The Alumasc Group plc
Report and Accounts 2020
LOW CARBON BUILDINGS
FOR A SUSTAINABLE FUTURE
We are Alumasc
Content
The Alumasc Group plc Report and Accounts 2020
02
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Our purpose is to provide high quality products,
systems and solutions, the majority of which
manage the scarce resources of water and energy
in the built environment.
Behave with integrity, building strong relationships
and trust with our customers.
Be entrepreneurial and deliver on our promises.
02
Strategic Report
Our Investment Case, Strategy
& Business Model
Chairman’s Statement
Operating Segments
Chief Executive’s Review
Principal Risks & Uncertainties
Sustainability Report
Section 172 Statement
30
Governance
Board of Directors
Corporate Governance Statement
Audit Committee Report
Directors’ Remuneration Report
Directors’ Remuneration Policy 2020
Nomination Committee Report
Directors’ Report
Statement of Directors’ Responsibilities
63
Financial Statements
& Company Information
Independent Auditor’s Report
Financial Statements
Financial Summary
Additional Shareholder Information
Notice of Annual General Meeting
List of Subsidiaries
Business & Operating Locations
The latest online...
More details on Alumasc's products and
services can be found on our website at
www.alumasc.co.uk
Water
Management
(page 06)
Building
Envelope
(page 08)
Housebuilding
Products
(page 10)
Alumasc Group plc
01
Managing COVID-19
Narrative
The Government lockdown in March this year hit the UK construction
industry hard and at the busiest time in the Alumasc year
However, actions already in hand to reduce our cost base and further restrictions
on discretionary expenditure protected margins and reduced the impact on profits
Cash management was outstanding
Having suspended dividend payments at the height of the pandemic in April, the
Group’s resilient performance since, coupled with the encouraging resumption in
construction activity, prompts the recommendation for a resumption in dividend
payments this October
Revenues
2019/2020
£76.0m
2018/2019
£90.1m
Trading Profit*
Underlying PBT*
Underlying EPS
Net Bank Borrowings
Total Facilities
£5.1m
£3.7m
8.2p
£4.3m
£24.0m
£6.5m
£5.6m
12.4p
£5.1m
£24.0m
Final Dividend
Total Dividend
2p per share
2p per share
4.4p per share
7.35p per share
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Having swiftly responded to the threat from the pandemic, the Group has been concentrating on the retention of its key people to drive recovery
and future growth, meeting customer needs within the bounds of rigorous COVID-19 proofing of facilities and the furtherance of our goal to be a
leading supplier to the call for low carbon buildings
* Trading profit is defined in note 4 to the Group financial statements. A summary of non-underlying items and a reconciliation to underlying profit before tax and underlying earnings per share is provided
in note 5 and note 12 to the Group financial statements respectively.
SUSTAINABLE BUILDING PRODUCTS
Conwy Culture Centre
BREEAM Excellent certified Conwy Culture Centre
contributes to a green future with a new Alumasc roof.
Sensitively designed to keep a low profile in its exceptional
surroundings, the new Conwy Culture Centre has recently
opened its doors to the public.
A Blackdown extensive sedum green roof completes the low-lying,
single storey centre, helping it to become part of, and give back to,
the natural environment.
Completed in 2019 on the site of an ex-primary school building,
it is now a modern masterpiece designed to inform and entertain
visitors in a beautiful, relaxing setting.
Alumasc provided a complete roofing solution which included the
waterproofing and green roof system. Blackdown’s extensive sedum
green roof provides a variety of planting, generally comprising
drought tolerant succulents such as sedum, rockery and alpine plants.
An example of an extensive green roof, it was an ideal choice for
the project as it enabled its roofing element to both blend in with
surroundings and positively contribute to the natural environment.
The Alumasc Group plc Report and Accounts 2020
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Our Investment Case, Strategy & Business Model
OUR STRATEGY
To become a leading supplier of sustainable
building products, systems and solutions
to the UK.
Investment case
Strategic objectives
Our profits will grow
from supplying a
growing market
fuelled by
low carbon specifications
and regulation
with premium products,
systems and solutions
backed by
market leading brands,
technical sales and service
a strong balance sheet
and well invested freehold
properties and manufacturing
Read about our approach to sustainability on pages 22 to 27
Grow revenues
at a faster rate than
the UK construction
market
Revenue Growth
• Green Building Focus
• Superior Service
• Premium Brands and Products
• Broad Product Range Innovation
• Online Sales
• Selective Export
• Add-on Acquisitions
Improve operating
margins to grow profit
faster than revenue
Margin Growth
• Valued Technical Support
• Productivity Gains
• Benefits of Scale
• Operational Excellence
Financial Returns
• Growing Operating Margins
• Cash Generation
• Returns on Investment
• Progressive Dividend Policy
Generate superior
financial returns
for shareholders
Read about our engagement with stakeholders on pages 28 to 29
The Alumasc Group plc Report and Accounts 2020
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OUR BUSINESS MODEL
Our business segments
Water Management
Building Envelope
Housebuilding Products
Sustainable building products backed by strong brands
Structural Growth
Specified Products
International Market Development
80%+
80%
Over 80% of Group revenues
relate to the growth sectors
of our long-term structural
growth drivers
80% of Group revenues are
linked to specification and
regulation
Export revenues, currently 15% of Group sales, are being
targeted in selective external markets
Long-term structural growth drivers
Management style
1: Water
management
2: Energy
management
3: Bespoke architectural
solutions
4: Ease of
construction
Attract Talent and Develop Leaders
Drive Cost and Revenue Synergies
Elevate Customer Service
Leverage Strong Brands
Continuous Product Development
Aligning Sustainable Products and Processes
Success measures
Repeat Customers
Motivated Employees
Sustainable Growth
Margin Improvement
Superior Returns
The Alumasc Group plc Report and Accounts 2020
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Chairman’s Statement
A YEAR OF STRONG PROGRESS
AND DEVELOPMENT
The wide range of actions taken
in recent years to reposition
Alumasc as a supplier of sustainable
building products from a tighter,
service oriented operating base,
was proceeding well in the first
8 months of the past financial
year: the assimilation of Wade,
the restructuring of operations,
the cost reduction programme,
product innovation, corporate
simplification, relisting on AIM,
were all making good progress
when the unforeseen asteroid
of COVID-19 struck us all in the
Spring of this year.
Summary
The Construction Industry was affected as
severely as most, with widespread closures
in response to the Government’s lockdown
request in March and minimal activity on sites
that were able to remain open despite the
blanket call.
Fortunately, Alumasc was already well
advanced in a well-publicised programme
to reduce its cost base by £2 million per
annum but responded swiftly to combat this
unprecedented threat, temporarily closing
several of its businesses and requiring the large
majority of employees either to work from
home or to furlough pending developments.
Action to conserve cash included an intense
focus on debt collection and working capital
controls more generally, the deferral of VAT
payments and the cancellation of the interim
dividend that would otherwise have been paid
in April 2020.
“ The long term redirecting
of Alumasc towards
the supply of premium,
sustainable building
products proceeds
methodically and with
considerable effect.”
John McCall
Chairman
The result of this broad range of policy and
mitigation actions has been outstanding:
The loss of £14 million of revenues, mainly as
a direct result of retrenchment by the industry
in the face of COVID-19, resulted in a year
on year fall of £1.4 million in trading profit,
confirming the effectiveness of the reduction in
the cost base and the squeeze on discretionary
expenditure that followed; and the Group's
net bank borrowings of £4.3 million at 30 June
2020, against total facilities of £24 million, were
£0.8 million lower than at the previous year end.
While disappointing given our expectations
after the first 8 months of the year, this is a
highly creditable and reassuring outcome in
the circumstances.
The encouraging news is that by May, there
were signs that the industry was keen to resume
activity within the health guidelines being
applied and, by the end of June, all construction
sites were again active and Alumasc operations
fully operational.
While it is impossible for COVID-19 not to
take centre stage in any report on the past 12
months, the long term redirecting of Alumasc
towards the supply of premium, sustainable
building products proceeds methodically and
with considerable effect. We remain genuinely
excited at the prospects for our Group and
its positioning in the sustainable environment
that continues to evolve. Further detail can be
found in the Chief Executive's review and the
Sustainability Report that follows.
The Alumasc Group plc Report and Accounts 2020 05
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Build Back Better.
Build Back Greener.
Build Back Faster.
These words, deployed by the Prime Minister on 30 June
2020 as a central theme to his New Deal for the Nation,
might have been devised as a strapline for Alumasc.
The summary of our strategy at the front of this Report
highlights quality, sustainability and ease of construction,
each as critical to our (future) success as to the
Government’s road map for recovery and levelling up.
Read about our Operating Segments on pages 06 to 11
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and, hopefully, more permanent goals. While
some things will undoubtedly change for ever,
greater investment in many of the projects
targeted by Alumasc – schools, hospitals,
prisons, infrastructure – is seen both as part of
the solution to the “problem” and as meriting
much greater emphasis in their own right. This
can only encourage the Board to believe that
the changes of recent years have been right for
Alumasc and will position it well in coming years.
John McCall
Chairman
next stage of his career outside the Group
and the exercise to fill this vacancy is well
advanced, with a shortlist established. When
the imposition of COVID-19 controls inevitably
interrupted this process, we swiftly moved
to provide full and effective cover and support
to the Finance team, in particular through
the input of Vijay Thakrar, our Non-executive
Director with 33 years’ experience in major
accounting firms, 22 years as a partner. While
this is no long-term solution, we are fortunate
to have been able to draw on Vijay’s ideal
experience and background to assist in these
unusual circumstances.
Prospects
Managing the unpredicted and unpredictable
effects of the COVID-19 pandemic has required
a combination of very short term – daily
almost – assessment of market conditions,
up and down, with a firm eye on longer-term
The year under review
This year more than most, I refer you to the
Chief Executive’s report that follows for a
detailed review of our activities.
I would like to highlight just three achievements
which have relevance for the future: firstly,
the significant reduction in our cost base
which underpins future performance without
diminishing opportunity. Secondly, the
continuing drive towards sustainable operations
and a sustainable, or “green”, product range.
Thirdly, the immediate and determined response
by all our employees, for which I unhesitatingly
offer the gratitude of all stakeholders, in the
face of an existential threat.
Not only have we come through that test but
we have done so in a manner that demonstrates
our resilience and our strengths and enables
the Board to recommend a return to dividend
payments in respect of the full year. The Board
is recommending a final dividend payment in
respect of the Financial Year ending on 30 June
2020 of 2p per share (2019: 4.4p), making a
total for the year of 2p per share (2019: 7.35p),
payable to shareholders on the Register on
25 September 2020.
Strategic developments
Fortunately as it turned out, the focus of the
past year was always to be on the delivery of
results from previous policy and actions. Hence,
there were no major projects that might have
diverted from the total commitment required
to counter COVID-19.
It would be wrong, however, to downplay
the progress towards outperformance and
sustainability, our twin strategic goals, now
solidly embedded in our strategy, business
model and year on year targets.
Corporate actions
Following the high activity level of recent years,
the only Corporate Action of significance in the
year took place in April with the reset of the
Group’s capital base for the purpose of greater
flexibility. Shareholders voted overwhelmingly in
favour of this action, with 99.9% of votes cast
in favour.
The Boardroom
The appointment of two Non-executive
Directors earlier in 2019 was followed by the
appointment of two Executives as Directors in
September 2019 and we thank Gilbert Jackson
and Michael Leaf for their contribution and
support in a turbulent first year.
In February this year, Andrew Magson, our
long-serving Finance Director, notified his
intention to leave Alumasc to develop the
The Alumasc Group plc Report and Accounts 2020
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Operating Segments
WATER MANAGEMENT
Creating innovative and contemporary,
high performance, products and systems
that manage and attenuate water, together
with integrated “Rain to Drain” solutions.
PROMISING ANOTHER 100 YEARS
OF SMOOTH RUNNING WATER
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ROYAL ALBERT
HALL
Our brands
Royal Albert Hall’s refurbishment with Alumasc
Apex Heritage Cast Iron gutters and downpipes.
Growth drivers
• Legislation aimed at conservation,
attenuation and control of water
Opportunities and
potential
• Outperformance of the UK
• Structural engineering
specifications
• Building regulations
Operations and
supply chain
• Partial UK in-house manufacture
• External supply chain including
suppliers in Europe and North
America
Routes to market
• Merchants and distributors;
some via preferred installers
construction market through
continued market share gain and
introduction of new products
and systems
• Development of further
synergies in our “Rain to Drain”
strategy following the 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
AWMS played an integral part in the Grade One Listed Royal Albert
Hall renovation project. AWMS was chosen for its ability to analyse
and precisely recreate the original gutter and pipe mouldings that
were used in the originally installed systems, therefore contributing to
the preservation of the historic building. Over ten years ago, Alumasc
Rainwater management systems were installed in a similar project at
King’s Cross St. Pancras Station.
With the need to retain as much of the Royal Albert Hall’s original
character and features as possible, Apex Heritage Cast Iron gutters
and downpipes were moulded to exactly replicate the originals. They
were successfully installed, promising another 100 years or more of
smooth-running water management and maintaining the period look
of the building.
Using the traditional skills of expert craftspeople, coupled with modern
manufacturing technology, AWMS can copy and create bespoke
designs for projects which require the utmost attention and sensitivity.
AWMS is the UK leader in metal rainwater systems with an unrivalled
range of aluminium, cast iron & steel and now the new copper and
quartz zinc systems.
Our products in action
Read more on our sustainable products on pages 26 to 27
The Alumasc Group plc Report and Accounts 2020
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Operating Segments continued
BUILDING ENVELOPE
Integrated roofing and walling solutions
including the supply of solar shading,
architectural screening and balcony
& balustrading systems.
TESTED, TRIED AND TRUSTED
TO PROVIDE DURABILITY WITH
SUSTAINABILITY
Credit: Chris Waterworth Architects
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Opportunities and
potential
• Business development
opportunities arising from the
new Alumasc Building Envelope
specification sales approach
together with Alumasc Roofing
• Development of the 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
Our brands
Growth drivers
• Architectural specification
• Building regulations relating
to energy management
• Demand for sustainable solutions
Operations and
supply chain
• Partial UK manufacture providing
fabrication, assembly and
finishing operations
• Diversified specialist supply chain
of mainly UK and European
based suppliers
• Levolux: Installation of certain
systems in the UK
Routes to market
• Direct to main building
contractors in the UK
• Through general contractors
and installing sub-contractors
in North America
Our products in action
Read more on our sustainable products on pages 26 to 27
DEPARTMENT
OF WORK AND
PENSIONS
Building Envelope solution provided to one of the
largest new office developments in Wales.
Alumasc were chosen by the designers and contractors BECT to provide
a building envelope solution for what would be the largest new office
development to be built in the Welsh valleys. The client for this building
was Rightacres of Cardiff to construct premises for the Department of
Work and Pensions.
Starting on site in December 2018 the building is now nearing
completion and has a final construction cost of circa £27 million to
provide 133,000 square feet of office space housing some 1,700 staff.
An Alumasc roofing system comprising a Derbigum warm roof build up
was designed to provide longevity and assurance with a proven life cycle
benefit of over 60 years. It was a full, tapered insulation scheme to allow
designated drainage to Alumasc Harmer outlet systems.
Through careful consideration by the design team this proposal was
selected due to the outstanding system fire rating and the warranty.
The building insurers were involved in the selection process in order
to meet and exceed their own strict requirements.
Levolux designed and installed the 300mm aerofoil fins in standard
PPC fitted back to a steel frame with a 200 x 50mm box section Infiniti
system. This provides timber effect curtain wall areas with thermally
broken brackets as an aesthetic design to the front elevation of the
building, thereby breaking up the overall design with a highly visually
pleasing façade.
Right from the very early design stage and throughout construction
Alumasc was available to provide assistance and technical advice for
modifications to ensure that a long-term working relationship was built
upon trust and integrity, ensuring that the project requirements were
delivered within budget.
The Alumasc Group plc Report and Accounts 2020
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Operating Segments continued
HOUSEBUILDING PRODUCTS
Timloc Building Products is one of the UK’s
leading manufacturers of building products
for the residential market. Based in Howden,
East Yorkshire, Timloc designs, manufactures
and supplies building product solutions from
ground level up to the roof ridge.
Waste product to
recycling plant
Recyclable at end
of building life
Recycled into
pellets
Products built
in for lifetime
of house
Manufactured
into Timloc
products
DELIVERING NEXT DAY
BUILDING A GREENER FUTURE
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Our brand
Growth drivers
• Growth in UK house building
demand and current under
supply of houses
• Legislation and building
regulations
• Ease of construction
Operations and
supply chain
• Nearly all in-house manufacture
Routes to market
• Merchants and distributors
• House builder specification
Opportunities and
potential
• Outperformance relative to
the UK 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
Our products in action
Read more on our sustainable products on pages 26 to 27
Actual
Actual
Actual
Goal
LIFETIME,
NOT SINGLE-USE
Multiple-use product designed for
the lifespan of the building.
Timloc’s ability to deliver products next day with low carriage paid
order values is what sets it apart from competitors and has enabled
it to become market leader within its sector.
Timloc Building Products are also at the forefront of sustainability
within their industry. Manufacturing multiple-use products that are
designed for the lifespan of a building and are recyclable at the end
of the building life.
Timloc has implemented a circular economy for the production and
consumption of many products. This regenerative system means
recycled materials are being used to make recyclable products. Currently
over 75% of Timloc products are manufactured from recycled materials.
Timloc’s continued innovation and development have seen the
introduction of several new products and ranges over the last 12 months.
Recent launches include Invisiweep, the almost invisible wall weep, and
Adapt-Air, the one-piece ducting to airbrick adapter kit.
Timloc has established a reputation for consistently delivering
exceptional levels of customer service and has been tried, tested and
trusted by its customers for over 50 years. Trust Timloc to Deliver.
The Alumasc Group plc Report and Accounts 2020
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Chief Executive’s Review
GOOD PERFORMANCE
AND STRONG RESULTS
Financial highlights and Overview
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)
2019/20
76.0
3.7
2.7
8.2
6.3
2.0
2018/19
90.1
5.6
3.9
12.4
10.1
7.35
% change
-16%
-34%
-31%
-34%
-38%
-73%
* Revenue and profit from continuing operations excludes the revenues and profits of Alumasc Facades prior to its disposal
on 31 October 2018 and its classification as a discontinued operation and non-underlying item. A reconciliation of underlying
to statutory profit before tax is provided in note 5 to the Group financial statements.
“The Group has built
on its strengths as a
supplier of sustainable
systems and products
and has delivered
substantial operational
efficiencies.”
Paul Hooper
Chief Executive
In recent years, Alumasc’s strategy has been to
re-position the Group to become a dedicated
supplier of premium building products to
the UK construction industry, while actively
seeking opportunities to grow internationally.
Simultaneously, the Group has built on its
strengths as a supplier of sustainable systems
and products and has delivered substantial
operational efficiencies. For instance, it achieved
its stated objectives during the year to move
from ten operating sites to six. Total annualised
cost savings of £2.4 million were achieved in the
year versus an original target of £2.0 million.
In line with other businesses Alumasc was affected
by COVID-19, particularly in April and May during
lockdown. Nevertheless, the Group is pleased
to report a strong recovery from June onwards
so far, with July 2020 being a record for the
month and August 2020 trading also very strong.
However, management remains appropriately
cautious given the limited visibility as to how the
wider economic situation will evolve and with the
potential for a second wave of COVID-19.
Overview of performance
Alumasc’s performance for the year was resilient
against the difficult backdrop that included
the run up to the December general election.
Our second half year was severely impacted
by the COVID-19 pandemic and subsequent
lockdown from 23 March 2020, with immediate
impact on all of our operations in some form.
Further detail is provided in the separate
COVID-19 section.
The Alumasc Group plc Report and Accounts 2020 13
• Leverage core strengths. 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.
This objective is being achieved, particularly
in the second half of the year with the
order book strengthening for supply
only projects;
• Export opportunities. Invest in local
technical sales resources to accelerate
growth in the profitable Levolux business
in North America. Current revenues in this
market are circa £3.0 million per annum.
This objective was achieved with a US-
based Senior VP appointed in the final
quarter of the year;
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• Reduce overhead. We announced a
significant restructuring of the existing
Levolux operational and overhead cost
base, with fixed cost savings of £1.0 million
targeted in the Group’s 2019/20 financial
year, and further significant annualised
savings expected in 2020/21. This includes
the relocation of sites.
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Meanwhile, Levolux accelerated its export
revenue by 14% and grew its year end export
order book by 7% to £3.5 million. At the end
of the final quarter, an experienced US Senior
VP of Sales has been appointed in the USA.
We anticipate good further growth in the
USA from this development.
3. Grow profit at a faster rate than revenue
by improving operating margins
The Group’s underlying operating margins
reduced from 6.5% to 5.5%, representing
a creditable result against such a sharp
decline in revenue. Prior to the lockdown
on 23 March, the Group was close to
achieving its stated objective to improve its
operating margin by around 2 percentage
points, having at that stage improved by 1.8
percentage points year to date at the end
of February 2020. The targeted cost savings
plans of £2.0 million announced a year ago
were exceeded with circa £2.4 million cost
savings actually delivered, underpinning the
Group’s performance prior and subsequent
to lockdown.
Executing our priorities in FY2020
Management accelerated the pace of strategic
development during its 2020 financial year:
1. Levolux business improvement plan
The objective of this plan was to return
Levolux to sustainable profit. At the end of
the prior year the Board announced a refocus
of the business to those areas where it could
clearly differentiate and add most value
to customers and therefore shareholders.
This included concentration on developing
the more profitable areas of the business,
simplifying operational delivery and reducing
risk. The key elements have been:
The above was achieved with year on year
savings of £1.8 million being achieved,
significantly ahead of the target. In addition,
Levolux moved out of its two leasehold
facilities into the Alumasc freehold facility in
St Helens. Alumasc continues to believe that
Levolux, as part of the Building Envelope
division, has a great future potential
and continues to be one of the Group’s
strongest brands.
• Integrated sales approach. Incorporate
2. Develop further opportunities for
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
increases Levolux’s existing market reach
and leverages existing strong customer
relationships.
This objective is being achieved and
examples where the ‘cross-sell’ and single
expert service has been welcomed by
specifiers and clients are growing. This has
been particularly apparent in the second
half year as the new concept developed;
specification cross-selling
There remains a significant future opportunity
for the Group from offering an integrated
“Building Envelope” of exterior building
products facilitating the integration of
walling, roofing, balconies, solar shading
and integrated aluminium detailing. This
not only provides a full external envelope
solution but also mitigates both the client’s
and contractor’s risks by ensuring that the
horizontal and vertical planes are detailed
to remove tolerance and interfacing detail
issues. Closer working between divisions
has led to cross-selling opportunities, for
example on page 27 of this report is shown
a Water Management division sale of three
systems with the Building Envelope’s Roofing
refurbishment system at Nottingham Trent
University. This will continue to be a focus
going forward.
While our newly formed Building Envelope
division suffered a loss in the year when Levolux
was significantly restructured, it is encouraging
to report that, despite the impact of COVID-19,
it returned to profit in the final two months.
The star performer in the year was the Water
Management Division (AWMS), delivering a
higher profit than the prior year even despite the
lockdown. This is testament to several factors,
including the strength of its brand and quality
of its sustainable systems in the market place,
and the excellent technical support given to
customers. The business also took swift action
to ensure that adequate pricing was achieved
commensurate with the trading environment.
Simultaneously, unprofitable products were
withdrawn and significant cost savings were
made which were further enhanced by ongoing
synergies achieved from the integration of
Wade, acquired in January 2018. Not only has
the product range been enhanced but the spare
capacity in AWMS Wade (Halstead) allowed
for Slotdrain manufacturing to be moved from
rented facilities in Dover to the Alumasc owned
Halstead facility. The overall cost savings are
estimated to be circa £0.9 million. In addition,
other savings were made across the division.
Throughout the lockdown, our specialist drainage
and rainwater distributor, Rainclear, stayed
operational, taking significant market share.
Pleasingly, its online business grew by 64%.
Our Housebuilding Products division also
performed at record levels up until the lockdown
and succeeded in launching several new products
into its industry leading service model.
Strategy and performance against
strategic objectives
Alumasc’s strategy is to:
1. Build leading positions in specialist markets
to grow revenues faster than the UK
construction market
The impact of COVID-19 makes any
analysis of the most recent year unreliable
when compared with the consistent
outperformance of previous years.
2. Augment UK revenue growth through the
development of selected export markets
Compared to the prior year in which export
revenues were 10% of Group revenues,
during the year under review, export revenue
accelerated to become 15% of Group revenue.
Increased export investment in both Sales and
Marketing for AWMS (Gatic and Wade) grew
export sales for this business and the year-end
export order book for AWMS stood at £4.8
million (versus £1.0 million in the prior year).
Included in this was the win of this division’s
largest ever export order for Gatic at Hong
Kong Chek Lap Kok’s third runway.
The Alumasc Group plc Report and Accounts 2020
14
Chief Executive’s Review continued
3. Implementation of a more cost-efficient
5. Proactive management of our portfolio
operating structure
Following the move of the AWMS Gatic
Slotdrain manufacturing from a leased facility
in Dover to the freehold AWMS’s Wade facility
and the restructuring of Levolux described
above, some c.£0.6 million per annum has
been saved in leased property costs. The
objective to move to six facilities from ten
has also been achieved.
Following the prior year simplification of
the pensions structure we will have saved
around £100k per annum in pension scheme
running costs.
Total annualised cost savings of £2.4 million
were achieved in the year versus a target of
£2.0 million.
4. Prioritising and focusing investment to drive
profitable growth
Following two years in which combined
capital expenditure exceeded depreciation
by £2.7 million, an investment of £1.7 million
in the year under review was around £0.3 million
below depreciation following a deliberate
moderation of spending when the impact
of the COVID-19 pandemic became apparent.
Once again investment was focused on our
businesses with the greatest manufacturing
activity: our Water Management business
and Timloc. Within this was an investment
in tooling at strategic suppliers for the Water
Management business which has improved
manufacturing efficiencies and significantly
lowered the carbon footprint of our suppliers
along with ensuring continuity of supply.
Investment continued at Timloc, to support
new product launches. The benefit of the
investments is evident in the relatively
strong performances of these businesses.
Investment in new people was directed into
expanding the sales reach, notably in the
Building Envelope division where previously
weaker areas of the UK now have a stronger
senior sales representation. Growing Levolux
and Water Management divisional export
sales have also been a focus.
of businesses
The Group continues to seek to grow
through bolt-on acquisitions and there are
no plans to make divestments. Whilst recent
focus has been on navigating the challenges
associated with COVID-19, the acquisition
strategy remains relevant.
6. Remaining closely aligned with the
sustainability agenda
With the ever increasing low carbon and
sustainable agenda Alumasc is in a perfect
position to increase supply solutions to
its customers that meet these criteria.
Not only does it have strong positions in
energy management through its presence in
solar shading, which can reduce the energy
consumption required to cool a building, but
it also has innovative Roofing solutions, such
as Olivine, which can actively reduce CO² in the
environment. Within the Water Management
division, the increasing scarcity of water can
be managed very successfully. There are
examples where both divisions combine to
provide a ‘Blue Roof’. This, in effect, produces
an equivalent to an attenuation tank on a flat
roof allowing the controlled egress into the
water effluent systems while saving clients the
significant alternative cost of an attenuation
tank installation. Our Housebuilding Products
division has also significantly contributed to
the energy management within housing with
its sealed ventilation systems, cavity closer
and radiator seals. It is constantly innovating
and launching new products that deliver
sustainable solutions for our clients.
All divisions are totally committed to, and
insist on, the use of recycled material where
appropriate. Alumasc is very proud to be able
to state that 75% of the Group’s products are
sourced from recycled material.
The relentless pursuit of both innovative
energy and water management solutions
combined with the increasing use of recycled
material will continue. Alumasc is already
very well placed in this regard. Our bespoke
approach to product and specification means
customers will be able to meet more stringent
environmental criteria in the years ahead.
Overview of performance
(a) Continuing operations
Revenue analysis
With so many variables created by the COVID-19
impact we have decided to suspend our
comparator to the UK construction market.
In the year some revenue reduction took place
from the review of profitability by product
and the subsequent targeted product deletion
and price adjustment actions particularly in the
Water Management division. During this time
it is believed that market shares have been held
and, in some cases, they have grown partly due
to the availability of high quality products with
professional service at a time when competitors
were closed.
Gross margins
Until the lockdown in March (i.e. to
February 2020) the Group’s Gross Margin was
running at 30.3%, 1.2% ahead of the prior year.
Remarkably, despite the significant disruption
of the lockdown, by the end of June the full year
Gross Margin was 29.7%, just 0.1% behind the
prior year, a great testament to the management
action taken and to the strength of Alumasc’s
brands. This overall performance was assisted
by price increases to recover rising costs and
the action taken on cost reductions.
Net fixed and operating expenses
Net fixed and operating expenses reduced by
£2.4 million (excluding any furlough benefit)
during the year. However, there was a small
percentage of sales increase in the cost
areas despite the impact of lockdown on sales.
This would have been much higher were it
not for the swift action taken in March 2020.
Underlying operating profit
Underlying operating profit was £4.2 million
compared with £5.9 million in the prior year.
The reduction was brought about by the impact
of COVID-19 and the resultant temporary
shutdown of our Housebuilding division and
two thirds of the Water Management division.
Around five weeks of trading were lost following
the shutdown by many builders merchants and
the cessation of some site activity. Alumasc
took swift action and initially had to furlough
293 (68%) employees while a further 83 (19%)
moved to work from home. Site activity did not
return in any meaningful way until June when
the effect was still a slowdown in activity with
contractors having to abide by COVID-19 safety
requirements. June was a strong month for the
Group and by the end of June only 38 staff (9%)
remained furloughed.
The Alumasc Group plc Report and Accounts 2020 Bank interest
Bank interest of £0.3 million was similar to the
prior year. This was assisted by swift actions to
conserve cash during and beyond the lockdown
period and is despite the decision taken by the
Board in May to fully draw down the £20.0
million committed Revolving Credit Facility.
Underlying profit before tax
Underlying profit before tax was £3.7 million
(2018/19: £5.6 million) reflecting the impact
of COVID-19 and the subsequent lockdown
on reduced revenue.
Non-underlying, non-recurring items
Non-underlying and non-recurring items
(relating to continuing operations) amounted
to a £1.3 million net cost in the period
compared with a £4.6 million net cost in the
prior year. In 2019/20, the larger items in this
category were restructuring and relocation
costs of £0.8 million, mainly associated with
the continued cost reduction programme
at Levolux. Further details are given in the
Financial Review.
(b) Discontinued operations and profit
(after tax) for the year
The net gain from discontinued operations
was £0.3 million, reflecting the deferred
consideration sales proceeds received in the
current financial year in accordance with the
Alumasc Facades business sale agreement.
The Group’s resulting overall statutory profit
(after tax) for the year was £2.3 million
(2018/19: £3.6 million).
Sustainability in action
Percentage of Product
Range manufactured
from Recycled Materials
Actual
2017
Actual
2018
Actual
2019
Goal
2020
15
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Timloc takes its responsibility to
protect the environment very seriously
and aims to help reduce plastic waste
in the building industry. Timloc’s
products are designed for long-life
use, it builds sustainable, durable
products which are recyclable at the
end of their useful life.
In recent years Timloc has committed to
reducing its environmental impact through
investment in recycled materials and the
majority of its products are manufactured
using recycled materials. The plastics
recycled originate from a range of sources
such as plastic bottles, trays and car parts,
e.g. bumpers and dashboards.
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Any waste material generated as a by-product
of the manufacturing process is collected
and granulated onsite and returned to the
material store in the factory to ensure no
material is wasted. In addition, 100% of
Timloc’s packaging is recyclable.
This year Timloc achieved its objective to
manufacture 75% of its products from
recycled polymers further reducing its
requirement for virgin polymers and
consequently protecting the environment.
The product 1201, a telescopic underfloor
ventilator (also referenced on page 26) is
produced from 100% recycled material.
Read about our approach to sustainability on pages 22 to 27
The Alumasc Group plc Report and Accounts 2020
16
Chief Executive’s Review continued
Water Management
2019/20 performance highlights
• Revenue: £33.7 million
(2018/19: £38.9 million)
• Underlying operating profit*:
£4.8 million (2018/19: £4.3 million)
• Underlying operating margin*: 14.3%
(2018/19: 10.9%)
• Operating profit: £4.6 million
(2018/19: £3.6 million)
* Prior to restructuring costs of £0.1 million in 2019/20
(£0.6 million in 2018/19) and brand amortisation
charges of £0.1 million in both years.
Building Envelope
2019/20 performance highlights
• Revenue: £33.2 million
(2018/19: £39.8 million)
• Underlying operating (loss) / profit*:
£(0.9) million (2018/19: £0.6 million)
• Underlying operating margin*:(2.8)%
(2018/19: 1.4%)
• Operating loss*:£(1.4) million
(2018/19: £(2.1) million)
* Prior to restructuring costs of £0.3 million in 2019/20
(£2.5 million in 2018/19) and brand amortisation
charges of £0.2 million in both years.
Housebuilding Products
2019/20 performance highlights
• Revenue: £9.1 million
(2018/19: £11.4 million)
• Operating profit: £1.2 million
(2018/19: £1.7 million)
• Operating margin:13.7%
(2018/19: 15.2%)
Divisional review
(a) Water Management
Despite the COVID-19/lockdown challenges in
the final quarter this division produced a higher
profit (£567k (13%)) than the year before.
The drivers of the improvement were not
revenue related (which reduced by £5.2 million
(13%)) but by selective price increases, product
portfolio management, cost reductions (partly
brought about by the move of Gatic Slotdrain
manufacturing from Dover to Wade’s freehold
facility), and general efficiency improvement
and tight cost control.
Water Management’s operating profit return
on sales increased to 14.3% from a prior year
of 10.9%. This was a very encouraging performance
and is indicative of improved margins.
(b) Building Envelope
The division sells principally into the UK
commercial new build construction market
which, following the previous year, continued
to experience falling demand through the year,
accelerated inevitably in the final quarter.
As described above Levolux’s turnaround was
generally on track though affected in the first
half year by below expected performance in
a handful of construction contracts entered
into prior to the restructuring of the business
and relating mainly to balcony work. Levolux’s
restructuring has taken significant cost out of
the business and when combined with a more
selective strategy for work that it will target with
a focus on supply only, along with a stronger
push into export markets, the benefits began
to show through in the final quarter.
Alumasc Roofing’s performance was resilient
in the refurbishment sector. This was the most
successful element of the division’s performance
and, while Roofing did not manage to match
its prior year performance, it enters the new
financial year with a significant order book and
with its strongest sales team ever. This bodes
well for the new financial year.
(c) Housebuilding Products
Timloc, our Housebuilding products business,
continued to perform well up until the lockdown,
with further operational improvements in turn
benefitting margins. However, the impact of
lockdown on this particular sector has been
well documented.
New product development continues to be
an important factor in Timloc’s success and it
launched a new product virtually in every month
of the first half year including AdaptAir, the
Ducting to Airbrick Adaptor, which not only has
a cost saving benefit for housebuilders but also
improves Health & Safety on site by taking out
the requirement for core drilling.
Timloc receives very positive feedback from its
customers on its excellent service and promotes
this through its #Trust Timloc to deliver strapline.
With its constant focus on improving efficiencies,
new product development and customer service
Timloc is well positioned as housebuilders
recommence work on site post lockdown and
the housebuilding sector catches up with
significant latent demand.
Outlook
In light of the COVID-19 impact on construction
activity, the Board is taking a cautious view on
2020/21. However, the significant £2.4 million
of cost savings taken in the last financial year
should stand the Group in good stead for what
could be uncertain times. Notwithstanding this
the Group has had a strong start to the new
financial year.
The Board believes that Alumasc’s strong
strategic and market opportunities, which
underpin its established track record over many
years of outperforming the UK construction
market, together with:
• the excellent Water Management division’s
performance which is benefitting from both
its UK and export re-focused strategy, as well
as its extensive online offering;
• the formation of the Building Envelope
division to drive specification cross-selling;
• the major restructuring of the Levolux
business within the Building Envelope division;
• focused investments in new products,
manufacturing capability and automation;
• investments in sales resources to grow the
business both in the UK and internationally;
• lower fixed costs and actions taken to deliver
operational efficiencies across the Group; and
• close alignment to the sustainability agenda,
position Alumasc to grow organically in the
current financial year and beyond.
As ever, the Board is confident in its ability
to deliver operationally but cannot ignore
the unknowns ahead with regards to the
macroeconomic climate.
The Alumasc Group plc Report and Accounts 2020 17
Financial Review
Reconciliation of underlying to statutory profit before tax
Underlying profit before tax for the 2019/20 financial year of £3.7 million exceeded statutory profit
before tax of £2.7 million for the reasons shown in the table below:
Underlying profit before tax
Brand amortisation
Net IAS 19 defined benefit pension scheme costs
Restructuring & relocation costs
AIM listing costs
Net gain from business disposals (pre-tax)
Statutory profit before tax
2019/20
£m
3.7
(0.2)
(0.3)
(0.8)
–
0.3
2.7
2018/19
£m
5.6
(0.2)
(1.2)
(3.0)
(0.2)
2.9
3.9
The reconciling items were:
• Amortisation of acquired brands of £0.2 million
(2018/19: £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 pension scheme
costs of £0.3 million (2018/19: £1.2 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 over ten years. The value of the
charge is determined by actuarial assessment
and the 2019/20 charge represents the non-
cash notional financing cost of the Group’s
pension deficit due to the time value of
money. 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 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 prior year.
• One-off restructuring and relocation costs
of £0.8 million (2018/19: £3.0 million)
mainly associated with the continued cost
reduction programme at Levolux, with costs
incurred due to relocating certain functions
and operations from two leased sites to
our freehold property at St Helens, and
staff changes, see note 5 to the financial
statements. The cost in the prior year related
to the redundancy and operational costs of
relocating Gatic Slotdrain production from
Dover to Wade’s freehold factory in Essex and
the aforementioned Levolux relocation. All
of these actions helped to enable Alumasc to
reduce fixed costs by circa £2.4 million in the
2019/20 financial year.
• The net gain from business disposals reflects
the deferred consideration sales proceeds of
£0.3 million received in the 2019/20 financial
year in accordance with the Alumasc Facades
business sale agreement. The prior year
comparator represents 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.
Taxation
The Group’s underlying effective tax rate was
20.3% (2018/19: 20.4%), 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 2020/21 financial year.
The Group’s effective tax rate on statutory
profit before tax was 16.4% (2018/19: 7.4%).
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 8.2 pence (2018/19: 12.4 pence).
This reduction is consistent with the lower
underlying profit before tax for the year for the
reasons described in the operational review.
Basic earnings per share of 6.3 pence (2018/19:
10.1 pence) reflected the reduction in
underlying profit before tax for the year, partially
offset by the lower level of net one-off costs in
2019/20 relative to 2018/19 described above.
Dividends
The Board is recommending to shareholders a
final dividend of 2 pence per share (2018/19:
4.4 pence), applicable to members on the share
register on 25 September and to be paid on
30 October. The interim dividend for 2019/20,
that was due to be paid on 7 April 2020 at a
cash cost of £1.1 million, was cancelled as part
of the Group’s COVID-19 cash conservation
programme, making a total dividend for
the year of 2 pence per share (2018/19:
7.35 pence).
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The Alumasc Group plc Report and Accounts 2020
18
Chief Executive’s Review continued
Investment in growth, cashflow and net debt
Summarised Cashflow Statement
EBITDA*
Change in working capital
Operating cashflow
Capital expenditure
Interest
Tax
Pension deficit funding
Finance lease payments
Dividend payments
Sub total
Facades / other
Net cashflow
Net bank debt at the year end (See note 27)
2019/20
£m
6.2
2.5
8.7
(1.7)
(0.3)
(0.1)
(2.3)
(0.5)
(1.6)
2.2
(1.4)
0.8
4.3
2018/19
£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
* EBITDA: Underlying operating profit from continuing operations before interest, tax, depreciation and amortisation.
Statement of financial position
and return on investment
The Group’s net assets and shareholders’ funds
reduced from £25.4 million at the beginning of
the financial year to £19.8 million at 30 June 2020,
with the impact of pension scheme actuarial
losses and the payment of the prior year’s final
dividend in October 2019 more than offsetting
retained profit after tax for the year.
The Group defines its capital invested as the
sum of shareholders’ funds, excluding net bank
debt, pension deficit (net of tax) and lease
liabilities. Following the adoption of IFRS16,
Leases, the Group’s capital invested increased
by £5.0 million, reflecting the Group’s leased
properties being brought onto the statement
of financial position for the first time. Post tax
return on investment, with property leases
included as part of capital invested for the
whole 12 month period, was 7.2% (2018/19:
10.2%, re-stated to include property leases),
reflecting the lower underlying profit in the year.
As per the Group’s announcements on 27 March
and 1 April 2020, the Group responded quickly
to the COVID-19 outbreak to protect the
business, its employees and all our stakeholders.
At this time, the Group also acted promptly
and decisively to conserve cash in light of
uncertainties caused by the pandemic, including
suspending dividends, defined benefit pension
contributions (in agreement with the pension
scheme trustees) and capital expenditure,
imposing very tight controls over operating
expenditure and accessing government support
in the UK (such as the Job Retention Scheme
and tax deferrals). Strong focus has been given
to cash collections from debtors while creditors
have continued to be paid on a timely/agreed
basis to protect supplier relationships.
As a result of all of these actions, the Group
recorded a net cash inflow for the year of
£0.8 million and at 30 June 2020 the Group
continued to have a modest level of net debt
of £4.3 million (30 June 2019: £5.1 million).
The net cash inflow in the year was after capital
investment of £1.7 million, which was £0.3
million below the depreciation charge for the
year, and a working capital inflow of £2.5 million,
both reflecting the cash conservation measures
introduced in the last quarter of the financial year.
Pensions
The Group’s IAS 19 defined benefit pension
scheme deficit for accounting purposes at
30 June 2020 was £19.3 million (30 June 2019:
£13.0 million), with an increase in the valuation
of gross pension liabilities due to reduced gilt
yields partially offset by a good investment
performance, including the benefit of interest
rate hedging within the investment portfolio.
The formal triennial valuation of the merged
Alumasc Group Pension Scheme at 31 March
2019 was finalised during the financial year.
This showed a significantly improved deficit
of £22.4 million compared with £33.0 million
in 2016, reflecting cash contributions from
Alumasc, above target investments returns,
mortality experience and changes to future
mortality expectations in the intervening period.
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 £20.0 million, with an initial
expiry date of April 2022 and two single year
extension periods;
• Overdraft facilities, repayable on demand,
of £4.0 million.
Going Concern and COVID-19
In assessing Going Concern to take account
of the uncertainties caused by COVID-19, the
Group has modelled a Base Case (BC) trading
scenario on a “bottom up” basis. Given the
continuing uncertainty regarding the impact
of COVID-19 (including potential further waves
of the pandemic) on the economy, customer
behaviour and ultimately on the Group’s
performance, the Group has also modelled
increasingly stressed scenarios compared to
BC (which assume 10% (“Mid Case”) and
20% (“Low Case”) revenue reductions from
BC, along with increasingly conservative
assumptions in these scenarios regarding cash
collections from debtors). Under the lowest
point in these stress tested scenarios (which
exists during April 2021), the Group retains
headroom of at least £6.7 million against its
total banking facilities for the next 13 months
to September 2021.
The Alumasc Group plc Report and Accounts 2020
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Introduction of new accounting
standards
The Group implemented IFRS 16 during the
financial year and details of the impact are
provided in notes 2 and 31 to the financial
statements. In essence, the impact was to
bring the Group’s leased properties onto the
statement of financial position for the first
time. This increased both property, plant and
equipment and lease liabilities each by £5.0
million on 1 July 2019 when the new accounting
standard was adopted. Therefore, the Group’s
capital invested also increased by £5.0 million,
with no change to shareholders’ funds at the
date of adoption. The full year impact on the
Group’s income statement was an increase in
EBITDA by £0.5 million; increase in depreciation
charge by £0.4 million and increased financing
charges by £0.2 million, thereby reducing profit
before tax by £0.1 million.
Paul Hooper
Chief Executive
8 September 2020
“As per the Group’s
announcements on
27 March and 1 April 2020,
the Group responded
quickly to the COVID-19
outbreak to protect the
business, its employees
and all our stakeholders.”
The Group has been in regular dialogue with
its main bankers, HSBC, as its scenario plans
have developed and has pro-actively and
transparently shared the aforementioned
scenario models. While they show headroom
of £6.7 million at the lowest point in the Low
Case scenario for the next 13 months, they did
indicate potential Bank covenant breaches at
the two testing points in the period, December
2020 and June 2021, due to the impact of
COVID-19 on revenues and profits in the Mid
and Low case scenarios modelled. Although
current trading levels would suggest that the
sensitised scenarios are unlikely to materialise,
given the uncertainties caused by the pandemic
formal agreement was reached with HSBC
to relax the relevant covenant testing for the
tests arising in December 2020 and June 2021
to the levels that the Board are satisfied can
be met in light of the scenarios modelled and
relevant cost saving measures that would be
implemented in such scenarios.
Having taken into account all of the afore-
mentioned comments, actions and factors
in relation to Going Concern and the potential
impact of COVID-19, and in light of the bank
facility headroom under various scenarios,
the Directors consider that the Group has
adequate resources to continue trading for the
foreseeable future. Accordingly, they continue
to adopt the Going Concern basis in preparing
the financial statements. See note 1 to the
financial statements for the full Going Concern
assessment.
The Alumasc Group plc Report and Accounts 2020
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Principal Risks & Uncertainties
RISK MANAGEMENT EMBEDDED IN STRATEGY
AND DAY TO DAY BUSINESS DECISION MAKING
Key for change since last year
Increase
Decrease
No change
Risks and uncertainties
Mitigating actions taken
Change
COVID-19
Comment
The Coronavirus pandemic initially
impacted a number of our clients’
business; some closed (but not all)
or could not accept delivery, until our
customers opened their businesses.
Government guidelines: Although initially
exempting the Construction Industry,
some customers were concerned
about social distancing and new ways
of working, leading to some temporary
closures/delay.
New ways of working have been
required under Government guidelines
to protect employees and customers
from COVID-19 and we continue to
monitor this.
• The company took swift action and closely monitored its working capital and introduced a number
of prudent cost control measures to conserve cash. This included delaying capital expenditure and
temporarily freezing non-essential new hires. The business also utilised the UK Government job retention
scheme, as needed.
• The health and wellbeing of staff was a primary concern and additional communication channels
were established.
• Costs were saved through the elimination of travel and subsistence expenses to de-minimis amounts.
• Where possible, staff switched to working from home without disruption. Three manufacturing
sites were temporarily closed. Timloc re-opened on 14 April 2020 and AWMS (Burton Latimer
and Halstead) on 27 April 2020 on a phased basis.
• Contingency measures were implemented. Parts of our business (Gatic, Levolux, Rainclear and Roofing)
traded throughout the UK lockdown and our manufacturing sites were closed for a few weeks (as our
customers had closed their sites).
• Supply chain remained resilient and pre-Brexit stocking of products ensured demand could be met.
• Exports and internet sales continued during the UK lockdown period.
• Some opportunities and mitigations used during the pandemic that improve the business are being
implemented. Best practices and new ways of working have been put in place.
• All Government guidelines on Health & Safety, including social distancing were implemented
and continue to be followed on all sites.
• Ongoing monitoring of the COVID-19 pandemic and external assurance provided to ensure compliance
with Government regulations and best practice.
Economic uncertainty
and Brexit risks
Comment
As a result of COVID-19 there is
macroeconomic uncertainty on a global
basis. In addition, markets could be
volatile post Brexit, and this may have
an impact on housebuilding/house-sales/
construction industry. Government
spending on infrastructure projects
needs to be maintained.
• Strategic positioning in markets/sectors anticipated to grow faster than the UK construction market.
• Development of export sales opportunities, especially for Levolux (particularly in North America) and
Alumasc Water Management (particularly in Asia, the Middle and Far East).
• Revenues are derived from a variety of end use construction markets.
• Development of added value systems and solutions that are either required by legislation, building
regulation and/or specified by architects and engineers.
• Continuous development and introduction of innovative green 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 associated with Brexit.
• Brexit developments being monitored closely, strong relationships monitored and regular dialogue with
key European suppliers. Contingency planning for key residual risk areas, including increased inventory
of materials/products imported from the EU.
Health and safety risks
Comment
The Group has a strong overall
track record of health and safety
performance, with the number of lost
time accidents significantly reduced.
• Health and safety is the number one priority of management and the first Board agenda item.
• Risk assessments are carried out and safe systems of work documented and communicated.
• All safety incidents and significant near misses are reported at Board level monthly. Appropriate
remedial action is taken.
• Group health and safety best practice days are held twice a year, chaired by the Chief Executive.
• Annual audits of health and safety are conducted in all Group businesses by independent consultants.
• Specific focus on improving safety of higher risk operations, with external consultancy support as needed.
Staff retention and
recruitment risks
Comment
Including recruitment, retention,
succession and people development.
Risk of loss of skills, ability to innovate
and improve.
• Increasing focus of Board and Executive Committee on staff retention and reward, supported
by HR and head-hunter advice.
• Market competitive remuneration/incentive arrangements.
• Employee numbers and changes monitored in monthly subsidiary Board meetings.
• Key, high performing and high potential employees identified and monitored.
• Training and development programmes.
• The Remuneration Committee considers retention and motivation when considering the
Remuneration framework.
• Succession planning.
The Alumasc Group plc Report and Accounts 2020 21
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Risks and uncertainties
Mitigating actions taken
Change
Product/service differentiation
relative to competition not
developed or maintained
Comment
Innovation and an entrepreneurial
spirit are encouraged in all Group
companies. Over 15% of Group
revenues relate to products launched
in the last three years.
• A devolved operating model with both Group and local management responsible for developing a
deep knowledge of our specialist markets and identifying opportunities and emerging market trends.
• Innovation best practice days held annually at Group level and more regularly in each business.
• Annual Group strategy meetings encourage innovation and “blue sky” thinking.
• New product introduction/development KPI used to monitor progress.
• Monitoring the market for potentially new and/or disruptive technologies, increased use of IT and
manufacturing machinery.
• Customer feedback used to trigger the design and /or supply of additional products and services.
• Development of low carbon products.
Loss of key customers
Comment
Generally, the Group has a good track
record of customer retention and has
a diversified customer base.
• Develop and maintain strong customer relationships.
• Product, system and service differentiation and reliability.
• Project tracking and enquiry/quote conversion rate KPI.
• Increasing use of, and investment in, customer relationship management (CRM) software.
• Organisational and business agility to adapt to changing and emerging customer needs.
• Customer satisfaction process.
Legacy defined benefit pension
obligations
Comment
Alumasc’s pension obligations
are material relative to its market
capitalisation and shareholders’ funds.
Supply chain risks
Comment
International supply chain risks could
increase through local lockdowns due
to the COVID-19 pandemic, increased
tariffs/duties, Brexit risks in Europe and
political/global volatility.
Cyber security and Business
Interruption
Comment
Cyber security risks and Business
Interruption risks are increasing
globally and have increased during
the COVID-19 pandemic.
• Continue to grow the business so the relative affordability of pension deficit contributions is improved
over time. The pension deficit increased during the year due to market performance.
• 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. The Alumasc Group Pension Scheme
as part of its investment strategy uses derivatives to partly mitigate inflation and interest rate risk.
• Annual strategic reviews, including supplier, quality, reliability and sustainability.
• Regular key supplier visits, good relationships maintained including quality control reviews and training.
• Regular supplier quality, value for money and risk reviews.
• Avoidance of strategic dependence on single sources of supply.
• Contingency plans to manage Brexit risks.
• Continuing to monitor China sourcing risks.
• Supply questionnaires and export checks are completed to ensure compliance.
• Training is scheduled to be provided on customs duties, particularly on managing new arrangements
post Brexit.
• IT disaster recovery plans are in place, with close to real time back up arrangements.
• Business continuity plans in place, or being evolved where we are relocating operations.
• 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 and reviews with external
IT professionals.
• Energy supply and contingency arrangements reviewed periodically.
• Critical plant and equipment are identified, with associated breakdown/recovery plans, including
assessment of engineering spares held on site.
• Business interruption insurance to cover residual risks.
• Review of Cyber security with an external party to ensure we have the appropriate protections
in place.
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).
Credit risk
Comment
The Group has good recent record
in managing credit risks and the
contribution the UK Government
Export Credit Scheme for overseas
opportunities.
• 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 2020
22
Sustainability Report
PROTECTING THE ENVIRONMENT AND
SUPPORTING LOCAL COMMUNITIES
Sustainability at a glance
Health & Safety KPI
Performance rate index1
2.82
Health & Safety
Health & Safety is Alumasc’s primary focus, and
this is reflected in how we operate our business
in a highly regulated environment. The Board
member responsible for Health & Safety is our
CEO who is responsible for our Health & Safety
Policy statement. Group policy on Health &
Safety requires that it is the first agenda item for
Group and operating subsidiary board meetings.
Our target is for Zero harm. This has informed
our Health & Safety programme and has helped
us develop our compliance with industry best
practice and focus on continuous improvement.
We promote manager and worker awareness
of their responsibilities, the hazards and risks
associated with operations and safe ways of
working through targeted training. We use
e-learning programmes, workshops for supervisors,
hazard alerts and safety/compliance checklists.
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.
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 was 39 compared to 54 in the prior
year. There have been no working days lost
between January 2020 and 30 June 2020 and
during this period we had three sites temporarily
closed in April 2020.
Our principal Health & 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), was 2.82
(compared to 2.69 in 2018/19). Alumasc’s
Health & Safety performance was good over
the last year, and there is a longer-term trend
of overall improvement; due to focus on a Zero
harm outcome and continuous improvement
by both management and employees. Our risks
arise from working with machinery, forklift
trucks crossing walkways, and car/lorry travel.
Health & Safety initiatives include robust risk
assessments and we work continuously to
ensure that improvements are implemented.
Working days lost between
January 2020 and 30 June 2020
Greenhouse gas (GHG)
emissions reduction
None
35%
Waste packaging and recycling
We seek to reduce packaging and single non-
reuse plastics and we encourage recycling
and waste segregation at each of our
locations. Office waste is minimised where
possible, with our computerised systems for
documents. We are a member of Valpak for
compliance reporting, and we comply with the
commitments under the Producer Responsibility
Obligations (Packaging Waste) regulations.
We are working with Valpak to reduce waste
packaging and information about the costs
of packing provided to the businesses. Ideas
to reduce waste from Valpak are shared with
the divisions.
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. Additional information about the
use of recycled plastics by Timloc can be found
on pages 10 and 11.
Climate change and sustainability
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.
Alumasc maintains the appropriate
environmental management standards in the
business to meet our statutory and moral
obligations and has an excellent record in this
regard. We have continuous improvement
as part of our environment programme and
findings from audits are communicated with
management and employees. Our Code of
Conduct states that every employee must seek
to protect and minimise any adverse impact
on the environment.
Water consumption
In excess of 80% of our water consumption
is for welfare purposes at Timloc and Wade.
Alumasc has some new properties such as
Timloc in Howden and Wade in Halstead,
with the latest water efficient systems.
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,
particularly metals. The Group seeks to improve
its environmental footprint by looking at new,
more energy efficient, technologies and by
reducing emissions. 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 by reducing particulates.
Information about some of sustainable solutions
can be found on pages 26 to 27.
A high proportion of Alumasc’s building
products 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, Derbigum Olivine
membranes, and Timloc; and energy/light
management through Levolux.
1 A relative measure capturing the total number of lost time
and other safety incidents, relating the result to the overall
number of hours worked.
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Our community
Alumasc supports local community initiatives, local sports groups and a number of charitable donations have been made
throughout the year by the business, following fundraising activities.
Alumasc Water Management Systems (AWMS)
held a raffle to raise funds and a Valentine’s
bake sale for Team Mikayla’s 2020 events. Team
Mikayla is a registered charity that supports
children with cancer.
Amount raised
£200
Building Envelope held a Bake Sale to raise money
for Macmillan Cancer Support. It included a
Berry Pie game, to guess the number of berries
used. The team in St Helens raised £220 for
Macmillan.
The Building Products division in St Helens took part
in the Knowsley 10K for Sam’s Diamonds in memory
of a former member of staff. The run took place around
Knowsley Safari Park!
To date £600 has been raised for Sam’s Diamonds
Cancer Support.
We support our local community
by providing use of our car park for
neighbouring Kettering Town FC.
Our Wade site supported Halstead in Bloom.
Some planting was unfortunately delayed due
to the COVID-19 lockdown.
The Alumasc Group plc Report and Accounts 2020
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Sustainability Report continued
Diversity and inclusion
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 a diverse
workforce and we promote a working
environment that is fair and inclusive. We seek
to extend these principles to our customers,
suppliers, stakeholders and the communities
where we operate. The chart above provides
headcount data as at 30 June 2020.
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
A confidential employee assistance helpline
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.
Employees are kept informed of divisional
and Group matters, through briefing sessions
and presentations. We are always looking at
ways to improve communications to motivate
employees. During COVID-19 the business kept
in touch with staff and ensured that people who
live on their own were safe and well. 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.
Non-executive Directors
Executive Directors
Senior managers
All other employees
Total
Alumasc Code of Conduct
Our Code of Conduct sets out the ethical
standards and expected behaviours from all
employees. The Code explains that employees
need to act honestly and be responsible
and trustworthy, is supported by employee
handbooks and outlines obligations on a
number of policies including Anti-bribery and
corruption, Whistleblowing and ethical trading.
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 Alumasc
improve its energy efficiency. The Group aims
to reduce carbon emissions year-on-year.
We aim to do this by reducing our carbon
emissions, fuel consumption, and by reducing
waste consumption. Carbon Footprint have
independently assessed our GHG emissions
in accordance with the UK Government’s
“Environmental reporting guidelines, including
Streamlined Energy and Carbon Reporting”
requirements. The assessment prepared for
Alumasc by Carbon Footprint included the
2019 emission conversion factors published
by the Department for Environment, Food and
Rural Affairs (Defra) and the Department for
Business, Energy and Industrial Strategy (BEIS).
The financial review for each scope was as follows:
Scope 1
Scope 2
Scope 31
1 Scope 3 has been voluntarily disclosed.
Male
5
3
42
291
341
Female
0
0
8
112
120
Total
5
3
50
403
461
Our carbon footprint includes emissions where
we have direct responsibility, for example, vehicles
and heating fuel (Scope 1) and emissions from
third parties from the generation of electricity
(Scope 2). We have voluntarily disclosed Scope 3
that demonstrates a significant reduction in
emissions, partly due to lockdown restrictions
following the COVID-19 pandemic.
We collect details on energy consumption from
our trading divisions and this information is
input onto the Carbon Footprint data tracker.
The information provided is verified by the
submission of invoices and evidence of fuel
consumption. The information is audited and
verified by Carbon Footprint.
The Group companies are continually reviewing
energy consumption and considering new
technologies to deliver ongoing reductions
in emissions. Our carbon footprint includes all
emission sources as required under S12008/410
for large unquoted companies.
• Company owned vehicles
• Fuels: Natural gas, gas oil, LPG
• Purchased electricity
• Public transport, including rail travel and taxis
• Flights
• Grey fleet car mileage
• Electricity transmission and distribution
The Alumasc Group plc Report and Accounts 2020 Total Group emissions
Total energy consumed (kWh)1
Scope 1
Scope 2
Scope 32
Scopes 1 & 2 gross emissions (tCO2e)
Total gross emissions (tCO2e)
Carbon offsets (tCO2e)
Total net emissions (tCO2e)
Scope 1 & 2 emissions normalised to per employee (tCO2e) (intensity ratio)
Scope 1 & 2 emissions normalised to per £million turnover (kgCO2e)
Previous year
2018/2019
n/a
1,615.55
1,282.20
586.00
2,897.75
3,483.56
0.00
3,483.56
5.53
32.09
Tonnes of CO2e
Current year
2019/2020
10,067,046
1,297.37
690.82
273.63
1,988.19
2,261.82
0.00
2,261.82
4.58
22.09
1 kWh includes Alumasc’s energy usage from building energy (Scope 1 & 2, excluding refrigerants) & grey fleet (Scope 3) only, as per SECR guidelines.
25
% Change
n/a
-19.69
-46.12
-53.31
-31.39
-35.07
-35.07
-17.18
-31.16
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Anti-bribery and Anti-corruption
Alumasc has a zero-tolerance of bribery and
corruption. The Group’s Anti-Bribery Policy
gives clear guidance of the ethical standards and
compliance required. Training is provided to
employees either via an online training module
and/or by face-to-face training. We encourage
all employees to be vigilant and to report any
suspicious matter.
2 Scope 3 has been voluntarily disclosed.
We are pleased to report this year a decrease
of 35% in the Group’s emissions. Large reductions
in GHG emissions have been achieved for
the period 2019/2020 when compared to
2018/2019. The reduction in emissions could
be attributed to:
• Energy efficient buildings for Wade
and Timloc;
• Reduction of energy used due to COVID-19
temporarily closing three manufacturing
sites for three weeks and re-opening on a
phased basis;
• Replacement of old machinery with newer
more efficient machinery; and
• Reduced travel (in particular this was as
an impact of the COVID-19 pandemic).
In addition, during the year Alumasc also
completed a detailed Energy Savings
Opportunity Scheme (ESOS) energy audit
of the amount used, and has a number of
recommendations for implementation.
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 Modern
Slavery Statement is published on our website:
www.alumasc.co.uk in line with Home Office
guidance. Alumasc works with its supply chain
to ensure that there is a zero tolerance to
Modern Slavery. The 2020 statement will be
published on our website in compliance with
the requirements before the deadline.
Alumasc expects its suppliers and those in the
supply chain, where possible, to confirm that all
suppliers have the same or similar policies. The
latest Modern Slavery Statement and previous
disclosures are available at www.alumasc.co.uk.
Total tCO2e
2,261.82
Total tCO2e/employee
4.58
Total tCO2e/turnover (£M)
22.09
Large reductions in GHG emissions were identified for the 2019/2020 period when
compared to the year ended 30 June 2019.
The Alumasc Group plc Report and Accounts 2020
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Sustainability Report continued
PRODUCTS & SOLUTIONS
THAT ARE SUSTAINABLE
Green roofing solutions
Alumasc provides a complete roofing
solution including the waterproofing
ranges and Green Roofs System.
Blackdown’s extensive sedum green roof
provides a variety of planting, generally
comprising drought tolerant succulents such
as sedum, rockery and alpine plants. The above
picture is an example of an extensive green roof;
it is an ideal choice as it enables any roofing
element to both blend in with surroundings and
positively contribute to the natural environment.
A Blackdown extensive sedum green roof can
complete any low-lying single storey building,
helping it to become part of, and give back to,
the natural environment.
Blackdown Green Roofs can be supplied in three
broad application categories including Extensive,
Biodiverse and Intensive and offer engineered
living roof systems which are fully compatible
with Alumasc’s warranted waterproofing ranges.
Green roofs benefit the wider environment
through their positive impact on sustainability,
biodiversity and the attenuation of storm
water. They improve the quality of life for
building users whilst being sympathetic to
the environment and can have wide ranging
long-term financial benefits.
1201 - A telescopic (adjustable)
underfloor ventilator
Timloc is passionate about manufacturing goods with
the highest level of recycled content possible.
There are numerous products in the Timloc range that are made
from 100% recycled material. Every single unit of the Timloc
robust, durable and industry-favourite 1201 is produced from
100% recycled material.
The recycled materials used originate from a variety of sources
including plastic bottles, plastic trays and plastic car parts, such
as bumpers and dashboards. The raw material produced as a
result of the recycling process is long-lasting, versatile and,
most importantly, environmentally friendly.
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Dundee University
A CO₂ neutralising roof? Dundee
University benefits from Olivine roofing
from Alumasc Roofing Systems.
One of the busiest buildings at the University
of Dundee was able to benefit from a complete
replacement of its waterproof roofing with
Alumasc Derbigum Olivine roofing membranes.
The August 2018 project ran for six weeks
and was completed on time, without any
complications, after a thorough site survey
to correctly identify the project needs.
“Olivine membranes are extremely special,”
explained Permatop Roofing Director Jim
McVeagh, who headed up the project. “Olivine
is a highly effective, durable waterproofing
solution for roofs which also actively purifies
the air by neutralising CO2 in rainwater.”
Olivine membranes use a naturally occurring
mineral upper layer that neutralises the most
prevalent greenhouse gas via an irreversible
chemical reaction when it comes into contact
with rainfall.
Nottingham Trent University (NTU)
NTU also selected a Derbigum Olivine
roofing system. This carbon dioxide
neutralising roofing helped NTU stay as
one of the UK’s most environmentally
friendly universities.
Alumasc Derbigum Olivine roofing absorbs and
neutralises CO2 on contact, as it falls in rainwater,
so when it reaches the drains it’s carbon-free.
Olivine grains decrease in size with each reaction,
however, they are large enough to last 30 years
plus before having completely reacted. This
environmentally focused solution was used
in the recent redesign and refurbishment of
Nottingham Trent University’s Clifton Campus
Library, which now features over 1,000m2 of
Olivine, providing a waterproof, BBA approved
roofing solution.
The refurbishment also included the specification
of Alumasc Rooflights and Harmer aluminium
Roof Outlets, together with GX Pressed
Aluminium Gutters and Heritage Circular Pipes,
ensuring adequate drainage.
GX Pressed Aluminium Gutters are designed to
accommodate thermal movement at every joint,
being also lightweight, durable, non-corrodible,
and are 100% recyclable.
Harmer AV roof outlets combine innovative
product design with full industry compliance
to meet the needs of rainwater drainage in any
construction project, with the ability to drain up
to 40% more roof area than conventional gravity
outlets. These outlets are sustainable, lightweight,
durable and have a non-corrodible design.
The UK market for green construction projects
has grown significantly in the last 10 years and
is poised to grow further. As environmental
awareness grows, more developments are
including “green” and sustainable solutions.
The Alumasc Group plc Report and Accounts 2020
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Section 172 Statement
ENGAGING WITH
OUR STAKEHOLDERS
Under Section 172 of the Companies Act
2006, there is a general duty on every
director to act in a way that they consider,
in good faith, would be most likely to
promote the success of the Company for
the benefit of its shareholders as a whole.
The Directors consider that they have
performed their duty in good faith to engage
under s.172 of the Companies Act 2006, to
promote the success of the Company for the
benefit of the members as a whole, while taking
into consideration, amongst other matters:
• The impact of the Company’s operations
on the community and the environment;
• Maintaining a reputation for high standards
of business conduct; and
• The need to act fairly between the members
of the Company.
• The likely consequences of any decisions
in the long term;
• The interests of the Company’s employees;
• The need to foster the Company’s business
relationships with suppliers, customers
and others;
How the Board applied its s.172 duties
Stakeholders
Engagement/activity
Matters considered/actions
Shareholders
The Board needs to know investors’ views so they can
be considered when making strategic and governance
decisions. Alumasc provides Annual and Interim reports,
general meetings and analysts presentations. Contact can
be made via the CEO and/or our advisers using our website
contact email.
Additionally, an Investor day was organised in order to
obtain feedback and input from our shareholders. We have
also engaged with key shareholders in connection with the
proposed 2020 Remuneration Policy.
Employees
Health & Safety decisions are taken and implemented
to protect the wellbeing and safety of employees. The
importance of Health & Safety is demonstrated by the fact
that it is always the first agenda item for Board meetings.
Communications and career development/succession
planning meetings have been held. Divisional site-based
meetings and /or virtual meetings, regular communications
and updates are provided for staff.
Customers
We establish good relationships with our customers and
have dedicated account management for larger accounts.
We strive to understand what products our customers
require and how to improve our customer service.
Suppliers
Key supplier relationship updates are received from our
Procurement team. Site visits and questionnaires on ethics
and modern slavery are provided by our suppliers.
Communication with our shareholders may be face to
face, via our website, our Annual Report and Accounts
and at the AGM. Information is provided in Broker, and
Analyst, briefings. Formal presentations are made to
shareholders via Analyst briefings following the annual
and interim results. The Notice of the AGM is also sent
out to shareholders at least 21 days before the meeting.
Information on the voting received is published on the
Company’s website after the AGM.
We organised a visit for investors to our Timloc factory
in Howden, Yorkshire. Any feedback is reflected in our
governance and/or our strategy. We listen to feedback
from our investors, sharing comments with the Board
to help inform strategy and decision making. We are
committed to developing our investor communications.
We have invested in Health & Safety and provide
appropriate training, personal protective equipment and
additional courses for supervisors. During the COVID-19
pandemic additional communication was required for staff,
particularly for those working from home. Additionally,
employees who lived alone had other colleagues check on
their wellbeing. Every effort was made during and after the
COVID-19 pandemic to protect employees. We also seek
to share our vision and longer-term strategy with staff.
Targeted questionnaires were used during the COVID-19
pandemic and we have had good feedback on our approach
to the welfare of staff who are working from home.
Customers provide feedback about product use and ask
about new product development. Often, we bring out new
products after feedback/requests are received. Customers
are encouraged to provide feedback about our products
and services. We continue to prioritise customer service
and strive for continual improvements.
We work with our supply chain partners to ensure minimum
disruption due to the COVID-19 pandemic. We consider
the routes to market that our customers prefer, for example
Timloc has a following day delivery to site, subject to a
minimum order value.
The Alumasc Group plc Report and Accounts 2020 29
Stakeholders
Engagement/activity
Matters considered/actions
Pension Trustees
Our relationship with the Trustees of The Alumasc
Group Pension Scheme is excellent, and we know how
important it is to work in partnership with the Scheme
and to make sure that the Trustees are consulted on
significant developments.
Bankers
We recognise the importance of having an excellent
working relationship with our bank, to ensure we have
the support and financial resilience needed.
At the beginning of the COVID-19 pandemic we used
our relationship to ask for a three-month deferral of
contributions to the Scheme and this was granted. We
are now paying the deferred amount in our contributions
and will have completed these payments before the next
triennial valuation. Regular dialogue with the Trustees
during the COVID-19 pandemic has been important and
provided additional assurance.
Regular trading information has been provided to the bank.
Alumasc’s relationship bank manager was invited to a Board
meeting during the COVID-19 pandemic to discuss our
RCF, to ensure that this would meet our business needs.
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Our Community/
the Environment
Products: Alumasc is focused on providing sustainable
products where possible. Examples of our innovative
products can be found on pages 26 to 27 of this report.
We seek, where possible, to develop new products that
are durable and sustainable. Our strategy is increasingly to
provide “green products” that are better for the environment.
Communities: We also support our communities; for
example, we have a good relationship with Kettering Town
FC and Acorn Day Nursery who are near neighbours in
Burton Latimer.
Compliance with Section 414 of the
Companies Act 200
We have complied with the requirements under
the provisions of the Companies Act 2006
contained in Sections 414CA and 414CB of the
Companies Act and the relevant references can
be found below.
Description
Business Model
Non-Financial KPIs
Management of principal risks and
the impact of business activity
Employees
Social and Community
Respect for Human Rights
Anti-corruption and anti-bribery
Environmental matters
Page
3
22
20-21,
41-43
24, 28
23
25
25, 43
22, 24, 29
Application of s.172
We have continued to comply with the
requirements under s.172 in the period of the
COVID-19 pandemic. The Board conducted
weekly calls to consider all matters, with the
primary focus being the Health & Safety of all
employees, customers and suppliers. The Board
also focused on what was necessary for the
long-term success of the business.
Key decisions made included: enabling
office based staff and sales executives to
work from home; implementing additional
cyber and IT security; temporarily closing
three manufacturing sites for three weeks;
conserving cash and monitoring the Group’s
liquidity; furloughing some staff; announcing
the cancellation of the interim dividend; and
rolling out and implementing a Health &
Safety checklist and procedures in line with
Government guidelines.
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Any new business strategies, supply-chain,
new products development and investment
decisions considered the following:
• the health, safety and wellbeing of employees,
customers and suppliers;
• the interests of all stakeholders particularly,
shareholders and The Alumasc Group Pension
Scheme;
• the environment and sustainability;
• the views of our bankers; and
• local/community issues.
The Alumasc Group plc Report and Accounts 2020
30
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
Gilbert Jackson
Executive Director
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. He also
holds the position of Chairman to
the Nomination Committee.
N
Appointed: 1992
Experience: Jon Pither holds
directorships in numerous
companies and is a past council
member of the CBI and a past
President of The Aluminium
Federation. He also holds the
position of Chairman to the
Remuneration Committee and
is a member of the Audit and
Nomination Committees.
A N R
Appointed: 2003
Experience: Paul Hooper joined
Alumasc as Group Managing
Director in April 2001. His earlier
career included a first Managing
Director role with BTR plc in 1992.
He subsequently joined Williams
Holdings plc in Special Operations,
implementing acquisitions in
Europe and North America,
prior to joining Rexam PLC as a
Divisional Managing Director with
responsibility for operations in
Europe and South East Asia.
Appointed: 2019
Experience: Gilbert Jackson,
currently the Divisional Managing
Director responsible for Roofing and
Levolux, has extensive experience in
building products and the construction
industry. He championed the idea
of specification led cross-selling
of a Building Envelope. Gilbert
joined Alumasc in 2011, having
previously worked at IKO and Marley
Waterproofing and Polypipe Civils Ltd.
Registered Office
The Alumasc Group plc
Burton Latimer
Kettering
Northamptonshire NN15 5JP
Tel:
+44(0) 1536 383844
Fax: +44(0) 1536 725069
www.alumasc.co.uk
info@alumasc.co.uk
1767387
Registered No:
Company Advisers
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
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
55 Colmore Row
Birmingham B3 2FG
Brokers
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
NOMAD
finnCap
60 New Broad Street
London
EC2M 1JJ
The Alumasc Group plc Report and Accounts 2020
Non-executive Directors
31
Committees:
A Audit Committee
N Nomination Committee
R Remuneration Committee
Chair of Committee
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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 has a broad
understanding of all aspects of
the sector. 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.
He is a member of the Audit,
Remuneration and Nomination
Committees.
A N R
Helen Ashton BA, FCG
Group Company Secretary
Michael Leaf
Executive Director
David Armfield
LLB
Non-executive Director
Vijay Thakrar
BSc, FCA
Non-executive Director
Appointed: 2019
Experience: Vijay is a chartered
accountant who was a partner at
Deloitte and EY before taking up a
number of non-executive director
(NED) roles. He has served as
NED on various boards, including
The Quoted Companies Alliance
and Quorn Foods. He is currently
on the boards of MK Dons Sports
& Educational Trust, Treatt plc
and Walker Greenbank plc. Vijay
is Chairman of the Alumasc Audit
Committee and is a member of
the Remuneration and Nomination
Committees.
A N R
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 in 2000
became a partner at PwC. David
was a founding partner of Kinetix
Critchelys Corporate Finance LLP
in 2010, which provides corporate
finance advice to the clean
technology and environmental
sustainability sectors. David
is also Senior Independent
Director at Xeros Technology
Group plc and a non-executive
director of Myonlineschool Ltd.
He is a member of the Audit,
Remuneration and Nomination
Committees.
A N R
Board tenure
Appointed: 2019
Experience: Michael Leaf joined
Alumasc in 2011 as Managing
Director of Timloc Building Products
where he has overseen significant
growth in both the revenues
and profitability of the business.
Michael has also performed a
number of other roles during his
time with Alumasc including the
management of the Pendock and
Engineering businesses prior to
their sale. Michael is currently the
Divisional Managing Director of the
Housebuilding Products division.
For the last 25 years Michael has
held a number of senior positions
within the Building Products
Industry and prior to joining
Alumasc, Michael was a Director
at Ideal Standard (UK) Ltd.
The Board
At Alumasc we have a strong
and experienced Board, bringing
a wealth of skills and knowledge
to the Company.
<5 Years: 4
5-15 Years: 1
>15 Years: 3
The Alumasc Group plc Report and Accounts 2020
32
Corporate Governance Statement
“The Board supports
good corporate
governance to build
long-term success and
a sustainable business.”
John McCall
Chairman
The Alumasc Group plc Board of Directors
(Biographical details can be found on pages 30 to 31)
The Board adopted the QCA Corporate
Governance Code 2018 (the QCA Code) on
25 June 2019 pursuant to Rule 26 of the AIM
rules. The following section outlines the Group’s
approach to governance and how the Board and
Committees operate.
Audit
Committee
Membership as at
30 June 2020
Vijay Thakrar (Chairman)
David Armfield
Stephen Beechey
Jon Pither
Remuneration
Committee
Membership as at
30 June 2020
Jon Pither (Chairman)
David Armfield
Stephen Beechey
Vijay Thakrar
Nomination
Committee
Membership as at
30 June 2020
John McCall (Chairman)
David Armfield
Stephen Beechey
Jon Pither
Vijay Thakrar
See pages 40 to 43
See pages 44 to 51
See page 58
Executive Committee
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 Michael Leaf and Mr Gilbert Jackson
were provided with:
• Access to the Group Company
Secretary
• A tailored induction appropriate
to their position
• Information as appropriate
• A briefing from the Nomad
The Alumasc Group plc Report and Accounts 2020 33
Deliver growth continued
Principle 1:
Establish a strategy and
business model which
promotes long-term
value for shareholders
Within certain parameters set by the Board, the Executive Committee, led by the Chief Executive Officer, the Executive
Directors and Executive Committee members, are responsible for recommending to the Board the strategy of the
Group. The strategic focus of the Group also reflects and takes into account views of the Group’s 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.
Further details of the Company’s business model and strategy are set out on pages 2 to 3.
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
Use of General Meetings
There is regular dialogue with individual institutional shareholders, in addition to
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. During
the year a factory site visit to Timloc was arranged for investors, this was well attended.
It provided an opportunity for investors to see how we manufacture our products and
our use of recycled plastics. A second visit to Timloc has been postponed due to the
COVID-19 pandemic.
Shareholders and potential investors have direct access to the Group via its website and can
review corporate data on the site. Additionally, the Group responds to individual enquiries
from shareholders on a wide range of issues.
The Annual General Meeting (AGM) also provides an opportunity for shareholders
to ask questions. 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 (subject to any COVID-19 measures). Our General Meeting was
held on 23 April 2020 whilst the Stay at Home Measures were in force; however, there
was an opportunity to submit questions in advance of the meeting via our website, and for
shareholders to ask questions in advance or on the day using the conference call facility.
We will also use a dial-in facility at the 2020 AGM in light of Government guidelines.
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The Alumasc Group plc Report and Accounts 2020
34
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 is aware of its corporate and social responsibilities and the need to build strong relationships across a range
of stakeholder groups. The business seeks to protect its employees and takes its Health & Safety responsibilities
very seriously.
Further information about our approach to Health & Safety and our approach to COVID-19 can be found on
pages 1, 4, 5, 12, 13, 18, 20, 22, 24, 28, 29, 41, 45.
Health & Safety
People
Diversity
The Environment
Culture
Customers
Suppliers
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 & 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 22 and 28.
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.
Alumasc engages with employees via 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 seriously its corporate and social responsibilities. During
COVID-19 we stayed in touch with our staff, some employees in one division were part
of a WhatsApp group and employees also made sure they were in contact with those
who lived on their own.
Our training programme includes: Health & Safety, technical and compliance skills to
reflect softer business skills including Supervisor and Management training. We have online
training available and have moved other training onto interactive audio visual platforms,
where possible.
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 majority of our products help to manage scarce resources of energy and water in the
built environment. We sell primarily manufactured products made of metal and support
materials that can be re-used.
Many of the materials used in our products can be recycled and a high proportion of the
plastics used are made from recycled materials.
All our employees are expected to operate in an honest and ethical manner. We look
to have relationships of trust and reliability with our customers and suppliers. Compliance
is an important part of our culture, as evidenced by our approach to Health & Safety.
We also aim to provide outstanding customer service and are very customer focused.
Our aim is to ensure we provide market leading products and services to meet customer
requirements. Alumasc seeks to innovate where possible to provide solutions for
customers. We do seek to provide excellent service and good relationships are part
of our long-term success.
Alumasc’s suppliers are critical to our success. We have long-term relationships with our
suppliers as we need assured timeliness, quality and the reliable delivery of materials and
products. As part of our supply chain our suppliers need to have shared and aligned values;
for example, to support our statement ensuring that Modern Slavery does not take place
and complying with our Anti-Bribery Policy. We work with our suppliers to ensure that we
respect the environment, and this year have made significant investments 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 for good causes in their communities.
For example, we have supported charity fundraising events and local football clubs.
Further information on the support we provide is in the Sustainability Report
on pages 22 to 29.
The Alumasc Group plc Report and Accounts 2020 i
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Deliver growth continued
Principle 4:
Embed effective risk
management considering
both opportunities and
threats throughout
the organisation
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 and the risk management
approach is outlined on pages 20 to 21 and 41 to 43.
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. 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, together with
risk mitigation initiatives and their effectiveness. Internal Audit as part of its remit also
reports on risks to the Audit Committee.
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, Whistleblowing
and Share Dealing Policies. Other policies have key messages delivered by staff training.
There is a delegated authorities matrix in place for approval levels across the business.
Each trading division is aware of matters and powers that are reserved for Board approval
and the relevant financial levels that require approval.
A summary of the principal risks and uncertainties facing Alumasc, together with
mitigating actions, are set out on pages 20 to 21.
Maintain a dynamic management framework continued
Board composition
Principle 5:
Maintain the Board
as a well-functioning,
balanced team led by
the Chair
The Board consists of a Chairman, Chief Executive, two Executive Directors, and four
Non-executive Directors; of whom three are independent. The Non-executive Directors
who are not considered independent are Mr John McCall and Mr Jon Pither. A director
is no longer considered independent after they have served for more than nine years on
the Board. The Board has three Executive Directors; Mr Paul Hooper, the Chief Executive,
and two additional Executive Directors, Mr Michael Leaf and Mr Gilbert Jackson, who were
appointed on 5 September 2019. On 6 February 2020 Mr Andrew Magson, Group Finance
Director, resigned from the Board.
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 as a whole. 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 judgment and experience to challenge and explore
all matters, whether strategic or operational. The Board is provided with Health & Safety
reports, finance and management reports and other information on a regular basis.
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 and they have no conflicts.
The Alumasc Group plc Report and Accounts 2020
36
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 and 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 can be found in the Audit Committee Report on pages 40 to 43.
b) Remuneration Committee
The Remuneration Committee Report is on pages 44 to 51.
c) Nominations Committee
Information about the Nomination Committee can be found on page 58.
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 Executive Directors who were
appointed during the year, Mr Michael Leaf and Mr Gilbert Jackson, are required to offer
themselves for election at the forthcoming AGM. The Directors required to retire are
those who have served three years since their previous re-election or were appointed
during the year. Accordingly, Mr Michael Leaf and Mr Gilbert Jackson are standing for
election and Mr Jon Pither and Mr David Armfield are standing for re-election.
The Board meets at least seven times a year and more frequently where business
needs require; for example, during the COVID-19 pandemic there were weekly calls
and as the businesses began to re-open the calls were held less frequently. 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 can be found on our 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 2020 Maintain a dynamic management framework continued
Principle 5 continued:
Board Committees
continued
Scheduled Board meeting attendance
Directors
J S McCall
J P Pither
D Armfield
S Beechey
V Thakrar
G P Hooper
A Magson
G Jackson
M Leaf
Position
Chairman
Deputy Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Chief Executive
Group Finance Director
Executive Director
Executive Director
37
Board
(Attended/eligible
to attend)
7/7
7/7
7/7
5/71
7/7
7/7
4/42
6/63
6/63
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Principle 6:
Ensure that between
them the directors
have the necessary
up-to-date experience,
skills and capabilities
1 Mr Stephen Beechey was unable to attend due to a clash of meetings.
2 Mr Andrew Magson resigned on 6 February 2020.
3 Mr Gilbert Jackson and Mr Michael Leaf were appointed to the Board on 5 September 2019.
For those Directors unable to attend a meeting, they were able to feedback any comments
they had on the papers to the Chair and were advised of any decisions taken during
the meeting.
Profiles of the Board members appear on pages 30 and 31 of this report and
on our website (https://www.alumasc.co.uk/investors/board-directors). These indicate
the high level and range of business experience which enables the Group to be
managed effectively.
The Chairman, together with the Nomination Committee and the Company Secretary, review the knowledge and
experience of the Board to ensure there is the right balance to support Alumasc’s strategy.
When considering appointing new Non-executive Directors to the Board, the Nomination Committee will consider
relevant matters including the experience and the skills needed together with the diversity of its composition. During the
year, Alumasc has refreshed its Board with the appointment of two new Executive Directors, and it keeps its membership
under review.
The Board considers that the Directors bring a senior and significant level of judgment 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. Site visits are also
arranged for Non-executive Directors.
The Directors received briefings from the Nomad and from other advisers 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
advisers if needed.
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.
The Alumasc Group plc Report and Accounts 2020
38
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 normally 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. Due to COVID-19 feedback was provided directly by
phone or email.
Overall Board composition is reviewed annually by the Chairman and the Nomination Committee to determine whether
or not any changes might be recommended. Two Executive Directors were appointed on 5 September 2019 and one
Executive Director (the Group FD) resigned on 6 February 2020.
The areas discussed related to strategy, succession planning, risk assessment, employee management and development.
The Executive Director appointments were made following the 2019 Board evaluation.
Principle 8:
Promote corporate
culture that is based
on ethical values and
behaviours
Our Chairman and Chief Executive Officer 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 comply with Health & Safety regulations.
The Group has policies that govern its activities in respect of zero tolerance towards Modern Slavery and other policies
such as Anti-Bribery, Whistleblowing and Data Protection. The Company 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.
Principle 9:
Maintain governance
structures and processes
that are fit for purpose
and support good
decision-making
by the board
Any matters of concern can also be raised to the Chairman or to the Chair of our Audit Committee, as appropriate.
The Board has seven scheduled meetings each year. Before each Board meeting an agenda is prepared and circulated
to the Directors.
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. The Board also considers budgets, annual and interim results,
dividend policies, contract approval, large capital expenditure requests, acquisitions and senior appointments.
The Chairman and our Board of Directors support good corporate governance to ensure that they build a successful
and sustainable business that is beneficial for all our stakeholders.
The Chief Executive Officer and Executive Directors have responsibility for the operational day-to-day management
of Alumasc’s business and activity. The Non-executive Directors bring outside experience and independent judgment to
our 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 and the reports for these
Committees can be found on pages 40 to 51, and page 58, the terms of reference for the Committees can also
be found on our website www.alumasc.co.uk.
The Alumasc Group plc Report and Accounts 2020 39
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 and roadshows/meetings with investors and at analysts’ briefings.
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 and/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, this 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 advisers and investors is also reviewed. Discussions, where needed, are held to enable closer alignment between
the way in which the Group is led and shareholder views.
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Additional information is provided in the s.172 Statement on pages 28 to 29.
John McCall
Chairman
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Audit Committee Report
STATEMENT FROM THE CHAIRMAN
OF THE AUDIT COMMITTEE
“Management took swift
actions to protect the
business and conserve
cash at the onset of the
COVID-19 pandemic.”
Vijay Thakrar
Chairman of the Audit Committee
Dear Shareholders,
I am pleased to present the Audit Committee’s
report for the year ended 30 June 2020.
Meeting attendance
Members
Vijay Thakrar
David Armfield
Stephen Beechey
Jon Pither
Attended/
eligible to attend
3/3
3/3
3/3
3/3
Audit Committee membership
The members of the Committee
are as follows:
• Vijay Thakrar (Chairman)
• David Armfield
• Stephen Beechey
• Jon Pither
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 auditor, and
a record of the meeting attendance by
Committee members is set out opposite.
After each Audit Committee meeting that
the auditors attend, the Committee meets
the auditors without members of the
management team being present.
The Alumasc Group plc Report and Accounts 2020
The Committee’s main duties
are as follows:
• monitoring and reviewing the integrity
of the financial reporting process and
reviewing the financial statements,
including the appropriateness of
judgments and estimates taken in
preparing the financial statements and
preparations for the introduction of
new accounting standards;
• monitoring and reviewing the
effectiveness of the Group’s internal
financial controls including approval of
the scope and review of the results of
the Company’s 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
2019/20 financial year
The main activities of the Committee during
the year were:
• reviewing and challenging management’s
forecasts and scenarios relating to COVID-19’s
impact on the Group, its liquidity position
and the appropriateness of adopting a Going
Concern basis in these financial statements;
• reviewing the interim and full year results
announcements and financial statements,
with particular focus on the key estimates
and judgments taken by management in the
preparation of those statements and the
external auditor’s comments in those areas;
• reviewing and approving the audit plan of the
external auditor, including the scope of the
work, the key areas of focus in terms of audit
risk and judgment, and the basis on which the
auditor assesses materiality;
• considering the effectiveness of the external
audit and the independence of the auditors;
• reviewing the methodology, impact and
disclosures in the financial statements relating
to the introduction of IFRS 16, Leases, during
the 2019/20 financial year;
• reviewing and approving the plan and scope
of internal audit work, including consideration
of internal audit reports issued during the
year and discussion of the key matters and
improvement points arising from those audits
with management; and
• reviewing with management the Group’s tax
advisor arrangements and overseeing the
tender process, which led to the Board’s
decision to appoint KPMG to replace Deloitte
from 17 January 2020.
41
Significant issues considered in
relation to the financial statements
The Committee considered, in conjunction
with management and the external auditor,
the significant areas of estimation, judgment
and possible error in preparing the financial
statements and disclosures, discussed how
these were addressed and approved the
conclusions of this work. The principal areas
of focus in this regard were:
(i) Going Concern and COVID-19 impact
Management took swift actions to protect the
business and conserve cash at the onset of
the pandemic. The Committee has challenged
management on their base case trading and
cashflow scenarios prepared for the period
between now and September 2021, including
stress tested and reverse stress tested scenarios
as set out on page 73, taking account of the
impact of COVID-19 and the possibility of a
second wave of COVID-19. Management have
discussed these scenarios with the Group’s
bankers and have negotiated relaxations of bank
covenants to provide headroom in the event of
downside scenarios materialising as also set out
on page 73. The Committee has also discussed
these issues with the external auditors to seek
their opinion. In light of these actions and,
taking account of the comments on page 64,
the Committee considers that the disclosure
of the Board’s assessment of Going Concern
is complete and understandable.
(ii) Revenue recognition
Revenue recognition on construction
projects carried out in the Building Envelope
division, which has bespoke construction
projects with performance obligations that
can span more than one accounting period,
leads to the application of judgment 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 80. Having
reviewed these judgments taken at the year end
with management and the external auditors,
the Committee was satisfied with management’s
judgments for the level of revenue and profit
recognised on construction projects for the
financial year.
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The Alumasc Group plc Report and Accounts 2020
42
Audit Committee Report continued
(iii) Defined benefit pension
schemes’ valuation
As described in the risk review on pages 20
and 21, Alumasc has relatively significant
legacy defined benefit pension obligations in
the context of the overall size of the Group.
Therefore, relatively small changes to market
assumptions (particularly the discount rate
and inflation rate) and actuarial assumptions
used to value defined benefit pension
obligations under IAS 19 can have a material
impact on the Group’s Consolidated Statement
of Financial Position and Consolidated
Statement of Comprehensive Income. Further
details are given in note 22 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.
(iv) 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 judgments
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 judgments 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 judgments taken by local management
surrounding valuation. Physical stock counts
are held at the financial year end and half
year end, and more regularly when needed.
The Committee reviews regular reports from
executive management, internal audit and
the results of the external audit to satisfy itself
that inventory values across the Group are
materially accurate.
(v) Valuation of goodwill
In light of the restructuring of the Levolux
business announced in the 2019 financial
statements, the Committee has challenged
management on the progress made and
whether the carrying values for the Levolux
business in the Group and Company financial
statements are appropriate. This included
challenging progress in respect of Levolux’s
restructuring, trading performance and budgets/
forecasts. The Committee also asked the
auditors to pay particular attention to Levolux
in their audit work. It has not been considered
necessary or appropriate to impair the
carrying values.
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 the external audit
continues to be 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.
The Group changed its external auditor from
KPMG to BDO in January 2019. 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 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
The audit for Alumasc’s financial year ended
30 June 2020 was BDO’s second following their
appointment in January 2019. Resolutions are
being put to the AGM to be held in October
2020 to recommend their re-appointment for
the 2020/21 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:
(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 20 and 21. 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.
The Alumasc Group plc Report and Accounts 2020 43
(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
20 and 21. 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.
Anti-Bribery policy
The Group has in place a policy with regards
to compliance with the Bribery Act 2010.
The Group’s Anti-Bribery policy and guidelines
reflect the Directors’ zero tolerance approach
to bribery and corruption of all kinds.
This policy has been cascaded down into the
operating companies with relevant training
provided. Any matters of particular concern,
whether arising from due diligence or otherwise
with regard to related parties as defined in the
Bribery Act 2010, are raised and discussed at
monthly operating company board meetings.
Code of Conduct
The Group has in place a Code of Conduct,
setting out the standards of business practice
that the Group expects from its executives and
employees. This policy is subject to periodic
review to ensure it reflects the operation of the
Group and the business environment in which
it operates.
Copies of this policy, the Whistleblowing
policy and the Anti-Bribery policy can be found
on the Group’s website www.alumasc.co.uk.
Vijay Thakrar
Chairman of the Audit Committee
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44
Directors’ Remuneration Report
STATEMENT FROM THE CHAIRMAN
OF THE REMUNERATION COMMITTEE
Dear Shareholder
I am pleased to present the Report
of the Remuneration Committee
(“the Committee”) for the financial
year ended 30 June 2020.
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 follows
the “spirit” of the Regulations given previous
disclosures before the Company joined AIM.
Meeting attendance
Details of the Committee members who
served during the year can be found below.
Members
Jon Pither (Committee Chairman)
David Armfield
Stephen Beechey
Vijay Thakrar
Attended/
eligible to attend
3/3
3/3
3/3
3/3
The main duties of the Remuneration
Committee are set out in the Committee’s
terms of reference and these can be
found at www.alumasc.co.uk
“The Company will
continue to review its
remuneration policies
and consult with
investors as necessary.”
J. P Pither
Chairman
Remuneration Committee
Our Remuneration Policy was approved by
shareholders at the 2017 AGM and that policy
will come to the end of its three-year life later
this year. Therefore, a new Remuneration
Policy (the 2020 Policy) is being put forward
for shareholder approval at the 2020 AGM,
following consultation with our major
shareholders. If approved, this policy will replace
the one passed in 2017. Companies listed on
the AIM market are not required to put their
policies to a shareholder vote but, reflecting the
Board’s approach to high levels of governance
and good practice, we are voluntarily putting
ours to a vote. There will be a second advisory
vote on the Annual Report on Remuneration.
I hope you will be able to support our resolutions.
This Remuneration Report sets out the 2020
Policy and the remuneration paid to the
Directors during the period. The Company will
continue to review its remuneration policies
and consult with investors as necessary.
The details of membership of the Committee
can be found on this page.
The Alumasc Group plc Report and Accounts 2020
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2020 Policy
The key objective of the Remuneration
Committee is to put in place a simple set of
arrangements that provides strong alignment
with shareholders and other key stakeholders.
As outlined in our Strategic Report the Board of
Alumasc has been pursuing a growth strategy to
develop new products for each of our divisions
that further demonstrate our commitment to
customer service and “green building products”.
We are also seeking to grow our export markets
and our involvement in infrastructure projects.
Following consultation with our major shareholders,
I hope the 2020 Policy supports the delivery of
this strategy by focusing on both short-term
and long-term performance and delivering a
significant proportion of the total package
in shares, thereby providing alignment with
shareholders.
Having reviewed the existing policy, we are of
the view that the current structure – comprising
base salary, benefits, a pension contribution and
participation in the annual bonus and Long Term
Incentive Plan (LTIP) – remains appropriate. We
are, however, taking the opportunity to update
the policy to take account of prevailing and
emerging good practice.
• Pensions – The 2017 Remuneration Policy
provides a maximum pension contribution
of 20% of salary for Executive Directors.
The Remuneration Committee is cognisant
of the scrutiny on executive pensions as
investors have urged companies to align
rates with the wider workforce.
• In light of this, under the 2020 Policy any new
Executive Directors (either promotions to the
Board or external hires) will have contributions
aligned with the workforce rate. There are
various pension schemes in operation at
Alumasc and different contribution rates
depending on length of service and age.
The Company will review the current schemes
and arrive at an appropriate ‘workforce rate’
that will apply for new Directors (including
the new Finance Director).
• LTIP maximum limit – The 2017 Policy
included the option to increase the LTIP policy
maximum to 100% of salary under any new
plan introduced by the Company. A new LTIP
was approved by shareholders in 2018 and this
includes a limit of 100% of salary per individual.
The 2020 Policy reflects the limit contained in
the previously approved 2018 LTIP, however
please note that our current practice to make
awards at a lower level will remain.
• LTIP clawback – Previously LTIP awards were
subject to a malus condition which enabled
the Committee to lapse unvested awards
in certain circumstances. In line with good
practice, this provision has been extended to
include clawback so that amounts received
in respect of vested awards can also be
recovered in exceptional circumstances
too. This is consistent with the bonus plan.
• LTIP performance measures – The
2017 Policy hardwired EPS and TSR as the
measures that apply to LTIP awards. To
provide the Remuneration Committee with
greater flexibility to take account of changing
priorities over the life of the next three-year
period, it is proposed that the 2020 Policy
will enable the Committee to set alternative
measures including Underlying Profit Before
Tax (UPBT) to better reflect the outlook and
priorities at the time.
Performance and remuneration
outcomes for the year ending
30 June 2020
The financial and operating performance for the
Group in 2020 is set out on pages 69 to 124.
2020 was a challenging year with the second
half particularly impacted from the interruption
caused by COVID-19. The Board took swift
and prudent decisions to support the Group’s
businesses during this difficult period and to
ensure that cashflow was protected as part
of a broader cash conservation programme.
These actions include the suspension of
capital expenditure, a freeze on new hiring
and cancelling the interim dividend as
previously announced.
We discussed rewards in view of the impact of
COVID-19, and the additional work it generated.
Some of the senior executives had to carry
out more than one role and remuneration
was discussed in this context. The business
welcomed the introduction of the Government’s
Coronavirus Job Retention Scheme as this has
helped the business to support staff.
The Group achieved the following results for
the year:
• Group revenues from continuing operations
decreased by 16% to £76 million
• Underlying profit before tax decreased by
34% to £3.7 million
• Underlying earnings per share decreased by
34% to 8.2 pence.
The 2019/20 annual bonus was based on
Group underlying PBT targets. The threshold
level of profit was not achieved and therefore
no bonus became payable. As disclosed in last
year’s report, a £10,000 bonus was agreed
as payable to the CEO and CFO in the prior
financial year.
45
This was the second part of the Facades sale
bonus (contingent on earn-out), and although
paid during this financial period, it related to
the previous financial year and was paid before
COVID-19.
Awards were granted under the LTIP to senior
executives in October 2017 based on EPS
and TSR performance for the three-year
period ending October 2020. The minimum
thresholds were not met and therefore this
award will lapse in full in October 2020.
The Remuneration Committee believes the
incentive outcomes reflect the performance
of the business during this challenging period.
The Remuneration Committee has not applied
any discretion during the year to any part of
the Directors’ remuneration.
Key decisions
During the year there were three formal meetings
and the following topics were discussed:
• Review of base salaries of the Group
Executive Directors (including the two
new Executive Directors), members of the
Executive Committee and Group employees
more generally;
• Determining the key terms of the 2020
Remuneration Policy;
• Variable pay, in particular long-term incentive
plan (LTIP) targets for the current year;
• The review of performance criteria for the
current LTIP and the ESOS; and
• The exit terms for Mr Magson.
Additional attendees by request include the
Chairman, the Chief Executive and Company
Secretary; they take no part in discussions
relating to their own remuneration.
As mentioned above, there will be two votes
on remuneration at the 2020 AGM to be held
on 22 October 2020; one to approve the new
2020 Remuneration Policy which will apply
for the next three-year period, and another to
approve the Directors’ Remuneration Report.
I hope you will be able to support these
resolutions. If you have any questions on this
report or our approach to remuneration more
generally, please feel free to contact me via the
Company Secretary.
Jon Pither
Chairman of the Remuneration Committee
The Alumasc Group plc Report and Accounts 2020
46
Directors’ Remuneration Report continued
Annual Report on Remuneration
The following sections show how the Remuneration Policy approved in 2017 was applied in the year ending 30 June 2020. The information provided
on pages 46 to 50 of the Directors’ Remuneration Report is subject to audit.
Single total figure of remuneration
The remuneration of the Non-executive Directors for the years 2019/20 and 2018/19 is as follows:
Director
John McCall
Jon Pither
David Armfield
Stephen Beechey
Vijay Thakrar
Richard Saville1
Total
Base salaries/fees
Benefits in kind
Single figure of total remuneration
2019/20
£000
100
40
35
35
40
–
250
2018/19
£000
100
40
35
18
18
30
241
2019/20
£000
5
–
–
–
–
–
5
2018/19
£000
4
–
–
–
–
–
4
2019/20
£000
105
40
35
35
40
–
255
2018/19
£000
104
40
35
18
18
30
245
1 Richard Saville resigned on 15 January 2019.
The Non-executive Directors’ fees were considered in the 2019/20 financial year and no changes were proposed.
Information on Directors’ service contracts can be found on our website:
https://www.alumasc.co.uk/wp-content/uploads/2019/04/3.3-The-Alumasc-Group_plc_-_Appendix_to_Schedule_1-24.04.19-FINAL_.pdf
The remuneration of the Executive Directors for the years 2019/20 and 2018/19 is comprised as follows:
Base salaries/fees
Bonuses
Benefits in kind1
Pension
contributions
or payments in
lieu of pension
contributions
Long-term
incentives with
performance period
ending during
the year
Single figure
of total
remuneration
Director
Paul Hooper
Gilbert Jackson2
Michael Leaf2
Andrew Magson3
Total
Notes:
2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19 2019/20 2018/19
£000
343
–
–
237
580
£000
104
–
–
104
20
£000
271
154
142
111
678
£000
352
178
165
148
843
£000
17
9
9
8
43
£000
10
–
–
10
20
£000
–
–
–
–
–
£000
51
–
–
27
78
£000
17
–
–
14
31
£000
54
15
14
19
102
£000
–
–
–
–
–
£000
265
–
–
186
451
1 Benefits in kind includes car allowance, health benefits, life cover and a disability injury insurance policy.
2 Mr. Gilbert Jackson and Mr. Michael Leaf were appointed as Directors on 5 September 2019, and their pay period covered the 10 months since their appointments to the year-end.
3 Mr. Andrew Magson resigned as a Director on 6 February 2020. The £10,000 bonus was paid to him prior to his resignation.
4 The £10,000 paid by way of bonus was agreed in the prior financial year and reported in the 2019 Annual Report. It was the second part of the Facades sale bonus (contingent on earn-out),
although paid during this financial period, it related to the previous financial year, and it was paid before COVID-19.
The Executive Directors do not hold any external paid directorships. Executive Directors may be permitted to accept external board or committee
appointments provided they do not interfere with their obligations to the Company.
The Alumasc Group plc Report and Accounts 2020
47
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.
Annual bonus
For the year to 30 June 2020 the minimum level at which any annual bonus would become payable was set at on a scale to underlying profit before tax
(UPBT) of £7.0 million. This target was not met and therefore no bonus was earned by Executive Directors for performance relating to the 2019/20
financial year.
2017 LTIP out-turn
Awards were made under the LTIP in October 2017. These were subject to EPS and TSR performance criteria. The minimum EPS target required growth
of RPI +2.5% per annum using a base EPS figure of 18.3 pence. This target was not met and therefore the award lapsed.
The Committee exercised no discretion in determining the vesting and considered that the formulaic outcome reflected the underlying performance
of the Group.
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No Directors exercised any options during the year (2018/19: Nil).
Pensions
The Group makes provision to pay into a defined contribution pension scheme of each executive’s choosing or a cash alternative. Pension contributions
are as follows:
Director
Paul Hooper
Gilbert Jackson
Michael Leaf
Andrew Magson
Pension contribution
(% of base salary)
20%
10%
10%
15%
The pension contribution rates for Messrs Jackson and Leaf were agreed at the time they joined the Company.
As part of the terms of the new policy, any new Executive Director appointments will have contributions aligned to the workforce rate. There are various
pension schemes in operation at Alumasc and different contribution rates depending on length of service and age. The Company will review the current
schemes and arrive at an appropriate ‘workforce rate’ that will apply for new directors (including the new Finance Director).
Payments in compensation to past directors and for loss of office
Mr. Andrew Magson resigned on 6 February 2020 and he was paid his salary, benefits and bonus achieved, as part of his notice period to 30 September
2020, amounting to £268,102.
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Directors’ Remuneration Report continued
Scheme interests awarded during the year
LTIP awards were granted in October 2019 as detailed in the table below.
Paul Hooper
Andrew Magson*
Scheme
2008 LTIP
2008 LTIP
Basis of
award granted
75% of base salary
50% of base salary
No. of shares
awarded
149,081
69,997
Face value
of award†
£124,483
£58,447
% vesting for
threshold
performance
25%
25%
Vesting and
performance
period
3 years
3 years
† Based on share price of 83.5 pence on the day of grant.
* Mr. Andrew Magson resigned as a Director on 6 February 2020.
These awards would vest on 17 October 2022 and are subject to two measures and an underpin. The underpin requires UPBT of at least £7.0 million to
be delivered (in the year ending 30 June 2022) below which no award would vest. However, if this is achieved, 65% of the 75% of salary award granted
to the CEO is based on EPS growth targets (threshold of RPI + 2.5%p.a. growth and maximum of RPI+10%p.a.) and the remaining 10% is based on
relative Total Shareholder Return (TSR) performance against the constituents of the FTSE All Share Index. The details of the performance criteria are
set out in more detail on page 47 of the 2019 Annual Report and Accounts.
No LTIPs were awarded in 2019 to Mr. Gilbert Jackson or to Mr. Michael Leaf in a transitional year when they were appointed to the Board. They were
given targeted performance related bonuses, as an element of variable pay based on key commercial objectives.
Statement of Directors’ shareholdings and share interests
Directors’ shareholdings
John McCall
Jon Pither
Paul Hooper
Gilbert Jackson
Michael Leaf
Andrew Magson1
David Armfield
Stephen Beechey
Vijay Thakrar
At the date
of this report
4,359,668
403,486
764,665
Nil
16,375
N/a
69,400
27,418
36,496
At
30 June 2019
4,359,668
318,986
519,534
N/a
N/a
133,379
69,400
Nil
10,000
1 Mr. Andrew Magson resigned on 6 February 2020.
The Directors’ shareholdings are beneficial with the exception of 434,000 shares (2018: 434,000) in which Mr. McCall has a non-beneficial holding.
Directors are encouraged to hold shares in the Company.
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 2020 was £265,856.40.
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
Jan
2010
Jan
2011
Jan
2012
Jan
2013
Jan
2014
Jan
2015
Jan
2016
Jan
2017
Jan
2018
Jan
2019
Jan
2020
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.
The Alumasc Group plc Report and Accounts 2020
49
Long Term Incentive Plans
The table below reconciles movements in LTIP awards during the year.
Date
of award
Market
price at
award date*
Earliest
exercise
date
Sept 2016
Oct 2017
Oct 2018
Oct 2019
157.5p
173.5p
130.5p
83.5p
Oct 2019
Oct 2020
Oct 2021
Oct 2022
Sept 2016
Oct 2017
Oct 2018
157.5p
173.5p
130.5p
Oct 2019
Oct 2020
Oct 2021
Sept 2016
Oct 2017
Oct 2018
157.5p
173.5p
130.5p
Oct 2019
Oct 2020
Oct 2021
Sept 2016
Oct 2017
Oct 2018
Oct 2019
157.5p
173.5p
130.5p
83.5p
Sept 2019
Oct 2020
Oct 2020
Oct 2022
Interest
as at
1 July
2019
122,510
115,425
149,081
–
387,016
19,067
33,197
43,303
95,567
19,067
28,779
38,798
86,644
57,521
54,194
69,997
–
181,712
of which
lapsed
in year3
Interest
as at
30 June
2020
122,510
115,4253
–
237,935
–
–
149,081
149,081
298,162
19,067
33,1973
–
52,264
–
–
43,303
43,303
19,067
28,7793
–
47,846
–
–
38,798
38,798
57,521
54,1943
–
–
111,715
–
–
69,997
69,997
139,994
were
granted
in year
–
–
149,081
149,081
–
–
–
–
–
–
–
–
–
–
69,997
69,997
vested
in year
exercised
in year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Paul Hooper
Total
Gilbert Jackson2
Total
Michael Leaf2
Total
Andrew Magson1
Total
* 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.
1 Mr. Magson resigned from the Board on 6 February 2020.
2 No LTIPs were awarded to Mr. Gilbert Jackson and Mr. Michael Leaf in 2019.
3 The October 2017 LTIP has failed to meet the hurdle criteria and will lapse in October 2020.
Non-executive Directors
The policy of the Board is that the remuneration of the Non-executive Directors should be consistent with the levels of remuneration paid by companies
of a similar size and complexity. Non-executive Directors receive an annual fee and are reimbursed expenses incurred in performing their duties. They do
not receive any performance related remuneration or pension contributions. The non-executive fees were not increased during the year.
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.
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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
2019/20
2018/19
2017/18
2016/17
2015/16
Chief Executive single figure
of total remuneration (£000)
352
343
332
510
493
Annual Bonus pay-out against
Long-term incentive vesting
maximum opportunity %† against maximum opportunity %
0%
0%
0%
*72%
50%
3.7%1
3.8%
0%
22%
20%
* 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.
1 This represents a bonus relating to 2019 in respect of the sales of the Facades business.
Percentage change in Chief Executive’s remuneration
The table below shows the percentage change in remuneration between the years ended 30 June 2019 and 30 June 2020 for the CEO and all Group
employees. All employees in general received a 2.5% cost of living pay rise in 2019, however due to some roles being combined post-restructuring this
amounted to 3.5%.
CEO
2.3%
0.0%
0.0%
2.3%
Total employee pay
(£000’s)
21,747
18,819
Employees
3.5%
-9.1%
-0.9%
3.1%
Dividends
(£000’s)
2,628
1,574
Salary
Benefits
Bonus
Total
Relative importance of spend on pay
2018/19
2019/20
Relative importance of spend on pay
30,000
25,000
20,000
0
0
0
£
’
15,000
10,000
5,000
0
21,747
18,819
2018/19
2019/20
Total Employee Pay
Dividends
2,628
1,574
2019/20
2017/18
Implementation of the Directors’ Remuneration Policy for the Financial Year 2020/21
The information below sets out how the Company intends to implement the Directors’ Remuneration Policy for the year in 2020/21.
Base salary
The salaries of the Executive Directors have been reviewed and in light of COVID-19 there is currently no expectation of a salary increase, in the same
way as there is none for the wider workforce, this will be kept under review. The provision of benefits will remain unchanged.
Non-executive Directors
The Board’s policy 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 for expenses incurred in performing their duties.
The fee levels will be unchanged in 2021.
The Chairman and Non-executive Directors have letters of appointment and details of their terms can be seen in the Appendix to Schedule 1 as
published on our website.
The Alumasc Group plc Report and Accounts 2020
51
Bonus
For 2020/21 the annual bonus for the Executive Directors will be determined by performance against a sliding scale of demanding Underlying Profit
Before Tax targets set at the beginning of the financial year. The targets themselves are commercially sensitive and will be disclosed in next year’s reports.
Long-term Incentive Plan
It is intended that awards under the 2018 LTIP will be made in October 2020. The face value of the awards at grant will be 75% of salary for the CEO and
40% of salary for the other Executive Directors. To reflect the fall in share price as a result of the global pandemic and to avoid granting awards over too
many shares, the number of awards will be calculated by reference to the higher of the share price at the time of grant or a notional share price of 130 pence.
The awards will vest subject to profit growth targets, defined as Underlying Profit before Tax (UPBT). For the CEO, 65% (out of his 75% of salary award)
will be based on this measure and the measure will apply to all of the awards granted to other Executive Directors. The remaining 10% of salary grant
for the CEO will be based on a relative Total Shareholder Return (TSR) measure. Details of the two measures and targets are set out below:
Underlying PBT
Awards will vest depending on growth achieved using a notional base UPBT figure of £7.0 million. Performance is based on the third year of the
performance period, being the financial year ending 30 June 2023.
Awards will vest according to the following targets:
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UPBT growth (from a base of £7 million)
Less than RPI + 2.5%p.a.
Between RPI +2.5%p.a. and RPI + 10%p.a.
RPI + 10%p.a. or higher
Proportion of the award that vests
0.0%
25% to 100% on a straight-line basis
100%
Total shareholder return
As mentioned above, 10% (out of the 75% of salary award) for the CEO is subject to a relative TSR measure.
If the Company’s TSR is below the FTSE All Share index, no part of this award will vest. If performance is at median/index, then 25% will vest. For
performance at upper quartile or higher, this part of the award will vest in full. For performance between median/index and upper quartile, vesting will
be on a straight-line basis.
Mr Gilbert Jackson’s and Mr Michael Leaf’s LTIP awards are based on targets relating to the profit performance of their respective divisions: Building Envelope,
and Housebuilding Products. The base profit figures for each division are equivalent to the total Group base figure of £7.0 million used for the UPBT measure
above. The base figures for each division are not disclosable at this stage due to commercial sensitivity, but will be disclosed when they cease to be so.
The targets applying to each of the divisional profit measures are as follows:
Growth of base case (divisional strategic target)
Less than RPI + 2.5%p.a.
RPI + 2.5%p.a.
Between RPI +2.5%p.a. and RPI +10%p.a.
RPI + 10%p.a. or higher
Proportion of the award that vests
0%
25%
25% to 100% on a straight-line basis
100%
In addition, a Group profit underpin applies requiring the Group UPBT threshold of RPI + 2.5% p.a. (using a base profit of £7.0 million) to be met before
any of these awards can vest.
Statement of voting - 2019 AGM
At the 2019 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)
% of
votes cast
87.13
12.87
Total number
of votes cast
15,914,261
2,349,812
18,264,073
4,836
18,268,909
* 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.
The Directors’ Remuneration Policy on pages 52 to 57 and this Report were both approved by the Board of Directors on 8 September 2020 and signed
on its behalf by the Remuneration Committee Chairman.
J.P. Pither
Chairman
Remuneration Committee
The Alumasc Group plc Report and Accounts 2020
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Directors’ Remuneration Policy 2020
The Remuneration Committee is putting its Remuneration Policy to a shareholder vote at the Company’s AGM on 22 October 2020.
This part of the Directors’ Remuneration Report sets out the Directors’ Remuneration Policy which, subject to shareholder approval, shall take effect
from the close of the Company’s 2020 AGM. The Company’s existing Directors’ Remuneration Policy was approved by shareholders at the 2017 AGM,
with 98.8% of votes cast in favour of it. The Remuneration Committee, having reviewed that policy, and taking into account shareholder comments
since the last policy vote, concluded that, in substance, it remains fit for purpose to support the implementation of the Group’s strategy over the next
three-year period.
The 2020 Policy includes changes to reflect the approval of the 2018 LTIP and other good practice features which have emerged since approval of
the 2017 Policy. Any discretion to be retained by the Committee is detailed in the relevant sections within the policy. Other minor amendments have
been made to the policy to aid its administration, to reflect the changes referred to above and to reflect changes in practice since the policy was last
approved in 2017.
Fixed remuneration
Element
Fixed salary
Purpose and link to strategy
Operation
Maximum
Provides fixed remuneration for the
Executive Directors, which reflects
the individual’s experience and the
size and scope of the executive’s
responsibilities.
Set on appointment and normally
reviewed annually in July.
Salaries are determined by the
Remuneration Committee taking into
account a range of factors, including,
but not restricted to, remuneration
practices and general salary ranges
within the Group, changes in scope
or responsibility, market rates and the
experience of the relevant Director.
Retirement benefits
To provide competitive
post-retirement benefits and
reward sustained contribution.
Benefits
Ensures the overall package
is competitive in order to help recruit
and retain Executive Directors.
Generally, payment may be made
into a pension plan or as a separate
cash allowance.
Group contributions are determined
as a percentage of base salary; for
new appointees as a percentage
of pay aligned to the pension
contributions of employees.
Executive Directors are entitled to a
range of benefits, including, but not
limited to, membership of the Group’s
healthcare scheme, disability and life
insurance, and car (or car allowance)
and other associated expenses.
Other benefits may be provided
depending on individual circumstances,
for example relocation expenses.
While there is no maximum salary,
ordinarily salary increases will
not exceed the range of salary
increases (in percentage terms)
awarded to other employees in the
Group. However, salary increases
may be above this level in certain
circumstances, for example:
• Increase in scope or responsibility;
• Performance in role; or
• An Executive Director’s remuneration
being aligned with changing market
rates;
• An Executive Director being
appointed on a below market salary
with a view to moving to the desired
positioning over time.
The maximum company contribution
for the CEO is up to 20% of salary
and for the other Executive Directors
is based on the contribution tables
used by the workforce.
For any new Executive Director
appointments (including promotions),
the pension contribution will be aligned
with the contribution rates applying to
the wider workforce.
Whilst the Committee has not set
a maximum on the level of benefits
Executive Directors receive, it is
based on the value of benefits, set
at a level that the Remuneration
Committee considers is appropriate,
taking into account companies of a
similar size (and complexity) in the
relevant market.
The Alumasc Group plc Report and Accounts 2020 Variable performance-linked remuneration
Element
Annual Bonus
Purpose and link to
strategy
Rewards the achievement
of financial and/or
strategic business
objectives.
53
Operation
Maximum
Performance conditions
The Policy allows for up
to 100% of base salary
to be earned.
Either all, or the majority of, the
available bonus will be based on
achievement of pre-determined
profit targets.
A straight-line bonus entitlement
will usually apply between the
minimum threshold and the
maximum performance target.
The Remuneration Committee
retains flexibility to apply different
performance measures and
weightings for each year covered
by the Remuneration Policy.
Performance conditions and
targets are reviewed and set
each year by the Remuneration
Committee. These targets will be
challenging and will reflect both
short-term expectations and
longer-term strategic goals.
The bonus will be based on
the achievement of financial
targets related to key business
objectives.
Other performance metrics that
the Remuneration Committee
considers appropriate from
time to time, including personal
objectives, may also be used.
Bonus pay-out is determined by
the Remuneration Committee
after the relevant year end,
following an assessment of
performance against the
targets. The Committee retains
discretion to amend the pay-out
should any formulaic output
not reflect the Committee’s
assessment of overall business
performance.
Malus and clawback
provisions apply.
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Directors’ Remuneration Policy 2020 continued
Variable performance-linked remuneration
Long Term
Incentive provision
The maximum level
of award under the
LTIP is up to 100% of
base salary. This is in line
with the LTIP approved
by shareholders at the
2018 AGM.
Incentivises and rewards
Executive Directors and
other key executives to
achieve higher returns
for shareholders over
a longer time frame.
Encourages a long-
term shareholding
in the Company and
strengthens alignment
between the interests
of Executive Directors,
other key executives and
those of shareholders.
Awards will be granted under
the most recent Alumasc Group
Long Term Incentive Plan
(“LTIP”), or under any new long-
term incentive plan approved by
shareholders in due course.
The Remuneration Committee
may grant conditional share
awards, nil cost share options or
such other form as has the same
economic effect.
Awards are typically granted
annually, and vesting is subject
to achievement of performance
measures over at least three years.
Malus and clawback provisions
apply as set out below this table.
Awards vest subject to the
achievement of financial and/
or market-based performance
measures assessed over not
less than three financial years.
The performance conditions
and targets for new awards are
reviewed annually to ensure they
remain relevant and aligned to
the Group’s strategy.
Performance conditions are
typically based on growth in
earnings per share (“EPS”) or
underlying profit before tax
(“UPBT”) and total shareholder
return (“TSR”).
A minimum threshold of
growth in EPS/UPBT must be
reached before any part of the
award vests. Up to 25% of the
maximum award opportunity will
vest for achieving the threshold
level of growth.
The measures and their
weightings are determined by
the Committee in advance of
each grant.
Each element of the award will
vest between 0% and 100%
of the balance available for
that element for performance
between threshold and
maximum, usually on a
straight-line basis.
Recovery provisions
LTIP
LTIP awards are subject to malus and clawback provisions such that, at the discretion of the Remuneration Committee, unvested awards may lapse
for material errors or the misstatement of results, or information coming to light which, had it been known, would have affected the award or vesting
decision or caused reputational damage to the Group.
For up to two years following the vesting of an LTIP award the Committee may reduce the award if shares have not been delivered to satisfy it or require
repayment of some or all of the value delivered to the participant in the event of a material misstatement of results or information coming to light which
had it been known, would have affected the vesting decision, or gross misconduct on the part of the participant.
Bonus
A malus provision exists which enables the Committee to cancel or reduce the bonus before payment in the event of material errors or the
misstatement of results.
For up to two years following the payment of an annual bonus the Committee may require repayment of some or all of the bonus in the event of
a material misstatement of results or information coming to light which had it been known, would have affected the payment decision, or gross
misconduct on the part of the participant.
The Alumasc Group plc Report and Accounts 2020 55
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Explanation of performance metrics
Performance metrics for the annual bonus and LTIP are selected to reflect the Group’s strategic priorities. Stretching performance targets are set
taking into account a number of different factors.
The Committee retains the discretion to change the performance measures and targets and the weightings attached to the performance measures
and targets part way through a performance period if there is a significant event which causes the Committee to believe the original measures,
weightings and/or targets are no longer appropriate and/or if the Committee believes that the remuneration outcomes would otherwise not fairly
reflect business performance. Any adjustments or discretion applied will be fully disclosed in the following year’s Remuneration Report.
Operation of share plans
The Committee may amend the terms of awards under its share plans in accordance with the rules of those plans in the event of a variation
of the Company’s share capital and may otherwise operate those plans in accordance with their terms. Awards may be satisfied wholly or partly
in cash at the election of the Committee.
Shareholding requirement
Executive Directors are encouraged to build up shareholdings in the Company.
Change of control policy
LTIP
Awards may vest early on a change of control (or other relevant event) subject to the satisfaction of performance conditions at the change
of control date and pro-rating for the proportion of the three-year financial years served, although the Remuneration Committee retains discretion
to determine otherwise.
Bonus
Awards may vest only to the extent that performance conditions have been satisfied or are reasonably expected to be satisfied up to the
change of control date and pro-rated for the proportion of the financial year served, although the Remuneration Committee retains discretion
to determine otherwise.
Policy for Non-executive Chairman and Directors’ fees
Element
Fees
Purpose and link to strategy
Operation
Maximum opportunity
The sole element of
Non-executive Director
remuneration is fees, set at
a level that reflects market
conditions and sufficient
to attract individuals with
appropriate knowledge
and experience.
Fees are subject to an overall
cap as set out in the Company’s
Articles of Association from time
to time.
Fees are appropriately positioned
against comparable roles in
companies of a similar size and
complexity in the relevant market.
Fees are reviewed periodically
and are determined by the
Chairman and the Executive
Directors in the case of the
Non-executive Directors and the
Remuneration Committee
in respect of the Chairman.
The Chairman is paid a single
consolidated fee and receives
some benefits in kind as agreed
by the Company.
The Non-executive Directors are
paid a basic fee plus additional
fees for chairmanship of a
Committee, or for any additional
work undertaken on behalf
of the Company.
The Non-executive Directors
do not participate in any of the
Group’s share incentive plans
nor do they receive any pension
contributions. Non-executive
Directors may be eligible to
benefits/expenses such as the
use of secretarial support, travel
costs or other benefits that may
be appropriate.
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56
Directors’ Remuneration Policy 2020 continued
How the Executive Directors’ remuneration policy relates to the wider Group
Both executives, and employees below executive level, have their base pay reviewed each year taking into account wage and general inflation,
affordability to the Group/relevant operating company, performance/development of the individual in their role and general market rates for specific
skills. Employees below executive level have lower proportions of their total remuneration subject to incentive-based rewards. Long-term incentives are
reserved for those judged as having the greatest potential to influence the Group’s earnings growth and share price performance.
Recruitment policy for Directors
The remuneration package for a new Executive Director would be set in accordance with the terms of the Company’s prevailing approved Remuneration
Policy at the time of appointment and taking into account the skills and experience of the individual, the market rate for a candidate of that experience
and the importance of securing the relevant individual.
Salary would be set at the level required to attract the most appropriate candidate. It may be set initially at a below mid-market level on the basis that it
may progress towards the mid-market level once expertise and performance has been proven and sustained. Under the terms of this policy, the annual
bonus potential for executives is limited to 100% of salary, and the maximum value of awards under a long-term incentive scheme is limited to 100% of
salary. In addition, the Committee may offer additional cash and/or share-based elements to replace deferred or incentive pay forfeited by an executive
leaving a previous employer. It would seek to ensure, where possible, that these awards would be consistent with awards forfeited in terms of vesting
periods, expected value and performance conditions. Other elements of remuneration may be included in the following circumstances:
• an interim appointment being made to fill an executive role on a short-term basis;
• if exceptional circumstances require that the Chairman or a Non-executive Director takes on an executive function on a short-term basis;
• if an Executive Director is recruited at a time in the year when it would be inappropriate to provide a bonus or long-term incentive award for that year
as there would not be sufficient time to assess performance. Subject to the limit on variable remuneration set out above, the quantum in respect
of the months employed during the year may be transferred to the subsequent year so that reward is provided on a fair and appropriate basis.
The Committee may also alter the performance measures, performance period and vesting period of the annual bonus or LTIP, subject to the rules
of the LTIP, if the Committee determines that the circumstances of the recruitment merit such alteration. The rationale will be clearly explained in the
next Directors’ Remuneration Report.
For an internal Executive Director appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out according
to its terms, adjusted as relevant to consider the appointment. In addition, any other ongoing remuneration obligations existing prior to appointment
may continue. For external and internal appointments, the Committee may agree that the Company will meet certain relocation and other incidental
expenses as appropriate.
The fees for a new Chairman or Non-executive Director will be reflective of experience, time commitment, responsibility and scope of the role, and will
be consistent with the approved Remuneration Policy at the time.
The Alumasc Group plc Report and Accounts 2020 57
Policy on payment for loss of office
The Committee’s policy on service contracts for Executive Directors is that they should provide for termination of employment by either side giving
12 months’ notice. The Group’s policy going forward will be that no Executive Director should be entitled to a notice period or payments in excess
of their contractual arrangements.
Provision
Notice period
Termination
payment
LTIP
Other payments
Terms
12 months
Base salary plus pension contributions and benefits accrued to date of cessation. A payment in respect of bonus may
also be made at the discretion of the Committee taking into account the circumstances of the departure, the extent
to which performance conditions are satisfied and the contribution of the Executive to the business during the bonus
period in question. Any bonus would typically be pro-rated for time in service to termination and paid at the usual time,
although the Committee retains discretion to pay the bonus earlier in appropriate circumstances.
If a participant ceases employment due to death, redundancy, retirement, injury, disability or any other reason at the
discretion of the Committee any unvested award the participant holds shall continue and be released at the normal release
date to the extent the performance condition is satisfied and, unless the Committee determines otherwise, reduced to
reflect the proportion of the performance period for which the participant was in service, although the Committee will
retain discretion to release the award sooner.
If a participant ceases employment for any other reason, any unvested award they hold will lapse on cessation.
If a participant ceases employment for any other reason, any award they hold under the Company’s current LTIP shall lapse
on cessation.
In appropriate circumstances, payments may also be made in respect of accrued holiday and outplacement and legal
fees. The Committee reserves the right to make additional exit payments where such payments are made in good faith
in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement
or compromise of any claim arising in connection with the termination of a Director’s office or employment.
Payments in lieu
of notice
The Committee reserves the right to make a payment in lieu of some or all of the notice period. Such a payment would
consist of salary for the notice period (or remaining portion of the notice period) and may also include a payment in
respect of benefits (including pension contributions or cash allowance) for the applicable period.
How employees’ pay is taken into account
Pay and employment conditions elsewhere in the Group continue to be considered in relation to the implementation of this policy.
How shareholders’ views are taken into account
The Committee considers shareholder feedback received in relation to the AGM each year. This, plus other feedback received during the year, is then
considered as part of the Group’s annual review of remuneration policy. The Committee will continue to review the Remuneration Policy to ensure
it takes due account of best remuneration practice and that it remains aligned with the interests of shareholders.
Legacy remuneration arrangements
The Committee reserves the right to make remuneration payments and payments for loss of office notwithstanding that they are not in line with the
policy set out above where the terms of payments were agreed:
(i) before the policy came into effect (provided that, in the case of any payments agreed on or after 30 October 2017 they are in line with the
policy approved at the 2017 Annual General Meeting); or
(ii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in
consideration for the individual becoming a Director of the Company.
For these purposes, ‘payments’ includes the satisfaction of variable remuneration and, in relation to an award over shares, the terms of the payment
are ‘agreed’ no later than the time the award is granted.
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Nomination Committee Report
STATEMENT FROM THE CHAIRMAN
OF THE NOMINATION COMMITTEE
“During the year
the Committee
recommended the
appointment of two
Executive Directors.”
John McCall
Chairman
I am pleased to present the report
of the Nomination Committee
(the Committee) for the year ended
30 June 2020. During the year the
Committee had three scheduled
meetings together with a number
of additional unscheduled meetings.
It was agreed to recommend to the Board two
internal Executive Director appointments: Mr
Gilbert Jackson, Managing Director of Building
Envelope and Mr Michael Leaf, Managing
Director of Housebuilding Products. Gilbert and
Michael were appointed as Executive Directors
with effect from 5 September 2019. Both bring
additional skills and relevant industry experience
to the Board.
On 6 February 2020, Mr Andrew Magson
resigned as the Group Finance Director.
Head-hunters were considered and Odgers
Berndtson were appointed to search for his
replacement. The Committee has progressed
the selection and has interviewed candidates.
Due to the COVID-19 lockdown, this process
has taken longer than anticipated, however it is
well progressed. In the interim, the Board has
provided full cover and support to the Finance
Team, particularly through the input of our
Non-executive Director, Vijay Thakrar, whose
ideal experience covers 33 years in major
accounting firms, including 22 years as a
Partner, a role in which he regularly mentored
and coached CFOs and their finance teams.
Meeting attendance
Members
John McCall
Jon Pither
David Armfield
Stephen Beechey
Vijay Thakrar
Attended/
eligible to attend
3/3
3/3
3/3
3/3
3/3
Key activities of the Committee
• Considering Board composition
• Reviewing the balance of skills and
experience of the Board
• Succession planning for the Board and
senior Executives
• Selection and appointment of head-
hunters
• Identifying and interviewing candidates
for the Group FD role
• Reviewing the time required from the
Non-executive Directors to discharge
their responsibilities
A copy of the terms of reference for
the Nomination Committee is available
at alumasc.co.uk/investors/corporate-
governance
The Alumasc Group plc Report and Accounts 2020
Directors’ Report
59
The Directors present their Annual Report and the consolidated financial statements for The Alumasc Group plc for the financial year ended 30 June 2020.
Strategic report
The Companies Act 2006 (“CA 2006”) requires this Annual Report to present a fair, balanced and understandable view of Alumasc’s business during
the year ended 30 June 2020 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 ‘Additional Shareholder Information’ section on page 125 to 126. The Strategic report can be found
on pages 2 to 29.
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 62 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.
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Directors
The Directors who served during the financial year were:
John McCall
Jon Pither
Paul Hooper
Andrew Magson (resigned 6 February 2020)
David Armfield
Vijay Thakrar
Stephen Beechey
Gilbert Jackson (appointed 5 September 2019)
Michael Leaf (appointed 5 September 2019)
The biographies of the Directors can be found on pages 30 to 31. Details of the Directors’ service agreements can be found on our website
at www.alumasc.co.uk. Information about Directors’ interests in the Company’s shares are shown on page 48.
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 2 pence per ordinary share (2018/19: 4.4 pence) which will, if approved at the AGM, be paid
on 30 October 2020 to shareholders on the register at the close of business on 25 September 2020, being a total of 2 pence for the year, as the interim
dividend was cancelled on 27 March 2020 in response to the COVID-19 pandemic.
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 Directors’ Remuneration Report on page 48.
Companies Act s.172
The Directors are mindful 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.
Information about how the Company considers its obligations under s.172 of the Companies Act are discussed in the Sustainability section of the
Strategic Report (on pages 28 and 29).
Recapitalisation
A General Meeting was held on 23 April 2020 to consider two resolutions to enable the Company to recapitalise its merger and revaluation reserves.
Following the approval of the special resolutions at the General Meeting, the Company issued Redemption shares on 8 June 2020 that were then
cancelled following a court hearing on 9 June 2020 and duly recorded at Companies House on 12 June 2020. More information on this can be found
on pages 5 and 100 (note 25 of the financial statements).
The Alumasc Group plc Report and Accounts 2020
60
Directors’ Report continued
Going Concern and COVID-19
Alumasc has closely monitored COVID-19 and the impact on our operations are referenced on pages 1, 4, 5, 12-20, 24, 25, 28, 29, 33, 34, 41, 42, 50, 58 to
60, 71 and in the financial statements. Our main focus has been on the safety and wellbeing of our employees, customers, suppliers and other stakeholders.
Employees who work at our manufacturing sites have returned and some staff are working from home. Whilst COVID-19 originally impacted our office in
Hong Kong, this is now fully operational. At the start of the pandemic the business took prudent decisions to preserve liquidity and maintain cashflow.
Our sites have implemented Health & Safety requirements advised by the Government and the business can operate in a safe and secure environment
without impacting outputs. Additional disclosures about Going Concern can be found in note 1 on page 73 of the financial statements.
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 2020 can be found on page 24.
Employees are kept informed of changes in the business and general financial and economic factors influencing the Group; this is done through briefing
sessions and presentations. The Group values the views of its employees and consults with them on a regular basis about matters that may affect them.
In light of the COVID-19 pandemic further information on how this has been approached and on our future approach can be found on pages 28 to 29
and page 34.
In the Corporate Governance and Sustainability Reports there are disclosures on how the Company provides information to employees, how the views
of employees are taken into account in decision-making and how strategic information is shared (see pages 24, 25, 28 to 29 and 34).
Stakeholder engagement
Further information on stakeholder engagement, including on our business relationships with suppliers and others, can be found in the Corporate
Governance report on pages 32 to 39 and in our Section 172 Statement on pages 28 to 29.
Post balance sheet events
Details of post balance sheet events are included in note 1 on page 73 of the financial statements.
Global Greenhouse Gas emissions
Information about the Group’s Greenhouse Gas emissions is given in the Sustainability Report on pages 22 and 24 to 25.
Political donations
No political donations were made during the year by the Company and its subsidiaries (2018/2019:£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 £104,000 (2018/19: £200,000).
Disclosure of information to the auditor
As far as the Directors are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all
reasonable 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
125
48
49
42-43, 94
2-29
22, 24-25
126
100
125
100, 125
Location in Annual Report
Additional information for shareholders
Directors’ Remuneration Report
Directors’ Remuneration Report
Note 21 and the significant accounting policies sections,
financial statements
Strategic report1
Strategic report: Sustainability Report1
Additional information for shareholders
Note 25, financial statements
Additional information for shareholders
Additional information for shareholders and in notes 24
and 25 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.
The Alumasc Group plc Report and Accounts 2020 61
Fair, Balanced and Understandable
The Board has concluded that the 2020 Annual Report is fair, balanced and understandable and provides the necessary information for shareholders
and other readers of the Report and Accounts to assess the Group’s position and performance, business model and strategy.
Auditor
BDO LLP has expressed willingness to continue in office. A resolution to reappoint BDO LLP as auditor will be proposed at the forthcoming Annual
General Meeting.
Annual General Meeting (AGM)
The notice convening the AGM, to be held on 22 October 2020 at 10.00am at Station Road, Burton Latimer, Kettering, Northamptonshire NN15 5JP,
is included within this document on pages 127 to 132 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 advisers.
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The Directors’ Report was approved by the Board on 8 September 2020.
On behalf of the Board
Helen Ashton
Group Company Secretary
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62
Statement of Directors’ Responsibilities
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 judgments 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
The Alumasc Group plc Report and Accounts 2020 Independent Auditor’s Report to the Members of The Alumasc Group plc
63
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 2020 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated
statement of cash flows, the consolidated statement of changes in equity, the parent company statement of financial position, the parent company
statement of cash flows, the 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 2020 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.
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Independent Auditor’s Report to the Members of The Alumasc Group plc continued
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.
Key audit matter
How we addressed the Key audit matter in the audit
The Directors’ assessment of going concern and associated
disclosure in the financial statements in light of COVID-19
Refer to note 1
At the time of approval of the financial statements there are
unprecedented levels of uncertainty related to the impact of
COVID-19 on all businesses including the Group.
The Directors have prepared the financial statements on a going
concern basis. The Directors’ assessment of the impact of COVID-19
on the going concern of the Group is described in note 1.
The Directors have had to address significant levels of estimation
uncertainty in forecasting the expected impact on the Group’s
future operating results and cashflows including modelling
downside sensitivities. These downside sensitivities include
consideration against the available loan facility headroom and
covenant tests in the forecast period. The Directors have also
applied judgment as to the level of disclosure given in the financial
statements in relation to this matter.
The COVID-19 outbreak has increased the level of estimation
uncertainty and judgment involved in relation to going concern
assessments and increased the risk of material uncertainties being
present and therefore it was considered to be a significant risk.
We reviewed management’s forecasts and sensitivities which covered the
period to the end of September 2021. As part of our work we:
• Confirmed the arithmetic accuracy of the forecasting model;
• Reviewed the performance post year end against the forecast performance;
• Challenged the extent of the downside sensitivities included in the model
by reference to the previous lockdown period in March and April 2020 and
reviewed reverse stress testing of worse case scenarios;
• Compared forecast revenue scenarios to actual results for the year ended
30 June 2020;
• Challenged the assumptions of forecast cost savings in downside sensitivities;
• Compared working capital cycles to previous year and those achieved during
the lockdown and post lockdown period to ensure reasonable; and
• Reviewed revised covenant agreements and forecast covenant calculations.
We also reviewed the disclosures in the annual report to ensure that they were
consistent with the Directors’ assessment and supporting COVID-19 budgets
and provided suitable information to the users of the financial statements.
Key observations
Our observations are set out in the Conclusions relating to going concern
section of our audit report.
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Key audit matter
How we addressed the Key audit matter in the audit
Carrying value of goodwill in the Levolux cash generating unit
(CGU) in the Group financial statements and carrying value
of the investment in Levolux Limited in the Parent Company
financial statements
Refer to the accounting policies and significant judgments and
estimates (Note 2), details of the group impairment assessment
set out in note 14 and investments set out in note 6 in the
Company financial statements
Goodwill and other intangible assets are tested for impairment at
least annually through comparing the recoverable amount of the
cash-generating unit (“CGU”), based on a value-in-use calculation,
to the carrying value. The Company tests for impairment
of investments in subsidiaries where there is an indicator of
impairment.
Following the restructuring of the Levolux CGU in the year
ended 30 June 2019 this was the first full year of trade under
the restructured business plan and was a particular area of audit
focus. Management’s review found no evidence of impairment
was identified in respect of the Levolux CGU and any of the other
CGUs. Managements’ review found no evidence of impairment of
the parent company investment in the Levolux subsidiary.
The risk that goodwill related to or investments in Levolux Limited
may be impaired is considered significant due to the level of
judgment involved in the impairment review and the opportunity
for management bias within the impairment model assumptions.
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 and 17
Revenue is recognised on the stage of completion of individual
contracts as measured at the year end date. The stage of
completion is calculated by assessing the contract costs incurred
to date as a proportion of the total forecast costs of the contract,
including contingencies where appropriate. If the contract is
early stage, revenue and costs are matched until the contract
is sufficiently progressed to reliably forecast the outcome.
The extent of revenue and profit (or loss) to recognise on a
particular partially completed contract represents an area of
significant judgment within the financial statements, which
involves an assessment of both current and future contract
performance.
The potential outcomes for contracts can have an individual or
collectively material impact on the financial statements, whether
through error or management bias and as such this was considered
a significant audit risk.
We reviewed the carrying value of Levolux goodwill and investment in
subsidiary undertakings and examined for indicators of impairment.
We also reviewed the Levolux impairment model for both goodwill and
investment in subsidiary undertakings prepared by Management and
challenged the judgments adopted and estimates applied in the value in use
for each CGU including:
• Review of the integrity of the value in use model and appropriateness of
discount rate used with the assistance of our valuation specialists;
• Challenged the assumptions in the forecasts of future trading performance
and cash generation. This included challenging the robustness of the key
assumptions such as the growth rate in light of past performance based on
facts and circumstances at the balance sheet date.
Our audit procedures for the review of operating cash flows and forecast
growth rates included, amongst others, comparing the forecast to recent
financial performance and budgets approved by the Board.
We read and considered the disclosures made by the Directors within the
financial statements and found them to be consistent with our testing and
compliant with the requirements of accounting standards.
Key observations
We concur with management’s view that there are no indicators of impairment
in respect of the carrying value of goodwill in the Levolux CGU or in respect of
the carrying value of the Company’s investment in Levolux Limited.
We obtained a breakdown of contracts making up contract revenue and
costs in the year.
From the breakdown we selected a sample of both complete and open
contracts at the year end date 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 considered the appropriateness of the application of IFRS 15 and in
particular the application of the input method in measuring the delivery of
the performance obligation in light of the characteristics of the contract.
• We tested a sample of incurred costs 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 held meetings 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 were accurate.
The Alumasc Group plc Report and Accounts 2020
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Independent Auditor’s Report to the Members of The Alumasc Group plc continued
Key audit matter
How we addressed the Key audit matter in the audit
Recognition of revenue and attributable profit (or losses)
on contracts continued
• We assessed the ability of management to accurately forecast contract cost
outcomes by reviewing contract outturns against costs forecast historically.
• We agreed contract variations to supporting documentation.
Key observations
We consider the judgments taken by management in relation to revenue
recognition to be robust. Nothing has come to our attention that would
suggest that recognition of revenue is inappropriate.
Valuation of net defined benefit pension obligation
Refer to the accounting policies and significant judgments
and estimates (Note 2) and note 22
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 with the
valuation of the defined benefit pension obligation.
Because of the estimation involved in this area we considered this
to be a key audit matter.
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 the independence and competence of the group’s actuary.
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.
Key observations
Based on the work undertaken we consider that estimates made in respect
of the valuation of the net defined benefit pension obligation are reasonable.
The Alumasc Group plc Report and Accounts 2020 67
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 £280,000 (2019 – £300,000) determined with reference to a benchmark of Group profit before tax normalised
to exclude certain non underlying costs, averaged over the last five (2019 – three) years due to fluctuations in the construction market, which it
represents 4.8% (2019 – 4.9%). We believe that normalised profit before tax represents one of the principal key performance indicators for the Group.
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 £210,000 (2019 – £225,000) for the Group and £157,000 (2019 – £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 £210,000 (2019 – £225,000) set at 75% of Group materiality.
The Group team used component materiality ranging from £109,000 to £210,000 (2019 – £39,000 to £225,000) having regard to the mix of size
and risk profile of the Group across the components.
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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 £10,000 (2019 – £15,000), 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 in 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.
The remaining 2 components 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 and specific risk-focussed procedures over revenue, trade
receivables and stock or analytical review procedures were undertaken to ensure we had the evidence needed to form our opinion on the financial
statements as a whole. All work was conducted by the Group engagement team.
The work over these full scope components above gave us coverage of 98% (2019 – 95%) of revenue, 92% (2019 – 82%) of the profit for the year
and 99% (2019 – 91%) of total assets.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Report and Accounts,
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.
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Independent Auditor’s Report to the Members of The Alumasc Group plc continued
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.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, 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 at:
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
8 September 2020
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Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2020
69
Year to 30 June 2020
Year to 30 June 2019
Underlying
£000
Notes
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
Other operating income
IAS 19 past service pension cost & settlement gain
Other non-underlying items
Net operating expenses
Operating profit
Finance expenses
Profit before taxation
3, 4
5
5
5
4, 5
9
Tax expense
Profit for the period from continuing operations
10, 12
75,992
(53,413)
22,579
(19,386)
968
–
–
(18,418)
–
–
–
75,992
(53,413)
22,579
90,104
(63,255)
26,849
–
–
–
90,104
(63,255)
26,849
–
–
–
(1,045)
(1,045)
(19,386)
968
–
(1,045)
(19,463)
(20,984)
–
–
–
(20,984)
–
–
(787)
(3,439)
(4,226)
(20,984)
–
(787)
(3,439)
(25,210)
4,161
(1,045)
3,116
5,865
(4,226)
1,639
(496)
3,665
(744)
2,921
(261)
(1,306)
302
(1,004)
(757)
2,359
(442)
1,917
(281)
5,584
(1,139)
4,445
(373)
(4,599)
883
(3,716)
(654)
985
(256)
729
Discontinued operations:
Profit after taxation for the period
from discontinued operations
Profit for the period
Other comprehensive income:
6
–
2,921
339
(665)
339
2,256
–
4,445
2,912
(804)
2,912
3,641
Items that will not be recycled to profit or loss:
Actuarial (loss)/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 cashflow hedges, net of tax
Exchange differences on retranslation of foreign operations
Other comprehensive (loss)/gain for the period, net of tax
Total comprehensive (loss)/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
(6,473)
176
11
187
(6,286)
(4,030)
Pence
5.4
0.9
6.3
5.4
0.9
6.3
8.2
Reconciliations of underlying to statutory profit and earnings per share are provided in notes 5 and 12 respectively.
123
263
4
267
390
4,031
Pence
2.0
8.1
10.1
2.0
8.1
10.1
12.4
The Alumasc Group plc Report and Accounts 2020
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Consolidated Statement of Financial Position
AT 30 JUNE 2020
Assets
Non-current assets
Property, plant and equipment – owned assets
Property, plant and equipment – right-of-use assets
Goodwill
Other intangible assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Corporation tax receivable
Derivative financial assets
Cash at bank
Total assets
Liabilities
Non-current liabilities
Interest bearing loans and borrowings
Lease liability
Employee benefits payable
Provisions
Deferred tax liabilities
Current liabilities
Trade and other payables
Lease liability
Provisions
Derivative financial liabilities
Bank overdraft
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
* See note 19 for details of restatement.
Notes
13
13
14
15
10
16
17
21
27
19, 27
20
22
23
10
18
20
23
21
19, 27
2020
£000
11,089
5,856
18,705
3,352
3,661
8,596
16,270
325
207
16,143
(19,909)
(5,244)
(19,269)
(1,182)
(1,007)
(15,311)
(680)
(1,194)
–
(567)
24
25
25
25
25
4,517
445
(416)
168
101
15,026
2020
£000
42,663
41,541
84,204
*
As restated
2019
£000
36,016
40,154
76,170
2019
£000
11,693
–
18,705
3,416
2,202
10,488
21,384
283
–
7,999
(7,857)
–
(12,951)
(1,272)
(954)
(46,611)
(23,034)
(17,752)
(64,363)
19,841
(27,691)
(50,725)
25,445
(20,111)
–
(2,333)
(10)
(5,237)
4,517
445
(416)
(8)
90
20,817
19,841
25,445
The financial statements were approved by the Board of Directors and authorised for issue on 8 September 2020.
Paul Hooper
Director
8 September 2020
Company number 1767387
The Alumasc Group plc Report and Accounts 2020
Consolidated Statement of Cashflows
FOR THE YEAR ENDED 30 JUNE 2020
Operating activities
Operating profit
Adjustments for:
Depreciation
Amortisation
Impairment of assets
Loss/(gain) on disposal of property, plant and equipment
IAS 19 past service pension cost
IAS 19 settlement gain on merger of pension schemes
Decrease/(increase) in inventories
Decrease/(increase) in receivables
(Decrease)/increase 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
Net proceeds from sale of business activity
Net cash (outflow)/inflow from investing activities
Financing activities
Bank interest paid
Equity dividends paid
Draw down/(repayment) of amounts borrowed
Principal paid on lease liabilities
Interest paid on lease liabilities
Refinancing costs
Purchase of own shares
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash at bank and bank overdraft
Net cash at bank and bank overdraft brought forward
Net increase/(decrease) in cash at bank and bank overdraft
Effect of foreign exchange rate changes
Net cash at bank and bank overdraft carried forward
71
Year to
30 June
2020
£000
Year to
30 June
2019
£000
3,116
1,639
1,851
313
300
4
–
–
1,892
5,114
(4,564)
(1,229)
(2,254)
–
4,543
–
–
–
–
(93)
4,450
(1,342)
–
(417)
143
339
(1,277)
(297)
(1,574)
12,000
(346)
(153)
–
–
9,630
12,803
2,762
12,803
11
15,576
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
Notes
7, 13
7, 15
5
5
22
6
6
6
27
27
27
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Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2020
Share
Capital
reserve –
premium own shares
£000
(241)
£000
445
–
At 1 July 2018
Profit for the period
Exchange differences on retranslation
of foreign operations
Net gain on cashflow 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
At 1 July 2019
Profit for the period
Exchange differences on retranslation
of foreign operations
Net gain on cashflow hedges
Tax on derivative financial asset
Actuarial loss on defined benefit pensions,
net of tax
Dividends
At 30 June 2020
Notes
11
26
Share
capital
£000
4,517
–
–
–
–
–
–
–
–
–
–
4,517
–
–
–
–
11
–
–
4,517
–
–
–
–
–
–
–
–
–
445
–
–
–
–
–
–
445
Hedging
reserve
£000
(271)
–
Foreign
currency
reserve
£000
86
–
Profit
and loss
account
reserve
£000
19,809
3,641
Total
equity
£000
24,345
3,641
–
317
(54)
–
–
–
–
–
–
(8)
–
–
217
(41)
–
–
168
4
–
–
–
–
–
–
–
–
90
–
11
–
–
–
–
–
4
317
(54)
123
(2,628)
(65)
123
(2,628)
(65)
–
–
(63)
63
(238)
(63)
20,817
25,445
2,256
2,256
–
–
–
11
217
(41)
–
–
101
(6,473)
(1,574)
15,026
(6,473)
(1,574)
19,841
–
–
–
–
–
–
–
63
(238)
–
(416)
–
–
–
–
–
–
(416)
The Alumasc Group plc Report and Accounts 2020
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Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
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 2020, and the Companies Act 2006.
Going Concern and COVID-19
As per the Group’s announcements on 27 March and 1 April 2020, the Group responded quickly to the COVID-19 outbreak to protect the
business, its employees and other stakeholders and temporarily closed the Timloc manufacturing facility, part of the Housebuilding Products
division, and the AWMS and Wade manufacturing facilities, part of the Water Management division. The remaining parts of the Group continued
to trade, serving customers from existing inventories and supplies from overseas and, in accordance with Government guidelines, all facilities were
re-opened by 27 April 2020. The majority of the Group’s employees are now back at work (including working from home where possible) and the
Group’s performance during May and June 2020 was stronger than expected when UK lockdown was implemented, as set out in the Group’s trading
update of 23 July 2020. The Group’s revenues during July and August 2020 have exceeded management’s forecasts put together as part
of the Group’s scenario planning.
At 30 June 2020 the Group had cash and cash equivalents of £15.7 million and a fully drawn down committed £20 million revolving credit facility,
which runs initially to April 2022 and has two annual extension periods to April 2024. This provided total headroom of some £15.7 million against
committed facilities and, together with £4 million overdraft facilities which last to August 2021, there is headroom of some £19.7 million against
total facilities at 30 June 2020.
As also announced on 27 March and 1 April 2020, the Group acted promptly and decisively to conserve cash in light of uncertainties caused
by the pandemic, including suspending dividends, defined benefit pension contributions (in agreement with the pension scheme trustees) and
capital expenditure, imposing very tight controls over operating expenditure and accessing government support in the UK (such as the Job
Retention Scheme and tax deferrals). Strong focus has been given to cash collections from debtors while creditors have continued to be paid
on a timely/agreed basis to protect supplier relationships. As a result, on 8 September 2020 the Group had headroom of c.£15 million against its
committed banking facilities and c.£19 million against its total banking facilities. The Group continues to manage its cashflows very closely going
forward, with cash re-forecasts continuing to be performed on a weekly basis.
In assessing Going Concern to take account of the uncertainties caused by COVID-19, the Group has modelled a Base Case (BC) trading scenario
on a “bottom up” basis. Given the continuing uncertainty regarding the impact of COVID-19 (including potential further waves of the pandemic)
on the economy, customer behaviour and ultimately on the Group’s performance, the Group has also modelled increasingly stressed scenarios
compared to BC (which assume 10% (“Mid Case”) and 20% (“Low Case”) revenue reductions from BC, along with increasingly conservative
assumptions in these scenarios regarding cash collections from debtors). Under the lowest point in these stress tested scenarios (which exists
during April 2021), the Group retains headroom of at least £6.7 million against its total banking facilities for the next 13 months to September 2021.
The Group has been in regular dialogue with its main bankers, HSBC, as its scenario plans have developed and has pro-actively and transparently
shared the aforementioned scenario models. While they show headroom of £6.7 million at the lowest point in the Low Case scenario for the next
13 months, they did indicate potential Bank covenant breaches at the two testing points in the period, December 2020 and June 2021, due to the
impact of COVID-19 on revenues and profits in the Mid and Low case scenarios modelled. Although current trading levels would suggest that the
sensitised scenarios are unlikely to materialise, given the uncertainties caused by the pandemic formal agreement was reached with HSBC to relax
the relevant covenant testing for the tests arising in December 2020 and June 2021 to levels that the Board is satisfied can be met in light of the
scenarios modelled and relevant cost saving measures that would be implemented in such scenarios.
The Group has modelled an additional scenario (a reverse stress test) that would lead to a breach of its banking covenants which assumes no cost
saving measures are implemented in the Low Case. It is considered that the risk of such a scenario arising is remote. Management has also identified
a number of mitigating actions that the Group would take to stay within its banking facilities throughout the period.
In addition to the above scenarios, the Group has also modelled the impact of a second wave of the pandemic on the BC forecast occurring
at various points through the assessment period, October 2020, January 2021 or April 2021. The model assumes a similar impact as the first wave
on revenue, profitability and working capital cycles along with a similar recovery period. In all these modelled scenarios the Group continues to
operate within its banking facilities and complies with bank covenant tests.
Given the unprecedented nature of the COVID-19 events, it is difficult to predict future trading and cashflows with certainty. The actual scenarios
which materialise in the period ahead will undoubtedly be different to the scenarios modelled. In the event that the actual position is worse than
modelled in the BC, the Directors consider that the headroom in the Group’s banking facilities and the further mitigation actions available would
enable the Group to respond to such downside. Having taken into account all of the aforementioned comments, actions and factors in relation to
Going Concern and the potential impact of COVID-19, and in light of the bank facility headroom under various scenarios, the Directors consider
that the Group has adequate resources to continue trading for the foreseeable future. Accordingly, they continue to adopt the Going Concern basis
in preparing the financial statements.
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
2 Summary of significant accounting policies
Except as described below, the accounting policies adopted are consistent with those of the previous financial year.
Changes in accounting policy
The following new standards, amendments and interpretations are effective for the period beginning on or after 1 July 2019 and have been adopted
for the Group financial statements:
IFRIC 23 Uncertainty over Income Tax Treatments
The Group has applied IFRIC 23, which is effective for periods beginning on or after 1 January 2019, from 1 July 2019 with no impact on the
disclosures made by the Group.
IFRS 16 Leases
The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and
continues to be reported under IAS 17 and IFRIC 4. The impact of adopting the standard on 1 July 2019 was, in broad terms, to bring the Group’s
property leases on to the consolidated statement of financial position. Previously these were treated as operating leases and were ‘off balance
sheet’. More specifically the impact of adoption was:
• The recognition of a right of use asset and lease liability of £5,027,000 on the date of adoption with no impact on reserves at that stage;
• The total annual charge to the income statement increased by £68,000, reducing profit for the period by this figure in the current financial year
to 30 June 2020;
• The operating profit cashflow increased by £499,000 with the cashflow generated by financing activities decreasing by the same value;
• EBITDA increased by £570,000 as the former lease expense was re-classified as a depreciation charge and interest cost in the year; and
• Given the Group’s definition of capital invested which is used to calculate return on investment (“ROI”) and the exclusion of net bank debt and
other long-term liabilities such as pension liabilities and lease liabilities from the same, the asset base by which the underlying operating profit after
underlying tax is divided by to calculate ROI has increased by £5,027,000. This has had the impact of reducing underlying return on capital invested
from 11.4% (on the old basis) to 7.2% in the current year.
The Group has applied the practical expedients whereby a single discount rate can be used across a portfolio of leases with reasonably similar
characteristics and applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of the lease term
remaining as of the date of initial application. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately below if they are
different from those under IFRS 16 and the impact of changes is disclosed in note 31.
Significant accounting policy
Identification of a lease
i)
Policy applicable for contracts entered into from 1 July 2019
At inception of a contract the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right
to control the use of an identified asset the Group assesses whether:
• the contract involves the sole use of a specific identified asset – this may be specified explicitly or implicitly, and should be physically distinct
or represent substantially all of the capacity of a physically distinct asset. If the supplier has the right to substitute the identified asset for a similar
asset then the asset is not identified;
• the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• the Group has the right to direct the use of the asset.
Policy applicable for contracts entered into prior to 1 July 2019
For contracts entered into before 1 July 2019, the Group determined whether the arrangement was or contained a lease based on the assessment
of whether:
• fulfilment of the arrangement was dependent on the use of a specific asset or assets; and
• the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the asset if one of the following was met:
– the Group had the ability or right to operate the asset while obtaining or controlling more than an insignificant amount of the output;
– the Group had the ability or right to control the physical access to the asset while obtaining or controlling more than an insignificant
amount of the output; or
– facts and circumstances indicated that it was remote that other parties would take more than an insignificant amount of the output,
and the price per unit was neither fixed per unit of output nor equal to the current market price per unit of output.
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2 Summary of significant accounting policies continued
Significant accounting policy continued
ii) As a lessee
Policy applicable for contracts entered into from 1 July 2019:
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured
at cost, which comprises the initial amount of the lease liability.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis
as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. The Group
uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise fixed payments. The Group does not make other types of payment
referred to in IFRS 16 for its leases.
Generally the lease liability represents the present value of contractual future lease payments including optional renewal periods where the Group
is reasonably certain to exercise the extension option. The Group does not typically enter into purchase options or variable lease payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under
a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset,
or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘Property, plant and equipment’ and discloses
the corresponding “Lease liability” in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less
and leases of low-value assets.
Further to this, the Group has taken advantage of the practical expedient within IFRS 16 and excluded leases with a remaining term of less than
12 months at the date of adoption.
The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Policy applicable for contracts entered into prior to 1 July 2019
In the comparative period, as a lessee the Group classified none of its leases as finance leases as none were deemed to transfer substantially
all of the risks and rewards of ownership.
Payments made under operating leases were recognised in profit or loss on a straight-line basis over the term of the lease.
iii) As a lessor
IFRS 16 lessor accounting requirements remain similar to requirements under IAS 17 with the change in accounting standard having no impact
on the Group’s financial statements.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to
ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment,
the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease
classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.
If a head lease is a short-term lease to which the Group applies an exemption under IFRS 16 then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, the Group applies IFRS 15 to allocate the consideration in the contract.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘Rental
income’ (see note 3).
The accounting policies applicable to the Group as a lessor in the comparative period were not different from IFRS 16. However, when the Group
is an intermediate lessor the sub-leases are classified with reference to the underlying asset.
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
2 Summary of significant accounting policies continued
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 sources of estimation uncertainty that could have a significant risk of causing material adjustment to the carrying amounts of assets
and liabilities at 30 June 2020 within the next financial year are the valuation of defined benefit pension obligations, the valuation of the Group’s
acquired goodwill, 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 22).
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.
In the application of the new leasing standard, IFRS 16, a right-of-use asset and lease liability have been recognised based on the discounted
payments required under the lease, taking into account the lease term. The lease term is based on the non-cancellable period of the lease together
with periods covered by an option to extend the lease where it is considered reasonably certain that options to extend will be exercised. Judgment
is required in determining whether options to extend or terminate the lease will be exercised. Lease liabilities are measured at amortised cost using
the effective interest rate method. Management in the adoption of IFRS 16 at 1 July 2019 also applied judgment related to the assessment of the
incremental borrowing rate (IBR) used to discount future lease rentals to present value. The IBR has been considered on a lease by lease basis and
the weighted average rate applied by the Group at transition was 3.1%.
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.
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
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2 Summary of significant accounting policies continued
Other intangible assets continued
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:
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Right-of-use assets
Freehold buildings
Long leasehold improvements
Short leasehold improvements
Plant and equipment
Motor vehicles
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–
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–
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over the period of the lease
25 to 50 years
over the period of the lease
over the period of the lease
3 to 15 years
4 to 5 years
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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 cashflows 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.
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Identification of a lease
Leases
i)
At inception of a contact the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right
to control the use of an identified asset the Group assesses whether:
• the contract involves the sole use of a specific identified asset – this may be specified explicitly or implicitly, and should be physically distinct
or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset
is not identified;
• the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• the Group has the right to direct the use of the asset.
This policy is applied to contracts entered into, or changed, on or after 1 July 2019.
ii) As a lessee
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured
at cost, which comprises the initial amount of the lease liability.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis
as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
2 Summary of significant accounting policies continued
Leases continued
ii) As a lessee continued
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using
the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. The Group uses its
incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise fixed payments. The Group does not make other types of payment
referred to in IFRS 16 for its leases.
Generally the lease liability represents the present value of contractual future lease payments including optional renewal periods where the Group
is reasonably certain to exercise the extension option. The Group does not typically enter into purchase options or variable lease payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under
a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is
recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘Property, plant and equipment’ and discloses
the corresponding “Lease liability” in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and
leases of low-value assets which it defines as having a purchase cost of £5,000. The Group recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
iii) As a lessor
IFRS 16 lessor accounting requirements remain similar to requirements under IAS 17 with the change in accounting standard having no impact
on the Group’s financial statements.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to
ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment,
the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification
of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a
short-term lease to which the Group applies an exemption under IFRS 16 then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, the Group applies IFRS 15 to allocate the consideration in the contract.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘Rental
income’ (see note 3).
The accounting policies applicable to the Group as a lessor in the comparative period were not different from IFRS 16. However, when the Group
is an intermediate lessor the sub-leases are classified with reference to the underlying asset.
Financial assets
When financial assets are recognised initially under IAS 39, they are measured at fair value, being the transaction price plus directly attributable
transaction costs.
Inventories
Inventories are valued at the lower of cost and net realisable value on a first in first out basis after making due allowance for any obsolete or slow
moving items. In the case of finished goods and work in progress, cost comprises direct materials, direct labour and an appropriate proportion
of manufacturing overheads. The allocation of manufacturing overheads has regard to normal production.
The Group holds certain raw materials from suppliers on an inventory held on consignment basis, which are accounted for as consumed.
This inventory remains the property of the supplier until used.
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Pension costs
The Group operates both defined benefit and defined contribution pension schemes as follows:
(i) Defined benefit pensions
The Group operates a principal defined benefit scheme, The Alumasc Group Pension Scheme (“AGPS”), which requires deficit reduction
contributions to be made to a separately administered fund. 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.
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.
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
2 Summary of significant accounting policies continued
Equity settled share based payment transactions
The fair value of long-term incentive awards and share options granted to employees is recognised as an employee expense from the date of grant,
with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised
as an expense is adjusted to reflect the actual number of shares for which the related service and non-market vesting conditions are met.
Derivative financial instruments and hedging
The Group uses derivative financial instruments to hedge its exposure to 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
remeasured at fair value. The gain or loss on remeasurement 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 cashflow hedges, as they hedge exposure to variability in
cashflows 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 cashflow 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.
Building Envelope:
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.
See note 23 for disclosure of the Group’s warranty provision held at the balance sheet date.
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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 consolidated statement of cashflows comprise cash at banks and in hand, short-term deposits with an original
maturity of three months or less net of 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.
Other income
Government grant income is shown gross in other income to match the costs as incurred by the Group. Where retention of a government grant is
dependent on the Group satisfying certain criteria, it is initially recognised as deferred income. When the criteria for retention have been satisfied,
the deferred income balance is released to the consolidated statement of comprehensive income or netted against the asset purchased.
New standards and interpretations not applied
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future
accounting periods that the Group has decided not to adopt early. The following amendments are effective for the period beginning 1 January 2020:
• IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment – Definition of Material)
• IFRS 3 Business Combinations (Amendment – Definition of Business)
• Revised Conceptual Framework for Financial Reporting
In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current
or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of
the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that
‘settlement’ includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a
conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments
are effective for annual reporting periods beginning on or after 1 January 2022.
Management is currently assessing the impact of these new accounting standards and amendments but does not believe that the amendments
to IAS 1 will have a significant impact.
3 Revenue
Revenue, as disclosed in the statement of comprehensive income, and total income are 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
2019/20
£000
2018/19
£000
59,264
16,728
75,992
40
76,032
70,205
19,899
90,104
40
90,144
The Alumasc Group plc Report and Accounts 2020
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
3 Revenue continued
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.
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.
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 and Levolux businesses, these businesses are now included within the Building Envelope
segment. The Group sold the Alumasc Facades business on 31 October 2018. This has been treated as a discontinued operation (see note 6).
Full Year to 30 June 2020
Water Management
Building Envelope
Housebuilding Products
Trading
Unallocated costs
Total from continuing operations
Segmental operating result
Brand amortisation
Restructuring & relocation costs (see note 5)
Total operating profit from continuing operations
Revenue
£000
33,715
33,209
9,068
75,992
75,992
Segmental
operating
result
£000
4,824
(939)
1,243
5,128
(967)
4,161
£000
4,161
(238)
(807)
3,116
Segment
assets
£000
26,645
22,267
13,051
61,963
22,241
84,204
Segment
liabilities
£000
(7,244)
(8,346)
(5,687)
(21,277)
(43,086)
(64,363)
Capital expenditure
Other
intangible
assets
£000
264
17
29
310
131
441
Property,
plant &
equipment
£000
1,813
162
361
2,336
19
2,355
Depreciation
£000
785
175
798
1,758
93
1,851
Amortisation
£000
100
173
39
312
1
313
Water Management
Building Envelope
Housebuilding Products
Trading
Unallocated/discontinued
Total
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Segmental
operating
result
£000
4,257
554
1,732
6,543
(678)
5,865
£000
5,865
(238)
(1,111)
324
(3,021)
(180)
1,639
Revenue
£000
38,902
39,804
11,398
90,104
90,104
Capital expenditure
Other
intangible
assets
£000
49
55
11
115
–
115
Property,
plant &
equipment
£000
1,279
211
1,041
2,531
78
2,609
Segment
liabilities
£000
(7,171)
(12,853)
(3,191)
(23,215)
(22,273)
(45,488)
Depreciation
£000
650
221
399
1,270
125
1,395
Amortisation
£000
188
290
36
514
–
514
Europe
£000
4,147
–
Europe
£000
2,695
–
North
America
£000
3,184
–
North
America
£000
3,149
–
Middle
East
£000
1,485
–
Middle
East
£000
972
–
Far
East
£000
1,587
6
Far
East
£000
2,392
–
Rest of
World
£000
773
–
Rest of
World
£000
219
–
Total
£000
75,992
39,002
Total
£000
90,104
33,814
4 Segmental analysis continued
Full Year to 30 June 2019
Water Management
Building Envelope
Housebuilding Products
Trading
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
Water Management
Building Envelope
Housebuilding Products
Trading
Unallocated & discontinued
Total
Analysis by geographical segment 2019/20
Sales to external customers
Segment non-current assets
Analysis by geographical segment 2018/19
Sales to external customers
Segment non-current assets
Segment
assets
£000
26,945
27,355
10,003
64,303
6,630
70,933
United
Kingdom
£000
64,816
38,996
United
Kingdom
£000
80,677
33,814
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.
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
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
Continuing operations
Profits/gains relating to discontinued operations (note 6)
Statutory operating profit/profit before tax
Operating
profit
£000
4,161
(238)
–
–
–
(807)
–
3,116
–
3,116
2019/20
Profit
before tax
£000
3,665
(238)
(261)
–
–
(807)
–
2,359
339
2,698
2018/19
Operating
profit Profit before tax
£000
£000
5,584
5,865
(238)
(238)
(373)
–
(1,111)
(1,111)
324
324
(3,021)
(3,021)
(180)
(180)
985
1,639
2,945
163
3,930
1,802
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 2019/20 and 2018/19 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:
• One-off costs of material restructuring and relocation of separate businesses within the Group in both 2019/20 and 2018/19, including costs
associated with the departure and recruitment of a Group Finance Director during the current financial year – see page 47 within the
Remuneration Report for more detail;
• The one-off prior year 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 prior year settlement gain arising from the merger of the Group’s pension schemes on 5 March 2019; and
• The one-off prior year 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.
Included within underlying operating profit for the current financial year is other operating income of £968k in relation to Coronavirus Job
Retention Scheme government support.
The Alumasc Group plc Report and Accounts 2020
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 period end
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 cashflows attributable to discontinued operations are as follows:
Operating cashflows
Movement in working capital
Investing cashflows – proceeds from sale of business
Investing cashflows – purchase of property, plant and equipment
Net cash inflow
85
Year to
30 June
2020
£000
–
Year to
30 June
2019
£000
3,763
–
339
339
–
339
£000
339
–
–
339
–
339
–
–
339
£000
–
–
339
–
339
163
2,782
2,945
(33)
2,912
£000
4,500
(100)
(514)
3,886
(343)
3,543
(84)
(677)
2,782
£000
223
(396)
3,886
(15)
3,698
The sales proceeds recognised in the current financial year relate to the contingent consideration earned and received in cash in the year, based on
the sales revenues of the business in its first twelve month period under new ownership, in accordance with the business sale agreement.
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
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 & equipment
Intangible assets amortisation
Brand amortisation
Loss/(gain) on disposal of property, plant and equipment
Unsettled foreign exchange losses
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
Short-term and low-value 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
Furlough income
Other operating charges
8 Employee costs and numbers
Employee benefit expense from continuing operations:
Wages and salaries
Social security
Defined contribution pension costs (note 22)
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
– Interest on lease liabilities
– IAS 19 net pension scheme finance costs
2019/20
£000
35,973
1,851
75
238
4
3
20,627
807
–
–
–
1,086
(40)
105
61
39
(968)
13,015
72,876
2018/19
£000
45,370
1,395
276
238
(17)
10
22,951
3,021
1,111
(324)
180
1,773
(40)
111
61
69
–
12,280
88,465
2019/20
£000
2018/19
£000
18,161
1,807
659
20,627
261
20,888
356
21,244
2019/20
Number
234
222
456
2019/20
£000
40
303
153
496
261
757
20,058
2,204
689
22,951
373
23,324
1,461
24,785
2018/19
Number
260
247
507
2018/19
£000
38
243
–
281
373
654
The Alumasc Group plc Report and Accounts 2020
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 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 (losses)/gains on pension schemes
Cashflow hedge
Tax (credited)/charged to other comprehensive income
Total tax (credit)/charge in the statement of comprehensive income
87
2019/20
£000
2018/19
£000
22
–
48
(19)
51
450
(157)
98
391
442
442
–
442
(1,838)
41
(1,797)
(1,355)
(69)
33
3
(21)
(54)
406
(20)
(43)
343
289
256
33
289
24
54
78
367
(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 16.4% is lower than (2018/19: 7.4%
was lower than) the standard rate of corporation tax in the UK of 19% (2018/19: 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% (2018/19: 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 provided in previous years – deferred tax
2019/20
£000
2,359
339
2,698
513
71
(64)
98
(19)
(157)
442
2018/19
£000
985
2,945
3,930
747
265
(639)
(43)
(21)
(20)
289
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
10 Tax expense continued
(c) Unrecognised tax losses
The Group has agreed tax capital losses in the UK amounting to £16.3 million (2019: £16.6 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 (2019: £1 million). These have been offset in the prior year against the capital losses detailed above.
A deferred tax asset has not been recognised in respect of the net capital losses carried forward of £15.3 million (2019: £15.6 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:
At 1 July 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
Charged to the statement of
comprehensive income – current year
Credited to the statement of
comprehensive income – prior year
Charged/(credited) to equity
At 30 June 2020
Accelerated
capital
allowances
£000
435
Short term
temporary
differences
£000
(30)
Brands
£000
556
Hedging
£000
(56)
125
(20)
–
540
170
(160)
–
550
(36)
–
–
(66)
(12)
3
–
(75)
(74)
–
–
482
11
–
–
493
–
–
54
(2)
–
–
41
39
Total
deferred
tax liability
£000
905
15
(20)
54
954
Pension
deferred
tax asset
£000
(2,574)
348
–
24
(2,202)
169
379
(157)
41
1,007
–
(1,838)
(3,661)
Deferred tax assets and liabilities are presented as non-current in the consolidated statement of financial position.
Deferred tax assets have been recognised where it is probable that they will be recovered. Deferred tax assets of £3.1 million (2019: £2.7 million)
have not been recognised in respect of net capital losses of £16.3 million (2019: £16.6 million), see note 10 (c).
(e) Factors affecting the tax charge in future periods
A UK corporation rate of 19% (effective 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously enacted reduction in
the rate from 19% to 17%. This will increase the Company's future current tax charge accordingly. The deferred tax asset at 30 June 2020 has been
calculated at 19% (2019: 17%).
11 Dividends
Final dividend for 2019 of 4.4p paid on 31 October 2019
Interim dividend for 2019 of 2.95p paid on 8 April 2019
Final dividend for 2018 of 4.4p paid on 31 October 2018
2019/20
£000
1,574
–
–
1,574
2018/19
£000
–
1,045
1,583
2,628
A final dividend of 2.0 pence per equity share, at a cash cost of £715,000, has been proposed for the year ended 30 June 2020, payable on
30 October 2020. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.
The interim dividend for 2020, that was due to be paid on 7 April 2020 at a cash cost of £1,055,000, was cancelled as part of the Group’s COVID-19
cash conservation programme.
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89
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
Underlying profit before taxation from continuing operations
Tax at underlying Group tax rate of 20.3% (2018/19: 20.4%)
Underlying earnings from continuing operations
Weighted average number of shares
Underlying earnings per share from continuing operations
2019/20
£000
1,917
339
2,256
000s
35,764
55
35,819
2019/20
Pence
5.4
0.9
6.3
2019/20
Pence
5.4
0.9
6.3
2019/20
£000
2,359
238
261
–
–
807
–
3,665
(744)
2,921
35,764
8.2p
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
2018/19
£000
985
238
373
1,111
(324)
3,021
180
5,584
(1,139)
4,445
35,956
12.4p
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The Alumasc Group plc Report and Accounts 2020
90
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
13 Property, plant and equipment
Right-of-use
asset
(property)
£000
Freehold
land and
buildings
£000
Long
leasehold
improvements
£000
Short
leasehold
improvements
£000
Plant &
equipment
£000
Cost
At 1 July 2018
Additions
Disposals
Disposal of business activity
At 1 July 2019 as reported
Impact of adoption of IFRS 16
Adjusted as at 1 July 2019
Additions
Disposals
At 30 June 2020
–
–
–
–
–
5,027
5,027
1,243
–
6,270
Accumulated depreciation and impairment losses
At 1 July 2018
Depreciation charge for year
On disposals
On disposal of business activity
At 1 July 2019
Depreciation charge for year
On disposals
Impairment
At 30 June 2020
–
–
–
–
–
414
–
–
414
Net book value at 30 June 2020
Net book value at 30 June 2019
Net book value at 1 July 2018
5,856
–
–
5,844
73
(13)
–
5,904
–
5,904
6
(11)
5,899
1,041
154
(10)
–
1,185
146
(11)
–
1,320
4,579
4,719
4,803
1,214
13
–
–
1,227
–
1,227
5
–
1,232
257
66
–
–
323
66
–
–
389
843
904
957
355
22
–
(73)
304
–
304
23
(17)
310
229
17
–
(18)
228
17
(17)
11
239
71
76
126
13,957
2,501
(1,560)
(48)
14,850
–
14,850
1,078
(839)
15,089
9,182
1,158
(1,465)
(19)
8,856
1,208
(692)
121
9,493
5,596
5,994
4,775
Total
£000
21,370
2,609
(1,573)
(121)
22,285
5,027
27,312
2,355
(867)
28,800
10,709
1,395
(1,475)
(37)
10,592
1,851
(720)
132
11,855
16,945
11,693
10,661
The impairment of property, plant and equipment of £132,000 was provided within restructuring and relocation costs within the prior financial year.
The Alumasc Group plc Report and Accounts 2020
14 Goodwill
Cost:
At 1 July and 30 June
Impairment:
At 1 July and 30 June
Net book value at 30 June
91
2020
£000
2019
£000
19,428
19,428
723
723
18,705
18,705
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
2020
£000
3,820
2,264
10,179
225
2,217
18,705
2019
£000
3,820
2,264
10,179
225
2,217
18,705
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 cashflow forecasts for the businesses, based on budgets and plans covering a five-year period. The growth rate used
to extrapolate the cashflows beyond this period was 1% (2019: 1%) for each CGU.
Key assumptions included in the recoverable amount calculation are the discount rate applied and the cashflows generated by:
(i) Revenues
(ii) Gross margins
(iii) Overhead costs
Each assumption has been considered in conjunction with the local management of the relevant operating businesses who have used their past
experience and expectations of future market and business developments, including COVID-19, in arriving at the figures used.
The range of pre-tax rates used to discount the cashflows of these cash generating units with on-balance sheet goodwill was between 11% and 12%
(2019: 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 2020 was similar to the rate used in 2019.
The surplus headroom above the carrying value of goodwill at 30 June 2020 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 cashflows;
or a reduction of 25% in the cashflow generated in the terminal year.
The surplus headroom above the carrying value of goodwill at 30 June 2020 for Levolux was not significant and the following change to each of the
key assumptions would lead to an impairment:
• a 4% increase in the discount rate;
• a growth rate of -1% used to extrapolate the cashflows;
• a 40% reduction in the cashflow generated in the terminal year.
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
15 Other intangible assets
Cost:
At 1 July 2018
Additions
Disposals
At 1 July 2019
Additions
Disposals
At 30 June 2020
Accumulated amortisation:
At 1 July 2018
Amortisation for the year
On disposals
At 1 July 2019
Amortisation for the year
Impairment
On disposals
At 30 June 2020
Net book value at 30 June 2020
Net book value at 30 June 2019
Net book value at 1 July 2018
Brands
£000
Computer
software
£000
5,843
–
–
5,843
–
–
5,843
2,772
238
–
3,010
238
–
–
3,248
2,595
2,833
3,071
2,355
115
(235)
2,235
441
(32)
2,644
1,513
276
(137)
1,652
75
168
(8)
1,887
757
583
842
Total
£000
8,198
115
(235)
8,078
441
(32)
8,487
4,285
514
(137)
4,662
313
168
(8)
5,135
3,352
3,416
3,913
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.
The impairment of computer software of £168,000 was provided within restructuring and relocation costs within the prior financial year.
16 Inventories
Raw materials
Work in progress
Finished goods
2020
£000
2,522
142
5,932
8,596
2019
£000
2,990
193
7,305
10,488
During the year the Group’s inventory provision decreased by £112,000 (2019: increased by £217,000). At 30 June 2020 the Group’s inventory
provision was £1,215,000 (2019: £1,327,000).
The Alumasc Group plc Report and Accounts 2020
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17 Trade and other receivables
Trade receivables
Contract assets
Other receivables
Prepayments
93
2020
£000
11,947
2,402
451
1,470
16,270
2019
£000
16,155
3,002
744
1,483
21,384
Contracts assets arise from the Group’s Building Envelope 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, other 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 2020, trade receivables and other receivables at nominal value of £469,000 (2019: £411,000) 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
2020
£000
411
186
(128)
469
2019
£000
297
141
(27)
411
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
Contract liabilities
Accruals
Gross
receivable
£000
12,753
1,648
26
153
238
14,818
2020
Loss
provision
£000
416
16
4
5
28
469
Gross
receivable
£000
16,490
2,375
498
56
149
19,568
2020
£000
8,635
2,427
839
898
2,512
15,311
2019
Loss
provision
£000
335
23
19
3
31
411
2019
£000
15,482
1,435
1,077
295
1,822
20,111
Contract liabilities arise from the Group’s Business Envelope division and represent payments in advance of revenue recognised under IFRS 15.
The Alumasc Group plc Report and Accounts 2020
94
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
19 Borrowings
Following a review performed in the year, cash at bank and bank overdraft balances have been restated to be correctly presented on a gross basis
in accordance with IAS 32. There is no change in net assets or reported profits.
Non-current liabilities:
Non-current instalments due on bank loan
Current liabilities:
Bank overdraft
2020
£000
19,909
567
As restated
2019
£000
7,857
5,237
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. Given the uncertainties caused by COVID-19, formal agreement was reached with the
Group’s main bankers HSBC to relax the relevant covenant testing for the tests arising in December 2020 and June 2021 to the following; Group
interest cover to be at least two and a half times and net debt as a multiple of underlying EBITDA to be below three and a half times.
These covenants are unaffected by the implementation of IFRS 16.
At 30 June 2020 the Group also had £4.0 million (2019: £4.0 million) of bank overdraft facilities, renewed until August 2021 and repayable on
demand. The Group has an offset arrangement in place against uncommitted overdraft facilities.
20 Lease liabilities
Non-current lease liabilities
Current lease liabilities
Total lease liabilities
2020
£000
5,244
680
5,924
2019
£000
–
–
–
Lease liabilities are initially measured at the present value of future lease payments, discounted using the Group’s incremental borrowing rate.
See note 31 for further disclosure on lease liabilities.
21 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 at bank
Trade receivables
Contract assets
Other receivables
Derivative financial asset
30 June 2020
Carrying
amount
£000
16,143
11,947
2,402
451
207
31,150
Fair
value
£000
16,143
11,947
2,402
451
207
31,150
Carrying
amount
As restated
£000
30 June 2019
Fair
value
As restated
£000
7,999
16,155
3,002
744
–
27,900
7,999
16,155
3,002
744
–
27,900
The Alumasc Group plc Report and Accounts 2020
95
21 Financial instruments continued
Financial assets and liabilities continued
Financial liabilities:
Bank loans
Bank overdraft
Lease liabilities
Trade and other payables
Derivative financial liabilities
30 June 2020
Carrying
amount
£000
19,909
567
5,924
11,986
–
38,386
Fair
value
£000
19,909
567
5,924
11,986
–
38,386
Carrying
amount
As restated
£000
30 June 2019
Fair
value
As restated
£000
7,857
5,237
–
18,381
10
31,485
7,857
5,237
–
18,381
10
31,485
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Trade and other payables balances do not include other taxation and social security costs or contract liabilities.
The table below summarises the maturity profile of the Group’s financial liabilities at 30 June 2020 and 2019 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 2020
Interest bearing loans and borrowings
Bank overdraft
Lease liabilities
Trade and other payables
At 30 June 2019 (as restated)
Interest bearing loans and borrowings
Bank overdraft
Trade and other payables
On
demand
£000
Less than
3 months
£000
3 to 12
months
£000
More than
1 year
£000
–
567
–
2,809
3,376
–
5,237
6,489
11,726
65
–
217
8,716
8,998
52
–
10,672
10,724
195
–
652
461
1,308
157
–
1,220
1,377
20,582
–
7,096
–
27,678
8,431
–
–
8,431
Total
£000
20,842
567
7,965
11,986
41,360
8,640
5,237
18,381
32,258
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 cashflows. Details of the facilities are given above. The Group’s net bank debt
position at 30 June 2020 was £4.3 million (2019: £5.1 million).
Details of the Group’s approach to capital structure are given within the Financial Review on page 18.
The maturity profile of the Group’s interest bearing financial liabilities is as follows:
Floating rate interest bearing financial liabilities:
In one to five years
2020
£000
19,909
19,909
2019
£000
7,857
7,857
Interest rate risk
The Group’s marginal pre-tax cost of debt finance at interest rates in place at 30 June 2020 under the banking facilities in existence at that time was
approximately 0.8% (2019: 1.4%).
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
+50
–50
Effect on profit
before tax
(23)
23
The Alumasc Group plc Report and Accounts 2020
96
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
21 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 2020 or 30 June 2019 related to derivative trading activity. Where cashflow 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
604
921
1,635
Payable
000
(231)
(1,122)
(36)
2020
Cash Net total Receivable
000
000
000
418
475
45
1,760
(3)
198
212
6,214
4,615
Payable
000
(1,418)
(1,885)
–
Cash
000
144
680
1,887
2019
Net total
000
(799)
555
2,099
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:
2020
2019
Increase
Decrease
Increase
Decrease
Hedging activities
Exchange
rate change
+10%
–10%
+10%
–10%
Effect on profit after tax and equity in Sterling
Hong Kong $
£000
59
(72)
19
(24)
Euro
£000
34
(42)
43
(52)
US $
£000
47
(57)
33
(40)
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
2020
£000
207
2019
£000
(10)
At 30 June 2020 the Group had forward foreign exchange contracts with principal amounts equivalent to £8,997,000 (2019: £11,046,000).
The forward foreign exchange contracts hedge foreign currency cost and price risks of various currency purchases and sales across the Group.
The cashflows 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.
The Alumasc Group plc Report and Accounts 2020
97
22 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, £659,000 (2019: £689,000)
was in respect of defined contribution schemes. At 30 June 2020 there was an accrual of £81,000 payable in respect of defined contribution
schemes (2019: £100,000).
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 £2.3 million per annum, to include deficit reduction contributions
and scheme running expenses, over a seven to eight year period from April 2019. These contribution levels are reviewed every three years with the
next review due in March 2022. In April 2020 management consulted with the Group’s Pension Trustees and agreed to a deferral of three months’
pension contributions to assist with the Group’s COVID-19 cash conservation programme. The deferral amounted to £575k in aggregate, which
would otherwise have been payable between April 2020 and June 2020. The deferred amount will be recovered between July 2020 and the next
revaluation in March 2022.
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 2040 – male
Future pensioners at 65 in 2040 – female
The Alumasc
Group
Scheme
2020
%
1.45
2.10
2.75-3.45
2.80
2.10
The Alumasc
Group
Scheme
2019
%
2.25
2.25
1.90-3.70
3.25
2.25
Years
Years
21.5
23.4
22.8
24.8
20.9
22.6
22.2
23.8
A discount rate of 1.45% has been used in calculating the present value of liabilities of the pension scheme at 30 June 2020. A 0.1% change to this
rate would have changed the present value of the pension fund liabilities at that date by approximately £1,859,000 before tax.
A Retail Price Index inflation rate of 2.80% and a Consumer Price Index inflation rate of 2.10% have been used in calculating the present value of
liabilities of the pension scheme at 30 June 2020. A 0.1% change to these rates would have changed the present value of the pension fund liabilities
at that date by approximately £900,000 before tax.
In valuing the liabilities of the pension scheme at 30 June 2020, 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 2020
would have increased by approximately £6,757,000 before tax.
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Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
22 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
2020
£000
2019
£000
2018
£000
2017
£000
2016
£000
44,222
17,922
–
13,135
19,576
7,019
1,594
103,468
(122,737)
(19,269)
43,758
16,194
–
12,483
19,692
6,123
2,217
100,467
(113,418)
(12,951)
40,966
–
13,681
12,041
23,853
6,783
1,387
98,711
(113,851)
(15,140)
40,190
–
13,459
12,539
24,676
7,896
362
99,122
(119,718)
(20,596)
34,342
–
10,953
11,974
25,710
8,075
1,764
92,818
(115,486)
(22,668)
Of the above assets, all have a quoted market price with the exception of £1,762,000 of insured annuities (2019: £1,761,000) and £1,000,000
of property (2019: £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 on plan assets
Actuarial loss on retirement benefit obligations
Net actuarial (loss)/gain (pre-tax)
Total recognised in the statement of comprehensive income (pre-tax)
The actual return on plan assets for 2019/20 was a gain of £6,452,000 (2018/19: gain of £6,015,000).
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
At 30 June
2019/20
£000
2018/19
£000
–
–
–
(1,111)
324
(787)
(261)
(373)
4,230
(12,541)
(8,311)
(8,572)
3,343
(3,196)
147
(1,013)
2020
£000
(113,418)
(2,483)
–
–
5,705
(12,541)
(122,737)
2019
£000
(113,851)
(3,045)
1,496
(1,111)
6,289
(3,196)
(113,418)
The Alumasc Group plc Report and Accounts 2020
22 Retirement benefit obligations continued
Defined benefit schemes continued
Changes in the fair value of plan assets before taxation are as follows:
At 1 July
Expected return on plan assets
Settlement on merger of pension schemes
Actuarial gain
Contributions by employer
Benefits paid
At 30 June
99
2020
£000
100,467
2,222
–
4,230
2,254
(5,705)
103,468
2019
£000
98,711
2,672
(1,172)
3,343
3,202
(6,289)
100,467
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The cumulative amount of actuarial losses recognised since 1 July 2004 in the Group statement of comprehensive income is £24,060,000
(2018/19: losses of £15,749,000).
23 Provisions
At 1 July 2018
Charge for the year
Utilised
At 1 July 2019
Charge for the year
Utilised
At 30 June 2020
At 30 June 2020
Current liabilities
Non-current liabilities
At 30 June 2019
Current liabilities
Non-current liabilities
Dilapidations
£000
Note (i)
1,310
75
(292)
1,093
75
(197)
971
–
971
971
–
1,093
1,093
Warranty
£000
Note (ii)
Restructuring
£000
Note (iii)
315
21
(57)
279
61
(53)
287
76
211
287
100
179
279
–
2,560
(327)
2,233
524
(1,639)
1,118
1,118
–
1,118
2,233
–
2,233
Total
£000
1,625
2,656
(676)
3,605
660
(1,889)
2,376
1,194
1,182
2,376
2,333
1,272
3,605
(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 mainly in respect of the restructuring of the Levolux business and are expected to be utilised within 12 months.
The Alumasc Group plc Report and Accounts 2020
100
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
24 Called up share capital
Allotted, called up and fully paid:
36,133,558 (2019: 36,133,558) ordinary shares of 12.5p each
25 Movements in equity
2020
£000
4,517
2019
£000
4,517
Share capital and share premium
The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue of the
Company’s equity share capital net of issue costs.
Capital reserve – own shares
The capital reserve – own shares relates to 369,245 (2019: 369,245) ordinary own shares held by the Company. The market value of shares
at 30 June 2020 was £265,856 (2019: £348,936). These are held to help satisfy the exercise of awards under the Company’s Long Term Incentive
Plans. During the prior 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. No shares were exercised in the current financial period. 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 cashflow 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.
26 Share based payments
The Company operates two types of share based payment schemes, the main features of each scheme as detailed in the Directors’ Remuneration
Report on pages 44 to 51.
Weighted
average
exercise
price
Weighted
average
exercise
price
(pence) Granted
219,078
160,000
n/a
1.50
(pence) Exercised
–
–
n/a
0.83
Lapsed
(253,208)
(130,000)
n/a
–
Weighted
average
exercise
price
Weighted
average
exercise
price
(pence) Granted
373,267
90,000
n/a
1.64
(pence) Exercised
(42,166)
–
n/a
1.27
Lapsed
(222,464)
(230,000)
n/a
–
Weighted
average
exercise
price
(pence)
Weighted
average
exercise
price
(pence)
Weighted
average
exercise
price
(pence)
n/a
1.57
Weighted
average
exercise
price
(pence)
n/a
1.74
Weighted
average
exercise
price
(pence)
n/a
1.23
As at
30 June
2020
814,990
430,000
Weighted
average
exercise
price
(pence)
n/a
1.50
As at
30 June
2019
849,120
400,000
As at
1 July
2019
849,120
400,000
As at
1 July
2018
740,483
540,000
LTIP(i)
ESOS(ii)
LTIP(i)
ESOS(ii)
(i) Long term incentive plan.
(ii) Executive share option scheme.
ESOS
For the share options outstanding at 30 June 2020 the weighted average remaining contractual life is 7.7 years (30 June 2019: 7.6 years).
The exercise price of the options outstanding ranges between 83 pence and 174 pence. 70,000 share options are exercisable at 30 June 2020
(30 June 2019: 80,000).
LTIP
None of the October 2017 LTIP awards will vest in October 2020.
The Alumasc Group plc Report and Accounts 2020
101
26 Share based payments continued
Fair value of awards
The fair values of awards granted in the year, together with the other inputs into the option pricing model, are shown below. The Black-Scholes
option pricing model has been used to calculate the fair value of the options and the amount to be expensed in the 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
2020
83p
83p
25%
3
1.0%
7.7%
6p
ESOS
Black Scholes
2019
127p
127p
25%
3
1.0%
5.3%
13p
Black Scholes
2020
83p
nil
25%
3
1.0%
7.7%
66p
LTIP
Black Scholes
2019
131p
nil
25%
3
1.0%
5.3%
111p
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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 2020 was £4,000
(2018/19: credit of £65,000). Of this, £3,000 (2018/19: £40,000) is in respect of key management personnel, which are the Directors of
The Alumasc Group plc.
27 Movement in borrowings
At 1 July 2018
Cashflow movements
Non-cash movements
Effect of foreign exchange rates
At 1 July 2019
Impact of adoption of IFRS 16
Cashflow movements
Non-cash movements
Effect of foreign exchange rates
At 30 June 2020
Cash at
bank / bank
overdrafts
£000
4,656
(1,898)
–
4
2,762
–
12,803
–
11
15,576
Bank
loans
£000
(9,468)
1,500
111
–
(7,857)
–
(12,000)
(52)
–
(19,909)
Net bank
cash/(debt)
£000
(4,812)
(398)
111
4
(5,095)
–
803
(52)
11
(4,333)
Lease
liabilities
£000
–
–
–
–
–
(5,027)
346
(1,243)
–
(5,924)
Total
borrowings
£000
(4,812)
(398)
111
4
(5,095)
(5,027)
1,149
(1,295)
11
(10,257)
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102
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
28 Financial commitments
(i) Capital commitments
At 30 June 2020, £420,000 (2019: £325,000) of capital expenditure had been authorised and £28,000 of capital expenditure had been authorised
and contracted but not provided for by the Group (2019: £nil).
(ii) 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 undiscounted minimum rentals payable under non-cancellable leases for 2019 are below. Following the adoption of IFRS 16, 2020 balances
are included in note 20.
Less than one year
Between one and five years
After five years
* See note 31 for further analysis.
Property
2020
£000
–
–
–
–
Plant and
vehicles
2020
£000
–
–
–
–
Property*
2019
£000
1,163
2,713
4,352
8,228
The total future minimum sub-lease receipts under non-cancellable leases where the Group acts as a lessor are as follows:
Less than one year
Between one and five years
After five years
Amounts recognised in the profit and loss account in respect of leases are as follows:
Interest on lease liabilities (note 9)
Income from sub-leasing right-of-use assets (property)
Expenses relating to short term leases
Expenses relating to low-value assets, excluding short term leases of low-value assets
29 Related party disclosure
The Group’s principal actively trading subsidiaries at 30 June 2020 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 133.
Country of
incorporation
England
England
% of equity interest
and votes held
2019
100
100
2020
100
100
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made at arms-length market prices. Outstanding balances at the year end are unsecured and
settlement occurs in cash. There have been no guarantees provided or received for any related party receivables.
Transactions with other related parties
Key management personnel are determined as the Directors of The Alumasc Group plc. Details of transactions with the Directors and their
compensation are detailed in the Directors’ Remuneration Report on pages 44 to 51.
Property
2020
£000
40
160
480
680
Plant and
vehicles
2019
£000
358
469
–
827
Property
2019
£000
40
160
520
720
2020
£000
153
(40)
701
385
1,199
The Alumasc Group plc Report and Accounts 2020
103
30 Contingent liabilities
At the balance sheet date there existed contingent liabilities amounting to £533,000 (2019: £530,000) in relation to outstanding Guarantees
and £241,000 (2019: £361,000) in relation to outstanding Performance Bonds.
31 IFRS 16 impact of transition
Transition
The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised
in retained earnings at 1 July 2019.
Impact on year to 30 June 2020
On transition to IFRS 16, the Group recognised an additional £5.0 million of right-of-use assets (see note 13) and lease liabilities with no net
amount required to be recognised in retained earnings. In summary, the impact on the statement of financial position at 30 June 2020 is set out
below. The impact on the statement of comprehensive income is to reduce the reported profit for the period by £68,000, being an improvement
in operating profit of £85,000, offset by an increase in interest expense of £153,000. The net impact on the Group’s cashflows is £nil, however
cashflows from operating activities have improved by £499,000 with cashflows from financing activities reducing by the same amount. Further
details of the impact are shown within note 2.
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As at 30 June 2020
Property, plant & equipment
Lease liabilities
Other net assets
Net Assets
As would
have been
reported
£000
11,089
–
8,820
19,909
As reported
under IFRS
16
£000
16,945
(5,924)
8,820
19,841
Effect
£000
5,856
(5,924)
–
(68)
When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at 1 July 2019. The weighted-average
rate applied is 3.1%.
The following reconciles the operating lease commitment disclosed at 30 June 2019 with the amount recognised on the balance sheet
at 1 July 2019:
Operating lease commitment at 30 June 2019 as disclosed in the Group's consolidated financial statements
Lease commitment adjustment*
Discounted using the incremental borrowing rate at 1 July 2019
Recognition exemption for:
– Short-term leases
– Leases of low-value assets
Lease liabilities recognised at 1 July 2019
* On adoption of IFRS 16, the Directors conducted a review of lease commitments and identified an overstatement of lease commitments of £1,589,000 which has been adjusted in the
reconciliation above.
1 July
2019
£000
9,055
(1,589)
(1,629)
(438)
(372)
5,027
The Alumasc Group plc Report and Accounts 2020
104
Company Statement of Financial Position
AT 30 JUNE 2020
Assets
Non-current assets
Property, plant & equipment – owned assets
Property, plant & equipment – right-of-use assets
Investments in Group companies
Deferred tax assets
Current assets
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Interest bearing loans and borrowings
Lease liability
Amounts due to subsidiary undertakings
Provisions
Deferred tax liabilities
Employee benefits payable
Current liabilities
Bank overdraft
Lease liability
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
5
5
6
9
7
12
19
10, 19
11
20
14
9
13
19
11
8
12
15
16
16
16
16
16
16
2020
£000
719
477
69,994
214
71,404
469
11
6,464
6,944
2019
£000
655
–
69,994
157
70,806
1,270
–
–
1,270
78,348
72,076
(19,909)
(479)
(14,828)
(100)
(75)
(1,054)
(36,445)
(567)
(3)
(2,235)
–
(2,805)
(39,250)
(7,857)
–
(19,424)
(100)
(123)
(707)
(28,211)
(5,237)
–
(1,569)
(127)
(6,933)
(35,144)
39,098
36,932
4,517
445
–
–
(416)
9
34,543
39,098
4,517
445
2,265
10,606
(416)
(105)
19,620
36,932
As permitted by Section 408 of the Companies Act 2006, the Company profit and loss account is not presented. The profit for the year after tax was
£3,981,000 (2019: loss of £1,045,000). The financial statements were approved by the Board of Directors and authorised for issue on 8 September 2020.
Paul Hooper
Director
8 September 2020
Company number 1767387
The Alumasc Group plc Report and Accounts 2020
Company Statement of Cashflows
FOR THE YEAR ENDED 30 JUNE 2020
Operating activities
Operating profit
Adjustments for:
Depreciation
Decrease/(increase) in receivables
Increase/(decrease) in trade and other payables
Movement in provisions
Cash contributions to retirement benefit schemes
Share based payments
Tax paid
Net cash inflow from operating activities
Investing activities
Purchase of property, plant and equipment
Net cash outflow from investing activities
Financing activities
Bank interest paid
Equity dividends paid
Draw down/(repayment) of amounts borrowed
Draw down/(repayment) of amounts borrowed from subsidiaries*
Refinancing costs
Payment of lease liabilities
Purchase of own shares
Net cash inflow/(outflow) from financing activities
Net increase in cash at bank and bank overdraft
Net cash at bank and bank overdraft brought forward
Net increase in cash at bank and bank overdraft
Net cash at bank and bank overdraft carried forward
105
Notes
2019/20
£000
*
As restated
2018/19
£000
4,442
91
801
672
–
(124)
–
5,882
(2)
5,880
(147)
(147)
(409)
(1,574)
12,000
(4,596)
–
(20)
–
5,401
11,134
(5,237)
11,134
5,897
2,090
66
(512)
131
(10)
(182)
(65)
1,518
(47)
1,471
(78)
(78)
(451)
(2,628)
(1,500)
4,616
(156)
–
(238)
(357)
1,036
(6,273)
1,036
(5,237)
5
13
4
19
19
19
* During the year the Directors have reclassified to financing activities the cashflows arising from funds advanced/repaid by/to subsidiary companies which were previously incorrectly classified as operating
cashflows. The reclassification is required to correctly reflect the nature of the cashflow. The prior year amounts have been restated accordingly which has not resulted in any change to the net increase
in cash at bank and bank overdraft reported.
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The Alumasc Group plc Report and Accounts 2020
106
Company Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2020
At 1 July 2018
Loss for the period
Net gain on cashflow 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
At 1 July 2019
Share
capital
£000
4,517
–
–
–
–
–
–
–
–
–
4,517
Share Revaluation
reserve
£000
2,265
–
–
–
–
–
–
–
–
–
2,265
premium
£000
445
–
–
–
–
–
–
–
–
–
445
Profit for the period
Net gain on cashflow hedges
Tax on derivative financial liability
Actuarial loss on defined benefit pensions, net of tax
Dividends
Transfer of reserves
At 30 June 2020
–
–
–
–
–
–
4,517
–
–
–
–
–
–
445
–
–
–
–
–
–
–
–
–
–
(2,265)
(10,606)
–
–
Capital
Merger
reserve –
reserve own shares
£000
(241)
£000
10,606
–
–
–
–
–
–
–
–
–
10,606
Profit
and loss
account
reserve
£000
23,398
(1,045)
–
–
23
(2,628)
(65)
–
–
(63)
Total
equity
£000
40,690
(1,045)
234
(39)
23
(2,628)
(65)
63
(238)
(63)
19,620
36,932
3,981
–
–
(355)
(1,574)
12,871
34,543
3,981
138
(24)
(355)
(1,574)
–
39,098
Hedging
reserve
£000
(300)
–
234
(39)
–
–
–
–
–
–
(105)
–
138
(24)
–
–
–
9
–
–
–
–
–
–
63
(238)
–
(416)
–
–
–
–
–
–
(416)
The Alumasc Group plc Report and Accounts 2020
Notes to the Company Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
107
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 and COVID-19
As the Company acts as a holding company for the Group’s investments, its results and cashflows are based on the performance of the Group’s
operating companies. The Company is the principal of 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 Going Concern assessment, which also takes account of the uncertainties caused by COVID-19, is detailed on page 73.
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 29. The financial position of the Group, its cashflows 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 2020 the
Group’s net debt was £4.3 million (2019: £5.1 million).
On the basis of the Group’s financing facilities and current operating and financial plans and sensitivity analyses, the Board is satisfied that the
Group has adequate resources to continue in operational existence for the foreseeable future and accordingly continues to adopt the Going
Concern basis in preparing the financial statements.
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 2019 and have been
adopted for the Company financial statements where appropriate:
IFRS 16 Leases
The Company has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated
and continues to be reported under IAS 17 and IFRIC 4. The impact of adopting the standard on 1 July 2019 was, in broad terms, to bring the
Company’s property leases on to the statement of financial position. Previously these were treated as operating leases and were ‘off-balance sheet’.
More specifically the impact of adoption was:
• The recognition of a right of use asset and lease liability of £485,000 on the date of adoption with no impact on reserves at that stage;
• The total annual charge to the income statement increased by £5,000, reducing profit before tax by this figure in the current financial year
to 30 June 2020; and
• EBITDA increased by £26,000 as the former lease expense was re-classified as a depreciation charge and interest cost in the year.
The Group has applied the practical expedients whereby a single discount rate can be used across a portfolio of leases with reasonably similar
characteristics and applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of the lease term
remaining as of the date of initial application. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately if they are
different from those under IFRS 16 and the impact of changes is disclosed in note 22.
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Notes to the Company Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
2 Summary of significant accounting policies continued
Significant accounting policy
Identification of a lease
i)
Policy applicable for contracts entered into from 1 July 2019
At inception of a contract the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys
the right to control the use of an identified asset the Company assesses whether:
• the contract involves the sole use of a specific identified asset – this may be specified explicitly or implicitly, and should be physically distinct or
represent substantially all of the capacity of a physically distinct asset. If the supplier has the right to substitute the identified asset for a similar asset
then the asset is not identified;
• the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• the Company has the right to direct the use of the asset.
This policy is applied to contracts entered into, or changed, on or after 1 July 2019.
Policy applicable for contracts entered into prior to 1 July 2019
For contracts entered into before 1 July 2019, the Company determined whether the arrangement was or contained a lease based on the
assessment of whether:
• fulfilment of the arrangement was dependent on the use of a specific asset or assets; and
• the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the asset if one of the following was met:
– the Company had the ability or right to operate the asset while obtaining or controlling more than an insignificant amount of the output;
– the Company had the ability or right to control the physical access to the asset while obtaining or controlling more than an insignificant amount
of the output; or
– facts and circumstances indicated that it was remote that other parties would take more than an insignificant amount of the output, and the
price per unit was neither fixed per unit of output nor equal to the current market price per unit of output.
ii) As a lessee
Policy applicable for contracts entered into from 1 July 2019:
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured
at cost, which comprises the initial amount of the lease liability.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis
as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using
the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The Company uses
its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise fixed payments. The Company does not make other types of payment
referred to in IFRS 16 for its leases.
Generally the lease liability represents the present value of contractual future lease payments including optional renewal periods where the Group
is reasonably certain to exercise the extension option. The Company does not typically enter into purchase options or variable lease payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under
a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is
recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Company presents right-of-use assets that do not meet the definition of investment property in ‘Property, plant and equipment’ and discloses
the corresponding lease liability in the statement of financial position.
The Alumasc Group plc Report and Accounts 2020
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2 Summary of significant accounting policies continued
Significant accounting policy continued
ii) As a lessee continued
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months
or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line
basis over the lease term.
Policy applicable for contracts entered into prior to 1 July 2019
In the comparative period, as a lessee the Company classified none of its leases as finance leases as none were deemed to transfer substantially
all of the risks and rewards of ownership.
Payments made under operating leases were recognised in profit or loss on a straight-line basis over the term of the lease.
iii) As a lessor
IFRS 16 lessor accounting requirements remain similar to requirements under IAS 17 with the change in accounting standard having no impact
on the Company’s financial statements.
When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to
ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment,
the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease
classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head
lease is a short-term lease to which the Company applies an exemption under IFRS 16 then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, the Company applies IFRS 15 to allocate the consideration in the contract.
The accounting policies applicable to the Company as a lessor in the comparative period were not different from IFRS 16. However, when the
Company was an intermediate lessor the sub-leases were classified with reference to the underlying asset.
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 13).
The valuation of the Company’s investments is reviewed where impairment indicators are identified 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:
Right-of-use assets
Freehold buildings
Long leasehold property
Plant and equipment
–
–
–
–
over the period of the lease
25 to 50 years
over the period of the lease
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.
The Alumasc Group plc Report and Accounts 2020
110
Notes to the Company Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
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 cashflows 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.
Identification of a lease
Leases
i)
At inception of a contact the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
To assess whether a contract conveys the right to control the use of an identified asset the Company assesses whether:
• the contract involves the sole use of a specific identified asset – this may be specified explicitly or implicitly, and should be physically distinct
or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is
not identified;
• the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• the Company has the right to direct the use of the asset.
This policy is applied to contracts entered into, or changed, on or after 1 July 2019 as the Company has opted to apply the practical expedient
to ‘grandfather’ the assessment of which contracts are, or contain, leases.
ii) As a lessee
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured
at cost, which comprises the initial amount of the lease liability.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis
as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using
the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The Company uses
its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise fixed payments. The Company does not make other types of payment
referred to in IFRS 16 for its leases.
Generally the lease liability represents the present value of contractual future lease payments including optional renewal periods where the Group
is reasonably certain to exercise the extension option. The Company does not typically enter into purchase options or variable lease payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under
a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is
recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Company presents right-of-use assets that do not meet the definition of investment property in ‘Property, plant and equipment’ and discloses
the corresponding lease liability in the statement of financial position.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less
and leases of low-value assets which it defines as having a purchase cost of £5,000. The Company recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease term.
The Alumasc Group plc Report and Accounts 2020
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2 Summary of significant accounting policies continued
iii) As a lessor
IFRS 16 lessor accounting requirements remain similar to requirements under IAS 17 with the change in accounting standard having no impact
on the Company’s financial statements. When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease
or an operating lease.
To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental
to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this
assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease
classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.
If a head lease is a short-term lease to which the Company applies an exemption under IFRS 16 then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, the Company applies IFRS 15 to allocate the consideration in the contract.
The accounting policies applicable to the Company as a lessor in the comparative period were not different from IFRS 16. However, when the
Company was an intermediate lessor the sub-leases were classified with reference to the underlying asset.
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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 a defined contribution scheme where agreed contractual contributions are paid into a separately administered fund.
(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 scheme represents the
contributions payable by the Company to the fund. The assets of the scheme are held separately from those of the Company in an
independently administered fund.
The Alumasc Group plc Report and Accounts 2020
112
Notes to the Company Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
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 cashflow hedges, as they hedge exposure to variability
in cashflows 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 cashflow 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.
The Alumasc Group plc Report and Accounts 2020
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2 Summary of significant accounting policies continued
Derivative financial instruments and hedging continued
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.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Provision is made when there
is objective evidence that the Company will not be able to recover balances in full.
Cash and cash equivalents
Cash and cash equivalents in the statement of cashflows comprise cash at banks and in hand, short-term deposits with an original maturity of
three months or less net of 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
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future
accounting periods that the Group has decided not to adopt early. The following amendments are effective for the period beginning 1 January 2020:
• IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment – Definition of Material)
• IFRS 3 Business Combinations (Amendment – Definition of Business)
• Revised Conceptual Framework for Financial Reporting
In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current
or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of
the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that
‘settlement’ includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a
conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments
are effective for annual reporting periods beginning on or after 1 January 2022.
Management is currently assessing the impact of these new accounting standards and amendments but does not believe that the amendments to
IAS 1 will have a significant impact.
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Notes to the Company Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
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
Final dividend for 2019 of 4.4p paid on 31 October 2019
Interim dividend for 2019 of 2.95p paid on 8 April 2019
Final dividend for 2018 of 4.4p paid on 31 October 2018
2019/20
£000
16
2019/20
£000
1,574
–
–
1,574
2018/19
£000
16
2018/19
£000
–
1,045
1,583
2,628
A final dividend of 2.0 pence per equity share, at a cash cost of £715,000, has been proposed for the year ended 30 June 2020, payable on
30 October 2020. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.
5 Property, plant & equipment
Cost:
At 1 July 2018
Additions
At 1 July 2019 as reported
Impact of adoption of IFRS 16
Adjusted as at 1 July 2019
Additions
At 30 June 2020
Depreciation:
At 1 July 2018
Charge for the year
At 1 July 2019
Charge for the year
At 30 June 2020
Net book value:
At 30 June 2020
At 30 June 2019
At 1 July 2018
Right-of-use
asset
(property)
£000
Freehold
land and
buildings
£000
Long
leasehold
property
£000
Plant
and
equipment
£000
–
–
–
485
485
–
485
–
–
–
8
8
477
–
–
749
–
749
–
749
–
749
298
12
310
12
322
427
439
451
235
–
235
–
235
–
235
235
–
235
–
235
–
–
–
513
78
591
–
591
147
738
321
54
375
71
446
292
216
192
Total
£000
1,497
78
1,575
485
2,060
147
2,207
854
66
920
91
1,011
1,196
655
643
Included within freehold land and buildings is land of £336,000 (2019: £336,000) which is not depreciated.
The Alumasc Group plc Report and Accounts 2020
6
Investments in Group companies
Cost:
At 1 July 2018, 1 July 2019 and 30 June 2020
Provisions:
At 1 July 2018
Provided in year
At 30 June 2019
Provided in year
At 30 June 2020
Net book value:
At 30 June 2020
At 1 July 2019
At 1 July 2018
115
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£000
89,911
17,417
2,500
19,917
–
19,917
69,994
69,994
72,494
During the prior year £2,500,000 was provided against the investment in Levolux Limited following annual impairment testing.
At close of business on 30 June 2020 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.
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.
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7 Trade and other receivables
Other receivables
Prepayments
8 Trade and other payables
Other payables
Accruals
9 Deferred tax
A reconciliation of the movement in deferred tax during the year is as follows:
Pension
deferred
tax asset
£000
142
(18)
(4)
At 1 July 2018
(Charged)/credited to the statement of comprehensive income
Charged to equity
At 30 June 2019
(Charged)/credited to the statement of comprehensive income
Credited/(charged) to equity
At 30 June 2020
120
(21)
101
200
2020
£000
236
233
469
2020
£000
1,831
404
2,235
2019
£000
473
797
1,270
2019
£000
1,032
537
1,569
Short term
temporary
differences
£000
14
1
–
15
1
–
16
Total
deferred
tax asset
£000
217
(17)
(43)
157
(20)
77
214
Deferred tax
liabilities
£000
(124)
1
–
(123)
48
–
(75)
Hedging
£000
61
–
(39)
22
–
(24)
(2)
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.
The Alumasc Group plc Report and Accounts 2020
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Notes to the Company Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
10 Borrowings
Non-current liabilities:
Non-current instalments due on bank loan
2020
£000
19,909
2019
£000
7,857
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. Given the uncertainties caused by COVID-19, formal agreement was reached with
the Group’s main bankers HSBC to relax the relevant covenant testing for the tests arising in December 2020 and June 2021 to the following:
Group interest cover to be at least two and a half times and net debt as a multiple of underlying EBITDA to be below three and a half times.
These covenants are unaffected by the implementation of IFRS 16.
At 30 June 2020 the Company and Group also had £4.0 million (2019: £4.0 million) of bank overdraft facilities, renewed until August 2021 and
repayable on demand. The Group has an offset arrangement in place against uncommitted overdraft facilities.
11 Lease liabilities
Non-current lease liabilities
Current lease liabilities
Total lease liabilities
2020
£000
479
3
482
2019
£000
–
–
–
Lease liabilities are initially measured at the present value of future lease payments, discounted using the Company’s incremental borrowing rate.
See note 22 for further disclosure on lease liabilities.
12 Financial instruments
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
Derivative financial assets
Cash at bank
Financial liabilities:
Bank overdraft
Bank loans
Lease liabilities
Trade, intercompany and other payables
Derivative financial liabilities
Carrying
amount
£000
236
11
6,464
6,711
567
19,909
482
17,063
–
38,021
30 June 2020
Fair
value
£000
236
11
6,464
6,711
567
19,909
482
17,063
–
38,021
Carrying
amount
£000
30 June 2019
Fair
value
£000
473
–
–
473
5,237
7,857
–
20,993
127
34,214
473
–
–
473
5,237
7,857
–
20,993
127
34,214
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 2020 and 2019 based on contractual undiscounted
payments. The total interest bearing loans and borrowings do not include lease liabilities as these balances do not meet the definition of financial
liabilities in IAS 39. 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.
The Alumasc Group plc Report and Accounts 2020
12 Financial instruments continued
Financial assets and liabilities continued
At 30 June 2020
Interest bearing loans and borrowings
Bank overdraft
Lease liabilities
Trade, intercompany and other payables
At 30 June 2019
Interest bearing loans and borrowings
Bank overdraft
Trade, intercompany and other payables
On
demand
£000
Less than
3 months
£000
3 to 12
months
£000
More than
1 year
£000
–
567
–
25
592
–
5,237
23
5,260
65
–
–
1,182
1,247
52
–
1,349
1,401
195
–
3
1,020
1,218
5,394
–
151
5,545
20,582
–
479
14,836
35,897
8,431
–
19,470
27,901
117
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Total
£000
20,842
567
482
17,063
38,954
13,877
5,237
20,993
40,107
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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 2020 was £14.0 million (2019: £13.1 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 2020 of £4.3 million (2019: £5.1 million).
The maturity profile of the Company’s interest bearing financial liabilities is as follows:
Floating rate interest bearing financial liabilities:
In less than one year
In two to five years
2020
£000
–
19,909
19,909
2019
£000
5,237
7,857
13,094
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.
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 2020 or 30 June 2019
related to derivative trading activity. Where cashflow 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
2020
£000
11
2019
£000
(127)
At 30 June 2020 the Company had forward foreign exchange contracts with principal amounts equivalent to £978,000 (2019: £4,282,000).
The forward foreign exchange contracts hedge foreign currency price risks of sales across the Group. The cashflows 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.
The Alumasc Group plc Report and Accounts 2020
118
Notes to the Company Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
13 Retirement benefit obligations
Defined contribution schemes
£93,000 (2019: £92,000) was charged to operating profit in the statement of comprehensive income for defined contribution pension scheme
contributions. At 30 June 2020 there was an accrual of £82,000 payable in respect of the defined contribution scheme (2019: £92,000).
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 2019 triennial actuarial review in the 2019/20 financial year, deficit reduction contributions decreased from
£141,000 to £124,000 per year, with effect from 1 January 2020.
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 2040 – male
Future pensioners at 65 in 2040 – female
2020
%
1.45
2.10
2.75-3.45
2.80
2.10
2019
%
2.25
2.25
1.90-3.70
3.25
2.25
Years
Years
21.5
23.4
22.8
24.8
20.9
22.6
22.2
23.8
A discount rate of 1.45% has been used in calculating the present value of liabilities of the pension scheme at 30 June 2020. A 0.1% change to this
rate would have changed the present value of the pension fund liabilities at that date by approximately £86,000 before tax.
A Retail Price Index inflation rate of 2.80% and a Consumer Price Index inflation rate of 2.10% have been used in calculating the present value of
liabilities of the pension scheme at 30 June 2020. A 0.1% change to these rates would have changed the present value of the pension fund liabilities
at that date by approximately £42,000 before tax.
In valuing the liabilities of the pension scheme at 30 June 2020, 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 2020
would have increased by approximately £313,000 before tax.
The following information relates to the Company’s element of the assets and liabilities of the scheme.
The combined assets and liabilities of the scheme at 30 June are:
Equities
Gilts
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
2020
£000
2,012
–
815
598
891
391
4,707
(5,761)
(1,054)
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)
Of the above assets, all have a quoted market price with the exception of £80,000 of insured annuities (2018/19: £80,000) and £41,000 of
property (2018/19: £33,000).
The whole of the defined benefit pension deficit is shown as a non-current liability.
The Alumasc Group plc Report and Accounts 2020
119
13 Retirement benefit obligations continued
Amounts recognised in the statement of comprehensive income in respect of the defined benefit pension plan, before taxation, are as follows:
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 on plan assets
Actuarial loss on retirement benefit obligations
Total recognised in the statement of comprehensive income
The actual return on plan assets for 2019/20 was a gain of £356,000 (2018/19: gain of £409,000).
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
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
Contributions by employer
Benefits paid
At 30 June
2019/20
£000
2018/19
£000
–
(48)
(14)
(25)
233
(690)
(457)
(471)
259
(232)
27
(46)
2020
£000
(5,249)
(137)
–
315
(690)
(5,761)
2020
£000
4,542
123
233
124
(315)
4,707
2019
£000
(5,052)
(175)
(48)
258
(232)
(5,249)
2019
£000
4,209
150
259
182
(258)
4,542
The cumulative amount of net actuarial losses recognised in the statement of comprehensive income is £1,419,000 (2018/19: losses of £962,000).
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Notes to the Company Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
14 Provisions
At 1 July 2018
Utilised
At 30 June 2019
Utilised
At 30 June 2020
£000
110
(10)
100
–
100
The Company has provided £100,000 (2019: £100,000) in relation to the anticipated cost of dilapidations required under the terms of the lease
of business premises.
15 Called up share capital
Allotted, called up and fully paid:
36,133,558 (2019: 36,133,558) ordinary shares of 12.5p each
16 Movements in equity
2020
£000
4,517
2019
£000
4,517
Share capital and share premium
The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue of the
Company’s equity share capital net of issue costs.
Capital reserve – own shares
The capital reserve – own shares relates to 369,245 (2019: 369,245) ordinary own shares held by the Company. The market value of shares at
30 June 2020 was £265,856 (2019: £348,936). These are held to help satisfy the exercise of awards under the Company’s Long Term Incentive
Plans. During the prior 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. No shares were exercised in the current financial period. 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 cashflow hedge that is determined to be an
effective hedge.
Merger & Revaluation reserves
During the year a capital reorganisation was performed to convert the non-distributable merger and revaluation reserves into distributable reserves.
Distributable reserves
The Company’s profit and loss account reserve shown on the balance sheet is £34,543,000 (2019: £19,620,000).
In connection with a capital reorganisation performed 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 £20,543,000 of the Company profit and loss
account reserve is distributable.
Cumulative actuarial losses relating to defined benefit pension schemes of £1,419,000 (2019: losses of £962,000) have been deducted in
calculating the distributable reserves figure above.
The Alumasc Group plc Report and Accounts 2020
121
17 Share based payments
The Company operates two types of share based payment schemes, the main features of each scheme as detailed in the Directors’ Remuneration
Report on pages 44 to 51.
Weighted
average
exercise
price
Weighted
average
exercise
price
(pence) Granted
219,078
20,000
n/a
1.43
(pence) Exercised
–
–
n/a
0.83
Lapsed
(180,031)
(10,000)
–
–
Weighted
average
exercise
price
Weighted
average
exercise
price
(pence) Granted
219,078
10,000
n/a
1.55
(pence) Exercised
–
–
n/a
1.27
Lapsed
(146,542)
(10,000)
–
–
Weighted
average
exercise
price
(pence)
Weighted
average
exercise
price
(pence)
Weighted
average
exercise
price
(pence)
n/a
1.58
Weighted
average
exercise
price
(pence)
n/a
1.88
Weighted
average
exercise
price
(pence)
n/a
1.21
As at
30 June
2020
607,775
60,000
Weighted
average
exercise
price
(pence)
n/a
1.43
As at
30 June
2019
568,728
50,000
As at
1 July
2019
568,728
50,000
As at
1 July
2018
496,192
50,000
LTIP(i)
ESOS(ii)
LTIP(i)
ESOS(ii)
(i) Long term incentive plan.
(ii) Executive share option scheme.
ESOS
For the share options outstanding at 30 June 2020 the weighted average remaining contractual life is 7.0 years (30 June 2019: 7.0 years).
The exercise price of the options outstanding ranges between 83 pence and 174 pence. 20,000 share options are exercisable at 30 June 2020
(30 June 2019: 20,000).
LTIP
None of the October 2017 LTIP awards will vest in October 2020.
Fair value of awards
The fair values of awards granted in the year, together with the other inputs into the option pricing model are shown below. The Black-Scholes
option pricing model has been used to calculate the fair value of the options and the amount to be expensed in the income statement.
Share price at grant date
Exercise price
Expected volatility
Expected life (years)
Risk free rate
Dividend yield at date of grant
Fair value per option
ESOS
Black Scholes
2020
83p
83p
25%
3
1.0%
7.7%
6p
Black Scholes Black Scholes
2020
83p
nil
25%
3
1.0%
7.7%
66p
2019
127p
127p
25%
3
1.0%
5.3%
13p
LTIP
Black Scholes
2019
131p
nil
25%
3
1.0%
5.3%
111p
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 2020 is £4,000
(2018/19: credit of £65,000).
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Notes to the Company Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2020
18 Financial commitments
(i) Capital commitments
The Company had no capital commitments at the year end (2019: £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 undiscounted minimum rentals payable under non-cancellable leases for 2019 are below. Following the adoption of IFRS 16, 2020 balances
are included in note 11.
Less than one year
Between one and five years
After five years
Property
2020
£000
–
–
–
–
Plant
2020
£000
–
–
–
–
Property
2019
£000
20
80
1,007
1,107
The total future minimum sub-lease receipts under non-cancellable leases where the Company acts as a lessor are as follows:
Less than one year
Between one and five years
After five years
19 Movement in borrowings
At 1 July 2018
Cashflow movements
Non-cash movements
At 1 July 2019
Impact of adoption of IFRS 16
Cashflow movements
Non-cash movements
At 30 June 2020
Property
2020
£000
40
160
480
680
Lease
liabilities
£000
–
–
–
–
(502)
20
–
(482)
Bank
overdrafts/
Cash
£000
(6,273)
1,036
–
(5,237)
–
11,134
–
5,897
Bank
loans
£000
(9,468)
1,500
111
(7,857)
–
(12,000)
(52)
(19,909)
Net
borrowings
£000
(15,741)
2,536
111
(13,094)
–
(866)
(52)
(14,012)
Plant
2019
£000
1
3
–
4
Property
2019
£000
40
160
520
720
Total
borrowing
£000
(15,741)
2,536
111
(13,094)
(502)
(846)
(52)
(14,494)
The Company is part of a Group offset banking arrangement, together with its subsidiary undertakings.
The Alumasc Group plc Report and Accounts 2020
123
20 Related party disclosure
Terms and conditions of transactions with related parties
A full list of the Company’s subsidiaries is shown on page 133.
The total non-current position with regards to amounts owed to subsidiary undertakings at 30 June 2020 was a £14,828,000 liability
(2019: £19,424,000 liability). Included in Other receivables is £134,000 (2019: £369,000) 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 44 to 51.
21 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 (2019: none) of the overdraft facilities guaranteed by the Company.
22 IFRS 16 impact of transition
Transition
The Company applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised
in retained earnings at 1 July 2019.
Impact on year to 30 June 2020
On transition to IFRS 16, the Company recognised an additional £485,000 of right-of-use assets (see note 5) and lease liabilities with no net
amount required to be recognised in retained earnings. In summary, the impact on the statement of financial position at the date of adoption
is set out below. The net impact on the Company’s cashflows is £nil, however cashflows from operating activities have improved by £21,000
with cashflows from financing activities reducing by the same amount. Further details of the impact are shown within note 2.
As at 30 June 2020:
Property, plant & equipment
Lease liabilities
Other net assets
Net Assets
As would
have been
reported
£000
719
–
38,384
39,103
As reported
under
IFRS 16
£000
1,196
(482)
38,384
39,098
Effect
£000
477
(482)
–
(5)
When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate at 1 July 2019. The weighted-
average rate applied is 3.1%.
Operating lease commitment at 30 June 2019 as disclosed in the Company’s financial statements
Discounted using the incremental borrowing rate at 1 July 2019
Recognition exemption for:
– Short term leases
– Leases of low-value assets
Lease liabilities recognised at 1 July 2019
1 July
2019
£000
1,111
(615)
–
(11)
485
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124
Financial Summary
Income Statement Summary
Continuing operations:
Revenue
Underlying operating profit
Underlying operating margin
Net interest cost on borrowings
Interest on lease liabilities
2013/14
£000
2014/15
£000
2015/16
£000
2016/17
£000
2017/18
£000
2018/19
£000
2019/20
£000
63,028
69,950
73,005
88,368
87,048
90,104
75,992
5,099
8.1%
6,341
9.1%
7,010
9.6%
8,703
9.8%
6,224
7.2%
5,865
6.5%
4,161
5.5%
(521)
–
(592)
–
(215)
–
(132)
–
(212)
–
(281)
–
(343)
(153)
Underlying profit before tax
4,578
5,749
6,795
8,571
6,012
5,584
3,665
Non-underlying items*
Profit before taxation
(1,168)
3,410
(1,434)
4,315
(1,502)
5,293
(888)
7,683
(1,082)
4,930
(4,599)
985
(1,306)
2,359
Taxation
Profit for the year from continuing operations
(706)
2,704
(1,120)
3,195
(1,319)
3,974
(1,492)
6,191
(967)
3,963
(256)
729
Discontinued operations – Profit after tax
Profit for the year
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)
Lease liabilities
Pension deficit (net of tax)
Discontinued operations
Capital Invested – continuing operations
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
17,042
7,666
–
14,338
(11,769)
27,277
15,929
(914)
–
16,748
(3,708)
28,055
16,580
(8,632)
–
18,588
(479)
26,057
20,437
(6,076)
–
17,095
(334)
31,122
24,421
4,812
–
12,566
(714)
41,085
25,445
5,095
–
10,749
359
41,648
19,841
4,333
5,924
15,608
–
45,706
Underlying return on capital invested (post-tax)**
14.8%
17.9%
20.5%
24.2%
13.8%
10.2%
7.2%
Underlying tax rate
24.2%
22.0%
20.8%
20.6%
20.2%
20.4%
20.3%
Notes
* Non-underlying items comprise brand amortisation and IAS 19 pension costs in all years. Further details of the 2018/19 and 2019/20 non underlying items can be found in note 5 of the
Report and Accounts 2020.
** Underlying operating profit after tax from continuing operations calculated using the underlying tax rate, as a percentage of average capital invested from continuing operations.
(2018/19 re-stated to include lease liabilities)
(442)
1,917
339
2,256
8.2
6.3
2.0
The Alumasc Group plc Report and Accounts 2020
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Additional Shareholder Information
125
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 30 and 31.
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 notes 24 and 25
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 upon request from the Group Company Secretary and
are available at the Company’s AGM. 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 44 to 51.
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 2020.
Details of the shares purchased by the Trust during the year are outlined within page 48. 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 2019 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, that the purchase is in the interests of
shareholders generally. The Directors will also give careful consideration to the financial position of the Company. 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 2020
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Additional Shareholder Information continued
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. There are no agreements
between the Group and its Directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid.
The total amount owing under the Group’s credit facilities as at 30 June 2020 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 how, 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 2020.
This information was also checked on 17 August 2020 being the latest practical date prior to the publication of this report.
Shareholder
John McCall
AXA Framington Monthly Income Trust
Mr Philip H R Gwyn
Hargreaves Lansdown
Charles Stanley
Chelverton Asset Management
Unicorn Asset Management
The Executors of Mrs E L O’Loughlin, deceased1
1 Following legal transmission the holding was below 3% on 17 August 2020.
Number of
Ordinary Shares
4,359,668
3,420,000
3,057,605
2,771,855
1,617,162
1,600,000
1,300,000
1,143,979
% of issued
share capital
12.07
9.46
8.46
7.67
4.48
4.43
3.60
3.17
Employment
Information about the Group’s employees, employment of disabled persons and employment practices is contained within the Sustainability report,
s.172 Statement and the Directors’ report on pages 22 to 25, 28 to 29 and 59 to 60.
Greenhouse gas emissions (‘GHG’)
Information about the Group’s greenhouse gas emissions is given in the Sustainability report on pages 22 to 25.
Annual General Meeting
The Notice of the AGM, to be held on 22 October 2020 is available in this Report and Accounts on pages 127 to 132 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.
The Alumasc Group plc Report and Accounts 2020
Notice of Annual General Meeting
127
Notice is given that the 2020 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 22 October 2020 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 2020
2 To receive the report of the Remuneration Committee for the year ended 30 June 2020
3 To approve the Remuneration Policy
4 To declare a final dividend of 2 pence per share
5 To re-elect Jon Pither as a Director
6 To re-elect David Armfield as a Director
7 To elect Michael Leaf as a Director
8 To elect Gilbert Jackson as a Director
9 To re-appoint BDO LLP as Auditor of the Company to hold office until the conclusion of the next Annual General Meeting
of the Company at which accounts are laid before the Company
10 That the Audit Committee be authorised to determine the auditor’s remuneration
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Special business
The following resolution will 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% 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 21 October 2021).
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% 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 2020
128
Notice of Annual General Meeting continued
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% 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 Daily Official List of the London Stock Exchange Plc) for the
five dealing days immediately preceding the day on which such ordinary shares are contracted to be purchased; and
(iv) the authority hereby conferred shall expire on 21 October 2021, 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,
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
8 September 2020
Registered Office
Burton Latimer
Kettering
Northamptonshire
NN15 5JP
Registered No
01767387
The Alumasc Group plc Report and Accounts 2020
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Explanatory notes to the Notice of the 2020 Annual General Meeting
COVID-19: The Company has been closely monitoring developments relating to the COVID-19 pandemic, including public health guidance.
Any changes to the arrangements for the AGM will be communicated via our website, www.alumasc.co.uk. At the date of the approval
of the Notice there are compulsory Government Measures in force restricting public gatherings. As with our General Meeting held earlier
this year, we will organise a conference call facility and this will be published the day before the meeting on our website. Any questions can
be emailed to CompanySecretary@alumasc.co.uk or raised on the day. The Company will make arrangements for a quorum to transact the formal
business of the meeting set out in the Notice.
Resolutions 1 to 11 are being proposed as Ordinary resolutions and Resolutions 12 to 14 are being proposed
as Special resolutions
Resolution 1 – Annual Report and Accounts for the year
The Directors will present to the shareholders the Annual Report and Accounts for the year ended 30 June 2020, together with the Directors’ and
Auditor’s report on those accounts.
Resolution 2 – Directors’ Remuneration Report
The Directors’ Remuneration Report is set out on pages 44 to 51. Resolution 2 is an advisory vote and does not affect the future remuneration paid
to any Director. It provides details of the remuneration paid for the year ended 30 June 2020.
Resolution 3 – Approval of the Remuneration Policy
The Remuneration Policy as approved by the shareholders at the 2017 AGM has come to the end of its three-year period and is due for renewal.
The new Remuneration Policy (the 2020 Policy) as set out on pages 52 to 57 of the Annual Report is proposed for approval. The 2020 Policy reflects
the Board's approach to a high level of governance and good practice.
The 2020 Policy updates the 2017 Policy in respect of pensions and Long Term Incentive Plans (LTIPs) and information about these changes are detailed
on pages 44 to 45 of the Directors' Remuneration Report.
The 2020 Policy has been updated to reflect the alignment of pensions with the wider workforce and any new directors will have contributions aligned
with the workforce rate. The 2020 Policy adds a clawback provision (in addition to the current malus clause) to the LTIP awards and aligns the LTIP
maximum limit in accordance with 2018 LTIP which was approved by shareholders.
Resolution 4 – To declare a dividend
The Company is proposing a dividend of 2p per share.
Resolutions 5 to 8: Re-election and Election of Directors
The Company’s Articles of Association require that one-third of the Directors must retire by rotation and seek re-election each year. Biographical details
of each Director can be found on pages 30 and 31 of this 2020 Annual Report and Accounts.
Resolution 5 – Re-election of Jon Pither
Your Board recommends that Jon Pither be re-elected as a Director.
Resolution 6 – Re-election of David Armfield
Your Board recommends that David Armfield be re-elected as a Director.
Resolution 7 – Election of Michael Leaf
Your Board recommends that Michael Leaf be elected as a Director.
Resolution 8 – Election of Gilbert Jackson
Your Board recommends that Gilbert Jackson be 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’s Articles
of Association.
Resolutions 9 and 10 – Reappointment of BDO as Auditor and to authorise the Auditor’s remuneration
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 are recommending that BDO be re-appointed as Auditor. Resolution 10 authorises the Audit
Committee of the Board to set the Auditor’s 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.
The Alumasc Group plc Report and Accounts 2020
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Notice of Annual General Meeting continued
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 (being the latest practicable date
prior to publication of this Notice); and in addition, (b) the financing (or re-financing, if the authority is to be used within six 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 2020.
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 2021 Annual General Meeting of the Company or, if earlier, on 21 October 2021.
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 2020). 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 in the best interests of shareholders generally. This authority will lapse on 21 October 2021, unless renewed earlier.
Recommendation
Your Directors believe that the resolutions set out in Resolutions 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.
Voting at the AGM
Your vote is important, and you are encouraged to complete and return the proxy form to the Company’s registrars, Equiniti, Aspect House,
Spencer Road, Lancing, West Sussex, BN99 6DA, not less than 48 hours before the time fixed for holding the AGM. Please refer to the notes
on pages 131 to 132 of this Notice for further details. Please consider appointing the Chairman of the AGM as your proxy with voting instructions,
to ensure your vote is counted, as if the current restrictions on meetings persist, other named proxies (other than Board members attending),
may not be able to attend the AGM.
In light of the measures taken by the UK Government to reduce the spread of COVID-19, the notes below for this year’s AGM will be subject to the
measures in force at the time. Given the restrictions on public gatherings we are seeking to minimise contact between the Board and shareholders and
therefore attendance is discouraged, and you should not attend. As the situation is evolving any change to these arrangements will be communicated
via our website (www.alumasc.co.uk). A dial in facility will be made available. Shareholders are encouraged to vote by submitting a Form of Proxy.
The Alumasc Group plc Report and Accounts 2020 i
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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. If the UK Government’s public health measures continue to apply at the time of the AGM, members may not be entitled to attend
in person. If this is the case and the public health measures continue to apply and although the right to appoint a proxy does apply at this year’s
AGM, you should appoint the Chairman of the meeting as your proxy. A proxy could be the Chairman, another Director of the Company or another
person who has agreed to represent you.
2) To be valid, any proxy form or other instrument appointing a proxy and power of attorney or other authority, if any, under which it is signed or a
notarial certified or office copy of such power or authority must be received by post or (during normal business hours only) by hand by Equiniti,
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA not later than 48 hours before the time fixed for the meeting or any adjournment
thereof. Completion and return of the form of proxy will not prevent a member from attending and voting at the meeting instead of the proxy if
they so wish. Amended instructions must also be received by Equiniti by the deadline for receipt of proxy forms. A member must inform Equiniti
in writing of any termination of the authority of a proxy.
3) As an alternative to completing and returning the printed form of proxy, a member may submit your proxy appointment electronically by
accessing www.sharevote.co.uk where full details of the procedure are given. For security purposes, members will need their voting ID, task ID and
shareholder reference number as printed on the form of proxy in order to validate the submission of their proxy appointment 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 20 October 2020
(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 22 October 2020 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.
The Alumasc Group plc Report and Accounts 2020
132
Notice of Annual General Meeting continued
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland does not
make available special procedures in CREST for any particular messages. Normal system timings and limitations will apply in relation to the input
of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take, (or, if the CREST member is a CREST personal
member or sponsored member or has appointed a voting service provider(s), to procure that his/her CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular
time. In this connection, CREST members and, where applicable, their CREST sponsor(s) or voting service provider(s) are referred, in particular,
to those sections of the CREST manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a
CREST Proxy Instruction in the circumstances set out in regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended).
9) Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of the same powers
as the corporation could exercise if it were an individual member provided that they do not do so in relation to the same shares.
10) As at 31 August 2020 (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 2020
List of Subsidiaries
133
The Group’s subsidiary undertakings as at 30 June 2020 are shown below. Unless otherwise shown below all subsidiary undertakings are incorporated
in the UK. All subsidiaries are 100% owned. The UK registered offices are located at The Alumasc Group plc registered address.
Country of incorporation
USA
Hong Kong
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Subsidiary
Alumasc Building Products Limited
Levolux Limited
Levolux Inc
Elkington China Limited
Alumasc Limited
Wade International 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
Building Products Next Day Ltd
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 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
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 International (UK) Limited
Wade Drainage Products Limited
Wergs Limited
Yenots Limited
Principal activity
Building products
Building products
Building products
Building products
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
The Alumasc Group plc Report and Accounts 2020
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
134
Business & Operating Locations
Building Envelope
Levolux
White House Works
Bold Road
St. Helens
Merseyside WA9 4JG
Tel: +44 (0)1744 648400
Fax: +44 (0) 1744648401
Email: info@levolux.com
Web: www.levolux.com
Waterproofing systems
Alumasc Waterproofing
White House Works
Bold Road
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
White House Works
Bold Road
St. Helens
Merseyside WA9 4JG
Tel: +44 (0) 1744 648400
Email: cad@roof-pro.co.uk
Web: www.roof-pro.co.uk
Water Management
Metal rainwater, roof, shower
and floor drainage systems
Alumasc Water Management Solutions
Station Road
Burton Latimer
Kettering
Northamptonshire NN15 5JP
Tel: +44 (0) 1536 383810
Fax: +44 (0) 1744 648401
Email: info@alumascwms.co.uk
Web: www.alumascwms.co.uk
Rainclear Systems
Unit 34 A
Techno Trading Estate
Ganton Way
Swindon SN2 8ES
Tel: +44 (0) 844 4142266
Fax: +44 (0) 844 4142277
Email: sales@rainclear.co.uk
Web: www.rainclear.co.uk
Metal drainage & access covers
Wade International
Third Avenue
Halstead
Essex CO9 2SX
Tel: +44 (0) 1787 475151
Fax: +44 (0) 1787 475579
Email: sales@wadeint.co.uk
Web: www.wade.eu
Civil drainage systems
Elkington Gatic
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
The Alumasc Group plc Report and Accounts 2020 The Alumasc Group plc Report and Accounts 2020
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