Directors’ powers
The Directors are responsible for the strategic management of the Company and their powers to do so are determined by the provisions of the Act and
the Company’s Articles of Association.
Employee benefit trust
A waiver of dividend exists in respect of 369,245 shares held by the Alumasc Group Employee Share Ownership Trust (‘Trust’) as at 30 June 2019. Details
of the shares purchased by the Trust during the year are outlined within note 24 to the financial statements. There are no restrictions on the transfer of
ordinary shares in the Company.
The rights attached to shares in the Company are provided by the Articles of Association, which may be amended or replaced by means of a special
resolution of the Company in a general meeting. The Directors’ powers are conferred on them by UK legislation and by the Company’s Articles of
Association.
No ordinary shares carry any special rights about control of the Company and there are no restrictions on voting rights except that a shareholder
has no right to vote in respect of a share unless all sums due in respect of that share are fully paid.
Shares are admitted to trading on the AIM market of London Stock Exchange and may be traded through the CREST system.
Allotment of shares
At the AGM in 2018 the Directors were empowered by the shareholders to allot equity securities, up to 5% of the Company’s issued share capital,
for cash, under section 570 of the Act. It is intended that this authority be renewed at the forthcoming AGM.
It is the Board’s intention, in line with guidance issued by the Pre-Emption Group, to also propose the renewal of the additional special resolution to
allow the Company to allot equity securities up to a further 5% of the Company’s issued share capital. This is applicable when the Board determines
a transaction to be an acquisition or other capital investment, as defined by the Pre-Emption Group’s Statement of Principles and is announced
contemporaneously with the allotment or has taken place in the preceding six-month period and is disclosed in the announcement of the allotment.
Purchase of own shares
Shareholders also approved the authority for the Company to buy-back up to 14.9% of its own ordinary shares by market purchase until the conclusion
of the AGM to be held this year. The Directors will seek to renew this authority at the forthcoming AGM. This power will only be exercised if the Directors
are satisfied that any purchase will increase the earnings per share of the Group as a result of the purchase and therefore, that the purchase is in the
interests of shareholders. The Directors will also give careful consideration to the financial position of the Company and its general financial position.
Any shares purchased in this way may be held in treasury which, the Directors believe, will provide the Company with flexibility in the management
of its share capital.
Where treasury shares are used to satisfy Share Awards, they will be classed as new issue shares for the purpose of the 10% limit on the number
of shares that may be issued over a 10-year period under the relevant share plan rules. The Company currently holds no shares in treasury.
The Alumasc Group plc Report and Accounts 2019 105
Significant agreements – change of control
The Group has in place agreements with its relationship banks, which contain certain termination rights that would have an effect on a change of control.
The Directors believe these agreements to be commercially sensitive and consider that its disclosure would be prejudicial to the Group; accordingly, they do
not intend to disclose specific details. In addition, the Group’s share schemes contain provisions that, in the event of a change of control, would result in
outstanding options and awards becoming exercisable, subject to the rules of the relevant schemes.
The total amount owing under the Group’s credit facilities as at 30 June 2019 is shown in note 19 to the financial statements. These agreements contain
clauses such that, in the event of a change of control, subject to the lender, the Company can offer to or must repay all such borrowings together with
accrued interest, fees and other sums owing as required by the individual agreements.
The rules of the Company’s incentive plans contain clauses relating to a change of control resulting from a takeover and in such an event awards would
vest subject to the satisfaction of any associated performance criteria.
Major shareholders
The Company’s share register recorded the following interests of 3% or more in the Company’s issued ordinary share capital as at 30 June 2019.
This information was also checked on 1 August 2019 being the latest practical date prior to the publication of this report.
Shareholder
Mr John McCall
AXA Investment Mgrs.
Mr Philip H R Gwyn
Hargreaves Lansdown
Unicorn Asset Management
Chelverton Asset Management
Mrs E L O’Loughlin
IPConcept Fund Management
NN Investment Partners
Charles Stanley
Number of
Ordinary
Shares held
pre and post
admission
4,359,668
3,420,000
3,057,605
2,315,384
1,800,000
1,626,000
1,550,962
1,500,000
1,475,000
1,097,849
% of issued
share capital
12.07
9.46
8.46
6.41
4.98
4.50
4.29
4.15
4.08
3.04
Employment
Information about the Group’s employees, employment of disabled persons and employment practices is contained within the Corporate Social
Responsibility report and the Directors’ report on pages 24 to 27 and pages 49 and 50.
Greenhouse gas emissions (‘GHG’)
Information about the Group’s Greenhouse Gas emissions is given in the Corporate Social Responsibility Report on pages 24 to 27.
Auditor
The auditors, BDO, were appointed during the year and have expressed their willingness to continue in office. Upon the recommendation of the Audit
Committee to the Board, resolutions to appoint them as auditor and to determine their remuneration will be proposed at the forthcoming AGM.
Annual General Meeting
The Notice of the AGM, to be held on 24 October 2019 is available in this Report and Accounts on pages 106 to 110 and copies are also available
from the Company’s website at www.alumasc.co.uk/investors. The Notice details the business to be conducted at the meeting and includes information
concerning the deadlines for submitting proxy forms and in relation to voting rights.
Statement of disclosure of information to auditors
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are aware, there is no relevant audit information
of which the Company’s auditor is unaware and each Director has taken all the steps that they ought to have taken as a Director of the Company
to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 106
Notice of Annual General Meeting
Notice of Annual General Meeting
Notice is given that the 2019 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 10am on Thursday 24 October 2019 to consider the following:
Ordinary business
Resolutions 1 to 10 will be proposed as ordinary resolutions.
1 To receive the reports of the Directors and auditor and the accounts for the year ended 30 June 2019.
2 To receive the report of the Remuneration Committee for the year ended 30 June 2019.
3 To declare a final dividend of 4.4 pence per share
4 To re-elect Paul Hooper as a Director
5 To elect Vijay Thakrar as a Director
6 To elect Stephen Beechey as a Director
7 To re-elect Jon Pither as a Director
8 To re-elect John McCall as a Director
9
To re-appoint BDO LLP as auditor of the Company to hold office from the conclusion of this meeting until the conclusion
of the next Annual General Meeting at which accounts are laid before the Company.
10 That the Audit Committee be authorised to determine the auditors’ remuneration
Special business
The following resolution will be proposed as an ordinary resolution.
11 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.
The following three resolutions will be proposed as special resolutions.
12 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 11
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 to:
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 5 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 23 October 2020).
13 Disapplication of statutory pre-emption rights: Acquisition or capital investment
That if resolution 11 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
5 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.
The Alumasc Group plc Report and Accounts 2019
107
14 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 percent of the issued share capital
of the Company at the date of this Notice;
(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 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 23 October 2020, 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 at the last AGM.
By order of the Board
Helen Ashton
Group Company Secretary
5 September 2019
Registered Office
Burton Latimer
Kettering
Northamptonshire
NN15 5JP
Registered No
01767387
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
108
Notice of Annual General Meeting continued
Notice of Annual General Meeting continued
Explanatory notes to the Resolutions 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 to be proposed at the 2019 Annual General Meeting
Resolutions 4 to 8: Directors
We set out the biographies of the Directors standing for election or re-election on pages 28 to 29 in this Report & Accounts
Resolution 4 – Re-election of Paul Hooper
Your Board recommends that Paul Hooper be re-elected as a Director.
Resolution 5 – Election of Vijay Thakrar
Your Board recommends that Vijay Thakrar be elected as a Director.
Resolution 6 – Election of Stephen Beechey
Your Board recommends that Stephen Beechey be elected as a Director.
Resolution 7 – Re-election of Jon Pither
Your Board recommends that Jon Pither be re-elected as Director.
Resolution 8 – Re-election of John McCall
Your Board recommends that John McCall be re-elected as Director.
The Board has concluded that the Directors standing for election and re-election are effective, committed to their role, and
subject to shareholder approval, should continue in office. Two Directors who were appointed during the year are standing
for election as required by the Company Articles of Association. The biographical details of each Director is set out on pages
28 and 29 of this 2019 Annual Report.
Resolution 9 – Re-appointment of BDO as Auditors of the Company
At each general meeting at which the Company’s accounts are presented the Company is required to appoint auditors to serve until the next general
meeting at which accounts are presented. The Directors appointed BDO during the year and are recommending that they be re-appointed as auditors.
Resolution 10 – That the Audit Committee be authorised by the Directors to determine the auditors’ remuneration
This resolution follows standard practice.
Resolution 11 – 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. This 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 the date of this Notice. This authority will lapse at the conclusion of the next Annual General Meeting,
unless renewed earlier. The Directors have no present intention to exercise the authority proposed to be conferred by this Resolution.
Resolutions 12 and 13 – Disapplication of statutory pre-emption rights
Special resolutions 12 and 13 will allow the Directors to allot equity securities for cash pursuant to the authority under ordinary resolution 11,
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 the date 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 2019.
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 2020 Annual General Meeting of the Company or, if earlier, on 23 October 2020.
The authority sought under this resolution provides the Company with greater flexibility in pursuing its strategy of building a focused 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 12 and 13.
Resolution 14 – 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. This resolution renews the
Company’s general authority to buy its own shares on similar terms to previous years’ authority. The purpose of this Resolution 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 2019). The
Directors will only exercise the authority granted by Resolution 14 (if passed) if to do so would result in an increase in earnings per share and is considered
to be in the best interests of shareholders generally. This authority will lapse on the 23 October 2020, unless renewed earlier.
Recommendation
Your Directors believe that the resolutions set out in Resolution 1 to 14 are in the best interests of the shareholders as a whole and unanimously
recommend that you vote in favour of these resolutions. They intend to do so in respect of their own beneficial holdings.
The Alumasc Group plc Report and Accounts 2019Notes to the Financial Statements continued 109
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 Annual General Meeting 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 Annual General Meeting
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 their 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 online. 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 Annual General Meeting. 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 22 October 2019
(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. Please note that a proxy need not be a shareholder.
8) CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Annual General
Meeting to be held on 24 October 2019 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).
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019
110
Notice of Annual General Meeting continued
Notes to the Notice of Annual General Meeting continued
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 2019 (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 Annual General Meeting 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 Annual General Meeting; 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 Annual General Meeting 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 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)). 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 2019Notes to the Financial Statements continued
List of Subsidiaries
List of Subsidiaries
111
The Group’s subsidiary undertakings as at 30 June 2019 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 Building Products Limited
Levolux Limited
Alumasc Limited
Alumasc Precision Limited
A G Standard Company Limited
Access Floor Systems Limited
AEBP Walling Limited
AIBP 2 Limited
ALK Limited
Alumasc Exterior Building Products Limited
Alumasc Construction Products Limited
Alumasc D Developments Limited
Alumasc D D Limited
Alumasc-Grundy Limited
Alumasc Holdings Limited
Alumasc Interior Building Products Limited
Apex Gutter & Drainage Limited
Benion Limited
Benjamin Priest Group Limited
Benjamin Priest Limited
Blackdown Horticultural Consultants Ltd
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
Green Roof Solutions Limited
Harmer Holdings Limited
Harvey Reed Top Table Limited
Justcredit Limited
Kett Limited
Levolux AT Limited
Levolux Inc
Powke Limited
Rainclear Systems Limited
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 Drainage Products Limited
Wade International Limited
Wade International (UK) Limited
Wergs Limited
Yenots Limited
Principal activity
Country of incorporation
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
Dormant
Hong Kong
USA
Strategic ReportGovernanceFinancial StatementsThe Alumasc Group plc Report and Accounts 2019 112
Business & Operating Locations
Businesses and Operating Locations
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
Housebuilding 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
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
Third Avenue
Halstead
Essex CO9 2SX
Tel: +44 (0) 1787 475151
Fax: +44 (0) 1787 475579
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
Roofing & Water Management
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 Greenroofs
Flax Drayton Farm
South Pertherton
Somerset
TA13 5LR
Tel: +44 (0) 1460 234582
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
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
The Alumasc Group plc Report and Accounts 2019 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